Guide to .. Tax Management ,Tax Planning and Tax Saving

Computation of Total Taxable Income

1. Income under the Head 'Salary' [ Section 15-17 ]
Salary-Definition & Meaning

1. Computation of Salary Income

2. Definition of Word ‘Salary’ [ Section 17(1)]

3. Section-15 : List of Incomes Chargeable to Income Tax under the head ‘ SALARIES’

4. Important Points / Characteristics for Computing Salary Income

Provident Fund

5. Treatment of Provident Funds (PF) for Computing Salary Income

6. Taxable Portion of annual accretion to RPF [Section 17(1)(vii)]. for Computing Salary Income

7. Transferred Balance from URPF to RPF [Section 17(1)(vii] for Computing Salary Income

8. Refund from Provident Fund [Section 17(3)(ii)] for Computing Salary Income

9. New Pension Scheme [ NPS] for Central Government and other Employees joining new jobs on or after 1-1-2004 for Computing Salary Income
Allowance [ Section 17(3)]

10. Allowance [ Section 17(3)] – for Computing ‘Salary’ Income

10. Allowance [ Section-10] – for Computing ‘Salary’ Income

11. Fully Exempted Allowances for Computing ‘Salary’ Income

12. Fully Taxable Allowances for Computing ‘Salary’ Income

13. House Rent Allowance (HRA) for Computing ‘Salary’ Income

14. Allowances covered u/s 10 (14) for Computing ‘Salary’ Income

15. Meaning Of Salary For Different Purposes
PERQUISITES [Section 17(2)]

16. Meaning and Types of Perquisites [ Section 17(2)]

17. Taxability of Perquisites for Computing Salary Income

18. Perks Exempted From Tax for all Employees and not added in Salary Income

19. Rent Free House [Section 17(2)(i) Rule 3(1)]

20. Rules Regarding Calculation Of Value Of Rent Free House

21. Valuation Of Rent Free Accomodation (Unfurnished & Furnished)

22. Valuation of Rent Free Accommodation Provided as Concessional Rent [Sec. 17(2)ii)]

23. Obligation of Employee of Rent Free House met by Employer [Section 17(2)(iv)]

24. Sum payable by the Employer directly or through a fund to effect an assurance / an annuity [Section 17(2)(v)]

25. Any specified security or sweat equity shares allotted or transferred to employee [Section 17(2)(vi)] [ w.e.f. 1-4-2009]

26. Contribution to an Approved Superannuation Fund by the Employer [Sec. 17(2)(vii)]

27. Interest free or Concessional loan from employer [Rule 3(7)(i)]

28. Valuation of Perk in respect of Travelling, Touring, Accommodation

29. Food or Beverages Facility by Employer to Employee

30. Valuation of Perquisite in respect of Gift Voucher or Token

31. Valuation of Perquisite in respect of Credit Card

32. Valuation of Perquisite in respect of Club Facility

33. Use of Moveable Assets by Employer to Employee

34. Transfer Of Moveable Assets to the employee

35. Meaning of Specified Employee for Taxable Perquisites [Section 17(2)(iii) Rule 3]

36. Valuation of Perquisite of Motor Car or any Other Automotive Conveyance [Rule 3(2)]

37. Perquisite of Free domestic servants [Rule 3(3)]

38. Perquisite in respect of free supply of gas, electric energy, water supply [Rule 3(4)]

39. Free Educational Facilities to Children of Employee’s Household [Rule 3(5)]

40. Facility of Free or Concessional Private Journey to an employee by the employer engaged in the carriage of passengers or goods [Rule 3(6)]

41. Perquisites and Income Tax


41. Receipts treated as Profit in Lieu of Salary [ Section 17(3)]

42. Leave Travel Concessional (LTC) Assistance [Section 10(5)]

43. Death-Cum-Retirement Gratuity [Section 10(10)]

44. Non-Government employees receiving gratuity under payment of Gratuity Act, 1972 [POGA]

45. Non-Government Employees receiving gratuity (Not covered under payment of Gratuity Act)

46. PENSION [Monthly and Commuted] for Computing Salary Income

47. Leave Encashment [Section 10(10AA)] for Computing Salary Income

48. Any amount received as compensation on termination of employment [Section-10B]

49. Any amount received on voluntary retirement [Section 10(10C)]

50. Payment received from Recognised Provident Fund [Section 10(12)]

51. Any payment from Superannuation Fund [Section 10(13)]


52. Entertainment Allowance to Government Employees [Section-16(ii)]

52A. Tax on Employment Under Section - 16(iii)


53. Section - 80C : Deductions from Gross Total Income (GTI) in case of Individual and HUF

54. Qualifying Amount ( Q.A.) for Deduction U/s 80C

2. Income from 'House Property'


Income chargeable to Tax under the head “House Property”


Meaning of Deemed Owner


Meaning of Composite Rent with Tax Treatment

3.1. Tax Treatment of Composite Rent of Building Let Out along with Other Assets

3.2. Tax Treatment of Composite Rent in a case of Letting of Building along with Provision of Services


Computation of Income from a Let Out Property


Computation of Gross Annual Value (GAV) of a Let Out Property

5.1. Computation of reasonable expected rent of a let out property (i.e. step-1).

5.2. Computation of actual rent of a let out property (i.e. step 2)

5.3. Computation of gross annual value of a let out property (i.e. step 3)


Computation of Gross Annual Value in the case of a Property which is Vacant for some time during the year


Expenses to be Deducted from Gross Annual Value of a Let Out Property


Pre-Construction Period


Meaning of Self-Occupied Property


Computation of Income from Self Occupied Property


Tax implication of more than one House Property occupied for Residence Purpose


Deduction in respect of Interest on Housing Loan in case of Self-Occupied Property


Computation of income when property is Self-Occupied for part of the year and Let Out for part of the year


Computation of income when, part of the property is Self-Occupied and part is Let Out


Tax treatment of Unrealised Rent which is subsequently realised


Tax treatment of Arrears of Rent


Deduction in respect of Interest on Loan taken for Residential House Property

3. Income from 'Business or Profession'

 1.Definition Of Head Business or Profession [Section 28]

2. Compensation Received as Business Income [Section 28(ii)]

3. Income of a Trade or Professional Association [Section 28(iii)]

4. Income from Export Incentives is chargeable to Income Tax

 5. Any Amount Received Under certain Agreement for not to Carry on Business [Section 28(va)]

6. Speculation Business [Explanation to Section 28]

7. Profit Earned from an Illegal Business

 8. Transfer of certain Assets Specified u/s 35AD in certain circumstances [Section 28(vii)]

8-A. Certain Incomes relating to business but not taxable under the head ‘Profits Gains of Business or Profession .

9. Computation of Income of Business or Profession - General Important Points

10. General Principles - for Deductions Allowed from Gross Income of Business and Professions

11. Deductions from Gross Income of Business or Profession [ Section 30 to 44DB]

12. Expressly Admissible Deductions from Gross Income from Business or Profession [Section 30-36]

13. Expenditure Incurred in the Field of Scientific Research [Section 35]

14. Expenses on Research Activities carried on by the assessee himself

15. Contribution to Approved Institutions to carry on Research is Allowed as Weighted Deductions for Calculating Profits and Gains of Business or Professions.

 17. Expenditure incurred on the acquisition of Patents Rights or Copy Rights [Section 35A] [Applicable for expenditure incurred before 1-4-1998]

18. Expenditure on know-how [Section 35 AB] [Applicable for expenditure incurred before 1-4-1998]

 19. Expenditure for obtaining License to operate Telecommunication Services [Section 35 ABB]

20. Expenditure on eligible projects or schemes [Section 35 AC]

 21. Deduction in respect of expenditure incurred on setting up of a Specified Business [Sec. 35AD]

22. Any amount given to an institution or association [Section-35CCA]

23. Expenditure on Notified Agricultural Extension Project [Section-35 CCC] [w.e.f. A.Y. 2013-14]

24. Expenditure on Notified Skill development project [Section-35 CCD] [w.e.f. A.Y. 2013-14]

25. Amortisation of Certain Preliminary Expenses [Section 35D]

26. Expenditure on demerger or amalgamation [Section 35DD]

27. Amortisation of Expenditure Incurred Under Voluntary Retirement Scheme [Section 35DDA]

 28. Expenditure on Prospecting etc., for certain Minerals [Section 35E]

29. Other Deductions Allowed to Compute Income from Business or Profession   [Section-36]

30. Interest on Borrowed Capital [Sec. 36(1)(iii)].

31. Deduction of discount on Zero Coupon Bond [Section 36(iiia)]

32. Contribution to Provident and Superannuation Fund [Sec. 36(1)(iv)].

34. Employee’s contribution towards staff welfare schemes [Sec. 36(1)(va)]

35. Bad debts [Sec. 36(1)(vii)]

36. Bad debts of Banks, financial institution and industrial investment corporation etc. [Section 36(1)(viia)]

37. Special Reserve Created and Maintained by Financial Corporation [Section 36(1)(viii)].

38. Expenditure on Family Planning [Section-36(1)(ix)].

39. General Or Allowable Deductions [Section 37]

41. Commission earned by the agents of Life Insurance Corporation, Unit Trust of India, Post Office or Mutual Funds

42. Legal Expenses in the Interest of Business are Allowable Expenses

43. Losses incidental to Business Allowed to be Debited.

44. Expenses Expressly Disallowed In the Case of any ‘Assessee’ [ Section-40a]

45. Expenses Expressly Disallowed In the Case of any Firm [Section 40(b)]

46. Expenses Expressly Disallowed In General Cases [Section 40(b)]

47.       Disallowing of certain Expenses under certain circumstances like ‘Payments to Relatives’

48.Payments exceeding ` 20,000 by cash/bearer cheque [Section 40A (3)].

48-A. Provision for the Payment of Gratuity – [Section-40A(7)]

 49. DEEMED PROFITS Under Profits and Gains of Business or Professions [Section 41]

50. VALUATION OF STOCK for Profit and Gains of Business or Professions

51. Deduction Of Certain Payments Only If Actually Paid [Section 43B]

52. Maintenance Of Accounts By Certain Persons Carrying On Profession Or Business. [Sec. 44AA]

53. Compulsory Audit For The Non-Corporate Assessees [Section-44 AB]

54. Computation of Income on Estimated Basis [Section 44AD]

 55. Profit from the business of carriage of goods for truck owners [Section 44 AE]

56. Special provision for computation of income from royalties in case of nonresidents [Section 44DA]

57. Partly Agricultural and Partly Business Income

 58. Adjustment In The Profit And Loss A/C Prepared By The Assessee

60. Computation of Profits and Gains of a Non-Resident from Shipping Business— [Section 44B]

61. Computation of Profits and Gains of business of Oil Exploration [Section 44BB]

 62. Computation of Profits and Gains of the Business of operation of Aircrafts by Non-Resident [Section 44 BBA]

63. Computation of Profits of Foreign Enterprises [Section 44BBB]

64. Ceiling Limits in respect of Head Office Expenses [Section 440]

67. Special Provisions in case of Income of Public Financial Institutions etc. [Section 43D]

4. Income from 'Capital Gain'

1.       Capital Gain , Capital Assets & Property for Computing Capital Gain


2.       Types of Capital Assets for Computing ‘Capital Gain’


2A.    Types of Capital Gains for Computing ‘Capital Gain’


3.       Computation Of ‘Period Of Holding


4.       Transfer Of A Capital Asset [Section-2(47)]


5.       Transactions Not regarded as ‘Transfer’ [Section-47]


6.       Capital Gain is Deemed to be the Income of the Previous Year

7.       Amount Received from insurer [Section-45(1A)] for Computing Capital Gain

 8.      Transfer of Capital Assets by a person to firm, AOP or Body Of Individuals (BOI) [Section 45(3)] for Computing Capital Gain

 9.      Transfer of Capital Assets on Dissolution of Firm, AOP or Body Of  Individuals (BOI) [Section 45(4)] for Computing Capital Gain

 10.    Enhancement of Compensation on Compulsory Acquisition of Assets [Section-45(5)] for Computing Capital Gain

10(A).Sale of units Purchased for Deduction U/s 80 CCB [Section-45(6)]

11.     Distribution of Assets by A Company in Liquidation for Computing Capital Gain

11(A).Capital Gain on Purchase by A Company of its Own Shares or Other  Securities [Section 46A]

12.     DEEMED CAPITAL GAIN [Section 47A]

13..    Method of Computing Capital Gain [Section 48]

13-A. Expenses Disallowed u/s Section 48 for Computing Capital Gain

14.     Cases in which the Indexation of Cost is not to be done while Calculating long Term Capital Gain

15.     Computation of Capital Gain in Case of Non-Residents [Sec. 48 Proviso 1 ]

16.     Determination of Cost of Acquisition for Computing Capital Gain.

 17.    Taxation of Gain on ‘Slump Sale’ for Computing Capital Gain

18.     Special Provision for full Value of Consideration in certain cases (Section 50C] for Computing Capital Gain

 19.    Treatment of Advance Money Received and Forfeited (Section-51] for Computing Capital Gain

20.     Cost of Acquisition of Goodwill [Section-55(2)(a)] for Computing Capital Gain

21.     Cost of Acquisition of Shares [Section 55 (2) (v)] for Computing   Capital Gain

22.     Capital Gains Exempted u/s 10

23.     Capital Gains—Exempted u/s 54

24.     Capital Gain on Transfer of Self-Cultivated Agricultural Land in Urban   Areas [ Section 54 B]

25.     Capital Gains on Compulsory Acquisition Of Land And Buildings [Section 54D]

26.     Capital Gain on Transfer of any Long Term Capital Asset [Section-54EC]

27.     Exemption of Capital Gain on Transfer Of Long-Term Capital Assets in case of Investment In Residential House [Section 54F]

28.     Capital Gain on Shifting of Industrial Undertaking from Urban Areas to Non-Urban Areas [Section 54G]

29.     Exemption of Capital Gain on transfer of assets in case of shifting of Industrial Undertaking from an urban area to any Special Economic Zone (SEZ) [Sec. 54GA]

 30.    Long term Capital Gain on Transfer of Residential Property if Net Consideration is Invested in the Equity Shares of an Eligible company [Section 54GB] [w.e.f. A.Y. 2013- 14 but upto A.Y. 201 7-1 8]

 31.    Reference to Valuation Officer [Section 55] towards Capital Gain

32.     TREATMENT OF CAPITAL LOSS [Section 74]



5. Income from 'Other Sources'

> Sec.56 : Basis of Charges
> Deductions from 'Income from Other Sources'
> Amounts Expressly Disallowed
> Income From Other Sources – in  Nutshell

6. 'Clubbing of Income' - Aggregation of Income

> Sec.60 : Transfer of Income without Transfer of Assets
> Sec.61 : Revocable Transfer of Assets
> Sec.64 : Inclusion of Income of Spouse, Minor Child , etc. in income of Individual

7. 'Set Off and Carry Forward of Losses'

> Sec.70 : Set-Off of Loss from one Source against Income from another Source Under the Same Head of Income.
> Sec.71 : Set-Off of Loss from one Head against Income from another Head
> Sec.71 B : Carry Forward and Set-Off of Loss Under the Head 'Income from House Property'
> Sec.72 : Carry Forward and Set-Off of Business Losses
> Sec.73 : Losses in the Speculation Business
> Sec.74 : Losses Under the Head 'Capital Gains'.
> Sec.74a : Losses from Certain Specified Sources Falling Under the Head 'Income from Other Sources'
> Table showing Set Off and Carry Forward of Losses

8. 'Deductions' from Gross Total Income

  1. Deduction in respect of Life Insurance Premia, Deferred Annuity, Contribution to PF, etc. [ Sec. 80 C ]
  2. Deduction in respect of Contribution to certain Pension Funds [Sec.80CCC]
  3. Deduction in respect of Contribution to Pension Scheme of Central Government or any other Employers [ Sec. 80 CCD]
  4. Deduction in respect of Health or Medical Insurance Premia [ Sec.80D]
  5. Deduction in respect of Maintenance Including Medical Treatment of a Dependent who is a person with Disability [ Sec. 80 DD ]
  6. Deduction in respect of Medical Treatment , etc. [ Sec. 80 DDB ]
  7. Deduction in respect of Interest of Loan taken for Higher Education [Sec.80 E ]
  8. Deduction in respect of Donations to certain Funds, Charitable Institutions , etc. [ Sec. 80 G ]
  9. Deduction in respect of Rents Paid [ Sec. 80 GG
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