Computation of Short Term & Long Term Capital Gain

At the time of Sale of an Asset, tax is liable to pay on gains earned on the sale of asset. Such gains could either be short term capital gain or long term capital gain.

Classification of Capital Gain

Short Term Capital Gain (STCG)

Capital asset held less than 36 months shall be deemed as short term capital asset. However, the following asset held less than 12 months shall be treated as short term assets:

  1. Equity or preference shares in a company which are listed in any recognized stock exchange in India.
  2. Other Listed Securities.
  3. Units of UTI.
  4. Units of equity oriented funds.
  5. Zero Coupon Bonds.
  • Long Term Capital Gain (LTCG)
  • Capital asset held more than 36 months or 12 months, as the case may be, is treated as long term capital asset.

Computation of Short Term Capital Gain

Gains on sale of shot term capital asset shall be computed in the following manner:-

Full Value of Consideration                                                              XXX

(Less)  Cost of Acquisition                                                               XXX

(Less)  Cost of Improvement                                                           XXX

Gross STCG                                                                                       XXX

(Less)  Exemption (if any) available u/s 54B/54D/54G/54GA       XXX

Net STCG                                                                                           XXX

Computation of Long Term Capital Gain

Gains on sale of Long Term Capital Asset shall be computed in the following manner:-

Full Value of Consideration                                                              XXX

(Less)  Indexed Cost of Acquisition                                                 XXX

(Less)  Indexed Cost of Improvement                                             XXX

Gross LTCG                                                                                       XXX

(Less)  Exemption (if any) available u/s 54B/54D/54G/54GA       XXX

Net LTCG                                                                                          XXX

Rates of Tax on Capital Gains

Short Term Capital Gains
  1. Short term capital gains shall be included in the gross total income of the taxpayer and will be taxed at the normal rates.
  2. STCGs arising from transfer of equity shares, units of an equity oriented funds or a unit of a business trust which is chargeable to securities transaction tax shall be taxed at 15% under Section 111A.
Long Term Capital Gains
  1. Long term capital gains are subject to tax at 20%
  2. LTCGs from transfer of listed securities, units or zero coupon bonds shall be taxable at lower of the following
    1. 20% after taking benefit of indexation or
    2. 10% without taking benefit of indexation.
  3. Long term capital gains arising from transfer of listed securities, units of equity oriented or a unit of business trust which is chargeable to STT shall be exempt from tax under section 10(38).

In case loss on the sale of an asset, the capital loss can be set-off against other Capital Gains in that year. If the loss cannot be set-off against capital gain in that year, it can be carried forward for next 8 years and set-off in the future years. However, lose can only be carried forward if the return was filed before due date.

Indexed Cost =Actual Cost*Cost Inflation Index of the Year of Sale/Cost Inflation Index of the Year of Purchase.

Income Slab & Tax Rates for AY 2018-19/FY 2017-18

Income Tax Rates for the Assessment Year 2018-19 (applicable on income earned during 01.04.2017 to 31.03.2018) for various categories of Indian Income Tax payers.

1. Income tax rates for individual (resident or non-resident) or HUF or Association of Person or Body of Individual or any other artificial juridical person.

Taxable income                                                                   Tax Rate

Up to Rs. 2,50,000                                                                    Nil

Rs. 2,50,000 to Rs. 5,00,000                                                 5%

Rs. 5,00,000 to Rs. 10,00,000                                               20%

Above Rs. 10,00,000                                                              30%

Less:
Rebate under Section 87A: The rebate is available to a resident individual if his total income does not exceed Rs. 5,00,000. The amount of rebate shall be 100% of income-tax or Rs. 2,500, whichever is less.

Add:
Surcharge:

10% of the Income Tax, where taxable income is 50 lakhs Rs. 1 crore.

15% of the Income Tax, where taxable income is more than Rs. 1 crore.

Education Cess: 3% of the total of Income Tax and Surcharge.

2. Income tax rates for resident senior citizen (who is 60 years or more at any time during the previous year but less than 80 years on the last day of the previous year).

Taxable income                                                                     Tax Rate

Up to Rs. 3,00,000                                                                    Nil

Rs. 3,00,000 to Rs. 5,00,000                                                  5%

Rs. 5,00,000 to Rs. 10,00,000                                                20%

Above Rs. 10,00,000                                                               30%

Less:
Rebate under Section 87A: The rebate is available to a resident individual if his total income does not exceed Rs. 5,00,000. The amount of rebate shall be 100% of income-tax or Rs. 2,500, whichever is less.

Add:
Surcharge:

10% of the Income Tax, where taxable income is 50 lakhs Rs. 1 crore.

15% of the Income Tax, where taxable income is more than Rs. 1 crore.

Education Cess: 3% of the total of Income Tax and Surcharge.

3. Income tax rates for resident super senior citizen (who is 80 years or more at any time during the previous year).

Taxable income                                                            Tax Rate

Up to Rs. 5,00,000                                                          Nil

Rs. 5,00,000 to Rs. 10,00,000                                      20%

Above Rs. 10,00,000                                                     30%

Add:
Surcharge:

10% of the Income Tax, where taxable income is 50 lakhs Rs. 1 crore.

15% of the Income Tax, where taxable income is more than Rs. 1 crore.

Education Cess: 3% of the total of Income Tax and Surcharge.

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4. Partnership Firm

For the Assessment Year 2018-19, a partnership firm (including LLP) is taxable at 30%.

Add:
Surcharge: 12% of the Income Tax, where taxable income is more than Rs. 1 crore.

Education Cess: 3% of the total of Income Tax and Surcharge.

5. Local Authority

For the Assessment Year 2018-19, a local authority is taxable at 30%.

Add:
Surcharge: 12% of the Income Tax, where taxable income is more than Rs. 1 crore.

Education Cess: 3% of the total of Income Tax and Surcharge.

6. Domestic Company

Turnover upto Rs. 50 Crores

Income Tax : 25 %

Add:
Surcharge: 7% of the Income Tax, where taxable income is more than Rs. 1 crore but not exceeding ten crores and 12%, of the Income Tax, where taxable income is more than Rs.10 crores.

Education Cess: 3% of the total of Income Tax and Surcharge.

Turnover exceeding Rs 50 Crores

Income Tax : 30 %

Add:
Surcharge: 7% of the Income Tax, where taxable income is more than Rs. 1 crore but not exceeding ten crores and 12%, of the Income Tax, where taxable income is more than Rs.10 crores.

Education Cess: 3% of the total of Income Tax and Surcharge.

7. Co-operative Society

Income Tax Rates for Co-Operative Society are:-

Taxable income                                                         Tax Rate

Up to Rs. 10,000                                                           10%

Rs. 10,000 to Rs. 20,000                                             20%

Above Rs. 20,000                                                         30%

Add:
Surcharge: 12% of the Income Tax, where taxable income is more than Rs. 1 crore.

Education Cess: 3% of the total of Income Tax and Surcharge.

Disclaimer

All hard works were made to make to this content up-to-date and accurate. However, this content doesn’t make any declaration regarding the data presented in this article as up-to-date and correct.

Post Office Tax Saving Investment Schemes

Post Office Savings Schemes offers

  • Savings Account
  • Recurring Deposit (RD) Account
  • Time Deposit (TD) Account
  • Monthly Income Scheme (MIS) Account
  • Public Provident Fund (PPF) Account
  • National Savings Certificates (NSC)
  • Senior Citizen Savings Scheme (SCSS) Account
  • Kisan Vikas Patra (KVP) and
  • Sukanya Samriddhi Accounts.

Post Office Tax Saving Schemes

Deposits in some post office schemes are eligible for deduction from income under section 80C of Income Tax Act.

5 Years Time Deposits

Investment in post office time deposit for 5 years is eligible for deduction from income under section 80C of IT Act. Minimum amount for open time deposit is ₹200 and in multiple thereof. No maximum limit.

Interest rate for 5 years time deposit is 7.8% from 1.10.2016

Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a tax saving investment. PPF was introduced by the Ministry of Finance of India in 1968. Deposits made towards PPF accounts can be claimed as tax deductions and interest earned on those deposits are also tax-free. Withdrawals are exempt from tax. The PPF interest rate is 8% per annum from 01.10.2016.

Minimum annual deposit is ₹500 and maximum annual deposit allowed is ₹1.5 lakhs. Investment up to ₹1 lakh is eligible for deduction under section 80C of IT Act.

Tenure of PPF account is 15 years, account continuance is allowed beyond maturity for 5 years at every renewal, with or without making additional deposits.

Loans can be availed against funds held in the PPF account from year 3 to year 6.

National Saving Certificates (NSC)

NSC specially designed for government employees, businessmen and other salaried classes who are income tax assesses. There is no maximum limit for investment in NSC. Investment up to ₹100,000.00 is eligible for deduction under section 80C of Income Tax Act.

The interest rate for NSC VIII Issue is 8%.

Maturity value of a certificate of ₹100.00 purchased on or after 01.10.2016 shall be ₹146.93 after 5 years.

Maturity value of a certificate of ₹100.00 purchased on or after 01.04.2012 shall be ₹147.61 after 5 years.

Certificates can be kept as collateral security to get the loan from banks.

Kisan Vikas Patra (KVP)

Investment under this scheme is eligible for deduction under section 80C of IT Act. Minimum deposit is ₹1000 and no maximum limit. This certificate is available in denomenation of 1000, 5000, 10,000 and 50,000.

Interest rate is 7.7%

Senior Citizen Savings Scheme (SCSS) Account

An individual of the age 60 or more can open this account with post office. Maturity period of this account is 5 years and interest rate is 8.5% from 01.10.2016.

Deposit under this scheme is eligible for deduction under section 80C of the Income Tax Act.

Which ITR Form should I file? – Types of ITR Forms

The taxpayer has to communicate the details of his taxable income to the Income-tax Department. These details are communicated to the Income-tax Department in the form of return of income. Different ITR forms are prescribed for different classes of taxpayers.

ITR-1 (SAHAJ)

This income tax return for salaried individuals. Individuals having income from salary, pension and interest income can use this form.

Who is eligible to file the form ITR 1

This form is used by an individual whose total income includes:-

  • Income from salary/pension; or
  • Income from one house property (excluding cases where loss is brought forward from previous years); or
  • Income from Other Sources (excluding Winning from Lottery and Income from Race Horses)

Who is not eligible to file the form ITR 1

This form should not be used by an individual whose total income includes:-

  • Income from more than one house property; or
  • Income from Winning from Lottery or income from Race houses; or
  • Income under the head ‘Capital Gains‘. Example, short-term capital gains or long-term capital gains from sale of house , plot, share etc; or
  • Agricultural income in excess of ₹5,000.00; or
  • Income from Business or Profession; or
  • Loss under the head ‘Income from other sources’; or
  • Person claiming relief under section 90 and/or 91; or
  • Any resident having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India or
  • Any resident having income from outside India

Click here to read more about ITR 1 Sahaj

ITR 2

This income tax form for individuals and HUFs who do not have income from business and profession. The due date of filing the ITR 2 form with Income Tax Department is 31 July every year. The financial year ends on 31 march every year so assessees have a period of four months to prepare their income tax returns.

Who is eligible to file the Form ITR 2?

This form is to be used by an individual or an HUF whose total income for the assessment year includes:

  • Income from salary or pension.
  • Income from house property.
  • Income from capital gains (short term and long term).
  • Income from other sources (including winning from lottery, bets on race houses and other legal means of gambling).
  • Foreign Assets.

Who is not eligible to file the Form ITR 2?

  • Any individual or HUF with income wholly or partially earned from business or profession.
  • Individuals who are eligible to fill out the Form ITR 1.
  • Individuals who are partners in a Partnership Firm.

Click here to read more about ITR2

ITR 2A

This income tax form for individuals and HUFs who have salary income and own more than one house property and do not have capital gains.

Who is eligible to file using the ITR 2A form?

This return form is to be used by an individual and HUF whose total income for an assessment year includes:-

  • Income from Salary or Pension.
  • Income from House Property.
  • Income from Other Sources (including winning from lottery and Income from race horses)

Further, in a case where the income of another person like spouse, minor child etc. is to club with the income of the assessee, this return form can be used where such income falls in any of the categories.

Who is not eligible to file using the ITR 2A form?

This return form should not be used by an individual and HUF whose total income for an assessment year includes:-

  • Income from Capital Gains.
  • Income from Business or Profession.
  • Any claim of relief/deduction under section 90, 90A or 91.
  • Any resident having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India.
  • Any resident having income from any source outside India.

Click here to read more about ITR 2A

ITR 3

This income return form is used by an individual or an HUF who is a partner in a firm and not carrying out business or profession under any proprietorship.

Who is eligible to file Form ITR 3 

This income tax form is to be used by an individual or  an HUF when:

  • A partner in a firm and
  • Where income chargeable to income-tax under the head “Profit or gains of business or profession” does not include any income except the income by way of any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by him from such firm.

In case, a partner in the firm does not have any income from the firm by way of interest, salary, etc. and has only way to share in the profit of the firm, he shall use this form only and not Form ITR-2.

Who is not eligible to file Form ITR 3 

This return form should not be used by an individual whose total income includes Income from Business or Profession under any proprietorship.

Click here to read more about ITR3

ITR 4

This income tax form for individuals and HUFs who have income from proprietary business or are carrying on a profession. A shopkeeper, a doctor, a tutor, a retailer, a wholesaler, an insurance agent, interior decorator or fashion designer, everyone can file their tax return in ITR 4.

If the requirements of an audit are applicable, the due date of filing of return is 30th September. Otherwise, usually, the due date of filing of return for non-audit cases is 31st July.

ITR 4S is a special case ITR, applicable for business where income is calculated on ‘presumptive method’. In the presumptive method, lets you report your income as 8% of your gross receipts (as per Section 44AD of the Income Tax Act) or as ₹7,500 per month for each if you are in the business of plying, leasing or hiring trucks (as per Section 44AE). You do not have to maintain accounting records of your business and advance tax rules do not apply to you. You need to meet the following conditions to file ITR 4S.

  • Your gross receipts or turnover must be less than ₹1 crore.
  • You must be resident of India.
  • You may be an individual, an HUF or a partnership firm but not a company.

Who is eligible to file using the ITR 4 Form

Assessees who are eligible to file using the ITR 4 form are:

  • Carrying on business or profession.
  • Eligible for Presumptive Business Income but where Turnover/Gross Receipts exceeds ₹1 crore.
  • The return may include Salary/Pension.
  • Earn Income from House Property.
  • Earn Income from Other Sources.

Click here read more about ITR 4

ITR 4S

This income tax form for those taxpayers who have opted for the presumptive income scheme as per Section 44AD and Section 44AE of the Income Tax Act. However, if the turnover of the business mentioned above exceeds Rs 1crores, the taxpayer will have to file ITR-4.

ITR 5

This income tax return is meant for firms, LLPs, AOPs (Association of persons) and BOIs (Body of Individuals)

Who is eligible to file the ITR-5 Form?

This form can be used a person being a firm, LLPs, AOP, BOI, artificial juridical person referred to in section 2(31)(vii), cooperative society and local authority.

However, a person who is required to file the return of income under section 139(4A) or 139(4B) or 139(4C) or 139(4D) shall not use this form.

ITR 6

Companies other than companies claiming exemption under section 11 must furnish their income tax must in ITR-6 Form.

What are the companies claiming exemptions under section 11?

Companies claiming exemption under section 11 are those whose income from property is held for charitable or religious purposes.

ITR 7

ITR-7 is filed when persons including companies fall under section 139(4A) or section 139 (4B) or section 139 (4C) or section 139 4(D).

Who is eligible to file the ITR-7 Form?

  • Return under section 139(4A) is required to be filed by every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes.
  • Return under section 139(4B) is required to be filed by a political party if the total income without giving effect to the provisions of section 139A exceeds the maximum amount which is not chargeable to income-tax.
  • Return under section 139(4C) is required to be filed by every
    • scientific research association ;
    • news agency ;
    • association or institution referred to in section 10(23A);
    • institution referred to in section 10(23B);
    • fund or institution or university or other educational institution or any hospital or other medical institution.
  • Return under section 139(4D) is required to be filed by every university, college or other institution, which is not required to furnish return of income or loss under any other provision of this section.

Residential Status Under Income Tax Act

The residential status of an assessee for income tax purpose is determined on the  basis of days stayed in India. Income Tax Act does not prescribe continuous staying in India. The incidence of tax on any assessee depends on  his residential status under Section 6 of  Income Tax Act, 1961.

Residential Status of Individuals

The residential status of an assessee can be divided into following categories.

residential status

Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies any one of the following conditions:

  • He is in India for a period of 182 days or more in the previous year                               

                                                                   OR

  • He is in India for 60 days or more during the previous year and has been in India for 365 days or more during the 4 years immediately preceding the previous year.

If the individual satisfies any one of the conditions mentioned above, he is a resident. If both the above conditions are not satisfied, the individual is a non-resident.

Exceptions to Residential Status

The 2nd condition stated above shall not be applicable to the following categories of individuals and only the 1st condition of 182 days or more would be applicable.

  • Indian citizens, who leave India in any previous year as a member of the crew of an India ship or for purposes of employment outside India.
  • An Indian citizen or person of Indian origin engaged outside India in an employment or a business or profession or in any other vocation, who comes to visit India in any previous year.

Classification of Ordinary Resident and Not Ordinary Resident

As per section 6(6) an individual shall not be ordinary resident in India if he satisfies any one of the following conditions:-

  • He has been a non-resident in 9 out of 10 previous years preceding the relevant previous year,

                                                  OR

  • He has been in India for a period 729 days or less in 7 previous years preceding the relevant previous year.

If any one of the above conditions is satisfied, the person is said to be resident but not ordinary resident in India. However, if none of the above conditions is satisfied, the person is said to be Resident and Ordinary Resident in India.

Recommended Read

Computation of Taxable Income from Salary

How to Calculate Income from House Property

Tax on Income from Other Sources

Computation of Total Income and Tax Liability of Individuals

Residential Status of HUF

An HUF would be resident in India if the control and management of its affairs are situated wholly or partially in India. If the control and management of the affairs are situated wholly outside India it would become a non-resident.

Residential Status of Firms and Association of persons

A firm and an AOP would be resident in India if the control and management of its affairs are situated wholly or partly in India. Where the control and management of the affairs are situated wholly outside India, the firm would become a non-resident.

Residential Status of Companies

A company would be resident in India in any previous year, if-

  • it is an Indian company;

                                        OR

  • its place of effective management, in that year, is in India.

Explanation to section 6(3) defines ‘place of effective management’ to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made.

Determination of residential status of a company

Residential Status

Residential Status of Local Authorities and Artificial juridical Persons

Local authorities and artificial juridical persons would be resident in India if the control and management of its affairs are situated wholly or partly in India. Where the control and management of the affairs are situated wholly outside India, they would become non-residents.

Tax on Income from Other Sources

Income from Other Sources

Income from other sources is the residual head of income. Hence, this head includes income which cannot be accounted for under any other head of income viz. Income from Salary, Income from House Property, Profits and Gains from Business or Profession and Income from Capital Gains.

Dividends

Income by way of dividend is shown under this head. Deemed dividend as under section 2(22)(e) is fully taxable as is dividends from co-operative societies and foreign companies. Dividends from the domestic company are exempt from tax under section 10(34).

Winnings

Winnings over Rs. 10,000 from lotteries, crossword puzzles, races including horse races, card game and other game of any sort, gambling or betting of any form whatsoever are included under ‘Income from Other Sources’.

Interest Received

Income by way of interest received on compensation or on enhanced compensation is taxable under this head. However, 50% of this income can be claimed as the deduction.

Recommended Read : Form 15G and 15H to Save TDS on Interest Income

Gifts

Taxable gifts are taxed under this head by individuals and HUFs. This includes monetary or non-monetary items received without any consideration or without adequate consideration. Non-monetary gifts include all immovable property and certain movable property.

Gifts are taxed only if the total amount received during the previous year is more than Rs. 50,000 and applies only to those gifts are individuals or HUFs received after 01-10-2009. This doesn’t apply if the assessee receives money

  • from relatives or a local authority or a trust, fund, educational/medical institution, body or any such institution outlined under section 10(23C) and section 12AA.
  • as a wedding gift
  • by way of being named in a Will or as inheritance
  • from a dying donor.

 

Recommended Read:

Income tax slab and tax rate

Income Tax Forms

Income not taxed under the head ‘Profits and Gains of Business or Profession’

Following incomes are charged to tax under this head, if not taxed under the head ‘ Profits and Gains from Business or Profession’.

  • Any contribution to a fund for the welfare of employees received by the employer.
  • Income by way of interest on securities.
  • Income from letting out or hiring of plant, machinery or furniture
  • Income from letting out of plant, machinery or furniture along with building; both the lettings are inseparable.
  • Any sum received under a Keyman Insurance policy including bonus.

How to Calculate Income from House Property

Income from house property means the income earned from a property by the assessee. House property consists of any building or land attached to the building. House property includes any building (house, office building, warehouse, factory, hall, shop, auditorium, etc.( and any land attached to building (compound, garage, garden, car parking, playground, etc.).

Rental income of a person other than the owner cannot charge to tax under the head ‘Income from House Property’. Hence, rental income received by a tenant from subletting cannot be charged to tax the head ‘Income from House Property. Such income is taxable under the head ‘Income from Other Sources’ or ‘profits and gains from Business or Profession, as the case may be.

Tax Chargeability (Section 22)

The annual value of property consisting of any building or lands attached to it, of which the assessee is the owner, is chargeable to tax under the head ‘Income from House Property’. 

Deductions from Income from House Property (Section 24)

Income chargeable under this head shall be computed after making the following deductions

Standard Deductions 

From the net annual value calculated, the assessee shall be allowed a standard deduction of a sum equal to 30% of the net annual value.

Interest on Borrowed Capital

Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital is allowed as a deduction.

Any amount paid for brokerage or commission for the arrangement of the loan will not be allowed as deduction.

Computation of Taxable Income from Salary

Computation of Total Income and Tax Liability

Income Tax Slab and Rates for FY 2016-17 /AY 2017-18

Annual Value

The annual value of a property is the sum of which the property might reasonably expect to let out from year to year. In determining the annual value there are four factors which are normally taken into consideration. These are:

  1. Actual rent received or receivable,
  2.   Municipal value,
  3. Fair rent of the property,
  4. Standard rent

Computation of Annual Value of a Property (Section 23(1))

This involves following steps:

Step I: Determine the gross annual value.

Step II: From the gross annual value compared in Step I, deduct Municipal tax paid by the owner during the previous year.

The balance is the net annual value which, as per the Income-tax Act is the annual value.

Illustration

Mr. John has let out one house property @Rs. 12,000 p.m., Municipal Valuation Rs. 12,500 p.m., Fair Rent Rs. 13,000 p.m., Standard rent Rs. 14,000 p.m., Municipal Tax paid Rs.6000.

Solution

Computation of Income under the head House Property

ParticularsRs.
Gross Annual Value 1,56,000.00
Working NoteRs.
i) Fair Value (13,000*12) 1,56,000.00
ii) Municipal Value (12,500*12) 1,50,000.00
iii) Higher of i) or ii) 1,56,000.00
iv) Standard Rent ( 14,000*12) 1,68,000.00
v) Expected Rent (lower of c or d) 1,56,000.00
vi) Rent recieved/reveivable (12,000*12) 1,44,000.00
Gross Annual Value shall be higher v) or vi) 1,56,000.00
Less: Municipal Tax6,000.00
Net Annual Value1,50.000.00

The annual value has to be determined for different categories of properties. These categories are:

Category A. House Property – Let out throughout the previous year.

Category B. House Property – Let out and was vacant during the whole or part of the previous year.

Category C. House Property – Part of the year let out and part of the occupied for own residence

Category A. House Property – Let out throughout the previous year

Step 1 : Determining the gross annual value.

Step 2 : Deduct taxes levied by any local authority in respect of the property, i.e., Municipal Taxes.

Category B. House Property – Let out and was vacant during the whole or part of the previous year.

According to Section 23(1), the annual value of such property shall be deemed to be:-

  1. the sum for which the property might reasonably be expected to let out from year to year, i.e., the expected rent; or
  2. where the property or any part of the property is let out and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable, i.e., the actual rent; or
  3. where the property or any part of the property is let out and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable, i.e., the actual rent, if any.

Category C. House Property – Part of the year let out and part of the occupied for own residence

Where a house property is let out for part of the year and rest of the year occupied for own residence, its annual value shall be determined as per the provision of section 23(1) relating to let out property. In this case,the period of occupation of property for own residence shall be irrelevant and the annual value of such house property shall be as if it is let out for part of the year. Hence, the expected rent as per section 23(1) (a) shall be taken for full year but the actual rent received or receivable shall be taken only for the period it is let out and the gross annual value shall be higher of these two.

Computation of Total Income and Tax Liability of Individuals

The total income of an individual is arrived at after making deductions under VI-A from the Gross Total Income.

Income to be considered while computing Total Income of Individuals

Capacity in which income is earned by an individualTreatment of income earned in each capacity
In his personal capacity

(under the 5 heads of income)

Income from salaries, Income from house property, Profits and gains of business or profession, Capital gains and income from other sources.
As a partner of a firmi) Salary, bonus etc, received by a partner is taxable as his business income.

ii) Interest on capital and loss to the firm is taxable as business income of the partner.

The income mentioned (i) and (ii) above are taxable to the extent they are allowed as the deduction to the firm.

iii) The share of profit in the firm is exempt in the hands of the partner.

 As a member of HUF

i) Share of income of HUF is exempt in the hands of the member.

ii) Income from an impartible estate of HUF is taxable in the hands of the holder of the estate who is the eldest member of the HUF.

iii) Income from self-acquired property converted into joint family property.

Income of other persons included in the income of the individual.

i) Transferee’s income, where there is a transfer of income without transfer of assets.

ii) Income arising to transferee from a recovable transfer of an asset.

In cases (i) and (ii), income is includible in the hands of the transferor.

iii) Income of spouse as mentioned in section 64(1)

iv) Income from assets transferred to son’s wife or to any person for the benefit of son’s wife.

v) Income of minor child as mentioned in section 64(1A).

Computation of Total Income and Tax Liability

Income -tax is levied on an assessee’s total income. Such total income has to be computed as per the provisions contained in the Income Tax Act, 1961. The procedure for computation of total income for the purpose of levy of income-tax is detailed hereunder-

Step 1- Determination of residential status

The residential status of a person has to be determined to ascertain which income is to be included in computing the total income. In the case of an individual, the duration for which he is present in India determines his residential status. Based on the time spent by him, he may be (i) resident and ordinarily resident, (ii) resident but not ordinarily resident, or (iii) non-resident. The residential status of an individual determines the taxability of income earned by him. For example, income earned outside India will not be taxable in the hands of a non-resident but will be taxable in case of a resident and ordinarily resident.

Step 2 – Classification of income under different heads

The Act prescribes five heads of income. These heads of income exhaust all possible types of income that can accrue to or be received by an individual. An individual has to classify the income earned by him under the relevant head of income.

Step 3 – Exclusion of income not chargeable to tax

There is certain income which is wholly exempt from income-tax e.g. agricultural income. This income has to be excluded and will not form part of Gross Total Income. Also, some incomes are partially exempt from income-tax e.g. House Rent Allowance, Education Allowance. These incomes are excluded only to the extent of the limit specified in the Act. The balance income over and above the prescribed limits would enter computation of total income and have to be classified under the relevant head of income.

Step 4 – Computation of income under each head

Income is to be computed in accordance with the provisions governing a particular head of income. Under each head of income, there is a charging section which defines the scope of income chargeable under that head. There are deductions and allowances prescribed under each head of income. These deductions and allowances have to be considered before arriving at the net income chargeable under each head.

Step 5 – Clubbing of income of Spouse, minor child etc.

In the case of individuals, income-tax is levied on a slab system on the total income. The tax system is progressive i.e. as the income increases, the applicable rate of tax increases. Some taxpayers in the higher income bracket have a tendency to divert some portion of their income to their spouse, minor child etc. to minimise their tax burden. In order to prevent such tax avoidance, clubbing provisions have been incorporated in the Income-tax Act, 1961, under which income arising to certain persons (like spouse, minor child etc) have to be included in the income of the person who has diverted his income to such persons for the purpose of computing tax liability. The effect has to be given to these clubbing provisions.

Step 6 – Set-off or carry forward and set-off of losses

An individual may have different sources of income under the same head of income. He might have profit from one source and loss from the other. For example, an individual may have profit from his let out house property and loss from his self-occupied property. This loss can be set-off against the profits of the let-out property to arrive at the net income chargeable under the head “Income from house property”.

Similarly, an assessee can have loss under one head of income, say, income from house property and profits under another head of income, say, profit and gains of business or profession. There are provisions in the Income-tax Act, 1961 for allowing inter-head adjustment in certain cases. Further, losses which cannot be set-off in the current year due to the inadequacy of eligible profits can be carried forward for set-off in the subsequent years as per the provisions contained in the Income-tax Act, 1961.

Step 7 – Computation of Gross Total Income

The final figures of income or loss under each head of income, after allowing the deductions, allowances and other adjustments, are then aggregated, after giving effect to the provisions for clubbing of income and set-off and carry forward of losses, to arrive at the gross total income.

Step 8 – Deductions from Gross Total Income

There are deductions prescribed from gross total income – Deductions in respect of expenditure, Deductions in respect of income and other deductions. Income tax deductions from 80C to 80U

Step 9 – Total Income

The total income of an individual is arrived at, after claiming the above deductions from the gross total income.

Step 10 – Application of the rates of tax on the income

For individuals, there is a slab and basic exemption limit. At present, the basic exempt limit is ₹2,50,000. This means that no tax is payable by individuals with total income of up to ₹2,50,000. Income tax slab and rates for FY 2015-16/AY 2016-17 and Income tax slab and rates for FY 2016-17/AY 2017-18.

Step 11 – Rebate under Section 87A

In order to provide tax relief to the individual taxpayers who are in the 10% tax slab, section 87A provides a rebate from the tax payable by an assessee, being an individual resident in India, whose total income does not exceed ₹ 5,00,000. The rebate shall be equal to the amount of income-tax payable on the total income for any assessment year or an amount of ₹2000 (AY 2016-17/FY 2015-16)/ ₹5000 (AY 2017-18/FY 2016-17), whichever is less.

Step 12 – Education cess and Secondary and higher education cess

The income-tax is to be increased by education cess@2% and secondary and higher education cess@1% on income-tax plus surcharge minus rebate under section 87A, wherever applicable. This is payable by all individuals who are liable to pay income-tax irrespective of their level of total income.

Step 13 – Credit for advance tax and TDS

From the total tax due, deduct the TDS and advance tax paid for the relevant assessment year. The balance is the net tax payable by an individual which must be paid as the self-assessment tax before submitting the return of income. How to calculate and pay Advance Tax

 

ITR 4 Income Tax Form

ITR 4 is an Income Tax Return form for individuals and HUFs who have income from proprietary business or are carrying on a profession. A shopkeeper, a doctor, a tutor, a retailer, a wholesaler, an insurance agent, interior decorator or fashion designer, everyone can file their tax return in ITR 4.

If the requirements of an audit are applicable, the due date of filing of return is 30th September. Otherwise, usually, the due date of filing of return for non-audit cases is 31st July.

ITR 4S is a special case ITR, applicable for business where income is calculated on ‘presumptive method’. In the presumptive method, lets you report your income as 8% of your gross receipts (as per Section 44AD of the Income Tax Act) or as ₹7,500 per month for each if you are in the business of plying, leasing  or hiring trucks (as per Section 44AE). You do not have to maintain accounting records of your business and advance tax rules do not apply to you. You need to meet the following conditions to file ITR 4S.

  • Your gross receipts or turnover must be less than ₹1 crore.
  • You must be resident of India.
  • You may be an individual, an HUF or a partnership firm but not a company.

Who is eligible to file using the ITR 4 Form

Assessees who are eligible to file using the ITR 4 form are:

  • Carrying on business or profession.
  • Eligible for Presumptive Business Income but where Turnover/Gross Receipts exceeds ₹1 crore.
  • The return may include Salary/Pension.
  • Earn Income from House Property.
  • Earn Income from Other Sources.

To download ITR 4 click here.

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General Guidelines

Here are a few general guidelines to keep in mind while filing your ITR 4 form

  • If any schedule is not applicable to you, strike it out and write –NA– across it.
  • If any item is not applicable to you, write NA against it.
  • Indicate nil figures by “Nil”.
  • Put a “-” sign before negative figures.
  • All figures are to be rounded off to the nearest one rupee except figure for total income/loss and tax payable. Those are to be rounded off to the nearest multiple of ten.
  • If you are an individual, under the Employer Category you should tick Government if you are a Central/State Government employee. You should tick PSU if you work in a public sector company of the Central/State Government.

How to file ITR 4 Form?

You can submit your ITR 4 either online or offline. It is mandatory to file Income Tax Returns electronically for the following assesses:

  • Those who earn more than ₹5 lakhs per year.
  • Those having any assets outside India (including financial interest in any entity) or signing authority in any account outside India.
  • Those claiming relief under Section 90/90A/91 to whom Schedule FSI and Schedule TR apply.

Offline:

  • By furnishing a return in a physical paper form.
  • By furnishing a bar-coded return.

The Income Tax Department will issue you an acknowledgement at the time of submission of your physical paper return.

Online/Electronically:

  • By furnishing the return electronically under digital signature.
  • By transmitting the data electronically and then submitting the verification of the return in Return Form ITR-V

If you submit your ITR 4 Form electronically under digital signature, the acknowledgement will be sent to your registered email id. You can also choose to download it manually from the income tax website. You are then required to sign it and send it to the Income Tax Department’s CPC office in Bangalore within 120 days of e-filing.

Computation of Taxable Income from Salary

Every payment made by an employer to his employee for service rendered would be chargeable to tax as income from salaries. The term ‘salary’ for the purpose of Income-tax Act, 1961 will include both monetary payments (example: basic salary, bonus, commission, allowances, etc) as well as non-monetary facilities (example: housing accommodation, medical facility, interest-free loans etc).

Definition of Salary

The term ‘salary’ has been defined differently for the different purposes in the Act. The definition as to what constitutes salary very wide.

‘Salary’ under section 17(1), includes the following:

  • Wages,
  • any annuity or pension,
  • any gratuity,
  • any fees, commission, perquisite or profits in lieu of or in addition to any salary or wages,
  • any advance of salary,
  • any payment received in respect of any period of leave not availed by him i.e. leave salary or leave encashment.
  • the portion of the annual accretion in any previous year to the balance at the credit of an employee participating in a recognised provident fund to the extent it is taxable and
  • transferred balance in the recognised provident fund to the extent it is taxable,
  • the contribution made by the Central Government or any other employer in the previous year to the account of an employee under a pension scheme referred to in section 80CCD.

Basis of Charge

  • Section 15 deals with the basis of charge. Salary is chargeable to tax either on ‘due’ basis or on ‘receipt’ basis, whichever is earlier.
  • However, where any salary, paid in advance, is assessed in the year of payment, it cannot be subsequently brought to tax in the year in which it becomes due.
  • If the salary paid in arrears has already been assessed on the due basis, the same cannot be taxed again when it is paid.

Place of Accrual Salary

Under section 9(1)(ii), salary earned in India is deemed to accrue or arise in India even if it is paid outside India or it is paid or payable after the contract of employment in India comes to an end.

Salary

Allowances

Allowances are fixed quantity of money or other substance given regularly in addition to salary for the purpose of meeting some particular requirement connected with the service rendered by the employee. Under the Income-Tax Act, 1961, allowance is taxable on due or receipt basis, whichever is earlier.

Allowances
Fully TaxableParty TaxableFully Exempt
1. Entertainment Allowance

2. Dearness Allowance

3. Overtime Allowance

4. Fixed Medical Allowance

5. City Compensatory Allowance

6. Interim Allowance

7. Servant Allowance

8. Project Allowance

9. Tiffin/Lunch/Dinner Allowance

10. Any other cash allowance

11. Warden Allowance

12. Non- Practising Allownace

 1. House Rent Allowance

Least of the following is exempt.

a. HRA Received

b.Excess of house rent paid  minus 10% of salary.

c. 50% of salary if staying in a  metro city and 40% in a non- metro city.

 

2. Special Allowance

1. Allowance granted to       Government employees outside  India.

2. Sumptuary allowance granted  to High Court or Supreme Court  Judges.

3. Allowance paid by the United  Nations Organization.

4. Compensatory Allowance  received by a Judge.

Perquisites

‘Perquisite may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages.

Perquisite is defined in section 17 (2) of the Income Tax Act as including:

  • The value of rent-free/concessional rent accommodation provided by the employer.
  • Any sum paid by the employer in respect of an obligation which was payable by the assessee.
  • The value of any benefit/amenity granted free or at a concessional rate to specified employees etc.
  • The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, free of cost or at concessional rate to the assessee.
  • The amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees.
  • The value of any other fringe benefit or amenity as may be prescribed.

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Profits in Lieu of Salary [Section 17(3)]

It includes the following:

  • The amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment.
  • The amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the modification of the terms and conditions of employment.
  • Any payment due to or received by an assessee from his employer or former employer from a provident or other funds to the extent to which it does not consist of employee’s contributions or interest on such contributions.
  • Any sum received by an assessee under a Keyman Insurance policy including the sum allocated by way of bonus on such policy.
  • Any amount, whether in the lump sum or otherwise, due to the assessee or received by him, from any person before joining employment with that person or after cessation of his employment with that person.
  •  Any other sum received by the employee from the employer.

Advance Salary

Advance salary is taxable when it is received by the employee irrespective of the fact whether it is due or not. It may so happen that when advance salary is included and changed in a particular previous year, the rate of tax at which the employee is assessed may be higher than the normal rate of tax to which he would have been assessed.

Loan or Advance against Salary

The loan is different from salary. When an employee takes a loan from his employer, which is repayable in certain specified instalments, the loan amount cannot be brought to tax as the salary of the employee.

Similarly, advance against salary is different from advance salary. It is an advance taken by the employee from his employer. This advance is generally adjusted with his salary over a specified time period. It cannot be taxed as salary.

Arrears of Salary

Normally, salary arrears must be charged on the basis. However, there are circumstances when it may not be possible to bring the same to charge on due basis. For example, if the Pay Commission is appointed by the Central Government and it recommends revision of salaries of employees, the arrears received in that connection will be charged on receipt basis.

Annuity

An annuity is a sum payable in respect of a particular year. Annuity received from a present employer is to be taxed as salary. It does not matter whether it is paid in pursuance of a contractual obligation or voluntarily. Annuity received from a past employer is taxable as profit in lieu of salary. Annuity received from a person other than an employer is taxable as ‘income from other sources’.

Gratuity

Gratuity is a voluntary payment made by an employer in appreciation of services rendered by the employee and is exempt to a certain limit.

Provident Fund

Provident fund is a scheme intended to give substantial benefits to an employee at the time of his retirement. Under this scheme, a specified sum is deducted from the salary of the employee as his contribution towards the fund. The employer also contributes the same amount to the fund. The contribution of the employee and the employer are invested in approved securities. Interest earned thereon is also credited to the account of the employee.

ParticularsStatutory PFRecognized PFUnrecognized PFPublic PF
Employer’s ContributionFully exemptAmount in excess of 12% of salary is taxable.Not taxable yearlyN.A
Employee’s ContributionEligible for deduction u/s 80CEligible for deduction u/s 80CNot eligible for deductionEligible for deduction u/s 80C
Interest creditedFully exemptAmount in excess of 9.5% p.a is taxable.Not taxable yearlyFully exempt
Amount received on retirement, etcFully exempt u/s 10(11).Fully exempt (who has service for 5 years or more.Taxable except employee’s contributionFully exempt u/s 10(11).

Note:

Salary for this purpose means basic salary and dearness allowance- if provided in the terms of employment for retirement benefits and commission as a percentage of turnover.

Deductions from Salary

The income chargeable under the head ‘Salaries’ is computed after making the following deductions

Entertainment Allowance [Section 16(ii)] – This deduction is available only for the government employees. The deduction is either the 1/5 of the basic salary or ₹5,000.00 or entertainment allowance received, whichever is less. The non-government employees cannot avail this deduction.

Professional Tax on Employment [Section 16 (iii)] – Professional tax on employment levied by a State under Article 276 of the Constitution is allowed as deduction only when it is actually paid by the employee during the financial year. If professional tax is reimbursed or directly paid by the employer on behalf of the employee, the amount so paid first included as salary income and then allowed as a deduction under section 16.

Unexplained Cash Credits – Section 68

Any sum found credited in the books of the assessee, for which he offers no explanation about nature and source thereof or the tax authorities are not satisfied by the explanation offered by the taxpayer, are termed as cash credits. In this article, we will discuss various provisions relating to tax treatment of cash credits.

Basic Provisions of Cash Credits

The provisions relating to tax treatment of cash credits are given in section 68 of the Income Tax Act 1961. According to section 68, where any sum is found credited in the books of the assessee, and the assessee offers no explanation about nature and source of the same or the explanation offered by him is not satisfactory in the opinion of Assessing Officer, the sum so credited may be charged to income-tax as the income of the assessee for that year.

In case of assessee being a closely held company (i.e., not being a company in which the public are substantially interested), if the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such company shall be deemed to be not satisfactory, unless:

  • the person, being a resident in whose name such credit is recorded in the books of such company, also offers an explanation about the nature and source of such sum so credited; and
  • such explanation in the opinion of the Assessing Officer has been found to be satisfactory.

The above-discussed provisions of share application money, share capital, etc., shall not apply if the person, in whose name such sum is recorded, is a venture capital fund or a venture capital company as referred to in section 10 (23FB).

Income Tax Slabs and Rates for AY 2017-18/FY 2016-17

Conditions to be satisfied for applicability of Section 68

Following conditions can be stated to attract the applicability of section 68.

  • The assessee has maintained ‘books’.
  • There has to be a credit of amounts in the books maintained by the taxpayer of a sum during the year.
  • The taxpayer offers no explanation about nature and source of such credit found in the books or the explanation offered by the taxpayer in the opinion of the Assessing Officer is not satisfactory.
  • If the taxpayer is a closely held company and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such company shall be deemed to be not satisfactory, unless:
    1. the person, being a resident in whose name such credit is recorded in the books of such company, also offers an explanation about nature and source of such sum so credited; and
    2.  such explanation in the opinion of the Assessing Officer has been found to be satisfactory.

If all the above conditions exist, sum so credited may be charged to tax as income of the taxpayer for that year.

How to Calculate and Pay Advance Tax

As per section 208 of Income Tax Act, 1961, every person whose estimated tax liability for a financial year is ₹10,000.00 or more, shall pay his tax in advance, in the form of ‘Advance Tax’.

Person not Liable to Pay Advance Tax

As discussed above, every person whose estimated tax liability for a financial year is ₹10,000.00 or more is liable to pay advance tax. However, following persons are not liable to pay advance tax even if their tax liability is ₹10,000.00 or more:

  • A taxpayer opting for the presumptive taxation scheme of section 44AD will not be liable to pay advance tax in respect of business for which the presumptive taxation scheme of section 44AD is adopted.
  • A resident senior citizen not having any income from business or profession is not liable to pay advance tax.

Due Dates for Payment of Advance Tax

Advance tax is to be paid in different instalments. The due dates for payment of different instalments of advance tax are as follows.

StatusBy 15th JuneBy 15th Sept.By 15th Dec.By 15th March
Noncorporate taxpayersNilUp to 30 of advance taxUp to 60% of advance taxup to 100% of advance tax
Corporate taxpayersUp to 15% advance taxUp to 45% of advance taxUp to 75% of advance taxUp to 100% of advance tax

Note:

  • Any tax paid till 31st March will be treated as advance tax.
  • If the last day for payment of any instalment of advance tax is a day on which the banks are closed, then the taxpayer should pay the advance tax on the immediately following working day.

Mode of Payment of Advance Tax

As per Rule 125 of the Income-tax Rules, 1962 a corporate taxpayer (company) shall pay taxes through electronic payment mode using the internet banking facility of the authorised banks.

Taxpayers other than a company, who are required to get their accounts audited, shall pay taxes through the electronic payment mode using the internet banking facility of the authorised banks.

Any other taxpayer can pay tax either by electronic mode or by physical mode i.e. by depositing the challan at the receiving bank.

Payment of Advance Tax

Advance tax can be paid by the taxpayer either on his own account or in pursuance of an order of the Assessing Officer.

The taxpayer who is liable to pay advance tax is required to estimate his current income and pay advance tax on his own account. In such a case, he is not required to submit any estimate or statement of income to the tax authorities.

After making payment of a first or second instalment of the tax (as the case may be). if there is a change in the tax liability, then the taxpayer can revise the quantum of advance tax in the remaining instalment(s) and pay the tax as per revised estimates.

Tax can be computed on the current income (estimated by the taxpayer) at the rates in force during the financial year. From the tax so computed, tax deducted or collected at source will be deducted and the balance tax payable will be used to compute the tax liability. Also, relief of tax allowed under section or section 90A or any deduction under section 91 or any tax credit allowed to be set off as per section 115JAA or section 115JD shall also be deducted while computing the tax liability.

Income Tax Deductions Section 80C to 80U

Section 80C to 80U of the Income Tax Act, 1961 provides provisions for tax deductions from your gross total income. You can claim deductions for amounts spent in tuition fees, medical expenses and donations. Also, you can invest in various schemes such as ELSS, national savings schemes, PPF, bank deposits etc. to get tax deductions.

Income Tax Deductions Under Section 80C to 80U

SectionsNature of DeductionsLimit

Section 80C

Individual/HUF

Life insurance premium payment.

Investment in PPF.

Employee’s contributions to EPF, Recognized PF and approved Superannuation Fund.

National Saving Certificates (VIII Issue).

Sum paid to purchase deferred annuity.

Children’s Tuition Fee.

Principal repayment of home loan.

Investment in Sukanya Samridhi Account.

Equity Linked Savings Scheme (ELSS).

Unit Linked Insurance Plan (ULIP).

Five Year Deposit Scheme.

Subscription to notified securities/notified deposit scheme.

Contribution to notified deposit scheme or notified pension fund by National Housing Bank.

Contribution to notified annuity plan of LIC.

Contribution to notified pension fund set by a mutual fund or UTI.

Subscription to notified bonds issued by the NABARD.

Deposits in Senior Citizen Savings Scheme.

Subscription to equity shares or debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions.

 ₹150,000.00

 Section 80CCC

Individual

Contribution to certain pension funds of LIC or any other insurer for the pension from a fund referred to in section 10(23AAB).
 Section 80CCD

Individual

 Contribution to NPS up to 10% of salary.

Section 80CCF

Individual/HUF

 Subscription to notified long-term infrastructure bonds. ₹20,000.00
 Section 80CCG

New retail investors

 Rajiv Gandhi Equity Scheme for investments in Equities. Lower of – 50 of amount invested or ₹25,000.00

 Section 80D

Individual/HUF

Medical Insurance – Self, spouse, children.

Medical Insurance – Parents more than 60 years old.

 ₹25,000.00

₹30,000.00

 Section 80DD

Individual/HUF

Medical treatment for handicapped dependent or payment to specified scheme for maintenance of handicapped dependent.

Disability is 40% or more but less than 80 %.

Disability is 80% or more.

 

 

₹75,000.00

₹1,25,000.00

 Section 80DDB

Individual/HUF

Medical expense on self or dependent for diseases specified in Rule 11DD. Maximum deduction is ₹40,000 (60,000 for senior citizen and ₹80,000 for very senior citizen)

 Section 80E

Individual

Interest on education loan for higher studies. This loan may have been taken for the taxpayer, spouse or children or for a student for whom the taxpayer as a legal guardian.

Maximum period: 8 years.

 Section 80G

All assessees

Donations to certain approved funds, trusts, charitable institutions.100%/50% of amount paid

 Section 80GG

Individual

Deduction for house rent paid where HRA is not received.

Deduction available is the minimum of rent paid minus 10% of total income, ₹5000.00 per month or 25% of the total income.

₹60,000.00

Section 80GGA

 All assessees

Donation for scientific research and rural development by any assessee not having income chargeable under the head ‘Profits and gains of business or profession’.
Section 80GGB

Indian Companies

Contributions are given by companies to political parties.
Section 80GGC

All assessees

Contributions are given by any person to political parties.
 Section 80-IA

All assessees

Profits and gains from undertakings or enterprises engaged in infrastructure development, etc.
Section 80-IAB

All assessees

Profits and gains from an undertaking or enterprise engaged in the development of Special Economic Zone (SEZ).
 Section 80-IB

All assessees

Profits and gains from certain industrial undertakings other than infrastructure development undertakings.
Section 80-IC

All assessees

Profits and gains from an undertaking or enterprise in special category States.
Section 80-ID

All assessees

Profits and gains from business of hotels and convention centres in specified areas.
Section 80-IE

All assessees

Deductions in respect of certain undertakings in the North Eastern States.
Section  80JJA

All assessees

Dedeuctions in respect of profits and gains from business of collecting and processing of bio-degradable waste.
Section 80JJAA

All assessees

Deductions in respect of the employment of new workmen.
Section 80LA

All assessees

Certain income of Offshore Banking Units and International Financial Services Centre
Section 80P

Co- operative Societies

Certain specified income of a Co- operative Societies.
Section 80QQB

Individual

Royalty income of author of a certain specified category of books.₹3,00,000.00
Section 80RRB

Individual

Deduction in respect of royalty on patents.₹3,00,000.00
Section 80TTA

Individual/HUF

Interest on deposits in savings bank account.₹10,000.00
Section 80U

Individual

Self suffering from a disability.

An individual suffering from a physical disability (including blindness) or mental retardation.

An individual suffering from severe disability.

 

₹75,000.00

₹1,25,000.00

 

ITR 3 Income Tax Form

ITR 3 return form is used by an individual or an HUF who is a partner in a firm and not carrying out business or profession under any proprietorship.

Who is eligible to file Form ITR 3 

This income tax form is to be used by an individual or  an HUF when:

  • A partner in a firm and
  • Where income chargeable to income-tax under the head “Profit or gains of business or profession” does not include any income except the income by way of any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by  him from such firm.

In case, a partner in the firm does not have any income from the firm by way of interest, salary, etc. and has only way to share in the profit of the firm, he shall use this form only and not Form ITR-2.

Who is not eligible to file Form ITR 3 

This return form should not be used by an individual whose total income includes Income from Business or Profession under any proprietorship.

Click here to download ITR 3 form from Income Tax Department.

Annexure -less Return Form

No document (including TDS certificate) should be attached to this return form. All such documents enclosed with this return form will be detached and returned to the person filing the return.

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How to file ITR 3 Form?

This Return Form can be filed with the Income-tax Department in any of the following ways:

Offline:

  • By furnishing a return in a physical paper form.
  • By furnishing a bar-coded return.

Online/Electronically:

  • By furnishing the return electronically under digital signature.
  • By transmitting the data electronically and then submitting the verification of the return in Return Form ITR-V

When the ITR 3 filed online, the assessee should print out two copies of ITR-V form. One copy of ITR-V, duly signed by the assessee, has to be sent by ordinary post to post Bag No.1, Electronic City Office, Be0ngaluru – 560100 (Karnataka).

When are you required file electronically?

  • A resident assessee having any assets (including financial interest in any entity) located outside India or signing authority in any account located outside India, shall fill out schedule FA and furnish the return electronically.
  • From the assessment year 2013-14 onwards all assessee having total income more than ₹5 lakh are required to furnish the return electronically.
  • Assessee claiming relief under section 90, 90A or whom Schedule FSI and Schedule TR apply.