unit 2.

1. Income Tax Law

Income-tax is a tax levied on the total income of an assessee, being a person charged under the
provisions of this Act, for the relevant previous year.

For understanding Income tax law in India, the following components need to be studied carefully:

(1) Income-tax Act, 1961

(2) Annual Finance Acts

(3) Income-tax Rules, 1962

(4) Notification and Circulars, issued from time to time

(5) Judicial Decisions

1.1 Income-tax Act, 1961

The levy of income-tax in India is governed by the Income-tax Act, 1961 which extends to whole of India
and came into force on 1st April, 1962. The Act contains 298 sections and XIV schedules. It contains
provisions for determination of taxable income, tax liability, assessment procedures, appeals, penalties
and prosecutions. These undergo changes every year with additions and deletions brought by the
Annual Finance Act passed by the Parliament.

1.2 Annual Finance Acts

Every year, Finance Bill is introduced by the Finance Minister of the Government of India in the
Parliament’s Budget Session. When the Finance Bill is passed by both the Houses of the Parliament and
gets the assent of the President, it becomes the Finance Act. Amendments are made every year to the
Income-tax Act, 1961 and other tax laws by the Finance Act. Finance Bill also mentions the Rates of
Income tax and other taxes given in various schedules which are attached to it. Therefore, though
Income-tax Act is a settled law, the operative effect is given by the Annual Finance Act.

1.3 Income-tax Rules, 1962

Central Board of Direct Taxes (CBDT) looks after the administration of direct taxes and is empowered u/s
295 of the Income Tax Act, to make rules for carrying out the purposes of the Act and thereby it frames
various rules from time to time for the proper administration of the Income-tax Act, 1961. These rules
were first framed in 1962 and are thereby collectively called Income-tax Rules, 1962. It is important to
read these rules along with the Income-tax Act, 1961. The power to make rules under this section shall
also include the power to give retrospective effect, but not earlier than the date of commencement of
this Act. However, such retrospective effect shall not be given so as to prejudicially affect the interests of
the assessees.

1.4 Circulars and Notifications

Circulars are issued by the CBDT from time to time to deal with certain specific problems and to clarify
doubts regarding the scope and meaning of the provisions. These circulars are issued for the guidance of
the officers and/or assessees. These circulars are binding on the department and not on the assessee
and therefore the assessee can take advantage of beneficial circulars.

Notifications are issued by the Central Government to give effect to the provisions of the Act. For
example, u/s 10(15)(iv)(h), interest on bonds and debentures are exempt by the Central Government
subject to such conditions through Notifications. The CBDT is also empowered to make and amend rules
for the purposes of the Act by issue of notifications. For example, u/s 35CCD, the CBDT is empowered to
prescribe guidelines for notification of skill development project.

1.5 Judicial Decisions

Judicial decisions are an important and unavoidable part of the study of income-tax law. For the
Parliament, it is not possible to provide for all possible issues that may arise in the implementation of
any Act and hence the judiciary will have to consider various cases between the assessees and the
department and give decisions on various issues. The Supreme Court is the Apex Court of the country
and the law laid down by the Supreme Court is the law of the land. In case, where the apparently
contradictory decisions are given by benches having similar number of judges, the principle of the later
decision would be applicable. The decisions given by various High Courts will apply in the respective
states in which such High Courts have jurisdiction.

2. Charge of Income-tax: [Sec. 4]

Tax cannot be levied or collected in India except under the authority of Law. Section 4 of the Income- tax
Act, 1961 gives authority to the Central Government for charging income tax. This is the charging section
in the Income-tax Act, 1961 which provides that:

(i) Tax shall be charged at the rates prescribed for the year by the Annual Finance Act;

(ii) The charge is on every person specified under section 2(31);

(iii) Tax is chargeable on the total income earned during the previous year and not the assessment year.
(There are certain exceptions provided by sections 172, 174, 174A, 175 and 176);

(iv) Tax shall be levied in accordance with and subject to the various provisions contained in the Act.

This section is the backbone of the law of income-tax insofar as it serves as the most operative provision
of the Act. The tax liability of a person springs from this section.

3. Assessment year: [Sec. 2(9)]

Assessment year means a period of 12 months commencing on 1st April every year. The total income
earned by the assessee during the previous year shall be chargeable to tax in the next year; which is
termed as the assessment year. For example, for the previous year 2022-23, the relevant assessment
year shall be 2023-24 (1.4.2023 to 31.3.2024).

4. Previous year: [Sec. 3]

The year in which income is earned, i.e. the financial year immediately preceding the assessment year, is
called the previous year and the tax shall be paid on such income in the next year which is called the
assessment year. This means that the tax is levied on the income in the year in which it is earned;
referred as previous year and the tax on such income will be paid in the assessment year. All assessees
are required to follow a uniform previous year i.e. the financial year starting from 1st April and ending
on 31st March.

5. Person: [Sec. 2(31)]

As the income tax is levied on the total income of the previous year of every ‘person’, it becomes
important to understand the term ‘Person’. The term ‘person’ includes the following seven categories:

(i) an individual,

(ii) a Hindu Undivided Family (HUF),

(iii) a company,

(iv) a firm,

(v) an Association of Persons (AoP) or a Body of Individuals (BoI), whether incorporated or not,

(vi) a local authority, and

(vii) every artificial juridical person not falling within any of the preceding sub-clauses e.g., a university
or deity.

As per Explanation to Sec. 2(31), an AoP/BoI/Local authority or any artificial juridical person shall be
deemed to be a person, irrespective of whether they were formed or established with the purpose of
earning or deriving profits or not.

6. Assessee: [Sec. 2(7)]

Assessee means a person by whom any tax or any other sum of money is payable under this Act. It also
includes the following:

(i) Every person in respect of whom any proceeding under this Act has been taken for the assessment of
his income;

(ii) Every person who is deemed to be an assessee under any provisions of this Act. Sometimes, a person
becomes assessable in respect of the income of some other persons. In such case also, he is considered
as an assessee. For example, legal representative of a deceased person;
(iii) Every person who is deemed to be an assessee in default under any provision of this Act. For
example, where a person making any payment to other person is liable to deduct tax at source, and if he
has not deducted tax at source or has deducted but not deposited the tax with the government; he shall
be deemed to be an assessee in default.

7. Certain Principles relating to Income under Income-tax Act

The following are the important principles relating to income:

Income generally refers to revenue receipts, but however under the Income-tax Act, 1961, certain
capital receipts have also been specifically included within the definition of income for example capital
gains i.e. gains on sale of a capital assets like land.

The income to be considered for tax purpose shall be net receipts and not gross receipts.

Net receipts are arrived at after deducting the expenditure incurred in connection with earning such
receipts.

Income is taxable either on due basis or receipt basis, as provided under the respective head of income.
For the purpose of computing income under the heads ‘Profits and gains of business or profession’ and
‘Income from other sources’, the method of accounting which is regularly followed by the assessee
should be considered, which can be either cash system or mercantile system.

Income earned during the year i.e. the previous year shall be chargeable to tax in the next year i.e. the
assessment year e.g. the income of the P.Y. 2022-23 shall be chargeable in the A.Y. 2023-24. But, there
are certain exceptions to this principle (i.e. Accelerated assessment u/s 172, 174, 174A and 175) which
are discussed in the Chapter ‘Liability in Special Cases’.

8. Income: [Sec. 2(24)]

The definition of ‘Income’ given under section 2(24) is inclusive and not exhaustive and therefore it may
be possible that certain items may be considered as income under this Act according to its general and
natural meaning, even if it is not included under section 2(24). The term ‘Income’ includes the following:

Profits and gains;

Dividend;

Voluntary contributions received by a trust which is created wholly or partly for charitable or religious
purposes; or by educational institutions, hospitals or electoral trust;

The value of any perquisite or profit in lieu of salary taxable u/s 17;

Any special allowance granted to the assessee to meet expenses wholly, necessarily and exclusively for
the performance of office or employment duties;

The value of any benefit or perquisite, whether converted into money or not, obtained from a company
either by a director or by a person who has substantial interest in the company or by a relative of the
director or such person, and any sum paid by any such company in respect of any obligation which,
otherwise, would have been payable by the director or other person aforesaid;

The value of benefit or perquisite to a representative assessee like a trustee appointed under a trust;

Any sum chargeable to income-tax under clauses (ii) and (iii) of sec. 28 or sec. 41 or sec. 59;

Any sum chargeable to income-tax under clauses (iiia), (iiib), (iiic), (iv), (v), (va) and (via) of sec. 28;

Any capital gains chargeable u/s 45;

The profits and gains of any insurance business carried on by a mutual insurance company or by a co-
operative society, computed in accordance with section 44 or any surplus taken to be such profit and
gains by virtue of provisions contained in the First Schedule;

The profits and gains of any of banking business (including providing credit facilities) carried on by a co-
operative society with its members;

Winnings from lottery, crossword puzzles, races (including horse races), card games or other games of
any sort or from gambling or betting;

Any sum received by the assessee from his employees as contributions to any provident fund or
superannuation fund or any fund set up under Employees’ State Insurance Act, 1948 or any fund for the
welfare of such employee; [Sec. 2(24)(x)]

Any amount received under the Keyman insurance policy including the sum allocated by way of bonus;
[Sec. 2(24)(xi)]

Any sum chargeable to income-tax u/s 56(2)(v), (vi);

Any sum of money or specified movable or immovable properties received without consideration or
inadequate consideration as provided u/s 56(2)(vii), (via);

Any consideration received for issue of shares as exceeds the FMV of shares referred to in section 56(2)
(viib);

Any sum of money received as advance in the course of negotiation for transfer of a capital asset, if such
sum is forfeited as the negotiation do not resulted in transfer of the asset 56(2)(ix);

Any sum chargeable to income-tax u/s 56(2)(x);

Any compensation or other payment referred to in Sec. 56(2)(xi);

Income shall include assistance received in the form of a subsidy or grant or cash incentive or duty
drawback or waiver or concession or reimbursement (by whatever name called) from the Central
Government or a State Government or any other authority or body or agency in cash or kind to the
assessee other than:

(a) the subsidy or grant or reimbursement which is taken into account for determination of the actual
cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43,
(b) the subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution
established by the Central Government or the State Government, as the case may be.

Tax and Accounts Professional Course

9. Heads of Income: [Sec. 14]

For the purpose of computation of total income under the Income-tax Act, 1961, all the incomes shall be
classified under the following 5 heads of income:

(i) Salaries [Secs. 15 to 17]

(ii) Income from House Property [Secs. 22 to 27]

(iii) Profits and Gains of Business or Profession [Secs. 28 to 44DB]

(iv) Capital Gains [Secs. 45 to 55A]

(v) Income from Other Sources [Secs. 56 to 59]

Gross Total Income means aggregate of income computed under the above five heads, after making
clubbing provisions and adjustments of set off and carry forward of losses.

10. Total Income and Computation of Tax Liability

Total income of an assessee means the Gross Total Income (GTI) as reduced by the amount of deduction
available under sections 80C to 80U.

1. Income from Salaries

Income from salary ……..

Add: Taxable allowances ……..

Add: Taxable perquisites ………

Gross Salary ……..

Less: Deductions u/s 16

– Standard deduction

– Entertainment allowance

……..
– Professional tax

……..

Taxable Income under the head ‘Salaries’ ……..

2. Income from House Property

Net Annual Value ……..

Less: Deductions u/s 24 ……..

Taxable Income under the head ‘Income from House Property’ ……..

3. Profits and Gains of Business and Profession

Net profit as per Profit and Loss Account ……..

Add: Amounts debited to P & L A/c but are not allowable as deduction under the Act ……..

Add: Amounts not credited to P & L A/c but are taxable under the head PGBP ……..

Less: Amounts credited to P & L A/c but are exempt u/s 10 or are taxable under other heads of income
……..

Less: Amounts not debited to P & L A/c but are allowable as deduction under the Act ……..

Taxable Income under the head ‘Profits and Gains of Business and Profession’ ……..

4. Capital Gains

Amount of Capital gains u/s 48 ……..

Less: Exemption u/ss 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GA, 54GB, 54H ……..

Taxable Income under the head ‘Capital gains’ ……..

5. Income from other sources

Gross income ……..

Less: Deductions u/s 57 ……..

Taxable Income under the head ‘Income from other sources’ ……..

Total [1 + 2 + 3 + 4 + 5] ……..

Less: Adjustment of set off and carry forward of losses ……..

Gross Total Income ……..

Less: Deductions under sections 80C to 80U [Chapter VI-A] ……..

Net Taxable Income ……..

Computation of Tax Liability:

Tax on Net income ……..

Less: Rebate u/s 87A (Available if resident individual is having net taxable income of ` 5,00,000 or less)
……..

Income Tax after rebate ……..

Add: Surcharge, if applicable ……..

Tax and surcharge ……..

Add: Health and Education cess ……..

Less: Rebate u/ss 86, 89, 90, 90A and 91 ……..

Less: Prepaid taxes, if paid

Self assessment tax paid (SAT) ……..

Tax Deducted or Collected at Source (TDS and TCS) ……..

Advance tax ……..

Total Net Tax liability ……..

11. Exemption and Deduction in respect of income

Exemption in respect of any income means that such income shall not form part of any head of income
and therefore not to be included in computation of total income. Whereas, deduction in respect of any
income means that such income shall be first included under the respective head of income for the
computation of gross total income and thereafter deduction can be claimed on such income under the
respective head or from the gross total income. Deduction may also be allowed for making certain
specified payments or contributions.

For e.g. Section 10 provides exemption in respect of certain incomes; sections 54, 54b, 54d, 54ec, 54f,
54g, 54ga, 54gb, 54H provides exemption in respect of capital gains of the assessee.

Section 16 [i.e. standard deduction, entertainment allowance and professional tax] provides deduction
from gross salary, section 24 provides standard deduction and deduction for interest of loan borrowed
under the head ‘Income from House Property’. Further, Chapter VI-A [i.e. sections 80C to 80U] provides
deduction from gross total income of the assessee.

Exemption cannot exceed the taxable income; but deduction can exceed taxable income.

Taxmann's Income Tax Research Module

12. Rounding off of Income: [Sec. 288A]

The total income computed in accordance with the provisions of this Act shall be rounded off to the
nearest multiple of ` 10.
If the last figure in that amount is five or more, the amount shall be increased to the next higher amount
which is multiple of 10 and if the last figure is less than five, the amount shall be reduced to the next
lower amount which is multiple of 10.

13. Rounding off of Tax: [Sec. 288B]

The total amount of income tax payable and the amount of refund due, computed in accordance with
the provisions of this Act shall be rounded off to the nearest multiple of ` 10.

If the last figure in that amount is five or more, the amount shall be increased to the next higher amount
which is multiple of 10 and if the last figure is less than five, the amount shall be reduced to the next
lower amount which is multiple of 10.

Meaning and importance of residential status

The taxability of an individual in India depends upon his residential status in India for any particular
financial year. The term residential status has been coined under the income tax laws of India and must
not be confused with an individual’s citizenship in India. An individual may be a citizen of India but may
end up being a non-resident for a particular year. Similarly, a foreign citizen may end up being a resident
of India for income tax purposes for a particular year. Also to note that the residential status of different
types of persons viz an individual, a firm, a company etc is determined differently. In this article, we have
discussed about how the residential status of an individual taxpayer can be determined for any
particular financial year.

How to determine residential status?

For the purpose of income tax in India, the income tax laws in India classifies taxable persons as:

A resident

A resident not ordinarily resident (RNOR)

A non-resident (NR)

The taxability differs for each of the above categories of taxpayers. Before we get into taxability, let us
first understand how a taxpayer becomes a resident, an RNOR or an NR.

Resident

A taxpayer would qualify as a resident of India if he satisfies one of the following 2 conditions :

1. Stay in India for a year is 182 days or more or

2. Stay in India for the immediately 4 preceding years is 365 days or more and 60 days or more in the
relevant financial year

Exceptions to Residential Status

In the event an individual who is a citizen of India or person of Indian origin leaves India for employment
during an FY, he will qualify as a resident of India only if he stays in India for 182 days or more. Such
individuals are allowed a longer time greater than 60 days and less than 182 days to stay in India.
However, from the financial year 2020-21, the period is reduced to 120 days or more for such an
individual whose total income (other than foreign sources) exceeds Rs 15 lakh.

In another significant amendment from FY 2020-21, an individual who is a citizen of India who is not
liable to tax in any other country will be deemed to be a resident in India. The condition for deemed
residential status applies only if the total income (other than foreign sources) exceeds Rs 15 lakh and nil
tax liability in other countries or territories by reason of his domicile or residence or any other criteria of
similar nature.

Resident Not Ordinarily Resident

If an individual qualifies as a resident, the next step is to determine if he/she is a Resident ordinarily
resident (ROR) or an RNOR. He will be a ROR if he meets both of the following conditions:

1. Has been a resident of India in at least 2 out of 10 years immediately previous years and

2. Has stayed in India for at least 730 days in 7 immediately preceding years

Therefore, if any individual fails to satisfy even one of the above conditions, he would be an RNOR.

From FY 2020-21, a citizen of India or a person of Indian origin who leaves India for employment outside
India during the year will be a resident and ordinarily resident if he stays in India for an aggregate period
of 182 days or more. However, this condition will apply only if his total income (other than foreign
sources) exceeds Rs 15 lakh. Also, a citizen of India who is deemed to be a resident in India (w.e.f FY
2020-21) will be a resident and ordinarily resident in India.

NOTE: Income from foreign sources means income which accrues or arises outside India (except income
derived from a business controlled in India or profession set up in India).

Non-resident

An individual satisfying neither of the conditions stated in (a) or (b) above would be an NR for the year.

Taxability

Resident: A resident will be charged to tax in India on his global income i.e. income earned in India as
well as income earned outside India.

NR and RNOR: Their tax liability in India is restricted to the income they earn in India. They need not pay
any tax in India on their foreign income. Also note that in a case of double taxation of income where the
same income is getting taxed in India as well as abroad, one may resort to the Double Taxation
Avoidance Agreement (DTAA) that India would have entered into with the other country in order to
eliminate the possibility of paying taxes twice.

Resident Status of a Company

Indian companies consistently maintain their presence within the borders of India only.

A foreign company can be recognised as an Indian resident solely if it has been efficiently managed
within India throughout the preceding year.

If a foreign company's place of effective management was not located in India during the previous year,
it is classified as a non-resident.

Even if there is the slightest possibility of a foreign company being managed effectively from a location
outside India, it will be classified as a non-resident.

CLUBBING OF INCOME UNDER SECTION 64

CONTENTS[Show]

There are many occasions when you may require to club income of someone else with your income. If
you are planning to transfer any of your assets/income to another person as a means of tax planning to
avoid the income getting taxed in your hands, hold on. Such transfers could result in attraction of
clubbing provisions under the Indian income tax laws.

Even genuine gifts extended to your kith and kin could have these income tax implications. It will help
you immensely if you get some insights on the clubbing provisions under the Indian income tax law.
Hence, let us understand these provisions a little more in detail.

Clubbing of income

As the term suggests, clubbing of income means adding or including the income of another person
(mostly family members) to one’s own income. This is allowed under Section 64 of the IT Act. However,
certain restrictions pertaining to specified person(s) and specified scenarios are mandated to discourage
this practice.

Specified persons to club income

Income of any and every person cannot be clubbed on a random basis while computing total income of
an individual and also not all income of specified person can be clubbed. As per Section 64, there are
only certain specified income of specified persons which can be clubbed while computing total income
of an individual.

Specified scenarios when you can club income

Section Specified person Specified scenario Income to be clubbed

Section 60 Any person

Transferring income without transferring asset either by way of an agreement or any other way,

Any income from such asset will be clubbed in the hands of the tranferor
Section 61 Any person Transferring asset on the condition that it can be revoked Any
income from such asset will be clubbed in the hands of the transferor

Section 64(1A) Minor child Any income arising or accruing to your minor child where child includes
both step child and adopted child. The clubbing provisions apply even to minor married daughter.
Income will be clubbed in the hands of higher earning parent.

Note:

If marriage of child’s parents does not subsist, income shall be clubbed in the income of that parent who
maintains the minor child in the previous year

If minor child’s income is clubbed in the hands of parent, then exemption of Rs. 1,500 is allowed to the
parent.

Exceptions to clubbing

Income of a disabled child (disability of the nature specified in section 80U)

Income earned by manual work done by the child or by activity involving application of his skill and
talent or specialised knowledge and experience

Income earned by a major child. This would also include income earned from investments made out of
money gifted to the adult child. Also, money gifted to an adult child is exempt from gift tax under gifts to
‘relative’.

Section 64(1)(ii) Spouse** If your spouse receives any remuneration irrespective of its
nomenclature such as Salary, commission, fees or any other form and by any mode i.e., cash or in kind
from any concern in which you have substantial interest* Income shall be clubbed in the hands of
the taxpayer or spouse, whose income is greater (before clubbing). Exception to clubbing: Clubbing is
not attracted if spouse possesses technical or professional qualifications in relation to any income arising
to the spouse and such income is solely attributable to the application of his/her technical or
professional knowledge and experience

Section 64(1)(iv) Spouse** Direct or indirect transfer of assets to your spouse by you for
inadequate consideration Income from out of such asset is clubbed in the hands of the transferor.
Provided the asset is other than the house property.

Exceptions to clubbing No clubbing of income in following cases:

a. Where asset is received as part of divorce settlement

b. If assets are transferred before marriage

c. No husband and wife relationship subsists on the date of accrual of income

d. Asset is acquired by the spouse out of pin money (i.e. an allowance given to the wife by her husband
for her personal and usual household expenses)
64(1)(vi) Daughter-in-law Transfer of assets transferred directly or indirectly to your
daughter in-law by you for inadequate consideration Any income from such assets transferred is
clubbed in the hands of the transferor

64(1)(vii) Any person or association of person

Transferring any assets directly or directly for an inadequate consideration to any person or association
of persons to benefit your daughter in-law either immediately or on deferred basis Income from
such assets will be considered as your income and clubbed in your hands

64(1)(viii) Any person or association of person Transferring any assets directly or directly for an
inadequate consideration to any person or association of persons to benefit your spouse either
immediately or on deferred basis Income from such assets will be considered as your income and
clubbed in your hands

Section 64(2) Hindu Undivided Family In case, a member of HUF transfers his individual property to
HUF for inadequate consideration or converts such property into HUF property Income from such
converted property shall be clubbed in the hands of individual

*An individual is said to have the substantial interest in the concern if–

In case of a company, individual either by himself or along with his relative/s beneficially owns shares
having 20% or more voting power (not being shares entitled to a fixed rate of dividend whether with or
without a further right to participate in profits)

In any other case, such individual either alone or along with his relative/s is entitled to 20% or more of
profits in the aggregate of such concern at any time during the previous year.

**Income from reinvestment of clubbed income by a spouse is not clubbed in the hands of individual.

Illustration 1

Mr P owns a shop which fetches a rent of Rs.12,000 per month. He transfers the rent to his friend Mr Q
but retains the ownership of the shop.

In this case, because Mr P has transferred the income without transferring the asset. Hence, as per
section 60 of the income tax act, Mr P must include the rental income while computing his total income.

Illustration 2

Mr Jay is beneficially holding 21% equity shares of PTK Pvt. Ltd. Mrs Jay is employed as a finance
manager in PTK Pvt. Ltd. The monthly salary received from Mrs PTK Pvt. ltd. is Rs. 40,000. Mrs Jay is not
having any qualification, experience or knowledge of finance.

In this situation, Mr Jay has a substantial interest in PTK Pvt. Ltd. with 21% shareholding. But Mrs Jay is
employed without any qualification and technical knowledge of finance. Hence, salary or payment
received by Mrs Jay from PTK Pvt. Ltd. will be clubbed with the income of Mr Jay as per section 64(1)(ii)
of the income tax act.

In the above case, if Mrs Jay had the qualification and knowledge for the finance manager post in PTK
Pvt. ltd., then income earned by Mrs Jay will not be clubbed in the income of Mr Jay.

Illustration 3

Mr Lucky holds gifted Rs. 6,00,000 to his wife. Mrs Lucky has then invested the same amount in the fixed
deposit. Mrs lucky receives the interest of 5,000 p.a. from such fixed deposit.

As Mr Lucky has transferred Cash (asset) without adequate consideration and it was converted into
another asset by Mrs Lucky. Hence, interest earned of Rs. 5,000 from the converted asset (fixed deposit)
will be clubbed in the income of Mr Lucky as per section 64(1)(iv) of the income tax act.

Note:

If Mr lucky transfers the cash as a settlement for divorce in the above case, then clubbing provisions will
not apply.

Also, if he transfers the cash before marriage and interest is accrued after marriage, no income shall be
clubbed in the hands of Mr. Lucky.

Hence, husband-wife relationship should remain at the time of transfer of asset and also at the time of
accrual of income.

Things To Remember

The clubbing provision applies to Income and loss both.

Capital gain on further transfer of the asset by the transferee will be considered as income and it shall
be clubbed in the income of transferor.

The income derived from the converted form of asset shall be clubbed in the hands of transferor.

If part consideration is payable or paid, then only the inadequate consideration will be clubbed in the
hands of the transferor

The clubbing provisions will not apply on the income derived from the clubbed income.

For example: If a bond is transferred for Rs. 5 lakh to the spouse or daughter-in-law without adequate
consideration and interest of Rs. 20,000 on such bond is clubbed in the hands of the transferor.
However, if the spouse or daughter-in-law further earns any income from such interest of Rs. 20,000, no
clubbing provisions shall apply on such income.

The clubbing provisions will apply for indirect transfers or cross transfers as well.
For example: If Mr K gifts a sum of Rs. 8,000 to Mrs. N and Mr. N gifts a sum of Rs. 15,000 to Mrs. K. Say
both the gifts are without any consideration. Then the overlapping amount of Rs. 8,000 will be clubbed
in the hands of the transferors.

TAX PLANNING

What is Tax Planning?

Taxes can eat into your annual earnings. To counter this, tax planning is a legitimate way of reducing
your tax liabilities in any given financial year. It helps you utilise the tax exemptions, deductions, and
benefits offered by the authorities in the best possible way to minimise your liability.

The definition of tax planning is quite simple. It is the analysis of one’s financial situation from the tax
efficiency point-of-view.

Objectives of Tax Planning

Tax planning is a focal part of financial planning. It ensures savings on taxes while simultaneously
conforming to the legal obligations and requirements of the Income Tax Act, 1961. The primary concept
of tax planning is to save money and mitigate one’s tax burden. However, this is not its sole objective.

Advantages of tax planning:

To minimise litigation: To litigate is to resolve tax disputes with local, federal, state, or foreign tax
authorities. There is often friction between tax collectors and taxpayers as the former attempts to
extract the maximum amount possible while the latter desires to keep their tax liability to a minimum.
Minimising litigation saves the taxpayer from legal liabilities.

To reduce tax liabilities: Every taxpayer wishes to reduce their tax burden and save money for their
future. You can reduce your payable tax by arranging your investments within the various benefits
offered under the Income Tax Act, 1961. The Act offers many tax planning investment schemes that can
significantly reduce your tax liability.

To ensure economic stability: Taxpayers’ money is devoted to the betterment of the country. Effective
tax planning and management provide a healthy inflow of white money that results in the sound
progress of the economy. This benefits both the citizens and the economy.

To leverage productivity: One of the core tax planning objectives is channelising funds from taxable
sources to different income-generating plans. This ensures optimal utilisation of funds for productive
causes.

Types of Tax Planning

Most people merely perceive tax planning as a process that helps them reduce their tax liabilities.
However, it is also about investing in the right securities at the right time to achieve your financial goals.

Following are some of the various methods of tax planning:

Short-range tax planning

Under this method, tax planning is thought of and executed at the end of the fiscal year. Investors resort
to this planning in an attempt to search for ways to limit their tax liability legally when the financial year
comes to an end. This method does not partake long-term commitments. However, it can still promote
substantial tax savings.

Long-term tax planning

This plan is chalked out at the beginning of the fiscal and the taxpayer follows this plan throughout the
year. Unlike short-range tax planning, you might not be offered with immediate tax benefits but it can
prove useful in the long run.

Permissive tax planning

This method involves planning under various provisions of the Indian taxation laws. Tax planning in India
offers several provisions such as deductions, exemptions, contributions, and incentives. For instance,
Section 80C of the Income Tax Act, 1961, offers several types of deductions on various tax-saving
instruments.

Purposive tax planning

Purposive tax planning involves using tax-saver instruments with a specific purpose in mind. This ensures
that you obtain optimal benefits from your investments. This includes accurately selecting the
appropriate investments, creating an apt agenda to replace assets (if required), and diversification of
business and income assets based on your residential status.

How to save taxes?

Taxpayers are provided with several options to reduce their tax liabilities. Various sections of the Indian
income tax law offer tax deductions and exemptions, of which, Section 80C is the most popular tax-
saving avenue. For e.g., Deposits in Public Providednt Fund , Five Year Bank Depoists, National Savings
Certificate , Investment in ELSS schemes.

A practical approach to saving taxes is to create a well-rounded financial plan that aligns with
fluctuations in your income. You may use an SIP calculator for financial planning. Also, it is a good habit
to make tax-saving investments at the beginning of the year rather than making hasty and often
incorrect investment decisions at the last moment. To do this, it is crucial to be aware of all the
exemptions and deductions available to you.

Tax saving options under Section 80C

Section 80C, one of the most prevalent sections in the Income Tax Act, 1961, provides provisions to save
up to Rs46,800 (assuming the highest slab of income tax i.e. @30% plus education cess 4%) on tax
liabilities each year. One of the best tax-saving avenues under Section 80C is investing in an equity-
linked savings scheme, more commonly known as ELSS. Such tax planning mutual funds offer the dual
benefit of potential capital appreciation and tax-saving. Apart from ELSS funds, you can choose to invest
in government schemes such as National Savings Certificate (NSC), Public Provident Funds (PPF), tax-
saving FDs, etc. Cumulative investments under these securities can offer deductions up to Rs1.5 lakh.
Also Read: ELSS – Tax Saving Investment Option

Tax saving options under Section 80D

Under this section, taxpayers are offered deductions on the premium paid towards health insurance
policies. Under Section 80D, a taxpayer can claim the following amounts as deductions:

Avail up to Rs25,000 on the premium paid towards health insurance for self, children, or spouse

Avail up to Rs50,000 if your parents are also covered under your health insurance plan

If either of your parents belongs to the senior citizen bracket, then a maximum deduction of Rs75,000 is
allowed

Tax saving options under Section 80E

Section 80E offers tax deductions on the interest paid for an education loan. These deductions can be
claimed for eight years starting from the date of repayment. There is no upper limit on the deductible
amount. This means that an assessee can claim the entire amount paid as interest from the taxable
income.

Claiming HRA Exemption

Under HRA, taxpayers can avail exemption on the cost incurred to stay in a rented accommodation. The
taxpayer is mandated to furnish the rent receipts provided by the landlord. The deduction available is
the least of the following amounts:

Actual HRA received; or

50% of basic salary+DA (dearness allowance) for taxpayers living in metro cities; & 40% of (basic salary +
DA) for taxpayers residing in non-metro cities; or

Total rent paid less 10% of basic salary + DA

Other Exemptions and Deductions

Apart from the deductions and the exemptions mentioned above, you can save taxes in several different
ways. Donations towards charities and qualified organisations are also eligible for tax exemptions.

Under the new tax regime announced with the Union Budget 2020, individuals can opt to pay taxes at
reduced rates and redefined income tax slabs by forgoing the various deductions and exemptions.

Income tax planning, if performed under the framework defined by the respective authorities, is an
entirely legal and a smart decision. However, you might land yourself in trouble for adopting shady
techniques to save taxes. It is the duty and responsibility of every citizen to carry out prudent tax
planning. Based on your tax slab, personal choices, and social liabilities, you can choose from distinct tax
saver mutual funds and investment avenues offered to you. Good luck!

INCOME-TAX RATES FOR AOP/BOI/AJP

Assessment year 2014-15

Total Income Tax Rates

First Rs. 2,00,000 Nil

Next Rs. 50,000 10%

Next Rs. 2,50,000 10%

Next Rs. 5,00,000 20%

Above Rs. 10,00,000 30%

Surcharge on income-tax: 10 per cent of income-tax if taxable income exceeds Rs. 1 crore (surcharge is
payable whether taxpayer is resident or non-resident).

Education cess: 2% of income-tax and surcharge.

Secondary and higher education cess: 1% of income-tax and surcharge.

Assessment years 2015-16 to 2017-18

Total Income Tax Rates

First Rs. 2,50,000 Nil

Next Rs. 50,000 10%

Next Rs. 2,00,000 10%

Next Rs. 5,00,000 20%

Above Rs. 10,00,000 30%

Surcharge on income-tax: For assessment year 2015-16, 10 per cent of income-tax if taxable income
exceeds Rs. 1 crore (surcharge is payable whether taxpayer is resident or non-resident).

For assessment year 2016-17, 12 per cent of income-tax if taxable income exceeds Rs. 1 crore (surcharge
is payable whether taxpayer is resident or non-resident).

For the assessment year 2017-18, 15 per cent of income-tax if taxable income exceeds Rs. 1 crore
(surcharge is payable whether taxpayer is resident or non-resident).

Education cess: 2% of income-tax and surcharge.

Secondary and higher education cess: 1% of income-tax and surcharge.

Assessment year 2018-19 to 2020-21

Total Income Tax Rates

First Rs. 2,50,000 Nil

Next Rs. 50,000 5%

Next Rs. 2,00,000 5%

Next Rs. 5,00,000 20%

Above Rs. 10,00,000 30%

Surcharge on Income tax: For the assessment years 2018-19 and 2019-20, 10 per cent of income-tax if
taxable income exceeds Rs. 50 lakh or 15 per cent of income-tax if taxable income exceeds Rs. 1 crore
(surcharge is payable whether taxpayer is resident or non-resident).

For the assessment year 2020-21,

10 per cent of income-tax if taxable income exceeds Rs. 50 lakh but does not exceed Rs. 1 crore or

15 per cent of income-tax if taxable income exceeds Rs. 1 crore but does not exceed Rs. 2 crore or

25 per cent of income-tax if taxable income exceeds Rs. 2 crore but does not exceed Rs. 5 crore or

37 per cent of income-tax if taxable income exceeds Rs. 5 crore (surcharge is payable whether taxpayer
is resident or non-resident).

However, the maximum rate of surcharge on tax payable on capital gain as referred to in section 111A,
and section 112A shall be 15%.

Education cess: 2% of income-tax and surcharge for the assessment year 2018-19.

Secondary and higher education cess: 1% of income-tax and surcharge for the assessment year 2018-19.

Health and education cess: 4% of income-tax and surcharge for the assessment year 2019-20 and 2020-
21.

Assessment year 2021-22

Net income range Tax Rates

Up to Rs. 2,50,000 Nil

Rs. 2,50,001- Rs. ,00,000 5%

Rs. 5,00,001- Rs. 10,00,000 20%

Above Rs. 10,00,000 30%

Surcharge on income-tax:
10 per cent of income-tax if taxable income exceeds Rs. 50 lakh but does not exceed Rs. 1 crore or

15 per cent of income-tax if taxable income exceeds Rs. 1 crore but does not exceed Rs. 2 crore or

25 per cent of income-tax if taxable income exceeds Rs. 2 crore but does not exceed Rs. 5 crore or

37 per cent of income-tax if taxable income exceeds Rs. 5 crore (surcharge is payable whether taxpayer
is resident or non-resident).

However, the maximum rate of surcharge on tax payable on capital gain as referred to in section 111A,
and section 112A shall be 15%.

Health and education cess: 4% of income-tax and surcharge.

Assessment year 2022-23

Net income range Tax Rates

Up to Rs. 2,50,000 Nil

Rs. 2,50,001- Rs. 5,00,000 5%

Rs. 5,00,001- Rs. 10,00,000 20%

Above Rs. 10,00,000 30%

Surcharge on income-tax:

10 per cent of income-tax if taxable income exceeds Rs. 50 lakh but does not exceed Rs. 1 crore or

15 per cent of income-tax if taxable income exceeds Rs. 1 crore but does not exceed Rs. 2 crore or

25 per cent of income-tax if taxable income exceeds Rs. 2 crore but does not exceed Rs. 5 crore or

37 per cent of income-tax if taxable income exceeds Rs. 5 crore (surcharge is payable whether taxpayer
is resident or non-resident).

However, the maximum rate of surcharge on tax payable on dividend income or capital gains referred to
in Section 111A, and Section 112A shall be 15%.

Health and education cess : 4% of income-tax and surcharge.

Assessment year 2023-24

Net income range Tax Rates

Up to Rs. 2,50,000 Nil

Rs. 2,50,001- Rs. 5,00,000 5%

Rs. 5,00,001- Rs. 10,00,000 20%

Above Rs. 10,00,000 30%

Surcharge on income-tax:

10 per cent of income-tax if taxable income exceeds Rs. 50 lakh but does not exceed Rs. 1 crore or

15 per cent of income-tax if taxable income exceeds Rs. 1 crore but does not exceed Rs. 2 crore or

25 per cent of income-tax if taxable income exceeds Rs. 2 crore but does not exceed Rs. 5 crore or

37 per cent of income-tax if taxable income exceeds Rs. 5 crore (surcharge is payable whether taxpayer
is resident or non-resident).

However, the maximum rate of surcharge on tax payable on dividend income or capital gain referred to
in Section 111A, Section 112, or Section 112A shall be 15%.

Health and education cess : 4% of income-tax and surcharge.

WHAT ARE THE 5 HEADS OF INCOME TAX?

CONTENTS[Show]

According to the Income Tax Act, a taxpayer’s earnings are divided into 5 heads of income. At the end of
each financial year, you must correctly classify your earnings under these heads of income for accurate
tax calculation.

It is essential for you to know which of your earnings falls under what category. To get a clear
understanding of the income heads, keep reading.

What are the 5 types of income tax?

The 5 heads of income tax are:

Income from salary

Income from house property

Income from profits and gains from business or profession

Income from capital gains

Income from other sources

Income from salary

Any income that you receive in terms of the service you provide on a contract of employment is
applicable for taxation under this head. This includes salary, advance salary, perquisites, gratuity,
commission, annual bonus and pension.

This tax head also includes some exemptions:

House Rent Allowance (HRA): As a salaried individual, if you live in a rented house, you can claim House
Rent Allowance for partial or complete tax exemptions.

Conveyance Allowance: You can get a monthly tax exemption of up to Rs.800.

Income from house property

An individual’s income from his or her property or land is taxable under the head of income from house
property. To put it simply, this head includes the policy for calculating tax on rental income that you
receive from your properties.

In case you own more than one self-occupied house, then only one house is considered to be occupied
and the rest are considered to be rented out. The taxation occurs on income received from both
commercial and residential property.

Income from profits and gains from business or profession

The profits that you earn from any kind of business or profession are taxable under this head. You can
subtract your expenses from the total income in order to determine the amount on which tax is
chargeable.

Here are the types of income that are chargeable under this head:

Profits generated from the sale of a certain license

Gains earned by an individual during an assessment year

The profits that an organisation makes on its income

Cash received on the export of a government scheme

The benefits that a business receives

Gains, bonuses or salary that an individual receives due to a partnership with a firm

Income from capital gains

When you earn profits by transferring or selling an asset that was held as an investment, that income is
taxable under the head of income from capital gains. A large number of assets, like gold, bonds, mutual
funds, real estate, stocks, etc., fall under capital assets.
Now, you can subdivide capital gains into short-term capital gains and long-term capital gains.

When you sell your capital assets after holding them for a period of 36 months or more, they will fall
under long-term capital gain and will have a tax rate of 20%. Alternatively, if you sell your capital assets
within a period of 36 months, the tax deduction will be under short-term capital gain at the rate of 15%.
In the case of securities, this is applicable if you sell your holdings within 12 months from the purchase
date.

Income from other sources

Among the five heads of income tax, this one includes any other income that does not have any mention
in the above 4 heads. They fall under Section 56 sub-section (2) of the Income Tax Act and include
income from lottery, bank deposits, gambling, card games, sports rewards, etc.

What are the differences between heads of income and sources of income?

The heads of income are ways to classify the earnings or gains of an individual during a given year as per
the Income Tax Act. This is necessary for taxation purposes. They are:

Income from house or property

Capital gains

Income from salaries

Gains and profits from profession or business

Income from capital gains

On the other hand, sources of income for any person or business are monetary sources from which they
can earn an income.

For individuals, they are:

Salary

Interest

Commission, etc.

In case of businesses, they are:

Returns on investments

Profits

Grants from the government and more

What are the five features of tax?

The five features of tax are:

Taxes can be of various tyres. Income tax is one of the most common taxes in the country. It is of 4
types: Direct tax, Indirect tax, Business tax, and Property and Sales Tax.

It is compulsory for all liable citizens to pay tax, and refusing to do so is a punishable offence.

Tax is payable periodically and regularly as determined by the tax authority.

It is levied in order to meet the government’s public expenditure.

Tax does not have any direct quid-pro-quo between the public authority and taxpayers.

Now that you know the 5 heads of income with sections, you can easily classify your income under the
proper heads. However, to calculate your net tax accurately and avoid unnecessary penalties, you may
opt for a tax professional.

SECTION 17(1) - DEFINITION OF SALARY UNDER THE INCOME TAX ACT

Introduction

A salary is a form of fixed compensation given to a person for performing work during a specified period.
However, in income tax, the definition of salary also includes various other forms of payments offered
by the employer to the employee. Let us know the meaning of salary as per the Income Tax Act.

Definition of Salary as per Income Tax Act

Sub-section(1) of Section 17 of the Income Tax Act provides an inclusive definition of “Salary”. It is a
much broader term than it is usually understood. In a financial year, the amount received by the
employee from his employer in any of the following forms will be considered “Salary” for income tax
purposes:

Wages- A sum of money paid under contract by the employer to the employees for services rendered is
called wages. The employee may generally receive it under various names such as basic pay, salary,
remuneration, etc. The payment may be for paid leaves, actual work, or the actual amount received or
due during the relevant previous year.

Annuity or Pension – Annuity or pension is the payment received from the previous or present employer
after attaining retirement. It may be a payout from the pension plans created by the employer.

Annuity received from a present employer is taxed as ‘Salary’.

Annuity received from a previous employer is taxed as ‘Profits in lieu of Salary’.

Profits in lieu of Salary or Wages- These payments include:

Employment termination compensation or employment terms modification compensation.

Payment due or received from an unrecognized provident fund or an unrecognized superannuation fund
to the extent of contribution by the employer and interest on the employer’s contribution.

Payments from the keyman insurance policy and the sum allocated as a bonus on such policy.

Any amount received from any person before joining or after cessation of the employment is also
termed as ‘profits in lieu of salary’.

Gratuity- A lump-sum amount voluntarily paid by the employer to the employee as a token of
appreciation for the services rendered to the organization is gratuity. The concept of gratuity is
statutorily recognized under The Payment of Gratuity Act, 1972.

Fees- An amount received as fees to the employee from the employer for the services rendered is
included in the definition of salary.

Commission- Any amount of commissions given to the employee for the services provided shall form
part of the salary. If the employee receives a fixed commission as a percentage of the sales or profits, it
shall be considered salary.

Perquisites- Perquisites are additional benefits received over and above the salary due to the
employee’s official position. It may be provided in cash or kind. For example, club fee payments,
interest-free loans, educational expenses, rent-free accommodation or concession in accommodation
rent, insurance premium paid for employees.

The advance Salary- Payments received in a financial year are advance salary payments before the year
they are actually due. A loan taken by the employer is not an advance salary.

Leave encashment- The government and some private employers compensate employees for the
accumulated leaves. They can give the payment during the service or after retirement or resignation.
The payment received for encashment of leaves unavailed during the service period will form part of the
salary.

Employee Provident Fund- Contributions by the employer exceeding 12 percent of salary or the annual
interest exceeding the rate notified by the Central Government (FY 2021-22 EPF interest rate is 8.1%) on
balance to the credit of an employee’s recognized provident fund.

Transfer PF balance- The taxable portion of the transferred balance from an unrecognized provident
fund to a recognized provident fund will be considered salary.

National Pension Scheme (NPS)- A contribution made by the Central Government or any other employer
in a financial year in an employee’s account under National Pension Scheme (NPS) will form part of the
salary.

What is the basis of the charge of salary income?

Section 15 of the Income Tax Act deals with the basis of charge. Salary shall be chargeable to tax either
on ‘due basis’ or ‘receipt basis’, whichever is earlier. For further clarification, income from salary during
the year shall consist of the following:

Any amount paid in advance to the employee before it became due or payable.

Whether paid or not, any salary due to the employee during the year.

Arrears of salary paid to the employee during the year and not charged to tax in any earlier years.

Place of accrual of salary

Salary accrues in India and is taxable under the head ‘Salaries’, if-

The services are rendered in India even if the payment is made outside India,

Salary paid by the Government of the foreign country to their employees serving in India,

Leave salary paid to the employees outside India regarding leaves earned in India shall be deemed to
accrue or arise in India and taxed under the head ‘Salary’.

INCOME FROM HOUSE PROPERTY AND TAXES

Budget 2023 update: It is proposed that the cost of acquisition of a property should not include any
home loan interest claimed as an income-tax deduction by the seller throughout the holding term for
computing capital gains from the sale of a residential property.

Income tax on house property: On Owning a house one day – everybody dreams of this, saves towards
this and hopes to achieve this one day. However, owning a house property is not without
responsibilities. Paying house property taxes annually is one of them. If you want to learn how to save
tax on home loan interest, this guide is for you. It also talks about how to report home ownership in
your income tax return.

Basics of House Property Tax

A house property could be your home, an office, a shop, a building or some land attached to the building
like a parking lot. The Income Tax Act does not differentiate between commercial and residential
property. All types of properties are taxed under the head ‘income from house property’ in the income
tax return. An owner for the purpose of income tax is its legal owner, someone who can exercise the
rights of the owner in his own right and not on someone else’s behalf.

When a property is used for the purpose of business or profession or for carrying out freelancing work –
it is taxed under the ‘income from business and profession’ head. Expenses on its repair and
maintenance are allowed as business expenditure.

a. Self-Occupied House Property

A self-occupied house property is used for one’s own residential purposes. This may be occupied by the
taxpayer’s family – parents and/or spouse and children. A vacant house property is considered as self-
occupied for the purpose of Income Tax.

Prior to FY 2019-20, if more than one self-occupied house property is owned by the taxpayer, only one is
considered and treated as a self-occupied property and the remaining are assumed to be let out. The
choice of which property to choose as self-occupied is up to the taxpayer.

For the FY 2019-20 and onwards, the benefit of considering the houses as self-occupied has been
extended to 2 houses. Now, a homeowner can claim his 2 properties as self-occupied and remaining
house as let out for Income tax purposes.

b. Let Out House Property

A house property which is rented for the whole or a part of the year is considered a let out house
property for income tax purposes

c. Inherited Property

An inherited property i.e. one bequeathed from parents, grandparents, etc. again, can either be a self-
occupied one or a let-out one based on its usage as discussed above.

How to calculate Income From House Property

Here is how you compute your income from a house property:

a. Determine Gross Annual Value (GAV) of the property: The gross annual value of a self-occupied house
is zero. For a let out property, it is the rent collected for a house on rent.

b. Reduce Property Tax: Property tax, when paid, is allowed as a deduction from GAV of property.

c. Determine Net Annual Value(NAV) : Net Annual Value = Gross Annual Value – Property Tax

d. Reduce 30% of NAV towards standard deduction: 30% on NAV is allowed as a deduction from the NAV
under Section 24 of the Income Tax Act. No other expenses such as painting and repairs can be claimed
as tax relief beyond the 30% cap under this section.
e. Reduce home loan interest: Deduction under Section 24 is also available for interest paid during the
year on housing loan availed.

f. Determine Income from house property: The resulting value is your income from house property. This
is taxed at the slab rate applicable to you.

g. Loss from house property: When you own a self occupied house, since its GAV is Nil, claiming the
deduction on home loan interest will result in a loss from house property. This loss can be adjusted
against income from other heads.

Note: When a property is let out, its gross annual value is the rental value of the property. The rental
value must be higher than or equal to the reasonable rent of the property determined by the
municipality.

Tax Deduction on Home Loans

a. Tax Deduction on Home Loan Interest: Section 24

Homeowners can claim a deduction of up to Rs 2 lakh on their home loan interest, if the owner or his
family resides in the house property. The same treatment applies when the house is vacant. If you have
rented out the property, the entire home loan interest is allowed as a deduction.

However, your deduction on interest is limited to Rs. 30,000 instead of Rs 2 lakhs if any of the following
conditions are satisfied:

A. Condition I

The loan is taken on or after 1 April 1999, and

The purchase or construction is not completed within 5 years from the end of the FY in which loan was
availed.

B. Condition II

The loan is taken before 1 April 1999.

C. Condition III

The loan is taken on or after 1 April 1999 for the purpose of repairs or renewal of the house property.

When is the deduction limited to Rs 30,000?

As already mentioned, if the construction of the property is not completed within 5 years, the deduction
on home loan interest shall be limited to Rs. 30,000. The period of 5 years is calculated from the end of
the financial year in which loan was taken. So, if the loan was taken on 30th April 2015, the construction
of the property should be completed by 31st March 2021. (For years prior to FY 2016-17, the period
prescribed was 3 years which got increased to 5 years in Budget 2016). Note: Interest deduction can
only be claimed, starting in the financial year in which the construction of the property is completed.
How do I claim a tax deduction on a loan taken before the construction of the property is complete?

Deduction on home loan interest cannot be claimed when the house is under construction. It can be
claimed only after the construction is finished. The period from borrowing money until construction of
the house is completed is called pre-construction period. Interest paid during this time can be claimed as
a tax deduction in five equal instalments starting from the year in which the construction of the property
is completed. Understand pre-construction interest better with this example.

b. Tax Deduction on Principal Repayment

The deduction to claim principal repayment is available for up to Rs. 1,50,000 within the overall limit of
Section 80C. Check the principal repayment amount with your lender or look at your loan instalment
details.

Conditions to claim this deduction-

The home loan must be for purchase or construction of a new house property.

The property must not be sold in five years from the time you took possession. Doing so will add back
the deduction to your income again in the year you sell.

Stamp duty and registration charges Stamp duty and registration charges and other expenses related
directly to the transfer are also allowed as a deduction under Section 80C, subject to a maximum
deduction amount of Rs 1.5 lakh. Claim these expenses in the same year you make the payment on
them.

c. Tax Deduction for First-Time Homeowners: Section 80EE

Section 80EE recently added to the Income Tax Act provides the homeowners, with only one house
property on the date of sanction of loan, a tax benefit of up to Rs 50,000.

c. Tax Deduction for First-Time Homeowners: Section 80EEA

A new section 80EEA is added to extend the tax benefits of interest deduction for housing loan taken for
affordable housing during the period 1 April 2019 to 31 March 2020. The individual taxpayer should not
be entitled to deduction under section 80EE.

. These benefits are not available for an under construction property.

Do you own more than one house?

If you own more than one house, you need to file the ITR-2 form.
Read our guide to ITR-2 form here.

Claiming Deduction on Home Loan

The amount of deduction you can claim depends on the ownership share you have on the property.

The home loan must also be in your name. A co-borrower can claim these deductions too.

The home loan deduction can only be claimed from the financial year in which the construction is
completed.

Submit your home loan interest certificate to your employer for him to adjust tax deductions at source
accordingly. This document contains information on your ownership share, borrower details and EMI
payments split into interest and principal.

Otherwise, you may have to calculate the taxes on your own and claim the refund, if any, at the time of
tax filing. It’s also possible that you may have to deposit the dues on your own if there is a tax payable.

If you are self-employed or a freelancer, you don’t have to submit these documents anywhere, not even
to the IT Department. You will need them to calculate your advance tax liability for every quarter. You
must keep them safely to answer queries that may arise from the IT Department and for your own
records.

Tax Benefits on Home Loans for Joint Owners

The joint owners, who are also co-borrowers of a self-occupied house property, can claim a deduction
on interest on the home loan up to Rs 2 lakh each. And deduction on principal repayments, including a
deduction for stamp duty and registration charges under Section 80C within the overall limit of Rs.1.5
lakh for each of the joint owners. These deductions are allowed to be claimed in the same ratio as that
of the ownership share in the property.

You may have taken the loan jointly, but unless you are an owner in the property – you are not entitled
to the tax benefits. There have been situations where the property is owned by a parent and the parent
and child together take up a loan which is paid off only by the child. In such a case the child, who is not a
co-owner is devoid of the tax benefits on the home loan.

Therefore, to claim the tax benefits on the property:

You must be a co-owner in the property

You must be a co-borrower for the loan

Each co-owner can claim a deduction of maximum Rs 1.5 lakh towards repayment of principal under
section 80C. This is within the overall limit of Rs 1.5 lakh of Section 80C. Therefore, you can avail a larger
tax benefit against the interest paid on home loan when the property is jointly owned and your interest
outgo exceeds Rs 2 lakh per year.

It’s important to note that the tax benefit of both the deduction on home loan interest and principal
repayment under section 80C can only be claimed once the construction of the property is complete.

HRA and Deduction on Home Loan

Scenario 1: You live in a rented accommodation since your house is too small for your needs Raghav
lives in a rented house in Noida since his own office, son’s school and his wife’s office are in Noida, He
has his own house on the outskirts of Delhi which is quite small and also lying vacant. He is paying
interest on the loan on his own house. Raghav can claim:

HRA for rent he pays for the house in Noida,and

Deduction on interest up to Rs 2,00,000 on the home loan

Scenario 2: You live in a rented house; your own house is also let out Neha recently bought a flat in
Indore, though she lives and works in Bangalore. She has no plans of returning to Indore in the next five
years so she gives that flat on rent. She lives on rent in Bangalore. Neha can claim:

HRA for the rent she pays for the house in Bangalore and

Claim the entire interest she pays during the year on the home loan

Guide : Income from Business and Profession

What is Business and Profession?

Income from business or profession is chargeable to tax only if the business or profession is carried on
by a taxpayer at any time during the previous year. Let us first understand what is Business:

Business, in simple words, means an occupation carried on by a person with a view to earn a profit.
Business does not include income from the Profession or partnership firm. The business includes any –

Trade,

Commerce,

Manufacturing,

Even rendering services to others is considered as business.

For example: Owning a shop, running a hotel, transportation, travel agency, share broking, etc.
Profession may be defined as a vocation, or a job requiring some thought, skill, and special knowledge.
So profession refers to those activities where the livelihood is earned by the persons through their
intellectual or manual skill like:

Legal

Medical

Engineering

Chartered Accountant

Architectural etc.

Any income generated from the above-mentioned activities will be taxed under the head “Income from
Business and Profession”.

In case of Business

A business meeting any of the following criteria needs to maintain the books of accounts as per the
income tax act:

Income more than INR 1,20,000 or,

Total sales, turnover or gross receipts are more than INR 10,00,000 In any of the three immediately
preceding previous years

Moreover, this condition has been relaxed for individuals and HUF where they will be bound by the
mandate of maintaining books of accounts if:

Income is more than INR 2.5 Lakhs or,

Total sales, turnover or gross receipts are greater than INR 25 Lakhs in any of the 3 immediately
preceding previous years.

In case of Profession

The taxpayers carrying out any of the above-mentioned professions are required to maintain the books
of accounts in accordance with rule 6F of the Income Tax Rules. These professionals have to maintain
the books of accounts if the gross receipts exceed INR 1.5 Lakhs in any of the 3 immediately preceding
years.

Incomes chargeable under Business and Profession

Any income earned by a taxpayer with an intention to earn a profit is covered under the head business
and profession. There are 3 types defined for Businesses/profession under the income tax act:

Non-Speculative Businesses/Profession: Includes profits/loss from all the normal business carried by a
taxpayer. Any salary, remuneration, commission, etc received by a partner from a partnership firm is
also considered as a business and professional income of a partner. However, the same is exempt from
tax in the hands of the partner.
Speculative Businesses: As name suggests, it includes profits/loss from doing speculative transactions i.e,
without taking actual delivery of goods. Although profits from the speculative business (eg. Share
trading) are chargeable under this head, they should be maintained and shown separately while e-filing
the income tax return

Specified Businesses: It includes profits/loss from businesses that are defined under section 35AD of the
income tax act. These businesses include affordable housing projects, water fabrication manufacturing
units, etc.

However, following are the incomes which are not chargeable as income from business and profession:

Any profits from activities other than above-mentioned businesses should be shown as casual income
and will be shown under Income from Other Sources

Any income from salary, remuneration, bonus, etc. received by the director of the company is treated as
Salary Income and not as a business and professional income.

Expenses allowable from Business and Profession Income

All the expenses incurred wholly and exclusively in relation to the business and profession shall be
allowed against the income from such business and profession. Here are some of the expenditures:

Rent and insurance of the building.

Payments for Legal and Professional services.

Remuneration, Bonus, Commission etc. to employees.

Interest and remuneration to working partners subject to certain conditions.

Traveling and conveyance expenses.

Membership fees.

Payment for know-how, patents, copyrights, trademark, licenses.

Depreciation on fixed assets.

Expenditures on scientific research for business purposes.

Preliminary expenses in case of a company.

Communication expenses

Discount allowed to customers.

Advertisement expenses in respect of promotion of business products.

Financial Charges (eg. Interest on loans).

Bank Charges/Bank Commission expenses.

Entertainment/Business Promotion expenses.

Staff Welfare expenses.

Printing and stationery expenses.

Postage expenses.

All other expenses relating to business/profession.

All these expenses are allowed on the basis of actual payments as well as on the accrual basis on the
date of the finalization of the accounts. For eg: An employee receives an income for the month of March
2020 in the month of April 2020. However, since the income is related to the Financial Year 2019-20
(which ends on 31st March 2020), it can be claimed against the income from the business/professional
income of the Financial Year 2019-20.

Expenses allowed only on a payment basis

Here are some of the examples of such expenses:

Any taxes, duty, cess or fees by whatever name called.

Expenses towards contribution to Provident fund, Employees’ state insurance premium, Gratuity fund,
or other funds for the welfare of the employees.

Bonus, commission, or leave encashment payable to employees.

Interest on loan from public financial institutions, state financial corporations, or scheduled banks.

Computation of Taxable Income from Business and Profession

Taxable income from business and profession is profits after deducting expenses related to business
activities. Taxpayer can find profits from books of accounts maintained during the year. Income earned
from Business and Profession is taxable at a Slab Rate applicable to taxpayer. Following are the slab
rates applicable for FY 2019-20/AY 2020-21:

Total Income Tax Rate

Up to INR 2,50,000 NIL

INR 2,50,000 to 5,00,000 5%

INR 5,00,000 to INR 10,00,000 20%

Above INR 10,00,000 30%

An additional 4% Health and Educational Cess will be applicable to the tax amount calculated

Income Tax Calculator

Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.
Explore

Set off and Carry Forward of losses from Business and Profession

Non-Speculative Business Loss can be set off against any income except Salary in the current year. The
taxpayer can carry forward the remaining loss for 8 years and set off against Business Income in future
years.

Speculative Business Loss can be set off against Speculative Business Income only. The taxpayer can
carry forward the remaining loss for 4 years and set off against future Speculative Business Income only.

Specifies Business Loss can be set off against any income except Salary in the current year. The taxpayer
can carry forward the remaining loss for 9 years and set off against Business Income in future years.

TDS/Advance Tax on Income from Business and Profession

Taxpayer needs to pay tax on income earned from business and professional activity. Direct taxes on
income can be paid in following 2 ways:

TDS (Tax Deducted at Source) : Due to pay while you earn concept TDS gets deducted on payments
made to taxpayers for any goods or services sold. Hence business owner needs to keep in mind the TDS
Deducted by the customers. Any TDS deducted can be claimed while filing ITR for business and
profession. And it will become your refund if there is a loss from B&P. And it will reduce your tax liability
if you have earned profits from B&P.

Advance Tax : If the tax liability is expected to exceed Rs. 10,000, the taxpayer must calculate and pay
Advance Tax. This is so as to avoid Interest under Section 234B and 234C. Advance Tax is to be paid in
quarterly installments as follows:

Due date of installment Advance Tax payable by Individual and Corporate Taxpayers

On or before 15th June 15% of the tax liability

On or before 15th September 45% of the tax liability

On or before 15th December 75% of the tax liability

On or before 15th March 100% of the tax liability

Tax for Freelancers

A freelancer is a person who is self-employed. They have the freedom to select their own projects and
assignments. They do not earn a steady income. The nature of their income is more of a professional
income. Hence it is covered under the head “Income from Business and Profession” under the Income
Tax Act.

The sum of all the receipts received from different projects becomes their income. And all the expenses
related to freelancers are allowed to be deducted. Following is the taxable income of a freelancer:
Net Taxable Income = Total Receipts – Freelancing Expenses

What is Speculative Business Income?

First of all, we have to understand what is a speculative transaction in order to understand the
Speculative Business income.

When a contract for purchase or sale of any commodities (including stocks and shares) is periodically or
ultimately settled without the actual delivery or transfer of the commodities, it is called a speculative
transaction and if your business is to earn income out of such transaction, then that will be your income
from Speculative Business.

One of the examples of Speculative Business is stockbroking, where the broker earns money by way of
buying and selling the commodities without taking delivery of the same. Incomes from normal business
and speculative business calculated and maintained separately.

Presumptive Taxation Scheme

The presumptive taxation scheme is introduced to give relief to small taxpayers from the tedious job of
maintaining books of account and from getting the accounts audited. The presumptive taxation scheme
can be opted by individuals, HUFs, and Partnership Firms in India.

Professionals having gross revenue up to INR 50 Lakhs can opt for the presumptive taxation scheme
wherein they can offer 50% of the gross revenue as the taxable income and pay taxes as per the
applicable slab rates on such income. Once the taxpayers opt for this scheme, they cannot claim any of
the profession related expenses as a deduction.

Tax Audit Applicability

Businesses having a gross turnover of more than INR 1 Cr. in a financial year are liable to a tax audit. The
taxpayer needs to file Form 3CD for the tax audit report electronically. Furthermore, the Finance
Minister Nirmala Sitharaman has announced that the tax audit due date of current Financial Year has
been extended to October 31, 2020, from September 30, 2020

In the case of a profession, taxpayers will liable to carry out a tax audit if the gross receipt under this
income head exceeds INR 50 Lakhs during any given financial year. If the taxpayers fail to have their
books of account audited, then they’ll be liable to pay a fine of up to 0.5% of the gross revenue of 1.5
Lakhs or whichever is lower.

ITR Form and Document Checklist

ITR 3 form is meant for individual or HUF having income from business or Profession and from
partnership firm/LLP. In simple words, ITR 3 needs to be filed when income is earned under the head
“Profit or gain of business or profession”. It is also filed when Tax Audit is applicable. However,
professionals can opt for the presumptive taxations scheme and declare 50% of their gross receipts as
their income by filing ITR 4 from the AY 2017-18.

GST Applicability and Return Filing

GST (Goods and Service Tax) is also applicable if your turnover from business exceeds Rs. 40 lakhs in a
particular financial year. In the case of the profession, GST is applicable if your receipts exceed Rs. 20
lakhs. One needs to take the GST Registration and file the GST Returns as well. Following are the
different types of GST Registrations:

Compulsory Registration,

Voluntary Registration,

Composite Scheme Registration.

Capital Gains: Definition, Rules, Taxes, and Asset Types

What Is a Capital Gain?

The term capital gain refers to the increase in the value of a capital asset when it is sold. Put simply, a
capital gain occurs when you sell an asset for more than what you originally paid for it.

Almost any type of asset you own is a capital asset. This can include a type of investment (like a stock,
bond, or real estate) or something purchased for personal use (like furniture or a boat).

Capital gains are realized when you sell an asset by subtracting the original purchase price from the sale
price. The Internal Revenue Service (IRS) taxes individuals on capital gains in certain circumstances.

Understanding Capital Gains

As noted above, capital gains represent the increase in the value of an asset. These gains are typically
realized at the time that the asset is sold. Capital gains are generally associated with investments, such
as stocks and funds, due to their inherent price volatility. But they can also be realized on any security or
possession that is sold for a price higher than the original purchase price, such as a home, furniture, or
vehicle.

Capital gains fall into two categories:

Short-term capital gains: Gains realized on assets that you've sold after holding them for one year or less

Long-term capital gains: Gains realized on assets that you've sold after holding them for more than one
year

Both short- and long-term gains must be claimed on your annual tax return.

Understanding this distinction and factoring it into investment strategy is particularly important for day
traders and others who take advantage of the greater ease of trading in the market online.

Realized capital gains occur when an asset is sold, which triggers a taxable event. Unrealized gains,
sometimes referred to as paper gains and losses, reflect an increase or decrease in an investment's
value but are not considered a capital gain that should be treated as a taxable event.

For example, if you own stock that goes up in price, but you haven't yet sold it, that is an unrealized
capital gain.

The tax rates for capital gains are listed below.

Capital Gains Tax

Short- and long-term capital gains are taxed differently. Tax-efficient investing can lessen the impact of
these taxes. Remember, short-term gains occur on assets held for one year or less. As such, these gains
are taxed as ordinary income based on the individual's tax filing status and adjusted gross income (AGI).

Long-term capital gains, on the other hand, are taxed at a lower rate than regular income. The exact rate
depends on the filer's income and marital status, as shown below:

Special Capital Gains Tax Rules

Note that there are some caveats. Certain types of stock or collectibles may be taxed at a higher 28%
capital gains rate, and real estate gains can go as high as 25%. Moreover, if the capital gains put your
income over the threshold for the 15% capital gains rate, the excess will be taxed at the higher 20% rate.

In addition, certain types of capital losses are not deductible. If you sell your house or car at a loss, you
will be unable to deduct the difference on your taxes. However, when you sell your primary home, the
first $250,000 is exempt from capital gains tax. That figure doubles to $500,000 for married couples.

Individuals whose incomes are above these thresholds and are in a higher tax bracket are taxed 20% on
long-term capital gains. High-net-worth investors may have to pay the additional net investment income
tax, on top of the 20% they already pay for capital gains.

Assets Eligible for Capital Gains

Not all investments are eligible for the lower capital gains rates. The following are some assets that are
and are not eligible.

Capital Gains and Mutual Funds

Mutual funds that accumulate realized capital gains throughout the tax year must distribute these gains
to shareholders.

Many mutual funds distribute capital gains right before the end of the calendar year

Shareholders receive the fund's capital gains distribution and get a 1099-DIV form outlining the amount
of the gain and the type—short- or long-term.

When a mutual fund makes a capital gain or dividend distribution, the net asset value (NAV) drops by
the amount of the distribution. A capital gains distribution does not impact the fund's total return.

Tax-conscious mutual fund investors should determine a mutual fund's unrealized accumulated capital
gains, which are expressed as a percentage of its net assets, before investing in a fund with a significant
unrealized capital gain component. This circumstance is referred to as a fund's capital gains exposure.
When distributed by a fund, capital gains are a taxable obligation for the fund's investors.

Example of Capital Gains

Here's a hypothetical example to show how capital gains work and how they're taxed. Let's say Jeff
purchased 100 shares of Amazon (AMZN) stock on Jan. 30, 2016, at $350 per share. He then decides to
sell all the shares on Jan. 30, 2018, at a price of $833 each. Assuming there were no fees associated with
the sale, Jeff realized a capital gain of $48,300 ($833 x 100 - $350 x 100 = $48,300).

How Are Capital Gains Taxed?

Capital gains are classified as either short-term or long-term. Short-term capital gains, defined as gains
realized in securities held for one year or less, are taxed as ordinary income based on the individual's tax
filing status and adjusted gross income. Long-term capital gains, defined as gains realized in securities
held for more than one year, are usually taxed at a lower rate than regular income.

What Is the 2023 Capital Gains Tax Rate?

In 2023, long-term capital gains can be taxed at 0%, 15%, 20%, or 25%. The rate at which your gains are
taxed will depend on your income, filing status, and the type of asset. Short-term capital gains are taxed
at your ordinary income tax rate.

How Do Mutual Funds Account for Capital Gains?

Mutual funds that accumulate realized capital gains must distribute the gains to shareholders and often
do so right before the end of the calendar year. Shareholders receive the fund's capital gains distribution
along with a 1099-DIV form detailing the amount of the capital gain distribution and how much is
considered short-term and long-term.

This distribution reduces the mutual fund's net asset value by the amount of the payout though it does
not impact the fund's total return.

What Is a Net Capital Gain?

The IRS defines a net capital gain as the amount by which net long-term capital gain (long-term capital
gains minus long-term capital losses and any unused capital losses carried over from prior years)
exceeds net short-term capital loss (short-term capital gain minus short-term capital loss). A net capital
gain may be subject to a lower tax rate than the ordinary income tax rate.

How Do I Avoid Capital Gains Tax on My House?

You can reduce capital gains tax on your home by living in it for more than two years and keeping the
receipts for any home improvements you make. The cost of these improvements can be added to the
cost basis of your house and reduce the overall gain that will be taxed.

The Bottom Line

Capital gains are the profits that are realized by selling an investment, such as stocks, bonds, or real
estate. Capital gains taxes are lower than ordinary income taxes, providing an advantage to investors
over wage workers. Moreover, capital losses can sometimes be deducted from one's total tax bill.

For these reasons, a thorough understanding of capital gains taxes can make a big difference for an
investor.

What Is Income From Other Sources? Taxability, Exemptions and Deductions

Under the I-T Act, for the computation of total income, the income of an assessee is classified into five
different heads of income. These are the income from salaries, house property, capital gain, profit and
gains from business or profession, and income from other sources. In this article, we will learn more
about the details of Income from other sources, its taxability, exemptions and deductions.

What is Income from Other Sources?

According to section 56 of the I-T Act, any income, profits, or gains included in the total income of an
assessee but doesn’t fall under any other head of income is chargeable under the head “Income from
Other Sources”. Thus, this head of the income is a residuary head that brings within its scope all the
taxable income, profits, or gains of an assessee that fall outside the scope of any other head.

The following requirements should be met as per Section 56 of the Income Tax Act for an income to fall
under the head “Income from Other Sources“:
You earn taxable income during a financial year.

The taxable income cannot be categorised under any other head of income, such as Salaries, Income
from House Property, Profits and gains of business or profession, and Capital gains.

Incomes Chargeable under the head ‘Income from Other Sources.’

Dividend Income

Dividend income includes the dividend received from any company, deemed dividend under section
2(22) (a)/(b)/(c)/(d)/(e), and interim dividend.

Casual Income

Casual income includes winnings from lotteries, crossword puzzles, races including horse races, card
games and other games of any sort, gambling, betting, etc.

Interest in compensation or enhanced compensation

Any income earned by the assessee as interest received on compensation or enhanced compensation
shall be taxable in the year it is received under the head “Income from other sources”.

Advance forfeited for transfer of a capital asset.

Any sum of money received as an advance or otherwise in the course of negotiation for the transfer of a
capital asset is chargeable to tax under the head “income from other sources” if the transfer of such
capital asset doesn’t take place and such amount is forfeited.

Compensation on termination of employment

Any compensation or payment received by the assessee in connection with the termination of
employment or the modification of the terms and conditions relating to their employment shall be
chargeable to tax under this head.

Keyman Insurance Policy

Any sum received under a keyman insurance policy, including any bonus allocated on such policy, is
chargeable under “Income from other sources” if such income is not chargeable under the head of
salaries or profit or gains from business or profession.

Interest Income From Saving Bank and Fixed Deposit

Any interest received on fixed deposits, post office or accumulated in a savings bank account must be
declared income from other sources.

Family Pension

If an assessee is receiving the pension on behalf of a deceased person, they should declare such income
under the heading ‘Income from Other Sources’.

Gifts
Money

If an assessee receives any money as a gift without consideration, and the aggregate value exceeds INR
50,000, the total consideration received is taxable.

Immovable Property

If an assessee receives any immovable property as a gift without consideration, the stamp duty value of
such immovable property will be taxable as income in the hands of the recipient if it exceeds INR 50,000.

If an assessee receives any immovable property as a gift for a consideration that is less than the stamp
duty value of the property and the difference between the stamp duty value and considerations is more
than the higher of INR 50,000 and 10% of consideration, the difference between the stamp duty value
and the consideration paid is taxable in the hands of the recipient.

Movable Property

If an assessee receives any movable property without consideration, the aggregate fair market value of
such property on the date of receipt would be taxable in the hand of the recipient if the amount exceeds
INR 50,000.

If an assessee receives any movable property for inadequate consideration and the difference between
the aggregate fair market value of such property and consideration exceeds INR 50,000, such difference
would be taxable.

Deductions Applicable for Income from Other Sources under section 57 of the I-T Act

According to section 57 of the IT Act, any assessee earning income from other sources can claim
deductions of the following expenses while calculating their income-

In the case of income from mutual funds, specified companies, or dividends:

Interest expenditure is allowed as a deduction subject to a maximum of 20% of such income.

In case of interest on securities:

Any amount paid as commission or remuneration to any other person.

In case of interest on the compensation of compulsory acquisition:

The amount equal to 50% of such income shall be allowed as a deduction, and no deduction shall be
allowed under any other clause of this section.

Family Pension:
A deduction of a sum equal to 33-1/3 % of such income or INR 15,000, whichever is less, is allowed.

Any other expenditure not in the nature of capital expenditure expended wholly and exclusively to earn
such income.

Deductions not allowed under section 58 of the I-T Act.

Any personal expense that the assessee bears.

Any interest taxable under the I-T Act is payable outside India, but neither tax has been paid nor TDS
deducted.

Any payment is taxable under the head “Salaries” if it is payable outside India unless tax has been paid
or deducted at source.

Where 30% TDS has to be deducted from any sum payable to a resident and such tax has not been
deducted or after deduction has not been paid on or before the due date of return filing under section
139(1).

Any expenditure in which a payment is made in cash exceeding INR 10,000 to a person in a day.

Final Word

Many passive income streams, such as dividends, interest, and rent, are taxable as income from other
sources. A majority of us earn some form of these passive streams of income. Therefore, it is important
to know about income from other sources and the available deductions so that you can disclose your
income under the correct head in your tax return and the expenses you are entitled to claim under the
Income Tax Act