sonam..sirf ise hi mat refer karna..main reference module hi rakhna..ye sirf outline hai jo revision mein help karti hai ya topic refresh karne ke liye hai...
Group Study Notes
Page no : 2
Dhaval K.Toprani
(CA-IPCC Student)
(1150 Points)
Replied 17 February 2011
keep following it..there's a lot more to come and also do join in for the discussions...so u can be a part of the notes right at the start only...
For SM click here
For other subjects click here
Mohammed
(CS, Mcom, LLB)
(857 Points)
Replied 17 February 2011
Kya Baat Kya Baat Kya Baat!!!! Really nice yaar
REVATI (B.com,CA Final)
(Proprietor)
(153 Points)
Replied 17 February 2011
| Originally posted by : Mohammed | ||
 |
Kya Baat Kya Baat Kya Baat!!!! Really nice yaar |
 |
CA Ravi Roy
(Self Employed)
(128 Points)
Replied 17 February 2011
@ dhaval==gud post
@ all cci member=em gonna to appear for nov ipcc exam..so pls help me in prepartion of law ( strategy n tricks to prepare law)
Gourav Kapoor
(CA Final Student)
(2977 Points)
Replied 17 February 2011
good work yar.........hats off to u people........vauable addition to CCI...i wish i cud be the part of this discussion...
Pradip Narsingani
(Income Tax & GST Consultant/ CA-Final)
(572 Points)
Replied 17 February 2011
thanks./././
Dhaval K.Toprani
(CA-IPCC Student)
(1150 Points)
Replied 18 February 2011
Basic Concepts
PREVIOUS YEAR AND ASSESSMENT YEAR -
Income earned in a year is taxable in next year. The year in which income is earned is P.Y. and the next year in which income is taxable is A.Y.
A.Y. means the period starting from Apr 1 and ending on Mar. 31 of next year. Financial Year preceding the A.Y. is P.Y. Income of P.Y. is taxed in A.Y. at the
rates prescribed by the relevant Finance Act.
P.Y. in case of newly set-up Business
It starts on the date of setting up of the business or on the date when the new source of income comes into existence and ends on immediately
following Mar.31. In short it may be 12 months or less in this case. But the second and subsequent P.Y. are always of 12M each.
e.g. X sets a new business on Mar3,2011. Find P.Y. for A.Y. 2011-12 - Answer Mar3 2011 to Mar 31 2011
So except in this case P.Y. is the financial year immediately preceding the A.Y.
Exceptions to rule that income of P.Y. is taxable in immediately foll. A.Y.
(i) Income of Non-resident from shipping
(ii) Income of persons leaving India either permanently or for a long period of time
(iii) Income of bodies formed for a short duration
(iv) Income of person trying to alienate his assets with a view to avoid payment of tax
(v) Income of discontinued business
F.Y. is both a P.Y. as well as an A.Y
Definition of person is inclusive and not exhaustive. It generally have 7 categories- Individual, H.U.F. , Firm, Co. , AOP OR BOI , Local Authority and Artificial Juridical Person
Income tax is an annual tax
Tax rates are fixed by Finance Act and not by the Income Tax Act
It is levied on Total Income
Income may be received in cash or kind. It's valuation is made according to Income Tax Rules
Income arises either on receipt or on accrual basis. We also have concept of deemed to accrue. It can also be illegal.
I.Tax can't be held up or postponed merely becoz of existence of dispute regarding the title of income.
Reimbursement of exps. is not treated as income. For e.g.Reimbursement of travelling exps.
Application of income is chargeable to tax while Diversion of income by overriding title is not.
If a person receives a tax free income on which tax is paid by person making payment , it has to be grossed up for inclusion in his total income.
Source of income need not exist in the A.Y.
Revenue receipt is taxable unless it is expressly exempt while capital receipts are not taxable unless it is expressly taxable.
Any perq or special allowance received is taxable in the hands of employee.
Any capital gain U/S 45 is income.
Employees contribution towards PF is treated as income of employer.
The Table will help u to understand Total Income and Gross Total income
Agriculture Income
Aggregation of Agricultural Income
1. Agricultural Income
2. Non Agricultural Income
3. Total Income (1+2)
4. Tax Payable on (3)
5. Total of Agricultural Income + Basic Exemption Limit
6. Tax Payable on (5)
7. Net tax Payable (3-5)
Aggregation is not required in following cases :-
a) When agricultural income doesnot exceed 5000
b) When non agricultural income is below basic exemption limit.
c) When non agricultural income is in losses.
Segregation of Agricultural Income and Non Agricultural Income in certain cases
1. Rubber, Centrifuged Latex, etc.- AI - 65% NAI- 35%
2. Coffee Grown and Cured - AI - 75% NAI- 25%
3. Coffee Grown, Cured, Roasted and Grounded AI - 60% NAI- 40%
4.Tea AI - 60% NAI- 40%
Residential Status
Residential Status-Section 6
Individual :-
1. Resident : An indivdual is said to be resident if he satisfies any one of the basic conditions
a) If he lives in india for a period not less than 182 days or more in the previous year OR
b)If he lives for not less than 60 days or more in the previous year and in addition if he also lives for not less than 365 days in the 4 years preceding previous years.
2. Non Resident : If the above conditions are not satisified he is non resident.
3. Resident and not ordinarily resident : First the any one of the above two basic conditions should be satisified. And any one of the below mentioned additional conditions should be satisfied.
a) He should be non resident in atleat 9 years out of 10 years preceding previous year.
b) His staying in india should not exceed 729 days in the 7 years preceding previous year.
4. Resident and ordinarily resident : First any one of the basic conditions should be satisified and neither of the additional conditions are satisfied.
HUF :-
Residential Status of HUF depends upon the control and Management and even also on the residential status of Karta. The residential status of karta is as follows:-
1. Resident : If control and Management is situated wholly and partially in india, then it is said to be resident in india.
2. Non-Resident : If control and management is situated wholly outside India, then it is said to be non resident in india.
3. Resident and not ordinarily resident in India :- The Control and Management should be wholly or partially in India. Karta should satisfy any one of the two additional conditions
a) He should be non resident in atleat 9 years out of 10 years preceding previous year.
b) His staying in india should not exceed 729 days in the 7 years preceding previous year.
4. Resident and ordinarily resident : - The contol and management should be wholly or partially in india.
karta will not satisfy the above two additional conditions.
Q.1 What is Gross Total Income and what are the treatment of losses with respect to it?
(5Marks)
Acc. to Sec.14 of IT Act GTI is aggregate of incomes computed under the foll. 5 heads :-
(i) Salary (ii) House Property (iii) PGBP (iv) Capital Gain & Other sources.
After aggregating incomer under the various heads, losses are adjusted and resultant figure is GTI.
Q.2 What is Association of Persons and who can be it's members?. Just receiving the income jointly is necessary feature of it?
(5 Marks)
An AOP is formed when persons come together to form a joint enterprise but haven't constituted a partnership under the law.
Receiving income jointly is not the only feature..an aop must have a common purpose and action.
It can constitute of individuals,companies,associations and firms as its members
X and Y are legal heirs of Z who died in 2006. They continue business without entering into partnership. This is AOP
ABC Housing Co-operative society is also AOP.
Q.3 Diff. b/w Deduction and exemption
Exemptions means the Amounts not at all charged any taxes, while calculating the Gross Total Income in that the amounts exempted u/s.10. Ex. 10(16) - Scholarship
Deductions means the amounts deducted partial or full based on conditions, it includes in the Gross Total Income, after that they are deducted u/s.80. Ex. u/s.80G - Donation
Q.4 Concept of Rounding off of Income and tax i. e. Sec 288A and Sec. 288B.
Rounding off of Total Income [Section 288A]
The total income shall be rounded off to the nearest multiple of ten rupees and for this purpose any part of a rupee consisting of paise shall be ignored. Thereafter if such amount is not a multiple of ten, then, if the last figure is 5 or more, the amount shall be increased to the next higher multiple of 10 and if the last figure of Total Income is less than 5, the amount shall be reduced to the next lower multiple of 10.
Rounding off of tax, etc. [Section 288B]
A receipt referable to fixed capital would be a capital receipt whereas a receipt referable to circulating capital would be a revenue receipt...CR being exempt and RR being taxable...however sale of a capital asset would be chargeable to tax under capital gains
To check the type one has to go by it's nature in the hands of recipient.
Receipt in lieu of source of income is a capital receipt and in lieu of income is revenue. For e.g. Compensation for loss of employment is capital while compensation for
temporary disablement is revenue.
It is not necessary that Revenue receipt is recurring and capital is in lump-sum.
Long term Capital gain is taxable @ 20%
Q.6 Heads where method of accounting is irrelevant
Methods of accounting are irrelevant under the following heads :-
Q.7 What is Amalgamation, Merger and De-merger
Amalgamation means merger of 2 or more companies to form one company.Such a merger will be considered as amalgamation only if:
De-merger
In relation to companies,it means the transfer,pursuant to a scheme of arrangement under sections 391 and 394 of the Companies Act,1956,by a "demergerd company" of its one or more of its undertakings is transferred to any "resulting company" in such a manner that:
PREVIOUS YEAR AND ASSESSMENT YEAR -
Income earned in a year is taxable in next year. The year in which income is earned is P.Y. and the next year in which income is taxable is A.Y.
A.Y. means the period starting from Apr 1 and ending on Mar. 31 of next year. Financial Year preceding the A.Y. is P.Y. Income of P.Y. is taxed in A.Y. at the
rates prescribed by the relevant Finance Act.
P.Y. in case of newly set-up Business
It starts on the date of setting up of the business or on the date when the new source of income comes into existence and ends on immediately
following Mar.31. In short it may be 12 months or less in this case. But the second and subsequent P.Y. are always of 12M each.
e.g. X sets a new business on Mar3,2011. Find P.Y. for A.Y. 2011-12 - Answer Mar3 2011 to Mar 31 2011
So except in this case P.Y. is the financial year immediately preceding the A.Y.
Exceptions to rule that income of P.Y. is taxable in immediately foll. A.Y.
(i) Income of Non-resident from shipping
(ii) Income of persons leaving India either permanently or for a long period of time
(iii) Income of bodies formed for a short duration
(iv) Income of person trying to alienate his assets with a view to avoid payment of tax
(v) Income of discontinued business
F.Y. is both a P.Y. as well as an A.Y
Definition of person is inclusive and not exhaustive. It generally have 7 categories- Individual, H.U.F. , Firm, Co. , AOP OR BOI , Local Authority and Artificial Juridical Person
Income tax is an annual tax
Tax rates are fixed by Finance Act and not by the Income Tax Act
It is levied on Total Income
Income may be received in cash or kind. It's valuation is made according to Income Tax Rules
Income arises either on receipt or on accrual basis. We also have concept of deemed to accrue. It can also be illegal.
I.Tax can't be held up or postponed merely becoz of existence of dispute regarding the title of income.
Reimbursement of exps. is not treated as income. For e.g.Reimbursement of travelling exps.
Application of income is chargeable to tax while Diversion of income by overriding title is not.
If a person receives a tax free income on which tax is paid by person making payment , it has to be grossed up for inclusion in his total income.
Source of income need not exist in the A.Y.
Revenue receipt is taxable unless it is expressly exempt while capital receipts are not taxable unless it is expressly taxable.
Any perq or special allowance received is taxable in the hands of employee.
Any capital gain U/S 45 is income.
Employees contribution towards PF is treated as income of employer.
The Table will help u to understand Total Income and Gross Total income
| 1. INCOME FROM SALARIES |
*** |
| 2. INCOME FROM HOUSE PROPERTY |
*** |
| 3. PGBP |
*** |
| 4. CAPITAL GAINS |
*** |
| 5. INCOME FROM OTHER SOURCES |
*** |
| TOTAL (1+2+3+4+5) |
*** |
| (-) SET-OFF AND CARRY FORWARD OF LOSSES |
(***) |
| GROSS TOTAL INCOME |
*** |
| (-) DEDUCTION U/S 80C TO 80U |
(***) |
| TOTAL INCOME |
*** |
| COMPUTATION OF TAX LIABILITY |
*** |
| (+) E.CESS |
*** |
| (+) S.H.E.C. |
*** |
| (-) PREPAID TAX |
(***) |
| TAX LIABILITY |
*** |
Agriculture Income
Aggregation of Agricultural Income
1. Agricultural Income
2. Non Agricultural Income
3. Total Income (1+2)
4. Tax Payable on (3)
5. Total of Agricultural Income + Basic Exemption Limit
6. Tax Payable on (5)
7. Net tax Payable (3-5)
Aggregation is not required in following cases :-
a) When agricultural income doesnot exceed 5000
b) When non agricultural income is below basic exemption limit.
c) When non agricultural income is in losses.
Segregation of Agricultural Income and Non Agricultural Income in certain cases
1. Rubber, Centrifuged Latex, etc.- AI - 65% NAI- 35%
2. Coffee Grown and Cured - AI - 75% NAI- 25%
3. Coffee Grown, Cured, Roasted and Grounded AI - 60% NAI- 40%
4.Tea AI - 60% NAI- 40%
Residential Status
Residential Status-Section 6
Individual :-
1. Resident : An indivdual is said to be resident if he satisfies any one of the basic conditions
a) If he lives in india for a period not less than 182 days or more in the previous year OR
b)If he lives for not less than 60 days or more in the previous year and in addition if he also lives for not less than 365 days in the 4 years preceding previous years.
2. Non Resident : If the above conditions are not satisified he is non resident.
3. Resident and not ordinarily resident : First the any one of the above two basic conditions should be satisified. And any one of the below mentioned additional conditions should be satisfied.
a) He should be non resident in atleat 9 years out of 10 years preceding previous year.
b) His staying in india should not exceed 729 days in the 7 years preceding previous year.
4. Resident and ordinarily resident : First any one of the basic conditions should be satisified and neither of the additional conditions are satisfied.
HUF :-
Residential Status of HUF depends upon the control and Management and even also on the residential status of Karta. The residential status of karta is as follows:-
1. Resident : If control and Management is situated wholly and partially in india, then it is said to be resident in india.
2. Non-Resident : If control and management is situated wholly outside India, then it is said to be non resident in india.
3. Resident and not ordinarily resident in India :- The Control and Management should be wholly or partially in India. Karta should satisfy any one of the two additional conditions
a) He should be non resident in atleat 9 years out of 10 years preceding previous year.
b) His staying in india should not exceed 729 days in the 7 years preceding previous year.
4. Resident and ordinarily resident : - The contol and management should be wholly or partially in india.
karta will not satisfy the above two additional conditions.
|
Scope of Total Income - Section 5
|
||||||||||||||||||||||||
Questions
Q.1 What is Gross Total Income and what are the treatment of losses with respect to it?
(5Marks)
Acc. to Sec.14 of IT Act GTI is aggregate of incomes computed under the foll. 5 heads :-
(i) Salary (ii) House Property (iii) PGBP (iv) Capital Gain & Other sources.
After aggregating incomer under the various heads, losses are adjusted and resultant figure is GTI.
Q.2 What is Association of Persons and who can be it's members?. Just receiving the income jointly is necessary feature of it?
(5 Marks)
An AOP is formed when persons come together to form a joint enterprise but haven't constituted a partnership under the law.
Receiving income jointly is not the only feature..an aop must have a common purpose and action.
It can constitute of individuals,companies,associations and firms as its members
X and Y are legal heirs of Z who died in 2006. They continue business without entering into partnership. This is AOP
ABC Housing Co-operative society is also AOP.
Q.3 Diff. b/w Deduction and exemption
Exemptions means the Amounts not at all charged any taxes, while calculating the Gross Total Income in that the amounts exempted u/s.10. Ex. 10(16) - Scholarship
Deductions means the amounts deducted partial or full based on conditions, it includes in the Gross Total Income, after that they are deducted u/s.80. Ex. u/s.80G - Donation
Q.4 Concept of Rounding off of Income and tax i. e. Sec 288A and Sec. 288B.
Rounding off of Total Income [Section 288A]
The total income shall be rounded off to the nearest multiple of ten rupees and for this purpose any part of a rupee consisting of paise shall be ignored. Thereafter if such amount is not a multiple of ten, then, if the last figure is 5 or more, the amount shall be increased to the next higher multiple of 10 and if the last figure of Total Income is less than 5, the amount shall be reduced to the next lower multiple of 10.
Rounding off of tax, etc. [Section 288B]
The amount of tax (including tax deductible at source or payable in advance), interest, penalty, fine or any other sum payable, and the amount of refund due, under the provisions of the Income-tax Act, shall be rounded off to the nearest multiple of ten rupees and, for this purpose, where such amount contains a part of ten rupees then, if such part is five rupees or more, it shall be increased to ten rupees and if such part is less than five rupees it shall be ignored.
Q.5 Capital Receipts V/s Revenue ReceiptsA receipt referable to fixed capital would be a capital receipt whereas a receipt referable to circulating capital would be a revenue receipt...CR being exempt and RR being taxable...however sale of a capital asset would be chargeable to tax under capital gains
To check the type one has to go by it's nature in the hands of recipient.
Receipt in lieu of source of income is a capital receipt and in lieu of income is revenue. For e.g. Compensation for loss of employment is capital while compensation for
temporary disablement is revenue.
It is not necessary that Revenue receipt is recurring and capital is in lump-sum.
Long term Capital gain is taxable @ 20%
Q.6 Heads where method of accounting is irrelevant
Methods of accounting are irrelevant under the following heads :-
- Income from House Property- As the Annual Value of house property is chargeable
- Capital Gains
- Salary-As salary is chargeable on due or receipt basis whichever comes earlier
Q.7 What is Amalgamation, Merger and De-merger
Amalgamation means merger of 2 or more companies to form one company.Such a merger will be considered as amalgamation only if:
- All assets and liabilities of the amalgamation co. or companies should become assets and liabilities of the amalgamated company
- Shareholders holding not less than 75% in the voting powers of the amalgamating company or companies should become shareholders of the amalgamated company
De-merger
In relation to companies,it means the transfer,pursuant to a scheme of arrangement under sections 391 and 394 of the Companies Act,1956,by a "demergerd company" of its one or more of its undertakings is transferred to any "resulting company" in such a manner that:
- all the property of the undertaking, being transferred by the demerged company,immediately before the demerger,becomes the property of the resulting company
- similarly for liabilties
- Properties and liabilities are transferred at book values of just before the de merger
- resulting co. issues its shares to shareholders of demerged company on proportionate basis
- Shareholders of not less than 3/4ths in value of shares in the DC become shareholders in RC
- transfers is on a going concern basis and in accordance with section 72A(5) by the Central Govt.
Q.8 X joins an Indian Co. Jan 23,2011. Prior to it, he is not in employment. What are prev. years for A.Y. 2011-12 and A.Y 2012-13
It is a case of new source of income and in such a case P.Y. starts from the day of existence of such source.
So P.Y> are:-
for A.Y. 2011-12 - Jan23,2011 to Mar. 31 , 2011
For A.Y. 2012-13 - Apr. 1 2011 to Mar.31 2012
Q.9 A person may maintain his books of account on calendar basis but for Taxation purpose he is taxable on F.Y. basis. Comment
The statement given is true. A person can maintain his books for any number of months. But according to Income tax act, he is taxable only on financial year basis i.e, 1st april to the 31st march of the following year.
Q.10 F.Y. is both a P.Y. as well as a A.Y. Comment
Yes Financial year can act as both Previous year and assessment year. A financial year is an Previous Year if the income is earned in this year which will be chargeable to tax in the next year. It is an Assessment year if the income earned in the preceding previous year is assessed in the current financial year.
Q.11 Legal status of D.U. , Delhi Municipal Corp. , Joint family of X and his sons.
Legal status
Delhi University - Artificial Judicial Person
Delhi Municipal Corporation - Local Authority
Joint family of X and his sons - HUF
Q.12 State the activities and operations,income from which is not deemed to accrue or arise in India
(i) In case of a business of which all the operations are not carried out in India
(ii) Purchase of goods in India for the purpose of export
(iii) Collection of news and views in India for transmission out of India
(iv) Shooting of cinematographic films in India
Q.13 Short Note on Place of Accrual of Salary
Salary is deemed to Accrue or arise in India if:-
(i) The service is rendered in India
(ii) If service is rendered outside India provided the employer is Govt. of India and the employee is citizen of India.
(iii) If service is rendered outside India and case (ii) is not attracted then it is deemed to accrue outside India
Q.14 Under what circumstances a non-resident is liable to tax on dividend income
Deke iske do instances ho sakte hai...ya toh use dividend Indian Company se milega ya Foreighn company se....abhi Indian Company se milta hai toh apni Govt ke pet me dukhega aur ye log ko tax lagane ki khujli hogi toh ye log Indian Company pe hi tax laga denge u/s 115-O...matlab NR ke haath mein ye exempt ho jaayega..u/s 10(34)....abhi agar Foreign Company dividend degi kya hoga...kuch nahi hoga...apne govt se koi lena dena hi nahi hai...shaanti se baithi rahegi...na company ko tax bharna padega aur na hi apne NR ko
Q.15 How is royalty defined u/s 9 of the Income Tax Act
(i) Use of any patent, invention, model or trademark.
(ii) Imparting of any info regarding technical,industrial, commercial or scientific work.
(iii) Rendering of services in connection with any of the above activities.
Index of Inputs
Pulkit
Vamshi
Dhaval
Pulkit
Vamshi
Dhaval
Dhaval K.Toprani
(CA-IPCC Student)
(1150 Points)
Replied 18 February 2011
Priyam u can join us too and be a part of the notes then..and making the notes helps more than just reading it
(Guest)
truly saying really wanted to join it....but im very slow at typing...jitne der mein mai notes type karoongi utne der mein duniya kaha se kaha pahuch jayegi....the purpose of group studies will be wasted...my typing speed is not good for online discussions.......today i was thinking about posting handwritten notes but i think that wudnt solve the purpose ....but ya again i must say a great work done by all.
Recent Topics
- GST registration -notice
- GSTIN Suspended Form GST Reg 17
- Request for GST Clarification regarding ITC
- Is Capital Gain exemption available for Property a
- EPF CONTRIBUION BY EMPLOYER
- Letter of credit -seller procedure
- Filling form 26 QB
- RPT AND ITC ISSUE
- Tax Liability and ITC Summary related Issues
- REQUIRED FORMAT FOR AMENDMENT TO PARTNERSHIP DEED
Related Threads
CAclubindia
