Income Tax Notes Part - 01 Basic Concepts
INCOME TAX NOTES PART-01
BASIC CONCEPTS
Computation of Total Income
Taxable income of any assessee is computed as per the format given below -
Computation of net taxable income/ total income of an assessee for the assessment year 20XX-20XX:
| Particulars | Amount (in Rs.) | |
| Income under the head “Salaries” | XX | |
| Income under the head “House Property” | XX | |
| Income under the head “Profits and gains of business or profession” | XX | |
| Income under the head “Capital Gains” | XX | |
| Income under the head “Income from other sources” | XX | |
| Gross total income (GTI) | XX | |
| Less: | Deductions under chapter VIA [Sec. 80] | XX |
| Net taxable income or Total income (NTI) | XXX |
Computation of tax
Tax to be paid by any assessee is computed as per the format given below –
Computation of tax liability of an assessee for the assessment year 20XX-20XX:
| Particulars | Amount (in Rs.) | |
| Income-tax on net taxable income | XX | |
| Less: | Rebate under section 87A | XX |
| XX | ||
| Add: | Surcharge (% of income-tax) | XX |
| Total (A) | XX | |
| Add: | Health & Education Cess @ 4% | td> XX|
| Total | XX | |
| Less: | Relief under Section 89 | XX |
| Tax Liability | XX | |
| Add: | Interest/Penalty etc. | XX |
| Less: | Pre-paid taxes [i.e., advance tax, self-assessment tax, TDS, TCS, MAT credit] | XX |
| Tax Payable | XXX |
Tax rates, rebate, surcharge and cess for the assessment year 2020-21
Tax Rates for “Individuals”
Situation 1: For a resident senior citizen (who is 60 years or more at any time during the relevant previous year 2019-20 but less than 80 years on the last day of the relevant previous year 20XX-20XX):
| Amount Net Taxable Income | Tax | |
| Upto Rs. 3,00,000 | Nil | |
| Rs. 3,00,000 - Rs.5,00,000 | 5% of income exceeding Rs. 3,00,000 | |
| Rs. 5,00,001 – Rs. 10,00,000 | Rs. 10,000 + 20% of income exceeding Rs. 5,00,000 | |
| Above Rs. 10,00,000 | Rs. 1,10,000 + 30% of income exceeding Rs. 10,00,000 | |
Situation 2: For a resident super senior citizen (who is 80 years or more at any time during the relevant previous year 2019-20):
| Amount Net Taxable Income | Tax |
| Upto Rs. 5,00,000 | td> Nil|
| Rs. 5,00,001 – Rs. 10,00,000 | 20% of income exceeding Rs. 5,00,000 |
| Above Rs. 10,00,000 | Rs. 1,00,000 + 30% of income exceeding Rs. 10,00,000 |
Situation 3: For any other resident individual (who is less than 60 years of age at any time during the relevant previous year 2019-20), any non-resident individual, every HUF/ AOP/ BOI/ artificial juridical person:
| Amount Net Taxable Income | Tax |
| Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 – Rs. 5,00,000 | 5% of income exceeding Rs. 2,50,000 |
| Above Rs. 10,00,000 | Rs. 1,12,500 + 30% of income exceeding Rs. 10,00,000 |
Tax Rates for “Firms”
A firm is taxable at a flat rate of 30%.
Tax Rates for “Companies”
| Company | Tax Rate |
| In the case of a domestic company: However, a domestic company (whose gross receipt / turnover during the PY 2017-18 does not exceed ` 400 crores) is taxable @25% | 30% |
| In the case of a foreign company: | 40% |
Rebate of tax in case of certain individuals [Sec. 87A]
This rebate is given to provide tax relief to individual taxpayers who are in lower income bracket.
Any resident individual whose net taxable income (i.e., GTI minus deductions under section 80C to 80U) is Rs. 5,00,000 or less is entitled to claim rebate under section 87A which is 100% of income tax payable on total income or Rs. 12,500, whichever is less. This rebate is available from income tax (before adding surcharge and cess).
Surcharge
The amount of Income Tax shall be increased by a surcharge as follows :-
| Person | Net Income Range (in Rs.) | Surcharge (as % of income tax) |
| Individual / HUF/ AOP/BOI/AJP | 0-50 Lakh 50 Lakhs – 1 Crore | NIL 10% |
| 1 Crore – 2 Crore 2 Crore – 5 Crore Above 5 Crore | 15% 25% 37% | |
| Firm / Co-Operative Society / local Authority | 0 - 1 Crore Above 1 Crore | NIL 12 % |
Health and Education Cess (HEC)
4% of (income tax after deducting rebate under section 87A and after adding surcharge)
Rounded off of income and tax liability (288A and 288B)
| Income / Tax liability before rounding off | Income / Tax liability after rounding off |
| 17,56,333.99 | 17,56,330 |
| 18,88,994.99 | 18,88,990 |
Agricultural Income
Capital gain arising from the transfer of agricultural land shall not be treated as agricultural income.
Partly agricultural incomes:
| Income | Non - agricultural income | Agricultural income |
| Growing and manufacturing tea in India | 40% | 60% |
| Sale of centrifuged latex or cenex or latex based crepes | 35% | 65% |
| Sale of coffee grown and cured by seller | 25% | 75% |
Residential Status How to determine the residential status of an INDIVIDUAL [Sec. 6]
An individual may be resident or non-resident. Further, if an individual is resident, he may be resident and ordinarily resident or resident but not ordinarily resident.
Following are the rules to determine the residential status of an individual:
a. Resident: Must satisfy at least one of the basic conditions.
b. Resident and ordinarily resident (ROR): Must satisfy at least one of the basic conditions and both of the additional conditions.
c. Resident but not ordinarily resident (RNOR): Must satisfy at least one of the basic conditions and one or none of the additional conditions.
d. Non-resident (NR): Must not satisfy any of the basic conditions.
Basic conditions [Sec. 6(1)]
a. He is in India in the previous year for a period of 182 days or more; or
b. He is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year.
Exceptions:
In the following two situations, basic condition (b) is not applicable:
1. An Indian citizen who leaves India during the previous year ▪ for the purpose of employment outside India; or ▪ as a member of crew of an Indian ship.
2. An Indian citizen or a person of Indian origin who comes on a visit to India during the previous year.
Additional conditions [Sec. 6(6)]
a. He has been resident in India in at least 2 out of 10 previous years immediately preceding the relevant previous year.
b. He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant previous year.
How to determine the residential status of a HUF
A Hindu undivided family (like an individual) is either resident in India or non-resident in India. A resident Hindu undivided family is either ordinarily resident or not ordinarily resident.
Following are the rules to determine the residential status of a Hindu undivided family:
a. A Hindu undivided family is said to be resident in India if control and management of its affairs are situated –
▪ Wholly in India or
▪ Partly in India and partly outside India
It is to be noted that in order to determine whether a HUF is resident or non-resident, the residential status of the karta of the family during the previous year is not relevant. Residential status of the karta during the preceding years is considered for determining whether a resident HUF is “ordinarily resident” or not.
A resident Hindu Undivided family is an ordinarily resident in India if karta or manager of the family satisfies the two additional conditions given above. However, if kata or manager of a resident HUF does not satisfy the two additional conditions, the family is treated as resident but not ordinarily resident in India.
b. A Hindu undivided family is said to be non-resident in India if control and management of its affairs are situated wholly out of India.
Exempted incomes
Some of the incomes exempt under section 10 (excluding exempt incomes under the head “Salaries”) are –
1. Agricultural income
2. Share of income from Hindu Undivided Family
3. Share of income of a partner from his firm
4. Payment received by an individual under Bhopal Gas Leak Disaster Act
5. Educational Scholarships received by an individual
6. Awards made by the Government in public interest
7. Income of scientific research association
8. Income of news agency
9. Income of Khadi and Village Industries
10. Income of SAARC
11. Income of IRDA
12. Income of mutual fund
13. Income of Swachh Bharat Kosh and Clean Ganga Fund
14. Partial withdrawal from NPS (to the extent it does not exceed 25% of an employee’s contribution) is exempt from tax.
15. 60% of the total amount received on account of assessee’s opting out of NPS or closing of NPS account.
Note: The summary of Income Tax Notes Part-01 summarise from the content of Book of School of Open Learning. © School of Open Learning.
