INCOME TAX AND GST
Module I
Clubbing of income
Sometimes the income of other person shall be included in the total
income of the assessee. Such practices included the income of the
other person to the income of the assessee is called clubbing of
incomes.
Following income are to be clubbed
Transfer of income without transfer of assets.
Revocable transfer of assets
Income of spouse
Income of daughter in law
Income from business
Income from minor child
Income from assets transferred to a person for the benefits of his
sons wife
Cross transfers
Income from converted property
Benami transactions
Aggregation of incomes
In computing total income of an assessee, the following incomes shall
be included
Share of member from an AOP or BOI
Cash credits
Unrecorded and unexplained investments
Unrecorded and unexplained money, gold etc.
Unexplained expenditure
Amount borrowed or repaid on hundi
Set off losses
Set off of losses refers adjusting of losses against income of the same
year.
Provisions for set off losses
Intra head set off
It means set off losses against incomes from any sources under the
same head.
Exception to intra head set off
1) Loss from speculative business
Losses incurred on account of speculation can be set off against
speculation income. It cannot be set off against income from other
business.
2) Loss of specified business
Loss incurred on account of specified business u/s 35 AD can be set off
against specified business income. It cannot be set off against income
from any other business.
3) Long term capital loss
It can be set off against long term capital gain only. It cannot be set off
against short term capital gain.
4) Loss in business of owing and maintaining race horse
It can be set off against profits in business of owning and maintaining
race horse. It cannot be set off against any other income.
5) Loss from an exempted income
It cannot be set off against any other taxable income in the same head.
Inter head set off
It means set off losses against income under other heads.
Exception to inter head set off
1) Loss from speculation business
It cannot be set off against any other heads of income. It can be set off
against speculation income of the assessee.
2) Loss of specified business
It cannot be set off against any other heads of income. It can be set off
against specified business income of the assessee.
3) Capital losses
Long term capital losses can be set off against long term capital gain
only. It cannot be set off against any other income.
Short capital loss can be set off against short term capital gain and long
term capital gain.
4) Loss in business of owning and maintaining horse race
It cannot be set off against any other heads of income of the assessee.
5) Loss under the heads of business or profession
It cannot be set off against income under the head salaries. It can be set
off against any other heads of income.
6) Loss of lottery, crossword puzzles, gambling etc.
It cannot be set off against any income.
Carry forward and set off losses
When loss cannot be set off in the same year in which it has been
incurred, it can be carried forward to the next year for set off. This is
known as carry forward and set off losses.
Following loses can be carry forward
Business loss
Loss of speculation business
Loss of specified business
Losses from firm
Losses under the head house property
Short term capital loses
Long term capital losses
Loss from activity of owing and maintaining race horses
Alternative minimum tax (AMT)
It is the minimum amount of tax payable by a person other than
company.
Security transaction tax (STT)
It is a tax levied at the time of buying and selling of securities in a
recognized stock exchange.
Rebate and relief of tax
Rebate of tax
While computing tax liability of an assessee, a rebate of income shall be
allowed in respect of certain incomes. It is deductible from tax.
Important rebate applicable to an assessee
Rebate in respect of share of income from an AOP or BOI.
Rebate = share in AOPxTax on total income
Rebate when total income does not exceed Rs 3, 50,000.
Rebate= Rs 2500 or tax on total income, whichever is less
Relief of tax
When an assessee receives an income during the year pertain to some
other years, he can claim relief u/s 89(1) of income tax.
Relief can be claimed in respect of following income
Arrears of salary
Advance salary
Profit in lieu of salary
Arrears of family pension
Gratuity
Lump sum from URPF
Total income
Total income means aggregate of different heads of income after
deducting deductions u/s 80 c to 80 u of income tax. It is a taxable
income of the assessee.
Steps in computation of total income of an individual
1. Determine the residential status of the individual.
2. Computation of income under different heads. (Income from salary,
income from house property, income from business or profession,
capital gain and income from other sources)
3. Deduction allowable from GTI should be deducted u/s 80 c to 80 u.
4. Total income is rounded off to the nearest multiple of rupees 10.
