Q1.

Assessment Year in Taxation Law

1. Definition of Assessment Year (AY)

The Assessment Year (AY) is the period of 12 months (from 1st April to 31st March) in which the
income earned during the previous year is evaluated and taxed.

For example:

●​ If a person earns income between 1st April 2023 – 31st March 2024, this period is called the
Previous Year (PY) 2023-24.
●​ The tax on this income will be assessed and paid in Assessment Year 2024-25 (1st April 2024 –
31st March 2025).

2. Legal Basis

The concept of the Assessment Year is governed by:

●​ Income Tax Act, 1961

●​ Section 2(9) of the Income Tax Act defines the "Assessment Year."
●​ Section 4 states that income tax is charged for a given Assessment Year based on the income
earned in the Previous Year.

3. Purpose of Assessment Year

●​ Taxpayers file Income Tax Returns (ITR) for the income earned in the previous year.
●​ The government assesses tax liability based on this income.
●​ Any applicable refunds, penalties, or additional taxes are processed in the Assessment Year.

4. Difference Between Assessment Year & Previous Year

Aspect Previous Year (PY) Assessment Year (AY)

Definition The year in which income is earnedThe year in which tax is assessed and

Duration 12 months (April 1 – March 31) 12 months (April 1 – March 31)

Example (2023-24) PY: 1st April 2023 – 31st March 20 AY: 1st April 2024 – 31st March 2025

Relevance Income generation period Tax filing and assessment period

5. Significance in Taxation Law

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 ●​ The AY is crucial because all ITR forms, tax rates, and deductions are linked to a specific
Assessment Year.
●​ Tax authorities use the AY to process assessments, audits, and appeals.
●​ Taxpayers must ensure they file returns for the correct AY to avoid penalties.

6. Example for Better Understanding

👉 Suppose Rohan is a salaried employee and earns ₹10,00,000 from April 2023 – March 2024
👉 He will file his ITR in Assessment Year 2024-25 (i.e., after April 1, 2024).​
(Previous Year 2023-24).​

👉 The tax department will assess his tax liability for AY 2024-25 based on his earnings from PY 2023-24.
7. Important Deadlines & Penalties

●​ Income Tax Return (ITR) Filing Deadline: Generally, 31st July of the Assessment Year (for
individuals not requiring an audit).
●​ Late Filing Penalty: Upto ₹5,000 under Section 234F if filed after the due date.

Conclusion

The Assessment Year is a fundamental concept in taxation law, ensuring that income earned in the
Previous Year is taxed systematically. Understanding this is crucial for LLB students, especially for legal
practice in taxation and compliance law.

Q2. Taxation of Income

1. Introduction to Taxation of Income

Taxation of income is a fundamental concept in Taxation Law, where individuals, businesses, and entities
pay a portion of their earnings as income tax to the government. In India, income tax is governed by the
Income Tax Act, 1961, which classifies and regulates income taxation.

2. Definition of Income Under Taxation Law

Under Section 2(24) of the Income Tax Act, 1961, "income" includes:

●​ Earnings in cash or kind

●​ Profits and gains
●​ Dividends
●​ Capital gains
●​ Voluntary contributions received by a trust
●​ Perquisites and allowances

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The tax is levied on income earned in a Previous Year (PY), which is assessed in the following
Assessment Year (AY).

3. Types of Taxable Income

As per Section 14 of the Income Tax Act, income is classified into five heads:

(1) Income from Salary (Section 15 - 17)

●​ Salary, wages, pension, allowances, gratuity, leave encashment, etc.

●​ Includes perquisites (non-monetary benefits) like rent-free accommodation and car benefits.

Example:​
If a person earns ₹10,00,000 per annum as salary, it is fully taxable under this head after applicable
deductions.

(2) Income from House Property (Section 22 - 27)

●​ Rental income from property owned by the taxpayer.

●​ Self-occupied property has certain exemptions, while rented property is taxable.
●​ Standard deduction of 30% of Net Annual Value (NAV) is allowed.

Example:​
If Mr. A earns ₹2,00,000 as annual rent from a house, he can deduct 30% (₹60,000) and pay tax on
₹1,40,000.

(3) Profits and Gains from Business or Profession (Section 28 - 44)

●​ Income from business, trade, or professional services.

●​ Taxable income is calculated after deducting business expenses like rent, salaries, depreciation,
etc.

Example:​
If a business earns ₹20,00,000 in revenue and has ₹5,00,000 in expenses, taxable income = ₹15,00,000.

(4) Capital Gains (Section 45 - 55)

●​ Profit earned from selling capital assets (land, shares, gold, etc.).
●​ Short-Term Capital Gains (STCG) – Held for <3 years (or 1 year for stocks).
●​ Long-Term Capital Gains (LTCG) – Held for >3 years (or 1 year for stocks).

Example:​
If Mr. B buys land for ₹10,00,000 and sells it for ₹25,00,000 after 5 years, LTCG = ₹15,00,000, taxed at
20% with indexation benefit.

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(5) Income from Other Sources (Section 56 - 59)

●​ Income not covered in the above categories.

●​ Includes dividends, lottery winnings, gifts, interest on savings, etc.

Example:​
If a person wins ₹1,00,000 in a lottery, the entire amount is taxed at 30% under Section 115BB.

4. Exemptions and Deductions Under Taxation Law

(A) Exempted Income (Section 10)

Certain types of income are fully or partially tax-exempt, including:

●​ Agricultural Income (Section 10(1))

●​ Life Insurance Payout (Section 10(10D))
●​ Leave Travel Allowance (LTA) (Section 10(5))
●​ Interest on PPF (Section 10(11))

Example:​
If Mr. C earns ₹5,00,000 from farming, this income is fully exempt from tax.

(B) Deductions (Section 80C - 80U)

Deductions reduce taxable income, including:

●​ Section 80C – Investment in PPF, EPF, LIC, ELSS (Max ₹1.5 lakh)
●​ Section 80D – Medical insurance premium (₹25,000 for self, ₹50,000 for senior citizens)
●​ Section 80E – Interest on education loan
●​ Section 80G – Donations to charities

Example:​
If Mr. D earns ₹8,00,000 and invests ₹1,50,000 in LIC, his taxable income = ₹6,50,000.

5. Tax Slabs and Rates (As per FY 2023-24)

Taxation is based on a progressive tax system:

Old Regime Tax Slabs (With Deductions)

Income Slab Tax R

Up to ₹2,50,000 No tax

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 ₹2,50,001 – ₹5,00,000 5%

₹5,00,001 – ₹10,00,000 20%

Above ₹10,00,000 30%

New Regime Tax Slabs (Without Deductions)

Income Slab Tax R

Up to ₹3,00,000 No tax

₹3,00,001 – ₹6,00,000 5%

₹6,00,001 – ₹9,00,000 10%

₹9,00,001 – ₹12,00,000 15%

₹12,00,001 – ₹15,00,000 20%

Above ₹15,00,000 30%

Rebate under Section 87A:

●​ If total income ≤ ₹7,00,000, tax liability = Nil (under New Regime).

6. Advance Tax & Tax Deduction at Source (TDS)

Advance Tax (Section 208-211)

●​ If tax liability > ₹10,000, taxpayers must pay advance tax in installments.

TDS (Section 192-194N)

●​ Employers, banks, and businesses deduct tax at the source before paying income.
●​ Example: Salary TDS, TDS on rent (10%), TDS on FD interest (10%).

7. Penalties for Non-Compliance

Failure to comply with tax laws results in:

Violation Penalty/Consequenc

Late ITR Filing (Section 234F) ₹5,000 (if filed after due date)

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 Tax Evasion (Section 270A) 50%-200% of tax evaded

Failure to pay Advance Tax (Section 234B) Interest @ 1% per month

8. Conclusion
Understanding taxation of income is crucial for LLB students, as it helps in taxation law practice,
corporate law, and financial compliance. The Income Tax Act, 1961 provides a structured framework for
classifying income, allowing deductions, and ensuring compliance through penalties.

Q3. Casual Income in Taxation Law

1. Introduction to Casual Income
Casual income refers to income that is occasional, irregular, and non-recurring. It is generally earned by
chance and not as part of regular business, profession, or employment.

The Income Tax Act, 1961, recognizes certain incomes as casual income, which are subject to taxation
under the head "Income from Other Sources" (Section 56).

2. Definition of Casual Income

The term "casual income" is not explicitly defined in the Income Tax Act. However, as per general legal and
taxation principles, it includes:

●​ Windfall gains (unexpected income)

●​ Income without any regular source
●​ Income that does not arise from a business or profession

Key Characteristics:

✔️ Unpredictable – Earned occasionally, not on a regular basis.​

✔️ Non-Recurring – It does not repeat periodically.​
✔️ Not Business-Related – It does not arise from business, profession, or salary.
3. Examples of Casual Income
As per Section 56(2) of the Income Tax Act, 1961, the following types of income are considered casual
income:

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(1) Lottery Winnings

●​ Includes prize money from lotteries organized by the government or private organizations.
●​ Example: Winning ₹5,00,000 from a state lottery is casual income.

(2) Betting and Gambling

●​ Includes winnings from horse races, card games, casinos, or online betting.
●​ Example: Winning ₹1,00,000 in an IPL betting game is casual income.

(3) Game Shows & TV Contests

●​ Prize money won in reality shows, quiz competitions, or TV game shows.

●​ Example: Winning ₹50,00,000 in Kaun Banega Crorepati (KBC) or a reality show.

(4) Crossword Puzzles & Raffles

●​ Prize money from newspaper puzzles, lucky draws, or raffle contests.

●​ Example: Winning ₹20,000 from a newspaper crossword contest.

(5) Gifts Received in Certain Cases

●​ Gifts received from non-relatives above ₹50,000 in a year are taxable.

●​ Example: Receiving ₹1,00,000 from a friend as a gift is casual income.

(6) Unexpected Windfall Gains

●​ Any other non-regular income like a treasure trove (hidden treasure).

●​ Example: Finding a historical gold coin worth ₹2,00,000 is considered casual income.

4. Taxation of Casual Income

Tax Rate for Casual Income (Section 115BB)

Casual income is subject to a flat tax rate of 30% + surcharge & cess.

Casual Income T Tax R TDS Applica

Lottery Winnings 30% Yes (TDS @30%)

Game Show Prize 30% Yes (TDS @30%)

Betting & Gambling 30% Yes (TDS @30%)

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 Crossword Puzzle 30% Yes (TDS @30%)

No deductions or exemptions are allowed on casual income.

5. Example of Tax Calculation

👉
Example:​

👉
Mr. X wins ₹10,00,000 in a lottery.​
Tax Calculation:

●​ Flat 30% tax on ₹10,00,000 = ₹3,00,000

●​ Cess @4% on ₹3,00,000 = ₹12,000
●​ Total Tax Payable = ₹3,12,000
●​ Net Prize Money = ₹6,88,000 (after TDS deduction)

6. Section 194B: Tax Deducted at Source (TDS) on Casual

Income
✔️ TDS @30% is deducted on casual income exceeding ₹10,000.​
✔️ No deduction (like 80C, 80D) is allowed on this income.​
✔️ If income is received after TDS, no further tax liability arises.
Example:

●​ If a person wins ₹50,000 in a lottery, TDS of ₹15,000 (30%) will be deducted.

●​ The winner will receive ₹35,000 after tax deduction.

7. Legal Aspects & Case Laws on Casual Income

(1) CIT v. Kothari (1971)

●​ Held that casual income is not a part of regular business or profession and is taxable
separately.

(2) Director of Income Tax v. R.K. Mishra (2011)

●​ Income from a TV game show (Kaun Banega Crorepati) was taxed under Section 115BB at 30%,
despite being a knowledge-based competition.

(3) Mehboob Productions v. CIT (1953)

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 ●​ If casual income is linked to professional work (e.g., a film award prize for a director), it may be
taxed as professional income, not casual income.

8. Exemptions & Non-Taxable Casual Income

✔️
Certain casual incomes are exempt from tax, including:​

✔️
Gifts from relatives (under Section 56)​

✔️
Scholarships & Fellowships (under Section 10(16))​
Compensation from accidental insurance

9. Penalties & Non-Compliance Issues

Failure to report casual income can lead to:

Offense Penalty

Not reporting casual income Tax evasion penalty u/s 270A (50%-200% of tax evaded)

Delayed ITR filing ₹5,000 (under Section 234F)

False reporting of winnings 100% tax penalty

10. Conclusion
Casual income is taxed at a fixed rate of 30%, with no deductions or exemptions. It includes lottery
winnings, game shows, betting, gifts, and windfall gains. LLB students must understand its taxation,
penalties, and legal implications, especially for corporate and financial law practice.

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Q4. Financial Year (FY) in Taxation Law
1. Introduction to Financial Year (FY)
The Financial Year (FY) is the 12-month accounting period used by the government and businesses for
financial reporting, budgeting, and taxation purposes.

In India, the Financial Year starts on 1st April and ends on 31st March of the next year. It is important
for tax filing, income calculations, and compliance with the Income Tax Act, 1961.

For Example:

●​ Financial Year 2023-24 → 1st April 2023 – 31st March 2024

●​ Financial Year 2024-25 → 1st April 2024 – 31st March 2025

2. Legal Basis of Financial Year in India

The concept of Financial Year is defined under:

1.​ Income Tax Act, 1961 – Tax laws require income to be reported for a specific FY.
2.​ General Clauses Act, 1897 (Section 3(21)) – Defines the FY as April-March.
3.​ Companies Act, 2013 (Section 2(41)) – Mandates companies to follow the April-March FY.

Why April to March as Financial Year?

●​ Historical British practice.

●​ Matches India's agricultural cycle (harvest and taxation planning).
●​ Aligns with the government’s budgeting process (Union Budget).

3. Difference Between Financial Year (FY) & Assessment Year

(AY)
Many people confuse Financial Year (FY) and Assessment Year (AY).

Aspe Financial Year (FY) Assessment Year (AY)

Definition Year in which income is earned Year in which income is assessed and taxe

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 Duration 12 months (April 1 – March 31) 12 months (April 1 – March 31)

Example FY 2023-24 (April 2023 – March 2024) AY 2024-25 (April 2024 – March 2025)

ITR Filing No filing required ITR must be filed

Example:​
If you earn income between April 1, 2023 – March 31, 2024 (FY 2023-24), you will file taxes in AY
2024-25.

4. Importance of Financial Year in Taxation

(1) Income Tax Filing & Compliance

●​ All income earned during the Financial Year is taxed in the Assessment Year.
●​ The last date for filing ITR for an individual (non-audit cases) is 31st July of the AY.

(2) Tax Deduction at Source (TDS) & Advance Tax Payments

●​ TDS and advance tax payments are calculated based on income earned during a financial year.
●​ Advance tax must be paid in installments throughout the FY.

(3) Financial Planning & Investments

●​ Deductions under Section 80C, 80D, etc. must be made within the same FY for tax benefits.
●​ Investments made after 31st March will be counted in the next FY.

(4) GST Compliance & Business Taxation

●​ GST returns and corporate taxes are reported based on FY cycles.

●​ Businesses prepare profit & loss statements and balance sheets for FY reporting.

5. Financial Year in Other Countries

Different countries follow different financial year cycles:

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 Country Financial Year

India April 1 – March 31

United States October 1 – September 30

United Kingdom April 6 – April 5

Australia July 1 – June 30

6. Case Laws Related to Financial Year & Taxation

(1) CIT v. Ranchhoddas Karsondas (1959)

📌 Principle: Income tax is assessed for a financial year, not a calendar year.
(2) CIT v. Laxmi Ratan Cotton Mills Co. Ltd. (1969)

📌 Principle: Even if income is received after March 31, it is counted in the next FY.
(3) ESI Corporation v. S.K. Aggarwal (1998)

📌 Principle: Businesses must follow April-March FY for tax calculations, unless exempted.
7. Key Deadlines Related to Financial Year (FY 2023-24)

Event Date

End of FY 2023-24 March 31, 2024

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 Start of AY 2024-25 April 1, 2024

ITR Filing Due Date (Individuals) July 31, 2024

ITR Filing Due Date (Audit Cases) October 31, 2024

Advance Tax Payment (Q4) March 15, 2024

8. Penalties for Non-Compliance with Financial Year Tax Rules

Non-Compliance Penalty/Fine

Late ITR filing ₹5,000 (under Section 234F)

Failure to pay Advance Tax 1% interest per month (under Section 234B)

TDS Non-deduction Penalty = Amount of TDS not deducted

9. Conclusion
Understanding the Financial Year (FY) is crucial for tax planning, ITR filing, and compliance with the
Income Tax Act, 1961. The FY determines the period for which income is calculated, and the
corresponding Assessment Year (AY) is when taxes are filed.

Q5. Tax Evasion – Detailed Explanation

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1. Introduction to Tax Evasion
Tax evasion refers to the illegal act of deliberately avoiding paying taxes by individuals or businesses. It
involves misreporting income, hiding assets, or falsifying records to reduce tax liability.

Tax evasion is a criminal offense under the Income Tax Act, 1961 and attracts penalties, interest, and
imprisonment in severe cases.

Difference Between Tax Evasion, Tax Avoidance & Tax Planning

Aspec Tax Evasion Tax Avoidance Tax Planning

Meaning Illegal act of not paying tax Using legal loopholes to Lawful ways to minimize ta
tax

Legality Illegal Legal (but unethical) Fully legal

Examples Hiding income, fake expen Using tax havens, compl Investments in 80C, HRA c
offshore accounts transactions donations

Punishment Heavy penalties & jail Legal but may face scrut No penalty

2. Legal Provisions Under the Income Tax Act, 1961

Several sections of the Income Tax Act, 1961 deal with tax evasion, penalties, and prosecution:

(1) Section 139 – Failure to File ITR

●​ If a person fails to file an Income Tax Return (ITR) despite having taxable income, it is considered
tax evasion.
●​ Penalty: ₹5,000 for late filing under Section 234F.

(2) Section 271 – Penalty for Concealment of Income

●​ If a taxpayer hides income or under-reports it, a penalty of 100%-300% of tax evaded can be
imposed.

(3) Section 276C – Willful Attempt to Evade Tax

●​ If a taxpayer deliberately evades taxes, the punishment includes:

○​ Tax evasion > ₹25 lakh → 6 months to 7 years imprisonment + fine
○​ Tax evasion < ₹25 lakh → 3 months to 2 years imprisonment + fine

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(4) Section 277 – False Statements & False Accounts

●​ If a taxpayer provides false information or documents, they can face:

○​ Imprisonment from 6 months to 7 years + fine

(5) Section 278 – Abetment of Tax Evasion

●​ If any CA, lawyer, accountant, or company director helps in tax evasion, they are equally liable
under law.

3. Common Methods of Tax Evasion

Taxpayers use various illegal methods to evade taxes, such as:

(1) Hiding Income (Black Money)

●​ Not reporting cash transactions or undeclared foreign income.

●​ Example: A businessman earns ₹50 lakh but reports only ₹30 lakh.

(2) False Deductions & Expenses

●​ Claiming fake expenses, false salary payments, or bogus donations.

●​ Example: A company shows fake salary payments to employees to reduce taxable profit.

(3) Shell Companies & Benami Transactions

●​ Using fake companies (shell firms) to route unaccounted money.

●​ Benami transactions (property registered in another person's name) to hide assets.

(4) Smuggling & Money Laundering

●​ Undisclosed foreign bank accounts and transferring money abroad illegally.

●​ Example: Hawala transactions to avoid detection by tax authorities.

(5) Fake GST Invoices & Input Tax Credit (ITC) Fraud

●​ Generating fake GST bills to wrongfully claim tax refunds.

●​ Example: A trader creates fake purchases to claim GST refunds fraudulently.

4. Consequences & Penalties for Tax Evasion

Offense Penalty Imprisonme

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 Failure to file ITR (S. 139, 234F) ₹5,000 for late filing No

Concealment of Income (S. 271) 100% – 300% of tax evade No

Willful tax evasion (S. 276C) Fine + Tax liability 3 months – 7 years

False Statements / Fake Accounts (S. 277) Heavy fine 6 months – 7 years

Benami Property (Benami Transactions Act, Confiscation of property Up to 7 years

Black Money (Foreign Income & Assets Act, 3x tax liability 3 – 10 years

5. Important Case Laws on Tax Evasion

(1) Karti Chidambaram Case (2019) – Black Money & Benami Properties

📌 Issue: Undisclosed foreign assets, money laundering.​

📌 Verdict: Arrested under Prevention of Money Laundering Act (PMLA), 2002.
(2) Vodafone Tax Evasion Case (2012) – Tax Avoidance

📌 Issue: Vodafone avoided capital gains tax on a ₹11,000 crore deal.​

📌 Verdict: Supreme Court ruled in favor of Vodafone, highlighting the difference between tax avoidance
and tax evasion.

(3) Satyam Scam (2009) – False Financial Reporting

📌 Issue: Satyam Computers inflated profits and evaded tax.​

📌 Verdict: CBI investigated, and Ramalinga Raju was jailed under multiple laws.
6. Laws Preventing Tax Evasion in India
The government has introduced strict laws to prevent tax evasion:

Law Purpose

Income Tax Act, 1961 Covers income tax violations & penalties

Goods & Services Tax (GST) Act, 2017 Prevents GST frauds & fake invoices

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 Benami Transactions (Prohibition) Act, 1988 Confiscates properties bought using black

Prevention of Money Laundering Act (PMLA), 2 Criminalizes money laundering and hawala
transactions

Black Money (Undisclosed Foreign Income & A Punishes unreported foreign assets
Act, 2015

7. Government Initiatives to Reduce Tax Evasion

(1) Demonetization (2016)

●​ Old ₹500 & ₹1000 notes banned to detect black money.

(2) Income Disclosure Scheme (IDS), 2016

●​ Allowed individuals to declare black money with reduced penalties.

(3) Linking PAN with Aadhaar

●​ Prevents duplicate PAN cards used for tax evasion.

(4) GST Implementation (2017)

●​ One Nation, One Tax system to prevent fake invoicing & tax frauds.

8. International Measures Against Tax Evasion

●​ OECD’s BEPS (Base Erosion & Profit Shifting) Action Plan to stop global tax evasion.
●​ Automatic Exchange of Information (AEOI) between countries to track black money.
●​ Foreign Account Tax Compliance Act (FATCA) for reporting offshore assets.

9. Conclusion
📌 Tax evasion is a serious criminal offense leading to heavy penalties and imprisonment.​
📌 The Income Tax Act, 1961, along with PMLA, Benami Act, and GST laws, prevent tax fraud.​
📌 Governments use Aadhaar-PAN linking, demonetization, and international cooperation to reduce
evasion.

Q6 Tax Avoidance – Detailed Explanation

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1. Introduction to Tax Avoidance
Tax avoidance refers to the practice of legally minimizing tax liability by exploiting loopholes in tax laws,
exemptions, deductions, and incentives provided by the government. Unlike tax evasion, tax avoidance is
legal but is often considered unethical.

Many large corporations and high-net-worth individuals use aggressive tax planning strategies to reduce
their tax burden, often shifting profits to low-tax jurisdictions.

2. Difference Between Tax Avoidance, Tax Evasion & Tax

Planning

Aspec Tax Avoidance Tax Evasion Tax Planning

Meaning Reducing tax liability by u Illegally concealing incom Legitimate tax-saving unde
legal loopholes avoid taxes

Legality Legal but unethical Illegal Legal & ethical

Examples Using offshore tax haven Hiding income, fake expe Investments in PF, NSC, L
companies Sec. 80C

Consequences Can be challenged under Penalties, fines, imprison No consequences

anti-avoidance laws

3. Legal Framework Governing Tax Avoidance in India

India has introduced anti-avoidance measures under various laws:

(1) General Anti-Avoidance Rule (GAAR) – Income Tax Act, 1961

●​ GAAR was introduced in 2017 to prevent aggressive tax planning that lacks a commercial
substance.
●​ Tax benefits can be denied if the main purpose of a transaction is tax avoidance.

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(2) Transfer Pricing Regulations (Sections 92 to 92F)

●​ Multinational companies (MNCs) often shift profits to low-tax countries.

●​ Transfer pricing rules ensure transactions between associated enterprises are at fair market
value.

(3) Double Tax Avoidance Agreement (DTAA) – Section 90 & 91

●​ India has DTAA with over 90 countries, allowing taxpayers to avoid double taxation.
●​ Some companies misuse DTAA (e.g., Mauritius Route) to avoid capital gains tax.

(4) Specific Anti-Avoidance Rules (SAAR)

●​ SAAR applies to specific tax avoidance practices, such as:

○​ Dividend stripping (Sec. 94(7)) – Buying shares before dividend & selling after.
○​ Bonus stripping (Sec. 94(8)) – Buying bonus shares & claiming capital loss.

4. Common Tax Avoidance Strategies

Taxpayers use various legal means to reduce tax liabilities:

(1) Use of Tax Havens & Offshore Accounts

●​ Many companies shift profits to low-tax countries (e.g., Bermuda, Cayman Islands).
●​ Example: Google used “Double Irish with a Dutch Sandwich” strategy to save billions in taxes.

(2) Round Tripping via Shell Companies

●​ Black money is routed through foreign shell companies and reinvested in India as foreign
investment.
●​ Example: Using Mauritius or Singapore entities to avoid capital gains tax.

(3) Dividend Stripping & Bonus Stripping

●​ Buying shares just before dividend declaration to claim tax-free dividends and then selling them
at a loss.
●​ This artificially reduces taxable income.

(4) Treaty Shopping

●​ Misusing Double Taxation Avoidance Agreements (DTAA) by setting up companies in countries

with favorable tax treaties.
●​ Example: Mauritius Route – Foreign investors used Mauritius to avoid capital gains tax in India.

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(5) Thin Capitalization (Debt Over Equity Financing)

●​ Companies fund themselves with excessive loans instead of equity to claim higher interest
deductions and lower taxable profits.
●​ India introduced Section 94B (Thin Capitalization Rules) to prevent this abuse.

5. Anti-Avoidance Measures in India

Measure Law/Provision Purpose

GAAR (General Anti-Avoida Income Tax Act, 1961 Prevents aggressive tax a
Rule)

Transfer Pricing Rules Sec. 92-92F Prevents profit shifting by

DTAA Anti-Abuse Provision Sec. 90A Prevents treaty shopping

Thin Capitalization Rules Sec. 94B Limits excessive interest

deductions

Benami Transactions Act, 19Confiscates properties bought in anoth

person’s name

6. Important Case Laws on Tax Avoidance

(1) Vodafone International Holdings v. Union of India (2012)

📌 Issue: Vodafone acquired Hutchison’s Indian telecom business via an offshore deal to avoid capital
📌 Verdict: The Supreme Court ruled in Vodafone’s favor, stating that indirect transfers were not taxable
gains tax in India.​

📌 Impact: India amended tax laws retrospectively to tax such transactions (Vodafone Tax
at the time.​

Amendment).

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(2) McDowell & Co. Ltd. v. CTO (1985)

📌 Issue: Whether tax avoidance using legal loopholes is permissible.​

📌 Verdict: Supreme Court ruled against tax avoidance, stating “colorable devices” cannot be part of
📌 Impact: Strengthened anti-tax avoidance laws in India.
tax planning.​

(3) Azadi Bachao Andolan v. Union of India (2003)

📌 Issue: Validity of using Mauritius for tax avoidance under DTAA.​

📌 Verdict: Supreme Court upheld DTAA benefits and allowed treaty shopping at the time.​
📌 Impact: India later renegotiated the India-Mauritius DTAA to prevent abuse.
7. Global Tax Avoidance & Countermeasures
(1) Base Erosion & Profit Shifting (BEPS) – OECD Initiative

●​ Targets tax avoidance by MNCs through artificial profit shifting.

●​ India signed the BEPS Action Plan to prevent tax base erosion.

(2) Multilateral Instrument (MLI) – 2019

●​ India signed the MLI to amend DTAA provisions, preventing misuse.

(3) Digital Tax – Equalization Levy (Google Tax)

●​ Introduced in India (2020) to tax digital giants like Google, Facebook, and Amazon.

8. Ethical Concerns & Economic Impact of Tax Avoidance

●​ Reduces government revenue for public welfare.
●​ Increases tax burden on honest taxpayers.
●​ Encourages economic inequality – Corporations avoid taxes while individuals pay.

9. Conclusion
📌 Tax avoidance is legal but unethical, often leading to amendments in tax laws.​
📌 GAAR, Transfer Pricing, and DTAA amendments are India’s key measures to prevent it.​
📌 Landmark cases (Vodafone, McDowell, Azadi Bachao) shaped India’s anti-tax avoidance
📌 With OECD’s BEPS framework and MLI, India is actively combating tax avoidance.
framework.​

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Q7. Tax Deducted at Source (TDS)
1. Introduction to TDS
Tax Deducted at Source (TDS) is a system introduced under the Income Tax Act, 1961, where the payer
deducts tax at the time of making payments such as salary, rent, commission, professional fees, and
interest. The deducted tax is then deposited with the Income Tax Department on behalf of the payee.

Purpose of TDS

●​ Prevents tax evasion by ensuring tax collection at the source of income.

●​ Provides a steady revenue stream for the government.
●​ Reduces the burden on taxpayers by ensuring advance tax payments.

2. Legal Provisions Governing TDS

(1) Section 192 – TDS on Salary

●​ Employers deduct TDS from employees' salaries based on income tax slabs.
●​ No TDS if income is below the basic exemption limit.

(2) Section 194A – TDS on Interest (Other than Securities)

●​ TDS is applicable on interest payments by banks/NBFCs exceeding ₹40,000 (₹50,000 for

senior citizens).

(3) Section 194C – TDS on Contractor Payments

●​ Applicable when companies or individuals pay contractors/sub-contractors.

●​ Rate: 1% (for individuals) and 2% (for companies).

(4) Section 194D – TDS on Insurance Commission

●​ Insurance companies deduct TDS on commission paid to agents.

(5) Section 194H – TDS on Commission & Brokerage

●​ TDS is deducted on commission or brokerage payments exceeding ₹15,000.

●​ Rate: 5%.

(6) Section 194I – TDS on Rent

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 ●​ TDS is deducted when rent payments exceed ₹2,40,000 per year.
●​ Rate: 2% (for plant & machinery), 10% (for land, buildings, furniture).

(7) Section 194J – TDS on Professional or Technical Fees

●​ TDS applies to fees paid to professionals, doctors, and consultants exceeding ₹30,000 per
year.
●​ Rate: 10%.

(8) Section 195 – TDS on Payments to Non-Residents

●​ Any payment made to foreign companies or non-resident individuals attracts TDS.

3. TDS Rates for Various Payments

Nature of Paym TDS Rate for Individ TDS Rate for Co Threshold Limit

Salary (Sec. 192) As per income tax slab As per income tax Based on tax slabs

Interest on deposits (Se10% 10% ₹40,000 (₹50,000 for seni

citizens)

Rent (Sec. 194I) 10% (land/buildings), 2% 10% / 2% ₹2,40,000

(machinery)

Contractor Payments (S1% 2% ₹30,000 (single transactio

194C) ₹1,00,000 (annual)

Commission & Brokera 5% 5% ₹15,000

194H)

Professional Fees (Sec 10% 10% ₹30,000

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4. TDS Deduction and Payment Process
(Step 1) Deduction of TDS

●​ The payer (employer, bank, or business) deducts TDS at the applicable rate.
●​ Example: If a company pays ₹5,00,000 as professional fees, it will deduct ₹50,000 as TDS (10%)
and pay only ₹4,50,000 to the professional.

(Step 2) Deposit of TDS with Government

●​ The deducted amount must be deposited with the Income Tax Department by the 7th of the
following month.

(Step 3) Filing of TDS Returns (Quarterly Filing – Form 26Q & 24Q)

●​ Employers file Form 24Q for salary TDS and Form 26Q for other TDS payments.
●​ Due dates:
○​ Q1 (April – June): 31st July
○​ Q2 (July – September): 31st October
○​ Q3 (October – December): 31st January
○​ Q4 (January – March): 31st May

(Step 4) Issuance of TDS Certificates (Form 16 & Form 16A)

●​ Form 16 – Issued to employees for TDS on salary.

●​ Form 16A – Issued for non-salary TDS (interest, rent, professional fees, etc.).

5. Consequences of Non-Compliance

Offense Penalty Legal Prov

Failure to deduct TDS Interest @ 1% per month on TDS amount Section 201(1A)

Failure to deposit TDS Interest @ 1.5% per month on TDS amount Section 201(1A)

Late filing of TDS return ₹200 per day (max. penalty = TDS amount) Section 234E

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 Failure to file TDS return Fine of ₹10,000 to ₹1,00,000 Section 271H

False TDS deduction claimRigorous imprisonment of 3 months to 7 yearsSection 276B

6. Important Case Laws on TDS

(1) CIT v. Eli Lilly & Co. (India) (2009)

📌 Issue: Whether TDS must be deducted on expatriate employees' salaries paid abroad.​
📌 Verdict: Supreme Court ruled that TDS must be deducted on the full salary, including payments
outside India.

(2) Hindustan Coca-Cola Beverages Pvt. Ltd. v. CIT (2007)

📌 Issue: Whether double taxation can arise due to TDS defaults.​

📌 Verdict: TDS liability does not arise if the payee has already paid tax on the income.
(3) Vodafone International Holdings v. Union of India (2012)

📌 Issue: Whether TDS is applicable on indirect transfer of Indian assets.​

📌 Verdict: Supreme Court ruled that Vodafone was not liable for TDS since the deal happened
outside India.

7. Recent Amendments & Digital TDS System

(1) TDS on Crypto Transactions (2022) – Section 194S

●​ 1% TDS on cryptocurrency and virtual digital assets (VDA) transactions above ₹10,000.

(2) TDS on E-commerce Transactions – Section 194O

●​ 1% TDS deducted by e-commerce companies like Amazon, Flipkart for transactions above
₹5,00,000.

(3) Pre-Filled TDS Details in ITR

●​ Taxpayers can verify TDS details in Form 26AS on the income tax portal.

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8. Conclusion
📌 TDS ensures tax collection at the source, reducing tax evasion and ensuring steady government
📌 Employers, businesses, and banks are responsible for deducting and depositing TDS.​
revenue.​

📌 Non-compliance leads to interest, penalties, and prosecution under Section 201, 271H, and
📌 Recent amendments include TDS on crypto, e-commerce, and digital transactions to increase
276B.​

transparency.

Q8. Agricultural Income

1. Introduction to Agricultural Income
Agricultural income refers to income derived from land used for agricultural purposes, including
farming, rent from agricultural land, and income from farm produce. Under Section 10(1) of the Income
Tax Act, 1961, agricultural income is exempt from income tax in India.

This exemption is based on the federal structure of the Indian Constitution, where only state
governments can levy taxes on agricultural income (Entry 46, State List – Seventh Schedule).

2. Legal Definition of Agricultural Income (Section 2(1A) of the

Income Tax Act, 1961)
According to Section 2(1A), agricultural income includes:

(1) Income from Land Used for Agriculture

●​ Income from cultivation, harvesting, and selling of crops like wheat, rice, fruits, and vegetables.
●​ The land must be situated in India and used for agricultural purposes.

(2) Rent or Revenue from Agricultural Land

●​ Rent received from leasing agricultural land is considered agricultural income.

●​ Example: A landowner rents out farmland and receives ₹1,00,000 per year as rent—this amount is
exempt from tax.

(3) Income from Processing of Agricultural Produce

●​ If an agriculturist processes farm produce (e.g., coffee, tea, rubber) to make it marketable, the
income is considered agricultural.

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 ●​ Example: Drying and shelling of peanuts before selling is agricultural income.

(4) Income from a Farm Building

●​ If a farmhouse is used for agricultural operations, income from it is exempt from tax.
●​ Conditions:
○​ The building must be on or near agricultural land.
○​ The land should be assessed for land revenue.
○​ The building should be used as a warehouse, storehouse, or worker’s accommodation.

3. Examples of Agricultural & Non-Agricultural Income

Agricultural Income (Tax-Free) Non-Agricultural Income (Taxable)

Sale of crops, fruits, and vegetables Sale of processed food (e.g., bread, jams, packa

Income from renting agricultural land Income from renting a warehouse in a city

Income from processing farm produce befor Income from sawmills, dairy farming, poultry farm

Income from a farm building used for storag Salary of agricultural workers

4. Taxation of Agricultural Income – Partial Integration Rule

Though agricultural income is exempt from tax, it affects tax liability when an individual earns both
agricultural and non-agricultural income.

Steps to Calculate Tax Under the Partial Integration Rule

1.​ Calculate total income = Agricultural Income + Non-Agricultural Income.

2.​ Compute tax on the combined income (as if agricultural income was taxable).
3.​ Compute tax on agricultural income separately.
4.​ Subtract Step 3 from Step 2 = Final Tax Liability.

🔹 Example: If a person earns ₹4,00,000 as salary and ₹2,00,000 as agricultural income, tax will be
calculated on ₹6,00,000 but adjusted to exclude agricultural income.

✅ Purpose of Partial Integration Rule:

●​ Prevents misuse of tax exemption by high-income individuals.
●​ Ensures progressive taxation, as higher income leads to a higher tax slab.

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5. Exemptions & Exceptions to Agricultural Income
(1) Taxable Income from Agricultural Operations

●​ Processing beyond the basic level (e.g., making sugar from sugarcane) is taxable.
●​ Agricultural income from foreign countries is taxable in India.

(2) Special Cases – Tea, Coffee, Rubber Income

The government applies composite taxation on these crops:

Agricultural Income (Exempt Business Income (Taxabl

Tea – 60% 40%

Coffee (cured) – 75% 25%

Coffee (uncured) – 100% 0%

Rubber – 65% 35%

6. Misuse of Agricultural Income Exemption

Some individuals show black money as agricultural income to avoid taxes.

(1) Fake Agricultural Income Declarations

●​ Politicians and businessmen declare fake farm earnings to evade taxes.

●​ Income Tax Department uses scrutiny measures to verify actual farm income.

(2) Land Leasing Loophole

●​ Rich individuals buy agricultural land and rent it to themselves, falsely claiming tax exemption.

(3) Money Laundering via Farm Income

●​ Shell companies claim agricultural income to convert black money into white.

🔹 Government Countermeasures:
●​ Increased scrutiny of agricultural income claims above ₹5 lakh.
●​ Mandatory PAN disclosure for high agricultural earnings.

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7. Important Case Laws on Agricultural Income
(1) CIT v. Raja Benoy Kumar Sahas Roy (1957)

📌 Issue: Whether growing trees for timber is agricultural income.​

📌 Verdict: Supreme Court ruled that forestry is not agriculture unless there is active cultivation.
(2) CIT v. Kunwar Trivikram Narain Singh (1965)

📌 Issue: Whether compensation received for land acquisition is agricultural income.​

📌 Verdict: Compensation is taxable as capital gains, not agricultural income.
(3) CIT v. Raja Mustafa Ali Khan (1946)

📌 Issue: Whether income from sale of trees is agricultural income.​

📌 Verdict: If trees naturally grow without human effort, the income is not agricultural.
8. Recent Amendments & Proposals on Agricultural Income Tax
●​ Government debates on taxing large farm income (above ₹50 lakh).
●​ Increased reporting of agricultural income for scrutiny.
●​ Digitization of farm income records to prevent fraud.

9. Conclusion
📌 Agricultural income is tax-exempt under Section 10(1) but can be misused for tax evasion.​
📌 Partial integration rule ensures fairness for individuals with mixed income.​
📌 Fake claims & money laundering through agriculture are under government scrutiny.​
📌 Case laws like Raja Benoy Kumar & Raja Mustafa Ali clarify the legal scope of agricultural
income.

Q9. Non-Resident Indian (NRI)

1. Introduction to NRI (Non-Resident Indian) in Taxation Law
A Non-Resident Indian (NRI) is an individual who is a citizen of India but resides outside India for
employment, business, education, or other purposes. In taxation law, determining whether a person is an
NRI is crucial because NRIs are taxed differently than residents under the Income Tax Act, 1961.

The residential status of an individual affects:

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 ●​ Taxability of income (whether global income or only Indian income is taxed).
●​ Applicability of exemptions and deductions.
●​ TDS (Tax Deducted at Source) rates on income earned in India.

2. Definition of NRI under the Income Tax Act, 1961

According to Section 6 of the Income Tax Act, 1961, a person’s residential status depends on the
number of days they stay in India during a financial year (1st April – 31st March).

(A) Residential Status Classification

An individual can be classified as:

1.​ Resident in India (RI)

2.​ Non-Resident Indian (NRI)
3.​ Resident but Not Ordinarily Resident (RNOR)

3. When is a Person Considered an NRI?

A person is classified as an NRI if they do not meet any of the following conditions:

Basic Conditions (Section 6(1))

An individual is a resident in India for a financial year if:

1.​ They stay in India for 182 days or more in the financial year, OR
2.​ They stay in India for 60 days or more in the financial year AND 365 days or more in the last 4
years.

If these conditions are not met, the person is considered an NRI.

4. Special Cases for NRI Classification

(A) Indian Citizens or Persons of Indian Origin (PIO) Working Abroad

For Indian citizens leaving India for employment, business, or as a crew member of a ship, the 60-day
rule is extended to 182 days.

(B) NRIs Returning to India (Resident but Not Ordinarily Resident - RNOR)

If an NRI returns to India, they may qualify as Resident but Not Ordinarily Resident (RNOR) if:

●​ They were NRI in 9 out of the past 10 years, OR

●​ They stayed in India for less than 729 days in the last 7 years.

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📌 RNORs are taxed only on income earned in India, like NRIs.
(C) Recent Amendment for High-Income NRIs (Finance Act, 2020)

●​ If an Indian citizen earns more than ₹15 lakh from Indian sources AND stays in India for 120
days or more, they will be classified as RNOR (not NRI).
●​ This prevents tax avoidance by wealthy Indians who live abroad but earn in India.

5. Taxation of NRI Income

(A) What Income is Taxable for NRIs?

●​ Income earned in India is taxable (e.g., salary in India, rent from Indian property, capital gains on
Indian investments).
●​ Income earned outside India is NOT taxable in India.

Type of Income Taxability for Taxability for Resid

Salary earned in India Taxable Taxable

Salary earned abroad Not taxable Taxable

Income from house property in India Taxable Taxable

Interest on Indian bank deposits Taxable Taxable

Interest on NRE account Exempt N/A

Capital gains on sale of property in India Taxable Taxable

Capital gains on sale of shares in India Taxable Taxable

📌 Example: If an NRI works in the USA and earns $100,000, this income is not taxable in India. But if
they earn ₹10 lakh from rent in India, this income is taxable in India.

6. TDS (Tax Deducted at Source) for NRIs

●​ Higher TDS rates apply to NRIs than residents.
●​ TDS applies even if the total income is below the taxable limit.
●​ NRIs can claim a refund if total tax liability is lower than TDS deducted.

Income Type TDS Rate for NRIs

Rent from property 30%

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 Capital gains on property sale 20% (long-term), 30% (short-term)

Interest on NRO account 30%

Dividend income 20%

Professional fees 10%

7. Special Tax Benefits for NRIs

(A) Exemptions and Deductions for NRIs

NRIs can claim certain tax exemptions and deductions, including:

●​ Section 80C: Deductions up to ₹1.5 lakh (Life insurance, PPF, ELSS, Home loan repayment).
●​ Section 80D: Deduction for health insurance premium.
●​ Section 54 & 54EC: Exemptions on capital gains from property sales if reinvested.

📌 NRIs CANNOT claim deductions under:

●​ Section 80TTB (interest income exemption for senior citizens).
●​ Section 87A (rebate for income below ₹5 lakh).

8. Important Case Laws on NRI Taxation

(1) Azadi Bachao Andolan v. Union of India (2003)

📌 Issue: Whether NRIs can use Double Taxation Avoidance Agreements (DTAA) to reduce tax liability.​
📌 Verdict: NRIs can benefit from DTAA, avoiding double taxation in India and their country of residence.
(2) Sudhir Choudhrie v. CIT (2011)

📌 Issue: Whether income from rent received by an NRI from Indian property is taxable.​
📌 Verdict: Rent received from India is taxable in India, even if the NRI lives abroad.
9. Double Taxation Avoidance Agreement (DTAA) for NRIs
NRIs may face double taxation (taxed in India & their country of residence). DTAA prevents this by:

1.​ Exemption Method – Tax is paid only in one country.

2.​ Tax Credit Method – Tax is paid in both countries, but credit is given in one.

📌 Example: If an NRI earns interest in India and the USA, DTAA ensures they do not pay tax twice.
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10. Recent Amendments in NRI Taxation
(A) Finance Act, 2020 – Stricter Residency Rules for NRIs

●​ Individuals earning more than ₹15 lakh from Indian sources & staying in India for 120+ days
are classified as RNOR.
●​ Prevents tax avoidance by high-net-worth individuals (HNIs).

(B) TDS on E-commerce Transactions for NRIs (Section 194O)

●​ NRIs earning from Indian e-commerce platforms (Amazon, Flipkart) will have TDS deducted
at 1%.

11. Conclusion
📌 NRI status depends on the number of days spent in India (182-day rule, 120-day rule for HNIs).​
📌 NRIs are taxed only on income earned in India, not global income.​
📌 TDS for NRIs is higher than for residents (30% on rental, 20% on capital gains).​
📌 DTAA prevents double taxation for NRIs.​
📌 New laws aim to prevent tax avoidance by high-income NRIs.
Q10. Tax Liability of Residents in India
1. Introduction to Tax Liability of Residents in India
Tax liability refers to the amount of tax an individual is required to pay under the Income Tax Act, 1961.
In India, the tax liability of an individual depends on their residential status.

A resident in India is taxed on global income, while a Non-Resident Indian (NRI) is taxed only on
income earned in India.

2. Residential Status and Its Impact on Tax Liability

Under Section 6 of the Income Tax Act, 1961, an individual is classified as:

1.​ Resident (Ordinary Resident - ROR)

2.​ Resident but Not Ordinarily Resident (RNOR)
3.​ Non-Resident Indian (NRI)

A. Who is Considered a Resident in India?

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A person is considered a Resident if they meet any of the following conditions:

1.​ Stay in India for 182 days or more during the financial year (April 1 – March 31), OR
2.​ Stay in India for 60 days or more in the financial year AND 365 days or more in the last four
financial years.

✅ If these conditions are met → The individual is a Resident.

🔹 Exceptions for Indian Citizens & Persons of Indian Origin (PIOs):
●​ If an Indian citizen leaves India for employment or as a crew member of a ship, the 60-day
rule is extended to 182 days.
●​ If an Indian citizen or PIO visits India and earns ₹15 lakh or more from Indian sources, they
are considered RNOR if their stay is 120 days or more.

3. Types of Residents and Their Tax Liability

A. Resident and Ordinarily Resident (ROR)

A person is classified as Resident and Ordinarily Resident (ROR) if:

●​ They satisfy the basic conditions of residency.

●​ They have been resident in India for at least 2 out of the last 10 years AND have stayed in India
for at least 730 days in the last 7 years.

📌 Tax Liability of ROR:​

✅ Taxable on Global Income – Income earned in India and abroad is taxed in India.​
✅ Eligible for tax deductions (like Section 80C, 80D, etc.).
B. Resident but Not Ordinarily Resident (RNOR)

A person is classified as RNOR if:

●​ They have been NRI in 9 out of the last 10 years, OR

●​ They have stayed in India for less than 729 days in the last 7 years.

📌 Tax Liability of RNOR:​

✅ Taxable on income earned in India only.​
✅ Foreign income is NOT taxed in India unless it is earned from a business or profession set up in
India.

C. Non-Resident Indian (NRI)

A person is classified as NRI if they do not meet any of the conditions for residency.

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📌 Tax Liability of NRI:​
✅ Only income earned in India is taxed.​
✅ Income earned abroad is NOT taxed in India.
4. Scope of Taxable Income for Residents in India
A Resident and Ordinarily Resident (ROR) is liable to pay tax on all types of income, including:

Type of Income Taxability for R

Salary received in India Taxable

Salary received abroad Taxable

Income from house property in India Taxable

Income from house property abroad Taxable

Interest earned in India (bank deposits, savings accounts) Taxable

Interest earned abroad (foreign bank accounts) Taxable

Dividends received in India Taxable

Dividends received from foreign companies Taxable

Capital gains from sale of Indian property Taxable

Capital gains from sale of foreign property Taxable

Income from business in India Taxable

Income from foreign business Taxable

📌 Example: If a Resident earns ₹10 lakh from an Indian salary and ₹5 lakh from rental income in the
USA, their total taxable income is ₹15 lakh.

5. Tax Slabs for Residents (For Assessment Year 2024-25)

A. Old Tax Regime (With Deductions & Exemptions)
Income Slab ( Tax R

Up to 2,50,000 Nil

2,50,001 – 5,00,000 5%

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 5,00,001 – 10,00,000 20%

Above 10,00,000 30%

✅ Rebate Under Section 87A: No tax if total income is below ₹5 lakh.

B. New Tax Regime (Lower Rates, Fewer Exemptions)
Income Slab (₹ Tax R

Up to 3,00,000 Nil

3,00,001 – 6,00,000 5%

6,00,001 – 9,00,000 10%

9,00,001 – 12,00,000 15%

12,00,001 – 15,00,000 20%

Above 15,00,000 30%

✅ Rebate Under Section 87A: No tax if total income is below ₹7 lakh under the new regime.
6. Exemptions and Deductions for Residents
Deduction Maximum Limit (₹) Applicable U

Section 80C (Investments in LIC, PPF, ELS₹1.5 lakh Old Regime

Section 80D (Health Insurance Premium) ₹25,000 (₹50,000 for senior citiz Old & New Regime

Section 24(b) (Home Loan Interest) ₹2 lakh Old Regime

Section 10(14) (House Rent Allowance - H Varies Old Regime

📌 Residents can claim these deductions to reduce tax liability under the Old Regime.
7. Advance Tax & TDS for Residents
A. Advance Tax

36
 ●​ If tax liability exceeds ₹10,000, the resident must pay advance tax in installments.
●​ Non-payment leads to penalties under Section 234B & 234C.

B. TDS (Tax Deducted at Source)

●​ Employers deduct TDS on salary.

●​ Banks deduct TDS on FD interest above ₹40,000 (₹50,000 for senior citizens).
●​ Tenants must deduct TDS @5% if rent exceeds ₹50,000 per month.

📌 Residents can file ITR and claim refunds if excess TDS is deducted.
8. Important Case Laws on Tax Liability of Residents
(1) K.V. Alagarswamy v. CIT (1977)

📌 Issue: Whether foreign salary is taxable in India for a resident.​

📌 Verdict: Salary earned abroad by an Indian resident is taxable in India.
(2) CIT v. P.L. Karuppan Chettiar (1992)

📌 Issue: Whether foreign business income is taxable for an Indian resident.​

📌 Verdict: All global income is taxable for residents in India.
9. Conclusion
📌 Residents are taxed on their global income, while NRIs are taxed only on Indian income.​
📌 Tax slabs vary under the Old and New Tax Regimes.​
📌 Residents can reduce tax through deductions (80C, 80D, etc.).​
📌 Advance tax & TDS rules apply to residents with taxable income.

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