Module I • Overview of Taxation system in India • Fundamental Principles relating to Tax Laws, •

General Taxing power and constitutional limitations, • Distinction between : Tax, Fee and Cess ;
1 20.00
Principles of • Tax avoidance and Tax evasion. • Tax planning and Tax management
Taxation Laws
Module II • Income not included in the Total Income. • Residential status, • Clubbing of Income, •
Basic Rate of Income Tax, •
2 concepts of Heads of Income, Salaries, Income from House Property, Income from Business or 20.00
Income Tax Profession, Capital Gains, Income from Other sources, • Deductions under the Income
Tax Act, 1961
Module III :
Applications of • Income Tax Authorities: Power and Functions, • Filing of returns and procedure for
3 the concepts assessment, • Calling for Information, • Regulatory Mechanism And appeal provisions 20.00
of Income under Tax Laws • Offences and Penal Sanctions •Double taxation
Tax
Module IV
• Introduction to Goods and Services Tax • constitutional background including GST
GOODS
Council • Structure of GST,
4 AND 20.00
Act-2017 CGST Act-2017 SGST Act-2017 UTGST Act-2017 IGST Act-2017
SERVICE
Compensation to States Act 2017
TAX
Module V GST • Levy of GST, • Reverse Charge Mechanism, • Input Tax Credits • Exemptions from
5 part GST, • Composition Scheme • Structure of Customs Laws in India including custom 20.00
II and Custom Cess • Territorial Waters of India • ‘Goods’ under Customs Act , • Types of Duties
ModuleDescriptors / Topics Weightage
Module I • Overview of Taxation system in India • Fundamental
Principles relating to Tax Laws, • Taxing power and
constitutional limitations, • Distinction between : Tax, Fee and
Cess ; • Tax avoidance and Tax evasion. • Tax planning and Tax
management

The taxation system in India is structured and governed by the Central

Government and the State Governments, with some aspects managed by
local bodies. It is a comprehensive system that encompasses direct taxes,
such as income tax, and indirect taxes, such as GST (Goods and Services
Tax). Here’s an overview:

1. Types of Taxes

A. Direct Taxes

These are taxes levied directly on an individual or organization and cannot

be transferred to others.

 Income Tax: Levied on individuals, HUFs (Hindu Undivided

Families), and corporations. It follows a progressive slab system for
individuals.

 Corporate Tax: Applicable to companies based on their profits.

Includes:

o Domestic companies.

o Foreign companies operating in India.

 Wealth Tax: Abolished in 2015 but earlier levied on the net wealth
of individuals and companies.

B. Indirect Taxes

These are levied on goods and services and passed on to the end
consumer.

 Goods and Services Tax (GST):

o Introduced in 2017, GST is a unified tax replacing multiple

indirect taxes (like VAT, service tax, etc.).

o Divided into CGST (Central GST), SGST (State GST), and IGST
(Integrated GST) depending on intra- or inter-state
transactions.
  Customs Duty: Levied on goods imported/exported from India.

 Excise Duty: Earlier levied on manufactured goods but subsumed

into GST for most products.

 Other Taxes: Includes stamp duty, entertainment tax (state-

specific for non-GST items), etc.

Conclusion

 India's taxation system is a blend of modern reforms and traditional approaches. With
the introduction of GST, steps toward a more unified and simplified tax regime have
been taken, though challenges like increasing the tax base and ensuring compliance
persist. The government continues to strive for a balance between taxpayer
convenience and revenue generation.

Fundamental Principles relating to Tax Laws

1. Neutrality: Taxes should not favour any one group or sector over
another and should not be designed to interfere with or influence
individual decision making.

2. Efficiency: Compliance costs to business and administration costs for

governments should be minimised as far as possible.

3. Certainty and Simplicity: Tax rules should be clear and simple to

understand, so that taxpayers know where they stand. A simple tax
system makes it easier for individuals and businesses to understand their
obligations and entitlements.

4. Equity: Tax Laws should be based on ability to pay

5. Effectiveness and fairness: Taxation should produce the right amount of

tax at the right time, while avoiding both double taxation and
unintentional non-taxation.

6. Flexibility: Taxation systems should be flexible and dynamic enough to

ensure they keep pace with technological and commercial developments.

7. Automatic Stabilizer: Should have the stabilizing effect on the national

income level
The constitutional provisions relating to taxation in India are designed to
ensure that both the Union and the States have the resources they need
to function effectively, while also protecting the interests of taxpayers.
Taxation is one of the most important sources of revenue for the
government. It is used to fund essential services such as education,
healthcare, and infrastructure.

What are the Constitutional Provisions Relating to Taxation?

The Constitution of India is the supreme law of the land and all laws in
India must be consistent with its provisions. The constitutional
provisions relating to taxation in India are contained in Articles
265 to 289 of the Constitution of India. These articles outline the
powers of the Union and the States to levy taxes, as well as the
procedures for assessing and collecting taxes.

Some of the key constitutional provisions relating to taxation include:

Articles 265 to 289 of the Constitution of India

Article 265

Article 265 of the Constitution of India states that no tax can be

levied or collected except by the authority of law. This means that
all taxes must be imposed by a valid law. Accordingly for levy of any tax,
a law needs to be framed by the government.

This article acts as an armour against arbitrary tax extraction.

Article 266

Article 266 of the Constitution of India deals with the

Consolidated Funds and Public Accounts of India and the States.
Money out of the Consolidated Fund of India or a State can be taken only
in agreement with the law and for the purposes and of the Constitution.

Article 268

Article 268 of the Constitution of India deals with duties levied by

the Union government but collected and claimed by the State
governments. These duties include stamp duties, excise on medicinal
and toilet preparations, etc. These duties collected by states do not form a
part of the Consolidated Fund of India but are with the state only.

Article 269

Article 269 of the Constitution of India provides the list of various taxes
that are levied and collected by the Union and the manner of distribution
and assignment of Tax to States. These taxes include taxes on income
other than agricultural income, taxes on corporation tax and duties of
customs.

This is done to ensure that the States have a fair share of the tax revenue
and that they are able to raise the resources they need to provide
essential services to their citizens.

Article 269(A)

Article 269(A) of the Constitution of India was inserted by the 122nd

Amendment of the Constitution in 2017. This article gives the power to
collect goods and services tax (GST) on supplies in the course of inter-
state trade or commerce to the Government of India. The proceeds of this
tax are then apportioned between the Union and the States in the
following manner:

 50% of the proceeds are directly apportioned to the States.

 The remaining 50% is credited to the Consolidated Fund of India

(CFI). Out of this amount, a prescribed percentage is then
distributed to the States.

The percentage of the proceeds that are distributed to the States through
the CFI is determined by the Goods and Services Tax Council (GST
Council).

Article 270 (Taxes levied and distributed between the Union and
the States):

All taxes and duties referred to in the Union List, except the duties and
taxes referred to in 2 [articles 268, 269 and 269A],respectively, surcharge
on taxes and duties referred to in article 271 and any cess levied for
specific purposes under any law made by Parliament shall be levied and
collected by the Government of India and shall be distributed between the
Union and the States.

Article 271

Article 271 of the Constitution of India allows the Parliament to increase

any of the taxes or duties mentioned in Articles 269 and 270 by levying an
additional surcharge for a particular purpose. The proceeds from the
surcharge are credited to the Consolidated Fund of India.

Article 282 The power to make grants

Article 282 of the Constitution of India provides for grants by the Union
government to the States for any public purpose. The grants can be made
for special, temporary or ad hoc schemes. The power to grant sanctions
under Article 282 is not restricted.

Article 289

Article 289 of the Constitution of India states that the property and income
of the States are not liable to taxation by the Union government, except in
the following cases:

 If the Parliament makes a law to that effect.

 If the State government consents to such taxation.

The Parliament can make a law to tax the property and income of the
States if it is necessary for the purpose of implementing a constitutional
provision. For example, the Parliament can make a law to tax the property
and income of the States in order to raise revenue for the Union
government.

Conclusion

The constitutional provisions relating to taxation in India are complex and

have been interpreted by the courts in a number of cases. However, the
basic principles underlying these provisions are clear: to ensure that both
the Union and the States have the resources they need to function
effectively, while also protecting the interests of taxpayers.

The terms tax, fee, and cess refer to different forms of financial
charges imposed by governments, and each serves distinct
purposes. Here’s a breakdown of their distinctions:

Tax

 Definition: A compulsory financial charge imposed by the

government on individuals, businesses, or transactions to generate
revenue for public expenditure.

 Purpose: Used for general purposes, such as infrastructure,

defense, education, healthcare, and administration.

 Characteristics:

o Divided into Direct Taxes (e.g., income tax) and Indirect Taxes (e.g., GST).
Example: Income tax, corporate tax, GST, customs duty.
o Failure to pay taxes can result in penalties or legal
consequences.
 o Taxes are generally used for broad governmental functions.

Fee

 Definition: A charge for specific services or privileges, benefit

provided by the government. A charge imposed by the government
or a public authority in exchange for a specific service or privilege.

 Purpose: To cover the costs of delivering particular services, such

as issuing licenses, permits, or inspections or parking fees.

 Characteristics:

o Typically based on the cost of the service provided.

o Generally voluntary; individuals pay fees when they choose to

access certain services.

o fees are usually not considered a form of taxation and do not

contribute to general revenue.

Cess

 Definition: An additional charge imposed for a specific purpose,

usually linked to funding a particular project or service.

A cess is an additional charge imposed by the government for a

specific purpose, usually to fund a particular project or initiative.

 Purpose: Cesses are often temporary and are used to raise funds
for specific needs, such as education, health, or environmental
protection

 Characteristics:

o Can be levied as an extra charge on existing taxes (e.g., a

cess on income tax).
o The revenue collected from a cess is earmarked for a
designated purpose.
o Examples include the Swachh Bharat Cess (for cleanliness
initiatives in India) or education cess.
o Cesses can be mandatory and are used to address particular
issues rather than general government funding.

Summary

 Tax: Broad revenue source for general government functions.

 Fee: Specific charge for particular services or privileges.

 Cess: Additional charge for a specific purpose, often temporary and

project-based.
What is Tax Evasion Meaning

Tax evasion means illegally trying to pay less tax by using fraudulent
methods. Tax evasion includes lying about your finances, hiding income
statements, not keeping good records of transactions, saying you have
more tax breaks than you really do or showing personal expenses as a
part of business expenses.

It is a crime and can lead to punishment under the law.

Common Tax Evasion Tricks

Tax evasion takes place when you trick tax authorities on purpose. Here
are the different tricks they use:

 Hiding Income: Not telling about all the money you make, like cash
from a side job or interest from investments that you do not report.

 Overstating Deductions: Saying you spent money on things for your

job that you did not really spend, or claiming tax breaks for personal
stuff you do not qualify for.

 Submitting Fake Tax Forms: Sending in a tax form with wrong

information on purpose.

Examples of Tax Evasion

Here are some examples of tax evasion:

 You earn a good amount of money from freelance gigs or a small

business you run on the side, but you do not mention any of this
income on your tax papers.

 A business owner claims fancy dinners, lots of travel, or personal

shopping sprees as business expenses to make it seem like they
earned less and pay less tax.

 You hide your money in a secret bank account overseas to avoid

paying taxes on it.

 Getting involved in the underground market, like smuggling stuff to

skip import taxes or getting paid in cash to avoid reporting your
income.

What is Tax Avoidance Meaning

Tax avoidance involves using legal tactics to reduce the amount of tax you
owe. Essentially, it means using the tax system in one place to benefit
 yourself by paying less tax. Tax avoidance is about finding new ways to
avoid paying taxes, all the while staying within the limits of the law.

It can involve adjusting financial records so you do not break any tax
rules. While tax avoidance is allowed, sometimes it can be seen as a
crime, especially in certain situations.

Common Tax Avoidance Tricks

Here are some common tax avoidance tricks to avoid paying as much tax
as possible. Here are some of them:

 Maximising Deductions: Claiming all the deductions allowed by law,

like medical expenses, donations, and certain investment costs.

 Using Special Accounts: Putting money into retirement funds like

the PPF or NPS, which lets you pay less tax.

 Taking Advantage of Tax Credits: Getting credits, like for education

expenses, that directly lower your tax bill.

Examples of Tax Avoidance

Here are some examples of tax avoidance:

 Utilising Section 80C benefits by investing in financial instruments

like PPF or ELSS mutual funds to help you lower the amount of tax
you need to pay.

 You can show the money you spent as interest on your home loan,
buying health insurance, or paying school fees to lower your tax bill.

 Giving money to approved charities or organisations can give you

tax breaks. Sometimes, even giving to political causes can help you
save on taxes

Tax Planning Tax Management

Tax planning is a process that allows you to Tax management is the process of
minimise your tax liabilities legally or process of making sure that you comply with all
legally reducing one’s tax burden. tax laws to avoid penalties such as
hefty fines or worse.

Tax planning is elaborate. It is done by making With tax management, one can fulfil
investments and taking advantage of the several their annual tax obligations accurately
tax deductions, exemptions, and benefits allowed
by the government under the Income Tax Act. and on time.

The main goal of tax planning is to make a plan Tax management is more focused on
that helps you take maximum advantage of the the past and the present. It focuses on
tax benefits, which maximises your tax savings in maintaining financial records such as
the long term. salary slips, investment proofs, and
interest certificates.

The scope of tax planning is much more Scope in this case is limited.
comprehensive.

Tax planning is generally done by professionals The tax management process is done
such as tax advisors or tax planners. by both the taxpayers as well as tax
advisors.

Some examples of tax planning are – making Examples of tax management include –
investments in Section 80C instruments such as filing income tax returns on time,
PPF, ELSS, and EPF to maximise the Rs. 1.5 lakh maintaining necessary financial
deduction, restructuring your salary to include documents to support your tax filings,
tax exempt components such as House Rent accurately calculating tax liabilities, and
Allowance and Leave Travel Allowance, and staying updated with changes in tax
taking advantage of deductions under Sections laws and regulations.
80E, 80D, and 80G.

MODULE 2

• Income not included in the Total Income. • Residential status, •

Clubbing of Income, • Rate of Income Tax, •Heads of Income, Salaries,
Income from House Property, Income from Business or Profession,
Capital Gains, Income from Other sources, • Deductions under the
Income Tax Act, 1961

Exemptions under Section 10 of Income Tax Act, 1961

Income not included in the Total Income typically refers to earnings or receipts
that are exempt or excluded from taxable income or from being counted in a
specific income calculation
1. Agriculture Income:

We can still consider India is the country mostly depending upon the
agriculture and income generated from the activities of agriculture.
income derived from agriculture, such as rent or revenue from land used
for agricultural purposes, is exempt from tax

2. Share Of Profit From A Firm:

Profits distributed to a partner from a firm are exempt .A partners share in

the total income of the firm is totally exempted from the total income of
the hands of the partner because firm is separately assess as such

3. income for HUF (Hindu Undivided Family):

Income received by a member from the income of an HUF or from an

impartible estate are exempt under Section 10(2

4. Income of Charitable or Religious Trusts (Section 11 and 12)

Income derived by entities set up for charitable or religious purposes is

exempt, subject to compliance with specific conditions.

5. Any interest that has been paid to a person who is not a resident Indian

Any interest that has been paid to the account of a person who is not a
resident Indian

Any interest that has been paid to a person who is not a resident Indian,
but of Indian origin

6.Concession on travel given to an employee who is also a citizen

of India

7.Any income earned or received by a non-Indian citizen

8.Income earned by foreign employees in India under the

Cooperative Technical Assistance Program

9.Income earned by a consultant

10.Any compensation obtained in the event of a disaster

11. Income in the form of a scholarship

12.Income received in the form of interest

13Income received by family members of the armed forces in the

form of pension

14. Income earned via Mutual Funds

15.Income earned by authorised trade unions

16.Income earned by a child in accordance with Section 64 of the
Income Tax Act

Residential status in tax law

Under the Income Tax Act, 1961 of India, an individual's residential status
determines the scope of their taxable income in India. Here's a detailed
explanation of how residential status is determined and its implications:

1. Classification of Residential Status

An individual can be classified as one of the following under Indian tax

law:

a. Resident

 A person is considered a Resident if they satisfy either of the two

basic conditions A resident can further be:

o Resident and Ordinary Resident (ROR)

o Resident but Not Ordinary Resident (RNOR)

b. Non-Resident (NR)

 An individual who does not satisfy any of the basic conditions is

classified as a Non-Resident.

2. Determining Residential Status

Rules vary depending on the country, but most tax jurisdictions use
physical presence tests or domicile rules to classify residential status.
An individual is considered a Resident if they satisfy at least one of the
following conditions during a financial year:

Physical Presence Test

o An individual is considered a Resident if they satisfy at least

one of the following conditions during a financial year

o An individual is considered a resident if:

 He/she stays for 182 days or more in the financial

year, or

 He/she stays for 60 days or more in the financial

year and 365 days in the preceding four years.
 o Those failing these tests are non-residents.

3. Tax Implications Based on Residential Status

 Resident and Ordinarily Resident: Taxed on global income,

including earnings from both domestic and foreign sources. must
disclose foreign assets in the income tax return.

 Non-Resident: Taxed only on income earned within the

country.

 Not-Ordinary Resident: Taxed on income earned in the country

and income from foreign business controlled from within the country.

3. Additional Conditions for "Ordinary Resident"

A Resident is considered an Ordinary Resident (ROR) if they satisfy both of the following
conditions:

1. They have been a resident of India for 2 out of the last 10 years preceding the
financial year.
2. They have stayed in India for 730 days or more in the last 7 years preceding the
financial year.

4. Special Provisions

 Some countries have double taxation avoidance agreements (DTAA) to prevent

individuals from being taxed in two jurisdictions.

 If HUF is resident, then status of Karta would determine whether
HUF is ROR or RNOR. If Karta is ROR the HUF would be ROR but if
Karta is RNOR then the HUF would be RNOR.

Clubbing of Income in Income Tax

income tax introduced a “clubbing of income under section 60 to

section 64 of the income tax act.

Clubbing of income is the process of including another person's income in

your taxable income

When the income of another person is included in your income and taxed
in your hands, then such a situation is called Clubbing of Income. The
income clubbed in your income is called deemed income. The provisions
of clubbing of income are applicable only to individuals and no other type
of assessee like firm/HUF/Company, etc.

Let’s say you have a total income of Rs 3,00,000. It comprises a salary

income worth Rs 2,00,000 & rental income of Rs 1,00,000. With an aim to
fall below the basic exemption limit, you transfer rental income without
transferring the house ownership in your wife’s name. Now, while
calculating tax, your taxable income shall be taken at Rs 3,00,000, not Rs
2,00,000. This is because of the income tax provisions on Clubbing of
Income.

2. Situations Where Clubbing of Income Applies

a. Transfer of Income Without Transfer of Asset (Section 60)

 If an individual transfers income from an asset to another person

but retains ownership of the asset, the income is taxable in the
hands of the transferor.

 Example: A transfers the interest income from a fixed deposit to B

but keeps the deposit in their name. The interest income will still be
taxed as A's income.

b. Revocable Transfer of Assets (Section 61)

 If an asset is transferred under a revocable agreement (i.e., it can

be reversed), the income from that asset is taxed in the hands of
the transferor.

 Example: A transfers a house to B under an agreement that A can

take it back. Rental income will be taxable for A.

c. Income of a Minor Child (Section 64(1A))

 Income earned by a minor child is clubbed with the parent’s income

whose total income (before including the minor’s income) is higher.

 Exemptions:

o Income earned by the minor due to their manual work or

specialized knowledge/skills.

o A deduction of ₹1,500 per minor child is allowed from the

income clubbed.

d. Income of a Spouse (Section 64(1)(ii))

 If an individual’s spouse receives income from a concern in which

the individual has substantial interest, the income is clubbed with
 the individual’s income unless the spouse is professionally qualified,
and the income is attributable to their qualifications.

e. Transfer of Assets to Spouse (Section 64(1)(iv))

 If an individual transfers assets (other than in connection with an

agreement to live apart) to their spouse without adequate
consideration, income from the assets is clubbed with the
transferor's income.

 Example: A transfers shares to their spouse B without

consideration. Dividends from the shares will be taxable in A's
hands.

f. Transfer of Assets to Daughter-in-Law (Section 64(1)(vi))

 If an individual transfers assets to their daughter-in-law without

adequate consideration, the income from such assets is clubbed
with the transferor's income.

g. Income from HUF Assets (Section 64(2))

 If a member transfers their personal assets to the Hindu Undivided

Family (HUF) without adequate consideration, income arising from
those assets is clubbed with the income of the transferor.

ECEPTIONS or in which Cases Clubbing of Income is not

Applicable?
Income transferred before marriage:
Any asset or gift given to the would-be wife before the wedding will not be
considered under the clubbing provisions. Since the relationship of
husband and wife should exist both at the time of transfer of assets and at
the time of accrual of income.

Saved money is not considered asset transferred:

Any amount saved by the wife from money given for meeting daily or
household expenses will not be covered under the ambit of clubbing
provisions.

Rate of Income Tax

Income exceeding a certain threshold in a fiscal year is liable to taxation.
In India individuals are required to pay income tax according to the tax
slab their income falls within. with the tax liability determined by the
applicable income tax brackets. These brackets and tax treatments differ
between the new and old tax regimes.
Income tax is categorised into three distinct age-based groups

 Individuals younger than 60 years,

 Senior citizens aged between 60 and 80 years,

 Super senior citizens aged over 80 years.

In Budget 2024, the tax slabs for the new regime was revised as follows:

Rs. 0 to Rs. 3,00,000 - 0%

Rs. 3,00,001 to Rs. 7,00,000 - 5%

Rs. 7,00,001 to Rs. 10,00,000 - 10%

Rs. 10,00,001 to Rs. 12,00,000 - 15%

Rs. 12,00,001 to Rs. 15,00,000 - 20%

Above Rs. 15,00,001 - 30%

Income tax slab for individuals aged above 60 years to 80 years

Individuals of Age 60 Years

Income Slabs
to 80 Years

Up to Rs 3,00,000 NIL

Rs 3,00,001 - Rs 5,00,000 5%

Rs 5,00,001 to Rs 10,00,000 20%

Rs 10,00,001 and above 30%

Income tax slab for Individuals aged more than 80 years

Individuals of Age above 80

Income Slabs
Years

Up to Rs 5,00,000 NIL

Rs 5,00,001 to Rs 10,00,000 20%

 Rs 10,00,001 and above 30%

Key Features of the New Income Tax Regime for FY 2024-25

The key features of the new tax regime for FY 2024-25 is as follows:

 Default tax regime: It is the default tax regime. If individuals want

to choose the old regime then they have to file Form 10-IEA.

 Basic exemption limit: The basic exemption limit is Rs. 3 lakhs for
everyone irrespective of their age.

 Rebate u/s 87A: Rebate u/s 87A is available to the individual

taxpayers if their income is upto Rs. 7 lakhs. Hence, they will have
zero tax liability if their income is under Rs. 7 lakhs.

 Surcharge: The highest surcharge rate is 25% under the new

regime as opposed to 37% in the old regime.

Revised Income Tax Slabs Under the New Regime: Key Changes
and Their Impact

The Union Budget 2024 has introduced significant updates to the income
tax regime, aimed at simplifying the tax structure and providing relief to
taxpayers. The revised income tax slabs bring expanded thresholds for
certain categories, ensuring more taxpayers benefit from lower rates.
These changes not only reflect the government’s commitment to boosting
disposable income but also encourage individuals to adopt the new tax
regime. The following table depicts the changes made in the new regime
to benefit the taxpayers:

Income Tax Deductions Guide: Sections 80C to 80U

What are Tax Deductions?

Tax deductions are specific expenses or investments that reduce an

individual’s taxable income, thus lowering the amount of income tax they
are required to pay. The government allows these deductions to
encourage individuals to save and invest, purchase insurance policies, and
contribute to specific funds and schemes.
Section 80C is one of the most popular and favorite sections amongst
taxpayers as it allows them to reduce taxable income by making tax-
saving investments or incurring eligible expenses.

Who can claim Section 80C deduction?:

Section 80C deduction can be claimed by Individuals and HUFs.

 Maximum deduction allowed under section 80C?: Up to

Rs.150,000 can be claimed as deduction every year from the Gross
total income. Companies, partnership firms, and LLPs cannot avail
the benefit of this deduction.

Some eligible investments and expenditures under Section 80C

include:

 Life Insurance Premium

 Public Provident Fund (PPF)
 Employees’ Provident Fund (EPF)
 National Savings Certificate (NSC)
 Equity-Linked Savings Schemes (ELSS)
 Tuition Fees for children (up to 2 children)
 Principal repayment on a home loan
 Fixed deposits (5-year tenure with scheduled banks)
 Sukanya Samriddhi Account deposits
 Senior Citizens Savings Scheme (SCSS)

2. Additional Deductions

a. Section 80CCC

 Contribution to annuity plans of insurance companies (e.g., pension

plans).

 Limit: Included within the ₹1,50,000 cap under Section 80C.

b. Section 80CCD

 Contributions to the National Pension Scheme (NPS):

 o Section 80CCD(1): Contributions by the individual (up to
10% of salary for employees or 20% of gross income for self-
employed; max ₹1,50,000 combined with 80C).

o Section 80CCD(1B): Additional contribution of ₹50,000 to

NPS (over and above the ₹1,50,000 cap under Section 80C).

o Section 80CCD(2): Employer's contribution to NPS (up to

10% of salary; no monetary limit).

3. Deductions for Health Insurance and Medical Expenses

a. Section 80D

 Maximum Limit: ₹25,000 (₹50,000 for senior citizens).

 Eligible Expenses:

o Premiums for health insurance policies for self, spouse,

children, and parents.

o ₹5,000 for preventive health check-ups (included in the limit).

o Medical expenses for senior citizens (if no health insurance is

available).

b. Section 80DD

 Maximum Limit: ₹75,000 (₹1,25,000 for severe disability).

 Eligible Expenses:

o Medical treatment or maintenance of a dependent with a

disability.

c. Section 80DDB

 Maximum Limit:

o ₹40,000 for general taxpayers.

o ₹1,00,000 for senior citizens.

 Eligible Expenses:

o Treatment for specified diseases (e.g., cancer, AIDS, kidney

failure).

4. Deductions for Home Loans

a. Section 24(b) (Not under Chapter VI-A but relevant)

 Deduction on home loan interest (up to ₹2,00,000 for self-

occupied property).

b. Section 80EE

 Additional deduction of ₹50,000 for first-time homebuyers (subject

to conditions).

c. Section 80EEA

 Deduction of up to ₹1,50,000 on interest for affordable housing

loans (subject to conditions).

5. Deductions for Donations and Contributions

a. Section 80G

 Deduction for donations to specified funds and charitable

institutions.

 Percentage of Deduction: 50% or 100% of the amount donated

(subject to limits).

b. Section 80GGA

 Donations for scientific research or rural development.

 Fully deductible (100%).

c. Section 80GGC

 Contributions to political parties or electoral trusts.

 Fully deductible.

6. Deductions for Education Loans

Section 80E

 Deduction on interest paid on education loans for higher studies.

 Duration: Up to 8 years or until repayment, whichever is earlier.

 No monetary limit.

7. Deduction for Savings Accounts

Section 80TTA
  Deduction of up to ₹10,000 on interest earned from savings
accounts with banks, post offices, or cooperative societies.

Section 80TTB (For Senior Citizens)

 Deduction of up to ₹50,000 on interest earned from deposits

(savings or fixed) with banks, post offices, or cooperative societies.

8. Deductions for Specified Individuals

a. Section 80U

 Deduction for individuals with disabilities.

 Limits: ₹75,000 (general disability) or ₹1,25,000 (severe disability).

9. Other Deductions

a. Section 80GG

 Deduction for rent paid if HRA is not received.

 Limit: ₹5,000/month or 25% of total income, whichever is less.

b. Section 80JJA

 Deduction for profits from businesses involving the collection and

processing of biodegradable waste.

10. Deductions for Businesses and Professionals

 Section 80IBA: For profits from affordable housing projects.

 Section 80P: For income from cooperative societies.

MODULE 3

Income Tax Authorities: Power and Functions

What is Income Tax Assessment?

Once you file your income tax return, it undergoes a thorough review
process by the Income Tax Department (ITD). This review involves
assessing and verifying the details you submitted. If everything is
accurate and compliant, you’ll receive your income tax refund. Essentially,
Income Tax Assessment is the examination of the information provided in
your return to ensure it meets all regulatory requirements.

In simpler terms, Income Tax Assessment is the process where the ITD
reviews the details from your tax return to confirm their accuracy and
compliance.
When it comes to income tax, taxpayers often find themselves at odds
with the decisions made by assessing officers. To ensure fairness and
justice, the Income Tax Act, 1961 provides avenues for redressal through
appeals and revisions. These mechanisms enable taxpayers to challenge
and seek rectification of assessment orders that they deem erroneous or
prejudicial. Appeals allow taxpayers to seek a higher authority’s review of
an assessment order.

Appeal in Income Tax

An appeal process begins with an assessment order passed by the

Assessing Officer (AO) under various sections such as Section 143(3), 144,
153A and 147(1). When an assessee is dissatisfied with such an order, the
first level of appeal is to the Commissioner (Appeals) within 30 days of the
order’s issuance.

The specific time limit for filing an appeal under Section 249(2) is within
30 days from the date of service of the assessment order. However, if the
Commissioner is satisfied that there was sufficient and reasonable cause
for the delay, the appeal may be admitted even after the expiry of the
given time limit. The appeal process has been streamlined to be
conducted electronically using Form 35.

Section 253 appeal is to the Income Tax Appellate Tribunal

The second level of appeal is to the Income Tax Appellate Tribunal (ITAT),
which must be filed under Section 253 within 60 days of the order passed
in the first appeal. Appeal shall be filed to ITAT in Form No. 36 within 60
days of service of order from the office of Commissioner (Appeal). This
level of appeal is open to both the assessee and the AO, unlike the first
appeal, which is available only to the assessee. The ITAT is the highest
fact-finding authority.

Appeal to High Court, Sec. 260A

An appeal to the High Court is permissible under Section 260A only when
a substantial question of law is involved. CIT or assessee aggrieved by any
order of ITAT may file appeal to High Court within 120 days from the date
of order received, It shall be heard by a bench of two judges.

Supreme Court under Section 261

With the leave of the High Court, the assessee can approach the
Supreme Court under Section 261. Additionally, an assessee can file a
Special Leave Petition under Article 136 of the Constitution.

Burden of Proof

The burden of proof typically lies on the assessee to demonstrate that

their income is exempt from taxation. However, this is not always the
case, as illustrated by different court rulings. In Ena Chaudhuri v. CIT,
the court held that the appellant failed to produce evidence to support the
claim that her income was exempt from tax and thus the burden of
proving such exemption rested on her.

What Is Double Taxation?

Double taxation is when taxes are levied twice on the same source of
income. It can occur when income is taxed at the corporate and personal
level. Double taxation can also happen in international trade or
investment when the same income is taxed in two countries.

Double taxation refers to income tax being paid twice on the same source
of income.

This can occur when income is taxed at both the corporate and personal
level, as in the case of stock dividends.

Double taxation also refers to the same income being taxed by two
countries.

How Double Taxation Works

Double taxation often occurs because corporations are considered

separate legal entities from their shareholders. As such, corporations pay
taxes on their annual earnings, just like individuals.

International Double Taxation

Income may be taxed in the country where it is earned and levied again
when repatriated to the home country. It may make international business
too expensive to pursue.

To avoid these issues, countries have signed treaties to avoid double

taxation, often based on models provided by the Organization for
Economic Cooperation and Development (IECD). In these treaties,
signatory nations agree to limit their taxation of international business to
augment trade between the two countries and avoid double taxation.
Double taxation is an issue related to the taxation of income that crosses
boundaries. DTAA can either cover all types of income or can target a
specific type of income depending upon the types of businesses/holdings
of citizens of one country in another. The following categories are covered
under the Double Taxation Avoidance Agreements (DTAA): services,
salary, property, capital gains, savings/fixed deposit accounts.

Sections 90 and 91 under the Income Tax Act 1961 offers specific relief to
taxpayers to avoid double taxation. Section 90 deals with those provisions
involving taxpayers who have paid tax to another country with which India
has a DTAA. Section 91 is for those countries with which India does not
have a DTAA. In effect, India provides relief to both types of taxpayers.
Some of the major benefits of Double Taxation Avoidance Agreements
(DTAA) are mentioned below:

The countries under the DTAA are provided relief from double taxation.
Relief on double taxation is provided by the exemption of incomes earned
abroad from tax in the resident country or by providing credit to the
extent taxes that have been already been paid abroad. In some cases, the
DTAA also provide concessional rates of tax. DTAA can become an
incentive for even legitimate investors to route investments through low-
tax regimes to sidestep taxation. This leads to a loss of tax revenue for
the country. DTAA also provides tax certainty to the various investors and
businesses of both the countries through the clear allocation of taxing
rights between the contracting states by Agreement.

As per Article 279A(1) of the Constitution, the GST Council had to be

constituted by the President within 60 days of the commencement of the
Constitution (One Hundred and First) Amendment Act, 2016.
MODULE 4

Introduction to Goods and Services Tax

Before Introduction of GST, the indirect tax system in India was VAT, Sales
tax, service tax central exercise, commercial tax etc imposed by both
central and state Govt. i.e the multiplicity of taxes levied by the Centre
and State Govt on goods and services. This has led to a complex and
conflicting principles in indirect tax structure, adding to the multiple
compliance and administrative costs.

There is no uniformity in tax rates and structure across States. There is

cascading of taxes due to tax on tax’.

By amalgamating a large number of Central and State taxes into a single

tax, it would mitigate cascading, or double taxation in a major way and
pave the way for a common national market. From the consumer point of
view, the biggest advantage would be in terms of a reduction in the
overall tax burden on goods.

In India constitution (101st Amendment) Act 2016, which paved the way
for introduction of GST.

• GST was introduced as the Constitution 122nd Amendment Bill (One

Hundred and Twenty Second Amendment) Act 2017 • GST came in to
force on 1 st July 2017 throughout India Under dual GST Model. • The GST
is governed by GST Council and its Chairman is Union Finance Minister of
India.

Goods and services tax –

“Any tax on supply of goods or service or both, except taxes on the supply
of the alcoholic liquor for human consumption”

The above definition clearly says that “GST is a single Indirect Tax through
out India applicable on supply of goods or service or both.

GST is a destination based tax levied at a single point at the time of

consumption of goods or services by the ultimate consume”. The final
consumer will thus bear only the GST charged by the last dealer in the
supply chain.
Dual GST model-

India has adopt dual GST Model because India is a federal country both
centre and state have been assigned the power to levy and collect taxes
through appropriate legislation. Dual GST will Therefore, keeping with the
constitutional requirement of fiscal federation. Both centre and state will
simultaneously levy GST on a common tax base

1. On intra-state (Transactions made within a single state)

Central GST (CGST): CGST would be administered by the Central

Government

 It Levied by the Central Government on intra-state supplies of goods

and services.

 At such a rate (maximum 20%,) as notified by the Central

Government on recommendation of GST Council; and

State GST (SGST): SGST would be administered by the State

Government

 It Levied by State Governments on intra-state supplies. Collected in

such a manner as may be prescribed; and z Shall be paid by the
taxable person.

2. On Inter-state (one state to another state) IGST (Integrated

goods and service Tax)

IGST will be levied and administered by centre on every Inter-state supply

of goods and services under the Article 269A (1)

GST is a consumption based tax, therefore, taxes are paid to the state
which the goods or services are consumed not the state in which they
were produced.

At such a rate (maximum 40%,) as notified by the Central Government on

recommendation of GST Council;

Features of GST

 GST would be applicable on “supply of goods and services

Goods means every kind of movable property other than money and
securities including actionable claims, growing crops
Import of goods and services -would be treated as inter-state supplies
and would be
subject to IGST in addition to the applicable customs duties
 Destination-Based Tax: Tax is collected where the goods or services
are consumed, not where they are produced.

 Input Tax Credit (ITC):

o Tax paid on inputs can be used to offset tax liability on output,

avoiding cascading taxes.

 Comprehensive Coverage:

o Applies to all goods and services except alcohol for human

consumption, petroleum products (temporarily), and real estate
transactions (stamp duty).

 Threshold Limits:

o Exemptions for businesses with turnover below a certain

threshold (e.g., ₹40 lakh for goods, ₹20 lakh for services).

3. GST Slabs

India’s GST is divided into multiple tax slabs:

 0%: Essential goods like fresh produce.

 5%: Items like packaged food and essential services.

 12%, 18%: Most goods and services fall here.

 28%: Luxury items and sin goods (e.g., tobacco, high-end cars).

The 101st Amendment Act of 2016 paved the way for the introduction of a
new tax regime (i.e. goods and services tax – GST) in the country

The amendment inserted a new Article 279-A in the Constitution of

India. This article empowered the President to constitute a GST Council by
an order

The Goods and Services Tax (GST) Council is a constitutional body

established under Article 279A of the Indian Constitution. It plays a
crucial role in shaping, implementing, and managing the Goods and
Services Tax in India. As a federal institution, the GST Council ensures
cooperation between the Centre and the States to create a unified tax
regime across the country

The Goods and Services Tax Council is a constitutional body that is

responsible for managing all aspects of the Goods and Services Tax (GST)
in India. This includes decisions on tax rates, administration, and other
related matters.
As the key decision-making body, Ensuring a uniform tax rate for goods
and services nationwide remains a primary responsibility of the GST
Council.

. Composition
The GST Council consists of members from both the Central Government
and the State Governments, reflecting the federal character of India's
polity.

Members of the GST Council

1. Chairperson:

The Union Finance Minister.

2. Members:

o The Union Minister of State for Finance or Revenue.

o Ministers in charge of Finance or Taxation from each State.

Decision-Making Process

 Voting Weightage:

o Central Government: 1/3 of the total votes.

o State Governments (collectively): 2/3 of the total votes.

 Decision Approval: Requires a 3/4 majority of weighted votes.

Every decision of the Council is to be taken by a majority of not less

than three-fourths of the weighted votes of the members present and
voting at the meeting.

Functions of the Goods and Services Tax Council

The Council is tasked with making recommendations to both the central

and state governments on various aspects of GST, including:

The consolidation of taxes, cesses, and surcharges levied by the central,

state, and local bodies to be merged into GST.

Determining the goods and services to be subjected to or exempted from

GST.

Formulating model GST laws, principles of levy, and apportionment of GST

on inter-state transactions.

Establishing threshold turnover limits for GST exemptions.

Setting GST rates, including floor rates with bands.

Proposing special rates during natural calamities or disasters.

Addressing specific provisions for certain states.

Recommending the GST implementation date for specific petroleum

products.

Recommending compensation to states for revenue loss due to GST

implementation, for a five-year period.Based on these recommendations,
the Parliament determines the compensation to be provided to the states.

 Designing procedures for GST registration, returns, and compliance.

 Reviewing the impact of GST implementation and proposing necessary

amendments.

 Resolving disputes between the Central Government and States or

among States regarding GST implementation.
Module 5

What is Reverse Charge Mechanism?

Typically, the supplier of goods or services pays the tax on supply. Under
the reverse charge mechanism, the recipient of goods or services
becomes liable to pay the tax, i.e., the chargeability gets reversed.

Reverse Charge means the liability to pay tax is on the recipient of supply
of goods or services instead of the supplier of such goods or services in
respect of notified categories of supply. The term ―reverse charge is
defined under section 2 (98) of CGST Act.

The objective of shifting the burden of GST payments to the recipient is to

widen the scope of levy of tax on various unorganized sectors, to exempt
specific classes of suppliers, and to tax the import of services (since the
supplier is based outside India).

Only certain types of business entities are subject to the reverse charge
mechanism. Find out the business constitution of any GST number using
the GST search tool.

When is Reverse Charge Applicable?

A. Supply of certain goods and services specified by the CBIC

As per the powers conferred in section 9(3) of CGST Acts, the CBIC has
issued a list of goods and services on which reverse charge is applicable.

B. Supply from an unregistered dealer to a registered dealer

Section 9(4) of the CGST Act states that if a vendor is not registered under
GST supplies goods to a person registered under GST, then reverse charge
would apply. This means that the GST will have to be paid directly by the
receiver instead of the supplier. The registered buyer who has to pay GST
under reverse charge has to do self-invoicing for the purchases made.

In intra-state purchases, CGST and SGST have to be paid under reverse

charge mechanism (RCM) by the purchaser. Also, in the case of inter-state
purchases, the buyer has to pay the IGST. The government notifies the list
of goods or services on which this provision gets attracted from time to
time.

C. Supply of services through an e-commerce operator

All types of businesses can use e-commerce operators as an aggregator to
sell products or provide services. Section 9(5) of the CGST Act states that
if a service provider uses an e-commerce operator to provide specified
services, the reverse charge will apply to the e-commerce operator and he
will be liable to pay GST. This section covers the services such as:

 Transportation services to passengers by a radio-taxi, motor cab,

maxi cab and motorcycle. For example – Ola, Uber.

 Providing accommodation services in hotels, inns, guest houses,

clubs, campsites or other commercial places meant for residential or
lodging purposes, except where the person supplying such service
through electronic commerce operator is liable for registration due
to turnover exceeding the threshold limit. For example – Oyo and
MakeMyTrip.

 Housekeeping services, such as plumbing and carpentering, except

where the person supplying such services through electronic
commerce operators are liable for registration due to turnover
beyond the threshold limit. For example, Urban Company provides
the services of plumbers, electricians, teachers, beauticians etc. In
this case, Urban Company is liable to pay GST and collect it from the
customers instead of the registered service providers.

Also, suppose the e-commerce operator does not have a physical

presence in the taxable territory. In that case, a person representing such
an electronic commerce operator will be liable to pay tax for any purpose.
If there is no representative, the operator will appoint a representative
who will be held liable to pay GST.

What is input tax credit with example?

Input Tax Credit (ITC) refers to the tax paid on purchases for the business
which can be claimed as deduction at the time of paying tax on output
tax.

Here’s how:
When you buy a product/service from a registered dealer you pay taxes on
the purchase. On selling, you collect the tax. You adjust the taxes paid at
the time of purchase with the amount of output tax (tax on sales) and
balance liability of tax (tax on sales minus tax on purchase) has to be paid
to the government. This mechanism is called utilization of input tax credit.
For example- you are a manufacturer:

1. Tax payable on output (final product) is Rs 450

2. Tax paid on input (purchases) is Rs 300

3. You can claim input credit of Rs 300 and deposit the rest Rs 150 as
taxes in cash

Essential Conditions for Availing Input Tax Credit (ITC) under GST

To claim an input tax credit under GST, a dealer must satisfy the following
conditions:

• Valid Documentation: The dealer should possess a valid Tax Invoice,

Debit or Credit Note, or Supplementary Invoice provided by the supplier
for the goods or services purchased.

• Receipt of Goods/Services: The dealer must have received the goods or

services for which the input tax credit is claimed.

• Filed Returns: The dealer should have filed the required returns,
specifically GSTR-3, a summary return of inward and outward supplies.

• Tax Payment Confirmation: It’s essential to ensure that the supplier has
paid the appropriate tax amount to the government. The input tax credit
can only be claimed if the suppliers’ taxes have been properly paid to the
authorities.

• Invoice Matching: The dealer must have completed the process of

matching invoices. This involves verifying the details of invoices uploaded
by the supplier with the dealer’s own records. Any discrepancies should
have been resolved, and the final input tax credit amount after necessary
adjustments should have been determined.

Composition Scheme

Businesses with annual turnover up to Rs 1.5 cr. can opt for composition
scheme. In case of North-Eastern states and Himachal Pradesh, the limit is
now Rs 75 lakhs. They need not raise any tax invoice but need to issue bill
of supply. – Turnover of all businesses with same PAN has to be added up
to calculate turnover for the purpose of composition scheme.

Who can opt for composition scheme: Only Manufacturers of goods,

Dealers, and Restaurants (not, serving alcohol) can opt for composition
scheme Tax rate:
‘Goods’ under customs act

Section 2 of Customs Act, 1962

(15) “goods” includes - (a) vessels, aircrafts and vehicles; (b) stores; (c)
baggage; (d) currency and negotiable instruments; and (e) any other kind
of movable property [Section 2(22)].

(8) “coastal goods” means goods, other than imported goods, transported
in a vessel from one port in India to another [Section 2(7)];

(9) “dutiable goods” means any goods which are chargeable to duty and
on which duty has not been paid [Section 2(14)];

(12) “export goods” means any goods which are to be taken out of India
to a place outside India [Section 2(19)];

(18) “imported goods” means any goods brought into India from a place
outside India but does not include goods which have been cleared for
home consumption [Section 2(25)].

(23) “prohibited goods” means any goods the import or export of which is
subject to any prohibition under this Act or any other law for the time
being in force but does not include any such goods in respect of which the
conditions subject to which the goods are permitted to be imported or
exported have been complied with [Section 2(33)];

(32) “warehoused goods” means goods deposited in a warehouse [Section

2(44)]