Basic Concepts and Rate of Tax

Why taxes: They are major source of revenue for the Government

Power to Levy taxes comes from Constitution of India

India has a Federal Tax structure - where both Central and State govt could levy taxes (Seventh Schedule to Indian C
Union List
State List
Concurrent List

Types of taxes: Direct and Indirect taxes -

Direct Taxes - It is levied on income or wealth of the person. So the burden is on the person paying the tax

Indirect Taxes - It is levied on price of goods or services supplied. Here the ultimate burden is on the consumer. The

Components of Income tax Law:

a) Income Tax Act, 1961 - 1 to 298 sections (w.e.f. 1st April 1962)
b) Finance Act - Finance Minister introduced Finance bill in parliament's budget session. When Finance bill is pased
c) Rules - which deals with practical aspects
d) Circulars / Notifications
e) Legal decisions of Court Decisions made by High Court -
Decisions made by Supreme Co
Steps involved in computing Income Tax:
Few Key terms;
a) Previous year and assessment year
Income earned during previous year is taxable in the immediately following year which is the assessment year

b) Assessee: The person by whom tax or any other sum of money is payable under this Income tax act

c) Person: Covers i) Individual, b) HUF, c) Company, d) Firm / LLP, e) Association of persons (AOP), Body of individual

Previous Year?
Year in which you earn the income
FY 2021-22 - April 2021 to March 2022
Assessment Year?
Year in which you file returns and income gets assessed by the department
For FY 2021-22- FY 2022-23 is the assessment year

Individuals
HUF
Firm / LLP - 30%
Companies
Domestic companies - 30% generally
If their turnover < 400cr - 25%

Foreign companies - 40%

Individuals?

0 to 2.5Lakhs -
2.5 to 5 Lakhs 5
5 to 10 lakhs 20
> 10 lakhs 30

Resident senior citizens i.e. 60 years or more

0 to 3 lakhs -
3 to 5 lakhs 5
5 to 10 lakhs 20
> 10 lakhs 30

Resident super senior citizens i.e. 80 years or more

0 to 5 lakhs -
5 to 10 lakhs 0
> 10 lakhs 0

4% Health and education cess

This is applied on Basic Tax payable

10 lakhs
Basic tax 112,500
HEC @4% 4,500
 Individuals:
0 to 50 lakhs No surcharge
50 to 1 crore 0
1 to 2 crore 0
2 to 5% 0
>5 0

Flat rate applied on basic

Basic Tax
Surcharge applied as % of basic tax
Sub-total
HEC applied on (basic tax + surcharge)

Section 87A- Rebate

if a resident individual has a total income of less than 5 lakhs:

a) Actual tax payable (or)

b) 12,500
whichever is higher is given as rebate

Marginal Relief:
Comes in picture, whenver there is application of surcharge

50 lakhs
Slab Income Rate Tax
0 to 2.5L 250,000 - -
2.5 to 5 L 250,000 5 12,500
5 L to 10 L 500,000 20 100,000
10 to 50L 4,000,000 30 1,200,000
Total Basic Tax 1,312,500
Add: HEC 52,500
Total tax payable 1,365,000

Marginal Reflief - Additional tax payable cannot exceed the additional income

Calculate tax payable - 10,100,000

Individual - 40 years
Slabs Income under the slab Tax Rate Tax amount
0 to 2.5L 250,000 - -
2.5 to 5L 250,000 5 12,500
5 to 10L 500,000 20 100,000
> 10L 9,100,000 30 2,730,000
Basic Tax 2,842,500
Add: Surcharge
@15 426,375
3,268,875
Add: HEC @4% 130,755
Total tax 3,399,630
Step2: Tax payable on 1 crore
Slabs Income under the slab Tax Rate Tax amount
0 to 2.5L 250,000 - -
2.5 to 5L 250,000 5 12,500
5 to 10L 500,000 20 100,000
> 10L 9,000,000 30 2,700,000
Basic Tax 2,812,500
Add: Surcharge @
10% 281,250
Sub-total 3,093,750

Step 3:
Additional tax payable - Step 1 (tax on 1.01 crore)
Less: Step 2( tax on 1 crore)
32,68,875 Less 30,93,750 =
175,125

Step4: Additional income made by the person:

Difference between 1.01 crores and 1 crore
100,000

Step5: Step 3 Less Step4

Additional tax payable less the additional income
1,75,125 less 1,00,000 = 75,125

Step 6:
Gross tax payable 3,268,875
Less: Marginal relief - 75,125
Net tax liability 3,193,750
Add: 4% Health and education cess 127,750
Total tax payable 3,321,500
 Restrict the additional tax payable to the additional income made by the person
Applying Marginal relief before you apply health and education cess @ 4%

2,01,00,000

5,01,00,000

Residential Status?
It has no connection with citizenship / origin
It is purely determined by number of days of stay in India

How residential status is determined for individual categories of taxpayers?

A person is resident in India by fulfilling any of two scenarios

Stage1:
a) stays in India for 182 days or more in the year b) staying for 60 days or more

365 days or more in the preced

Second condition is not applica

a) Indian citizen who leaves ind

b) Indian citizen who comes ba

Sub-categorisation of resident individuals:

A. Resident & Ordinarily resident B. Resident & Not ordinarily resident

a) Non-resident in India for 9 out of 10 years

A person who doesn’t fit into
both the criterias as given in the right (or)

b) his stay in India in 729 days or less in the last 7 p

A. Non-resident
B. Resident & Oridinarily resident - They need to pay tax on global income
C. Resident & Not-ordinarily resident

Australian cricketer who plays cricket in India for 100 days every years in the last 10 years

Stage1: Whether resident or not for the current year:

Possibility 1 ; 182 days or more stay in current year - Not satisfied

Possibility 2: 60 days or more in the current year + 365 days or more in the preceding 4 years
Current year - 100 days
Last 4 years - 400 days ( 4 years * 100 days every days)

Since second crietria is satisfied, Brett lee will be categorized as a resident

Stage2: Whether he is ordinarily resident / not ordinarily resident?

Not ordinarily resident:

a) Non-resident for 9 out of 10 years

b) by staying for 729 days or less in preceding 7 years

Since stay of Brett lee is 700 days only in the last 7 years,
he will be categorized as a resident and not-ordinarily resident

Deemed Resident in India (you will be a resident & not ordinarily resident)

a) Indian citizens
b) Should have total income exceeding 15 lakhs (apart from foreign sources)

i) if this income is not subject to tax in any other country in which they are residing

(or)

ii) by staying in India for 120 days or more in the year

And
365 days or more in the last 4 years

HUF If the affairs are managed wholly or partly in India = Resident in India
Dependent on Karta - you will categorize them as ordinary / not-ordinarily re

Firm / LLP: If the affairs are managed wholly or partly in India = Resident in India

Companies: Two ways in which it can be a resident:

a) Indian compay
(or)
b) Place of effective management

Scope of Total Income

2.01 crores
 5.01 crores

Resident & Ordinarily resident Resident & Not ordinarily resid

Resident for atleast 2 out of 10 years Non resident for 9 out of 10 ye

50,100,000
0-2.5 lak 250,000 - -
2.5 to 5 la 250,000 5 12,500
5 to 10lak 500,000 20 100,000
> 10 Lakhs 49,100,000 30 14,730,000
Basic Tax 14,842,500
Surcharge @ 37% 5,491,725
Sub-total 20,334,225

Step 3 : incremental tax liability

1,818,600

Step 4: incremental income - 1,00,000

Step 5: Marginal relief = 18,18,600 less 1,00,000 = 17,18,600

Sub-total 20,334,225
Less: marginal
relief - 1,718,600
18,615,625
Add: HEC @ 4% 744,625
Total tax liability 19,360,250

Stage1: Resident vs Non-resident

Two ways possible

Way 1 : 182 days or more in a particular year

Way2:
60 days or more in a year
+
365 days or more in preceding 4 years

Stage 2: Resident oridinarily resident vs Resident Not ordinarily resident

Resident & Not oridiraily resident:

Way 1: Non-resident for 9 out of 10 previous years

Way 2: Stay in India for 729 days or less in preceding 7 years

Deemed Resident?
a) Indian citizens
b) Income of more than 15 lakhs (apart from income earned from foreign sources)

i) Where this income is not subjected to tax in the country of their reisdence
(or)
i) Stay in India for 120 or more
+
365 days or more in the preceding 4 years

Scope of Total income of person:

Resident & ordinarily resident Resident & not ordinarily resid

He will pay tax on his global income a) Income received / deemed t

b) Income accrued / deemed to
a) Income accuring / deemed to accrue in India c) Income accrued / received o
b) Income received / deemend to be received in India from a business / profession se
c) Income accruing / deemed to accrue outside India
d) Income received / deemed to be received outside India

Accrued ? When the transaction happen

When the receipt / payment happens

Received ? We are talking about first point of receipt

Deemed to be accrue in India?

a) Salary income:
Gets taxed in India, if it relates to employment done in India

Salary paid by Govt. of India to their Indian citizens employed outside India

b) Dividend paid by Indian company

c) Income from assets / capital assets located in India

Income Resident OR Resident NOR

Sale of shares of Indian,

received in Germany Taxed Taxed
Dividend from japanese
company, received in
Japan Taxed Not taxable

Rental income from

London property,
received in London bank
account, but later on
transferred to India Taxable Not taxable

Divided from an Indian

company Taxable Taxable
(deemed to acccrue in India)

Income from a land in

Gujarat Taxable Taxable

Interest from bonds in

UK 10,000 - 50% received
in India 10,000 5,000
Income from business in
Chennai (50% received in
India) 20,000 20,000
Gain from sale of shares
in India, received in
London 20,000 20,000
Dividend from British
company received in
London 5,000 -
Capital gains from
Germany shares, 50%
received in India 40,000 20,000
 Income from business in
Germany, controlled
from Delhi - 70,000
(40,000 is received in
India) 70,000 70,000

Business in Delhi,
managed from London 15,000 15,000

rent from London

property, credited in
London, later on brought
to India 50,000 -

5 Heads of Income:
a) Salary
b) House Property
c) Profit / gains from business / profession
d) Capital gains
e) Income from other sources
enth Schedule to Indian Constitution)

n paying the tax

is on the consumer. The supplier just acts as an agent of Govt. in collection taxes

hen Finance bill is pased by both houses and gets assent of President, it becomes Finance Act

ons made by High Court - is binding only on that particular jurisdiction

ons made by Supreme Court - is binding on all the assesses in India

Head of Income:
1. Salary
2. Income from House Property
3. Income from business or professi
4. Capital Gains - sell a asset of capi
5. Income from other sources
he assessment year

come tax act

(AOP), Body of individuals BOI, f) Local authority, g) Aritifical juridical person

% generally
 500,000
50,000
550,000
22,000

51 lakhs
Slab Income Rate Tax
0 to 2.5L 250,000 - -
2.5 to 5 L 250,000 5 12,500
5 L to 10 L 500,000 20 100,000
10 to 50L 4,100,000 30 1,230,000
Total Basic Tax 1,342,500
Surcharge @ 10% 134,250
Sub-total 1,476,750
Add: HEC 59,070
Total tax payable 1,535,820 Less: Marginal Relief

Additional tax outflow 170,820

Incremental income 100,000

10,000,000 Marginal relief? 70,820
Differential tax 3,399,630
Differential income 100,000
Marginal relief 3,299,630

Origial tax payable 3,399,630

Less: marginal relief as above - 3,299,630
Revised tax payable 100,000
3,321,500 3,221,500
y the person
nd education cess @ 4%

ying for 60 days or more in a year Year 1 240

+ 2 -
ays or more in the preceding 4 years 3 -
4 200
d condition is not applicable for certain category of persons:

an citizen who leaves india for employment abroad

ian citizen who comes back to India in a particular year
440

rily resident
Scope of Income
or 9 out of 10 years

days or less in the last 7 preceding years

last 10 years working
He comes back to India - He stays for 200 Resident India
Resident & Not ordinarily resident
eding 4 years

y are residing

Resident in India
dinary / not-ordinarily resident

Resident in India
ent & Not ordinarily resident

esident for 9 out of 10 years

50,000,000
0 to 2.5 lakh 250,000 - -
2.5 to 5 lakh 250,000 5 12,500
5 to 10 lakh 500,000 20 100,000
> 10 lakh 49,000,000 30 14,700,000
Basic Tax 14,812,500
Surcharge @ 25% 3,703,125
Sub-total 18,515,625
ent & not ordinarily resident Non-Resident

ome received / deemed to be received a) Income received / deemed to be received in India

ome accrued / deemed to be accrued b) Income accrued / deemed to be accrued in India
ome accrued / received outside India
a business / profession setup / controlled from India

employed outside India

 Non-
resident

Taxed a) Source in India Source outside India

Not taxable b) Receipt in India Not in India

Not taxable

Taxable

Taxable

5,000 In which country income is generated? Accrued in India

20,000 IN which country income is received?

20,000

20,000
40,000

15,000

-
 Two categories?

Direct

Levied and collected on income e

Eg: Income tax / Wealth tax, etc.

Income Tax

Constitution of India

Discussed in 3 lists?

Union list - Income tax

Circular? Clarificatory in nature State list
Binding only on the deparment. Not binding on the taxpayer Concurrent list
Notification?
a) Implementation of amendments to Income tax act
Binding on both taxpayer and the department

Judgments of Courts:

a) High Court: It is binding only on the particular jurisdiction

b) Supreme Court: Are binding on all the taxpayers throughout India

m House Property
m business or profession
ns - sell a asset of capital
m other sources
Previous year Year in which you earn
2022-23

Assessment year Year in which you pay

Jul-23
2023-24

Assessee: Any person by whom tax is paya

Person: a) Individual - natural persons

b) HUF - Hindu Undivided family
c) Firms (Partnership firm / Limit
d) Companies
e) Association of persons (AOP)
f) Body of Individuals (BOI)
g) Artificial Juridical person
(eg: temple, deity)

eg: Trustee
70820
Two categories?

Indirect Tax

d collected on income earned by a person Tax is collected on the price on goods / service we purchase

e tax / Wealth tax, etc. Eg: Goods and Service Tax, Customs Duty, etc.

Basic price 30000

GST @ 28% 8400

Total price
customer
pays 38400
Constitution of India
You pay 38,400 to shopkeeper
Discussed in 3 lists?

Union list - Income tax

Petrol, diesel, Liquor
Concurrent list
GST - is shared in CGST 14
SGST 14
Cross state s

IGST 28

Various components of Income Tax law?

1. Income Tax Act, 1961
2. Income Tax Rules, 1962 - Deal with procedural aspects
3. Finance Act - Issued every year along with the Budget
4. Circulars - Clarifications issued by the government periodically on different areas
5. Notifications - Wherein amendments to Act and rules will be made
6. Case laws
Commissioner of Appeal
Appellate Tribunal in Chennai issues a favuorable ruling in case of tax payer in a subject
High Court - Is binding only on that particular state
Supreme Court of India - It is binding on across the country

Steps to calculate Income tax in India?

a) Residential staus of the person

 b) Calculate your income from various sources
i) Income from salary
ii) Income from House property
iii) Income from business or profession
iv) Capital gains - Tax levied sale of capital assets - Shares / properties
v) Income from other sources
c) Apply rules relating to clubbing of income
d) Apply rules relating to carry forward and set off of losses
e) Gross Total Income
f) Deductions from Gross Total Income
g) Total Income
h) Apply rate of tax fixed by the government and assess your tax

Key terms used in Income Tax law:

Year in which you earn the income
a) Assessee - Person on whom assessment of Incom
b) Assessment -
Year in which you pay taxes and file your income tax returns c) Previous year and assessment year
d) Person ?

n by whom tax is payable under Income tax act

ual - natural persons Slab rate of follow

Hindu Undivided family We go by the Hindu law
Partnership firm / Limited liability partnership) HUF includes all the lineal descendants of the family
starting from a common ancestor
tion of persons (AOP) We also include wives and daughters of the above persons
Individuals (BOI)
l Juridical person Two persons come together to achieve a common a
But they did not a create a partnership
Eg: Joint venture
ice we purchase

f tax payer in a subject

 1st stage: Self - assessment
2nd stage: Scrutiny by tax officers on specific cases

on whom assessment of Income tax is made

assessment year Previous Year - Year in which income is earned by the assessee
Assessment Year - Income in which return is filed and income is assessed

1st April to 31st March

Financial Year FY 2022-23

Previous year - FY 2022-23 31st March 2023 1st April - assessment year
Assessment Year - 2023-24 July 2023 - returns will be filed

above persons
assessment year
General principles on interpretation of law (mainly tax laws)

a) Rule of literal construction:

law must be understood based on the words used in law itself.
When only one meaning is possible, you cannot go beyond the law and look at the object /
intent of the legislature
Rule applied here is that "plain words need no explanation". Law must be interpreted in its
plain, literal & grammatical meaning

b) Rule of reasonable construction:

When words are capable of more than one interpretation, that interpretation which furthers
the intent / object of the law must be preferred
Rather than the one which defeats the purpose of the law
This is called Golden rule of construction

c) Rule of harmonious construction:

When two sections / provisions are in collision with each other, courts should try to construe
in such a manner that they are in harmony with each other
A guiding principle here is a specific rule will always over-ride a general rule
Importance of words - subject to, notwithstanding, without prejudice to

d) Mischief Rule

Hence courts will try to make constructions which will supress the mischief and advance
the remedy
 Means Vs Includes?
Commissioner
Appeal before commissioner of appeals
Income tax Appellate Tribunal
High Court judgements are binding on all persons

Supreme Court judgements are binding on all aut

What was the law prior to this law?

What was the mischief / defect / hardship in the previous law?
How does the current law seek to resolve the mischief?
er of appeals

binding on all persons within the jurisdiction

s are binding on all authorities in a country

 Persons?
i) Individuals
ii) Hindu Undivided family (HUF)

All the male memers lineally descended from a common ancestor

also includes their wives and daughters

iii) Firm - Partnership firm + Limited Liability Partnership (LLP)

iv) Company - a) Domestic company, b) Foreign company

v) Association of persons (AOP) - Two or more persons come together fo

Examples? Joint venture

vi) Body of Indiviuals (BOI) - Two or more persons receive income jointly
eg: executors / trustees, etc.

vii) Local authority

viii) Artifical juridical person (AJP)

Rate of Taxation?
 Profit from sole trading business
Interest income
Rent from properties

om a common ancestor

ty Partnership (LLP)

oreign company

more persons come together for a common objective (when they are not a firm legally)

persons receive income jointly

Rates of Income Tax:

Compute Income under all heads - Gross total Income

Less: Allowable deductions
Total taxable Income
Compute tax payable as per slabs
Less: Reduce Rebate u/s 87A Resident individuals
Tax payable If your income is below 5 lakhs, then 12,500 or total tax payble, whic
Add: Health and Education Cess @ 4% is avaibable as rebate
Total Tax payable

Partnership firm / Limited liability partnership - 30%

10,00,000
Partners remuneration 5,00,000
Net profit 500000
Tax paid 150000
Net profit 350000

Remuneration drawn by partners is taxable in hands of partners

One partners - 1,75,000 is completey tax free in hands of partners

Companies:
Domestic companies -
a) Turnover in FY 2017-18 less than 400crores - 25%
b) Other companies - 30%
Foreign companies - 40 %

Lets 6,00,000

Resident individual Income 4,50,000

Tax payable - 10,000
Rebate - 10,000
Net tax - Nil

Income > 50L upto 1 Cr - 10%

1cr to 2 cr - 15%
2cr to 5cr - 25%
Income 60,00,000 > 5cr - 37%
upto 2,50,000 - Nil
next 2,50,000 - 12,500
Next 5,00,000 - 1,00,000
From 10,00,000 to 60,00,000 - 15,00,000 50,00,000 * 30%
Total Basic tax - 16,12,500
Surcharge 10% - 10% 16,12,500 - 1,61,250
Total Tax - 17,73,750

Total income - 2,01,00,000

Basic tax computation:
Upto 2,50,000 - Nil
Next 2,50,000 - 12,500 Step 1 Tax payable on the actual income
Next 5,00,000 - 1,00,000 Step 2 Tax payabe had the income been2crore
19100000 5730000 Step 3 Additional tax payable by this person
Total Basic tax - 5842500 Step 4 Additional income earned above 2crores

Marginal relief (difference between additi

Surcharge @ 25% - 14,60,625 Step 5 income)
Total Tax - 73,03,125 7303125 Step 6 Net tax payable (73,03,125 less 5,18,750)

Tax payable had he earned 2,00,00,000

Basic tax computation:
Upto 2,50,000 - Nil
Next 2,50,000 - 12,500 Step 1
Next 5,00,000 - 1,00,000
19000000 5700000
Total basic tax - 58,12,500
Surcharge @ 15% - 8,71,875
Total tax 6684375
Additional tax 618750 Step 2
Additional tax cannot exceed additional income
Marginal relief ( 6,18,750 Less 1,00,000) - 5,18,750

Net tax payable after marginal relief 6784375

Step 3

Step 4

Step 5

Step 6

Income
Basic Tax 14842500
Add: Surcharge is applied 5000000
Total tax 19842500
Add: 4% Health and
Education cess (applied
on total tax) 793700

Residency status:

PY 2020-21
Resident in India:

a) Stay in india for 182 days or more in 2020-21

(or)

b) Stay in India for 60 days or more in 2020-21

Stay in India for 365 days or more in last 4 years (2019-20, 2018-19,2017-18, 2016-17)

Relaxation given to:

a) Indian citizen who is a crew member of ship
b) Indian citizen who has gone abroad for employment or business or profession and temporarily visits In

Resident and ordinarily resident (ROR)

Resident and Not ordinarily resident (RNOR)

Which category of persons will be resident and ordinarily resident:

a) Resident in india for atleast 2 out of 10 Pys

and
b) stayed in India for 730 days or more in preceeding 7 years

RNOR:
a) he should have stayed 729 days or less in last7 years (and)
b) He should be a non-resident for at least 9 years

Bret lee is an Australian cricketer who visits India for 100 days every year in last 10 years

Test of residency:
a) First criteria not satisfied - since he does not stay for 182 days

b) Second criteria - Min 60 day in current days + 365 days or more in previous 4 years

brett lee will be a resident of India for current year

Test of ROR and RNOR

He should be resident for 2 out of 10 years
Days stayed for last 7 years - 700 years

Brett lee will be a Resident and not ordinary reisdent

Scope of Taxation:

A. resident and ordinarily resident

a) income received in india
b) income accrued in India
c) Income accrued outside India

B. Resident and not-ordinarily resident

a)Income received in India
b) Income accrued in India
c) Income accrued outside India but earned from businsess or profession located in India

C. Non-Resident
a) Income receivd in India receipt and repatriaion
b) Income accrued in India

lets say we are earning a rental income in China. It is rec

lets say US rental income is starightway received in India

w 5 lakhs, then 12,500 or total tax payble, whichever is lower Income
5,00,000 (5,00,000 less 2,50,000)*5%
5 to 10 L - 20%

Income - 8,00,000
5,00,000 (5,00,000 less 2,50,000)*5%
3,00,000 (8,00,000 Less 5,00,000) * 20%
Total

Income - 15,00,000
First 2,50,000- Nil
2,50,000 to 5,00,000 - 5% on 2,50,000 - 12,500
5,00,000 to 10,00,000 - 20% on 5,00,000 - 1,00,000
10,00,000 to 15,00,000 - 30% on 5,00,000 - 1,50,000
Total tax payable - 2,62,500

Indian resident person aged 85 years earns FD intere

Very senior citizen
Upto 5,00,000 - Nil
5,00,000 to 10,00,000 - 20% on 5,00,000 - 1,00,000

10,00,000 to 12,00,000 - 30% on 2,00,000 - 60,000

Total tax liability - 1,60,000

hands of partners
n hands of partners
le - 10,000

50L upto 1 Cr - 10%

Tax payable on the actual income 7303125

Tax payabe had the income been2crore 6684375
Additional tax payable by this person 618750
Additional income earned above 2crores 100000

Marginal relief (difference between additional tax and additional

income) 518750
Net tax payable (73,03,125 less 5,18,750) 6784375

Income - 5,01,00,000

Tax on 5,01,00,000
Upto 2,50,000 - Nil
Next 2,50,000 - 12,500
Next 5,00,000 - 1,00,000
49100000 14730000
Total Basic tax 14842500
 Surcharge 5491725
Total tax 20334225

Tax had the income 5,00,00,000

Tax on 5,01,00,000
Upto 2,50,000 - Nil
Next 2,50,000 - 12,500
Next 5,00,000 - 1,00,000
49000000 14700000
Total Basic tax 14812500
Surchage @ 25% 3703125
Total tax payable 18515625

Additional tax payable 1818600

Additional income above 5cr 100000

Marginal relief 1718600

Net tax payable 18615625

2018-19,2017-18, 2016-17)
business or profession and temporarily visits India

days every year in last 10 years

or more in previous 4 years

or profession located in India

d repatriaion
e are earning a rental income in China. It is received in a bank account in China. We are transferring it to indian bank account

S rental income is starightway received in Indian bank account

 12,500

12,500
60,000
72,500

,50,000 - 12,500
n 5,00,000 - 1,00,000
on 5,00,000 - 1,50,000

5 years earns FD interest of 12,00,000

n 5,00,000 - 1,00,000

on 2,00,000 - 60,000
ndian bank account
2. Partnership Firm / LLP - Flat 30%

3. Companies:
A. Domestic companies:

Generally: 30% (25% if total turnover in FY 2019-20 < 400 crores)

They also have option to pay 22% by foregoing special deductions u/s 115BAA
Similarly rate is 15% for new domestic manufacturing companies set up after 1.10.2019 if they decide to forego all s

B. Foreign companies - 40%

Illustration:

a) Income of a person is 12,00,000:

i) Individual who is 45 years of age:

Upto 2,50,000 Nil

2,50,000 to 5,00,000 - 5% 12,500 (5 % on 2,50,000)
5,00,000 to 10,00,000 - 20% 100,000 (20% on 5,00,000)
10,00,000 to 12,00,000 - 30% 60,000 (12,00,000 less 10,00,000)
Total Basic tax 172,500
Add: health and education cess 6,900 (4% on the basic tax)
Total Liability 179,400

ii) Individual who is 65 years -also a resident in India

Upto 3,00,000 Nil
3,00,000 to 5,00,000 - 5% 10,000 (5% on 2,00,000)
5,00,000 to 10,00,000 - 20% 100,000 (20% on 5,00,000)
10,00,000 to 12,00,000 - 30% 60,000 (12,00,000 less 10,00,000)
Total Basic tax 170,000
Add: health and education cess 6,800 (4% on 1,70,000)
Total Liability 176,800

iii) Individual who is 90 years -also a resident in India

Upto 5,00,000 Nil

5,00,000 to 10,00,000 100,000 (20% on 5,00,000)
10,00,000 to 12,00,000 60,000 (12,00,000 less 10,00,000)
Total Basic Tax 160,000
Add: health and education cess 6,400 (4% on 1,60,000)
Total Liability 166,400
 General rate of Tax:

Income Tax
< 2,50,000 Nil
2.5 to 5 lakhs 5% 900000
5 to 10 lakhs 20%
> 10 lakhs 30% Upto 2.5 lakhs
2.5 to 5 lakhs
5 lakhs to 9 lakhs

Super senior citizen - resident individuals who are 80 years or more

12,00,000
Resident individuals of 60 years or more
Senior Citizen Very Citizen
300000 500000
Income Rate Income tax
0 to 3L 300000 0 0
3L to 5L 200000 5 10000
5L to 10L 500000 20 100000
> 10L 200000 30 60000
Basic Tax 170000
Cess @ 4% 6800
Total Tax payable 176800

Slab Income Rate Income Tax

0 to 5L 500000 0 0
5L to 10L 500000 20 100000
> 10 L 200000 30 60000
Basic Tax 160000
Cess @ 4% 6400
Total tax payable 166400
If a person has income of less than 5 lakhs, t

Rebate u/s 87A: Resident individuals whose total income is less than 5 lakhs, has a rebate of total tax pa
a) Resident individual
b) Total income of less than 5 lakhs

Rebate at lower of following:

a) Tax payable 0
b) 12,500
 Domestic companies
Generally - 30%
If TO is less than 400 crores in PY 2019-20 - 25%
New scheme of tax for companies - 15 / 22% flat rate, provided the companies don’t claim any weighted d
Foreign companies - 40%

ey decide to forego all special deductions

 Basic Tax
Add: Surcharge

Add: Health and education cess

Income Rate of Tax Tax
250000 0 0
250000 5 12500
400000 20 80000 4% applied on the tax payable
900000 Basic Tax 92500
Add: HEC @ 4% 3700
Total tax payable 96200

Gross Total Income

Less: deductions
Total Income
Basic Tax 62500
Add: Surcharge 0 (Surcharge as a percent of basic tax)
Total Tax
Add: Health and Education cess 4% 2500 (computed on the tax amount + Surcharge)
Total Tax liability 65000

me of less than 5 lakhs, then zero tax will be payable by that person

s a rebate of total tax payable or 12500, whichever is less

on’t claim any weighted deduction / exemptions
Total income of person is 15 lakhs

Upto 2.5 lakhs 0

2.5 to 5 lakhs - 5% 12500 (2,50,000 *5%)
5 to 10 lakhs - 20% 100000 (20% of 10,00,000 less 5,00,000)
> 10 lakhs - 30% 150000 (30% on 5,00,000)
Basic Income tax 262500
cess 10500
Resident senior citizens ( people who are 60 years or more at any point in the previous year)
Upto 3 lakhs 0
3 to 5 lakhs - 5%
5to 10 lakhs - 20%
> 10 lakhs - 30%

Resident very senior citizens (persons who are 80 years)

Upto 5 lakhs - 0
5 to 10 lakhs- 20%
> 10 lakhs - 30%

Health and Education cess - 4% on your income tax

previous year)
Optional new scheme of taxation under Section 115BAC:
Individuals and HUFs have the option to pay tax at the following concessional rates

Conditions to be fulfilled:
a) No higher basic exemption limit for resident senior citizens
b) No deduction claimed for Leave travel concession / House rent allowance
c) Standard deduction of INR 50k is not claimed under Salaries
d) Interest on loan for self-occupied property is not claimed
e) deduction for family pension not claimed
f) No deduction claimed under Chapter VI-A (other than employers contribution towards NPS under 80CCD(2)
 16,00,000 1600000

Nil Nil
12500 125000 Upto 2.5L
25000 100000 2.5L to 5
37500 180000 5 to 7.5L
50000 405000 7.5L to 10L
62500 10L to 12.5L
30000 12.5L to 15L
217500 > 15L

HP Loss Chapter VIA

200000 150000

350000
PS under 80CCD(2)
Upto 2.5L 0
5
10
7.5L to 10L 15
10L to 12.5L 20
12.5L to 15L 25
30
Rate of surcharge ( Surcharge is always applied on Basic tax)

Surcharge is applied as % of basic tax

A. For individuals: HEC is applied as % of (tax + surcharge)

a) Total income > 50 lakhs <equal to 1 crore - 10%

b) Total income > 1 crore < equal to 2 crore - 15%
c) Total income (excluding dividend and equity capital gains) > 2 crore < equal to 5 crore - 25% on other income
15% on dividend and equity capital gains
d) Total income (excluding dividend and equity capital gains) > 5 crore - 37'% on other income
15% on dividend and equity capital gains

In cases where surcharge is applicable, marginal relief should also be computed and benefit allowed

Concept of marginal is that increase in tax due to increase in income, should not exceed the amount of increase in in
Basic principle :Increase in tax should not exceed increase in income

B. For firms / LLP Partnership firm

Surcharge @ 12%, where income exceeds INR 1 crore Company

C. Domestic companies(Private / public / listed / unlisted)

7 and 12% - Domestic
a) Total income > 1 crore < equal to 10 crores - 7% 2 and 5% - Foreign companies
b) Total income > 10 crore - 12%

D. Foreign companies
a) Total income > 1 crore < equal to 10 crores - 2%
b) Total income > 10 crore - 5%

Illustration:

a) lets say income of a person is INR 51,00,000

Computation of Income tax:

Upto 2,50,000 Nil

2.5 to 5 lakhs 12,500
5 to 10 lakhs 100,000
10 to 51 lakhs 1,230,000 (41 lakhs * 30%)
Total Basic Tax 1,342,500
Add: Surcharge @ 10% on Basic tax 134,250
Subtotal 1,476,750
less: marginal relief - 64,250
Total Basic Tax 1,412,500
Add: Health and education cess @ 4% 56,500
Total tax liability 1,469,000

Step 1: Find out income tax liability for 50,00,000 income

Upto 2,50,000 Nil
2.5 to 5 lakhs 12500
5 to 10 lakhs 100000
10 to 51 lakhs 1200000 (40 lakhs * 30%)
Total Basic Tax 1312500

Step 2: Additional Income: 1,00,000

Step 3: Additional Tax: (Tax on 51,00,000 Less Tax on 50,00,000)

Tax on 51,00,000 1476750
less: Tax on 50,00,000 -1312500
Additional tax liability 164250

Marginal - Difference between Step 3 and Step 3 - 64,250

Upto 2,50,000 Nil

2.5 to 5 lakhs 12,500
5 to 10 lakhs 100,000
10 to 55 lakhs 1,350,000 (45 lakhs * 30%)
Total Basic Tax 1,462,500

Additional tax 150,000

Additional Income 500,000

Illustration 2:
Income 1,01,00,000 - Individual - 45 years
Upto 2,50,000 Nil
2.5 to 5 lakhs 12,500
5 to 10 lakhs 100,000
10 to 1.01 crores lakhs 2,730,000 (91 lakhs * 30%)
Total Basic Tax 2,842,500
Add: Surcharge @ 15% 426,375 (28,42,500 * 15%)
Sub Total 3,268,875
Less: Marginal Relief - 75,125
Net Tax 3,193,750
Add: Health and education cess @ 4% 127,750
Total tax liability 3,321,500

Step 1: Compute income tax on 1crore

Upto 2,50,000 Nil
2.5 to 5 lakhs 12,500
5 to 10 lakhs 100,000
10 to 1.00 crores lakhs 2,700,000
Total Basic Tax 2,812,500
Surcharge @ 10% 281,250
Sub Total 3,093,750

Step 2: Income earned over and above 1 crore - 1,00,000

Step 3: Additional tax liability

Tax liability on 1.01 3,268,875
Tax liability on 1 crore 3,093,750
Additional tax 175,125

Step 4:
Difference between additional tax and additional income
Marginal Relief - 175125 Less 1,00,000 - 75,125
 Basic Tax 160000
Surcharge 16000 (10% of 1,60,000)
Sub-total 176000
Add: HE cess 7040 (4% on basic tax + Surcharge)
183040

re - 25% on other income Compute tax liability

a) 2,01,00,000
b) 5,01,00,000

benefit allowed

ed the amount of increase in income

eed increase in income
 Total income 6 crores
This includes equity dividend 50 lakhs

On equitydivided - 15%
On balance income - 5.5 crores - 37%

Whenever there is surcharge, you need to check for Marginal relief

Marginal relief?
Your total income is 50,10,000
Your additional tax payable cannot exceed the additional income

Steps :
1> Tax on the actual income
2> Tax if your income was 50,00,000
3> Differential tax
4> Marginal relief = Differential tax less differential income

1> Tax on 50,10,000

Upto 2.5 lakhs 0

2.5 to 5 lakhs 12500 -5%
5 to 10 lakhs 100000 (20% of 5,00,000)
> 10 lakhs 1203000 (30% (50,10,000 less 10,00,000)
Basic tax 1315500
Surcharge 131550 (10% of basic tax)
Total tax 1447050
2> Tax if the income was 50,00,000

Upto 2.5 lakhs 0

2.5 to 5 lakhs 12500
5 to lakhs 100000
10 laksh to 50 lakhs 1200000
Basic 1312500

3) Differential tax 134550

4) income in excess of 50 lakhs - 10,000

5) Marginal relief - 1,24,550
3268875
Question 1:

Total income - 1,01,00,000

Upto 50 lakhs 0
a) Tax on 1,01,00,000 50 to 1 crore 10%
1 to 2 crore 15
Upto 2.5 lakhs 0 2 to 5 crore 25
2.5 to 5 12500 > 5 crore 37
5 to 10 100000
10 lakhs
to 1.01
crores 2730000
Basic tax 2842500
Surcharge' 426375 -15%
3268875
b) Tax if his income was 1 crore
Upto 2.5 lakhs 0
2.5 to 5 12500
5 to 10 100000
10 lakhs
to 1.01
crores 2700000
Basic Tax 2812500
Surcharge 281250
Total 3093750

c) Additional tax payable

175125

b) Additional income above 1 crore - 1,00,000

e) Marginal relief = 1,75,125 less 1,00,000 = 75,125

f) Net tax payable -32,68,875 less 75,125 = 31,93,750

g) Health and education cess 127750

Total tax payable 3321500

Tax for
2.01 crores
5.01 crores
 Surcharge
< 50 Lakhs 0
50 to 1 crore 10% Surcharge shall be limited to 15%
1 to 2crore 15% a) Dividend income
2 to 5 crore 25% b) capital gain on sale of listed equity shares
> 5 crore 37%
Resident + Ordinary resident - Global income Receipt / Repatriation

Resident + Not ordinarily resident

Income which is received / accrued in India + Any income outside India from a business / profession setup in India

Non Resident - Only income received/ acrued in India is taxable

ROR RNOR Non-Resident

a) Income from UK Bonds - 50% received in India 10000% 5000% 5000%
Total interest - 10,000
5,000 received in UK bank account
5,000 received in Indian bank account

b) Dividend from London Company - credited in

london bank a/c 100% 0 0
c) Interest from State bank of India, received in
USA 100 100 100
(Income accrues in India)

d) Income from resort in Ooty - receive it

Bangladesh 100 100 100

e) Income earned from USA employment, sent to

bank account in India 0 0 0

f) Income from a business in Germay, managed /

controlled from India -1,00,000 (receving 40K in
india, 60k in germany account) 100000 100000 40000

(business is happening in Germany) - business is managed / controlled in India

g) Business income from Mumbai, managed from

Russia - 50,000 50000 50000 50000

ROR RNOR NR

Global income Receipt / Accrual in India Receipt / Accrual in India

whether received /accrued in India / abroad
+

Business /
profession set
up / managed
from India
2020-21 resident

2021-22 non reesident

Resident -

a) stays 182 days or more

b) 60 days or more in current year + 365 days or more in preceding 4 years (Not applicable to Indian citizens leaving a

Criteria for ROR:

a) 730 days or more in preceding 7 years (and)
b) resident (determined in terms of Step 1) for 2 out of last 10 years

Indian citizen
income from indian sources > 15 lakhs
and he does not pay tax on this income abroad

He is deemed as a RNOR
Indian citizen
Income from indian sources > 15 lakhs

He is staying for 120 days / more in CY + 365 or more in the preceding 4 years

He is a RNOR

HUF If the control of affairs is wholly or partly in India

Firms Resident

Companies: a) Indian compies (companies under Companies Act,

b) Place of effective management is india or not
 Depends upon your stay in India
Previous year - Running year under
Asseement year
Resident Non-Resident

Resident & Ordinarily resident

Resident & Not ordinarily resident

182 days or more

60 days or more & 365 days or more in previous 4 year

Indian citizen or a crew member of Indian Ship

who either leave India during the current year / visit India during current ye

Balaji, an Indian citizen leaves to USA for employment on 1st Sept

My stay in India is from April to August - 150 days

Indian citizen is going abroad for studies

or goes abroad for employment
only become a resident by staying for 182days or more

Resident - ROR / RNOR

Resident and ordinary resident: Satisfies both followiong conditio

1) His stay in 7 preceding years is 730 days or more
2) He is a resident in India for 2 out of past 10 years

If one of the conditions are not satisifed, you become resident and

Illustration:

A foreign cricketer comes to India for 100 days every year.

He has been doing this for last 10 years
Indian citizens, whose income from Indian citizen, who play
Indian sources exceeed INR 15 lakhs Determine his residential status
182 or more
a) if their stay is 120 or more in PY
+ 365 or more in the preceding 4 years Step1: resident / Non resident

60 days or more in CY + 365 days in the preceding 4 years

400

This cricketer is a resident in India

Step 2: Determing ROR / RNOR:

 ROR
a) 730 days or more in the last 7 years +
b) resident for 2 out of last 10 years

700

He will be considered as a resident and not ordinary resident in I

October 2019 left India

For 2020-21

Indian Citizen
His income from Indian sources > 15 lakhs
He does not pay tax on this income in the foreign country

He will be deemed to be a resident and not ordinary resident

Indian Citizen
Income from Indian sources > 15 lakhs
This person is going abroad for employment

a) 182 or more in the year

(or)
b) Staying in India for 120 or more in the Previous Year + 365 or m

Resident and ordinary resident:

Their Global income -
Income accrues / arised / received in or outside India
(Bilateral relife - Double taxation avoidance agreement)
(Unilateral relief)

Repatriation Non-resident:
Income accruring / arising / received in India

profession setup in India Resident and not-ordinary resident:

Income accruing / arising / received in India

Income from business / profession setup or controlled from India

Resident RNOR
Where you earn your income Sale of sales of Indian company Taxed Taxed
Received in Germay
Earning this Income UK
Received partially in India Dividend from Japanese companTaxed Not taxed

received in Japan
 Rent from a London property, Taxed Not taxed
received in london,
later of transferred to Indian

bank account

Fully
taxed in
Business income from Germany Taxed India

Controlled from India

total income - 1,00,000
a) Double Taxation Agreement (DTA) 50,000 received in Indian bank

b) Relief for foreign taxes

Accrual in India

non reesident

cable to Indian citizens leaving abroad for employment / business or he can come to India for a visit from abroad / crew member of sh
rs is wholly or partly in India

ompanies under Companies Act, 2013)

management is india or not
 For indivduals:
Depends on number of days a person stays in the previous year

There are two ways in which person can become resident:

a) by staying in India for 182 days or more in PY

(or)

Sportsperson b) By staying in india for 60 days or more in the PY Not applicble for:
+ a) Crew member of India
Staying for 365 days or more in the preceeding 4 years b) indian citizens who lea
c) indian citizens who com
t India during current year
Resident (Or) Non-resident
mployment on 1st Septmebr 2021
Resident & ordinarily resident Resident & Not ordinarily resident

Resident and not ordinarliy resident:

a) Non-resident for 9 out of 10 previous years
days or more (or)
b) If his stay in India is 729 days or less in the 7 preceding previous years

Resident and ordinarily resident:

a) Resident in atleast 2 out of 10 previous years (and)
both followiong conditions b) Staying in india for 730 days or more in the 7 preceding years

Bret lee is visting india for 100 days every year

ou become resident and not oridinarily resident in last 10 years

What is his residential status?

Whether he is resident / non-resident?

days every year.
a) stay in india for 182 days or more in the previous - not
Indian citizen, who plays for Australian Cricket team (or)
What if he stays for 120 days every year b) stays in india for 60 days or more in the previous year
182 or more 365 days or more in preceding 4 years - satisfied
If his income from indian sources > 15lakhs
he is resident in India for the purpos
he will become a resident and not-ordinarily resident
eceding 4 years Non-ordinarliy:
a) Non-resident for 9 out of 10 years

b) stay in india is 729 or less for prec

He will be categorised as resident bu

ot ordinary resident in India

foreign country

ot ordinary resident

Previous Year + 365 or more in the last 4 years

Non-resident
Taxed

Not taxed
 Not taxed

50,000 received in India, is subject to tax in India

ad / crew member of ship )

 Resident and ordinarily resident
Resident and not ordinarily resident
Not resident

Resident and not ordinary resident:

a) He is a non-resident for 9 out of 10 previous years
(or)
b) his stay in India is 729 days or less in the preceding 7 years
Not applicble for:
a) Crew member of Indian ship
b) indian citizens who leave abroad for employment / business
c) indian citizens who come to Indian in the previous

Whether resident / non-resident?

Fulfilling any 1 of 2 criterias:

i) stay 182 days or more in PY

(or)

days every year ii) staying in 60days or more in PY

+ 365 days or more in 4 preceding years

Resident
Step 2 ; Determining ROR / RNOR

Non-ordinarily resident:
more in the previous - not satisfying this condition a) He is a non-resident for 9 out 10 Pys
(or)
more in the previous year + b) Staying in India for 729 days or less in 7 preceding years
4 years - satisfied

dent in India for the purpose of Taxation

sident for 9 out of 10 years - Not satisfied

india is 729 or less for preceding 7 years - Satisfied

categorised as resident but not ordinarliy resident

e preceding 7 years

preceding years
2crore 1 lakhs
7,055,750

7,055,750

50,100,000

0 - 250000 Nil
2.5 to 5 lakhs 12,500
5 to 10 lakhs 100,000
10 lakhs to 5.01 crores ( 30%) 14,730,000
Basic Tax 14,842,500
Surcharge 5,491,725
Subtotal 20,334,225
Less: Marginal relief - 1,718,600
Net Tax 18,615,625
Add: Health and education cess @ 4% 744,625
Total Tax 19,360,250

Computation of Marginal relief

Step1:
Compute Tax liability for 5 crores
0 - 250000 Nil
2.5 to 5 lakhs 12,500
5 to 10 lakhs 100,000
10 lakhs to 5.00 crores ( 30%) 14,700,000
Basic Tax 14,812,500
Surcharge 3,703,125
Subtotal 18,515,625

Step 2:
Additional income over and above 5 crores 1 lakhs

Additional tax 1,818,600

Marginal Relief 1,718,600

5 crore 1 lakh
19,360,250

14,812,500