Systematic Approach to Taxation

Book Details

Preface to the Fiftieth Edition	vii
Syllabus: Paper 3: Taxation	ix
Section A: Income-tax Law (50 Marks)	ix
Section B – Goods and Services Tax (GST) (50 Marks)	ix

PART I

INCOME TAX

Chapter 1 Introduction [Sections 1 to 4]	3
1.1 Income Tax Law	3
1.2 Scheme of Taxation	5
1.3 Important Concepts	6
Theoretical Questions	24
Multiple Choice Questions	25
Chapter 2 Scope of Total Income & Residential Status [Sections 5 to 9B]	32
2.1 Definition of Total Income [Section 2(45)]	32
2.2 Scope of Total Income/Incidence of tax [Section 5]	32
2.3 Need to determine Residential Status?	34
2.4 Basic rules for determining residential status of an assessee	34
2.5 Rules for determining the residential status of an individual [Sections 6(1) & 6(1A)]	34
2.6 Residential Status of Hindu Undivided Family (HUF) [Section 6(2)]	43
2.7 Residential Status of Firm, Association of Persons (AOP), Body of Individuals (BOI) and of other persons (except companies) [Sections 6(2) and 6(4)]	44
2.8 Residential Status of a Company [Section 6(3)]	44
2.9 Incomes received or deemed to be received in India [Section 7]	45
2.10 Incomes which accrue or arise in India or are deemed to accrue or arise in India [Section 9]	45
2.11 Fund management activities not to constitute business connection in India [Section 9A]	48
2.12 Income on receipt of capital asset or stock in trade by specific person from specified entity. [Section 9B inserted w.r.e.f. Assessment Year 2021-22]	48
2.13 The provisions regarding incidence of tax above may be summarised in the following table:	49
Theoretical Questions	52
Multiple Choice Questions	52
Chapter 3 Incomes which do not form part of Total Income [Sections 10, 10AA and 11 to 13A]	56
3.1 Agricultural Income [Section 10(1)]	58
3.2 Sum received by a Member from HUF [Section 10(2)]	58
3.3 Share of Profit of a Partner from a Firm [Section 10(2A)]	58
3.4 Interest on Non-resident (External) Account [Section 10(4)]	58
3.5 Travel concession or assistance received by an individual from his employer [Section 10(5)]	58
3.6 Remuneration to persons who are not citizens of India [Section 10(6)]	58
3.7 Allowances or perquisites outside India [Section 10(7)]	58
3.8 Death-cum-retirement gratuity received by an employee [Section 10(10)]: For detailed discussion see Chapter on 'Salaries'.	59
3.9 Payment in commutation of pension received by the employees [Section 10(10A)]	59
3.10 Leave Encashment [Section 10(10AA)]: For detailed discussion see Chapter on 'Salaries'.	59
3.11 Compensation on retrenchment [Section 10(10B)]: For detailed discussion see Chapter on 'Salaries'.	59
3.12 Payments under Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 [Section 10(10BB)]	59
3.13 Exemption for compensation received or receivable on account of any disaster [Section 10(10BC)]	59
3.14 Amount received on voluntary retirement [Section 10(10C)]: For detailed discussion see Chapter on 'Salaries'.	59
3.15 Tax on non-monetary perquisites paid by employer [Section 10(10CC)]	59
3.16 Amount received under a life insurance policy [Section 10(10D)]	59
3.17 Provident Fund [Section 10(11)]	60
3.18 Interest and withdrawals from Sukanya Samriddhi Account [Section 10(11A)]	60
3.19 Payments from Recognised Provident Fund [Section 10(12)]	60
3.20 Amount payable at the time of closure or opting out of National Pension Scheme to be exempt to the extent of 60% of the total amount payable [Section 10(12A)]	60
3.21 Tax-exemption to partial withdrawal from National Pension System (NPS) by an employee [Section 10(12B)]	61
3.22 Any payment from an approved Superannuation Fund [Section 10(13)]	61
3.23 House rent allowance [Section 10(13A)]	61
3.24 Notified special allowance [Section 10(14)]	61
3.25 Interest, premium or bonus on specified investments [Section 10(15)]	61
3.26 Scholarships granted to meet the cost of education [Section 10(16)]	61
3.27 Daily and constituency allowance, etc., received by MPs and MLAs [Section 10(17)]	61
3.28 Award or Reward [Section 10(17A)]	62
3.29 Pension received by certain awardees/any member of their family [Section 10(18)]	62
3.30 Exemption of the family pension received by the family members of armed forces (including para-military forces) personnel killed in action in certain circumstances [Section 10(19)]	62
3.31 Annual value of one palace of the ex-ruler [Section 10(19A)]	62
3.32 Income of a local authority [Section 10(20)]	62
3.33 Income of an approved research association [Section 10(21)]	62
3.34 Income of certain funds of national importance [Section 10(23C)]	62
3.35 Income of notified mutual funds [Section 10(23D)]	63
3.36 Distributed income received by a unit holder from the business trust [Section 10(23FD)]	63
3.37 Income of trade union [Section 10(24)]	63
3.38 Income of a member of Scheduled Tribe residing in certain specified areas [Section 10(26)]	63
3.39 Income of an individual being a Sikkimese [Section 10(26AAA)]	63
3.40 Income of minor clubbed in the hands of a parent [Section 10(32)]	64
3.41 Income arising to a shareholder on account of buy back of shares [Section 10(34A)]	64
3.42 Income received from securitisation trust [Section 10(35A)]	64
3.43 Exemption of capital gains on compensation received on compulsory acquisition of agricultural land situated within specified urban limits [Section 10(37)]	64
3.44 Exemption of specified income from international sporting event held in India [Section 10(39)]	64
3.45 Exemption of amount received by an individual as loan under reverse mortgage scheme [Section 10(43)]	64
3.46 Exemption of income of New Pension Scheme Trust [Section 10(44)]	64
3.47 Specified income arising to a notified body/authority/board/trust/commission [Section 10(46)]	64
3.48 Exemption in respect of income received by certain foreign companies [Section 10(48)]	65
3.49 Exemption in respect of income a foreign company on account of storage of crude oil in a facility in India and sale of crude oil therefrom [Section 10(48A) & 10(48B)]	65
3.50 Exemption in respect of certain income of Indian Strategic Petroleum Reserves Limited [Section 10(48C)]	65
3.51 Income of a notified institution established for financing infrastructure and development to be exempt [Section 10(48D)]	65
3.52 Income of a Developmental Financing Institution to be exempt [Section 10(48E)].	65
3.53 Exemption in respect of income chargeable to equalization levy [Section 10(50)]	66
3.54 Deduction allowed to newly established Units in Special Economic Zones	66
3.55 Exemption under sections 11 to 13	67
3.56 Which income will be exempt under section 11	68
3.57 Accumulation of income in excess of 15% of the income earned [Section 11(2)]	71
3.58 Certain points for consideration	72
3.59 Treatment of business income of a trust [Section 11(4A)]	72
3.60 Registration of Trust [Section 12A]	72
3.61 Sections 11 and 12 not to apply in certain cases [Section 13]	73
3.62 Incomes which are exempt [Section 13A]	74
3.63 Income of an Electoral Trust shall be exempt [Section 13B]	74
Theoretical Questions	75
Multiple Choice Questions	75
Chapter 3A Computation of Total Income and Tax Liability [Sections 14, 14A, 288A and 288B]	81
3A.1 Heads of Income [Section 14]	81
3A.2 No deduction for expenditure incurred in respect of exempt income against taxable income [Section 14A]	81
3A.3 What is Gross Total Income [Section 80B(5)]	82
3A.4 What is Total Income [Section 2(45)]	82
3A.5 How to Compute Total Income	82
Theoretical Questions	83
Chapter 4 Income under the Head "Salaries" [Sections 15 to 17]	84
4.1 Computation of Income under the head Income from "Salaries"	85
4.2 Basis of Charge [Section 15]	87
4.3 Meaning of Salary	89
4.4 Wages	89
4.5 Annuity	89
4.6 Retirement benefits	90
4.7 Treatment of Bonus	90
4.8 Salary in lieu of notice period	90
4.9 Fee and Commission	90
4.10 Overtime Payments	90
4.11 Meaning and Type of Allowances	90
4.12 House Rent Allowance [Section 10(13A) and Rule 2A]	91
4.13 Prescribed allowances which are exempt to a certain extent [Section 10(14)]	94
4.14 Treatment of Entertainment Allowance (Not to be allowed, if the employee does not opt to be taxed under old regime)	96
4.15 Allowances which are exempt in case of certain persons if such person opts to be taxed under the old regime	98
4.16 Allowances which are fully taxable under both the regimes	98
4.17 What are perquisites?	99
4.18 Definition of 'Perquisite' as per section 17(2)	100
4.19 Perquisites which are taxable in the hands of all categories of employees	102
4.20 Perquisites which are taxable only in the case of specified employees	102
4.21 Rent free accommodation or accommodation provided at concessional rate	104
4.22 Valuation of monetary obligation of the employee discharged by the employer	111
4.23 Valuation of Life Insurance premium/deferred annuity premium paid/payable by the employer	111
4.24 Fringe benefits or amenities which shall be taxable perquisite in the hands of all employees	112
4.25 Valuation of motor car/other vehicles [Rule 3(2)]	118
4.26 Provision by the employer of services of a sweeper, a gardener, a watchman or personal attendant [Rule 3(3)]	122
4.27 Value of benefit to the employee resulting from the supply of gas, electric energy or water for household consumption [Rule 3(4)]	122
4.28 Valuation in respect of free or concessional educational facilities to any member of employees' household [Rule 3(5)]	122
4.29 Free or concessional journey given to the transport employees and their family members [Rule 3(6)]	123
4.30 Value of any specified security or sweat equity shares	123
4.31 Contribution made by the employer in a recognised provident fund, in the scheme referred to in section 80CCD(1); and in an approved superannuation fund exceeding ₹7,50,000 [Section 17(2)(vii)]	124
4.32 Annual Accretion to the balance at the credit of the fund or scheme referred to in section 17(2)(vii) [Section 17(2)(viia)]	124
4.33 Annual accretion referred to in the sub-clause (viia) of section 17(2) of the Act. [Rule 3B]	124
4.34 Contribution made by the Central Government in the previous year, to the Agniveer Corpus Fund account of an individual enrolled in the Agnipath Scheme referred to in section 80CCH	127
4.35 Tax-free Perquisites (for all employees)	127
4.36 Treatment of medical facilities [Proviso to section 17(2)]	128
4.37 Treatment of Leave Travel Concession or Assistance (LTC/LTA) [Section 10(5)]	130
4.38 Profits in lieu of salary [Section 17(3)]	131
4.39 Gratuity	132
4.40 Treatment of Pension [Section 17(1)(ii)]	138
4.41 Treatment of Leave Salary	140
4.42 Retrenchment Compensation [Section 10(10B)]	143
4.43 Compensation received on Voluntary Retirement [Section 10(10C)]	143
4.44 Contribution by the employer to recognised provident fund	144
4.45 Interest credited to recognised provident fund	144
4.46 Amount comprised in the transferred balance	144
4.47 Standard deduction [Section 16(ia)]	144
4.48 Entertainment Allowance [Section 16(ii)]	145
4.49 Tax on Employment (Professional Tax) [Section 16(iii)]	145
4.50 Treatment of Provident Fund	146
4.51 Relief when salary is paid in arrears or in advance, etc. [Section 89/Rule 21A]	150
4.52 Deduction from gross total income	153
4.53 Summarised provisions	156
Theoretical Questions	173
Multiple Choice Questions	173
Chapter 5 Income under the Head "Income from House Property" [Sections 22 to 27]	187
5.1 Chargeability [Section 22]	188
5.2 Basis of Charge	188
5.3 Essential conditions for taxing income under this head	188
5.4 Cases of Composite Rent	189
5.5 When income from house property is not charged to tax	190
5.6 What is Annual Value?	190
5.7 Computation of annual value of a property [Section 23(1)]	191
5.8 Treatment of unrealised rent [Explanation to section 23(1)]	194
5.9 Deductions from income from house property [Section 24]	196
5.10 Computation of Income of a property which is self-occupied for residential purposes or which could not actually be self occupied owing to employment [Section 23(2), (3) & (4)]	199
5.11 Computation of income of house property which is partly let and partly self occupied	203
5.12 No notional income for house property held as stock-in-trade for a period upto two years [Section 23(5)]	204
5.13 Interest when not deductible from "Income from House Property" [Section 25]	204
5.14 Special provision for arrears of rent and unrealised rent received subsequently [Section 25A]	204
5.15 Property owned by Co-owners [Section 26]	204
5.16 Can Annual Value (Net Annual Value) be negative?	206
5.17 Can there be any loss under the head income from house property?	206
Theoretical Questions	215
Multiple Choice Questions	215
Chapter 6 Income under the Head "Profits and Gains of Business or Profession" [Sections 28 to 44D]	220
6.1 Business or Profession	223
6.2 Chargeability/scope of income under the head 'Profits and gains of business or profession' [Section 28]	223
6.3 Rationalisation of provision relating to conversion of inventory into Capital Asset [Section 28(via)]	225
6.4 Profits and gains of business	226
6.5 Business must be carried on during the previous year	226
6.6 Business loss	226
6.7 Legal business v illegal business	227
6.8 Cases where income from certain business is not taxable under the head 'Profits and gains of business'	227
6.9 Income from business or profession — how to be computed	228
6.10 General principles for allowability of deductions	228
6.11 Losses and expenditure	228
6.12 Method of Accounting [Section 145]	228
6.13 Expenses which are expressly allowed as a deduction [Sections 30 to 37]	231
6.14 Rent, rates, taxes, repairs and insurance for buildings [Section 30]	231
6.15 Repairs and insurance of machinery, plant and furniture [Section 31]	232
6.16 Depreciation [Section 32]	232
6.17 Special provisions for depreciation in certain cases	247
6.18 Carry forward and set off of unabsorbed depreciation [Section 32(2)]	252
6.19 Tea Development Account, Coffee Development Account and Rubber Development Account [Section 33AB] (Deduction under section 33AB is not available if tax is payable under the new regime, i.e., under Section 115BA/115BAA/115BAB/115BAC/115BAD/115BAE)	253
6.20 Site Restoration Fund [Section 33ABA] (Deduction under section 33ABA is not available if tax is payable under the new regime, i.e., under Section 115BA/115BAA/115BAB/115BAC/ 115BAD/115BAE)	256
6.21 Expenditure on Scientific Research [Section 35]	258
6.22 Expenditure for obtaining licence to operate telecommunication services and amortisation of spectrum fee for purchase of spectrum	261
6.23 Deduction in respect of expenditure on specified business [Section 35AD] (Deduction under section 33AD is not available if tax is payable under the new regime, i.e., under Section 115BA/ 115BAA/115BAB/115BAC/115BAD/115BAE)	265
6.24 Expenditure by way of payments to associations and institutions for carrying out Rural Development Programmes [Section 35CCA]	267
6.25 Deduction for expenditure incurred on agricultural extension project [Section 35CCC] (Deduction under section 33CCC is not available if tax is payable under the new regime, i.e., under Section 115BA/115BAA/115BAB/115BAC/115BAD/115BAE)	268
6.26 Deduction for expenditure incurred by a company on skill development project [Section 35CCD] (Deduction under section 33CCD is not available if tax is payable under the new regime, i.e., under Section 115BA/115BAA/115BAB/115BAC/115BAD/115BAE)	268
6.27 Amortisation of certain preliminary expenses [Section 35D and Rule 6AB]	268
6.28 Amortisation of expenditure in case of amalgamation or demerger [Section 35DD]	270
6.29 Amortisation of expenditure incurred under voluntary retirement scheme [Section 35DDA]	270
6.30 Deduction for expenditure on prospecting, etc., for certain minerals [Section 35E and Rule 6AB]	270
6.31 Other deductions [Section 36]	271
6.32 General Deductions [Section 37(1)]	275
6.33 Advertisement to political parties [Section 37(2B)]	277
6.34 Building, plant and machinery or furniture not exclusively used for the purpose of business or profession [Section 38]	277
6.35 Amounts not deductible [Section 40]	277
6.36 Expenses or payments not deductible in certain circumstances: [Section 40A]	280
6.37 Disallowance in respect of contributions to non-statutory funds [Section 40A(9)]	284
6.38 Marked to market loss or other expected loss not to be allowed except provided in section 36(1)(xviii) [Section 40A(13)]	284
6.39 Certain deductions to be allowed only on actual [Section 43B]	284
6.40 Special provision for full value of consideration for transfer of assets other than capital assets in certain cases [Section 43CA]	286
6.41 Computation of income from construction and service contracts [Section 43CB inserted]	287
6.42 How to compute the income from business or profession	287
6.43 Undisclosed income and investments taxed as deemed income	288
6.44 Deemed profits chargeable to tax	290
6.45 Maintenance of accounts by certain persons carrying on profession or business [Section 44AA and Rule 6F]	291
6.46 Compulsory audit of accounts [Section 44AB]	294
6.47 Special provisions for computing profits and gains of any business (excluding the business covered under section 44AE) [Section 44AD]	295
6.48 Special provision for computing profits and gains of profession on presumptive basis [Section 44ADA]	297
6.49 Special provisions for computing profits and gains of business of plying, hiring or leasing goods carriages [Section 44AE]	299
6.50 Special provisions for computing profits and gains [Sections 44B, 44BB, 44BBA, 44BBB and 44BBC]	301
Theoretical Questions	321
Multiple Choice Questions	321
Chapter 7 Income under the Head "Capital Gains" [Sections 45 to 55A]	340
7.1 Basis of Charge [Section 45(1)]	342
7.2 There must be a capital asset	343
7.3 Capital asset must have been transferred	348
7.4 Capital gain should arise in the previous year in which transfer took place	351
7.5 Computation of capital gains [Section 48]	351
7.6 Full value of consideration	353
7.7 Expenses on transfer	354
7.8 Cost of acquisition [Section 55(2)]	354
7.9 Treatment of advance money received if forfeited [Section 56(2)(ix), w.e.f. A.Y. 2015-16]	363
7.10 Cost of improvement [Section 55(1)(b)]	364
7.11 Indexation of cost of acquisition and cost of improvement to be allowed in case of long-term capital gain [Second proviso to Section 48] [Indexation applicable upto 22.7.2024]	364
7.12 Indexed cost of improvement [Explanation (iv) to Section 48]	368
7.13 Computation of capital gain in special cases	370
7.14 Transfer of securities by depository [Section 45(2A)]	395
7.15 Withdrawal of exemption in certain cases [Section 47A]	396
7.16 Capital gain in the case of transfer of shares/debentures by non-residents [Proviso 1 to section 48 and rule 115A]	397
7.17 Types of exemption of capital gains	399
7.18 Profit on transfer of house property used for residence [Section 54]	400
7.19 Capital Gain on transfer of land used for agricultural purposes [Section 54B]	403
7.20 Capital Gain on compulsory acquisition of land and buildings forming part of an industrial undertaking [Section 54D]	405
7.21 Capital gain on transfer of long-term capital assets being land or building or both not to be charged on investment in certain bonds [Section 54EC]	407
7.22 Capital gain not to be charged on investment in units of a specified fund [Section 54EE]	408
7.23 Capital Gain on transfer of asset, other than a residential house [Section 54F]	409
7.24 Capital gain on transfer of assets in cases of shifting of industrial undertakings from urban areas [Section 54G]	413
7.25 Exemption of capital gain on transfer of assets of shifting of industrial undertaking from urban area to any Special Economic Zone [Section 54GA]	415
7.26 Exemption of long-term capital gains tax on transfer of residential property if invested in a new manufacturing SME company [Section 54GB]	415
7.27 Extension of time limit for acquiring new asset or depositing or investing amount of capital gain, in case of compulsory acquisition [Section 54H]	415
7.28 Tax on short-term capital gains in certain cases [Section 111A]	416
7.29 Computation of tax on long-term capital gains [Section 112]	417
7.30 Tax on long-term capital gains in certain cases [Section 112A]	425
7.31 Issues relating to certain amendments made by the Finance (No. 2) Act, 2024	434
7.32 Summarised Provisions	444
Theoretical Questions	455
Multiple Choice Questions	455
Chapter 8 Income under the Head "Income from Other Sources" [Sections 56 to 59]	470
8.1 Chargeability	471
8.2 Method of Accounting	471
8.3 Specific incomes included under 'Income from Other Sources' [Section 56(2)]	471
8.4 Other incomes which are normally included under the head 'Income from Other Sources'	472
8.5 Taxability of Dividend [Section 56(2)(i)]	472
8.6 Winnings from Lotteries, Crossword Puzzles, Horse Races and Card Games [Section 56(2)(ib)]	475
8.7 Special rate of income-tax in case of winnings from online games [Section 115BBJ inserted by the Finance Act, 2023, w.e.f. A.Y. 2024-25]	476
8.8 Interest on Securities [Section 56(2)(id)]	476
8.9 Income from letting out of machinery, plant or furniture [Section 56(2)(ii)]	477
8.10 Income of any person to include not only gift of money from any person(s) but also the gift of property (whether movable or immovable) or property acquired for inadequate consideration [Section 56(2)(x)]	477
8.11 Share premium in excess of the fair market value to be treated as income in the hands of closely held company [Section 56(2)(viib)]	480
8.12 Interest on compensation or enhanced compensation [Section 56(2)(viii)]	480
8.13 Forfeiture of advance received for transfer of a capital asset to be taxed under the head "income from other sources" [Section 56(2)(ix)]	481
8.14 Any sum received, including the amount allocated by way of bonus, at any time during a previous year, under a life insurance policy, which is not exempt under Section 10(10D) [Section 56(2)(xiii) inserted by the Finance Act, 2023 w.e.f. A.Y. 2024-25]	481
8.15 Family pension payments received by the legal heirs of a deceased employee	481
8.16 Contribution of the employee towards his welfare fund, deducted/received by the employer [Section 56(2)(ic)]	482
8.17 Any other income taxable under this head	482
8.18 Amounts not deductible in computing the income under the head 'Income from Other Sources' [Section 58]	482
8.19 Deemed income chargeable to tax [Section 59]	483
Theoretical Questions	485
Multiple Choice Questions	485
Chapter 9 Income of Other Persons Included in Assessee's Total Income (Clubbing of Income) [Sections 60 to 65]	490
9.1 Transfer of income where there is no transfer of assets [Section 60]	491
9.2 Revocable transfer of assets [Section 61]	491
9.3 Income of an individual to include income of spouse, minor child, etc. [Section 64]	492
9.4 Clubbing of income of a minor child [Section 64(1A)]	495
9.5 Income from self-acquired property converted to joint family property [Section 64(2)]	496
9.6 Under which head of income will the clubbed income be assessed	497
9.7 Liability of person i.e. the transferee in respect of income included in the income of another person i.e. transferor [Section 65]	497
Theoretical Questions	499
Multiple Choice Questions	499
Chapter 10 Set off or Carry Forward and Set off of Losses [Sections 70 to 80]	502
10.1 Set off of loss from one source against income from another source under the same head of income [Section 70]	503
10.2 Set off of loss from one head against income from another head (Inter-head adjustment) [Section 71]	504
10.3 Carry forward and set off of losses	506
10.4 Carry forward and set off of loss from house property [Section 71B]	507
10.5 Carry forward and set off of business losses [Section 72]	507
10.6 Set off and Carry forward and Set off of Speculation Loss [Section 73]	509
10.7 Set off and carry forward and set off of loss of a specified business referred to in section 35AD [Section 73A]	509
10.8 Carry forward of losses under the head 'capital gains' [Section 74]	509
10.9 Set off and carry forward and set off of loss from activity of owning and maintaining race horses [Section 74A]	510
10.10 Brought forward losses must be set off in the immediately succeeding year/years	510
10.11 Special provisions of set off of losses in case of an individual or HUF or AOP/BOI or Artificial Juridical Person who is taxable under section 115BAC(1A)	510
10.12 Carry forward and set off of the accumulated business losses and unabsorbed depreciation allowance in amalgamation or demerger, etc. [Section 72A]	511
10.13 Losses of firms	512
10.14 Carry forward and set off of losses on succession of any person [Section 78(2)]	512
10.15 Carry forward and set off of losses in case of certain companies [Section 79]	512
10.16 Summarised provisions	514
Theoretical Questions	517
Multiple Choice Questions	518
Chapter 11 Deductions to be made in Computing Total Income [Sections 80A to 80U (Chapter VIA)]	522
11.1 Basic rules of deductions [Sections 80A/80AB/80AC]	525
11.2 Deduction on account of certain payments are allowed from sections 80C to 80GGC.Deduction in respect of Life Insurance Premium, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. [Section 80C]	526
11.3 Deduction in respect of contribution to certain pension funds [Section 80CCC]	531
11.4 Deduction in respect of contribution to pension scheme of Central Government by Central Government or any other employer [Section 80CCD]	532
11.5 Limit on deductions under sections 80C, 80CCC and 80CCD [Section 80CCE]	533
11.6 Deduction in respect of contribution to Agnipath Scheme [Section 80CCH]	533
11.7 Deduction in respect of Medical Insurance premia [Section 80D]	533
11.8 Deduction in respect of maintenance including medical treatment of a dependant who is a person with disability [Section 80DD]	536
11.9 Deduction in respect of medical treatment, etc. [Section 80DDB]	538
11.10 Deduction for interest paid on loan taken for pursuing higher education [Section 80E]	539
11.11 Deduction in respect of interest on loan taken for residential house property [Section 80EE]	539
11.12 Deduction in respect of interest on loan taken for certain house property [Section 80EEA]	540
11.13 Deduction in respect of purchase of electric vehicle [Section 80EEB]	540
11.14 Deduction in respect of donations to certain funds, charitable institutions, etc. [Section 80G]	541
11.15 Deductions in respect of rent paid [Section 80GG]	546
11.16 Deduction in respect of certain donations for scientific research or rural development [Section 80GGA]	549
11.17 Deduction in respect of contributions given by companies to political parties [Section 80GGB]	549
11.18 Deduction in respect of contribution given by any person to political parties [Section 80GGC]	549
11.19 Deduction in respect of employment of new employees [Section 80JJAA]	550
11.20 Deduction in respect of royalty income, etc., of authors of certain books other than text books [Section 80QQB]	551
11.21 Deduction in respect of royalty on patents [Section 80RRB]	551
11.22 Deduction in respect of interest on deposits in savings accounts to the maximum extent of ₹10,000 [Section 80TTA]	552
11.23 Deduction in respect of interest on deposits in case of senior citizens [Section 80TTB]	553
11.24 Deduction in case of a person with disability [Section 80U]	553
Theoretical Questions	557
Multiple Choice Questions	558
Chapter 12 Agricultural Income & its Tax Treatment [Sections 2(1A) and 10(1)]	570
12.1 Summarised definition of Agricultural Income [Section 2(1A)]	570
12.2 What does agriculture include?	572
12.3 Agricultural income	573
12.4 Non-agricultural income	573
12.5 Income which is partially agricultural and partially from business	573
12.6 Tax on non-agricultural income if the assessee earns agricultural income also	574
Theoretical Questions	577
Multiple Choice Questions	577
Chapter 13 Assessment of Individuals	580
13.1 An individual is liable to pay tax in respect of the following incomes	580
13.2 Computation of total income and tax liability	581
13.3 For the assessment year 2024-25 and 2025-26, the following deductions are available to an individual under Chapter VIA provided he opts to be taxed under old regime	582
13.4 Taxation of income of a member of Scheduled Tribe [Section 10(26)]	583
13.5 Taxation of income of Sikkimese Individual [Section 10(26AAA)]	583
13.6 Tax on income of an Individual/HUF or AOP/BOI or Artificial juridical person [Section 115BAC(1A)] [w.e.f. A.Y. 2024-25]	583
13.7 Rates of income-tax under old and new regime	586
13.8 Rebate of maximum ₹12,500 for resident individuals having total income up to ₹5,00,000 [Section 87A]	588
13.9 Alternate Minimum Tax (AMT) on all persons other than companies [Section 115JC to 115JF Chapter XII-BA]	598
Theoretical Questions	616
Multiple Choice Questions	616
Chapter 14 Return of Income [Sections 139 to 140A]	620
14.1 Submission of return of income [Section 139(1)]	620
14.2 New Scheme to facilitate submission of returns through Tax Return Preparers [Section 139B]	623
14.3 Mandatory to file return before due date if certain losses are to be carried forward [Section 139(3)]	623
14.4 Provisions of section 139 to apply, if a return of income is furnished after the order of condonation of delay [Section 139(9A)] [inserted w.e.f. 1.10.2024]	624
14.5 Belated return [Section 139(4)]	624
14.6 Return of income of charitable trust and institutions [Section 139(4A)]	624
14.7 Return of income of political party [Section 139(4B)]	625
14.8 Return of income of certain associations and institutions [Section 139(4C)]	625
14.9 Certain university or college, etc. to file return of income/loss [Section 139(4D)]	625
14.10 Business trusts will also be required to file return of income [Section 139(4E)]	625
14.11 Investment fund referred to in section 115UB mandatorily required to furnish return of income [Section 139(4F)]	626
14.12 Form and manner of furnishing return of income [Rule 12]	626
14.13 Preparation of return by authorised representative [Rule 12A]	629
14.14 Revised return [Section 139(5)]	629
14.15 Updated return [Section 139(8A) and Section 140B]	630
14.16 Defective return [Section 139(9)]	631
14.17 Power of Board to dispense with furnishing documents, etc. with the return [Section 139C]	631
14.18 Filing of return in electronic form [Section 139D] 632
14.19 Permanent account number [Section 139A]	632
14.20 Quoting of Aadhaar number [Section 139AA]	636
14.21 Return by whom to be verified [Section 140]	637
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14.22 Self assessment and tax on updated return	638
14.23 Processing of return [Section 143(1)]	641
14.24 Assessment after hearing evidence/scrutiny assessment [Section 143(3)]	642
14.25 New scheme for scrutiny assessment [Section 143(3A)/(3B)/(3C)]	642
14.26 Best judgment assessment [Section 144]	642
Theoretical Questions	643
Multiple Choice Questions	644
Chapter 15 Deduction and Collection of Tax at Source [Sections 190 to 206AA]	651
15.1 Deduction at source and advance payment [Section 190]	652
.2 Direct payment [Section 191]	652
15.3 Deduction of tax from salary [Section 192]	653
15.4 Deduction of tax from accumulated balance of the recognized provident fund withdrawn by the employee [Section 192A]	660
15.5 Deduction of Tax from Interest on Securities [Section 193]	662
15.6 Deduction of tax from dividends [Section 194]	663
15.7 Interest other than interest on securities [Section 194A]	664
15.8 Winnings from lottery, crossword puzzle, card game, etc. [Section 194B]	667
15.9 Winnings from online games [Section 194BA]	668
15.10 Winnings from horse races [Section 194BB]	670
15.11 Payment to resident contractor [Section 194C]	670
15.12 Insurance Commission [Section 194D]	672
15.13 TDS from non-exempt payments made under life insurance policy [Section 194DA]	673
15.14 Payments to non-resident sportsmen or foreign entertainer or sports associations [Section 194E]	674
15.15 Payments in respect of deposit under National Savings Scheme, etc. [Section 194EE]	674
15.16 Commission, etc. on sale of lottery tickets [Section 194G]	675
15.17 Commission and Brokerage [Section 194H]	675
15.18 Rent [Section 194-I]	676
15.19 Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land) [Section 194-IA]	678
15.20 TDS from payment of rent by certain Individuals or HUF [Section 194-IB]	679
15.21 TDS from payment under specified agreement referred to in section 45(5A) [Section 194-IC]	680
15.22 Fees for professional or technical services [Section 194J]	681
15.23 Income in respect of units [Section 194K]	682
15.24 Payment of compensation on acquisition of certain immovable property [Section 194LA]	683
15.25 Payment of certain sums by certain individuals or Hindu undivided family [Section 194M]	684
15.26 Payment of certain amounts in cash [Section 194N]	685
15.27 TDS from Payment of Certain Sums by E-commerce Operator to E-commerce Participant [Section 194-O]	686
15.28 Deduction of tax in case of specified senior citizen. [Section 194P]	687
15.29 Deduction of tax at source on payment of certain sum for purchase of goods [Section 194Q]	687
15.30 TDS on benefit or perquisite in respect of business or profession [Section 194R]	688
15.31 Where no tax is to be deducted at source [Second & third provisos to section 194R(1)]	689
15.32 TDS on Payment on Transfer of Virtual Digital Asset [Section 194S]	689
15.33 Other sums [Section 195]	690
15.34 Income payable 'Net of Tax' [Section 195A]	691
15.35 Interest or dividends or other sums payable to Government, Reserve Bank or certain corporations [Section 196]	691
15.36 General provisions	692
15.37 No deduction to be made in certain cases [Section 197A]	692
15.38 Lower deduction in certain cases for a limited period [Section 197B]	693
15.39 Tax deducted is income received [Section 198]	693
15.40 Credit for tax deducted [Section 199]	693
15.41 Tax deduction and collection account number [Section 203A and Rule 114A]	694
15.42 Mandatory Requirement to furnish permanent account number [Section 206AA]	694
15.43 Special provision for deduction of tax at source for non-filers of income-tax return [Section 206AB]	695
15.44 Profit and Gains from the Business of trading in Alcoholic Liquor, Forest Produce, Scrap, etc. [Section 206C]	696
15.45 Tax to be collected at source in case of Parking Lot, Toll Plaza or Mining and Quarrying [Section 206C(1C)]	698
15.46 TCS on remittance out of India under LRS and on overseas tour programme package [Section 206C(1G)]	698
15.47 Seller to collect TCS from consideration received from buyer [Section 206C(1H)]	700
15.48 Higher rate of TCS if PAN is not furnished by collectee [Section 206CC]	700
15.49 Special provision for collection of tax at source for non-filers of income-tax return [Section 206CCA]	701
Theoretical Questions	701
Multiple Choice Questions	702
Chapter 16 Advance Payment of Tax [Sections 207-211, 217 & 219]	708
16.1 Liability for payment of Advance Tax [Section 207]	708
16.2 Senior citizen not required to pay advance tax [Section 207(2)]	708
16.3 Conditions of Liability to pay Advance Tax [Section 208]	709
16.4 Computation and Payment of Advance Tax where the calculation is made by the assessee himself [Section 209(1)(a) & (d)]	709
16.5 What constitutes Current Income?	709
16.6 Payment of advance tax	709
16.7 Instalments of advance tax and due dates [Section 211]	710
16.8 Payment of advance tax in case of capital gains/casual income [Proviso to section 234C]	713
16.9 Assessee Deemed to be in Default [Section 218]	714
16.10 Credit for Advance Tax [Section 219]	714
16.11 Interest payable if Advance Tax is not paid or paid less than 90% [Section 234B]	714
16.12 Interest for deferment of advance tax [Section 234C]	714
Theoretical Questions	715
Multiple Choice Questions	715
Chapter 17 Case Scenarios (Direct Tax)	717

Part II

Goods and Services Tax (GST)

Chapter 1 Basic Concepts of Indirect Taxes and Introduction of GST	739
1.1 Constitutional Background [Pre-GST Regime]	739
1.2 Constitution (101st Amendment) Act, 2016 (For introduction of GST Law	740
1.3 Comparative constitutional provisions of pre-GST regime and GST regime in respect of indirect taxes	743
1.4 Revised Schedule VII after 101st Constitution Amendment	744
1.5 Need for GST	744
1.6 Taxes subsumed in GST	745
1.7 Taxes not subsumed into GST	745
1.8 Benefits of GST	745
1.9 Historical perspective	747
1.10 Salient Features of GST	748
1.11 Acts and Rules passed for implementation of GST	750
1.12 Provisions of Central Goods and Service Tax Act, 2017 are also applicable to IGST Act and UTGST Act	750
Theoretical questions	752
Multiple choice questions	753
Chapter 2 Supply under GST	755
2.1 Meaning of the word "supply" [Section 7 of the CGST Act, 2017]	755
2.2 Activities or transactions which constitute a "supply" to be treated as either supply of goods or supply of services as referred to in Schedule II [Section 7(1A)]	763
2.3 Necessary elements that constitute supply under CGST/SGST Act	767
2.4 Types of supply	770
2.5 Activities which shall be treated neither as a supply of goods nor a supply of services [Section 7(2) CGST Act]	771
2.6 Power of the Government to specify the nature of certain transactions of supply [Section 7(3)]	773
Theoretical Questions	773
Multiple Choice Questions	773
Practical Questions	775
Chapter 3 Levy and Collection (Taxable Event)	777
3.1 Levy and Collection under CGST Act, IGST Act and UTGST Act	777
3.2 Tax payable on reverse charge basis [Section 9(3) of CGST Act, section 5(3) of IGST Act and section 7(3) of the UTGST Act]	779
3.3 Tax payable on reverse charge basis if specified categories of supplies are made to a specified class of registered persons [Section 9(4)]	786
3.4 Kinds of supply on which tax is leviable under GST	786
3.5 Levy of GST on Intra-State supply	787
3.6 Levy of GST on Inter-State supply	788
3.7 Zero Rated Supply [Section 16 of IGST Act, 2017]	789
Theoretical Questions	790
Multiple Choice Questions	790
Chapter 4 Exemption from GST	794
4.1 Meaning of "exempt supply" [Section 2(47) of the CGST Act, 2017]	794
4.2 Power to grant exemption from tax [Section 11 of the CGST Act, 2017 and section 6 of the IGST Act, 2017]	794
4.3 Goods exempt from GST	795
4.4 Services exempt from GST	795
Theoretical Questions	809
Multiple Choice Questions	809
Chapter 5 Taxability of Composite and Mixed Supply	813
5.1 Tax liability on composite and mixed supplies [Section 8 of CGST Act, 2017]	813
Questions	816
Multiple Choice Questions	816
Practical Questions	817
Chapter 6 Location of the Supplier and Place of Supply of Goods and Services	818
6.1 Location of Supplier of Goods	818
6.2 “Location of the supplier of services� [Section 2(15) of the IGST Act, 2017]	818
6.3 Place of supply of goods other than supply of goods imported into, or exported from India [Section 10 of IGST Act, 2017]	819
6.4 Place of supply of goods imported into, or exported from India [Section 11 of IGST Act, 2017]	821
6.5 Place of supply of services where location of supplier and recipient is in India [Section 12 of IGST Act, 2017]	821
6.6 Place of supply of services where location of supplier or location of recipient is outside India [Section 13 of IGST Act, 2017]	826
6.7 Special provision for payment of tax by a supplier of online information and database access or retrieval services (OIDAR Services) [Section 14 of IGST Act, 2017]	828
Theoretical Questions	830
Multiple Choice Questions	831
Practical Questions	833
Chapter 7 Composition Levy (Composition Scheme)	835
7.1 Composition levy (Composition Scheme) [Section 10(1) of CGST Act, 2017]	835
7.2 Restrictions on the registered person availing composition levy [Section 10(2) of CGST Act, 2017]	836
7.3 Composition scheme primarily for supplier of services Section 10(2A) of CGST Act, 2017]	836
7.4 Lapse of the option of composition scheme [Section 10(3) of CGST Act, 2017]	837
7.5 Person who opts for composition scheme shall not collect any tax and shall not be eligible for input tax credit [Section 10(4) of CGST Act, 2017]	837
7.6 Consequences of wrongful availment of composition scheme [Section 10(5) of CGST Act, 2017]	837
7.7 Inclusion in and exclusion from “aggregate turnover� for determining the eligibility to pay tax under composition levy — Inserted with effect from 01.01.2020 — Explanation 1 to Section 10 of the CGST Act	838
7.8 Exclusions from the “turnover in State/Union territory� for determining the tax payable under composition levy—Explanation 2 to Section 10 of the CGST Act	838
7.9 Meaning of "Aggregate turnover" [Section 2(6) of the CGST Act, 2017]	838
7.10 Meaning of registered person –	838
7.11 Relevant rules for composition levy	838
7.12 Benefits of composition scheme	841
7.13 Statement of payment of self-assessed tax to be filed on quarterly basis	841
7.14 Annual furnishing of return	841
Theoretical Questions	842
Multiple Choice Questions	842
Practical Questions	844
Chapter 8 Time of Supply	846
8.1 Time of supply of goods [Section 12 of CGST Act, 2017]	846
8.2 Time of supply of services [Section 13 of the CGST Act, 2017]	850
8.3 Time of supply where there is change in rate of tax in respect of supply of goods or services or both [Section 14 of CGST Act, 2017]	855
Theoretical Questions	858
Multiple Choice Questions	858
Practical Questions	860
Chapter 9 Value of Supply	863
9.1 Where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply [Section 15(1)]	863
9.2 Where the value cannot be determined under the above provisions [Section 15(4)]	867
9.3 Value of supply in case of lottery, betting, gambling and horse racing. [Rule 31A]	869
9.4 Value of supply in case of online gaming including online money gaming. [Rule 31B]	870
9.5 Value of supply of actionable claims in case of casino. [Rule 31C]	870
9.6 Value in case of notified supplies [Section 15(5)]	870
9.7 Value of supply inclusive of integrated tax, central tax, state tax, union territory tax – Rule 35	874
Theoretical Questions	875
Multiple Choice Questions	875
Practical Questions	876
Chapter 10 Input Tax Credit and its Utilisation	879
10.1 Eligibility and conditions for taking input tax credit [Section 16 of the CGST Act, 2017]	879
10.2 Apportionment of input tax credit [Section 17(1), (2) & (3) of CGST Act, 2017]	885
10.3 Availability of credit in special circumstances [Section 18]	891
10.4 Taking input tax credit in respect of inputs and capital goods sent for job work [Section 19 of the CGST Act, 2017]	897
10.5 Input Service Distributor	898
10.6 Availment of input tax credit [Section 41]	900
10.7 Utilisation of input tax credit [Section 49] [Relevant provisions]	900
10.8 Restrictions on use of amount available in electronic credit ledger [Rule 86B]	907
10.9 Commissioner or its authorised officer authorised to disallow debit of electronic credit ladger and Block the Credit [Rule 86A of CGST Rules]	908
Theoretical Questions	909
Multiple Choice Questions	910
Practical Questions	912
Chapter 11 Tax Invoice, E-Way Bill and Credit & Debit Notes	917
11.1 What is an invoice	917
11.2 Tax invoice [Section 31]	917
11.3 Amount of tax to be indicated in tax invoice and other documents [Section 33]	922
11.4 Issue of one or more Credit and Debit Notes [Section 34 of the CGST Act, 2017]	922
11.5 E-Way Bill	928
Theoretical Questions	934
Multiple Choice Questions	934
Practical Questions	937
Chapter 12 Registration	938
12.1 What are the advantages of taking registration in GST?	938
12.2 Registration is PAN based and State/UT specific	938
12.3 Persons liable for registration [Section 22 of the CGST Act, 2017]	938
12.4 Persons Registered Under any pre-GST law Liable to be registered under GST [Section 22(2)]	941
12.5 Liability of registration in case of transfer of business [Section 22(3) & (4)]	941
12.6 Person not liable for registration [Section 23 of CGST Act]	941
12.7 Compulsory Registration by Certain Persons irrespective of threshold registration limit [Section 24]	943
12.8 Procedure for registration [Section 25]	944
12.9 Deemed registration/rejection of registration	952
12.10 Special provisions relating to casual taxable person and non-resident taxable person [Section 27]	953
12.11 Amendment of registration [Section 28]	954
12.12 Cancellation or suspension of Registration and Revocation of Cancellation of registration [Section 29 & 30]	956
Theoretical Questions	964
Multiple Choice Questions	964
Practical Questions	968
Chapter 13 Payment of Tax, TDS & TCS under GST	969
13.1 Introduction	969
13.2 Payment of tax, interest, penalty and other amounts	970
13.3 Order of utilization of ITC Available in the Electronic Credit Ledger [Section 49(5)]	971
13.4 Refund of the Amount Available in electronic cash ledger (ECL) or electronic credit ledger (ECrL) [Section 49(6)]	973
13.5 Electronic Liability Register (ELR) to be maintained in Form GST PMT-01 for recording all liabilities [Section 49(7)]	973
13.6 Order of Discharge of Tax and Other Dues [Section 49(8)]	973
13.7 Deemed passing on the Full Incidence of CGST/SGST/IGST [Section 49(9)]	974
13.8 Transfer of any amount available in the ECL under CGST Act to the ECL for integrated tax, central tax, State tax, Union territory tax or cess [Section 49(10)]	974
13.9 Any amount transferred to the ECL under the CGST Act shall be deemed to deposit in the said ledger [Section 49(11)]	974
13.10 Government may specify such maximum proportion of output tax liability which may be discharged through the electronic credit ledger [Section 49(12)]	974
13.11 Interest on delayed payment of tax only on net tax liability payable in cash [Section 50 ]	974
13.12 TDS under GST [Section 51 of the CGST Act, 2017]	975
13.13 TCS under GST [Section 52]	978
Theoretical Questions	981
Multiple Choice Questions	981
Practical Questions	983
Chapter 14 Returns	985
14.1 Return, furnishing details of outward supplies during a tax period [Section 37]	985
14.2 Return, furnishing details of inward supplies [Section 38]	988
14.3 Furnishing of returns by registered person, Form GSTR-3B [Section 39]	990
14.4 First return [Section 40]	997
14.5 Annual return [Section 44]	997
14.6 Final return on cancellation of registration [Section 45]	999
14.7 Details of inward supplies of persons having Unique Identity Number [Rule 82]	999
14.8 Notice to return defaulters [Section 46]	999
14.9 Levy of late fee for not filing the return within the prescribed date [Section 47]	999
14.10 List of GST Returns/Statements to be furnished by Registered Persons	1000
Multiple Choice Questions	1001
Practical Questions	1004
Chapter 15 Accounts & Records	1005
15.1 Accounts and other records [Section 35]	1005
15.2 GST Audit [Section 35]	1006
15.3 Period of retention of accounts [Section 36]	1006
15.4 Type of accounts & records to be maintained	1006
Multiple Choice Questions	1008
Chapter 16 Case Scenarios (GST)	1009

About the Author

Dr. Girish Ahuja & Dr. Ravi Gupta

Dr. Girish Ahuja did his graduation and post-graduation from Shri Ram College of Commerce, Delhi and was a position holder. He was awarded a Ph.D. degree by Faculty of Management Studies (FMS), Delhi University. He is a Fellow of the Institute of Chartered Accountant of India (ICAI) and was a rank holder of both Intermediate and Final examinations of the Institute. He had been nominated by the Government of India as a member of the Task Force for redrafting the Income-tax Act and New Income-tax Law. He is also on the Board of Directors of many reputed companies and has a vast and rich experience in the field of finance and taxation. He has been nominated by the Government of Directors of UNITECH LTD with the approval of the Supreme Court to Board and was also been nominated by the Govt. of India as Independent Director of the Central Board of State Bank of India. Dr. Ahuja is a author of various books on Direct Taxation and he has addressed more than 5000 seminars organized by the ICAI, ICSI, ICWAI, Chambers of Commerce.

Dr. Ravi Gupta did his graduation and post-graduation from Shri Ram College of Commerce. Thereafter, he did LL.B. from Delhi University and MBA (Finance) from Faculty of Management Studies, Delhi. He has been awarded a Ph.D. degree in International Finance by the Delhi University. He had been a faculty member at Shri Ram College of Commerce (Delhi University). He is an advocate and leading consultant at Delhi NCR and also has vast practical experience in handling tax matters of trade and industry. He has been appointed by the Government of India as a member of the Committee consututed for Simplification of Income Tax Act. He is also a Central Council member of ICAI (Government of India Nominee) and on the Board of various reputed companies. He is a co-author of various books on Income-tax. He has addressed more than 3000 seminars on Direct Taxes organized by ICAI, Chambers of Commerce, Universities, etc.

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