Income Tax


Sunday 16 April 2017

Meaning of Person under section 2(31) as per Income Tax

The Definition of "Person" is covered under section 2(31) of Income Tax Act 1961.
Person includes-
  • Individual,
  • Hindu Undivided Family (HUF),
  • Company,
  • Association of Person (AOP) / Body of Individual (BOI) whether incorporated or not, 
  • Firm,
  • Local Authority,
  • Every Artificial Juridical Person.
The levy of Income Tax is on every "Person".

What is Income as per Income Tax Act 1961 ?

The concept of Income is different what commonly understood by the public, as defined under section 2(24) of Income Tax. It being as "Income Includes.........", the scope of income is not confined only to the income which are mentioned in section 2(24).

  • Casual income, like Lottery, Crossword puzzles etc,
  • Capital Gain on transfer of Assets,
  • Notional Income is treated as Income
Income Tax Act, 1961 has specific provisions including the income of One person in the hands of the other, In certain circumstances, like Income of Minor child in hands of the parents would be included.  


Meaning of Assessment Year (A.Y.) & Previous Year (P.Y.)

Assessment year is the Financial year following the previous year. Assessment year is a twelve months period, commencing from 1st April every year.

Previous year is the Financial year immediately preceding the assessment year. Financial year ending on 31st March every year. Previous year means in which income has accrued or received.

Newly Set-Up Business or Profession, Previous year means Date of setting up the Business or Profession, as the case may be, the date on which newly income source come into existence & year ending on 31st March.

Income which is earned in Previous year is chargeable to Tax in the Assessment year.

For Eg- Mr A, earned an Income of Rs. 4,80,000 during the Previous year 2016-17, this income is chargeable to Tax in the Assessment year 2017-18. Hence, Assessment year is 2017-18 & relevant Previous year is 2016-17. 

Saturday 15 April 2017

List of Expenditure Based Allowances Exempted u/s 10(14)(i)

1. Travelling Allowance : Amount Received for the expenditure Less Actual amount of expenditure
2. Helper Allowance : Amount Received for the expenditure Less Actual amount of expenditure
3. Research Allowance : Amount Received for the expenditure Less Actual amount of expenditure
4. Uniform Allowance : Amount Received for the expenditure Less Actual amount of expenditure
5. Conveyance Allowance : Amount Received for the expenditure Less Actual amount of expenditure
6. Daily Allowance : Amount Received for the expenditure Less Actual amount of expenditure

 a. Amount received
 b. Amount Actually spent on above such items

Least of the above Amount is Exempt From Tax

For Eg :- Mr A received Rs. 6900 /- for travelling or for any above expenditure but he spent only Rs. 4500 /-, than rest of the amount is taxable i.e., Rs. 2400/- 

Allowances Which are Exempt upto a Extent Limit

  1. Children Education Allowance :  ₹. 100 per month per Child (Max Of 2 Child) in a financial year is exempt from tax & rest of the amount is fully taxable.
  2. Children Hostel Allowance :  ₹. 300 per month per Child (Max Of 2 Child) in a financial year is exempt from tax & rest of the amount is fully taxable.
  3. Transport Allowance :  ₹. 1600 per month for normal person  or 3200 per month for Orthopedically Handicapped person, in a financial year is exempt from tax & rest of the amount is fully taxable.
  4. Siachen Allowance : ₹. 7000 per month
  5. Compensatory Allowance(CFAA) : ₹. 2600 per month 
  6. Compensatory Modified Field Area Allowance(CMFAA) : ₹. 1000 per month
  7. Special Compensatory Allowance : ₹. 200 per month, for specified places, such as Tribal areas, schedule areas, agency areas
  8. House Rent Allowance : As per section 10(13A)
  9. Entertainment Allowance : a. 1/5 of Salary, b.  ₹. 5000 per annum,  or c. Actual Paid, whichever is lower is exempt from tax, only for government employee. 
  10. Any Special Allowance in the nature of Counter-Insurgency Allowance : ₹. 3900 per month 
  11. Hard Area Allowance : ₹.1300 per month.

List Of Some Fully Taxable Allowances

Basic Salary
Dearness Allowance(DA)
Dearness Pay (DP)
Commission on Turnover
Fixed Commission
Project Allowance
High Cost Living Allowance
Medical Allowance
City Compensatory Allowance
Tiffen Allowance
Servant Allowance

*--Above all items are fully Taxable

Thursday 13 April 2017

Important points related to Direct Taxes A.Y. 2018-19

1. Domestic companies turnover upto 50 Crore Rupees, for Financial year 2016-17 to be considered for tax @25% in AY 2018-19

2.  TDS on rent 194IB required to be deducted only once in a year in Last month of the year and TAN not required . Further TDS cannot be more than Last month's Rent. Applicable for individual or HUF not liable for tax audit w.e.f 1 June 2017.

3. Sec. 45(5A) In case of joint development agreement between land owner individual or HUF and builder, tax to land owner for transfer of land in year completion certificate issued by builder.
Further, TDS under Section 194IC @10% w.e.f 1-4-17 in case any monetary consideration payable under specified agreement.

4. Section 54EC scope expanded so as to provide that investment in any bond redeemable after 3 years which has been notified by CG.

5. No cash donation w.e.f 1-4-17 exceeding 2000. Existing limit was 10000.

6.  40A Section limit reduced to 10000 from existing 20000 w.e.f 1-4-17. Further depreciation also to be disallowed if capital asset purchased in cash exceeding 10000 w.e.f 1-4-17 effectively A.Y. 2018-19.

7.  44AD concessional   rate 6% on digital/cheque receipts  applicable to A.y 2017-18 also. Time limit for receipts from debtors before due date under Section 139(1).

8.  Restrictions on cash receipt of 3 Lakh or more applicable if
      a. Received in Aggregate from a person in a day
      b. In respect of single transaction 
      c. In respect of transactions relating to one event or occasion from a person.
9. Enabling 15G and 15 H on insurance commission w.e.f  1-Jun-17.
10. 44AA books maintenance turnover revised to 25 Lacs and income to 2.5 Lacs from AY18-19. However Professional mentioned in sub sec. 1 such as legal medical etc. Gross income limit is still 1.50 Lacs. for books maintenance.

11. From A.Y 17-18 payment of expenditures to relatives will not be considered for limit of 20 Crore for domestic transfer pricing.

12. Time for filling revised return shall be upto the end of relevant assessment year or before completion of assessment which ever is earlier, w.e.f.  A.Y 18-19 
13. Set off of losses under Income from House Property against any other head shall be restricted to 2 lakh rupees,w.e.f. A.Y. 18-19.

14. TCS in case of no PAN 5% or twice the TCS rate which ever is heigher. w.e.f. 1-Apr-17.

15. Limitation of interest to associates restricted to 30% of earnings before interest tax depreciation. 
Excess interest can be carried forward to 8 assessment years. Provisions applicable of interest exceed 1 crore.

16.  Non deductions of tds on expenses against  other sources income also subject to disallowance of expenditure..

17.  50CA introduced to provide that where consideration for transfer of unquoted shares  is less than fair market value , the fair market value shall be deemed to be full value of consideration, w.e.f. A.Y. 18-19.
18.  Base Year for Capital Gain shifted to 2001 from 1981.
19.  MAT credit can be carried forward to 15 yrs.

20. To levy surcharge of 10% on income between Rs 50 lakh-1 crore.

Highlights Of Budget 2017

Double-digit inflation has been controlled
Growth in many emerging economies expected to recover in 2017
India is seen as an engine of global growth
  Advantages of GST have been extensively discussed
Demonetisation has potential to generate long-term benefits
Aim to spend more in rural areas, infra, poverty alleviation
Focus areas - farmers, rural employment and infra
Target for agricultural credit set at Rs. 10 lakh crore
Demonetisation impact will not spill into next year
  Aim to bring 1 crore rural households out of poverty
Coverage under crop insurance scheme to be increased to 40%
Dairy processing infra fund to be set up for Rs. 2,000 crore
Last year's MNREGA targets have been achieved
We're committed to double farm income in 5 years' time
Well on our way to achieving 100% rural electrification
Rs. 48,000 cr for MNREGA, highest allocation ever
In education, will undertake reforms in the UGC
100 India international Skill Centres to be established
Propose national testing agency to conduct entrance exams
Affordable Housing to now be given 'infrastructure' status
Target elimination of tuberculosis by 2025
Two new AIIMS to be set up in Jharkhand and Gujarat
Keen to foster environment where labour rights are protected
Women, child welfare allocation upped to Rs. 1,84,362 crore
Allocation for Scheduled Castes raised to Rs. 55,393 crore
Unmanned railway crossings to be eliminated by 2020
Railway lines of 3,500 km to be commissioned in 2017-2018
At least 25 stations to be redeveloped in 2017-18
All railway coaches will have bio-toilets by 2019
All service taxes for bookings via IRCTC to be withdrawn
New Metro Rail policy to be framed
Allocation for highways raised to Rs. 64,000 crore
 Airport Operation Management for tier-II airports via PPP
20,000 MW solar power capacity to be set up
Strategic crude oil reserves to be set up in Odisha,Rajasthan
FIPB to be abolished to ease foreign investment
Rs. 10,000 crore for recapitalisation of banks

Restriction on Cash Transactions as applicable w.e.f 1st April 2017

Amendments relating to Cash Transactions wef 1st April 2017

1. Restrictions on cash transactions above Rs. 2,00,000/- :-
Any transaction including capital assets above Rs. 2,00,000/- will not be allowed, only through banking transaction.
There is a penalty of Amount equivalent to transaction amount above Rs. 2,00,000 if any transaction above Rs. 2,00,000/- is done in cash.

Imp Note that penalty is imposed on receiver of cash.

2. Restriction on Capital Expenditure in Cash :-
Any Cash payments of above Rs. 10,000/- for purchase of capital asset will be disallowed.That cost will be not added in the cost of asset for Income Tax purposes & Depreciation cannot be claimed on same. Ensure that payment for purchase of any capital asset of more than Rs. 10,000/- shall be through banking transaction only, Cash Payment will not be allowed.

3. Restriction on Cash Eexpenses above Rs. 10,000/- :-
Any expense of above Rs. 10,000/- done in cash will be disallowed. Only throughbanking transaction is allowable. Earlier for the limit was of Rs. 20,000/-.

4. Restriction on cash Donations to charitable trusts :-
Deduction at the rate of 50% is granted in case donation is made to a registered charitable or religious trust. Any donation above Rs. 2,000/- in cash will not be eligible for tax deduction under Sec 80G of the income tax act. Earlier this limit was of Rs. 20,000/-
therefore, to ensure that donation should be through banking transaction only for Income Tax purpose & etc.

For eg., if you sell any Assets like Bike for Rs. 2,50,000/- and receive the amount in cash. The amount of penalty levied on you will be same of Rs. 2,50,000/-.

Sunday 9 April 2017

Agriculture Income Exempt u/s 10

Agriculture Income is exempt form Tax If it cover under definition of "Agriculture Income" of Section 2(1A).