Direct Tax For Assessment Year 2020-21
Direct Tax For Assessment Year 2020-21
Direct Tax For Assessment Year 2020-21
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9TH EDITION
January 1, 2020
1
INDEX
Chapter. Particular- Page
No. No.
1. Tax Rates for AY 2020-21 & Some Important Notes 2-3
2. Capital gain 4-11
3. Prevention and Circulation of Unaccounted Money. 12-13
4. Profit or gain of Business or Profession 14-22
5. Deduction 22-23
6. Exemption 24
U/S 87A Resident Individual and HUF having income up to 5,00,000 entitled to rebate of Rs. 12,500 From
there calculated Tax. Calculated income tax increased with cess on income tax 4% and APPLICABLE
SURCHARGE .
SURCHARGE INDIVIDUAL, HUF, , FIRM & LLP LOCAL DOMESTIC COMPONY FOREIGN COMPONY
AUTHORITY,AOP,BOI
INCOME SURCHARGE INCOME SURCHARGE INCOME SURCHARGE INCOME SURCHARGE
>50 Lakh 10% >1 12% >1 5% >1 CRORE ≤10 2%
to 1 Crore Crore CRORE CRORE
1-2 Crore 15% ≤10
2-5 Crore 25% ≥10 CRORE 5%
CRORE
>5 Crore 37%
≥10 10%
CRORE
MARGINAL
RELEIF
ASSESSEE CALCULATION
Individual, (TAX ON 1 CRORE )+(TOTAL INCOME – 1 CRORE)
HUF,
LOCAL AUTHOITY
Marginal relief is granted so as to additional income tax doesn’t exceed addition income..
MAT Minimum Alternate Tax (M.A.T.) - The rate of MAT payable by a company is 18.50% u/s 115 JB.
a) The period allowed to carry forward the tax credit under MAT is further extended to 15 (Fifteen) years.
CAPITAL – 43 No Limit 10000/- The expenditure shall not be included in the cost
Purchase per day of asset. No Depreciation benefit.
of Fixed Assets
REVENUE – 35AD No Limit 10000/- No deduction shall be allowed in respect of
Expenditure on per day such expenditure.
Specified Business per asset
Section 2(14) CAPITAL ASSETS means all property in kind except (i)SIT, consumable stores & Raw
material (ii) Personnel affect (excluding JADPSA), (III)Agricultural land (iv)Gold deposit bond issued
under gold deposit scheme 1999. ,
Explanation (F.Act-2012) Any right in relation to Indian company.
PTBR : JADPSA are capital assets. Jewellery, Archaeological collection, Drawing, Painting, Sculptures,
Any other work of art.
45(1A) INSURANE CLAIM
Transfer took place in the year of damage or destruction but Taxable in the year of Receipt of
insurance claim.
Capital gain / loss
Sale consideration (FMV or insurance claim) √
Less:
Cost of Acquisition/ indexed cost of acquisition
Cost of improvement / indexed cost of improvement √
Capital gain/ loss √
For long term capital assets instead of Cost of Acquisition and Cost of Improvement , indexed cost of
Acquisition and indexed cost of improvement shall be taken.
Shifting base year from 1981 to 2001 for computation of capital gains
ICOA/ICOI= COA/COI*CII of the year in which transfer took place
CII of the year of Acquisition/improvement
55 COST OF ACQUISTION
Includes all cost incurred to acquire the capital assets reduced by that have been made by other
authority.
PTBR: The capital gain is derived after reduction of COA and COI from FVCR. So the capital assets
which are not acquired , automatically generated (eg. Goodwill,Right,etc) then cost of acquisition is
indeterminate then capital gain can’t be calculated and accordingly capital gain will not arise.
So to overcome from this tax planning.
For the following self generated assets cost of acquisition specified.
CAPITAL ASSETS COST OF ACQUISTION
ACQUIRED SELF
GENERATED
Goodwill of a business Purchase price NIL
Trade mark or brand name associated with a business Purchase price NIL
Tenancy rights Purchase price NIL
Stage carriage permits(Route Permits) Purchase price NIL
COST OF IMPROVEMENT
Cost incurred after acquisition.
NIL for Goodwill of business, Right to manufacture, produce or process any article or thing, Right to
carry on any business.
PTBR: Cost of improvement incurred before 01.04.1981 is to be ignored in all cases.
However. For non-resident, tax on LTCG on unlisted securities shall be 10% without applying the
first proviso and second proviso to section 48.
Proviso to 112 LTCG ON LISTED SECURITIES(SHARE & DEBENTURE) OR UNIT OR ZCB
TAX Rates is lower of the following:
20% after indexation
10% without indexation
Subject to exemption u/s 10(38) for equity share and unit.
47 CERTAIN TRANSACTION NOT REGARDED AS TRANSFER
.i. Distribution of capital assets on partition of HUF.
.ii. Transfer of capital assets under a GIFT, WILL, IRREVOCABLE TRUST.
.vi. Transfer of share held in an Indian company, by the amalgamating foreign company to the
amalgamated foreign company.
Provided at least 25% of the shareholder of the amalgamating FC continue to remain
shareholder of the amalgamated FC & Such transfer doesn’t attract tax on capital gain in
the country, in which the amalgamating company is incorporated.
.vib. Any transfer in a demerger by demerged company to resulting company, if the resulting
company is an Indian company.
.vic. Any transfer of capital assets being share of Indian company, in a demerger, to the resulting
company if the resulting company is an Indian company.
Provided at least 3/4th in value of the share of the Demerged FC continue to remain
shareholder of the resulting FC & Such transfer doesn’t attract tax on capital gain in the
country, in which the amalgamating company is incorporated.
.vica. Any transfer in a business reorganization, of a capital assets by the predecessor co-
operative bank to the successor co-operative bank.
.vicb. Any transfer by a shareholder, in business reorganization, of a capital asset being a share or
shares held by him in the predecessor co0operative bank if the transfer is made in
consideration of the allotment to him of any share or shares in the successor co-operative
bank.
.vicc. Any transfer in a demerger, of a capital assets, being a share of a foreign company, referred
to in Explanation 5 to clause (i) of sub-section (1) of section 9, which derives, directly or
indirectly, its value substantially from the share or shares of any Indian company, held by
the demerged foreign company to the resulting foreign company.
Provided at least 3/4th in value of the share of the Demerged FC continue to remain
shareholder of the resulting FC & Such transfer doesn’t attract tax on capital gain in the
country, in which the amalgamating company is incorporated.
.vid. Any transfer or issue of shares by the resulting company, in a scheme of demerger to the
shareholder of the demerged company if the transfer or issue is made in consideration of
demereger of the undertaking:
.vii. Transfer in a scheme of amalgamation of banking company with a banking institution.
.viib. Any transfer of a capital asset, being a Government Security carrying a periodic payment of interest, made
outside India through an intermediary dealing in settlement of securities, by a non-resident to another non-
resident.
.viii. Any transfer of bond (FCCB/FCEB) or GDR between NR to NR, made outside INDIA.
.xi. Any transfer of a capital assets, being any work of art, archaeological, scientific, or art
47(xii) ANY TRANSFER OF CAPITAL ASSETS BEING LAND OF SICK INDUSTRIAL COMPANY.
(a) The company transfer LAND.(exemption only for land)
(b) The land is transferred during the period beginning from the PY in which company become
sick industrial company and ending with the PY in which entire net worth exceeds or equal to
accumulated loss.
(c) The sick industrial company managed by its workers’ co-operative.
(d) The land is transferred under a scheme prepared and sanctioned by BIFR.
contribution in LLP.
(d) The aggregate of the PSR of shareholder of the company in the LLP shall not less than 50% at
any time during the period of 5 year from the date of conversion;
(e) The total sales, turnover or gross receipt should not exceed 60 lakh rupees in any 3 PPY.
(f) No amount is paid, to any partner out of accumulated profit standing as on date of
conversion.
47(xiv) A SOLE PROPRIETORSHIP CONCERN SUCCEEDED BY A COMPANY.
Following condition should be satisfied:
(a) All the assets and liabilities of the sole proprietor concern relating to the business
immediately before the succession becomes the assets and liabilities of the company.
(b) The shareholding of the sole proprietor in the company is not less than 50% of the total
voting power in the company and his shareholding continues to so remain as such for a period
of 5 year from the date of the succession ; and
(c) The sole proprietor does not receive any consideration or benefit directly or indirectly, in any
form or manner , other than by way of allotment of share in the company;
47(xvi) ANY TRANSFER OF CAPITAL ASSETS IN THE COURSE OF DEMUTUALISATION OR CORPORATISATION
OF RSE.
Following condition should be satisfied
(a) All the assets and liabilities of the AOPs or BOIs relating to the business immediately before
the succession become the assets and liabilities of the company;
(b) The corporatization of recognized stock exchange in India is carried out in accordance with a
scheme of demutualization or corporatization which is approved by SEBI.
EXEMPTION Cost of Cost of Cost of new Cost of new Cost of new If CONA ≥ Cost of If CONA ≥
new assets new assets assets or CG assets or assets or NC then new NC then
or CG or CG w.i.less CG w.i.less CG w.i.less full other assets full other
w.i.less w.i.less wise or CG wise
proportion w.i.less proportio
DEPOSIT Available Available Available Available Available Available NA Available
SCHEME
(CGAS)
WITHDRAWAL If new RHP If new land If transfer If transfer If transfer If within 1 Sold or (i).If within
OF transferred transferred with in 3 year with in 3 with in 3 year equity pledge 3 year new
EXEMPTION with in 3 with in 3 from DOA year from year from share or with in assets
year from year from DOA DOA new assets 3 year transferred
its DOA sold or from (ii)if within
purchase transferred DOA 2 year
or additional
construct purchased
or within 3
year new
construct
COMPUTING Applicable App App App App NA NA NA
MACHINERY
ASSESSEE Individual Individual All industrial All All Individual All Individual
or HUF or HUF undertaking industrial industrial or HUF or HUF
undertaking undertaking
1. Computing machinery Applicable means cost of acquisition of New assets will be reduced by
exemption withdrawn, rather exemption withdrawn directly taxable in normal case.
56(2)(viia) Share received as gift by closely held company(other than widely held company)
56(2)(viib) Received consideration for issue of share at above face value
Note:
(1) Aggregate value of All sum received during previous year from All person should consider while
determining the limit of 50000.
(2) Property should be in the nature of capital assets, if it is received in other form then 56(2) (vii) not
applicable. Egg- as sit.
(3) 56(2) (vii) not applicable when property receipt from relative or on the occasion of marriage or on
death.
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SECTION CONTENT
28 Taxable income under head of PGBP
29 Computation of profit and loss u/h of PGBP considering section 29 to 43B
Admissible Expenditure
30 Rent, Rates, tax, Repair and insurance of building
31 Repair and insurance of plant and machinery and furniture.
32(1)(ii) Depreciation
32(1)(iia) Additional Depreciation
32AC Investment in New Plant and Machinery
32AD Investment in New Plant and Machinery in Notified Backward Area in Certain cases.
35 Expenditure on Scientific research
35ABB Amortisation of telecom license fee
35AC Expenditure on eligible project Scheme
35AD Deduction of expenditure on specified business
35CCA Contribution to association or institution for carrying out RDP.
35CCC Expenditure on Agricultural extension project
35CCD Expenditure of Skill development project
35DDA Amortisaiton of expenditure on VRS.
35D Preliminary expenses
36 Other deduction as specified
37(1) deduction of other genuine business expenses
Inadmissible expenditure
32(1)(ii) Depreciation
Depreciation allowed to owner, on building, p/m, Furniture, Intangible assets, etc. Irrespective of wholly or partly
used by assesses / wholly or partly owned possession. It is mandatory to claim depreciation, irrespective of assesses
desire to claim or not. Depreciation is Allows on block wise. Separate block for each category of assets, all the assets
falling in a block is chargeable at same rate. Depreciation is allowed on WDV standing on last day previous year.
However, depreciation would be restricted to half if put to use for less than 180 days. Block of assets prepared as
follows:
Particular Block -1 Block -2 Block -3 Block -4 Block -5 Block -6 Block -7 Block -8
building F/f, , P/m, Motor Ship Intangible Motor Computer, Building
Book other Temporary
car other than including car used than annual Purpose, Book
used in software in publication Annual
and Library. publication, Book
business business library, APCE,
WPCE,
Rate 5% 10% 15% 20% 25% 30% 60% 100%
Opening WDV
Add: Assets Acquired
during year.
Less: Amount Payable
in respect of Assets
sold, discarded,
demolished or
destroyed.
Balance
Depreciation on
Above balance
Closing WDV
APCE: Air Pollution Control Equipment. , WPCE: Water Pollution Control Equipment.
32(1)(iia) Additional Depreciation
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In case of new plant and machinery acquired and installed for manufacture or production of article or thing or for
generation or generation and distribution of power, additional depreciation @20% of actual cost shall be allowed as
deduction. However, depreciation would be restricted to 10% if put to use for less than 180 days.
Provided that where an assessee, sets up an undertaking or enterprises for manufacture or production of any article
or thing on or after the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the state of Andhra
Pradesh or Bihar, Telangana or West Bengal, then additional depreciation would be allowed @30%.
No deduction for following:
1. For any Second hand machinery or plant.
2. For any residential accommodation.
3. For office appliance or road transport.
4. For machinery or plant whole of the actual cost of which allowed as deduction.
5. Assessee engages in generation or generation and distribution or electricity, who is claiming depreciation as
per WDV.
32AC Investment in New Plant and Machinery
A company engage in manufacture or production or article or thing, Acquire or install new assets and the amount of
actual cost of such new assets acquired and installed during any previous year exceeds 25 Crore Rupees, then 15%
deduction is allowed, it is addition to Depreciation, and it shall not be reduced from WDV.
32AD Investment in New Plant and Machinery in Notified Backward Area in Certain cases.
Where an assessee, sets up an undertaking or enterprises for manufacture or production of any article or thing on
or after the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the state of Andhra Pradesh or Bihar,
Telangana or West Bengal, then allowed deduction of 15%. It is addition to Depreciation, and it shall not be reduced
from WDV.
Relevant period means Period From commencement of business or date of payment, whichever is earlier till expiry
of license of telecommunication fees.
Treatment on sale of Telecommunication license.
Sale Sale price >Unamortised balance Sale Price <Unamortised balance
In part Profit till depreciation allowed Balance considered as cost allowed
PGBP income, beyond that CG. in remaining period.
In full Balance amount allowed as
deduction in the year of transfer
Inadmissible expenditure
40(a)(iv) Payment to provident fund without secure that TDS will be deducted there from.
Employer’s contribution towards provident fund or any other fund not allowed as deduction if it is not ensured that
TDS will be deducted there from at maturity.
When payment is made in cash in excess of 10000/35000 to a person in a day by otherwise account payee cheque or
account payee demand draft. However, no disallowance will be made in case of certain specified unavoidable
circumstance (bank holiday, Bank strike, etc).
Presumptive taxation
44AD Presumptive income of person engage in business other than transport
Applicable to sole proprietor, individual, HUF and firm carrying any business having a gross turnover not exceeding
rupees 200 LACS. Deduction for expenses will not be allowed, deduction under section 30 to 38 deemed to have
been allowed.
However, deduction under section 40(b) would be available to firm. (From AY 17-18 it is presumed that the Partners
Remuneration and Interest have already been deducted before calculating the Deemed Profit.)
(i) FOR SMALL BUSINESSES (Section 44 AD)
Turnover upto Rs. 200 Lakhs
Deemed Profit –
a) 6% of Gross Receipts received by an account payee cheque or account payee bank draft or use of electronic clearing
system through a bank account during the previous year or before the due date specified in sub-section (1) of section
139 in respect of that previous year;
b) 8% of Gross Receipts other than those covered in para (a) above.
For light goods vehicle (less than the gross weight of 12MT) Rs. 7,500 per vehicle per month (part shall be
considered full month).
For heavy goods vehicle (more than 12 MT gross weight) – Rs. One thousand per tonne per vehicle per
month (part will be considered full month).
However, where the assessee is a partnership firm, the remuneration or interest paid to partners can be claimed as a
deduction under section 40(b). In other words, separate deduction from the above calculated presumptive income
can be claimed as a deduction.
Chapter-5: DEDUCTION
Deduction
under
section 80 It is deducted from gross total income
Section Content
80C Life insurance premium, deferred annuity contribution to provident fund, subscription to certain
shares or debentures, investment in bond of NABARD, investment in five year post office deposit,
tuition fees of school or college, repayment of loan taken for construction of residential house
property, etc. Maximum restricted to 150000
80CCC Maximum deduction restricted to 150000 on account of contribution to a pension fund of LIC or
IRDA approved insurer.
80CCD(1) Contribution to new pension scheme up to 10% of salary or gross total income for salaried person
or self employed respectively. Maximum restricted to 150000
80CCE 80C+80CCC+80CCD(1)=150000
80CCG Rajiv Gandhi equity saving scheme: for new retail investor having GTI not exceeding 12 lacks,
entitle to rebate of 50% of amount of investment in equity share or unit of equity oriented mutual
fund or 25000 whichever is less.
80D Specified decease. Deduction for senior citizen 30000 and for other than senior citizen 25000
rupees.
Scenario Premium paid Deduction under
80D
Self, family, Parents
children
80DD Disability if ≥80% then deduction is 125000 & if <80% then deduction is 75000.
80DDB Expenditure for medical treatment of decease: deduction for senior citizen is 1,00,000 and for
other 40000.
80E Interest of loan taken for education
80EE Rs. 50000/-
Interest on loan taken for construction of RHP provident loan amount not exceeding 25 lacs, value
of house doesn’t exceed 40 lacs and assess should not have any other RHP.
80G Donation to fund, trust for charitable purpose that is approved u/s 80G. Eg- PMNRF,
If amount exceed 10000 then only account payee cheque or account payee bank draft.
80 GG For Rent Paid
Lower of Following:
1. Rs. 5000 p.m. (60,000.00 per annum)
2. 25% of Total Income;
3. Rent Paid – 10% of Total Income
80GGA Donation to scientific research association or social and statistical research association.
If amount exceed 10000 then only account payee cheque or account payee bank draft.
80GGB Contribution to political party or electrol trust by company.
80GGC Contribution to political party or electrol trust by individual.
80JJAA 30% of additional wages paid to new regular workmen by company. New regular workmen doesn’t
include casual employee. The threshold of minimum workmen has been reduced from 100 to 50.
80P Deduction available to Co-operative society: 100% of profit included in GTI.
Memory technique(1) ABCDF (2),(3) &(4) + GENRAL DEDUCITION OF 100000 OR 50000.
(1) ABCDF
(i) (a) Agriculture-Purchase of agricultural implements, seed, livestock for agriculture
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Chapter-6: EXEMPTION
Exemption
under
section 10 It doesn’t form part of gross total income
Section Content
10(1) Agricultural income
10(2A) Share of the partner in total income of partnership firm
10(7) Allowance or perquisites paid by government to its employee outside india.
10(10CC) Tax paid on perquisites but its employer exempt in the hand of employee.
10(10D) Any sum received under life insurance policy including bonus.
10(23D) Income of mutual fund
10(23DA) Income of securitisation trust from activity of securitisation
10(23FB) Income of VCC/VCF from investment in VCC.
10(23FC) Interest income received by business trust form SPV.
10(23FD) Income received by unit holder of business trust from BT except portion of income consisting of
interest income exempted u/s 10(23FC)
10(34) Dividend received by share holder.
10(34A) Consideration received by holder of securities on buy back of unlisted equity share.
10(35) Dividend interest received by united holder of MF form MF.
10(35A)
10(37) Capital gain on compulsory acquisition of agricultural land of urban area by government.
10(38) Long term capital gain on sale of share & unit of equity oriented mutual fund
10(43) Amount received under reverse mortgage.
10(44) Income received by NPS Trust
10(48) Income received in Indian currency by foreign company for supplies of crued oil and other as
specified by central government.
CHAPTER XVII
COLLECTION AND RECOVERY OF TAX
A.—General
190. Deduction at source and advance payment 1.742
191. Direct payment 1.743
B.—Deduction at source
192. Salary – AVERAGE RATE
193. Interest on securities 10%
194. Dividends 10%
194A. Interest other than “Interest on securities” 10%
194B. Winnings from lottery or crossword puzzle 30%
194BB. Winnings from horse race 30%
194C. Payments to contractors 1%/2%
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SECTION PAGE
I-23 ARRANGEMENT OF SECTIONS
194D. Insurance commission 10%
194E. Payments to non-resident sportsmen or sports associations
1.760
194EE. Payments in respect of deposits under National Savings
Scheme, etc. 1.760
194F. Payments on account of repurchase of units by Mutual
Fund or Unit Trust of India 1.760
194G. Commission, etc., on the sale of lottery tickets 1.761
194H. Commission or brokerage 1.761
194-I. Rent 1.762
194J. Fees for professional or technical services 1.764
194K. Income in respect of units 1.766
194L. Payment of compensation on acquisition of capital asset 1.767
194LA. Payment of compensation on acquisition of certain
immovable property 1.768
194LB. Income by way of interest from infrastructure debt fund 1.768
195. Other sums 1.768
195A. Income payable “net of tax” 1.770
196. Interest or dividend or other sums payable to Government,
Reserve Bank or certain corporations 1.770
196A. Income in respect of units of non-residents 1.771
196B. Income from units 1.772
196C. Income from foreign currency bonds or shares of Indian
company 1.772
196D. Income of Foreign Institutional Investors from securities 1.772
197. Certificate for deduction at lower rate 1.773
197A. No deduction to be made in certain cases 1.774
198. Tax deducted is income received 1.776
199. Credit for tax deducted 1.776
200. Duty of person deducting tax 1.777
200A. Processing of statements of tax deducted at source 1.778
201. Consequences of failure to deduct or pay 1.779
202. Deduction only one mode of recovery 1.780
203. Certificate for tax deducted 1.781
203A. Tax deduction and collection account number 1.782
203AA. Furnishing of statement of tax deducted 1.783
204. Meaning of “person responsible for paying” 1.783
205. Bar against direct demand on assessee 1.784
206. Persons deducting tax to furnish prescribed returns 1.784
206A. Furnishing of quarterly return in respect of payment of
interest to residents without deduction of tax 1.786
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SECTION PAGE
I.T. ACT, 1961 I-24
206AA. Requirement to furnish Permanent Account Number 1.787
206B. [OMITTED BY THE FINANCE (NO. 2) ACT, 1996, W.E.F.
1-10-1996] 1.788