PROFITS AND GAINS OF BUSINESS OR PROFESSION.docx

8/13/2019 PROFITS AND GAINS OF BUSINESS OR PROFESSION.docx

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Income Tax II Notes for B.com

MOHAMED SADATH, Faculty member, SRS first grade college, Tumkur Page 1

PROFITS AND GAINS OF BUSINESS OR PROFESSION

1. What is the Meaning of Business?Business simply means any economic activity carried on for earning profits. According to Sec 2(3)

business is any trade, commerce, manufacture or any adventure in the nature of trade commerceand manufacture. Any transaction with a motive of selling at profits included under this concept. Itis not necessary that there should be a series of transaction in a business and it should be carried on

permanently.

2. What is the Meaning of Profession?Profession is an occupation requiring purely intellectual skills or manual skills controlled by the

intellectual skill of the operator. e.g. Lawyer, doctor, engineer etc. So profession refers to those

activities where the livelihood is earned by the persons through their intellectual or manual skill.

3. What do you mean by block of assets?Block of assets means the group of assets falling within a same class of assets for which same rate ofdepreciation is prescribed. Depreciation is allowed on block of assets at the prescribed rates on the

written down value of such block of asset.

4. How will you calculate depreciation while computing taxable income from business orprofession?

Depreciation will be allowed only when the assets are owned wholly or partly by the assessee. If an

asset is used partly for business purpose and partly for personal purpose, depreciation shall be

allowed only for that part which is used in business or profession.

In case, an asset put to use for the purpose of business or profession for a period less than 180

days in that previous year, the depreciation of such asset shall be restricted to 50% or halfof the

amount calculated at the prescribed rate.

5. What is unabsorbed depreciation?If the full amount of depreciation cannot be charged due to absence or inadequacy of profit, the

balance amount of depreciation which cannot be so allowed is called unabsorbed depreciation.

Unabsorbed depreciation relating to the previous year can be set off against profit of other business

and balance, if any can be set off against his income chargeable under any other head for that year.

If still some part of such allowance remains unabsorbed, it can be carried forward. No time limit is

fixed for the purpose of carrying forward of unabsorbed depreciation. It can beset off against any

income. In the matter of set off, the order of priority is , first, current depreciation, second brought

forward business losses and last ,unabsorbed depreciation.

6. What are the deductions or expenses allowable from business or professional income?The following general deductions are allowable from business or professional income;

1) Legal expenses2) Customs duty, excise duty and sales tax paid3) Sales tax appeal expenses4) Day to day expenses to carry on the business5) Gift to employees


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6) Workmen compensation fund7. Write a list of expenses expressly disallowed (Not allowed) from business or

professional income?

The following expenses are disallowed from business or professional income.a) Guest house expensesb) Wealth taxc) Income taxd) Tax penaltye) Advance income taxf) Drawingsg) Salary to proprietorh) Interest on capitali) Life Insurance Premiumj) Expenses for family membersk) Provision like provision for bad debts, provision for taxation etcl) Donations, gift and charitym) Depreciation allowed above the prescribed limitn) All expenses of capital natureo) All expenses relating to other heads of incomep) Amount exceeding Rs.20,000 paid in cashq) Medical insurance premium paid in cash

FORMAT FOR COMPUTATION OF TAXABLE INCOME FROM BUSINESS

Particulars Amount

Net profit as per P&L A/c

Add: Non business expenses

Add: Business income not credited in P&L A/c

Less: Non-business Income credited in P&L A/c

Less: Business expenses not debited in P&L A/c

Income from Business

xxxx

xxxx

xxxx

xxxx

xxxx

Xxxx

FORMAT FOR COMPUTATION OF TAXABLE INCOME FROM BUSINESS

Particulars AmountProfessional receipts

Less: professional expenses

Income from profession

xxx

xxx

Xxx


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INCOME FROM CAPITAL GAINS

1. What is the basis of taxation of capital gains?Any profits and gains arising from the transfer of a capital assets effected in the previous

year shall be chargeable to income tax under the head capital gain in the PY in which the transfer

took place.

It should satisfy the following conditions

1. There should be a capital asset2. The capital assets should be transferred.3. Transfer should result in profit or gains4. Such Profit or Gain arising on transfer of capital asset, should not be exemptfrom tax

under section 54 of the act.

2. What do you mean by Capital Asset?The term Capital Asset, has been defined by Section 2 (14) as A Property of any kind, held by

the assessee, whether connected with his Business or Profession or not, whether tangible or

intangible, moveable or immoveable, fixed or circulatingFor e.g.: Land, Building, Plant, Machinery, Vehicles, etc. are examples of tangible capital assets,whereas, Goodwill, Patent, Copy Right, Trade Mark, etc. are examples of intangible capital

assets.

3. Which assets are not included in Capital Assets?The following assets are not capital assets.

a. Any stock in trade, consumable stores or raw materials held for the purpose of hisbusiness or profession.

b. All personal effects except jewelleryc. Agricultural land in India which is situated in rural area. etc.

4. What is period of holding?Period of holding means, the period startingfromthe date on which the asset was acquired bythe assessee and endingonthe date of transfer of the asset by the assessee or the date on which

the calculation of such period is made, whichever is earlier. Period of holding plays an

important role, as it can change the character of the asset from short term to long term and can

thereby change the taxability of the gain arising on its transfer.

5. What is Full Value of Sale Consideration?Full Value of Sale Consideration means what one receives when an asset is being transferred,

whether received immediately or receivable after some time. For Income Tax purpose Capital

Gains are chargeable to tax on accrual basis, irrespective of the method of accounting followed

by the assessee. It does not mean the market value of the asset transferred. It may be received

in cash or in kind. If it is received in kind, then market value of what is received in kind shall betreated as a full value of sale consideration, Book entries are irrelevant for the purpose.

Adequacy or inadequacy of the consideration is also irrelevant.

6. What is Cost of Acquisition?Cost of Acquisition is the price for which a capital asset is acquired or purchased by the

assessee. It even includes expenses of a capital nature for completing or acquiring a title or

ownership of a property.


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As per section 55(2b), the Cost of acquisition of a Capital Asset acquired before 01stApril,

1981shall be either the actual cost of acquisition or its Fair Market Value as on 01stApril, 1981,

whichever is higher.

If the capital asset came into possession of the assessee by means of gift , inheritance,

succession, etc then cost of acquisition to the assessee means cost of the asset to the previous

owner. If cost of acquisition to the previous owner cannot be ascertained then fair market value

on the date on which the capital asset became the property of the previous owner shall be

taken.

7. What is cost of improvement [C.O.I.] [Section 55(1)]?C.O.I in relation to any tangible asset means all expenses of a capital nature, incurred in

connection with an Addition, Alteration, Modification, or Rectification to the tangible asset.

However, Cost of Improvement for any asset incurred before 01stApril, 1981,shall always be

taken asNIL.

For e.g.: A Building consisting of three floors was acquired by an assessee for Rs. 50 Lacs in

1992. In 1995 assessee spent Rs. 8 Lacs and constructed the fourth floor. In this case Rs. 50 Lacs

is the cost of acquisition of the building, whereas Rs. 8 Lacs is the cost of improvement.

8. What are transfer expenses while computing capital gains?Transfer Expenses incurred by an assessee wholly and exclusively in connection with the

transfer of the capital asset, are allowed to be deducted from the full value of consideration,

provided such expenses are not deductible under any other head of income, i.e. no double

deduction of any expense is allowed. For e.g.: Commission, Brokerage, Stamp Charges,

Registration Charges, Travelling and Conveyance Charges, etc. incurred in connection with the

transfer of the asset. Expenses shall be real ones; Notional Expenses are not allowed to be

deducted.

9. Explain the types of capital assets.From Income Tax Act point of view, Capital Assets are of two types, namely, Short Term or Long

Term. Short Term and Long Term Assets are not two separate assets. An asset, which is a shortterm capital asset, can become long term capital asset, if held by assessee for some more period

of time. In other words, character of an asset is dependent on the period of holding (P.o.H.) of

that asset by the assessee. Let us now understand these two types of Capital Assets.

(a.) SHORT TERM CAPITAL ASSET:If a Capital Asset is held by the assessee for a periodnot exceeding 36 months (3 Years) is called Short Term Capital Asset. In other words, if

a capital asset is held for a period upto 36 months, then it is called Short Term Capital

Asset.

(b.) LONG TERM CAPITAL ASSET:If a Capital Asset is held by the assessee for a period ofmore than 36 months, then it is called Long Term Capital Asset.

CAPITAL ASSET

SHORT TERM LONG TERM

If POH < 36 Months If POH > 36 Months


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In other words, a capital asset is called as short term upto first 36 months of its period of

holding, then from the very next day after completion of 36 months period, the same asset will becalled as long term capital asset.

EXCEPTION TO THE ABOVE RULE:In the following three cases, for determining whether the asset

is short term or long term, the period of holding of 36 months, as discussed above, shall be

substituted by 12 months.

(a.) Equity or Preference Shares, whether listed on any recognized Stock Exchange ornot.

(b.) Listed Debentures or Government Securities, only if listedon any recognized StockExchange.

(c.) Units of a Mutual Fund or units of UTI(unit trust of India),Whether listed on any recognized Stock Exchange or not, whether such units are quoted or

not.

In all the three cases above, if they are held by the assessee for a period upto 12 months,

then they are called short term capital asset, whereas, if they are held for a period of more

than 12 months, then they shall be called as long term capital asset.

Note:As per Sec 50 any gain on transfer of depreciable assetshall be taxable as short term

capital gainirrespective of their period of holding.

10.What is Capital Gain Accounts Scheme?Under Sec 54, 54B, 54D, 54EC, 54F and 54G the capital gains is exempt if such gains are

reinvested in new assets, within the time limit allowed for the purpose, if such reinvestment is not

made before the date of furnishing the return of income then the amount of capital gain is required

to be invested in CGAS, subject to the following conditions

1. The deposit shall be made before furnishing the return of income or within the due date forfurnishing the return of income u/s 139(1), whichever is earlier.

2. The deposit shall be made in an account with a bank or financial institution approved for thepurpose

3. The return of income shall be accompanied by proof of such deposit the amount deposited canbe withdrawn for utilization in accordance with the scheme, for the specified purpose


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INCOME FROM OTHER SOURCES

1. What are the incomes chargeable to tax under the head income from other sources?Income from other source is a residuary head of income. Any item of income which does not fall

under any other four specific heads of income is to be charged under this head.

According to sec 56(2) following incomes are chargeable under this head.a. Dividend declared by a foreign companyb. Family pensionc. Winnings from lottery, crossword puzzles, horse race etcd. Income from plant, machinery or furniture let out on hire where it is not the actual

business of the assessee.

e. Interest from securities, bank depositsf. Income from sub lettingg. Any other receipts which doesnt fall under any other heads of income.h. Income from agricultural land situated outside Indiai. Examiner ship fees received by college teachersj. Income from undisclosed sourcek. Ground rent etcl. Receipts without consideration in certain cases

2. How dividend received by an assessee is treated?It means any amount paid by a company, out of divisible profits, whether taxable or not

taxable, to its share holders in proportion to his share holding in the company. Dividend also

includes deemed dividend. The following payments are deemed as dividend.

a) any distribution entailing the release of companys assetsb) any distribution of debentures, debenture stock, deposit certificatesc) distribution on liquidation of companyd) distribution on reduction of capitale) any payment by way of loan or advance by a closely held company

Dividend distributed or paid by a domestic company after 31-3-2003 is not taxable in the

hands of the shareholder under sec10 (34). On such dividend, the dividend declaring company

has to pay tax. But deemed dividend under sec2 (22) is taxable in the hand of the share

holders.

3. What is Bond washing transaction?It means selling securities to a friend or relative who does not have any taxable income before

the payment of interest and purchasing the securities back after the payment of tax. To prevent

the tax evasion through bond washing transaction, the interest received by the transferee will

be deemed as the income of the transferor and accordingly, it will be included in the total

income of the transferor and not the transferee.

4. How much deduction can be claimed through Family pension?In case of family pension received by legal heirs , a standard deduction of 1/3 rdof such actual

amount received as family pension or Rs.15000/- whichever is less is allowed as deduction

5. What are the Permissible Deductions from Income from other sources?The following are the Permissible Deductions from Income from other sources:


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1. In respect of any sum collected from employees towards the welfare fund contribution,deduction shall be allowed to the extent the amount is remitted within the relevant due date

under respective Acts

2. In respect of family pension a sum equal to 33.33% of the pension or Rs.15,000 whicheveris less shall be allowed as deduction.

3. In respect of income earned by way of lease rental on letting machinery, the repairs ,insurance and depreciation shall be deductible.

4. Any other expenditure incurred wholly and exclusively for the purpose of earning suchincome, subject to the following conditions

a. Expenditure in incurred wholly and exclusively for the purpose of making orearning the income

b. It is not a capital expenditurec. It is not a personal expensesd. It is incurred in the accounting year

6. Provide a list of investment on securities whose interest is exempted under the headincome from other sources.

Interest received by an assessee from following investments exempted from other sourceincome

a. 12 year national savings annuity certificateb. National Defence gold bondc. Post office cash certificated. National plan certificatee. National plan savings certificatef. Post office national savings certificateg. Post office savings bank account.

7. What are the expenses not deductible from Income from other sources?The following expenses are not deductible from income from other sources;

a. Personal expenses of the assesseeb. Any amount paid as wealth taxc. Any amount which is considered as unreasonabled. Any expenditure in connection with winnings from lotteries, crossword puzzle etce. Interest payable outside India for which Tax has not been paid or deducted at source


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DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME

Certain deductions are allowed from the gross total income of an assessee either as an

incentive to save for future or as a kind of relief to the assessee. The aggregate amount of deduction

cannot exceed the gross total income.

Section Eligible assessee Eligibility Quantum of deduction80C Individual & HUF LIP, PF, ULIP, NSC, housing

loan, tuition fee etcQualifying amount orRs.1,00,000/- whichever is less

80CCC Individual LIC pension fund Actual contribution orRs.1,00,000/-

80D Individual& HUF Medi claim insurance Actual premium paid orRs.15,000 whichever is less

(senior citizen- Rs.20,000)80E Individual Interest on education loan Any amount paid by way of

interest

1. Deductions under Section 80C:Deduction on account of payment / deposit / investment, etc.. In any of the followings:-

a) Any amount paid towards Premium of Life Insurance Policy of an Insurance Company,where annual premium of the policy does not exceed 20 % of the Sum Assured (Sum

Assured is nothing but the amount for which the policy is taken out). If the annual premium

exceeds 20% limit, then amount of premium in excess of 20% shall be ignored for the

purpose of deduction under this section.

For e.g.: For a Life Insurance Policy of Rs. 1,00,000/- if the annual premium is Rs. 23,000/-,

then deduction under this section will be available for only Rs. 20,000/- and balance Rs.

3,000/- shall lapse.

b) Such premium may be paid by the assessee on the life of Self or Spouse or Children, whetherdependent on the assessee or not. There is no limit on the number of children and a childmay be minor or major, male or female, married or unmarried.

c) Amount deposited in a Pension Plan or an Annuity Planof an Insurance Company inIndia. It would be worth noting here that the same Pension Plan or Annuity Plan may be

eligible for Deduction under section 80CCC, but an assessee may either claim deduction

under section 80CCC or may claim deduction under this section, but not both. No Double

Deduction is allowed under the act.

d) Amount contributed by an employee to a Statutory Provident Fund.e) Amount contributed by an employee to a Recognized Provident Fund.f) Amount contributed by an employee to anApproved SuperannuationFund.g) Amount contributed by an assessee to a Public Provident Fund for an amount not

exceeding Rs. 70,000/- per annum.

h) Investments in National Savings Certificates(N.S.C.)i) Accrued Interest onNational Savings Certificates(N.S.C.)j) Investments in National Savings Scheme(N.S.S.).k) Unit Linked Insurance Plan (U.L.I.P.) of Unit Trust of India (U.T.I.) or Life Insurance

Corporation of India (L.I.C.) or any other Mutual Fund.

l) Contribution to 5 Years, 10 Years or 15 Years Cumulative Time Deposit (C.T.D.)Scheme ofPost Office.

m) 5 Years Term Deposit with any Scheduled Bank,


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n) Investment in units of anotified Mutual Fund, for an amount not exceeding Rs. 10,000/-per annum.

o) Contribution to Equity Linked Savings Scheme(E.L.S.S.)of a notified Mutual Fund, for anamount not exceeding Rs. 10,000/- per annum.

p) Contribution to a Fund set up by National Housing Bank (NHB).q) Any Paymenttowards Cost of Purchase or Construction of a Residential Property (It

even includesany payment made for Stamp Duty or Registration charges to register the

Property) including any Repayment of any Loan(only Loan and not Interest), taken from

Government or any Bank or Life Insurance Corporation (L.I.C.) or National Housing Bank or

from an Employer where Employer is a Public Company or a Public Sector Company or

University or a Co.-Operative Society

r) Payment of Tuition Feesof children, (other than any Donation or Development Fees,Gymkhana Fees, Library fees, Bus Fees or any such payment of a similar nature) to any

University, School, College or an Educational Institutionin India (but not to any

Coaching Class or to any Private Tutor), for a Full TimeEducational Course, for a maximum

of two children.

s) Investments in Debenture, Bonds or Equity Shares of an approved Public Sector Companyor a Public Financial Institution engaged in providing Infrastructure Facilities in India.t) Investments in units of an approved Mutual Fund engaged in providing InfrastructureFacilities in India.

u) Senior Citizens Savings Scheme, 2004v) Bonds of National Bank for Agricultural and Rural Development (NABARD)

The amount of deduction under this section shall be the lower ofthe following two:-

The total of the amount actually Paid, or Rs. 1,00,000/-

2. Deduction under Section 80CCC: Deduction on account of payment of Pension planPremium:

This Deduction is available upon depositing a sum under an Annuity Plan or a PensionPlanof Insurance Company in India. Amount of deduction shall be the lower of the following

two:-

The amount depositedunder such plan, or

Rs. 1,00,000/-

In other words, this deduction is restricted to maximum of Rs. 1,00,000/-. This deduction is

available to Individuals only.Eligible assessee may be Resident in India or may be a Non-

Resident, whether he/she is a Citizen of India or not. Pension or Annuity received at the time of

maturity of such policy, shall be taxable as income from Other Sources.

Note: Contribution to Pension Plan is covered by section 80C as well as by section 80CCC also.

However, as per section 80CCE, the maximum amount of deduction permissible under section 80C

+ 80CCC combined shall not exceed Rs. 1,00,000/- per annum. In simple words, thoughContribution to Pension Plan is covered twice with Rs. 1 Lac of ceiling limit under both thesections, the deductible amount shall not be Rs. 2 Lacs (i.e. Rs. 1 Lac + Rs. 1 Lac), but shall be Rs. 1

Lac only.


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3. Under Section 80D: Deduction on account of payment of Mediclaim Premium:

This deduction is available upon payment of Mediclaim Insurance Premium, by assessee on thehealth of self and/or family members. The amount of deduction shall be the lower of the following

two:-

The actual amountof mediclaim premium paid, or Rs. 15,000/-

Individuals can pay mediclaim premium on the health of

Self or Spouse, whether Spouse is dependent upon the asseessee or not, Parents whether dependent upon the asseessee or not or Dependent Children.

If a person on whose health the mediclaim premium is being paid is a Resident Senior Citizen,

then the quantum of deduction under this section shall be the amount of mediclaim premium paid

or Rs. 20,000/-whichever is less. In such a case, the assessee himself/herself need not be a senior

citizen or a resident, only the person on whose health the medicalim premium is being paid shall be

a resident senior citizen.

Mediclaim Premium should have been paid by way of any mode other than by way ofCash. If it is paid out of cash, then no deduction under this section shall be available.4. Deduction under Section 80E: Deduction on account payment of Interest on Loan taken for

Higher Education:

(a)This deduction is available on account of payment of interest on Loan taken for HigherEducation. (Only for payment of interest notfor repayment of Principal amount of

loan).

(b.)Theres no upper limit on the amount of deduction. Therefore, unlimited amountofdeduction can be claimed.

(c.)However, the deduction is allowable only for a period of eight consecutive (continuous)yearsstarting from the year in which assessee starts paying interest for the first time.

(d.)The Loan should have been taken for Higher Education, whether in India or outside India.(e.)Higher Education means any full time educational course after HSC (XIIth), whether it

leads to any degree or not. (Even any vocational course or a Diploma course will also be

eligible). It should be in the field of Engineering, Medicine, Applied/Pure Science,

Management, Mathematics, Statistics, Information Technology.

(f.) The Loan should have been taken by assessee:- for Self, or for his/her spouse, or for children

(g.)The loan should have been taken from any Bank or a notified Financial Institution or anyapproved Charitable Institution.

(h.)This deduction is allowable on payment basis only. In simple words, no deduction will beallowed if interest on educational loan has just accrued, but has not yet been paid. It will beallowed as a deduction only if it has been paid during the given year.

For example:

If interest for the current year amounts to Rs. 82,000/-, out of which only Rs. 50,000/- has been

paid, then deduction under this section will be only for Rs. 50,000/-.


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SET OFF AND CARRY FORWARD OF LOSSES

If an assessee incurs any loss under one or more heads of income, it can be set off against income

under any other heads of income. This is known as set off and carry forward of losses. Losses can be

set off subject to the following rules.

1.

Intra head set off2. Inter head set off3. Carry forward of losses

Intra Head Set Off:

If the net result of any head of income is a loss in any financial year, the assessee can set off such

loss against his income from any other source of income under the same head of income. But the

following are the exceptions to this rule.

a) Loss from speculation business can be set off only against speculation business profit butnot against non-speculation business profit.

b) Loss incurred from owning and maintaining race gorse cannot be set off against any incomeother than from such business

c) Losses cannot be set off against winnings from lotteries, cross word puzzles and card gamesd) Long term capital loss can be set off only against long term capital gain.Inter head set off:

If the net result under any heads of income is a loss the same can be set off against the income

under any other heads. But the following are exceptions to this rule.

a) Losses in a speculation business cannot be set off against any other incomeb) Loss under the head capital gain cannot be set off against income under any other head.c) Loss from business or profession cannot be set off against income under the head salariesd) Loss cannot be set off against winnings from lotteries, crossword puzzles, card games etc.

Carry forward of losses:

If in any year, loss cannot be set off either under the same head or under the different heads,because of absence or inadequacy of the income in the same year, it may be carried forward and set

off against the income of the subsequent year. The following losses can be carried forwarded.

a) Loss under the head income from house propertyb) Loss under the head income from business or professionc) Loss under the head capital gaind) Loss under the head income from other sources only from the activity of owning and

maintaining race horse.

Set off and carry forward under different heads on income

1. Income from salaryCarry forward and set off will not arise under the head salary as there is no chance of any loss

2. Income from house propertya. Loss can be carried forward for a period of 8 AYb. Carried forward loss should be set off only from house property income

3. Income from business and professiona. Non speculative loss

i. Loss can be carried forward for a period of 8 AY.ii. Carried forward loss should be set off only against business income


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iii. It is not necessary that loss should belong to the same business and continuity ofbusiness is also not necessary

b. Speculative lossi. Loss can be carried forward and set off only against speculative income

ii. Loss can be carried forward for a period of 4 AY.iii. It is not necessary that the same business should be continued

4. Income from capital gaina. Loss can be adjusted only from capital gainsb. Loss can be carried forward for a period of 4 AY.c. Long term capital loss can carried forward and set off only against LTCGd. Shirt term capital loss can carried forward and set off against both LTCG and STCG

5. Income from other sourcesa. Loss can be carried forward for a period of 4 AY.b. Loss from owning and maintaining horse race can be adjusted against same incomeLoss under the head Carried forwarded to be

set off against income of:Time limit from the year

in which loss was

occurredIncome from house property[Sec 71B]

House property 8 AY

Non speculation Business Loss

[Sec72]Speculation or non

speculation business profit8 AY

Speculation Business Loss

[Sec73]Speculation business profit

only4 AY

Long term capital loss [Sec74] Long term capital gain 8 AY

Short term capital loss [Sec74] Any capital gains 8 AY

Loss from the activity of owningand maintaining race horse

[Sec74A]

Profit from the sameactivity

4 AY


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INCOME TAX AUTHORITIES

CBDT:

CBDT is the top most authority with regard to direct tax. It is constituted under the central board of

revenue act 1963. CBDT is given powers to issue such orders, instructions and direction to other

income tax authorities as it may deem fit for the proper administration of the Act.

Director general of income tax:

He is appointed by the central govt. He is required to perform such function as may be assigned by

the CBDT

a) Giving instructions to the income tax officersb) Enquiry or investigation into concealmentc) Search and seizured) To requisite books of accountse) Power of surveyf) Power to make any enquiry

Commissioner of Income Tax:He is appointed by the central govt. they are appointed to administer the income tax departments of

a specified area .CIT enjoys both administrative power and judicial powers. It includes

a. Search and seizureb. Granting registrationc. Appointment of class ii officersd. 4.Reduction or waiver of penaltye. 5.To award and withdraw recognition to pff. Transfer case from one IT officer to anotherg. Revision of orders passed by the ITO, which is prejudicial to the revenue.

Commissioner (Appeals):

He is an appellate authority. His powers area. Acceptance and disposal of appealsb. Power to call for information or production of evidencec. Power to inspect the registersd. Set off refunds against tax remaining payablee. Imposition of penalty

Income Tax officers:

They perform their functions in respect of such areas or of such persons or classes of incomes as

the commissioner may direct. If a question arises as to whether ITO has jurisdiction to assess any

person, the commissioner determines the question. His powers includes

a. Power regarding discovery, production of evidenceb. Search and seizurec. Requisition of books of accountsd. Issue notice for furnishing return and extend time thereforee. Allot PANf. Impose penalty for default in payment of tax.g. Make assessmenth. Reassess escaped incomei. Rectification of mistakes


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j. Demand advance payment of tax.Tax recovery officers;

Any income tax officer can be appointed as Tax recovery officer by the Chief Commissioner of

Income Tax. Tax recovery officers can be appointed with specific or general orders. He will exercise

powers as applicable.

Inspectors:

The commissioners appoint them. They are subordinate to ITO. They have no fixed jurisdiction or

particular power or function. They are to assist the ITO or other income tax authority under which

they are attached.

Assessing officer:

Assessing officer means an income tax officer. Assistant commissioner or deputy commissioner

who is vested with powers to assess. AO is the first and foremost officer of the income tax

department who comes in contact with the assessee. He is both an administrator and a quasi-

judicial officer.

TAX RATES [applicable for the AY 2012-2013]

1. For Individual:Net income % of tax

Up to Rs. 1,80,000 Nil

Rs.1,80,001-5,00,000 10%

Rs.5,00,001-8,00,000 20%

Rs.8,00,001 and above 30%

2. For Resident women:Net income % of tax

Up to Rs. 1,90,000 NilRs.1,90,001-5,00,000 10%

Rs.5,00,001-8,00,000 20%


3. For Senior citizens [ Above 60 years of age & below 80 years of age]Net income % of tax


Rs.2,50,001-5,00,000 10%

Rs.5,00,001-8,00,000 20%


4. For Senior citizens [ Above 80 years of age ]Net income % of tax


Rs.5,00,001-8,00,000 20%


*Education cess @ 3% is to be calculated on the tax amount.

Documents

PROFITS AND GAINS OF BUSINESS OR PROFESSION.docx