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TAXSTRUCTUREIN INDIA
Govt. Of India
Ministry of Finance
Economic Affairs Expenditure Revenue Financial Services Disinvestment
Direct Tax Indirect Tax
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BASICS OF DIRECT TAXES
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Income Tax
Wealth Tax
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Basic Concepts of Income Tax
Assessment Year [Sec 2 (9)]
Previous Year [Sec 3]
Person [Sec 2 (31)]
Income[ Sec 2 (24)]
Gross total Income[ Sec 14]
Total Income & Tax Liability [ Sec 2(45)] Agricultural Income
Exemption Vs Deduction
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EXCEPTIONSTO ASSESSMENT YEAR
Shipping Business of NonResidents (Sec 172)
Persons Leaving India (Sec 174)
Bodies Formed for Short Duration (Sec 174A)
Persons Likely to Transfer Property to Avoid Tax(Sec 175)
Discontinued Business (Sec 176)
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Person
Person [Sec. 2(31)]
Individual
HUF
Company
Firm
AOP/BOI
Local Authority Artificial Juridical Persons
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Income
Income [Sec.2(24)] Income under sec 2 (24) is inclusive term.
It includes
Profit & Gains
Dividend
Voluntary Contributions received by aTrust
Perquisites in the hands of employee
Capital gains
Insurance Profit etc..
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Gross Total Income
Income computed under following fiveheads:
Salaries
Income from House Property
Profits & Gains of the business orprofession
Capital Gain Income from other sources
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Total Income & Tax Liability
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SALARIES
As per Sec 15 of Income Tax Act,1961 salary
consists of:-
Any salary due from an employer or a former
to an assessee in the previous year, whether
actually paid or not.
Any salary paid or allowed to him in the
previous year by or on behalf of an
employer(or a former employer), though not
due or before it became due; and,
Any arrears of salary paid or allowed to him inthe previous year by or on behalf of an
employer (or a former employer),if not charged
to income tax for any earlier previous year.
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EXEMPTIONSUNDERSALARYHEAD
Gratuity [Sec 10(10)]
Pension [Sec 10(10A)]
Leave Encashment [Sec 10(10AA)]
Retrenchment Compensation [Sec 10(10B)]
Voluntary Retirement Compensation [Sec 10(10C)]
House Rent Allowance [Sec 10(13A)]
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ALLOWANCES
City Compensatory Allowance
Fixed Medical Allowance
Tiffin/Lunch/Dinner/Refreshment Allowance
Servant Allowance Dearness Allowance
Project Allowance
Overtime Allowance
Any other Cash Allowance
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PERQUISITES
Rentfree unfurnished Accommodation (Rule 3)
Rentfree furnished Accommodation
Gas, Electricity or water supply
Free Domestic Servants
Free or concessional Education Facility
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DEDUCTIONSFROM SALARY(SECTION 16)
Entertainment Allowance [Sec 16 (ii)]
Tax on Employment [Sec 16 (iii)]
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INCOME FROM HOUSE PROPERTY
Income Chargeable: Real & Notional
Charging Section :Sec 22
Annual Value:
Gross Annual Value (GAV) Net Annual Value (NAV)
Deductions from NAV
In case of let out properties:
In case of self occupied residential houseproperties:
Interest Deduction
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INCOME FROM CAPITAL GAINS
Chargeable Sec:45
Profits or Gains arising from the transferof a capital asset is chargeable to tax inthe year in which transfer take placeunder the head Capital Gain.
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TRANSFER: SEC 2(47)
Transfer in relation to Capital Asset includes sale,Exchange or relinquishment of the asset orextinguishment of any rights therein or the
compulsory acquisition thereof under any law orconversion of the asset by the owner in stock -in-trade of a business carried on by him or thematurity or redemption of a zero coupon bond.
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CAPITALASSET:
Capital Asset: Sec. 2(14): Capital Asset meansproperty of any kind (Fixed, Circulating, movable,
immovable, tangible or intangible) whether or notconnected with business or profession.
Exclusions
(a) Stock-in- trade (b) Personal effects of the assessee
(c) Agricultural land in a rural area
(d) 6% Gold Bonds 1977 or 7% Gold Bonds 1980 orNational Defence Bonds 1980 issued by the Central
Government (e) Special Bearer Bonds 1991 issued by the Central
Government.
(f) Gold Deposit Bonds issued under Gold DepositScheme 1999
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Short-term capital asset: Sec. 2(42A): means acapital asset held by an assessee for not more
than thirty six months immediately preceding thedate of its transfer. However, in the followingcases, an asset, held for not more than twelvemonths, is treated as short-term capital asset
Quoted or unquoted equity or preference shares in acompany
Quoted Securities
Quoted or unquoted Units of UTI
Quoted or unquoted Units of Mutual Funds specifiedu/s. 10(23D)
Quoted or unquoted zero coupon bonds
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Long-term capital asset: Sec. 2(29): means a
capital asset which is not a short-term capitalasset
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YEAROFCHARGEABILITYTOTAX
Capital gains are generally charged to tax in the yearin which transfer takes place. Exceptions
(a) Sec. 45(1A) Insurance Claim In the year of
receipt. (b) Sec. 45(2) Conversion of capital asset into
Stock-in-trade In the year of actual sale of thestock.
(c) Sec. 45(5) Compulsory acquisition Whenconsideration or part thereof is first received.
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EXEMPT CAPITAL GAINSUNDER SECTION 10
10 (33): Transfer of US 64 on or after April 1,2002
10 (37): Compulsory acquisition of UrbanAgriculture Land where consideration isreceived after March 31, 2004.
10 (38): Long-term capital gain arising ontransfer on or after October 1, 2004 of equityshares or units of equity oriented mutual fund
and the STT is paid at the time of transfer.
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COMPUTATIONOFCAPITALGAINS (SEC. 48)
The method of computation depends on the nature ofcapital asset transferred. It is as follows:
Short-term Capital Gain Long-term Capital Gain
A. Find out Full Value of
Consideration
A. Find out Full Value of Consideration
B. Deduct: B. Deduct:
(i) expenditure incurred wholly andexclusively in connection with suchTransfer.
(i) expenditure incurred wholly andexclusively in connection with suchTransfer.
(ii) Cost of Acquisition (ii) Indexed Cost of Acquisition(iii) Cost of Improvement (iii) Indexed Cost of Improvement
(iv) Exemption provided by Ss. 54B,54D, & 54G, 54GA
(iv) Exemption provided by Ss. 54, 54B,54D, 54EC, 54ED, 54F & 54G, 54GA
C. (A-B) is short-term capital gain C. (A-B) is a long-term capital gain
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Indexed Cost of acquisition = Cost ofacquisition * Cost inflation index for thefinancial year in which the asset is transferred/
Cost inflation index for the first financial year inwhich the asset was held by the assessee or theyear beginning on 1.4.1981, whichever is later orthe year of Improvement of the asset
However, in case of Bonds, Debentures exceptcapital indexed bonds depreciable assets, and fornon residents even if they are long term capital
assets the benefit of indexation is not available.
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COSTINFLATION INDEX
Financial Year Cost Inflation
Index
Financial Year Cost Inflation
Index1981-82 100 1992-93 223
1982-83 109 1993-94 244
1983-84 116 1994-95 259
1984-85 125 1995-96 281
1985-86 133 1996-97 305
1986-87 140 1997-98 331
1987-88 150 1998-99 351
1988-89 161 1999-2000 389
1989-90 172 2000-2001 406
1990-91 182 2001-2002 426
1991-92 199 2002-2003 447
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Financial Year Cost Inflation Index2003-04 463
2004-05 480
2005-06 497
2006-07 519
2007-08 551
2008-09 582
2009-10 632
O O
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CAPITAL GAINS - VARIOUS EXEMPTIONS DETAILS
Section 54 54B
(a) Kind of asset
transferred
Long-Term Capital Asset being
House Property used forresidential purpose
Land used for agricultural
purposes
(b)EligibleAssessees
Individual & HUF Individual & HUF
(c) Condition ofperiod ofholding
original Asset
3 Years 2 Years
(d) Condition ofutilisation ofconsideration
Purchase of Residential Housewithin 2 years after or 1 year priorto date of transfer; or constructionof residential house within 3 yearsfrom the date of transfer
Purchase of Agricultural Landwithin 2 years from the date oftransfer
(e) Exempt
Amount
The amount of gain or, the cost of
new asset, whichever is less
Lower of the Capital Gain or the
Cost of acquisition of newagricultural land.
(f) Otherrequirements
See Notes 1, 2 & 4 Assessee or his parents musthave used the land for precedingtwo years
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CAPITAL GAINS - VARIOUS EXEMPTIONS DETAILS
Section 54D 54EC
(a) Kind of assettransferred
Land or Building or any right thereinused by an industrial undertakingcompul- sorily acquired under any law)
Any Long-Term Capital Asset
(b) EligibleAssessees
All All
(c) Condition ofperiod ofholdingoriginal Asset
2 Years 1 Year for Shares, Listed Securities,Units of UTI/Mutual Fund specified u/s10(23D), Zero coupon bonds. 3 years forany other capital asset
(d) Condition ofutilisation ofconsideration
Purchase/construction of Land,Building, or any right therein within 3years from the date of transfer by wayof compulsory acquisition for thepurposes of shifting/re-establishing/setting up anotherindustrial
undertaking
Investment of whole or any Part ofCapital Gain in specified assets
as stipulated in the section. Investmentshould be made within 6 months from thedate of transfer
(e) ExemptAmount
Lower of the Capital Gain or the Costof acquisition of new land and building
Lower of the Capital Gain or the cost ofinvestment in specified assets subject toa maximum of Rs. 50 lakhs
(f) Otherrequirements
See Notes 1, 2 and 4 Must have beenused for business of industrialundertaking for preceding 2 years
See notes 1, 2 & 4 Rebate u/s 88 ordeduction u/s 80C not to be granted forthe for . same investment. New Asset
must be retained a period of 3 years
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Section 54GA
(a) Kind of assettransferred
Land or Building or any right therein or Plant or Machinery inUrban Area used for the business
(b) Eligible Assessees Industrial undertakings in urban area shifting to any SpecialEconomic Zone.
(c) Condition of period ofholding of original
asset
No period specified
(d) Condition ofutilisation ofconsideration
Acquire similar assets & incur expenses on shifting originalasset, within 1 year before, or 3 years from the date oftransfer
(e) Exempt Amount The amount of gain or the aggregate cost of new asset, andshifting expenses, whichever is lower
(f) Other requirements See Notes 1, 2, 3 and 4
CAPITAL GAINS - VARIOUS EXEMPTIONS DETAILS
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TAX RATES FOR CAPITAL GAINS
for Individual,HUFs
BOI, AOP, Firm
Corporates Corporates
Income Income
LLPs < 1 Crore > 1 Crore
Listed securitiescovered u/s. 10(36)
NIL NIL NIL
Listed securities traded onrecognized Stock Exchange notcovered under 10(36)
NIL NIL NIL
Listed securities not traded onrecognized Stock Exchangewithout Indexation or
10.30% 10.30% 11.07%
with Indexation 20.60% 20.60% 22.15%
On any other asset 20.60% 20.60% 22.15%
Short-term Capital Gains
On listed securities traded onrecognized Stock Exchange orUnit of Equity Oriented Fund
15.45% 15.45% 16.61%
Others at applicable
Slab Rates
at applicable
Slab Rates
at applicable
Slab Rates
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NOTES
In case New Asset is transferred before 3 years from dateof purchase/construction, the Capital Gains exemptedearlier will be chargeable to tax in year of transfer of newasset.
In order to avail the exemption, gains are to be reinvested,before the due date of return u/s 139(1). If the amount isnot so reinvested, it is to be deposited on or before thatdate in account of specified bank/institution and it should beutilised within specified time limit for purchase/construction
of New Asset.
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NOTES
U/s 54F Capital Gains exempted earlier shall be
chargeable to tax if a) If the assessee purchases within2 years or constructs within 3 years any residential houseother than the one in which reinvestment is made & b) Ifthe new asset is transferred within a period of 3 years fromthe date of its purchase/construction.
As per Section 54H, where the transfer is by way ofcompulsory acquisition, the period available for acquiringthe new asset u/ss. 54, 54B, 54D, 54EC and 54F shall becomputed from the date of receipt of compensation andnot the date of transfer.
If cost of new house is more than the net consideration of
original asset, the whole of the gains is exempt. If cost ofspecified asset is less than net consideration,proportionate amount of the gains will be exempt i.e.Capital Gain X cost of New Asset/Net consideration onSale of asset.
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INCOME FROM OTHER SOURCES
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TAX RATES (INCLUDES SURCHARGE AND EDUCATION
CESS) FOR ASSESSMENT YEAR 2011-12
INDIVIDUALS/HUF/AOP/BOI
Income (Rs.) Rate of Tax
Up to 1,60,000 Nil
1,60,001-5,00,000 10.30
5,00,001- 8,00,000 20.60
8,00,001 and above 30.90
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FOR RESIDENT WOMEN (BELOW 65 YRS. OF AGE)
Income (Rs.) Rate of Tax
Up to 1,90,000 Nil
1,90,001-5,00,000 10.30
5,00,001- 8,00,000 20.60
8,00,001 and above 30.90
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FOR RESIDENT SENIOR CITIZEN (ABOVE 65YRS. OF AGE)
Income (Rs.) Rate of Tax
Up to 2,40,000 Nil
2,40,001-5,00,000 10.30
5,00,001- 8,00,000 20.60
8,00,001 and above 30.90
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DEDUCTIONSFROM GROSS TOTAL INCOME &TAX LIABILITY