Chapter 13 - Income Tax Liability
Chapter 13 - Income Tax Liability
Chapter 13 - Income Tax Liability
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Taxation Revisionary Series
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CA Intermediate
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May, 2024
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CA Nishant Kumar
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Income Tax Revision Schedule
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Date Day Topic
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01-02-2024 Thursday L1 - Basics of Taxation and General Tax Rates
03-02-2024 Saturday L2 - Residence and Scope of Total Income
06-02-2024 Tuesday L3 - Income from Salaries
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08-02-2024 Thursday L4 - Income from House Property
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10-02-2024 Saturday L5 - Profits and Gains from Business or Profession
13-02-2024 Tuesday L6 - Capital Gains
15-02-2024 Thursday L7 - Income from Other Sources
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17-02-2024 Saturday L8 - Clubbing of Income
20-02-2024 Tuesday
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L9 - Set Off; Carry Forward of Losses
22-02-2024 Thursday L10 - Deductions from Gross Total Income
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02-03-2024 Saturday L11 - Return Filing and Self Assessment
03-03-2024 Sunday L12 - TDS, TCS, Advance Tax
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Date Day Topic
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05-03-2024 Tuesday L1 - Supply Under GST
07-03-2024 Thursday L2 - Charge Under GST; Composition Levy
09-03-2024 Saturday L3 - Place of Supply
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12-03-2024 Tuesday L4 - Exemptions from GST
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14-03-2024 Thursday L5 - Time of Supply
16-03-2024 Saturday L6 - Value of Supply
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19-03-2024 Tuesday L7 - Input Tax Credit
21-03-2024 Thursday L8 - Registration Under GST
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23-03-2024 Saturday L7 - Tax Invoice; Credit and Debit Notes; E-Way Bill
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26-03-2024 Tuesday L8 - Accounts and Records; TDS & TCS
28-03-2024 Thursday L9 - Payment of Tax
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Component Description
Total Income The amount calculated by subtracting deductions outlined in Chapter VI-A from
the Gross Total Income.
Gross Total The sum of income from five distinct categories. This calculation includes
Income (GTI) adjustments for income clubbing and provisions for the set-off and carry
forward & set-off of losses.
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Income to be Considered While Computing Total Income of Individuals
Income Type Description
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Personal Income (under 5 This includes salaries, income from house property, business or
income categories) professional profits and gains, capital gains, and other sources of
income.
Income as a Partner in a • Salaries, bonuses, etc., received by a partner are taxed as
Firm/LLP business income.
• Interest on capital and/or loans to the firm/LLP is also taxed as
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the partner's business income.
• The above incomes are taxable only to the extent they are
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Step Action Details
• Influenced by presence in India and includes categories like
Resident and ordinarily resident, Resident but not ordinarily
resident, and Non-resident.
• If an individual, who is an Indian citizen, earns more than
₹ 15 lakh during the past year (excluding income from
foreign sources) and is not liable to pay taxes in another
country due to their domicile, residence, or similar criteria,
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they are deemed a resident in India for that previous year.
This deemed resident is categorized as “resident but not
ordinarily resident” in India for that year.
2. Classification of Income classified under Salaries, Income from house property,
Income Under Profits and gains of business or profession, Capital Gains, and Income
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Different Heads from other sources. Specific charging and deeming provisions apply.
3. Computation of Calculate income for each category, applying relevant provisions,
income under each excluding exempt income, including allowable deductions, and
head choosing between the default or optional tax regime.
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4. Clubbing of income Include income transferred to or generated by certain individuals in
of spouse, minor the taxpayer's income for tax computation, with specific exemptions
child, etc. available.
5. Set-off or carry Adjust losses within the same income category or across different
forward and set-off categories, with provisions for carrying forward unabsorbed losses.
of losses Restrictions apply based on the type of loss and income head.
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6. Computation of Combine income from all categories, applying clubbing rules and
Gross Total Income adjusting for losses, to determine GTI.
(GTI)
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7. Deductions from Apply deductions under Chapter VI-A and section 10AA to calculate
Gross Total Income total income, considering specific payments, certain incomes, and
other incomes, with limitations based on the tax regime chosen.
8. Total income Calculate total income by deducting allowable deductions from GTI,
rounding off to the nearest ₹10, and prepare for tax calculation.
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9. Application of the Determine tax liability using concessional tax rates in the default tax
rates of tax on the regime or regular provisions under the optional tax regime, applying
total income specific tax rates to certain incomes and general slab rates to the
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rest.
10. Surcharge and Aspect Detail
Rebate Surcharge Surcharge is an extra tax levied on the income-
Overview tax payable. It is calculated as a percentage of
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• Total income > ₹2 crore but ≤ ₹5 crore
(excluding dividend income and capital
gains under sections 111A, 112, 112A):
25% surcharge on income-tax
• Total income > ₹5 crore (excluding
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dividend income and capital gains under
sections 111A, 112, 112A): 37%
surcharge on income-tax
• Total income > ₹2 crore (including
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dividend income and capital gains under
sections 111A, 112, 112A, not covered
above): 15% surcharge on income-tax
• Surcharge on dividend income and
capital gains under sections 111A, 112,
112A: Not exceeding 15%
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Marginal Marginal relief is available under both tax
Relief regimes to ensure that the increase in tax
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Without Business or regime (Section 115BAC) and regular provisions, including
Professional Income AMT if applicable.
• This comparison helps decide the more beneficial option and
whether to opt out of the default regime.
• Flexibility to choose tax under the default regime one year
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and opt out in another.
• Decision to remain in or opt out of the default regime can be
made annually.
• Crucial to calculate total income and tax liability under both
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13 Tax Regime Choice
(b). for Assessees With regimes (including AMT) to ascertain the more advantageous
Business or option.
Professional Income • Option to opt out of the default tax regime is available.
• Decision must be made by the due date for submitting the
income return under section 139(1) for that year.
• Once opted out, the decision applies to subsequent years but
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can revert to the default regime only once.
• After reverting once, cannot choose this option again, except
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income.
• The assessees who avail the profit linked deductions (SEZ, etc.), and investment linked
deductions (Section 35AD) are subject to something known as Alternate Minimum Tax.
• Government of any country needs regular inflow of tax to work for the welfare of the country,
and therefore, the concept of Alternate Minimum Tax has been introduced.
• Alternate Minimum Tax = 18.5% of Adjusted Total Income
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• Adjusted Total Income is calculated as follows:
Particulars ₹
PGBP xxx
Add: Deduction u/s 10AA xxx
Add: Deduction u/s 35AD xxx
Add: Deductions u/s 80JJAA, 80QQB, 80RRB xxx
xxx
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Less: Depreciation u/s 32 on assets on which deduction u/s 35AD was claimed xxx
Adjusted Total Income xxx
Important Notes
• This concept is applicable to all the assessees except companies.
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• Alternate Minimum Tax is applicable only when the Adjusted Total Income of the assessees
exceeds ₹20 lakhs.
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Adjustments While Computing PGBP Income
PGBP Adjustments - Expenditures
S. Transaction Treatment
No. If Debited to P&L Otherwise
1 Rent Paid for Residential House Add Back to Net Profit No Action Required
2 Depreciation Always Add Back; Compute Compute and Deduct in
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fresh and deduct in the end the end
3 Municipal Taxes Paid for House Add Back to Net Profit; Subtract while
Property Subtract while computing computing IFHP
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IFHP
4 Contribution to Outsiders for No Action Required Subtract from Net Profit
Scientific Research (Old Scheme)
5 Contribution to Outsiders for Add Back to Net Profit No Action Required
Scientific Research (New Scheme)
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6 Payment exceeding ₹10,000 in Add Back to Net Profit (Full No Action Required
cash to Non-Transporters Amount)
7 Payment exceeding ₹35,000 in Add Back to Net Profit (Full No Action Required
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10 Car used for Personal as well as Add back personal portion of No Action Required
for Business Use car expenditure
11 Drawings Add Back to Net Profit No Action Required
12 Investment in NSC Add Back to Net Profit; Subtract from GTI
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GST
20 Income Tax Paid Add Back to Net Profit No Action Required
21 Interest on Loan for Personal Add Back to Net Profit No Action Required
Purpose
22 Advertisement in a souvenir Add Back to Net Profit No Action Required
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published by local political party
23 Purchase of Furniture or Any Add Back to Net Profit; Consider in Block and
Other Capital Asset Consider in Block and Provide Provide Depreciation
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Depreciation
24 Family Planning Expenditure (for Add Back to Net Profit No Action Required
Non-Corporate Assessees)
7 Income from UTI Subtract from Profit; Include Include Gross Value in IFOS
Gross Value in IFOS
8 Honorarium Subtract from Profit; Include in Include in IFOS
IFOS
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11 Interest on Debentures Subtract from Profit; Include Include Gross Value in IFOS
Gross Value in IFOS
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12 Profit from Sale of Subtract from Profit; Treated as Treated as Capital Gains
Scientific Research Asset Capital Gains
13 Sale of Goods to Relative No Action Required No Action Required
at less than MRP
14 Royalty on Patents Subtract from Profit; Include in Include in IFOS
IFOS
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PGBP Adjustments - Incomes
S. Transaction Treatment
No. If Credited to P&L Otherwise
15 Bad Debts Recovered Subtract the unreasonable Add to Profit only the
(Credited Unreasonably) portion reasonable portion
16 Warehousing Charges Subtract from Profit; Taxed as Taxed as Specified Business
Specified Business Income Income
17 Interest on FDs Subtract from Profit; Include Include Value in IFOS
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Value in IFOS
18 Interest on PPF Subtract from Profit; Include Include Value in IFOS
Value in IFOS
19 Interest on Savings Bank Subtract from Profit; Include Include Value in IFOS
Value in IFOS
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20 Interest on National Subtract from Profit; Include Include Value in IFOS
Savings Certificates VIII Value in IFOS
Issue
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Important Questions: Questions 3, 4, 5, 8, 9, 10, 17, 18, 19, 20, 21, 23, 24, 26
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