CHAPTER-WISE TRICKY POINTS FROM QUESTIONS

PGBP

All points are covered in PGBP adjustments only.

CAPITAL GAINS
(1) Reverse Mortgage → Transfer of Capital Asset in Reverse mortgage is not Taxable
↓
But Cap Gain is taxable at the time of sale of Capital Asset by Bank for
recovering the loan.

(2) Sale of Right entitlement → Always STCG applicable

(3) Slump Sale For FMV 1 → Book Value / SDV

Depreciable Asset For Net Worth → WDV as per Income Tax Act
Example: Building Depreciable Asset
Example: Land
For FMV 1 → SDV because Immovable Property
If Land revalued hai, For NW → WDV as per Income Tax Act
toh revaluation effect If WDV as per IT Act is not given, Book value is considered
bhi hatana padega as WDV as per IT Act

(4) Advance forfeited by previous owner is not deducted → If received before 1/4/14
Advance is always deducted before Indexation.

(5) Cost of Improvement incurred before 1/4/2001 is ignored.

(6) Section 54 → Upto 2 Crores → 2 Houses allowed

→ 2 adjacent flats → even if purchased by 2 separate agreements
→ even if used by 2 tenants before purchase.
Section 54 → Jo ghar purchase Kiya hai But it is not necessary for buyer
↓ to use for his own residential
It shall be used for residential purposes
purposes ↓
Buyer can let out the house for
Residential Purpose to anyone.

8.1
(7) Furniture → not allowed in Section 54C → Dep Asset → always STCG
→ COA = WDV for Dep Asset
In Section 54G, If there is both Exemption should be first exhausted against STCG
STCG + LTCG first, then LTCG.
Because, Tax Rate for STCG shall be higher (Q 30)

(8) Section 45(4), Section 9B →

For Section 9B - FMV on the date when asset is received by partner

(9) ULIP
• Considered as Equity oriented fund
• Taxable at @ 12.5% in excess of 1.25 Lakhs u/s 112A
• ULIP → Taxable under CG and LIP → Taxable under IFOS
• ULIP issued before 1/2/21 → Taxable under IFOS as it is not a Capital Asset
• While computing 10% / 15% / 20% → Take 10% / 15% /20% of Sum Assured
• 10% /15% /20% → Deduction u/s 80C is allowed only upto this amount
• While computing CG u/s 45(1B) → Take Maturity proceeds (-) Prem. paid till date

ASSESSMENT OF VARIOUS ENTITIES

MAT
Income from Units of UTI → Not deducted → It is not exempt anymore.

AMT
When unabsorbed loss and unabsorbed depreciation both are given then
↓
PGBP Profit for 10AA Deduction shall be calculated by deducting unabsorbed
depreciation only → Not unabsorbed loss.

VDA
• Tax Rate- 30% on VDA Income (consideration- COA) → Taxable under CG
• TDS Rate- 1% on consideration.
• VDA Income shall be taxable at 30%+ 4% Cess irrespective of other Income.
• BEL will not be exhausted

8.2
 TRUST AND EXIT TAX

(1) Income not invested in 11(5) Safe Investment modes → Taxable @ 30% u/s 115BBI
(2) Anonymous donation
Govt grant → Do both alternatives in Exam

Alternative 1 Alternative 2
Include Do NOT include
in Total Donation in Total Donation
for calculation of 5%

(3) Income applied for the benefit of Related Person

↓
3 Implications

Not Treated Taxable Penalty u/s

as applied @30% u/s 271AAE
115BBI Penalty = 100% of that amount - 1st Violation
= 200% on Subsequent Violation

(4) If loan already taken as applied in any PY, don't take repayment as applied again.

BUSINESS TRUST
Interest and Dividend from SPV → Taxable in the hands of Unit holders
Other Interest and Dividend → Taxable in the hands of Business Trust

Distribution of Income

For Business Trust For Investment Fund & Sec Trust

↓ ↓
Jitna distribute Kiya, Kitna bhi distribute Karo,
Utna taxable in the 100% taxable
hands of Unit Holders in the hands of Unit Holders

8.3
 BUY BACK
Rule 119A → Interest Calculation → Tax Liability Lower multiple of 100 pe round
off karna padta hai.
Jab bhi hum Section 119A mein Interest calculate karenge, toh Tax ko round off
karna padega to lower 100 → Kyunki hame fraction ignore karna hai

Kab lagega?
• Jab bhi Assessee → CG ko Interest pay Karega OR
• Jab bhi CG → Assessee ko Interest pay Karega

TRANSFER PRICING
(1) Section 94B- 30% of EBITDA me local Borrowings count nahi Karte hai.
(2) Cost plus method → GP margin → Always taken on sale
↓
Unless mentioned in Question
↑
(3) TNMM → Operating profit margin → Always taken on cost

NR TAXATION
(1) Royalty / Interest / Dividend Received → Net of TDS
(2) Royalty / Interest / Dividend Earned. → Gross
[Gross up karne ke liye TDS Rate +
Cess lena padega]
(3) Interest u/s 115A
• Indian Concern or Govt → 20% In Foreign Currency hona chahiye.
• Indian Company → 20%/9% If Indian Currency → Rate = 35%

(4) FTS
◦ Approved by Govt → 20% Paper mein kuch nahi diya hai toh assume
◦ Not Approved by Govt → 35% kar lena ki approved hai & yeh assumption
likh dena

8.4
(5) NR → Indexation available nahi hai.
(6) Agar FTS ke consideration ke liye Debenture de rahe hain → Toh NR ke hands mein
2 Income taxable hogi
◦ FTS
◦ Interest on debentures.

SECTION 115BAA & 115BAB

Generally asked points

(1) For Section 115BAB → Set up Date → 01/10/2019

Section 112A, Dep - Half Rate (+) Capitalisation
(2) Scientific Contribution & Section 35(2AB) → Not Allowed
(3) In-House Research → Revenue & Capital Expenditure → Allowed
Section 35(1)(i), 35(1)(iv) Allowed
(4) Section 80JJAA Deduction → 240 days / 150 days Applicability
(5) Section 80M = Dividend Paid
Dividend Received
(6) Additional Depreciation is Not Allowed
(7) Section 115BAB Tax Rates 115BAB/BAE
◦ Business Income → 15% not relevant
◦ IFOS & HP → 22% anymore as it
◦ STCG Dep Assets → 15% can't be opted
◦ STCG Non - Dep → 22% after 31.3.24
◦ Special Incomes → Special Rates

SEARCH SURVEY
Section 133A Section 133B
Survey Power to Collect Info

Any Place where BOA are Kept Business Premises

Business Place - Business Hours Business Hours

Other Place - After Sunrise Bef Sunset

Books Impound kar Sakte hain 15 days Books Impound nahi kar sakte

8.5
*w.e.f 1/10/2024

TDS RATES

On Sections other than specifically mentioned below Rate applied on whole amount & NO PAN Rate 20%

0.1% 1% 2% 5%
194Q 194-O 194-I [P&M] 194H
No PAN 5%
On excess over limit
No PAN 5% 194N 194D
On excess over limit
194G
206C(1H) 194C [Ind /HUF] 194C [Others] 194M
No PAN 1%
On excess over limit 194IA 194J 194LB

[FTS, Non Prof, Call 194-IB

194O Centre, Royalty on Films] 194DA
From 1.10.24 194DA, 194G, 194H, 194N
194-IB, 194M * [> 1 Cr, If Limit 20L]

10% 20% 30% Slab Rate

192A 194E 194B 192
No PAN MMR% 194BB 194P
194-I
194J
193, 194
194A, 194K
194LA
194-IC
194R

TDS Deductible Starting from the Limits TDS Applicable on Excess Amount Over
• 192A - ₹ 50,000 or more Limit Under these Sections:
• 194DA - ₹ 1,00,000 or more 194N, 194Q, 206C(1H),206C(1G)
• 194-IA - ₹ 50,00,000 or more
Section 10AA Other Chapter Linkings
TP- AO Calculates ALP & Section 10AA not allowed on Increased Amount of Income
Sec 143(1) - If Section 10AA liya hai, due date of ROI ke baad Return file kiya
Sec 115BAA, 115BAB, 115BAC - Section 10AA deduction not Allowed
MAT - Section 10AA deduction nahi hota because not exempt
AMT - ✓
Sec 35AD - If Ded u/s 35AD is availed then Ded u/s 10AA and Ch VI-A is not available

8.6
 Summary of Amendments in Rates of TDS
Memory Technique: IBM ka GHODA

Section Before After (w.e.f 1/10/24)

194DA - Maturity Proceeds of LIP 5% 2%
194G - Lottery Sale Commission 5% 2%
194H - Commission/ Brokerage 5% 2%
194-IB - Rent of Immovable Property 5% 2%
194M - Payment of Contract, Prof Fees / 5% 2%
Commsn & Brokerage
194-O - Payment by ECO 1% 0.1%

→ If 206C(1) applies on a Transaction, and Buyer gives declaration that he's buying
for mfg/gen. of Elec, then 206C(1) is not Applicable.
Then we check applicability of 194Q, if Buyer has last year T/o is > 10 Cr.
If Buyer has Last YR T/O upto 10 Cr and the Seller has last year T/0 > 10Cr, Do we
Apply 206C(1H)? Answer - NO
206C(1H) does not apply on Transactions on which Sec 206C(1) is applicable.

8.7