INCOME TAX

 The constitution of India – Schedule VII – Union list entry 82 has given the power to the
central government to levy a tax on any income other than agricultural income.

 The Income Tax law consists of Income Tax Act 1961, Income Tax Rule 1962, notification
and circulars issued by Central Board of Direct Taxes (CBDT), Annual Finance Acts and
judicial pronouncements by the Supreme Court and high courts.

PURPOSE OF TAXATION
For providing various facilities like: -
 Medical care.
 Security of life (Defence & police)
 Means of communication.
 Transport.
 Infrastructure, road, railways and airport.
 To lessen the gap between HIG and LIG.

TYPES OF TAXES
 Direct Tax: - Individual directly pay and bear the burden of tax like –
 Income Tax
 Professional Tax
 Wealth Tax
 Corporate Tax
 Indirect Tax: -
 Firms pay the tax but consumer bear the burden.
 Those which are not levied upon you directly. Individual pays the taxes via consumption,
expenditure and right on income or property.
 Equal for everyone, rich or poor.
 On spending or investing, you start paying indirect tax.
 Goods and services tax (GST).
 Excise duty, VAT etc.

Direct Taxes Indirect Taxes

Income Tax Custom Duty

Corporate Tax Excise Duty

Goods and Services

Property Tax Tax

Wealth Tax

INDIRECT TAXES
 Value
Added Tax

Custom Central
Duty
Indire Sales Tax

ct Tax
Service Excise
Tax Duty

HEADS OF INCOME AND SECTIONS

Heads of Income Section

 Income from Salary 15-17

 Income from House Property 22-27
 Income from Business/ Profession 28-44
 Income from Capital Gain 45-55
 Income from Other sources 56-58

Note: - Section 18-21 of Income Tax Act deal with the definition of deduction from and amounts
not deductible in determining the taxable income under the head “Interest on securities”.

TAX PAYER’S RESPONSIBILITY – Personnel having anyone of the following are liable to fill up
income tax return or e-filing Income Tax return –
a) Gross total income >2,50,000.00 (before allowing any deductions under Section 80C to
80U).
b) Rs. 3,00,000.00 for senior citizens (who are more than 60 years old but less than 80 yrs
old).
c) Rs. 5,00,000.00 for super senior citizens (who are more than 80 years old).
d) A company or a firm irrespective of whether you have income or loss during the financial
year.
e) You want to claim an income tax refund.
f) You want to carry forward a loss under a head of income.
g) You have exempt long term capital gains from – sale of equity shares in a company or sale
of unit of equity oriented mutual funds, of more than 2,50,000.00 in a financial year.
h) Even though these gains are exempt from tax, such persons have to mandatory file an
income tax return.
i) If you are a Resident individual and have an asset or financial interest in an entity located
outside of India or if you are a resident and a signing authority in a foreign account.
j) If tax has been deducted from your income than avoid a notice from the income tax
department.
k) Having property more than 30 lakhs.
l) Share bond investment more than 01 lakh.
m) Mutual fund investment more than 02 lakh.
n) Credit card transaction more than 02 lakh.
 o) Club member where entry fee is Rs. 25,000.00

CAPITAL GAIN
 Capital gain in the profit one earns on the sale of an asset like stocks, bonds or real estate.
 If results in capital gain when the selling price of an asset exceeds its purchase price.
 It is the difference between the selling price (higher) and cost price (lower) of the asset.

Status of Assessee: - Means a person by whom income tax or any other sum is payable under
the income tax act 1961.

DIFFERENCE BETWEEN FINANCIAL YEAR AND ASSESSMENT YEAR

 Income earned in a year is taxable in the next year.

 The year in which income is earned is known as “PREVIOUS YEAR OR FINANCIAL
YEAR”.
 The next year in which income is taxable is known as “ASSESSMENT YEAR”.
 FY is the period between 1st Apr to 31st Mar.
 Assessment year is the next year in which the income is liable to assess.

TAX DEDUCTED AT SOURCE (TDS) –

 Collected by employer before paying.
 To avoid tax evasion.
 Collected at source on accrual of income.
 Amount deducted at source is adjusted against final tax liability on pro rata basis.
 NPO deducts and remits to IT Department monthly.

OBTAIN RELIEF ON SALARY

 Intimation to NPO by 31st Dec of same FY.

 Declaration of relief from income tax.
 Form 12BB for house.
 Documentary evidence.

TAX SLABS

NEW TAX REGIME SLABS FOR FY 2024-25 FOR INDIVIDUAL, HUF, AOP, BOI (u/s 115 BAC)

Income for FY 2024-25 Income Tax Rates

Income up to ₹3,00,000 Nil

₹3,00,001 – ₹ 700,000 5%

₹7,00,001 – ₹10,00,000 10%

₹10,00,001 – ₹1,200,000 15%

₹12,00,001 – ₹15,00,000 20%

Above ₹15,00,000 30%

ALLOWABLE DEDUCTIONS IN NEW TAX REGIME: -

Section Nature Allowable deduction limit

16 (ia) Standard deduction to salaried employees Upto Rs. 50,000.00
57(iia) Family pension paid to family member after Lower of
death of employee by employer (i) Rs. 15,000.00 or
(ii) Rs. 33 1/3% of such family
pension received.
80 CCD (2) Employer contribution to National Pension - For Central and state govt.
Scheme (NPS) employees – limit is 14% of
salary.
- For other employees – limit is
10% of salary.
80 CCH Amount deposited under the Agniveer Corpus 100% amount deposited
Fund
80 JJA Profit and gains from business of collecting and 100% upto 5 years of
processing of biodegradable waste commencement of business
80LA(1A) Income of unit of an international financial 100% for any consecutive 10
service center years out of first 15 years.

EXEMPTION ALLOWED UNDER NEW TAX REGIME

 Interest and final payment under PPF.
 Interest and final payment under Sukanya Samridhi Yojna.
 Sum received from Life Insurance Policy.
 Payments including withdrawals from NPS.
 Gratuity, commutation of Pension, Leave Accumulation.

OVERRIDING SPECIFIED TAX RATES

Section Description Tax Rate

111A Short Term Capital Gain – Listed Equities & Equity MF 15%
112 Long term capital gain – others 20%
112A Long Term Capital Gain Above Rs 1 Lakh – Listed Equity, Equity 10%
MF, Certain ULIPs
115BB Winning from lotteries, crossword puzzles or race including 30%
horse race or card game or sport in India or gaming or betting in
any form or nature whatsoever (other than online gaming)
115BBJ Tax on winnings from Online Gaming 30% of Net Winning

SURCHARGE FOR ASSESSEE

Quantum of Income of Assessee Rate of surcharge only on Income Rate of surcharge on

Taxable u/s 111A, 112, 112A & all other Income
Dividend
Total income upto Rs. 50 lakhs Nil Nil
Total income > 50 lakh <=1 crore 10% 10%
Total income>1 crore<=2 crore 15% 15%
Total income>2 crore (excluding 15% 25%
income u/s 111A, 112, 112A &
Dividend)
Total income>2 crore including 15% 15%
income u/s 111A, 112, 112A &
dividend
 TOTAL TAX PAYABLE
 Health & Education Cess – 4% of income tax & surcharge
“Total Tax Payable = Tax + Surcharge + Heath & Education Cess”

EXEMPTIONS & DEDUCTIONS

BASIS FOR COMPRARISION DEDUCTION EXEMPTION

Concept The amount of deduction is first The exempted income is not
included in the gross income and considered as a part of gross
then deducted from it to arrive at income.
the net taxable income
Income is Dealing Sections Tax deductible 80C to 80U Tax free Section 10
Objective To promote saving and To boost that particular section in
investments of general public which tax is exempted
Allowable to Specified persons All the persons
Conditional Yes No

“Tax Rate” under “Old Tax Regime” for Individual, HUF, AOP, BOI, for FY 2023-24

Income Age < 60 years Resident senior citizen Resident super senior citizen
Age: ≥ 60 but < 80 years Age: 80 years and above
Upto 2,50,000.00 Nil Nil Nil
2,50,000 – 3,00,000 5% Nil Nil
3,00,000 – 5,00,000 5% 5% Nil
5,00,000 – 10,00,000 20% 20% 20%
Above 10,00,000 30% 30% 30%

INCOME EXEMPTED FROM TAX (SEC 10)

i) Agricultural Income
ii) Compensation Received from Bhopal Gas leak.
iii) Sum received from life insurance policy.
iv) Payment received from provident fund and public provident fund.
v) Conveyance allowance, Travelling Allowance, Daily allowance.
vi) CEA (Rs. 100PM per child up to max of 02 children).
vii) Island special duty allowances up to Rs. 3250.00 PM
viii) Tough location allowance up to Rs. 1300.00 PM
ix) Education scholarship.
x) Special compensatory allowance.
xi) Commuted value of pension.
xii) DCRG
xiii) Leave encashment amount.
xiv)TA/ DA/ on PMT or ty duty.
xv) Leave Travel Concession (LTC)
xvi)HRA (Subject to restrictions) – HRA CALCULATION
Least of following: - (i) Actual HRA received from the employer.
(ii) Actual rent paid – 10% of (Basic Salary + DA)
(iii) 50% of (Basic Salary + DA) for those living in
metro cities, 40% for non-metro cities.
xvii) Allowance for Gallantry awards.
xviii) Transport allowance (Rs. 3200.00 pm) for physically challenged employee.
xix) Study Allowance.
xx) Ratin Money Allowance.
 xxi) Foreign Allowance or perquisites paid or allowed by Govt. to its employees posted outside India.

DEDUCTIONS UNDER CHAPTER VI-A

Income Tax Deduction for FY Eligible

Sections Max Deduction Available for FY 2024-25
2024-25 Person

Investing into very common and

popular investment options like Individual
Section
LIC, PPF, Sukanya Samriddhi Or
80C
Account, Mutual Funds, FD, child HUF
tuition fee, ULIP, etc

Section For amount deposited in annuity

Individuals
80CC plan of LIC or any other insurer Upto Rs 1,50,000

Section
Investment in Pension Funds Individuals
80CCC

Section Atal Pension Yojana and National

Individuals
80CCD (1) Pension Scheme Contribution

Atal Pension Yojana and National

Section
Pension Scheme Contribution Individuals Upto Rs 50,000
80CCD(1B)
(additional deduction)

Amount Contributed
or
Section National Pension Scheme 14% of Basic Salary + Dearness
Individuals
80CCD(2) Contribution by Employer Allowance (in case the employer is
Government)
- Whichever is lower

Upto Rs 1,00,000
Self and family - Rs.25,000
Medical Insurance Premium, Individual Parents (below 60 yrs) - Rs.25,000
Section
preventive health checkup and Or Parents (above 60 years) - Rs.50,000
80D
Medical Expenditure HUF Apart from the above, Rs.5000 deduction
is also available for preventive health
checkup.

Normal Disability (at least 40% or more but

Individual
Section Medical Treatment of a Dependent less than 80%): Rs 75000/-
Or
80DD with Disability Severe Disability (at least 80% or more):
HUF
Rs 125000/-

Individual
Section Medical expenditure for treatment Senior Citizens: Upto Rs 1,00,000
Or
80DDB of Specified Diseases Others: Upto Rs 40,000
HUF

Section Interest paid on Loan taken for Individual No limit (Any amount of interest paid on
 80E Higher Education education loan) upto 8 assessment years

Section
Interest paid on Housing Loan Individual Upto Rs 50,000 subject to some conditions
80EE

Section Upto Rs 1,50,000/- subject to some

Interest Paid on Housing Loan Individual
80EEA conditions

Section Interest paid on Electric Vehicle Upto Rs 1,50,000 subject to some

Individual
80EEB Loan conditions

All Assesses
100% or 50% of the Donated amount or
Section Donation to specified (Individual,
Qualifying limit,
80G funds/institutions. Institutions HUF,
Allowed donation in cash upto Rs.2000/-
Company, etc)

Rs. 5000 per month

Section Income Tax Deduction for House 25% of Adjusted Total Income
Individual
80GG Rent Paid Rent paid - 10% of Adjusted Total Income
- whichever is lower

All assessees
except those
who have an
100% of the amount donated.
Section Donation to Scientific Research & income (or
Allowed donations in cash upto
80GGA Rural Development loss) from a
Rs.10,000/-
business
and/or a
profession

100% of the amount contributed

Section
Contribution to Political Parties Companies No deduction available for the contribution
80GGB
made in cash

Individual
HUF 100% of the amount contributed.
Section Individuals on contribution to
AOP No deduction available for the contribution
80GGC Political Parties
BOI made in cash
Firm

Individuals
(Indian citizen Rs.3,00,000/-
Section or foreign Or
Royalty on Patents
80RRB citizen being Specified Income
resident in - whichever is lower
India)

Individuals
(Indian citizen Rs.3,00,000/-
Section or foreign Or
Royalty Income of Authors
80QQB citizen being Specified Income
resident in - whichever is lower
India)
 Individual
Section Interest earned on Savings Or
Upto Rs 10,000/-
80TTA Accounts HUF (except
senior citizen)

Section Interest Income earned on Individual (60

Upto Rs 50,000/-
80TTB deposits (Savings/ FDs) yrs or above)

Section Normal Disability: Rs. 75,000/-

Disabled Individuals Individuals
80U Severe Disability: Rs. 1,25,000/-

TYPES OF RETURNS (U/S 139)

Subsections of Section 139 of Income Tax Act 1961
What is Section 139(1) of Income Tax Act?
Section 139 (1) of the Income Tax Act acts as a framework that allows taxpayers to file late returns in case
they miss the prescribed deadline. There are various sub-sections under section 139(1) of the Income Tax
Act. The section 139(1) of the Income Tax Act offers means to rectify the non-submission of Income Tax
Returns within the timeline.
Section 139(1) of Income Tax Act - Mandatory and Voluntary Returns
Section 139(1) of the Income Tax Act deals with the mandatory return policies while filing the Income Tax
Return. The following entities are to file their tax return:
 Every person with a total income that exceeds the exemption limit has to furnish the income tax
return within the defined due date.
 Any private, public, domestic, or foreign entity located in India or doing business in India.
 Firms, including LLP (Limited Liability Partnership) or ULP (Unlimited Liability Partnership).
 Residents who have assets located outside of India or any entity that retains authority for an
account based outside India.
 Every HUF (Hindu Undivided Family), AOP (Association of Persons), and BOI (Body of Individuals)
has to file an Income Tax Return if their income exceeds the prescribed exception limit.
 Under Section 139(1c), certain classes of people who fulfill a certain condition are exempt from filing
the tax return. The issued notice should be placed before each House of Parliament for 30 days
when sessions are held immediately following the notification. Only upon agreement by both the
houses the notification shall be effective.
Voluntary Returns: If someone files an income tax return even though their income falls below the
mandatory filing threshold, that return is considered voluntary. These voluntary returns are still valid for tax
purposes.
Section 139(3) - Return of Loss
Section 139(3) deals with filing income tax returns in the case of a loss. It is usually quite useful to file for
the return in the case of losses, as the loss is allowed to be carried forward, reducing the tax liability in
subsequent years. The following are specifically defined cases-
 In the case of an Individual Taxpayer, the tax return is not mandatory if the loss was incurred in the
previous financial year. However, in the cases of loss in companies and firms, the tax return for a
loss is mandatory.
 If the loss for a company arises under the head “Profits and Gains of Business and Profession” or
“Capital Gains,” filing the tax return shall be mandatory in the case that the company wants to carry
 ahead the loss and offset it with the future income. The option is only available if the tax return is
filed by the due date.
 In the case of loss occurring in “House or residential property,” the loss can be carried forward even
if the tax return is filed beyond the due date.
 Except for "House and Property," other losses filed under Section 142(1) cannot be carried forward,
leaving out the unabsorbed depreciation value.
 In the alternative case of loss being offset against some income in another category for the same
year, an offset is permitted even if the return is filed beyond the due date.
 Losses incurred in previous years can be carried forward if the return is filed by the due dates and
the losses are assessed.

Section 139(4) - Belated Income Tax Return

It is advisable for a taxpayer (whether an individual or any other entity) to furnish the tax return before the
due date as per Section 139(1) of the Income Tax Act. However, if the return file is still delayed, there is still
the possibility of filing the belated return for prior years until the expiry date of the current applicable year of
assessment or before the financial year is concluded. Nonetheless, if the taxpayer fails yet again, a penalty
of 5,000 rupees is charged under Section 271F of the IT Act, 1961. The penalty can be escaped if the
income did not require the mandatory filing as defined under Section 139(1) of the Income Tax Act and the
return was filed after the due date.
Section 139(5) - Revised Income Tax Return
If a person who has furnished a return under section 139(1) or section 139(4) discovers any omission or
error, they may submit a revised return before the end of the relevant assessment year or before the
assessment is completed, whichever is earlier. The revised return will replace the original return from the
date the original return was filed. A loss return filed belatedly under section 139(4) can be revised under
section 139(5), but the loss cannot be carried forward since the original return was filed late.
Section 139(4a) - Charitable Trusts
You must file an income tax return if you receive any of the following income and the total amount (before
considering exemptions under sections 11 and 12) exceeds the tax-free limit:
 Income from property held in trust (or under another legal obligation) for charitable or religious
purposes, even if the trust also has other purposes.
 Voluntary contributions made to such trusts or institutions.
The return of income must be furnished in Form No. ITR-7 and verified in the prescribed manner containing
all the necessary particulars. This return must be submitted by the representative assessee within the time
prescribed under section 139(1) of the income tax act electronically, either under digital signature or
otherwise.
Section 139(4b) - Political Parties
The chief executive officer (regardless of whether they are referred to as Secretary or by any other title) of
every political party must file a return of income for the previous year if the total income, computed under
this Act without considering the provisions of section 13A, exceeds the maximum amount not chargeable to
income tax. The return should be submitted in the prescribed form, verified in the prescribed manner, and
include all required details. All the provisions of this Act will apply to this return as if it were required to be
filed under sub-section (1).
Section 139(4c) and 139(4d) - Income Tax Return for Entities Claiming Exemption under Section 10
As per Section 10 of the Income Tax Act of 1961, there are certain institutions that can claim certain
benefits, and for the tax return of these institutions- Section 139(4C) and Section 139(4D) are to be referred
to.
Section 139(4C) includes those institutions for which it is necessary to file a tax return if the maximum
allowable limit is beyond the maximum cap of tax exemption, which shall exclude other exemption benefits
enjoyed by the institution.
These institutions are mainly the following groups and agencies-
 Associations engaged in scientific research,
 Institutions or associations under Section 10(23A),
 News agencies,
 Institutions under Section 10(23B),
 Educational and Medical Institutions, Universities, and Hospitals,
Section 139(4D) of the Income Tax Act pertains to universities, colleges, and other institutions that are not
required to file tax returns of income and loss under any other provision in this section. Specifically, it
applies to institutions referred to in Section 35(1)(ii) and Section 35(1)(iii). If an institution falls under this
category, it must furnish its return of income or loss every previous year, similar to other taxpayers.
However, if their income is unconditionally exempt under various clauses of Section 10, they may use the
relevant ITR form for filing their return.
Section 139(9) - Defective Returns
A tax return can be deemed to be defective under Section 139(9) if documents are missing. The taxpayer
shall make the judgment of a defective return, and the taxpayer shall be duly notified via a simple letter. A
time slot of fifteen days shall be given to rectify the problem and produce the missing documents. The
period might also be extended upon the request of the taxpayer providing valid reasons. Thereby, one must
note the following list of documents for your file to avoid being deemed defective.
 Statement displaying the computation of payable taxes.
 Filed tax return in the required form.
 Proofs of all claims of the taxes paid.
 Before filing the return, a report is furnished. This report of the auditing done under Section 44AB is
required.
 Copies of the audit report, balance sheet, and auditor's profit and loss accounts in case the
taxpayer's account is audited.
 The relevant report in the case of Cost Audit.
 If the taxpayer has no book maintained for accounts, then a statement is required indicating the
gross receipts, turnover amount, bank balance, stocks, cash, debtors or creditors information,
expenses and net profit, etc.
 In the case that the taxpayer maintains a book of the accounts, then these mandatory copies are
required:
1. All accounts of Profit and Loss, Manufacturing accounts, Trading accounts, Balance sheets,
and accounts of all income and expenses.
2. Personal accounts of partners in the case of partnership firms
3. For AOP/BOI, all members should produce their personal accounts.
4. Proprietor’s personal account.
CALCULATION OF INCOME TAX IN OLD TAX REGIME

1. Gross salary
2. Less exemptions under sections: - (a) Section 10
(b) Section 16 (Standard deduction)
3. Income chargeable under the head ‘Salaries’ = (1)-(2)
 4. Add: - Any other income/ income or loss from house property {Section 24(B)}
5. Gross total income = (3) + (4)
6. Deduction under Chapter VI A (80C to 80U)
7. Total taxable income = (5) – (6)
8. Tax on total taxable income
9. Less rebate u/s 87A if applicable (max Rs. 12,500.00 if income upto 5 lakh)
10. Surcharge if applicable
11. Health & education cess (4%)
12. Tax payable = (8) + (10) + (11)- (9)
13. Less relief under section 89 (Arrears)
14. Net tax payable = (12) - (13)

INCOME/ LOSS FROM HOUSE PROPERTY

 Rent payable by the tenant or rent receivable.
 Municipal valuation of property.
 Fair rent of the property. i.e. rent at same or similar locality.
 Standard rent paid by the long staying tenant.

SELF OCCUPIED HOUSE

 Annual letter value is NIL.
 If nil then no deduction under section 24(i) shall be allowed.
 Except interest on borrowed capital/loan.
 Taken prior to 01.04.99 – Rs. 30,000.00, Taken after 01.04.99 – Rs. 2,00,000.00 or interest actually
paid whichever is less.

INCOME FROM HOUSE PROPERTY

 Deductions from gross AV of house property.
 House not self-occupied property: -

Annual Value - A
Less corporation/municipal tax actually paid during year - B
Net annual value (NAV) (A-B) - C
Deduction under section 24 - D
Repairs & collection charges [30% of C (i.e. 30% of NAV)], Interest paid on borrowed capital.

Net chargeable income from house property (C-D) - E

 Receipt produced for getting of relief.
 No limit for interest paid on borrowed capital for purchase/construction of house.

SALARY RECEIVED IN ARREARS (U/S 89)

 Calculate tax payable on total income including arrears in the year in which received (A)

 Calculate tax payable on total income excluding arrears in the in which received (B)

 Difference between A&B (C)

 Compute tax on total income after excluding arrears in the year to which relate (D)
  Compute tax on total income after including arrears in the year to which relate (E)

 Difference between D & E (F)

 Excess of tax computed at (C) over tax computed at (F) i.e. (C) - (F)

LATE FEES FOR DELAY IN FILLING OF ITR [SECTION 234F]

(a) Total income upto Rs. 5 lakh - Rs. 1000.00
(b) Total income exceeds Rs. 5 lakhs

Return filled upto 31 Dec of A.Y. - Rs. 5,000.00

Return filled after 31 Dec of A.Y. - Rs. 10,000.00