(1) Profits and gains of any business or profession carried on by assesses at any time
during previous year.
(2) Compensation or other payment due to or received by any person –
(a) managing whole or substantially whole of affairs of an Indian company or any other
company in India at or in connection with the termination of his management or modification of the terms and conditions relating thereto;
Dept. of MBA-SJBIT Page 54 (c) For vesting the management of any property or business in Government or any
corporation owned or controlled by the Government.
(3) Income derived by trade, professional or other similar association from specific
services rendered to its members. This clause is an exception to general rule
that income from mutual activity is not chargeable to tax.
(4) Profits on sale of import licence; or Profits on transfer of Duty Entitlement Pass Book
(DEPB) or Duty Free Replenishment Certificate (DFRC) under EXIM Policy;
(5) Cash assistance against exports from Government of India and Duty
Drawback;
(6) Value of any benefit or perquisite, whether convertible into money or not arising from
exercise of business or profession;
(7) Interest, salary, bonus, commission or remuneration due to or received by partner
from the firm. Such income is taxable in hands of partners to the extent it is allowed as
deduction in hands of firm. Any amount not allowed as deduction to firm under Section 40(b), is not taxable in the hands of partner.
(8) Any sum received or receivable, in cash or in kind, under an agreement for – (a) Non-competition i.e. not carrying out any activity in relation to any business; or
(b) Exclusivity i.e. not sharing any know-how, patent, copyright, trademark, license,
franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision of services.
Exceptions : However, sum received for transfer of business, or transfer of right to
manufacture, produce or process any article/thing, which is chargeable under ‗Capital Gains‘ is not taxable under this Section.
Dept. of MBA-SJBIT Page 55 INCOME FROM CAPITAL GAINS
1. Chargeability u/s 45
Profits or gains arising from the transfer of a capital asset is chargeable to tax in the year in which transfer take place under the head "Capital Gains".
Definitions
Transfer: Sec. 2(47): Transfer in relation to a capital asset includes sale, Exchange, or
relinquishment of the asset or extinguishment of any rights therein or the compulsory acquisition thereof under any law or conversion of the asset by the owner in stock-in- trade of a business carried on by him or the maturity or redemption of a zero coupon bond.
Capital Asset: Sec. 2(14): Capital Asset means property of any kind (Fixed, Circulating,
movable, immovable, tangible or intangible) whether or not connected with business or profession.
Exclusions —
a. Stock-in-trade
b. Personal effects of the assessee c. Agricultural land in a rural area
d. 6½% Gold Bonds, 1977 or 7% Gold Bonds, 1980 or National Defence Bonds, 1980 issued by the Central Government
e. Special Bearer Bonds, 1991 issued by the Central Government. f. Gold Deposit Bonds issued under Gold Deposit Scheme 1999
Short-term capital asset: Sec. 2(42A): means a capital asset held by an assessee for not
more than thirty six months immediately preceding the date of its transfer. However, in the following cases, an asset, held for not more than twelve months, is treated as short- term capital asset—
a. Quoted or unquoted equity or preference shares in a company Circular No. 495 dated 22.9.1987 explaining amendments by Finance Act, 1987 whereby unquoted shares of a private limited company also if held more than 12 months falls in the category of LTCG. Also Refer the Judgment in 120 TTJ 699 for unquoted shares held for less than 36 months.
Dept. of MBA-SJBIT Page 56
c. Quoted or unquoted Units of UTI
d. Quoted or unquoted Units of Mutual Funds specified u/s. 10(23D) e. Quoted or unquoted zero coupon bonds
Long-term capital asset: Sec. 2(29A): means a capital asset which is not a short-term
capital asset
2. Year of chargeability to tax
Capital gains are generally charged to tax in the year in which ‗transfer‘ takes place. Exceptions —
a. Sec. 45(1A) — Insurance Claim — In the year of receipt.
b. Sec. 45(2) — Conversion of capital asset into stock-in-trade — In the year of actual sale of the stock.
c. Sec. 45(5) — Compulsory acquisition — When consideration or part thereof is first received.
Exempt Capital Gains under Section 10
10(33) : Transfer of US 64 on or after April 1, 2002
10(37) : Compulsory acquisition of Urban Agriculture Land where consideration is received after March 31, 2004.
Long-term capital gain arising on transfer on or after 10(38) : October 1, 2004 of equity shares or units of equity oriented
mutual fund and the STT is paid at the time of transfer
Income Tax Deductions u/s 80C
One can get following income tax deductions with qualified investments u/s 80C are as appended below:
Dept. of MBA-SJBIT Page 57
Section Details Quantum of Deduction
80C
Life Insurance Premium, PPF, NSC, EPF, 5-year Fixed Deposit, Post Office Senior Citizen Saving Scheme, ELSS, Tuition Fees including Admission fees or college fees paid for full time education of any two children‘s, Housing Loan Principal Repayment
Maximum Rs 100000
Income Tax Deductions u/s 80CCC
One can get following income tax deductions with qualified investments u/s 80CCC and some are as appended below:
Profit in lieu of salary
Profit in lieu of salary is a part of salary income and accordingly it is taxable under the head ―Income from Salary‖. Profit in lieu of salary means any payment made to an employee on lieu of salary even if the same has no connection with the profits of the employer. The word ‗profit‘ is used only to convey any ‗advantage‘ or ‗gain‘ by receipt of any payment by the employee. As per the Income Tax Act, 1961 ―Profit in lieu of salary‖ includes the following:
1. 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 or the modification of the terms & conditions relating thereto is taxable as profit in lieu of salary. The recipient may however claim exemption u/s 10(10B) or 10(10C), if eligible. 2. Any payment (except to the extent it is specifically exempt u/s 10) due to or received by an employee from his employer or former employer or from a provident fund, or other fund (to the extent it does not consist of contributions made by the assessee or interest thereon) which may otherwise be taxable as income from salary. It may be noted that the assessee is entitled to exemption to the prescribed extent in respect of the following payments received by him-
a. Payment of Gratuity u/s 10(10);
b. Payment of commuted pension u/s 10(10A);
Dept. of MBA-SJBIT Page 58
d. Payment from statutory provident fund and public provident fund u/s 10(11); e. Payment from recognized provident fund u/s 10(12);
f. Payment from an approved superannuation fund u/s 10(13); g. Payment of House Rent Allowance (HRA) u/s 10(13A).
3. Payment from unrecognized provident fund or superannuation fund to the extent it does not consist of contribution by the employee or interest on employee‘s contribution (at the time of payment to the employee).
1. Any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy is taxable as ―profit in lieu of salary
Income Tax slab For Individuals:
Income Slabs Tax Rates
1 Where the total income does not exceed Rs. 2,00,000/-.
NIL 2 Where the total income exceeds
Rs. 2,00,000/- but does not exceed Rs. 5,00,000/-.
10% of amount by which the total income exceeds Rs. 2,00,000/-
3 Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-
Rs. 30,000/- + 20% of the amount by which the total income exceeds Rs. 5,00,000/-.
4 Where the total income exceeds Rs. 10,00,000/-
Rs. 130,000/- + 30% of the amount by which the total income exceeds Rs. 10,00,000/-.
Surcharge : Nil