Basic Concepts and General Tax Rates

Direct Tax
• We’ll be studying Income Tax Law, which constitutes of
o Income Tax Act, 1961 (as amended by Finance Act, 2022) – Charge of Income Tax is
governed by the Income-Tax Act, 1961, which came into force w.e.f. 1st April, 1962.
o Income Tax Rules, 1962 – Section 295 of the Act empowers the Central Board of Direct
Taxes to make Rules.
o Notifications and Circulars issued by CBDT – Section 119 of the Act empowers the
CBDT to issue orders, instructions and directions for the proper administration of the
Act.
o Judicial Decisions (Case Laws)

Finance Act
• Presenting the Finance Bill: Every year on the 1st of February, the Finance Minister of India
presents a Finance Bill in the Parliament, which contains various amendments proposed to be
made in the direct and indirect taxes levied by the Central Government.
• Approval and Assent of Bill: As soon as the Bill is passed by both the houses of the Parliament
and thereafter receives the assent of the President of India, it becomes the Finance Act.
• Incorporation of Amendments: The amendments proposed therein are then incorporated in
the Income Tax Act which are applicable from the very first day of the next Financial Year.
For example, amendments by Finance Act, 2022 are effective from 01-04-2022.

Some Important Terms

Assessee
• In simple terms, one who is being assessed is known as Assessee.
• In technical terms, a person who is required to pay tax is known as Assessee.

Person
• Individual
o Nishant Kumar
• Hindu Undivided Family (HUF)
o Nishant Kumar’s HUF
• Company
o Sorting Hat Technologies Pvt. Ltd.
o Reliance Industries Ltd.
• Partnership Firm (Including LLP)
• Association of Persons (AOP)/ Body of Individuals (BOI)
o Joint Ventures
o Clubs
• Local Authority
o Municipal Committee
o District Board, etc.

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 • Artificial Juridical Person
o Anything which is not covered above
o Deities
o Bar Council
o Universities, etc.

Heads of Income
• Income from Salaries
o Employer Employee Relationship
• Income from House Property
o Ownership of House Property
• Profits and Gains from Business or Profession
• Capital Gains
o Transfer of a Capital Asset
• Income from Other Sources
o Anything which is not covered above

Previous Year and Assessment Year

• The period in which a person earns the income is known as the Previous Year in respect of
that income, and the period in which the person pays tax on this income is known as the
Assessment Year.
• For example, if a person earns income in the F.Y. 2022-23, he would be required to pay tax on
it in the F.Y. 2023-24. So, for the income earned in F.Y. 2022-23, the P.Y. is 2022-2023, and the
A.Y. is 2023-24.

Tax Rates Applicable for A.Y. 2023-24 (P.Y. 2022-23)

In case of Individual/HUF/AOP/BOI/AJP
1. In case of Individual/HUF/AOP/BOI/AJP (Resident/Non-Resident)
Income Tax Rate
Upto ₹2,50,000 NIL
Above ₹2,50,000 upto ₹5,00,000 5%
Above ₹5,00,000 upto ₹10,00,000 20%
Above ₹10,00,000 30%
2. In case of Senior Citizens (Resident Individual aged 60 years or more in the P.Y.)
Income Tax Rate
Upto ₹3,00,000 NIL
Above ₹3,00,000 upto ₹5,00,000 5%
Above ₹5,00,000 upto ₹10,00,000 20%
Above ₹10,00,000 30%
3. In case of Super Senior Citizens (Resident Individual aged 80 years or more in the P.Y.)
Income Tax Rate
Upto ₹5,00,000 NIL
Above ₹5,00,000 upto ₹10,00,000 20%
Above ₹10,00,000 30%

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60th/80th Birthday on 1st April, 2023
He’ll also get the benefit of Senior Citizen/Super Senior Citizen.

Surcharge
Surcharge means Extra Tax.

Income Tax Rate

Above ₹50,00,000 upto ₹1,00,00,000 10% of Tax
Above ₹1,00,00,000 upto ₹2,00,00,000 15% of Tax
Above ₹2,00,00,000 upto ₹5,00,00,000 25% of Tax
Above ₹5,00,00,000 37% of Tax
Health and Education Cess
• Cess means collection of tax for a specified purpose.
• It is calculated @ 4% on Tax (including Surcharge)

Question 1

Total Income of Ms. Priyanka, a Resident individual is ₹15,10,000. Calculate tax liability for A.Y. 2023-
24, assuming her age is 21 years.

Solution

Computation of Tax Liability of Ms. Priyanka (Age 21 Years)

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹5,00,000 5% of ₹2,50,000 12,500
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹15,10,000 minus ₹10,00,000 30% of ₹5,10,000 1,53,000
2,65,500
Add: Surcharge -
2,65,500
Add: Health and Education Cess @ 4% 10,620
Net Tax Payable 2,76,120

Question 2

Mr. X has a total income of ₹12,00,000 for P.Y.2022-23, comprising of income from house property
and interest on fixed deposits. Compute his tax liability for A.Y.2023-24 assuming his age is 63 years.

Solution

Computation of Tax Liability of Mr. X (Age 63 Years)

Particulars ₹
Tax Liability:
First ₹3,00,000 NIL -
Next ₹3,00,001 - ₹5,00,000 5% of ₹2,00,000 10,000
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹12,00,000 minus ₹10,00,000 30% of ₹2,00,000 60,000

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 1,70,000
Add: Surcharge -
1,70,000
Add: Health and Education Cess @ 4% 6,800
Net Tax Payable 1,76,800

Question 3

Mr. X has a total income of ₹12,00,000 for P.Y.2022-23, comprising of income from house property
and interest on fixed deposits. Compute his tax liability for A.Y.2023-24 assuming his age is 82 years.

Solution

Computation of Tax Liability of Mr. X (Age 82 Years)

Particulars ₹
Tax Liability:
First ₹5,00,000 NIL -
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹12,00,000 minus ₹10,00,000 30% of ₹2,00,000 60,000
1,60,000
Add: Surcharge -
1,60,000
Add: Health and Education Cess @ 4% 6,400
Net Tax Payable 1,66,400

Question 4

Total Income of Mrs. Swati, a Non-Resident individual is ₹2,75,000. Calculate tax liability for A.Y. 2023-
24, assuming her age is 65 years.

Solution

Computation of Tax Liability of Mrs. Swati (Age 65 Years)

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Balance, i.e., ₹2,75,000 minus ₹2,50,000 5% of ₹25,000 1,250
1,250
Add: Surcharge -
1,250
Add: Health and Education Cess @ 4% 50
Net Tax Payable 1,300

Question 5

Total Income of Mr. Y, a Resident individual is ₹1,10,00,000. Calculate tax liability for A.Y. 2023-24,
assuming his age is 50 years.

Solution

Computation of Tax Liability of Mr. Y (Age 50 Years)

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 Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹5,00,000 5% of ₹2,50,000 12,500
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹1,10,00,000 minus ₹10,00,000 30% of ₹1,00,00,000 30,00,000
31,12,500
Add: Surcharge @ 15% 4,66,875
35,79,375
Add: Health and Education Cess @ 4% 1,43,175
Net Tax Payable 37,22,550

Question 6

Total Income of Mr. Z, a Resident individual is ₹1,00,00,000. Calculate tax liability for A.Y. 2023-24,
assuming his age is 55 years.

Solution

Computation of Tax Liability of Mr. Z (Age 55 Years)

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹5,00,000 5% of ₹2,50,000 12,500
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹1,00,00,000 minus ₹10,00,000 30% of ₹90,00,000 27,00,000
28,12,500
Add: Surcharge @ 10% 2,81,250
30,93,750
Add: Health and Education Cess @ 4% 1,23,750
Net Tax Payable 32,17,500

Marginal Relief
• Sometimes, when the income increases slightly, the increase in tax exceeds the increase in
income.
• Government provides relief with respect to excess of tax over excess of income.
• Such relief is known as Marginal Relief.

Question 7

Total Income of Ms. Meena, a Resident individual is ₹51,00,000. Calculate tax liability for A.Y. 2023-
24, assuming her age is 55 years.

Solution

Computation of tax liability of Ms. Meena for the A.Y.2023-24

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹5,00,000 5% of ₹2,50,000 12,500
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000

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 Balance, i.e., ₹51,00,000 minus ₹10,00,000 30% of ₹41,00,000 12,30,000
13,42,500
Add: Surcharge @ 10% 1,34,250
14,76,750
Restricted to:
Tax on ₹50,00,000 + (NTI – ₹50,00,000)
₹14,76,750 + (₹51,00,000 – ₹50,00,0000) 14,12,500
Lower of the above 14,12,500
Add: Health and Education Cess @ 4% 56,500
Tax Payable 14,69,000
Therefore, Marginal Relief 64,250

Computation of tax liability of Ms. Meena on 50 lakhs

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹5,00,000 5% of ₹2,50,000 12,500
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹50,00,000 minus ₹10,00,000 30% of ₹40,00,000 12,00,000
13,12,500
Add: Surcharge -
Tax 13,12,500

Question 8

Total Income of Ms. Sushma, a Resident individual is ₹1,01,00,000. Calculate tax liability for A.Y. 2023-
24, assuming her age is 40 years.

Solution

Computation of tax liability of Ms. Sushma for the A.Y.2023-24

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹5,00,000 5% of ₹2,50,000 12,500
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹1,01,00,000 minus ₹10,00,000 30% of ₹91,00,000 27,30,000
28,42,500
Add: Surcharge @ 15% 4,26,375
32,68,875
Restricted to:
Tax on ₹1,00,00,000 + (NTI – ₹1,00,00,000)
₹30,93,750 + (₹1,01,00,000 – ₹1,00,00,0000) 31,93,750
Lower of the above 31,93,750
Add: Health and Education Cess @ 4% 1,27,750
Tax Payable 33,21,500
Therefore, Marginal Relief 75,125

Computation of tax liability of Ms. Sushma on 1 crore

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 Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹5,00,000 5% of ₹2,50,000 12,500
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹1,00,00,000 minus ₹10,00,000 30% of ₹90,00,000 27,00,000
28,12,500
Add: Surcharge @ 10% 2,81,250
Tax 30,93,750

Question 9

Total Income of Ms. Rekha, a Resident individual is ₹2,01,00,000. Calculate tax liability for A.Y. 2023-
24, assuming her age is 25 years.

Solution

Computation of tax liability of Ms. Rekha for the A.Y.2023-24

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹5,00,000 5% of ₹2,50,000 12,500
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹2,01,00,000 minus ₹10,00,000 30% of ₹1,91,00,000 57,30,000
58,42,500
Add: Surcharge @ 25% 14,60,625
73,03,125
Restricted to:
Tax on ₹2,00,00,000 + (NTI – ₹2,00,00,000)
₹66,84,375 + (₹2,01,00,000 – ₹2,00,00,0000) 67,84,375
Lower of the above 67,84,375
Add: Health and Education Cess @ 4% 2,71,375
Tax Payable 70,55,750
Therefore, Marginal Relief 5,18,750

Computation of tax liability of Ms. Rekha on 2 crore

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹5,00,000 5% of ₹2,50,000 12,500
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹2,00,00,000 minus ₹10,00,000 30% of ₹1,90,00,000 57,00,000
58,12,500
Add: Surcharge @ 15% 8,71,875
Tax 66,84,375

Question 10

Total Income of Ms. Jaya, a Resident individual is ₹5,01,00,000. Calculate tax liability for A.Y. 2023-24,
assuming her age is 40 years.

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Solution

Computation of tax liability of Ms. Jaya for the A.Y.2023-24

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹5,00,000 5% of ₹2,50,000 12,500
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹5,01,00,000 minus ₹10,00,000 30% of ₹4,91,00,000 1,47,30,000
1,48,42,500
Add: Surcharge @ 37% 54,91,725
2,03,34,225
Restricted to:
Tax on ₹5,00,00,000 + (NTI – ₹5,00,00,000)
₹1,85,15,625 + (₹5,01,00,000 – ₹5,00,00,0000) 1,86,15,625
Lower of the above 1,86,15,625
Add: Health and Education Cess @ 4% 7,44,625
Tax Payable 1,93,60,250
Therefore, Marginal Relief 17,18,600

Computation of tax liability of Ms. Jaya on 5 crore

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹5,00,000 5% of ₹2,50,000 12,500
Next ₹5,00,001 - ₹10,00,000 20% of ₹5,00,000 1,00,000
Balance, i.e., ₹5,00,00,000 minus ₹10,00,000 30% of ₹4,90,00,000 1,47,00,000
1,48,12,500
Add: Surcharge @ 25% 37,03,125
Tax 1,85,15,625

Tax Rate in case of Companies

Particulars Tax Rates
A) Domestic Company
(i) Total T/o or Gross Receipts of P.Y. 2020-21 is upto 400 crores 25%
(ii) Otherwise 30%
B) Foreign Company 40%
Surcharge
Total Income Domestic Company Foreign Company
Above 1 crore upto 10 crores 7% 2%
Above 10 crores 12% 5%
Health and Education Cess @ 4%

Question 11

Compute the marginal relief available to X Ltd., a domestic company, assuming that the total income
of X Ltd. is ₹1,01,00,000 for A.Y. 2023-24 and the total income does not include any income in the
nature of Capital Gains.

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[Note – The gross receipts of X Ltd. for the P.Y. 2020-21 is ₹470 crore]

Solution

Computation of tax liability of X Ltd. for A.Y. 2023-24

Particulars ₹
Tax Liability: 30% on ₹1,01,00,000 30,30,000
Add: Surcharge @ 7% 2,12,100
32,42,100
Restricted to:
Tax on ₹1,00,00,000 + (NTI – ₹1,00,00,000)
₹30,00,000 + (₹1,01,00,000 – ₹1,00,00,0000) 31,00,000
Lower of the above 31,00,000
Add: Health and Education Cess @ 4% 1,24,000
Tax Payable 32,24,000
Therefore, Marginal Relief 1,42,100

Question 12

Compute the marginal relief available to Y Ltd., a domestic company, assuming that the total income
of Y Ltd. for AY 2023-24 is ₹10,01,30,000 and the total income does not include any income in the
nature of Capital Gains.

[Note – The gross receipts of Y Ltd. for the P.Y. 2020-21 is ₹490 crore]

Solution

Computation of tax liability of Y Ltd. for A.Y. 2023-24

Particulars ₹
Tax Liability: 30% on ₹10,01,30,000 3,00,39,000
Add: Surcharge @ 12% 36,04,680
3,36,43,680
Restricted to:
Tax on ₹10,00,00,000 + (NTI – ₹10,00,00,000)
₹3,21,00,000 + (₹10,01,30,000 – ₹10,00,00,0000) 3,22,30,000
Lower of the above 3,22,30,000
Add: Health and Education Cess @ 4% 12,89,200
Tax Payable 3,35,19,200
Therefore, Marginal Relief 14,13,680

Computation of tax liability of Y Ltd. on ₹10 crores

Particulars ₹
Tax Liability: 30% on ₹10,00,00,000 3,00,00,000
Add: Surcharge @ 7% 21,00,000
Tax 3,21,00,000

Tax Rates in case of Firm/LLP/Local Authority

Particulars Tax Rate
1. Tax Rate 30%

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 2. Surcharge, if Total Income is above ₹1 crore 12%
3. Health and Education Cess on Tax (including Surcharge) 4%

Tax Rates for Co-operative Society

Particulars Tax Rate
1. Tax Rate
a. Total Income upto 10,000 10%
b. Above 10,000 upto 20,000 20%
c. Above 20,000 30%
2. Surcharge, if Total Income is above ₹1 crore upto ₹10 crores 7%
3. Surcharge, if Total Income is above ₹10 crore 12%
4. Health and Education Cess on Tax (including Surcharge) 4%

Rebate u/s 87A

In case of Resident individual whose total income does not exceed ₹5,00,000, rebate shall be allowed
from Income tax @ 100% of such tax or ₹12,500 whichever is less.

Question 13

Mr. Raghav, a resident individual, aged 26 years has a total income of ₹3,40,000, comprising his salary
income and interest on bank fixed deposit. Compute his tax liability for A.Y. 2023-24.

Solution

Computation of tax liability of Mr. Raghav for the A.Y.2023-24

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹3,40,000 5% of ₹90,000 4,500
4,500
Less: Rebate u/s 87A
Less: Lower of:
Less: (i) Tax Amount 4,500
Less: (ii) ₹12,500 12,500 4,500
Net Tax -

Question 14

Mr. Dinesh aged 35 years and a resident in India, has a total income of ₹4,80,000 comprising of long-
term capital gains taxable under section 112. Compute his tax liability for A.Y. 2023-24.

Solution

Computation of tax liability of Mr. Dinesh for the A.Y.2023-24

Particulars ₹
Tax Liability:
First ₹2,50,000 NIL -
Next ₹2,50,001 - ₹4,80,000 20% of ₹2,30,000 46,000
46,000
Less: Rebate u/s 87A
Less: Lower of:

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Less: (i) Tax Amount 46,000
Less: (ii) ₹12,500 12,500 12,500
Tax 33,500
Add: Health and Education Cess @ 4% 1,340
Net Tax Payable 34,840

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