Unit 1
Introduction
4 topics · 1 h 35 min to read · 19% of the marks DU has asked
1.1Basic concepts
33 min read
The terms the rest of the Act is built on: income and agricultural income, person and assessee, the tax year, the road from gross total income to total income, the maximum marginal rate and the Permanent Account Number.
1.1.1Income
1.1.2Agricultural income
1.1.3Person
1.1.4Assessee
1.1.5Tax year (formerly previous year and assessment year)
1.1.6Gross total income
1.1.7Total income
1.1.8Maximum marginal rate
1.1.9Permanent Account Number
1.2Residential status and the scope of total income
21 min read
Residence is tested afresh for each tax year, mainly by the days a person spends in India. The status found, resident and ordinarily resident, not ordinarily resident or non-resident, then fixes how much of his world income India taxes.
1.2.1Residential status: meaning and classes
1.2.2Individual: resident or non-resident
1.2.3Deemed residence and income from foreign sources
1.2.4Ordinarily resident or not ordinarily resident
1.2.5HUF, firm, AOP, company and other persons
1.2.6Scope of total income
1.3Exempt incomes
35 min read
Section 11 keeps out of total income every income listed in Schedules II to VI, so long as the conditions stated against it are met. An individual meets most often agricultural income, sums from his HUF, his share of a firm's profit, life insurance sums, payments from provident, pension and savings funds, a set of employment and public-service receipts, and a few receipts of non-residents.
1.3.1How section 11 works
1.3.2Agricultural income and partial integration
1.3.3Sum from an HUF and a partner's share of profit
1.3.4Sums received under a life insurance policy
1.3.5Provident, pension and savings funds
1.3.6Allowances, pensions and other employment receipts
1.3.7Other receipts of individuals
1.3.8Non-residents and foreign citizens
1.3.9Institutions and other bodies
1.4Lessons from Kautilya's taxation policy
6 min read
Kautilya's Arthashastra treats the treasury as the base of the State and sets out how to fill it without ruining those who pay; most of its rules are early forms of the principles a sound tax system still follows.
1.4.1Kautilya's principles of taxation
1.4.2Lessons for today's tax system
Unit 2
Computation of income from salaries and house property
2 topics · 1 h 09 min to read · 32% of the marks DU has asked
2.1Income from salaries
44 min read
Everything an employee gets from a present, former or future employer for his work is taxed here: pay, allowances, perquisites, retirement benefits and compensation. Add the taxable part of each item to reach gross salary, then take the deductions of s. 19(1) to reach the income under the head.
2.1.1What is taxed as salary
2.1.2Basis of charge: due, received, arrears and advance
2.1.3Allowances
2.1.4Perquisites
2.1.5Gratuity
2.1.6Leave salary
2.1.7Pension
2.1.8Provident funds and other retirement funds
2.1.9Profits in lieu of salary, retrenchment and voluntary retirement
2.1.10Deductions from salary
2.1.11Computation of income from salaries
2.2Income from house property
25 min read
The owner of a building is taxed on its annual value: what it could fetch if let, or the higher rent it actually earns. From that value come the municipal taxes he paid, a flat 30% and the interest on money borrowed for it. A house he lives in has a nil value, so only its interest, within a ceiling, is left.
2.2.1What is charged, and on whom
2.2.2Annual value of a let-out house
2.2.3Self-occupied, deemed let-out and other nil-value houses
2.2.4Deductions: the 30% and interest on borrowed capital
2.2.5Arrears of rent and unrealised rent recovered
2.2.6Co-owned property
2.2.7Computation of income from house property
Unit 3
Computation of income from business or profession and capital gains
2 topics · 1 h 46 min to read · 29% of the marks DU has asked
3.1Profits and gains of business or profession
56 min read
This head taxes the profit of a business or profession. Start from the profit the accounts show, put back what the Act does not allow, take out what belongs to other heads, and allow depreciation and the other allowances by the Act's own rules. Small traders, professionals and truck owners may instead declare a fixed presumptive income.
3.1.1What is charged here
3.1.2Method of accounting and valuation of stock
3.1.3Allowable expenses and the general deduction
3.1.4Depreciation
3.1.5Other allowances for capital and long-term spending
3.1.6Expenses the Act disallows
3.1.7Sums allowed only on actual payment
3.1.8Bad debts
3.1.9Books of account and tax audit
3.1.10Presumptive income
3.1.11The computation from the profit and loss account
3.2Capital gains
50 min read
A gain on transferring a capital asset is income of the year of transfer: the full value of the consideration, less transfer expenses and the cost of acquisition and improvement. The holding period makes it short-term or long-term; reinvesting in a house, farm land or specified bonds can exempt it; and each kind of gain has its own rate.
3.2.1Capital asset and transfer
3.2.2Short-term and long-term
3.2.3Full value of consideration
3.2.4Cost of acquisition and improvement
3.2.5Special cases of charge
3.2.6Exemption: house sold, house bought
3.2.7Exemption: farm land for farm land
3.2.8Exemption: specified bonds
3.2.9Exemption: any other long-term asset into a house
3.2.10Other exemptions
3.2.11The capital gains account scheme
3.2.12Rates of tax for tax year 2026-27
3.2.13The computation, step by step
Unit 4
Income from other sources, clubbing of income and set-off
3 topics · 1 h 20 min to read · 9% of the marks DU has asked
4.1Income from other sources
33 min read
The last and residual head. It taxes any income that is not exempt and fits no other head, together with named items such as dividends, interest, winnings and gifts. Take each item gross, deduct only what s. 93 allows, and keep winnings apart for their flat 30% rate.
4.1.1What the head covers
4.1.2Dividends and interest
4.1.3Winnings from lotteries, games and races
4.1.4Gifts and receipts for inadequate consideration
4.1.5Family pension, interest on compensation and other items
4.1.6Bond washing, dividend stripping and bonus stripping
4.1.7Deductions allowed and not allowed
4.1.8Computation layout
4.2Clubbing of income: income of other persons included in total income
22 min read
To stop a family spreading one income over several lower slabs, the Act taxes some income of a spouse, a son's wife, a minor child or a transferee in the hands of the individual behind it. Identify the case, find whose income it joins, and add it under its own head; a loss travels the same way.
4.2.1What clubbing does
4.2.2Transfers of income and revocable transfers
4.2.3Spouse's remuneration from a concern with substantial interest
4.2.4Assets transferred to the spouse
4.2.5Son's wife, transfers for their benefit, and converted HUF property
4.2.6Income of a minor child
4.2.7Summary of the clubbing cases
4.3Aggregation of income; set-off and carry forward of losses
25 min read
Total income is the five heads added together, with clubbed and deemed incomes brought in. A loss is set off first inside its own head and then against other heads where the Act allows; the rest is carried forward for a fixed number of years, against the same kind of income only.
4.3.1Aggregation of income
4.3.2Set-off within the same head
4.3.3Set-off against other heads
4.3.4Losses kept within their own class
4.3.5Carry forward and set off
4.3.6Unabsorbed depreciation
4.3.7Losses under the default tax regime
4.3.8Order of set-off and the computation
Unit 5
Deductions and computation of total income and tax liability
3 topics · 1 h 42 min to read · 12% of the marks DU has asked
5.1Deductions from gross total income
44 min read
Chapter VIII deductions come off gross total income to give total income. Each has its own conditions and ceiling; most are open only under the old regime, and the default regime keeps just three.
5.1.1How deductions work
5.1.2Life insurance, provident funds and other savings
5.1.3Pension contributions and the Agniveer fund
5.1.4Health insurance and preventive check-ups
5.1.5Disability and specified diseases
5.1.6Interest on loans: higher education, a first house, an electric vehicle
5.1.7Donations and political contributions
5.1.8Rent paid without house rent allowance
5.1.9Interest on deposits
5.1.10Deductions linked to professional and business income
5.1.11Deductions at a glance, and the default regime
5.2Rebates and reliefs; computation of total income and tax liability of individuals
32 min read
Total income is the sum of the heads after set-off and deductions. Tax on it is worked out at slab rates under the default or the old regime, with flat rates for some incomes, then adjusted for rebate, surcharge, cess and reliefs before tax already paid is credited.
5.2.1From income to tax payable
5.2.2The default regime and the old regime: slab rates
5.2.3Opting out of the default regime
5.2.4Income taxed at special rates
5.2.5Agricultural income: partial integration
5.2.6Rebate for resident individuals
5.2.7Surcharge, marginal relief and cess
5.2.8Relief for arrears and advance salary
5.2.9Relief for tax paid abroad
5.2.10Worked example: the two regimes compared
5.3Online filing of returns of income, and TDS
26 min read
An individual whose income crosses the basic exemption limit, or who meets certain other tests, files an online return by a due date that depends on his income. Tax already deducted at source by payers is credited against the tax due.