This document summarizes the process of computing taxable income and tax in India across five categories: income from salary, house property, business/profession, capital gains, and other sources. It outlines the key components and deductions for calculating taxable income under each category, such as allowances exempted from salary income tax, the process for determining annual rental value of a house property, and the conditions for capital gains tax liability. The document provides an overview of the complete taxation process in India.
This document summarizes the process of computing taxable income and tax in India across five categories: income from salary, house property, business/profession, capital gains, and other sources. It outlines the key components and deductions for calculating taxable income under each category, such as allowances exempted from salary income tax, the process for determining annual rental value of a house property, and the conditions for capital gains tax liability. The document provides an overview of the complete taxation process in India.
This document summarizes the process of computing taxable income and tax in India across five categories: income from salary, house property, business/profession, capital gains, and other sources. It outlines the key components and deductions for calculating taxable income under each category, such as allowances exempted from salary income tax, the process for determining annual rental value of a house property, and the conditions for capital gains tax liability. The document provides an overview of the complete taxation process in India.
1. Income from salary 2. Income from house property 3. Income from profit or gain from business or profession. 4. Income from capital gain. 5. Income from other sources. Complete Process of Computation of Taxable Income & Tax 1) Determine the residential status of the assesse 2) Determine the incidence of tax 3) Classify income after considering specific exemption into respective head. 4) Aggregate the income. 5) Apply clubing Provision. 6) Setoff/Carry forward losses (if any) 7) Balance shall be gross total income. Cont 8. Allow deduction 80C to 80U chpt VI A. 9. Balance shall be total income. 10. Determine the tax payable, applying the rates applicable. 11. Deduct rebate/relief of tax. 12. Add surcharge. 13. Add educational cess. 14. Balance is tax payable. 15. File return of income before the due date of filing. Income From Salary Salaries U/S 17(1) include following:- 1. Wages 2. Pension 3. Gratuity 4. Any fees, Commission, Perquisite,Profit in lieu of salary 5. Any advance salary etc
List of Allowance exempted from tax 1. Conveyance allowance . 2. Children education allowance . 3. Any allowance granted to an employee to meet the hostel expenditure of his child . 4. Transport allowance . 5. House rent allowance . 6. Provident Fund . 7. Gratuity . 8. Leave travel concession . 9. Compensation received at the time of voluntary retirement . 10. Encashment of earned leave at the time of retirement . 11. Computation of pension . 12. Entertainment allowance .
Statement of total income from salary Particular Rs Rs Basic salary XXX Dearness Allowances (DA) XXX House Rent Allowances xxx Less :- Exemptions Under sec10 (13 A) xxx XXX Eduacation Allowances XXX Less :- Exemptions Under sec10 (14) xxx XXX Conveyance Allowance xxx Less :- Exemption Under sec 10(14) xxx XXX Bonus XXX Gratuity xxx Less:- Exemption Under sec 10(10) xxx XXX Perquisities (Taxable) XXX Entertainment Allowances XXX Gross Salary XXX Less :- Deductions U/S 16 xxx U/S 16(2) xxx U/S 16(3) xxx XXX Taxable Income from Salary XXX INCOME FROM HOUSE PROPERTY Sec 22 of Income Tax Act 1961 Income from houses, buildings, bungalows Tax is based on Annual value. POINTS TO BE REMEMBERED Assessee should be the Owner of the Property Should be not be used for Own Business or Profession In Case of Dispute Regarding Title Property Let Out along with other Assets In case of sub-Letting ANNUAL VALUE (SEC 23) EXPECTED RENT
FAIR RENT The rent which a similar property will fetch at the same or nearby similar locality. Municipal Rent Value (MRV) X X X Fair Rental Value (FRV) X X X Whichever is higher (ER) X X X ( If no SR) Standard Rent (SR) ( If available) X X X Whichever is less (ER) X X X MUNICIPAL RENT The value fixed by the municipal or local authority
STANDARD RENT Rent fixed by the Rent Control Act Max rent an owner can claim from his tenant as rent
ACTUAL RENT Rent for which property has been let out CALCULATION OF GAV
Particular House 1 House 2 MRV 1,05,000 1,05,000 FRV 1,07,000 1,07,000 Whichever is higher 1,07,000 1,07,000 SR 1,35,000 1,35,000 ER (Whichever is Less)
1,07,000 1,07,000 AR 1,12,000 98,000 GAV 1,12,000 1,07,000
COMPUTION OF HOUSE PROPERTY INCOME Particulars amount amount
Gross Annual Value xxx Less: Municipal tax -Paid by owner xxx
Net Annual Value xxx
Deduction U/S 24
1. Standard deduction -30% of NAV xxx 2. Int. on borrowed capital- Paid or due xxx xxx
Income from House Property
xxx
Income from Profit/Gain from Business/Profession Chargeability Under sec 28 1. Profit/Gain from any business/Profession 2. Profit on sale of import entitlement license 3. Duty drawback 4. Value of benefit arising from any business/profession 5. Income derived by trade/profession 6. Income from speculative transaction 7. Income received under keyman insurance policy 8. Any interest,salary, Bonus, commision or remuneration received by partner of a firm. Case business income is not taxable u/s 28 Rental business Dividend on share Speculative transactions excluded :-Hedging contracts and derivative transaction.
How to compute PGBP U/S 30 Deductions allowed Rent taken Repairs not in a nature of capex Insurance premium U/S 31 Deductions allowed w.r.t plant & machinery. Sec 32 Depreciation
Income from Capital Gain Chargeability U/S 45 (1) Capital Gain tax liability arises when following conditions get satisfied:- There should be a Capital Asset There should be a Transfer Transfer should be in previous year Result of transfer should be profit or gain Such Profit/Gain is not exempt. Exemption for Capital Assets Any Stock-in-Trade. Movable Property (excludes jewellery archeological, Drawings, Paintings, Sculpture). Agricultural Rural Land. 65% Gold Bond -1977 / 7% Gold Bonds-1980/ National Defense Gold Bond issued by Central Government. Special Bearer Bonds 1991. Gold Deposit Bond issued under Gold deposit scheme 1999. Types of Capital Assets There are two types of Capital Assets I. Short Term Capital Asset II. Long Term Capital Asset Income from Other Sources Chargeability U/S 56(2) It includes the following Dividend. Windfall from lotteries crossword gambling. Income by way of interest on securities. Income from Royalty Director fees Income from investment