WELCOME
[Link]
ASSISTANT PROFESSOR
COMMERCE (Computer Applications)
VIVEKANANDA COLLEGE
TIRUVEDAKAM WEST
MADURAI – 625 234.
INCOME TAX - LAW &
PRACTICE
TAX
Tax can be defined as a levy or financial charge or fee imposed by state
or central government on legal entities or individuals.
Tax Classifications
A direct tax is a form of tax is collected directly by the government from
the persons who bear the tax burden.
Examples of direct taxes are Income Tax and Wealth Tax.
An indirect tax is a form of tax collected by mediators who transfer the
taxes to the government, and also perform functions associated with filing
tax returns. The customers bear the final tax burden.
Examples of indirect tax is Goods and Service Tax (GST)
INCOME TAX
The government needs money to maintain law and order in the country.
Safeguard the security of the country from foreign powers
Foremost duty of the government to bring out such welfare and development
programmes which will bright the gap between the rich and the poor .
All this requires mobilisation of funds from various sources.
Income tax is very important direct tax.
It is an important and most significant source of revenue of the government.
Income tax, being a direct tax, is an important tool to achieve balanced socio-
economic growth by providing concession and incentives in income tax for
various development purposes.
WHO IS LIABLE TO PAY INCOME TAX
Every person, whose taxable income for the previous
financial year exceeds the minimum taxable limit is liable to
pay to the Central Government income tax during the current
financial year on the income of the previous financial year at the
rates in force during current financial year.
Heads of Income
[Link] [Link] property
[Link] & [Link] Gains
Profession
5. Other Sources
Aggregate of all the 5 heads of income is
known as gross total income
DEFINITIONS
1. Assessee – Section 2(7)
2. Assessment year – Section 2(9)
3. Previous year – Section 3
4. Income – Section 2 (24)
5. Person – Section 2(31)
6. Gross Total Income – Section 80B (5)
7. Total Income – Section 2(45)
TYPES OF RESIDENTIAL STATUS SEC -6
The different types of residential status are:-
Resident(R)
Not Ordinarily Resident (NOR)
Non-Resident (NR)
Basic Conditions u/s 6(1)
a) He is in India in the pervious year for a period of 182 days or more;
or
b) He has in India for at least of 60 days or more during the previous
year and 365 days or more during the four years immediately
preceding the previous year.
Additional Conditions u/s 6(6)
i. He must be a resident in India in two out of the ten previous years
preceding that year; and
ii. He must be in India during 7 preceding previous years for aggregate
period of 730 days or more.
Income from Salary
(Sec15,16 & 17)
TAXABLE SALARY
ADD LESS
Entertainment
Basic Salary
Allowance
Allowances Employment Tax
Perquisites
RETIREMENT BENEFITS
Gratuity
Pension
Leave salary
Compensation received at the time of Voluntary
Retirement Service
Income from
House Property
BASIS OF CHARGE
The basis of charge of income under the head ‘income from
house property’ is the Annual Value of the property. Annual
Value is inherent capacity of the property to earn an income. It
is the amount for which the property might reasonably be
expected to let from year to year.
Income from house property is charged to tax on Notional
Basis, as generally tax is not on receipt of income but on the
inherent potential of the house property to generate income.
CONDITIONS TO BE SATISFIED
1. The property must consist of buildings or lands
appurtenant to such buildings.
2. The assessee must be the owner of such house property.
3. The property should not be used by the owner thereof for
the purpose of any business or profession carried on by
him, the profits of which are chargeable to tax.
IMPORTANT FACTORS
Municipal value
Fair rent value
Standard rent
Actual rent
Municipal Tax
Types of properties
Self Part of year
Deemed Partly Let out
Occupied let out
Let out Let out Partly Self
un occupied Part of year
Property property
Self occupied
occupied
Property
Annual value
Annual value Taxable Computatio
Annual Taxable Treated as n
Annual
value value Computation Let out Separately.
Similar to Annual value
of let out
taxable Nil property.
Let out Portion
computation
taxable
Property Similar to Self occupied
Let out nil
Property
Income from
Business & Profession
Profit and gains of Business or Profession
Meaning of Business Sec. 2 (13)
Business includes
§ Any trade, commerce or Manufacture or any
adventure or concern in the nature of trade,
commerce or manufacture.
Meaning of Profession sec. 2(36)
Profession Means :
§ Such activities, which are performed by a person on
account of his natural ability for some particular
work.
Capital Gains
BASIS OF CHARGE
Capital Gains tax liability arises only when the following
conditions are satisfied:
[Link] should be a capital asset.
[Link] capital asset is transferred by the assessee
3. Such transfer takes place during the previous year.
4. Any profit or gains arises as a result of transfer.
IMPORTANT TERMS
1. Transfer of Capital Asset :- Transfer, in relation to capital asset,
includes sale, exchange or relinquishment of the asset or the
extinguishment of any rights therein or the compulsory acquisition
thereof under any law [sec. 2(47)].
2. Full Value of Consideration :- The expression “full value” means the
whole price without any deduction whatsoever.
3. Expenditure on Transfer :- The expression “expenditure on transfer”
means expenditure incurred which is necessary to effect the transfer.
4. Cost of Acquisition :- Cost of acquisition of an asset is
the value for which it was acquired by the assessee.
5. Cost of improvement :- Cost of improvement is capital
expenditure incurred by an assessee in making any
additions/ improvement to the capital asset.
Short term/long term Capital Asset
Capital Asset
Shares, listed
Securities, units of MF Other assets
Period of Period of Period of Period of
Holding Holding Holding Holding
<= 12 months > 12 months < =36 months > 36 months
Short term Short term Long term Capital
Long term Capital
Capital asset Asset Capital asset Asset
Income from
Other Sources
GENERAL [SECTION 56(1)]
Income of every kind, which is not to be excluded
from the total income and not chargeable to tax
under any other head, shall be chargeable under the
head “Income from Other Sources”.
Income from Other Sources
Charging Section There is an income
Sec 56 (1)
Income is not exempt
From tax
Such income is not
Chargeable under
Salary, HP, PGBP & Capital gains
CASUAL INCOME
Casual incomes includes winning from lotteries,
crossword puzzles, races including horse races, card
games and other games .
Set off and carry forward of Losses
Treatment of Losses (Set off) in Same AY
Loss from Business
Other than Speculation Any head except
Sec 72 Salaries
Unabsorbed Depreciation Any head except
Sec 32 Salaries
Loss From Speculation
business Sec 73 Only Speculation Profit
Loss from Short term Short term/Long term
Capital gains Sec 70/74 Capital gains
Set off and carry forward of Losses
Treatment of Losses (Set off) in Same AY
Loss from Long-term Only Long term Capital
capital gain Sec 74 gain
Loss from house Property Any head
Sec 71 B
Loss From owning and Only Profit from owning and
Maintaining horse races Maintaining horse races
Loss from IFOS Any Head ( No carry
(Except All Winnings) forward)
Once Losses are Carry forward to Next year I.e. (All brought
forward losses) Set off against same Head of Income
Set off and carry forward of Losses
Time Limit to carry forward
Loss from Speculation
business/ Loss from
4AY S
Owning and maintaining
Horse races
Loss from Business/ Loss
8AY S
from Capital gains/Loss
from Capital gains
Unabsorbed No time Limit
Depreciation
Loss from IFOS Cannot be carry
forward
Deductions Under
Sec. 80C to 80U
INTRODUCTION
The total income of an assessee is to be computed after
making deductions permissible u/s 80C to 80U. However, the
aggregate amount of deductions cannot exceed the Gross
Total Income.
DEDUCTION FOR PAYMENT OF
LIFE INSURANCE PREMIA, ETC., [SECTION 80C]
Deduction under this section is allowed as follows –
Deduction is available only in respect of ‘specified sums’
actually paid or deposited during the previous year (sum
not actually paid and outstanding is not allowed)
Specified sums must have been paid/deposited by an
Individual
The total amount of deduction under this section is subject
to a maximum limit of Rs.1,50,000.
DEDUCTION IN RESPECT OF
HEALTH INSURANCE PREMIA [SEC. 80D]
Deduction is available in respect of the amount paid to effect or
to keep in force health insurance under a scheme –
made by General Insurance Corporation of India (GIC) and approved by
Central Government; or
made by any other insurer and approved by Insurance Regulatory and
Development Authority.
Deduction shall be to the extent of lower of –
Health insurance premia paid in respect of health of individual Rs.
25,000 (Rs. 30,000 in case the insured is a senior citizen).
MAINTENANCE OF A DEPENDANT BEING PERSON WITH
DISABILITY [SECTION 80DD]
Deduction is available in respect of –
expenditure incurred for medical / treatment / nursing / training/
rehabilitation, or
amount paid under scheme LIC / UTI other insurer approved by CBDT
for maintenance, of a “dependant”, being a person with disability.
Deduction shall be allowed to the extent of –
Rs. 75,000 (Rs. 1,25,000 in case of dependant suffering with severe
disability), irrespective of expenditure incurred or sum paid.
DEDUCTION IN RESPECT OF
MEDICAL TREATMENT, ETC. [SEC. 80DDB]
Deduction is available in respect of sum actually paid during
previous year for medical treatment of prescribed disease or
ailment for the following –
In case of individual: himself or his spouse, children, parents, brothers and
sisters,
Deduction shall be available to the extent of lower of the
following –
sum actually paid; or
Rs. 40,000 (Rs. 60,000 in case of a senior citizen).
Rs. 80,000 for super senior citizen.
DEDUCTION IN RESPECT OF INTEREST ON LOAN
TAKEN FOR HIGHER EDUCATION [SEC.80E]
Deduction in available in respect of sum paid by the assessee in
the previous year, out of his income chargeable to tax, by way
of interest on loan taken –
for his higher education, or
for the higher education of his relative.
100% of the amount of interest on such loan Deduction will be
admissible.
DEDUCTION IN RESPECT OF DONATIONS
[SECTION 80G]
Deduction is allowed under this section to all assesses in respect
of donations of sum of money in the following manner –
100% deduction will be allowed if donations are given to any of the
specified funds.
50% deduction will be allowed if donations made to any of the 5
specified funds.
100% deduction shall be allowed subject to the qualifying amount if
donations are made for promoting family planning.
50% deduction shall be allowed subject to the qualifying amount if
donations are made towards any of the 5 specified purposes.
TAX RATES
RATES OF INCOME TAX FOR AN INDIVIDUAL
(ASSESSMENT YEAR 2017-18)
(MALE OR FEMALE)
1. INDIVIDUAL - (Resident in India and below age of 60 years
during the previous year.
2. INDIVIDUAL - SENIOR CITIZEN (Resident in India , who is of
the age of 60 to 80 years during the previous year )
3 INDIVIDUAL = SUPER SENIOR CITIZEN (Resident in India ,
who is of the age of 80 years above during the previous year )
1. INDIVIDUAL - (Resident in India and below age of 60 years during
the previous year.
INCOME (`. ) RATE
0 - 2,50,000 NIL
2,50,001 - 5,00,000 10%
5,00,001 - 10,00,000 20%
Above 10,00,000 30%
2. INDIVIDUAL - SENIOR CITIZEN (Resident in India , who is of
the age of 60 to 80 years during the previous year )
INCOME (`. ) RATE
0 - 3,00,000 NIL
3,00,001 - 5,00,000 10%
5,00,001 - 10,00,000 20%
Above 10,00,000 30%
3 INDIVIDUAL = super SENIOR CITIZEN (Resident in India , who is of the age of 80 years above during the
previous year )
INCOME (`. ) RATE
Upto 5,00,000 NIL
5,00,001 - 10,00,000 20%
Above 10,00,000 30%
RATES OF INCOME TAX
(Assessment Year 2017-18)
Long Term Capital Gain 20%
Short Term Capital Gain on sale of Listed equity shares15%
Casual Income 30%
Rebate u/s 87A:
Rebate of Rs. 5,000 for individual having total taxable amount
not exceeding Rs.5,00,000.
EDUCATION CESS &
SHEC
Education Cess @2% on tax on income
SHEC @1% on tax on income
Mr. Mani given following information to earn the income of Previous Year
2016-17 in various heads.
Particulars Rs.
Income from Salary 1,00,000
Income from House Property 1,80,000
Income from Business or Profession 1,10,000
Income from Capital Gain 50,000
(Long term capital gain)
Income from Other Sources 1,60,000
(Winning from lottery Rs. 10,000 include)
Life Insurance Premium paid to himself 75,000
Determine the Tax liability of Mr. Mani for the A.Y. 2017-18.
THANK YOU
