Income Tax Handbook 2014

Tax Hand Book
Issue Date Apr 24, 2013 (Updated on July 10, 2013 & Feb 26, 2014)
Contents
A.
Residential Status
B.
Income Tax Slab Rates
C.
Sources of Income
D.
Salary
E.
Business Income
8-9
F.
Speculation Income
10
G.
Capital Gains
H.
Taxability of Gifts
I.
Income from other sources
20-23
J.
Income from House Property (Rental Income)
24-25
K.
Clubbing of Income
26-27
L.
Withholding of Income
28-30
M. Limited Liability Partnership
31-32
N.
NRI Bank Accounts
33-36
O.
Taxation of Trust Structures
Disclaimer: The Income Tax rules and regulations may be subject to modifications by legislative, regulatory, administrative or judicial decisions. Investors
are advised to consult his/her financial advisor/consultant with respect to the specific tax implications arising out of his/her transactions. This presentation
is for reference only and is not to be construed as tax advice.
3-4
11-18
19
37
Private & Confidential . Refer
disclaimer at the end of the report
Residential Status
Required to be determined for each assessment year for determining the scope of total income.
Residential Status
The extent of an individuals liability for personal income tax depends on whether the individual is
resident and ordinarily resident,
resident but not ordinarily resident, or
non-resident in India
Residential Status Determination
An individual is said to be resident in India in any previous year if he fulfills any one of the following two basic conditions:
Section 6 (1) Resident
He is in India in that previous year for a period or periods amounting in all to 182 days or more; or
He is in India for a period or periods amounting in all to 60 days or more during the previous year and 365 days or
more during the 4 years preceding that previous year
Non-Resident
Section 6 (6) Resident and not

ordinarily resident
If an individual does not satisfy both the basic conditions mentioned above, he shall be considered as a non-resident
In addition to fulfilling one of the above basic conditions, in case an individual fulfills any of the following additional
conditions, he will be treated as Not Ordinarily Resident in India in that previous year:
He has been a non-resident in India in 9 out of the 10 preceding previous years; or

He has been in India for a period not exceeding 729 days during the 7 preceding previous years.
Resident and ordinarily resident
In case an individual fails to satisfy both the conditions for not ordinarily resident, he shall be considered as resident and
ordinarily resident.
Taxability of
1. Income received or deemed to be received in India
2. Income accruing or arising or deemed to accrue or arise in India
3. Income accruing or arising outside India fromi) Business controlled in India or profession set up in India
ii) Any other source
Resident & ordinarily resident
Resident but not ordinrariy resident
Non-resident
Taxable
Taxable
Taxable
Taxable
Taxable
Taxable
Taxable
Taxable
Taxable
Not Taxable
Not Taxable
Not Taxable

Residential Status
Particulars
Explanation
An individual,
who is a citizen of India,
leaving India in any year for employment purpose or
as a member of the crew of an Indian ship,
is
considered
as resident in India in that year only if he has been in India for 182 days or more.
Exceptions to Basic
conditions
A citizen of India or person of Indian origin

who is residing outside India and
comes to India, on a visit in any previous year
is
required
to stay in India for 182 days for being treated as Resident.
If an employee is assigned to entities outside India &

he stays in India for less than 182 days during the previous year as per Section 6(1)(a),
he could obtain the status of non resident
Residential Status of Company

- Section 6 (3)
The following companies are considered as resident in India

Any Indian Company
Any other company whose control & management is situated wholly in India
In any other case, the company shall be considered as non resident
Firm and AOP

- Section 6 (6)
Firm and AOP is considered as resident if the control and management is wholly or partly situated in India
If control & management is wholly situated outside India, such firm and AOP is considered as non-resident
Notes:
1. As per the Income Tax Act, 1961 a person shall be deemed to be of Indian origin if he or either of his parents or any of his grand parents was born in undivided India.
2. Under the Foreign Exchange (Deposit) Regulations, 2000, which deal with banking accounts in India by NRIs, the term PIO is defined as under
a) he at any time held an Indian Passport, or
b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955, or
c) he is a spouse of an Indian citizen or a person referred to in (a) or (b) above

Income Tax Slab Rates
Rates of tax for Individuals, HUF, AOP, BOI and Artificial Juridical Person
Income
Rates of tax
Upto Rs. 200,000/- (Basic exemption limit)
NIL
Above Rs. 200,000/- upto Rs. 500,000/-
10%
Above Rs. 500,000/- upto Rs. 10,00,000/-
20%
Above Rs. 10,00,000/-
30%
Notes:
1. The above mentioned basic exemption limit of Rs.200,000/- shall be
applicable to both men & women (resident & non-resident) below 60
years and, Rs.250,000/- in case of resident individuals who are 60 years
or more at any time during the previous year but below the age of 80
years.
Rates of tax for firms and companies

Firms &
LLPs
Domestic
Co
Foreign
Co
Basic Tax Rate
30%
30%
40%
Surcharge - if taxable income > Rs. 1

crore in the previous year
N.A
5%
2%
Surcharge - if taxable income > Rs. 10

crore in the previous year
N.A
10%
5%
Education cess on Income tax plus

surcharge
3%
3%
3%
Particulars
2. In case of every resident individual aged 80 years or more at any time

during the previous year, the basic exemption limit shall be Rs.
500,000/-.
3. In case of trust, political parties and other artificial juridical persons, the
above mentioned rates shall apply unless exemption is granted or
maximum marginal rate is applicable depending upon the facts of each
case.
4. Surcharge @ 10% shall be applied for taxable income above Rs. 1 crore
5. Education cess @ 3% shall be applied on income tax plus surcharge
Rebate of tax for resident individuals having total income of up to Rs. 5

lakhs (Section 87A of the Income Tax Act, 1961)
1. The above mentioned rebate shall be equal to the amount of income tax
payable on the total income for any assessment year or an amount of
Rs. 2000, whichever is less.
5

Sources of Income
Salary
Business (Non-speculation)
Income
Speculation Business Income
Income from Capital Gains
Interest Income
Dividend Income
Rental Income

Income under the head Salary
Particulars
Explanation
Salary includes any amount due to or received by an employee
including arrears of salary from an employer or former employer (Sec.15)
Definition of
salary
So, any income earned in pursuance of an employer-employee

relationship is taxable as Salary.
This includes compensation received before joining employment or after
cessation of employment.
As per Section 17 (1), salary includes
wages,
Computation
Particulars
Basic Salary
Add: Taxable allowance (after exemption u/s 10)
Add: Taxable perquisites u/s 17
Gross Salary
Less: Deduction u/s 16
Entertainment Allowance
Profession Tax
Taxable Salary
any annuity or pension,

any gratuity,
any fees, commissions, perquisites or profits in lieu of or in addition
to any salary or wages,
Constitutents
of salary
any advance of salary,

leave encashment,
the annual accretion to RPF (employer's contribution in excess of 12%
of salary and Interest credited to RPF in excess of 9.5% p.a
accumulated transferred balance from unrecognised PF to RPF to the
extent it is chargeable
employer's contribution to employee's account under a pension
scheme as per Sec. 80CCD
Taxable Year
Year in which it is due or received, whichever is earlier.
Tax rates
Subject to normal slab rates

Amount
xxx
xx
xx
xxx
xx
xx
xxx
Business Income
Particulars
Explanation
Profits and gains of business or profession carried on by the assessee (including deemed profits and income from
discontinued business) - Sec. 28, 41 and 176
Section 2 (13) defines "Business" to include any
Definition
trade,
commerce or
manufacture or
any adventure or concern in the nature of trade, commerce or manufacture
Taxable Year
Due basis or receipt basis depending on accounting method regularly followed by the assessee - Sec. 145
Tax rates
Subject to normal slab rates
Taxation of Income from trading in

capital markets
It is taxed under the head of Non speculation business income
Tax Audit for F&O trading
If turnover > 100 lakh, tax audit u/s 44AB is required

Since the transaction in shares are non-delivery based, it is only the net of the sales and purchases that is to be treated
as turnover. For the purpose of 44AB , following items should be considered to constitute turnover:-
Turnover for F&O trading
The total of positive and negative differences , plus

Premium received on sale of options is also to be included in turnover ,plus
In respect of any reverse trades entered, the difference thereon But not the total value of contract.
Turnover for delivery based trading
Gross sale value has to be taken as turnover
Tax Audit for delivery based trading
If gross sale value > 100 lakh, tax audit u/s 44AB is required

Business Income contd.
Particulars
Explanation
Commodity Derivatives
As per the Finance bill of March 2013, income from commodity derivatives would not be considered as speculative income and
introduced Commodities Transaction tax @ 0.01% on non-agri futures traded on the bourses
U/s 72, non-speculation business income can be set off against
any other business income &
Set off
then against short term capital gains,
house property income &

income from other sources,
but not against salary income.
Carry Forward
Any remaining balance (post set off) can be carried forward for next 8 assessment years to be set off only against non-speculation
business income
Computation
Particulars
Net Profit as per P/L Account
Add: i) Inadmissible expenses
ii) Income taxable but not credited to P/L Account
Less: i) Income credited but not taxable
ii) Allowable expenses & debited to P/L Account
Taxable Income
Amount
xxx
xx
xx
xxx
xx
xx
xxx

Speculation Income
Particulars
Explanation
A speculative transaction means a transaction in which a contract for purchase or sale of any commodity including stocks and shares
is periodically or ultimately settled otherwise than by actual delivery or transfer of the commodity or scrip. (Sec. 43(5))
Intra-day trading (in equity shares, currency and commodities) shall be considered as speculation business transaction and income
thereon is taxed at normal rates
Definition
Exceptions Forward contracts and,

Futures & Options contracts
which are treated as Non-speculation business income
10
Set off
U/s 73, speculation business loss cannot be set off against income from regular business or against income under any other head .
Hence, set off allowed only against speculation income.
Carry Forward
Carried forward & set off within 4 assessment years from the current assessment year, only against speculation income

Capital Gains
Particulars
Explanation
Definition
Under Section 2 (14) of the Income Tax Act, 1961, Capital asset means property of any kind held by an assessee, whether or not connected
with his business or profession, but does not include the following
Stock-in-trade, raw materials or consumable stores held for the purposes of business or profession.
Agricultural land in India which is not situated in any specified area
Personal effects of movable nature, such as furniture, utensils and vehicles held for personal use by the assessee or any dependent
member of his family.
Personal effects of movable nature do not include
Jewellery,
Archaelogical collections,
Drawings, Painting, Sculptures or any work of Art.
Taxable Year
Year of transfer of capital asset

A capital asset held by an assessee for not more than 36 months before the date of its transfer is a Short Term Capital Asset. However,
a share held in a company, or

Short Term Capital Asset
any other security listed in a recognised stock exchange in India,

units of UTI and a mutual fund or
a zero coupon bond
will be treated as short term capital asset if it is held for not more than 12 months before the date of its transfer.
Only debentures have to be necessarily listed in order to qualify for the 12 month period for determination of long term capital asset
Long Term Capital Asset
If the capital asset is not a short term capital asset as defined then it is a long term capital asset
Set off
Short term capital loss can be set-off against short term or long term capital gains of that year & balance remaining can be set off against
income from any other head except salary.
Long term capital loss can be set-off only against long term capital gain.
Carry Forward
Short term capital loss can be carried forward for 8 assessment years u/s 74 to be set off against short term or long term capital gains only.
Long term capital loss can be carried forward for 8 assessment years u/s 74 to be set-off only against long term capital gain
Deduction under
Chapter VIA
11
Available for short term capital gain (other than stcg on securities taxable u/s 111A).
Not available against long term capital gains

Capital Gains Tax - Rates

Long Term Capital Gains (units held for more than 12 months)
Listed Equity shares &

Equity Oriented Schemes
Debt Schemes, zero
coupon bonds, offshore
funds, Off Market Buyback
of equity shares
Individual / HUF
Domestic Company
NRI
Individual / HUF
Domestic Company
NRI
Nil
Nil
Nil
15%
15%
15%
10% without indexation

or 20% with indexation
whichever is lower

whichever is lower

whichever is lower
Listed Cumulative bond /

NCD / debentures
Unlisted stocks
Unlisted bonds /
debentures
ShortTerm Capital Gains (units held for 12 months or less)

20% with indexation
20% with indexation
Normal slab rates
Normal slab rates

Normal slab rates
Normal slab rates
Gold / Bullion / Jewellery
20% with indexation
20% with indexation
20% with indexation
Normal slab rates
Real Estate
20% with indexation
20% with indexation
20% with indexation
Normal slab rates
Note:
Debentures have to be listed to qualify for the 12 month holding period criteria of Long Term Capital gains.
Unlisted debentures require a holding period of 36 months for being a long term capital asset.
12

Capital Gains Tax - Notes & TDS Rates

Notes
Surcharge @ 5% is to be levied in the case of domestic companies, if their income exceeds Rs. 1 crore but less than Rs. 10 crore & @ 10% if income exceeds Rs. 1 crore
Surcharge @ 10% is to be levied in the case of individual / HUF, if their income exceeds Rs. 1 crore
Education cess @ 3% will be applied on tax + surcharge
Dividend Stripping: The loss due to sale of units in equity mutual funds will not be available for set off to the extent of the taxfree dividend declared, if units are
i) bought within 3 months prior to the record date fixed for dividend declaration; and
ii) sold within 9 months after the record date fixed for dividend declaration
Bonus Stripping: The loss due to sale of original units in mutual fund schemes, where bonus units are issued, will not be available for set off to, if original units are
i) bought within 3 months prior to the record date fixed for allotment of bonus units; and
ii) sold within 9 months after the record date fixed for allotment of bonus units.
However, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such unsold bonus units.
Tax Deducted at Source (Applicable only to NRI Investors)
13
Short term
capital gain
Long term
capital gain
Equity
15.45%
NIL
Debt Listed Units
30.90%
20.60%
Debt Unlisted
units
30.90%
10.30%

Certain Exemptions from Tax on Long Term Capital Gains
14
Section
Assessee
Conditions
Quantum of Exemption
54
Individual,
HUF
Residential house to be transferred

Must be a long term capital asset
Income from such asset is chargeable under the head Income from House
Property
Within a period of 1 year before or 2 years after the date of transfer, a
residential house is purchased or within a period of 3 years after the date of
transfer, a residential house is constructed.
If the cost of the new residential

house is greater than capital gain,
then the whole of the capital gain is
exempt. Otherwise to the extent of
the cost of the new residential
house.
54B
Individual
Agricultural land to be transferred

Must have been used in the 2 years immediately preceding the date of transfer
for agriculture purposes either by the assessee or by his parent
Within 2 years from the date of transfer another agricultural land is purchased
If the cost of the new asset is not

less than capital gain, then the
whole of the capital gain is exempt.
Otherwise to the extent of the cost
of the new agricultural land.
54EC
Any
Assessee
Must be a long term capital asset

Within a period of 6 months from the date of transfer, the amount of capital
gains should have been invested in the specified bonds issued by REC or NHAI
Assessee shall not transfer or convert or avail loan or advance on the security of
the above bonds within a period of 3 years from the date of its acquisition
The max amt of investment shall not exceed Rs. 50 lakhs during any fin year.
Amount of investment in the

specified bonds or the capital gains
whichever is lower.
54F
Individual,
HUF
Must be a long term capital asset, but not a residential house

Within a period of 1 year before or 2 years after the date of transfer, a
residential house is purchased or within a period of 3 years after the date of
transfer, a residential house is constructed.
Assessee does not owns more than one residential house other than the new
asset on the date of transfer
Assessee does not within a period of 1 year after the date of transfer, purchase
or does not within a period of 3 years after the date of transfer construct any
residential house other than the new asset.
If the cost of the new residential

house is not less than the net
consideration, then the whole of the
capital gain is exempt. Otherwise to
the extent of the capital gain in the
same proportion as the cost of the
new residential house bears to the
net consideration.

Capital Gains Account Scheme

Under Sections 54, 54B and 54F, the capital gains is exempt if such gains are reinvested in new assets, within the time allowed for the
purpose. If such reinvestment is not made before the date of furnishing the return of income then the amount of the capital gain or the net
consideration, is required to be deposited in an account under Capital gains Accounts Scheme.
The deposit shall be made before furnishing the return of income or within the due date for furnishing the return of income u/s. 139
(1), whichever is earlier.
The deposit shall be made in a bank account or institution in a scheme notified by the Central government.
Amount deposited can be withdrawn for utilization in accordance with the scheme, for the specified purpose
If the amount deposited is not utilized for acquiring the new asset within the required period, the capital gain related to the unutilized
amount shall be treated as capital gain of the year in which period specified in the above provisions expires.
Cost Inflation Index
FY
15
CII
FY
CII
FY
CII
FY
CII
1981-82
100
1990-91
182
2000-01
406
2010-11
711
1982-83
109
1991-92
199
2001-02
426
2011-12
785
1983-84
116
1992-93
223
2002-03
447
2012-13
852
1984-85
125
1993-94
244
2003-04
463
2013-14
939
1985-86
133
1994-95
259
2004-05
480
1986-87
140
1995-96
281
2005-06
497
1987-88
150
1996-97
305
2006-07
519
1988-89
161
1997-98
331
2007-08
551
1989-90
172
1998-99
351
2008-09
582
1999-00
389
2009-10
632

Capital Gains on depreciable assets
Particulars
Explanation
In the case of block of assets, depreciation u/s 32 can be claimed on the WDV as per Sec 43 (6) provided as on the last day of
the previous year, the following two requirements are fulfilled:
Computation of Capital
Gains - Depreciable Asset
a) There must be at least one asset in the block
b) There must be some value for the block on which prescribed percentage can be applied
Where any one or both the above mentioned requirements are not satisfied on transfer of any asset from the block, the
provisions of Sec. 32 cease to apply & Sec. 50 provision become applicable resulting in short term capital gains
When one or some of the assets in the block is / are sold for a consideration which is more than the value of the block
When all the assets are transferred for a consideration which is more than the value of the block
When Sec. 50 gets attracted
When all the assets are transferred for a consideration which is less than the value of the block
In the first 2 situations above, the net result of the computation would result in short term capital gains, the excess of WDV
over the sale consideration in the third situation shall be treated as short term capital loss
Computation
Particulars
Full value of consideration
xxx
Less: i) Expenses for transfer
xx
ii) WDV of the block of assets at the

beginning of the previous year
xx
ii) Assets acquired during the year &

belonging to the same block of assets
xx
Short term capital gain / loss
16
Amount
xxx

Securities Transaction Tax Rates
Securities Transaction Tax Rates

Transaction
Rates
Payable By
0.100%
Purchaser/Seller
Nil
Purchaser
Sale of units of equity oriented mutual fund (delivery based)*
0.001%
Seller
Sale of equity shares, units of equity oriented mutual fund (non-delivery based)
0.025%
Seller
Sale of an option in securities
0.017%
Seller
Sale of an option in securities, where option is exercised
0.125%
Purchaser
Sale of a futures in securities*
0.010%
Seller
Sale of unit of an equity oriented fund to the Mutual Fund*
0.001%
Seller
Purchase/ Sale of equity shares

Purchase of units of equity oriented mutual fund (delivery based)*
* effective 1 June 2013
17

Deductibility of expenses from sale value of shares

Particulars
Explanations
Intention at the time of purchase
Length of period of holding
Time devoted
Infrastructure & set up employed
Transaction frequency
Points to determine Whether the sale

transaction in capital market is chargeable
as business income or capital gain
Transaction volume
Purchase - sale ratio
Owned fund vs. Borrowed fund
Circumstances due to which asset is sold
Use of sale consideration
Any other occupation of the assessee
Accounting treatment in assessee's books

MOA / AOA of assessee
Interest on borrowings
Brokerage, Service Tax, stamp duty, SEBI fee charged by Brokers
Deductions allowed from Business Income
Demat Account Charges
Loss of shares & securities and non payment by brokers

Portfolio Management & Advisory Fees
Penalties, Bad Delivery charges, Auction Charges etc.
Deductions allowed from Capital Gain
18
Only expenses incurred in connection with transfer

Taxability of Gifts
Particulars
Explanation
When is it taxable
Gifts received by an individual or Hindu Undivided Family (HUF) are taxable as per the Income Tax Act, 1961 but there are a few
exceptions as mentioned below. It is included under the head Income from other sources under Section 56(2)(viii)
Gifts are taxable in the hands of recipient and there is no taxation for the donor.
Cases for taxation
Any cash gift (including gifts by cheque or drafts) received, exceeding Rs. 50,000/Any movable property received without consideration or at a lesser consideration than its fair market value, the aggregate fair
value of which is more than Rs.50,000/Any immovable property received without consideration and its stamp duty value is more than Rs.50,000/Any immovable property received for a consideration which is less than the stamp duty value of the property by an amount
which is more than Rs. 50,000/-, the difference between the stamp duty value & the consideration shall be chargeable to tax
Frequency
In the case of immoveable property, a single transaction is considered for calculating the limit of Rs.50,000/In other cases , all transaction in a financial year will be considered for calculation of the ceiling limit of Rs. 50,000/-
Exempted Gifts
The following receipts/gifts are exempted even if they are without or inadequate consideration From any relative; or
On the occasion of marriage of an individual; or
Under a will or by way of inheritance; or
In contemplation of the death of the payer or donor, as the case may be; or
From a local authority; or
From any fund, foundation, university, other educational institution, hospital, medical institution, any trust or institution
referred to in Section 10 (23C)
Note:
Relative means spouse, brother or sister of assessee or spouse, brother or sister of either of the parents, any lineal ascendant or descendant of the assessee or spouse.
Property means immoveable property being land or building or both; shares & securities; jewellery; archeological collections; drawing, paintings, sculptures; any work of
art and bullion.
19

Particulars
Explanation
Income from other sources is a residuary head of income. Any item which is chargeable to tax but does not fall with the scope
of the other four specific heads of income shall be included under this head of income.
Certain items of income which are specifically chargeable only under this head of income under section 56, are as follows:
Dividend income (including deemed divided un/s. 2(22)(e))
Income through winnings from lotteries, races including horse races, gambling, betting, etc.
Any sum of money, the aggregate value of which exceeds Rs. 50,000, received from any person without consideration by an
individual or HUF during the year
Any movable property, the aggregate value of which exceeds Rs. 50,000, received from any person without consideration,
or for inadequate consideration where such inadequacy exceeds Rs. 50,000, by an individual or HUF during the year
Definition
Where an immovable property, stamp duty value of which exceeds Rs. 50,000, received by an individual or HUF from any
person without consideration, the stamp duty value of such property will be considered.
Any immovable property received for a consideration which is less than the stamp duty value of the property by an amount
exceeding Rs. 50,000/-, the difference between the stamp duty value & the consideration will be considered.
Where a firm or closely held company receives shares of a closely held company from any person or persons, without
consideration where the aggregate fair market value exceeds Rs. 50,000 or for inadequate consideration where the
inadequacy in aggregate exceeds Rs. 50,000
Income from subletting
Interest Income
Family Pension
20
When is it taxable
Due basis or receipt basis depending on the method of accounting regularly followed by the assessee
Set off
Income from other sources can be set off against non-speculation business loss, house property loss and short term capital loss
of the current year except loss from activity of owning & maintaining race horses u/s 74
Carry Forward
No carry forward of loss is permissible
Tax Rates
Normal slab rates

Particulars
Explanation
Taxablility does not arise in the hands of individual/HUF in case such sum of money, specified movable/immovable property is received
From any relative; or
On the occasion of marriage of an individual; or
Exemptions from
taxability of gifts
Under a will or by way of inheritance; or
In contemplation of the death of the payer or donor, as the case may be; or
From a local authority; or
From any fund, foundation, university, other educational institution, hospital, medical institution, any trust or institution referred to in
Section 10 (23C)
From charitable institution registered u/s 12AA.
Computation
Particulars
Gross Receipts
Less: Exemption u/s 10
Amount
xxx
xx
xxx
Less: Deduction u/s 57

Taxable Income
21
xx
xxx

Tax on Dividend
Individual
Dividends received from domestic company / MF
Dividends from foreign company
Domestic Company
NRI
Taxfree in the hands of investor

Taxable as per marginal rates
30% + 10% surcharge + 3% cess

= 33.99%
Local taxation applies
Note:
Dividend received by an Indian company from its foreign subsidiary (minimum 26% share holding) are subject to tax @ 15% plus 10% surcharge and 3% cess.
Dividend Distribution Tax
Individual
on Companies
Domestic Company
15% + 10% surcharge + 3% cess = 17.00%
on Equity oriented schemes

on Debt mutual fund schemes
22
NRI
Nil
25% + 10% surcharge + 3%

cess = 28.325%

= 33.99%

= 28.325%

Tax on Interest Income
Particulars
Interest from foreign company
Interest on Bonds/NCD from domestic company
Deductions available (Section 57)
Individual
Domestic Company
Taxable as per normal rates
NRI
Local taxation applies
Taxable as per normal rates

Any reasonable sum paid by way of remuneration or commission for the purpose of realizing such
income including interest on borrowed capital if such borrowed capital is used for making
investment in shares or securities.
TDS Rates
Source of Income
23
Exemption
TDS
Interest from securities
No TDS in respect of listed debentures in demat form (Sec 193). However

on remat of NCDs, TDS shall be deducted
Interest other than interest from securities (Eg.

Bank interest)
Exemption upto Rs. 5000

Exemption upto Rs. 10,000 if interest is received from banking
company, cooperative society engaged in banking business, specific
schemes of post office
TDS @ 10% is deducted in

respect of all assesses

Particulars
Explanation
Computation
Defination
Annual value of any property comprising of building or land appurtenant thereto,

of which the assesee is the owner. Property can be residential or commercial
Particulars
Income not
taxable
Annual value of any building or portion of a building occupied by the assessee for
the purposes of business or profession carried on by him
Less: Property taxes paid to local authority
Gross Annual Value (GAV) is fair rent or municpal valuation whichever is higher,
maximum subject to standard rent.
What is Gross
Annual Value
Net Annual Value
xxx
Less: Deductions u/s 24 of the IT Act, 1961

xx
If actual rent < fair rent because of vacancy, then actual rent is taken as GAV,
otherwise fair rent is taken as GAV
Interest on borrowed capital
xx
Let-out property
xxx
Add: 70% of arrears of rent received u/s
25B
xx
Add: Unrealised rent received u/s 25AA
xx
Taxable Income
30% of the net annual value

Interest on borrowed capital
in case of let-out & deemed let-out property - can be fully claimed
If loan is used for repair, renovation or reconstruction of the house
property, then deduction upto Rs. 30,000 is allowed
If loan is used to acquire or construct property on or after 1.4.99 & where it
is completed within 3 years from the end of the financial year in which loan
is borrowed, then interest deduction upto Rs. 1.5Lakh shall be allowed. Rs.
1lakh additional for first time home loan seeker for loan upto Rs. 25 lakhs..
24
xx
30% of the net annual value
If more than 1 properties are self-occupied & not leased, any one house
property can be chosen as self-occupied & the remaining are treated as
"deemed let-out properties.
Deductions
xxx
If actual rent > fair rent, then actual rent is taken as GAV
Self-occupied property
Types of House
property
Gross Annual Value
Amount

xxx
Particulars
Explanation
Loss from house property can be set off against
Set off
non speculation business income,
short term capital gains &

income from other sources of that year
Carry Forward
25
Any balance house property loss remaining, is allowed to be carried forward &
set off within the next 8 assessment years, only against income from house
property u/s 71B

Clubbing of Income
Particulars
Explanation
When income of other persons is included in the total income of the assessee, it is known as clubbing of income
Definition
Clubbing of income includes clubbing of negative income also (Explanation to Sec.64)

Sec. 64(1) covers cross transfers also, the effect of which is difficult to separate
Treatment
Clubbed income is taxable under the head "Income from other sources" and is subject to normal slab rates
if income is transferred but asset is not transferred (Sec. 60)
if transfer of asset is a revocable transfer (Sec. 61)

Exception: if transfer is made to a trust which is irrevocable till the lifetime of beneficiary (transferee) or transfer is
made before 1 April 1961
if asset is transferred by an individual to spouse without adequate consideration (Sec.64(1)(iv))
Exception:
Income from the asset is clubbed
with the income of the transferor
assets transferred before marriage & assets transferred in consideration of agreement to leave apart
asset transferred for adequate consideration i.e. a genuine sale
if a karta transfers a co-parcenary property
applies only to original assets & not to the accretion to the asset (eg. Bonus shares)
if asset is transferred by an individual to son's wife without adequate consideration (Sec.64(1)(vi))
if asset is transferred by an individual to anybody without adequate consideration but the benefit goes to the spouse of
transferor (Sec.64(1)(vii))
Income is clubbed with the

income of the transferor
26
if remuneration to the spouse of an individual given by an organisation in which such individual has a substantial interest
(Sec. 64 (1)(ii))

Clubbing of Income
Particulars
Explanation
If an individual gifts a self acquired property to HUF of which he/she is a member, clubbing applies as follows (Sec. 64(2))
till the HUF is not partitioned
Income from the property is clubbed with the income of the transferor
after the HUF is partitioned
Income from the property which goes to the benefit of spouse or minor child is clubbed with income of that individual
Income of a minor child is clubbed with the income of the parent

Exceptions
if income is earned on account of any activity involving application of his knowledge or manual labour
if parents are not divorced, then income is clubbed with income of that parent, whose income is greater
Other points to note
if parents are divorced, then income is clubbed with income of that parent who maintains the minor
exemption of Rs.1500 per year per minor is available for the parent's income in which minor's income is clubbed
27

Withholding Tax
Particulars
What is Withholding
Tax
Rate of Withholding
tax
Explanation
It is an obligation on the payer to withhold tax at the time of making payment under certain heads such as rent, commission, salary,
professional services, contract, etc. at the specified tax rates
As per Sec.195 of the Income Tax Act, there is an obligation on the person responsible for payment to deduct tax at source at the
time of payment or, at the time of the credit of the income to the account of the non-resident
Tax is to be deducted at the rate prescribed in the Act or rate specified in the Double Taxation Avoidance Agreement (DTAA)
whichever is beneficial to the assessee.
Current rates for withholding tax for payment to non-residents are
Interest - 5%
Dividends paid by domestic companies - nil
Royalties - 10%
Technical services - 10%
Any other service
Individuals: 30% of the income
Companies: 40% of the income
The above rates are general & are applicable in respect of countries with which India does not have a DTAA
Provisions in the
Finance Bill 2013-14
28
A final withholding tax at the rate of 20% on profits distributed by unlisted companies to shareholders through buyback of shares.
Proposal to increase the rate of tax on payments by way of royalty and fees for technical services to non-residents from 10% to 25%

Withholding Tax
Tax rates in case of some countries with which India has double taxation avoidance agreements
Country
Dividend (Not being covered by sec. 115O)
Interest
Royalty
Fees for technical

service
Australia
15%
15%
Note 2
Note 2
Canada
15% if at least 10% of the shares of the

company paying the dividends is held by the
recipient of dividend; 25% in other cases
15% (Note 1)
10-20%
10-20%
Mauritius
5% if at least 10% of the capital of the

company paying the dividend is held by the
recipient; 15% in other cases.
20 % (Note 1)
15%
No separate provision
Singapore
10% if at least 25% of the shares of the

recipient; 15% in other cases
10% if loan is granted by a

bank/similar institute including an
insurance company; 15% for others
15% for copyrights;

10% for others
15% for copyrights; 10%

for others
United Arab
Republic
10%
20%
30%
No separate provision
United Kingdom
15%
10% if interest is paid to a bank;

15% for others (Note 1)
(Note 3)
(Note 3)
15% if at least 10% of the voting stock of the

recipient; 20% in other cases
10% if loan is granted by a

bank/similar institute including an
insurance company; 15% for others
(Note 3)
(Note 3)
United States
29

Withholding Tax
Note
1. Dividend / Interest earned by the government and certain institutions like Reserve Bank of India is exempt from taxation in the country of source.
2. Royalties and fees for technical services would be taxable in the country of source at the following rates :
a) 10 per cent in case of rental of equipment and services provided along with know-how and technical services ;
b) any other case
during first five years of the agreement
i. 15 per cent if the payer is Government or specified organization;
ii. 20 per cent in other cases;
Subsequent years, 15% in all cases

Income of Government and certain institutions will be exempt from taxation in the country of source.
3. Royalty and fess for technical services would be taxable in the country of source at the following rates:
a) 10 per cent in case of royalties relating to the payments for the use of, or the right to use, industrial, commercial or scientific equipment;
b) 20 per cent in case of fees for technical services and other royalties.
30

Limited Liability Partnerships

Particulars
Explanation
A Limited Liability Partnership, popularly known as LLP combines the advantages of both the Company and Partnership into a single form of
organization.
Unlike corporate shareholders, the partners have the right to manage the business directly.
What is LLP
An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP's employees or other
agents.
LLP has a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution
in the LLP.
No partner would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be
shielded from joint liability created by another partners wrongful business decisions or misconduct.
Highlights
LLPs will be treated as Partnership Firms for the purpose of Income Tax w.e.f assessment year 2010-11
LLP resident in India even if control & management of its affairs is partly in India
No surcharge will be levied on income tax.
Profit will be taxed in the hands of the LLP and not in the hands of the partners (Sec 10 (2A)).
Remuneration to partners is a deductible expenditure for LLP subject to certain limits
Interest on capital contribution - deductible expenditure provided it is authorised by the LLP agreement
Interest & remuneration received by a partner from his LLP will be taxed as Profits & Gains of Business u/s 28(v)
No capital gain on conversion of partnership firms into LLP.
Capital Gain on conversion of Company into LLP will be exempt from tax, if prescribed conditions are complied with.
On conversion, the successor LLP , will be allowed to carry forward and set off of accumulated loss and unabsorbed depreciation allowance
& take the credit of MAT paid by the predecessor company
Professionals can form Multi-disciplinary Professional LLP, which was not allowed earlier.
Audit requirement only in case of contributions exceeding Rs. 25 lakh or turnover exceeding Rs. 40 lakh.
31

Limited Liability Partnerships
Particulars
Explanation
30% flat tax rate + 3% education cess
Tax rate
Limits on
Remuneration
to Partners
32
No Minimum Alternate Tax & Dividend Distribution Tax. Alternate Minimum Tax @ 19.06% (18.5% plus 3% cess) is applicable on the book
profits.
On first Rs. 300,000 of book profit or in case of loss Rs.150,000 or at the rate of 90% of book profit, whichever is more
On the balance of book profit at the rate of 60%

NRI Bank Accounts
Features
Type of account
Currency
Tenure of Deposits
Repatriability
Tax deducted at source

on interest earned
Purpose of Account
Joint Holding
33
NRE
NRO
FCNR
Savings, Current, Recurring, Fixed Deposit
Savings, Current, Recurring, Fixed Deposit
Term Deposit only
INR
INR
Any permitted currency i.e. a

foreign currency which is freely
convertible
At the discretion of the bank.
As applicable to resident accounts.
1yr- 5 yrs
Freely Repatriable
Repatriable upto USD 1 million per

financial year subject to documentation
and conditions. Current income like rent,
dividend, pension is repatriable subject
to CA certificate and proof of such nature
of income
Freely Repatriable
Tax free
30% plus surcharge and education cess.
Tax free
To deposit foreign funds received from any:
To deposit
To deposit foreign funds received

from any:
Traveler's cheques
dues earned in India in Rupees
Traveler's cheques
Foreign currency
foreign exchange funds
Foreign currency
Other NRE/FCNR a/c
Other NRE/FCNR a/c
Proceeds of repatriable investments
Proceeds of repatriable
investments
Only with NRIs (a Resident Indian can be a joint

holder only in either or survivor mode)
Indian Residents and NRIs

Only with NRIs
NRI Bank Accounts

Features
Operations by Power
of Attorney in favour
of a resident by the
non-resident account
holder
NRE
Operations thru PoA is restricted to
withdrawals for permissible local
payments or remittance to the account
holder himself through normal banking
channels.
NRO
FCNR

withdrawals for permissible local payments in
rupees, remittance of current income to the
account holder outside India or remittance to
the account holder himself through normal
banking channels.

withdrawals for permissible local
payments or remittance to the
account holder himself through
normal banking channels.
Remittance is subject to the ceiling of USD 1

(one) million per financial year.
Loans
a. In India
i) to the Account
holder
Permitted up to Rs.100 lakhs
Permitted subject to the extant rules (Note 2)
Permitted only up to Rs.100 lakhs
ii) to Third Parties
Permitted subject to conditions (Note 3)
Permitted only up to Rs.100 lakhs
b. Abroad
i) to the Account
holder
Permitted
Not Permitted
(Provided no funds are remitted back to

India and are used abroad only)
Permitted
(Provided no funds are remitted back

to India and are used abroad only)
Not Permitted
(Provided no funds are remitted back to

India and are used abroad only)
34
Permitted
Permitted
(Provided no funds are remitted back
to India and are used abroad only)

NRI Bank Accounts
Features
NRE
NRO
FCNR
i) to the Account
holder
Not Permitted
Not Permitted
Not Permitted
Not Permitted
Not Permitted
c. Foreign Currency
Loans in India
Purpose of Loan
a. In India
i) to the Account
holder
35
i) Personal purposes or for carrying on

business activities.*
Personal requirement and / or business

purpose.(Note 1)
ii) Direct investment in India on nonrepatriation basis by way of contribution

to the capital of Indian firms / companies.

purpose.(Note 1)
iii) Acquisition of flat / house in India for

his own residential use. (Please refer to
para 6(a) of Schedule1 to FEMA 5).

purpose.(Note 1)
Fund based and / or non-fund based

facilities for personal purposes or for
carrying on business activities *. (Please
refer to para 6(b) of Sch. 1 to FEMA 5)

purpose (Note 1)
i) Personal purposes or for carrying on

business activities *
ii) Direct investment in India on nonrepatriation basis by way of
contribution to the capital of Indian
firms / companies
iii) Acquisition of flat / house in India
for his own residential use. (Please
refer to para 9 of Schedule 2 to FEMA
5).
facilities for personal purposes or for
carrying on business activities *.
(Please refer to para 9 of Schedule 2 to
FEMA 5).

NRI Bank Accounts
Features
NRE
NRO
FCNR

facilities for bonafide purposes.
Not permitted.

facilities for bonafide purposes.
b. Abroad
To the account
holder and Third
Parties
*Note:
1. The loans cannot be utilised for the purpose of on-lending or for carrying on agriculture or plantation activities or for investment in real estate business.
2. Subject to usual norms as are applicable to resident accounts, for personal purposes or for carrying on business activities except for the purpose of relending
or carrying on agricultural / plantation activity or for investment in real estate business.
3. Subject to conditions such as
(i) the loans shall be utilised only for meeting borrower's personal requirements and/ or business purpose and not for carrying on agricultural/ plantation
activities or real estate business, or for relending,
(ii) Regulations relating to margin and rate of interest as stipulated by the Reserve Bank from time to time shall be complied with, and
(iii) The usual norms and considerations as applicable in the case of advances to trade/industry shall be applicable for such loans/ facilities
36

Taxation of Trust structure
Trusts
Revocable
Irrevocable
Clubbing at contributor level

(tax at settlor level)
(no tax at trust level)
37
Determinate
Either at trust or
at assessee level
Tax rate as per head of
income
Used for PE/AIF I
Indeterminate / Discretionary
Tax rate at peak
Used for AIF III

Disclaimer
L&T Finance Wealth Management

4th Floor, The Metropolitan, C-26/27, E-Block,
Bandra Kurla Complex, Bandra (East ),
Mumbai 400 051, INDIA
Board: +91 22 6737 2852
Email: LnTPWM@ltcapitalindia.in
Thank You
Disclaimer: This presentation is strictly meant for private circulation and not for public distribution and is being furnished by L&T Capital Markets Limited (LTCML) strictly on a confidential
basis. This presentation and communication is for the personal information of the Authorized Recipient and LTCML will not treat recipients as clients by virtue of their receiving this
presentation. It shall not be photocopied, reproduced or distributed to other person(s) at any time in any form without prior written consent of LTCML. This presentation or communication
does not solicit any action based on the material contained herein. It does not constitute a personal recommendation or take into account the particular investment objectives, financial
situation / circumstances and the particular needs of any specific person who may receive this presentation. The product / strategy / data discussed in the presentation may not be suitable for
all the investors. Further this information also does not construe any investment, legal or tax advice to the recipient. Information and statistical data herein have been extracted from publicly
available information sources and also obtained from sources LTCML believes to be reliable but in no way are warranted by LTCML, its affiliates, directors and officers as to its accuracy or
completeness. The information is compiled by L&T Capital Markets Ltd and while LTCML endeavours to keep the information up to date and correct, it makes no representations or
warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the report for any purpose. Any reliance the recipient may
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consider and independently evaluate whether it is suitable for his / her / their particular circumstances and, if necessary, seek professional, financial, legal and/or tax advice before investing.
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of any Company and/or its affiliates. The views presented may not be sufficient and should not be used independently for the development or implementation of an investment strategy. The
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Tax Hand Book

Income Tax Slab Rates

Income from other sources

Income from House Property (Rental Income)

M. Limited Liability Partnership

NRI Bank Accounts

Taxation of Trust Structures

Residential Status Determination

Section 6 (6) Resident and not

He has been a non-resident in India in 9 out of the 10 preceding previous years; or

Resident and ordinarily resident

Resident & ordinarily resident

Resident but not ordinrariy resident

Private & Confidential . Refer

A citizen of India or person of Indian origin

If an employee is assigned to entities outside India &

Residential Status of Company

The following companies are considered as resident in India

Firm and AOP

Private & Confidential . Refer

Income Tax Slab Rates

Upto Rs. 200,000/- (Basic exemption limit)

Above Rs. 200,000/- upto Rs. 500,000/-

Above Rs. 500,000/- upto Rs. 10,00,000/-

Above Rs. 10,00,000/-

Rates of tax for firms and companies

Basic Tax Rate

Surcharge - if taxable income > Rs. 1

Surcharge - if taxable income > Rs. 10

Education cess on Income tax plus

2. In case of every resident individual aged 80 years or more at any time

Rebate of tax for resident individuals having total income of up to Rs. 5

Private & Confidential . Refer

Speculation Business Income

Income from Capital Gains

Private & Confidential . Refer

Income under the head Salary

So, any income earned in pursuance of an employer-employee

any annuity or pension,

any advance of salary,

Year in which it is due or received, whichever is earlier.

Subject to normal slab rates

Private & Confidential . Refer

Subject to normal slab rates

Taxation of Income from trading in

It is taxed under the head of Non speculation business income

Tax Audit for F&O trading

If turnover > 100 lakh, tax audit u/s 44AB is required

Turnover for F&O trading

The total of positive and negative differences , plus

Turnover for delivery based trading

Gross sale value has to be taken as turnover

Tax Audit for delivery based trading

Private & Confidential . Refer

Business Income contd.

then against short term capital gains,

house property income &

Private & Confidential . Refer

Exceptions Forward contracts and,

which are treated as Non-speculation business income

Private & Confidential . Refer

Year of transfer of capital asset

a share held in a company, or

any other security listed in a recognised stock exchange in India,