• Kandivali West Mumbai 400067, India
  • 022 39167251
  • support@email.com
June 2, 2022

FAQ’s for Computation of Income Tax

by CA Shivam Jaiswal in Income Tax

FAQ’s for Computation of Income Tax

What is the manner of computation of taxable business income under the normal provisions of the Income-tax Law, i.e., in case of a person not adopting the presumptive taxation scheme of section 44AD? ​

Generally, as per the Income-tax Law, the taxable business income of every person is computed as follows:

Particulars          Amount
Turnover or gross receipts from the businessXXXXX
Less : Expenses incurred in relation to earning of the income(XXXXX)
Taxable Business IncomeXXXXX

For the purpose of computing taxable business income in the above manner, the taxpayers have to maintain books of account of the business and income will be computed on the basis of the information revealed in the books of account​.

What is the manner of computation of taxable income in case of a person adopting the presumptive taxation scheme of section 44ADA?

 ​​​​​​​​In case of a person adopting the provisions of sections 44ADA, income will be computed on presumptive basis, i.e. @ 50% of the total gross receipts of the profession. However such person can declare income higher than 50%.In other words, in case of a person adopting the provisions of sections 44ADA​, income will not be computed in normal manner but will be computed @50% of the gross receipts.

In a case where the undisclosed income is represented in the form of investment in asset and such asset is partly from income that has been assessed to tax earlier, then what shall be the method of computation of undisclosed income represented by such und

​As per sub-rule (2) of rule 3 of the Income Declaration Scheme Rules, 2016, where investment in any asset is partly from an income which has been assessed to tax, the undisclosed income represented in form of such asset will be the fair market value of the asset determined in accordance with sub-rule (1) of rule 3 as reduced by an amount which bears to the value of the asset as on the 1.6.2016, the same proportion as the assessed income bears to the total cost of the asset. This is illustrated by an example as under:
Investment in acquisition of asset in previous year 2013-14 is of Rs.500 out of which Rs.200 relates to income assessed to tax in A.Y. 2012-13 and Rs.300 is from undisclosed income pertaining to previous year 2013-14. The fair market value of the asset as on 01.06.2016 is Rs.1500.

What is the manner of computation of taxable business income in case of a person adopting the presumptive taxation scheme of section 44AD?

​​​In case of a person adopting the provisions of section 44AD, income will be computed on presumptive basis, i.e., @ 8% of the turnover or gross receipts of the eligible business for the year. Income shall be calculated at rate of 6% in respect of total turnover or gross receipts which is received by an account payee cheque or draft or use of electronic clearing system or through such other electronic mode as may be prescribed​. In other words, in case of a person adopting the provisions of section 44AD​, income will not be computed in normal manner as discussed in previous FAQ (i.e., Turnover less Expense) but will be computed @ 8%/6% of the turnover. Income at higher rate, i.e., higher than 8% can be declared if the actual income is higher than 8%. ​

What is the effective date of enhancement of limit of gratuity from Rs 10 lakh to 20 lakh for purpose of tax exemption computation under section 10(10)(ii)?FAQs on Salary Income

​​​The exemption limit under section 10(10)(ii) for the employees, who are covered under Payment of Gratuity Act, 1972, has been enhanced from Rs. 10,00,000 to Rs. 20,00,000 vide notification S.O. 1420 (E) dated 29 March 2018 notified by Ministry of Labour and Employment. The exemption limit under section 10(10)(iii) for the employees, who are not covered under the Paym​ent of Gratuity Act, 1972, is Rs. 20,00,000 as enhanced by Notification No. SO 1213(E), dated 08-03-2019.

What should I do on receiving the notice from income-tax department for the payment of advance tax, if my actual income is more than what is determined by the tax officer? ​

​Assessing Officer can serve an order requiring the assesse to pay advance tax, if he is of the opinion that such person is liable to pay advance tax.
However, if you feel that year advance tax liability is lower than the liability calculated by the income-tax officer; you may file an estimation of the income and amount of tax payable thereon Such information should be submitted in Form No. 28A to the Assessing Officer.Alternatively, In case the tax demand calculated by the Income-tax officer is lower than the tax liability computed by you, you should pay the advance tax as per your own computation. No intimation to Income-tax officer is required to be made in such cases.

Whether it is mandatory to provide ISIN details and scrip-wise computation of Long Term Capital Gains (LTCG) arising on sale of Shares/Mutual Funds units on which STT has been paid?

​​The tools for computation of LTCG under sections 112A and 115AD have been provided in the departmental utility for the convenience of taxpayers. These are optional tools designed for computation of the final figures of LTCG, which is then populated in the respective items in Schedule CG. Alternatively, the taxpayers can themselves compute the aggregate long term gain or loss manually, and input the same directly in the respective items in Schedule CG.

Is there any limit of income below which I need not pay tax?

 ​​​At this moment (i.e., for the financial year 2022-23​) Individual, HUF, AOP, and BOI having income below Rs. 2,50,000 need not pay any Income-tax. In respect of resident individuals of the age of 60 years and above but below 80 years, the basic exemption limit is Rs. 3,00,000 and in respect of resident individuals of 80 years ​and above, the limit is Rs. 5,00,000. For other categories of persons such as co-operative societies, firms, companies and local authorities, no basic exemption limit exists and, hence, they have to pay taxes on their entire income chargeable to tax.

Income-tax is levied on the income of every person. As per Income-tax Law what constitutes income?

​Under the Income-tax Law, the word income has a very broad and inclusive meaning. In case of a salaried person all that is received from an employer in cash, kind or as a facility is considered as an income. For a businessman his net profit will constitute his income. Income may also flow from investments in the form of Interest, Dividend, Commission, etc. Further, income may be earned on account of sale of capital assets like building, gold, etc. Income shall be computed as per relevant provision of Income-tax Act, 1961 which lays down detail condition for computation of income chargeable to tax under various heads of income​.

How to round off total income before computing tax liability?

​​​​​​​​As per section 288A​​, total income computed in accordance with the provisions of the Income-tax Law, shall be rounded off to the nearest multiple of ten. Following points should be kept in mind while rounding off the total income. First any part of rupee consisting of any paisa should be ignored. After ignoring paisa, if such amount is not in multiples of ten, and last figure in that amount is five or more, the amount shall be increased to the next higher amount which is in multiple of ten and if the last figure is less than five, the amount shall be reduced to the next lower amount which is in multiple of ten and the amount so rounded off shall be deemed to be the total income of the taxpayer.​
Illustration for better understanding
If the taxable income of Mr. Keshav is Rs. 2,52,844.99, then first paisa shall be ignored, i.e., 0.99 paisa shall be ignored) and  the remaining amount of Rs. 2,52,844 shall be rounded off to Rs. 2,52,840 (since last figure is less than five). If the total income is Rs. 2,52,845 or Rs. 2,52,846.01, then it shall be rounded off to Rs. 2,52,850 (since the last figure is five or above).​

How to compute the total tax liability?

​​​​​After ascertaining the total income, i.e., income liable to tax, the next step is to compute the tax liability for the year. Tax liability is to be computed by applying the rates prescribed in this regard. Following table will help in understanding the manner of computation of the total tax liability of the taxpayer.
Computation of total income and tax liability for the year

Particulars          Amount
Income from salary XXXXX  
Income from house propertyXXXXX  
Profits and gains of business of profession XXXXX  
Capital gainsXXXXX  
Income from other sourcesXXXXX  
Total of head wise incomeXXXXX  
Set off of losses               XXXXX  
Gross Total Income        XXXXX  
Less : Deductions under Chapter VI-A (i.e., under section 80C to 80U))                  (XXXXX)  
Total Income (i.e., taxable income)                                         XXXXX  
Tax on total income to be computed at the applicable rates (for rates of tax, refer “Tax Rate” section)XXXXX  
Less : Rebate under section 87A (discussed in later FAQ)              (XXXXX)  
Tax Liability After RebateXXXXX  
Add: Surcharge (discussed in later FAQ)XXXXX  
Tax Liability After Surcharge       XXXXX  
Add: Health & Education cess @ 4% on tax liability after surcharge           XXXXX  
Tax liability before rebate under sections 86, section 89, sections​ 90, 90A and 91XXXXX  
Less : Rebate under sections 86,  section 89, sections​ 90, 90A and 91(if any)                (XXXXX)  
Tax liability for the year before pre-paid taxes   XXXXX  
Less: Prepaid taxes in the form of TDS, TCS and advance tax       (XXXXX)  
Tax payable/Refundable             XXXXX  

Rebate under section 86 is available to a member of association of persons (AOP) or body of individuals (BOI) in respect of income received by such member from the AOP/BOI.
Rebate (i.e., relief) under section 89 is available to a salaried employee in respect of sum received towards arrears of salary, gratuity, etc.
Rebate under sections​ 90, 90A and 91​ is available to a taxpayer in respect of double taxed income, i.e., income which is taxed in India as well as abroad.​

What is the meaning of presumptive taxation scheme?

​​​​​​As per sections 44AA of the Income-tax Act, 1961, a person engaged in business or profession is required to maintain regular books of account under certain circumstances. To give relief to small taxpayers from this tedious work, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, sections 44ADA, sections 44AE., Section 44BB and Section 44BBB​

A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from tedious job of maintenance of books of account. For small taxpayers, the Income-tax Act, 1961 has framed presumptive taxation schemes as given below:

Section 44AD : Computation of income on estimated basis in the case of taxpayers [being a resident individual, resident Hindu undivided family or resident partnership firm (not being a limited liability firm] engaged in certain business subject to certain conditions.

  • Section 44ADA : Computation of professional income on estimated basis for assessee being a resident in India and engaged in a profession referred to in section 44AA(1) subject to certain conditions.
  • Section 44AE : Computation of income on estimated basis in the case of taxpayers (being an Individual, HUF, AOP, BOI, Firm, Company, Co-operative society or any other person may be resident or non-resident) engaged in the business of plying, leasing or hiring goods carriages, subject to certain conditions.
  • Section 44B : Taxation of shipping profits derived by a person being a non-resident in India, subject to certain conditions.
  • Section 44BB :  Computation of taxable income of a person being a non-resident (may be an India citizen or a foreign citizen) from activities connected with exploration of mineral oils, subject to certain conditions.
  • Section 44BBA :  Computation of income in respect of foreign airlines, subject to certain conditions.
  • Section 44BBB :  Computation of profits and gains of foreign companies engaged in the business of civil construction, subject to certain conditions.

What is marginal relief and how it is computed?

The concept of marginal relief is designed to provide relaxation from levy of surcharge to a taxpayer where the total income exceeds marginally above Rs. 50 lakh, Rs. 1 crore, Rs. 2 crore, Rs. 5 crore or Rs. 10 crore, as the case may be. Thus, while computing surcharge, in case of taxpayers (i.e. Individuals/HUF/AOP/BOI/artificial juridical person) having total income of more than Rs. 50 lakh marginal relief shall be available in such a manner that the net amount payable as income-tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 50 lakh by more than the amount of income that exceeds Rs. 50 lakh.

In case of a company, surcharge is levied @ 7% (2% in case of foreign company) on the amount of income-tax if the total income exceeds Rs. 1 crore but does not exceed Rs. 10 crore and @ 12% (5% in case of foreign company) on the amount of income-tax if total income exceeds Rs. 10 crore. Hence, in case of company whose total income exceeds Rs. 1 crore but does not exceeds Rs. 10 crore, marginal relief will be computed as discussed above, but in the case of company having total income above Rs. 10 crore marginal relief is available in such a manner that the net amount payable as income-tax and surcharge shall not exceed the total amount payable as income-tax and surcharge on total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore.

Illustration for better understanding
Mr. Mukesh is salaried employee (age 40 years). His total income from salary for the year 2022-23 amount to Rs. 51,00,000. Will he liable to pay surcharge, if yes, then how much and will he get the benefit of margin relief?
Surcharge is additional tax levied on the amount of income-tax. In case of taxpayers (i.e. Individuals/HUF/AOP/BOI/artificial juridical person), surcharge is levied @ 10% on the amount of income-tax where the total income of the taxpayer exceeds Rs. 50 lakh. In this case, total income of Mr. Mukesh exceeds Rs. 50 lakh and hence he will be liable to pay surcharge. Marginal relief is available in cases where the total income is slightly above Rs. 50 Lakh. The Computation of normal tax liability (i.e. liability without marginal relief) and tax liability under marginal relief (i.e. liability after marginal relief) will be as follows:

(1)    Normal tax liability (i.e. without marginal relief)

ParticularsAmount
Tax on total income before surcharge (*)13,42,500  
Add: Surcharge (@10% on the amount of income-tax of Rs. 13,42,500    1,34,250  
Tax liability after surcharge (i.e., normal tax liability)14,76,750  

The normal tax rates for the financial year 2022-23 applicable to an individual below the age of 60 years are as follows:

  • Nil upto income of Rs. 2,50,000
  • 5% for income above Rs. 2,50,000 but upto Rs. 5,00,000
  • 20% for income above Rs. 5,00,000 but upto Rs. 10,00,000
  • 30% for income above Rs. 10,00,000.

Apart from above rates, cess will be computed separately.

(2)    Tax liability under marginal relief (i.e. after marginal relief)

ParticularsAmount
Tax on Rs. 50 lakh (at the above discussed rates)              13,12,500
Add: Income above Rs. 50 lakh 1,00,000
Tax liability under marginal relief14,12,500  
Total14,12,500

Conclusion
Normal tax liability (i.e. without marginal relief) comes to Rs. 14,76,750 and tax liability under marginal relief comes to Rs. 14,12,500. It can be observed that tax liability under marginal relief is lower and, hence, Rs. 14,12,500 will be the tax liability before cess. Total tax liability will be computed as follows:

ParticularsAmount
Tax liability after marginal relief (*)14,12,500  
Add: Health & education cess @ 4%56,500
Tax liability14,69,000
In this case, surcharge paid by Mr. Mukesh will be Rs. 70,000 computed as follows:   
Tax Liability(before cess) on51,00,000
after considering the provisions of marginal relief14,12,500
Tax liability (before cess) at normal rates on       51,00,000
 if surcharge is not levied13,42,500
Surcharge (i.e. increase in tax liability)   70,000

Illustration for better understanding
Mr. Raja is businessman (age 35 years). His total income for the year 2022-23 amounted to Rs. 1,02,00,000. Will he be liable to pay surcharge, if yes, then how much and will he get the benefit of marginal relief?
Surcharge is additional tax levied on the amount of income-tax. In case of taxpayers (i.e. Individuals/HUF/AOP/BOI/artificial juridical person), surcharge is levied @ 10% on the amount of income-tax where the total income of the taxpayer exceeds Rs. 1 crore. In this case, total income of Mr. Raja exceeds Rs. 1 crore and hence he will be liable to pay surcharge. Marginal relief is available in cases where the total income is slightly above Rs. 1 crore. The Computation of normal tax liability (i.e. liability without marginal relief) and tax liability under marginal relief (i.e. liability after marginal relief) will be as follows:

(1)    Normal tax liability (i.e. without marginal relief) 
Tax on total income before surcharge (*)28,72,500
Add: Surcharge (@15% on the amount of income-tax of Rs. 28,72,500 )4,30,875
Tax liability after surcharge (i.e., normal tax liability)33,03,375
  • Normal tax liability (i.e. without marginal relief)

The normal tax rates for the financial year 2022-23 applicable to an individual below the age of 60 years are as follows:

  • Nil upto income of Rs. 2,50,000
  • 5% for income above Rs. 2,50,000 but upto Rs. 5,00,000
  • 20% for income above Rs. 5,00,000 but upto Rs. 10,00,000
  • 30% for income above Rs. 10,00,000.

Apart from above rates, cess will be computed separately.

  • Tax liability under marginal relief (i.e. after marginal relief)
Tax on Rs. 1 crore (at the above discussed rates)28,12,500
Add: Surcharge on income-tax @ 10% (if income is Rs. 1 crore)2,81,250
Add: Income above Rs. 1 crore2,00,000
Tax liability under marginal relief32,93,750

Conclusion

Normal tax liability (i.e. without marginal relief) comes to Rs. 33,03,375 and tax liability under marginal relief comes to Rs. 32,93,750. It can be observed that tax liability under marginal relief is lower and, hence, Rs. 32,93,750 will be the tax liability before cess. Total tax liability will be computed as follows:                    

 Rs.
Tax liability after marginal relief (*)32,93,750
Add: Health & education cess @ 4%1,31,750
Tax liability34,25,500

Illustration for better understanding
Mr. Karan is a businessman (age 35 years). His total income for the year 2022-23 amounted to Rs. 1,07,00,000. Will he be liable to pay surcharge, if yes, then how much and will he get the benefit of marginal relief?
Surcharge is additional tax levied on the amount of income-tax. In case of taxpayers (i.e. Individuals/HUF/AOP/BOI/artificial juridical person) surcharge is levied @ 15% on the amount of income-tax where the total income of the taxpayer exceeds Rs. 1 crore. In this case, total income of Mr. Karan exceeds Rs. 1 crore and hence he will be liable to pay surcharge. Marginal relief is available in cases where the total income is slightly above Rs. 1 crore. The computation of normal tax liability (i.e. liability without marginal relief) and tax liability under marginal relief (i.e. liability after marginal relief) will be as follows :

(1) Normal tax liability (i.e. without marginal relief)

Tax on total income before surcharge (*)30,22,500
Add: Surcharge (@15% on the amount of income-tax of Rs. 30,22,500)4,53,375
Tax liability after surcharge (i.e., normal tax liability)34,75,875

Tax rates are discussed in previous illustration.

(2)    Tax liability under marginal relief (i.e. after marginal relief)

Tax on Rs. 1 crore (at the rates discussed in previous illustration)28,12,500
Add: Income above Rs. 1 crore7,00,000
Tax liability under marginal relief35,12,500

Conclusion

Normal tax liability (i.e. without marginal relief) comes to Rs. 34,75,875 and tax liability under marginal relief comes to Rs. 35,12,500. It can be observed that normal tax liability (i.e. without marginal relief) is lower and, hence, Rs. 34,75,875 will be the tax liability before cess. Total tax liability will be computed as follows:

 Rs.
Normal tax liability i.e. tax liability after surcharge of Rs. 4,53,37534,75,875
Add: Health & education cess @ 4%1,39,035
Tax liability36,14,910

How to compute income from a property which is self-occupied for part of the year and let out for part of the year?

​At times a property may be let-out for some time during the year and is self-occupied for the remaining period (i.e., let-out as well as self occupied during the year). For the purpose of computation of income chargeable to tax under the head “Income from house property”, such a property will be treated as let-out throughout the year and income will be computed accordingly. However, while computing the taxable income in case of such a property, actual rent will be considered only for the let-out period.

How to compute income from self occupied property?

​​​​​​​​A self-occupied property means a property which is occupied throughout the year by the taxpayer for his residence. Income chargeable to tax under the head “Income from house property” in case of a self-occ​upied property is computed in following manner :

Particulars                                                                                                                                    Amount​
Gross annual value                                                                                                                      Nil
Less:- Municipal taxes paid during the year                                                                         Nil
Net Annual Value (NAV)                                                                                                            Nil
Less:- Deduction under section 24        
➣Deduction under section 24(a) @ 30% of NAV       
➣Deduction under section 24(b​) on account of interest on borrowed capital                                                                     
Nil
Income from house property                                                                                                    XXXX

From the above computation it can be observed that “Income from house property” in the case of a self occupied property will be either Nil (if there is no interest on housing loan) or negative (i.e., loss) to the extent of interest on housing loan. Deduction in respect of interest on housing loan in case of a self-occupied property cannot exceed Rs. 2,00,000 or Rs. 30,000, as the case may be (discussed later). Deduction of municipal taxes paid during the year will not be allowed in case of self occupied property.

When do I have to pay the taxes on my income?

​​​​​The taxes on income can be finalized only on the completion of the previous year. However, to enable a regular flow of funds and for easing the process of collection of taxes, Income-tax Act has provisions for payment of taxes in advance during the year of earning itself or before completion of previous year. It is also known as Pay as your earn concept. Taxes are collected by the Government through the following means voluntary payment by taxpayers into various designated Banks such as Advance tax, Self-Assessment tax, etc.

  •  Taxes deducted at source
  •  Taxes collected at source ​​
  •  Equalisation Levy​ ​​

What is the procedure for computing advance tax?

​ ​Advance tax is liable to be paid in every case where the advance tax payable is Rs. 10,000 or more. A Resident Senior citizen not having any income from business/profession, is not liable to pay advance tax. An assessee who opts for the presumptive taxation scheme under section​ 44AD and section 44ADA is required to pay advance tax related to such business. However, advance tax can be paid during the financial year (immediately preceding to the assessment year) on or before March 15.

The computation of advance tax can be done in the following manner:

Income from salariesxxx
Income from house propertyxxx
Income from Capital Gainsxxx
Income from Business or Professionxxx
Income from other sourcesxxx
Gross Total Incomexxx
Less: Deductions under sections 80C to 80Uxxx
Net Incomexxx
Income Tax on Net Incomexxx
Less: Rebate under section 87A​xxx
Balancexxx
Add: Surcharge, if anyxxx
Totalxxx
Add: Health and Education Cess @4%xxx
Totalxxx
Less: Relief under section 89, 90, 90A or 91​xxx
Less: Pre-paid taxesxxx

(i.e. advance tax, self -assessment tax, TDS, TCS, MAT/AMT credit Advance Tax Liability.(The Advance tax calculator is available on http://www.incometaxindia.gov.in)

Under how many heads the income of a taxpayer is classified?

S​ection 14​ of the Income-tax Act has classified the income of a taxpayer under five different heads of income, viz.:

  • Salaries
  • Income from house property
  • Profits and gains of business or profession
  • Capital gains
  • Income from other sources​​

What is surcharge and how it is computed?

Surcharge is an additional tax levied on the amount of income-tax. In case of individuals/HUF/AOP/BOI/artificial juridical person, surcharge is levied @ 10% on the amount of income-tax where the total income of the taxpayer exceeds Rs. 50 lakh but doesn’t exceeds Rs. 1 crore. Surcharge is levied @ 15% of income-tax where the total income of the taxpayer exceeds Rs. 1 crore but doesn’t exceeds Rs. 2 crore.(*).Surcharge is levied @ 25% of income-tax where the total income of the taxpayer exceeds Rs. 2 crore but doesn’t exceeds Rs. 5 crore.Surcharge is levied @ 37% of income-tax where the total income of the taxpayer exceeds Rs. 5 crore. Note: The surcharge rate for AOP with all members as a company, shall be capped at 15%.

In case of Firm, and local authority surcharge is levied at 12% if total income exceeds Rs 1 crore.​In case of co-operative society, surcharge is levied at 7% if total income exceeds Rs 1 crore but doesn’t exceeds Rs. 10 crore and surcharge is levied at 12% if total income exceeds Rs 1 crore.In case of a domestic company surcharge is levied @ 7% on the amount of income-tax if the total income exceeds Rs. 1 crore but does not exceed Rs. 10 crore and @ 12% on the amount of income-tax if total income exceeds Rs. 10 crore (*).In case of a foreign company surcharge is levied @ 2% on the amount of income-tax if the total income exceeds Rs. 1 crore but does not exceed Rs. 10 crore and @ 5% on the amount of income-tax if total income exceeds Rs. 10 crore (*).(*) A taxpayer can claim marginal relief from the amount of surcharge, subject to certain conditions. Refer to next FAQ for concept of marginal relief.

Illustration for better understanding

Mr. Kapoor is a doctor, his total income for the year amounted to Rs. 44,00,000. Will he be liable to pay surcharge, if yes, then how much?
Surcharge is additional tax levied on the amount of income-tax. In case of individuals surcharge is levied @ 10​% on the amount of income-tax where the total income of the taxpayer exceeds Rs. 50 lakh. In this case, total income of Mr. Kapoor is below Rs. 50 lakh, hence, he will not be liable to pay surcharge. ​

When Assessing Officer is​ liable to determine the Advance tax liability?

​​If a taxpayer who has a legal obligation to pay advance tax fails to make payment for advance tax or advance tax is lower than the correct amount AO may pass an order asking the taxpayer to pay tax on assessee’s current year income .Such order shall clearly specify the amount payable and in number of instalments the same needs to be paid.Such order should be passed anytime during the previous year but before 1st March, i.e., by 28th February

Computation by the Assessing Officer

Assessing Officer can serve an order requiring the assesse to pay advance tax if he is of the opinion that such person is liable to pay advance tax or the tax paid is lower. In such cases, the Officer will take the higher of following incomes and calculate the tax as per prevailing rate of income-tax:-​

  • The total income of the latest previous year in respect of which Officer has assessed income, i.e., the year for which an assessment has been completed by the Income-tax Officer,       or
  • The total income declared by the assesse in any return after the year of assessment by officer., i.e. Any income furnished by the assessee in Income-tax return for any previous year after 28 Record

What is the difference between gross total income and total income?

​Total Income is the income on which tax liability is determined. It is necessary to compute total income to ascertain tax liability. secti​on 80C to 80U p​rovides certain deductions which can be claimed from Gross Total Income (GTI). After claiming these deductions from GTI, the income remaining is called as  Total Income. In other words, GTI less Deductions (under secti​on 80C to 80U) = Total Income (TI). Total income can also be understood as taxable income. Following table gives a better understanding of the difference between GTI and TI :

Computation of gross total income and Taxable Income

ParticularsAmount
Income from salaryXXXXX
Income from house propertyXXXXX
Profits and gains of business or professionXXXXX
Capital gainsXXXXX
Income from other sourcesXXXXX
Gross Total IncomeXXXXX
Less : Deductions under Chapter VI-A (i.e. under s​ection 80C to​​​ 80U)XXXXX
Total Income (i.e., taxable income)XXXXX

Most of my income is given away in charity and I am left with just enough money to meet my personal requirements. What will be considered as my income?

​​​​​​​​What is done after the income is earned by you will not give you tax exemption. However, contribution to approved institutions will give you the benefit of deduction from taxable income under section 80G​ subject to limits specified therein.

In case unlisted equity shares are acquired or transferred by way of gift, will, amalgamation, merger, demerger, or bonus issue etc., how to report the “cost of acquisition” and “sale consideration” in the relevant column?

You may enter zero or the appropriate value against “cost of acquisition” or “sale consideration” in such cases. Please note that the details of unlisted equity shares held during the year are required only for the purpose of reporting. The quantitative details entered in this column are not relevant for the purpose of computation of total income or tax liability.

What are the circumstances under which assessment under section 147 i.e. income escaping assessment can be carried out?

 If any income of an assessee has escaped assessment for any assessment year, the Assessing Officer may, subject to the new provisions of sections 148 to 153, assess or reassess such income and also any other income which has escaped assessment and which comes to his notice subsequently in the course of the proceedings, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for such assessment year. It is imperative to note that once assessment or reassessment or re-computation has started, the Assessing Officer is empowered to assess or reassess the income which has escaped assessment and which comes to his notice subsequently in the course of the proceeding under this procedure notwithstanding that the procedure prescribed in new section 148A was not followed before issuing such notice for such income.

My daughter stays in USA. She owns a house in India and has let it out. She has asked tenants to pay rent to me. She has not received any rent. Is she still liable to tax? What if she transfers the house to me?

 ​​​​​Rental income is charged to tax in the hands of the owner of the property. Your daughter is the owner of the house and, therefore, she is liable to pay tax, even though you receive rent. If the house is transferred to you, then you will become the owner and you will have to pay Income-tax on the rental income.​

What is gross total income?

​​Total income of a taxpayer from all the heads of income (as discussed in previous FAQ) is referred to as Gross Total Income.

What is rebate under section 87A for F.Y 2022-23 and who can claim it? ​​​​​​​​​

An individual who is resident in India and whose total income does not exceed Rs. 5,00,000 is entitled to claim rebate under section 87A​. Rebate under section 87A is available in the form of deduction from the tax liability. Rebate under section 87A​  will be lower of 100% of income-tax liability or Rs. 12,500. In other words, if the tax liability exceeds Rs. 12,500, rebate will be available to the extent of Rs. 12,500 only and no rebate will be available if the total income (i.e. taxable income) exceeds Rs. 5,00,000.

Can I claim deduction for my personal and household expenditure while calculating my taxable income or profit?

No, you cannot claim deduction of personal expenses while computing the taxable income. While computing income under various heads, deduction can be claimed only for those expenses which are provided under the Income-tax Act.

Enter your email address:

Subscribe to faceless complainces