All about TAX

in
Financial Year

2009 – 2010 
 By :-
Narendra Tank
Shiv pratap singh
Harsh Lohia
Rahul purswani
Nikhilesh suwalka
 Tax Slab for F.Y. 2009 - 2010
Taxable Income of Senior
Taxable Income of Men Taxable Income of Women Citizens Tax

Upto Rs.1,50,000 Upto Rs.1,80,000 Upto Rs.2,25,000 Nil

Rs.1,50,000 To Rs.3,00,000 Rs.1,80,000 To Rs.3,00,000 Rs.2,25,000 To Rs.3,00,000 10%

Rs.3,00,000 To Rs.5,00,000 Rs.3,00,000 To Rs.5,00,000 Rs.3,00,000 To Rs.5,00,000 20%

Rs.5,00,000 and Above Rs.5,00,000 and Above Rs.5,00,000 and Above 30%

Note :
3% Education Cess also on the tax amount after tax and surcharge (if any)

What is surcharge?
* If salary is above 10 lacs , 10% surcharge will also be applicable.
 Tax Free Incomes :
The following incomes are completely exempt from Income Tax
Without any upper limit.
 
1. Interest on PPF/ GPF / EPF.
2. Interest on GOI Tax Free Bonds.
3. Dividends on Shares and on Mutual Funds.

4. Any Capital Receipt from Life Insurance Policies. i.e. sums

received either on death of the insured or on Maturity of Life
Insurance Plans. However, in case of Life Insurance Policies issued
after March 31, 2004, exemption on Maturity payment
u/s.10(10)D is available only if premium paid on any year does not
exceeds 20% of the Sum Assured.
 Tax Free Incomes :
5. Interest on Saving Bank Account in Post Office.

6. Long term Capital Gain on sale of shares and equity MF

Dividend Income :
 
Dividend income from companies / equity – oriented Mutual
Funds is Completely Exempt in the hands of investors.

Dividend is also Tax Free in the hands of investors in case of debt

– oriented Mutual Funds Schemes
 Gift Tax
Gift Tax was abolished with effect from October
1, 1998.

The gifts are no longer taxable in the hands of

donor or donee.
However, with effect from September 1, 2004,
any gift received by an individual or HUF will be
included in taxable income, provided the amount
of gift exceeds Rs.50000/-.
 Gifts received from following is Tax Free.

1. Spouse
2. Brother or Sister.
3. Brother or Sister of Spouse.
4. Brother or Sister of either of parents of the individual.
5. Any lineal ascendant or descendant of the individual.
6. Any lineal ascendant or descendant of the spouse of the
individual.
7. Spouse of the persons referred to in (2) or (6)
8. Gifts received on the occasion of marriage
9. Gift received under a WILL by way of inheritance are also tax
free.
CAPITAL AND REVENUE
 
1.Capital Receipts;- Receipts from fixed capital
Ex: Receipt from plant and
machinery
2.Revenue Receipts:
   Receipts from circulating capital 

Difference between capital and revenue

receipts
Difference between capital and revenue
expenditure
 Income Exempt From Tax
(section – 10)
•Agricultural income sec 2(1A)
•Sum received by a member from HUF
•Tax-free income under the head salary
•Exempted to former ruler: sec – 10 (19A)
•Awards: sec – 10(17A)
•Income of local authority: Sec – 10(20)
•Any sum received under a life insurance policy
•Income of any regimental fund of the armed forces
•Income of certain national funds; sec – 10(23-c)
•Income of mutual funds
• Income of Registered Trade union – section
10(24)
• Income of provident funds: sec – 10(25)
 Computation of Gross Taxable
Income
Income is Computed under the foll. 5 Heads:

1. Income from salaries

2. Income from House Properties
3. Income from Gains of Business & Profession
4. Income from Capital Gains
5. Income from Other Sources
 Income from Salary (section – 17)
• Basic Salary
• Allowances
1. Full exempted allowances:- It includes
a) Foreign allowances only for government employees
b) Allowances allowed to supreme court & high court judges.
c) Travelling allowance
d) Daily allowance
e) Conveyance allowance
f) Research allowance
g) Helper allowance
h) Uniform allowance

  
2. Partly exempted allowance
• House rent allowance
a) Actual HRA
b) Rent Paid – 10 % of salary
c) 40 % of salary & in case of (K,C,D,M) 50 % of salary.
Taxable amount = Actual HRA – a,b,c which ever is lower

• Special allowances
a) Children education allowance
b) Children hostel allowance
c) Tribal area allowance
d) Transport allowance
e) Underground coal mines allowance
f) Allowance to transport employees
g) Highly active field area allowance
h) Island duty allowance

• Entertainment allowance
3. Fully Taxable Allowances

a) Medical allowance
b) Dearness allowance
c) Overtime allowance
d) City compensatory allowance
e) Lunch allowance
f) Project allowance
1. Provident funds
1.1 Statutory provident fund
1.2 Recognised provident fund
1.3 Unrecognised provident fund
2. Public provident fund
Approved super annuation fund
3. Perquisites
Perquisites taxable in all cases
Fully exempted perquisites
Perquisites taxable in specified cases only
4. Retirement benefits
5 Pension
6. Gratuity
7. Leave salary encashed at the time of retirement
8. Profit in lieu of salary 
9. Value of accomodation
• Reliefto foreign Govt. Employees
• Relief to foreign companies
• Incomes of non-residents
• Interest on certain securities: sec-10(15)
• Share of profit from partnership firm
• Income of SAARC fund
• Capital gain on transfer of US 64 units of the
UTI
• Exemption to political parties – section
•13A
 Income from House Property
(SECTION 22 TO 27)
• Annual value
• Let-out house properties
• Self- occupies house properties
• Partly let-out and partly self – occupies house properties
• Deductions under section 24
Standard deduction under section – 24 (a)
Interest on loan under section – 24 (b)

1. In case of self occupied house (NAV = NIL)

Less:- Deductions under sec – 24 (b)
=Taxable income from house property
 Income from House Property
2.) In case of any Property being let out, then we
have to find out the :

a) Municipal value of house

b) Fair rent of house
c) a) or b) which ever is more
d) Standard rent of house
e) c) or d) which is less
f) Actual rent of the house - unrealized rent
g) e) or f) which is more – vacancy period rent

= GAV (GROSS ANNUAL VALUE)

Less:-MUNICIPAL TAX PAID BY THE OWNER
= NAV (NET ANNUAL VALUE)
DEDUCTIONS OUT OF ANNUAL VALUE

a) Standard deduction = it will be allowed

30 % of NAV of the house
1) If NAV is negative then no S D
2) In case of self occupied house then no SD

b) Deduction for interest

1.)In case of SOP house
1.1) If loan was obtained upto 31 march,1999 then,
Interest cant exceed RS 30000
1.2) If loan is obtained after 31 march,1999 then,
Interst cant exceed RS 150000.
IN CASE OF LET OUT HOUSE:- There is no upper limit for
deduction on interest on loan for such houses
NATURE OF INTEREST
1.) REVENUE INTEREST – Interest of revenue nature
that is for previous year
2.) CAPITAL INTEREST- 1/5 of interest paid or due
during the period precceding to previous year in
which house was constructed only 5 instllment are
allowed.
 Income from Business / profession

Business
        According to Sec.2(13), the term ‘Business’ includes,
“any trade, commerce or manufacture or adventure in the
nature of trade, commerce or manufacture”.
 Profession
        According to Sec. 2(36), “ profession” includes
vocation, it is an occupation requiring purely intellectual
skill or manual skill controlled by the intellectual skill of
the operator e.g. Lawyer, Doctor, Engineer, etc.
 VOCATION

It is only a way of living for which one has special fitness. It

does not involve any organised or systematic activity like
business  
Computation of profit and gains involves:-
1.) Admissible or allowable expenses sec 30 – 37 
2.) Scientific research expenditure
3.) Expenditure on acquisition of copy rights
4.) Payment to rural development
5.) Payment made for the conservation of natural resources
6.) Expenditure on prospecting of certain minerals allowed
NET PROFIT

add:- disallowed expenses

any personal expenses
life insurance premium
drawings
any type of provision
any type of reserve
wealth tax
fringe benefit tax
income tax
depreciation
penalty
• Any illegal expenses
• Any capital loss
• Charity & donation
• Compensation
• Rent paid to owner
• Family planning expenses
• Rural development expenses
• House hold expenses
• Difference in trial balance
• Interest on capital
• Undervaluation of stock
Less:-1.)allowed expenses
2.)income not taxable under this head
Add:- income of this head but not shown in p & l
a/c

= Taxable income from business & profession

 Income from Interest
•Interest Income from the following sources to be included in
Gross Taxable Income:
•Interest on company deposits.
•Interest on debentures/bonds.
•Interest on savings bank account/ fixed deposits with banks.

•Interest on post office savings schemes like MIS, NSC, KVP etc.
•Interest on private loans given to relatives, friends or any other
entity.
•Interest on government securities.
(Note: Deduction u/s 80 L has been omitted now and accordingly
interest income from the above sources is Fully Taxable now.)
 Capital Gains
Meaning
        Any income derived from the transfer of capital assets is known as “Capital
gain” 
Capital Asset
        u/s 2(14). Capital asset means any property held by an assessee.  
Transfer
        u/s 2(47). Transfer means sales, Exchange, Relinquishment of an asset etc.,  

Short term capital gain

        A capital gain resulting from the transfer of a capital asset within 36 months
from the date of its acquisition is known as ‘short term capital gain’ 
Long term capital gain
        The gain resulting from the transfer of a capital asset after the expirty of 36
months from the date of its acquisition is known as long term capital gain
 
 Cost of acquisition  
 Cost of improvement
Exemptions under section 54
 Short Term Capital Gain
• Capital gain is considered to be short term if immovable property is
sold / transferred within THREE years of acquisition
• Similarly, if shares or other financial securities such as mutual fund units
are sold within ONE year of purchase, the profit earned is treated as short
term capital gain.

SALES CONSIDERATION
(-) TRANSFER EXPENSES
(-) COST OF ACQUISITION
(-) COST OF IMPROVEMENT
= GROSS STCG
(-) EXEMPTION UNDER SECTION -54
= NET STCG
 Tax Treatment on Short Term
Capital Gain

It is included in the gross taxable income like other

sources of income and normal rates of tax apply,
which depend on the gross taxable income from all
sources including short term capital gains.
Tax Treatment on Short Term
Capital Gain

In case of Sale of equity shares or units

of equity oriented Mutual Fund
schemes, short term capital gains are
taxed at a Flat Rate of 15%,
irrespective of the tax slab on other
sources of income, provided securities
Transaction Tax is paid on such sale.
 Long term capital gain

The gain resulting from the transfer of a capital asset after the expirty of 36 months
from the date of its acquisition is known as long term capital gain.
In case of LTCG  if immovable property is sold / transferred after THREE years of
Acquisition.
• Similarly, if shares or other financial securities such as mutual fund units are
•sold AFTER ONE year of purchase, the profit earned is LTCG.

SALES CONSIDERATION
(-) TRANSFER EXPENSES
(-) INDEX COST OF ACQUISITION
(-) INDEX COST OF IMPROVEMENT
= GROSS LTCG
(-) EXEMPTION UNDER SECTION -54
= NET LTCG
 INDEX COST OF ACQUISITION

a) If assets was purchased after 1 april,1981

Cost of acquisition * previous yr index value/
transfer yr index value

b) If assets was purchased before 1 april ,1981

Cost of acquisition or fair market value as on
1 april ,1981 whichever is more * previous yr index
value/transfer yr index value
 Long Term Capital Gain

If Immovable Property is sold after THREE years of

purchase, Or

Financial securities such as shares, deep discount

bonds, units of open - ended or close – ended schemes
of mutual funds are sold/redeemed/transferred after
holding the same for more than Twelve Months, then
the gain is considered to be long term capital gain.
Long Term Capital Gain
Non listed shares/units of equity
oriented mutual fund schemes, tax is
payable in respect of long term capital
gains at a flat rate 20% and the
amount of gain has to be adjusted for
inflation. This inflation adjustment is
known as indexation benefit.
 Tax Treatment on Long Term
Capital Gain

With effect from October 1, 2004, long term capital gain

on transfer of listed shares/units of equity oriented mutual
funds schemes has been exempted from tax, provided
securities transaction tax has been paid on such sale.
 
 
       
Income form other sources

 It
is the residuary head of income. Under this head, income of every kind which is
not charged to tax under any of the other four heads are chargeable to tax. 
•Examples of income from other sources
o Winning from lotteries, crossword puzzles, races
o Annuities granted under a will
o Dividends (Exempted u/s 10)
o sub letting income
o Interest on bank deposit
o Income from royalty
o Agriculture income outside India
o Income received from writing articles
o Income from undisclosed sources
o Interest received on income tax refund
o Rent from plant , furniture & machine
o Gift is more than Rs 50000
o Directors commission & fees
o Family pension
 EXEMPTED INCOME FROM OTHER
SOURCES

• Dividend from Indian company

• 9 % & 10% bonds of some companies
• DA to MLA & MP
• Gift received in kinds
• Capital investment bonds
• Capital relief bonds
 Deduction of tax at source
sec- 193 & 194
1.) Listed company rate = 10.3 %
2.) Unlisted company rate = 20.6%
3.) Casual income rate = 30.9%
If winning amount is greater than Rs 10,00,000
Then rate of TDS = 33.99 %
4.) Brokerage & commission rate = 10.3 %

NOTE:- AMOUNT OF DIVIDEND RECEIVED BY THE SHAREHOLDER

WILL BE GROSSED UP AS –
AMOUNT OF DIVIDEND RECEIVED *100/100 – RATE OF TDS
 OTHER IMP. POINTS
• If amount is less than Rs 2500 then no TDS
• Dividend received from foreign companies (no
TDS)
• Interest received from any society no TDS
• Agriculture income
 AMOUNT NOT DEDUCTABLE
SEC - 57
• PERSONAL EXPENSES
• PURCHASE OF LOTTERY TICKETS
• EXPENSES ON CASUAL INCOME
• FAMILY PENSION
1.) ACTUAL PENSION – 1/3 OF SUCH PENSION
OR RS 15000
2.)WHICHEVER IS LESS
THANK YOU