01

POWER TO LEVY TAXES

Entry 82 of the Union List i.e. List I in the Seventh Schedule to Article 246 of the Constitution of India
has given the power to the Parliament to make laws on taxes on income other than agricultural
income.
INCOME TAX ACT 1961
SECTION 1
Act applies to whole of India

SECTION 2 AND SECTION 3

Definitions

SECTION 4 :CHARGING SECTION

Income-tax is payable by every Person on his total Income earned in the Previous Year at the Rates
applicable for the relevant Assessment Year.

PERSON : [SECTION 2 (31)]

Person includes
1. Individual 2. HUF
3. Company (including foreign company) 4. Firm (including LLP)
5. Association of Persons (AOP)/Body of Individuals (BOI) 6. Local Authority
7. Artificial juridical person (AJP)

INCOME [SECTION 2(24)]

Income under Income tax Act is defined in inclusive manner. List of 16 inflows are given under the
definition. Those inflows are considered as income but that doesn’t mean that inflows not covered
by definition is not an Income. If general meaning of the inflow implies that it is an income then it is
considered as income.
Examples of Inflow not considered as Income
1. Loan
2. Reimbursement of Expenses
3. Surplus left from Mutual activity

Total Income :
1. Income from salaries
2. Income from house property
3. Profits or gains of business or profession
4. Capital gains
5. Income from other sources
Gross Total Income
less : Deductions under Chapter VIA - Section 80C to 80U
Net Total Income/Total Income

DIVERSION OF INCOME AND APPLICATION OF INCOME

1. Application of Income means spending of Income after it is being earned by the assessee. Such
amount shall not be excluded from total income of the assessee as it is merely application of
earned income. In other words, applied income shall be taxable in the hands of the assessee.
2. Diversion of Income is the process of diverting income before it is earned by the assessee. Such
amount shall be excluded from the Total Income of the assessee as the income is diverted to
1 BASIC CONCEPTS
 someone else. In case of diversion of Income there is an over- riding title of any other person
on such income. So the income before being earned by the assessee reaches such person and
hence not chargeable to tax in hands of the assessee.

ASSESSMENT YEAR & PREVIOUS YEAR

Assessment year means a period of 12 months starting from 1st april every year.
Previous year is a financial year immediately preceding the assessment year.
In PY person will earn income and in AY person will pay tax on income earned during PY.
Note: If a source of income comes into existence in the said financial year, then, the previous year will
commence from the date on which the source of income newly comes into existence and will end with
31st March of the financial year.

CASES WHERE INCOME OF A PREVIOUS YEAR IS ASSESSED IN THE PRIVOUS YEAR

1. Shipping business of non-resident (Section 172)
2. Persons leaving India and he has no present intention of returning to India (Section 174)
3. AOP/ BOI/ Artificial Juridical Person formed for a particular event or purpose (Section 174A)
4. Persons likely to transfer property to avoid tax (Section 175)
5. Discontinued business (Section 176)

TAX RATES
Particulars Individual/HUF/AOP/BOI/AJP Firm & Local Authority Indian Company Foreign Company
Basic tax Slab rates (Note 1) 30% 30% (Refer Note 2) 40%
Add: Surcharge If TI > ` 50 lakhs - 10% If TI > ` 1 Crore - 12% If TI > ` 1 Crore – 7% If TI > ` 1 Crore – 2%
(Calculate If TI> ` 1 Crore - 15% If TI > ` 10 crores - 12% If TI > ` 10 crores - 5%
Surcharge on If TI> ` 2 crores - 25%
Basic Tax) If TI > ` 5 crore - 37% (Note 3)
Add: Health & 4% of (Basic tax – Rebate + 4% of (Basic tax + 4% of (Basic tax + 4% of (Basic tax +
Education Cess Surcharge) Surcharge) Surcharge) Surcharge)
TAX PAYABLE XXXX XXXX XXXX XXXX

NOTE 1 - SLAB RATES

1.1 AS PER OPTIONAL TAX REGIME AS PER ANNUAL FINANCE ACT
Resident Senior Citizens (Age≥ 60 Resident Very Senior / Super Others (Individuals aged < 60,
years but < 80 years at any time Senior Citizens (Age ≥ 80 years HUF, AOP, BOI, AJP Non Resident
during the P.Y.) at any time during the P.Y.) Individual irrespective of age)
Upto 3,00,000 NIL Upto 5,00,000 NIL Upto 2,50,000 NIL
3,00,001-5,00,000 5% 5,00,001 -10,00,000 20% 2,50,001 - 5,00,000 5%
5,00,001-10,00,000 20% > 10,00,000 30% 5,00,001-10,00,000 20%
> 10,00,000 30% > 10,00,000 30%

1.2 DEFAULT TAX RATE AS PER SECTION 115BAC - a. Tax Rate

(i) Upto ` 3,00,000 NIL
(ii) From ` 3,00,001 to ` 6,00,000 5%
(iii) From ` 6,00,001 to ` 9,00,000 10%
(iv) From ` 9,00,001 to ` 12,00,000 15%
(v) From ` 12,00,001 to ` 15,00,000 20%
(vi) Above ` 15,00,001 30%

BASIC CONCEPTS 2
b. Surcharge
(i) > ` 50,00,000 10%
(ii) > ` 1,00,00,000 15%
(iii) > ` 2,00,00,000 25%
Note: 37% of surcharge for income more than `5crores is NOT APPLICABLE in default scheme.

c. Conditions to be satisfied
Certain deductions/exemptions not allowable:
Section Exemption/Deduction
10(5) Leave travel concession
10(13A) House rent allowance
10(14) Exemption in respect of special allowances or benefit to meet expenses relating to duties or
personal expenses (other than transport, conveyance, allowance to meet cost of travelling
or daily allowance)
10(17) Daily allowance or constituency allowance of MPs and MLAs
10(32) Exemption in respect of income of minor child included in the income of parent
10AA Tax holiday for units established in SEZ
16 (i) Entertainment allowance
(ii) Professional tax
24(b) Interest on loan in respect of self-occupied property
32(1)(iia) Additional depreciation
35(1) Contribution in case of Scientific Research
(ii),(iia),(iii)
or 35(2AA)
35AD Investment linked tax incentives for specified businesses
80C to 80U Deductions under Chapter VI-A (other than employers contribution towards NPS under
section 80CCD(2),Government contribution towards Agnipath scheme under section 80CCH(2)
and deduction in respect of employment of new employees under section 80JJAA).

d. Certain losses not allowed to be set-off: While computing total income, set-off of any loss :
(i) Assesse cannot set-off any b/f loss or unabsorbed depreciation attributable to deduction
referred above.
(ii) HP loss cannot be set off against other head.
(iii) No deduction or exemption for allowance or perquisite provided under any other law for
the time being in force.

e. Time limit for opting out of sec 115BAC

(i) In case of an assessee having no income from business or profession: Assessee may choose to
pay tax under default tax regime under section 115BAC in one year and exercise the option to shift
out of default tax regime in another year. Such option has to be exercised along with the return of
income to be furnished u/s 139(1)
(ii) In case of an assessee having income from business or profession: Option of regular tax regime
must be exercise alongwith the return u/s 139(1). Such option once exercised shall apply for subsequent
AY also. However the option once exercise for regular tax regime can be withdraw only once for PY &
there after the person shall never be eligible for the benefit of regular tax regime till the time having
any income under PGBP

3 BASIC CONCEPTS
f. Other Points
1. Rebate u/s 87A is available to assessee under defult tax regime under Section 115BAC
2. Special Rate income will be taxed at Special Rate
3. If assessee paying Tax under for Section 115BAC then provisions of AMT under Section 115JC
are not applicable.
4. AMT credit (if any) is not allowed to be adjusted against tax payable u/s 115BAC
5. If assessee having PGBP & opting 115BAC for first time in AY 24-25 and if any
additional depreciation is included in B/F unabsorbed depreciation then such additional
depreciation not allowed to be set-off but it will be added to opening WDV of block as
on 01/04/2023.

1.3 CIRCULAR NO. 28/2016

A person born on 1st April would be considered to have attained a particular age on 31st March, the
day preceding the anniversary of his birthday.
Therefore, a resident individual whose 60th birthday falls on 1st April, 2024, would be treated
as having attained the age of 60 years in the P.Y.2023-24, and would be eligible for higher basic
exemption limit of ` 3 lakh in computing his tax liability for A.Y.2024-25.

1.4 TAX RATE FOR CO-OPERATIVE SOCIETIES

(i) ` 0 to `10,000 10%
(ii) > `10,000 to ` 20,000 20%
(iii) > ` 20,000 30%

1.5 REBATE
AMOUNT OF REBATE U/S 87A

Conditions for availing Rebate

Under Normal provision 1.Individual Under Section 115BAC
(optional) 2.Resident

Total Income ≤ 5 lakhs Total Income ≤ 7 lakhs Total Income > 7 lakhs
Amount of Basic Tax
or Amount of Basic Tax Step 1 – Total income (-) ` 7 lakhs (A)
` 12,500 or Step 2 - Compute income-tax liability
` 25,000 on total income (B)
Step 3 - If B>A, rebate under section
87A would be a B – A.
NOTE 2: TAX RATE FOR INDIAN COMPANY
i. Turnover/ Gross receipts of PY 2021-22 is up to ` 400 crores 25%
ii. Others 30%

BASIC CONCEPTS 4
NOTE 3: MARGINAL RELIEF
Marginal relief is available in case of such persons having a total income exceeding Rs 50 lakh/1
crore/2 crore/5 crore/10 crore i.e., the total amount of income-tax payable (together with surcharge)
on such income should not exceed the amount of income-tax payable on total income of Rs 50 lakh/1
crore/2 crore/5 crore/10 crore by more than the amount of income that exceeds Rs Rs 50 lakh/1
crore/2 crore/5 crore/10 crore.

NOTE 4: ROUNDING - OFF OF INCOME / TAX [SECTION 288A / 288B]

1. Ignore Paisa
2. Last digit 5 or more - rounding off on higher side nearest 10
3. Last digit less than 5 - rounding off on lower side nearest 10
Example:
2,03,454.99 2,03,450
2,03,455.00 2,03,460
2,03,458.99 2,03,460
2,03,464.75 2,03,460

NOTE 5: RATE OF SURCHARGE APPLICABLE TO INDIVIDUAL/HUF/AOP/BOI/AJP

Sr No. Total Income of Dividend income Total Income Surcharge Surcharge
Individual/HUF/ & capital of individual/ applicable applicable on
AOP/BOI/AJP assessee gains u/s HUF/ AOP/ on dividend total tax on
before including 111A/112A/112 BOI/AJP income & total income
dividend income & assessee after capital gains other than
capital gains u/s 111A/ including u/s 111A/ dividend
112A/ 112 dividend 112A/ 112 income &
income & capital gains
capital gains
u/s 111A/
112A/ 112
(i) 30 20 50 NIL NIL
(ii) 50 45 95 10% 10%
(iii) 50 80 130 15% 15%
(iv) 50 310 360 15% 15%
(v) 50 610 660 15% 15%
(vi) 50 30 80 10% 10%
(vii) 50 75 125 15% 15%
(viii) 150 45 195 15% 15%
(ix) 150 270 420 15% 15%
(x) 150 600 750 15% 15%
(xi) 400 100 500 15% 25 %
(xii) 400 250 650 15% 25%
(xiii) 700 200 900 15% 37%

No matter how high the Total Income level of assessee, the surcharge on dividend income & Capital
gains u/s 111A,112A & 112 shall not exceed 15%.

5 BASIC CONCEPTS
 SECTION 115JC - ALTERNATE MINIMUM TAX
Income tax payable is higher of –
a. Calculate Basic Tax on Net Total Income as per regular provisions + SC + HEC
b. Calculate 18.5% (9% if person is located in IFSC) (15% for cooperative society )of Adjusted Total
Income + SC + HEC

Provisions are not applicable

a. Company
b. Individual, HUF, AOP, BOI & AJP if adjusted total income is ≤ 20 lakhs.
c. If person paying Tax Under section 115BAC.
D. Any other person (Including PF/LLP), does not claim deduction u/s 10AA, u/s 35AD & u/s 80IA to
80RRB (except 80P).

[Section 115JC(2)] – Computation of ATI

Net Total Income as per regular provisions XX
Add :
(i) deductions claimed u/s 80JJAA, 80QQB, 80RRB XX
(ii) deduction claimed u/s 10AA; and XX
(iii) deduction claimed u/s 35AD as reduced by the amount of depreciation allowable in
accordance section 32 as if no deduction u/s 35AD was allowed in respect of the assets
on which the deduction under that section is claimed. XX
Adjusted Total Income XXX

AMT Credit (Section 115JD)

a. Total Tax Payable under AMT Route – Total Tax Payable under Normal Provision
b. It can be carried forward for 15 years
c. Credit to be adjusted when Regular tax payable is more than AMT
d. Credit to be set off will be restricted to the difference between the regular income tax computed
under normal provision & AMT

BASIC CONCEPTS 6