How to prepare Direct Taxation for CA Final - May 2018

This article is an excerpt from a Facebook Live session with CA Mehul Thakkar answering student queries for Direct Taxation subject for CA Final.

Following questions were asked:

• DT is one of the vast subjects and this creates fear among students. What will be your advice to students so that they can gain confidence in DT?
• In DT, With Finance Act 2017, Amendments have already come in the syllabus. How should one study for the amendments and how many questions students can expect in the exams?
• Usually, it is seen that a lot of students are unable to complete their DT syllabus in the last one day before exams. What would be your advice for them? How to revise the entire syllabus one day before exam?
• I understand that it is not advisable to do selective studies in a course like CA. But still for some students who couldn't study complete subject what are some topics/ chapters that are most important for the exams?
• How should a student use RTPs and mock test papers that are released by the institute every year?
• Live Questions during the session: How to prepare for the CA Final.
• In the new course, there is a specific inclusion of International Taxation in the curriculum. So, what is your view on that?
• There are specific questions that come in exams based on remote topics. So, what is the way of handling those questions?

DT is one of the vast subjects and this creates fear among students. What will be your advice to students so that they can gain confidence in DT?

Mostly, there are two reasons which I found -

i. There is a pre mindset. Seniors normally will inform you that DT is a very vast subject. With that belief, you look at the subject.

ii. They do not study subject as a whole in details and skip the important topics.

So, my suggestion to all the students is that, first go away with the pre-mindset. You should have a belief / mindset that DT is not so vast. With that mindset and with a fresh thinking, you should face DT without any fear. If you want to overcome the fear, then you should face it.

And the next important thing is that you should study every aspect. When you are studying the subject for the first time, then you should study everything which in turn will boost up your confidence.

In DT, With Finance Act 2017, Amendments have already come in the syllabus. How should one study for the amendments and how many questions students can expect in the exams?

Amendments are very crucial as far as DT exam is concerned.

Budget 2017 is going to be applicable for the students for the 1st time who will be appearing for May 18 exams, henceforth its importance becomes very high. In May 2011 attempt, amendments questions were asked worth 49 marks.

The importance varies but definitely one can expect questions of 20 to 40 marks from the amendment portion.

Now, the important part is what the students feel regarding the amendments who would be appearing for the upcoming May 18 exams and also the changes which is something different from the amendments.

The students should take care of the changes that I am talking about. -

In May 18 exams, the notification circulars dated till 31st Oct 17 will also be included in the exam. Many changes come through these notifications. So, this is something which the students should take care of.

Students should not only focus on amendments, when I talk about amendments, students should take care of the amendments + changes.

Amendments means you need to cover up all the amendments that were covered up in 2017.

Regarding the changes, I want to mention two things in this regard, -

i. One need to cover up all the Notification Circulars dated till 31st October 17.

ii. Changes that were brought in the syllabus.

You might have noticed the modules of old and new syllabus has been kept same but there is one particular chapter named - Tax Planning wherein 18 pages have been incorporated from the topic GAAR.

GAAR was a topic that was postponed by the FM long back, but now it has been implemented. Now, the institute hasn't kept GAAR as a separate topic, rather they have included the same under Tax planning.

Those 18 pages consists of examples that are all based on international taxation. So, you need to look at the changes in two ways - first are the notification circulars which you need to study dated till 31st Oct 17 and the changes that are brought forward by the institute.

One must be careful about the special topic that are incorporated by the institute.

Apart from these, there were certain amendments during Finance Act 2016 which are to be applicable for the Assessment year 18-19 for the May 18 exams. So, one should take care of that.

For e.g, in May 11 exams, students expected amendments to be asked from the Finance Act 10, but instead it came from Finance Act 2009 worth 49 marks. Not a single question was asked from the FA 10 portion. So, I would suggest all the students to go through 2 amendments.

I have also published one article on CAclubindia regarding amendments.

Many of the students have gone through that. There is a certain issue that arises with amendments - as to where we need to start from, from where to read, how do I get in-depth understanding on this, what will be the questions asked by the institute, how do I attempt because ultimately presentation matters in the final examination.

So, keeping all these things in mind, I want to state that from the year 2003, I have started writing separate book for amendments.

This time also I have published one e-book on CAclubindia regarding amendments of around 143 pages. It will consist of the practical question, discussion based on the amendments and also the ideal solution for it.

There will be 95% coverage on it which I have prepared in Q/A form and it is also available in CAclubindia as well.

Usually, it is seen that a lot of students are unable to complete their DT syllabus in the last one day before exams. What would be your advice for them? How to revise the entire syllabus one day before exam?

What is observed while imparting training to the students, there are basically two types of students.

1. One set of students - those who want to read fully and believe that only then, they can have the satisfaction and appear in the exam.

2. Second set of students who have no confidence on themselves and believe they cannot complete the course.

Advice for the 1st set of students:

Whenever you sit for revision, if you have allocated 8 days for revision, then while revising the subject you should decide that which are the topics that I need to refer one day before the exams.

You should have a special mark that is important for you and which you feel that - it can't be missed. This is an important thing which students need to follow.

For e.g, PGBP is a very long topic. I have seen students who keep focussing on only assessment procedures etc. and can't focus on any other thing, thereby wasting 3 to 4 hours on the same topic.

So, you should have the clarity and make a proper planning as to which topics you need to cover each day which will enable you to complete your revision and also will help you to study a day before the exams without facing any difficulty. So, I would advise such students to plan accordingly.

Advice for the 2nd set of students:

These set of students want to go for only the important topics. So, they need to have clarity and follow the last year's exam papers and all the important files and concepts that comes from exam point of view.

But, I would suggest them to study these 2 things which they shouldn't forget -

i. Amendment cum changes &
ii. Case Study.

These things can be covered up in the last day.Even, I have shared many fileson CAclubindia based on important topics / concepts from exam point of view.

This time also I have shared a file of DT revision material having 340 pages.

In those 340 pages of DT revision material, I have covered those changes as well. I have covered the important amendments, practical questions (section wise) in that file.

So, I think students can download it from CAclubindia and use that file also for their last day revision.

I understand that it is not advisable to do selective studies in a course like CA. But still for some students who couldn't study complete subject what are some topics/ chapters that are most important for the exams?

My suggestion would be - mostly there are standard topics that institute is always focussing;

• Profits & Gains from business profession - you should not miss PGBP. If you look at the last attempt, Nov 17, the paper was slightly odd. They haven't taken care of profits and gains from business profession, the way students expected. Rather, they have taken care of various small topics and put it under PGBP; like they have covered business statutory in that, they have covered business trust in chapter PGBP.
• Capital Gain and other topics related topics as well.
• Business restructuring which is itself a very big topic. Mostly they test slump sale and this is very surprising that whenever they test for 10 marks, they test slump sale.
• Transfer Pricing.
• Charitable trust and they are testing it consistently. You can see the frequency is very high. If you look at last 10 papers, you will find 6 to 7 times charitable trust. It has also been asked in compulsory question too.
• Next important topic which one should focus on is - Taxation of company. So, you should be clear about minimum alternate tax (MAT). If you look exactly at other than corporate, there is alternate minimum tax. So, students should look into MAT or AMT.
  
  For MAT, my suggestion to the students is - you should exactly know what they are expecting from you. You should read the questions carefully. Whenever, 16 marks question appears and you find the question beginning as .... XYZ Pvt. Ltd. provides following information etc. then at the end you must read carefully what they expect from you. If they expect from you, compute tax payable, only then MAT is being taken care of in the examination. When they ask to compute total income, you should focus only on total income. If they ask that compute tax payable only then, it is a sum of MAT, then you have to work out total income, regular tax, you have to work out book profit and MAT and then you have to compare if MAT is higher or regular tax is higher. But, when they ask for total income, then focus only on total income. Sometimes, they ask only book profit which will be of 10 marks, if they ask for total tax calculation, then it will be of 16 marks, for total income it will be around 12-16 marks. So, you should look into exactly what they expect from you in the examination. Don't jump into and unnecessarily invest your energy and time as time is very precious.

• One more topic is collection and recovery wherein TDS is very important. This time, I found there were changes in TCS, there were lots of sub-sections which have been omitted. That you should look into. There are changes in TDS also, more particularly, 194(I)B section. So, students should look into 194(I)B also; definitely they may find some practical question based on that. From TDS, one can expect questions of 6 to 12 marks. In TDS, what I have seen is - students mostly focus on rate and limit. In TDS, examiners mostly focus on notifications, circulars and case studies.

• The other evergreen procedures like assessment, appeals, IT authority, their powers etc. should also be given importance.

• So, I think these topics are sufficient along with the other fundamental & crucial chapters like special provisions for NRIs etc.

Still, I would say to focus on the revisionary note that I have provided worth 340 pages that includes the important provisions, sums and the solutions. So, students can follow that also, which is already available on CAclubindia website.

How important is it to remember all the section numbers, notification numbers, provisions numbers in the exam?

If you know the section numbers thoroughly, then only, you should mention them. Some students mention the sub-sections also, but I will suggest to do it only if you are very clear about it, else just mention the section numbers.

But, what I have seen is that, even if the section numbers are mentioned in the question paper, then also, students are very confused and commit a mistake in writing the section number. So, you should be watchful while reading the question.

So give emphasis on the section numbers of assessment, appeals, revision, IT authorities & their powers as your questions will be based on that. You should also prepare sub-sections as well.

How should a student use RTPs and mock test papers that are released by the institute every year?

If you talk about RTPs, I would suggest students to prepare a minimum of 4 RTPs, (present year's RTP and previous three year's RTP). If there is a student who has completed the revision of all his subjects on time, then he would seek more and in that a case, I would suggest going through a minimum of 5 RTPs. The benefit of RTP is that it's given in Q/A format which covers few case studies

Next comes the mock test papers and I will suggest the students to go through the mock test papers that are offered by the institute. You should follow the institute's mock test paper to get an idea of what is their expectation for the upcoming examination.

Live Questions during the session: Someone has asked how to prepare for the CA Final.

You should be clear about 3 aspects of your CA Final examination.

1. You should first focus on understanding. Many of the students lack in understanding and if you lack in understanding, you lack in confidence and if you lack in confidence, then you are gone.
2. Second part is very crucial - memory. Lots of memory based tools are available now. So, just adopt any of them which will help you to sharpen your memory.
3. Third part is presentation which I call as the UMP approachi.e. Understanding, Memory and Presentation. What I found is that the students lack in presentation. They are good at understanding and memory but when they face the question, they are unable to present their answers. So, presentation skills need to be developed and is required to have a command over the language. Every subject has got different language and different requirement.

You should look into presentation skills and follow the Q/A pattern provided by the institute. This time the institute has published the solution papers of last 5 attempts. So, you can follow those papers which would help you in improving your presentation skills.

In the new course, there is a specific inclusion of International Taxation in the curriculum. So, what is your view on that?

If you compare old syllabus with new syllabus, you can find that the topic of international taxation has been given separate weightage of 30 marks. Apart from that, there are 6 optional papers, in that also one more subject is available - if you want to opt for international taxation and transfer pricing of 100 marks separately, then you can go for it.

Now let us talk about the compulsory part wherein 70 marks has been kept aside and rest 30 marks has been allotted for international taxation. Around 3 to 4 topics have been newly included in the international taxation part in addition to what exists in the old syllabus.

Even, I have recorded lectures separately for International Taxation (worth 30 marks) of around 34 to 36 hours and also hoping to launch it soon in CAclubindia that will focus on non-residence, transfer pricing, double taxation avoidance agreement and convention, analysis, how they will test in examination, how to interpret double taxation, convention, model clauses etc. including GAAR - all these, I have tried to cover within that 30 marks.

Students who have taken the new syllabus shouldn't take it lightly. It definitely requires minimum 30 to 40 hours' study for international taxation.

There are specific questions that come in exams based on remote topics. So, what is the way of handling those questions?

I have already said that first of all, you have to understand everything. Refer to my revisionary notes of last attempt on CAclubindia.

In that, I have covered Safe Harbour Rules and 6 questions from ICAI and out of that, two questions they have tested, so it was long awaited.

Safe Harbour was originally introduced by Finance Act 2009. Then Govt. took 4 years' time to come out with the rules, that means it was due since 2013 and ICAI also took 4 years' time and tested it in 2017.

Moreover, the rules of Safe harbour have completely changed as representations came from foreigners & foreign investments and the various foreign companies having substitutes in India.

If you refer to my recent revisionary material, you can find that I have included new notifications - in which I have covered Rule 10(TD) - which has replaced the previous Safe Harbour rules.

So, you should look into it carefully and follow the recent changes.

So, almost all the issues that have been raised by the students has been answered accordingly by Mr. Mehul Thakker and we hope that the students will be benefitted with this FB session!!

All the very best for your exams and stay tuned for next FB live session with CA Ravi Taori on 23 March 2018 for Audit subject in CA Final & CA IPCC.

To Enrol for the online classes of Mehul Thakkar Click here