S.No.

Section

Particulars

Taxability/Exemption

1.

17

Basic salary

Fully taxable

2.

17

Dearness Allowance (referred to as ‘DA’)

Fully taxable

3.

17

Bonus, fees or commission

Fully taxable

A.

Allowances

4.

10(13A) read with Rule 2A

House rent allowance

Least of the following is exempt:

a) Actual HRA Received

b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Chennai)

c) Rent paid minus 10% of salary

* Salary = Basic + DA (if part of retirement benefit) + Turnover based Commission

Note:

i. Fully taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent

ii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1,00,000 [Circular No. 08 /2013 dated 10-10-2013].

5.

10(14)

Children education allowance

Up to Rs. 100 per month per child up to a maximum of 2 children is exempt

6.

10(14)

Hostel expenditure allowance

Up to Rs. 300 per month per child up to a maximum of 2 children is exempt

7.

10(14)

Transport Allowance granted to an employee to meet expenditure for the purpose of commuting between place of residence and place of duty

Rs. 3,200 per month granted to an employee, who is blind or deaf and dumb or orthopedically handicapped with disability of lower extremities

8.

Sec. 10(14)

Allowance granted to an employee working in any transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance.

Amount of exemption shall be lower of following:

a) 70% of such allowance; or

b) Rs. 10,000 per month.

9.

10(14)

Conveyance allowance granted to meet the expenditure on conveyance in performance of duties of an office

Exempt to the extent of expenditure incurred for official purposes

10.

10(14)

Travelling allowance to meet the cost of travel on tour or on transfer

Exempt to the extent of expenditure incurred for official purposes

11.

10(14)

Daily allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty

Exempt to the extent of expenditure incurred for official purposes

12.

10(14)

Helper/Assistant allowance

Exempt to the extent of expenditure incurred for official purposes

13.

10(14)

Research allowance granted for encouraging the academic research and other professional pursuits

Exempt to the extent of expenditure incurred for official purposes

14.

10(14)

Uniform allowance

Exempt to the extent of expenditure incurred for official purposes

15.

10(7)

Any allowance or perquisite paid or allowed by Government to its employees (an Indian citizen) posted outside India

Fully Exempt

16.

-

Allowances to Judges of High Court/Supreme Court (Subject to certain conditions)

Fully Exempt.

17.

10(45)

Following allowances and perquisites given to serving Chairman/Member of UPSC is exempt from tax:

a) Value of rent free official residence

b) Value of conveyance facilities including transport allowance

c) Sumptuary allowance

d) Leave travel concession

Fully Exempt

18.

-

Allowances paid by the UNO to its employees

Fully Exempt

19.

Sec. 10(14) read with Rule 2BB

Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations)

Amount exempt from tax varies from Rs. 300 to Rs. 7,000 per month.

20.

Sec. 10(14) read with Rule 2BB

Border area, Remote Locality or Disturbed Area or Difficult Area Allowance (Subject to certain conditions and locations)

Amount exempt from tax varies from Rs. 200 to Rs. 1,300 per month.

21.

Sec. 10(14) read with Rule 2BB

Tribal area allowance in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa

Up to Rs. 200 per month is exempt

22.

Sec. 10(14) read with Rule 2BB

Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations)

Up to Rs. 2,600 per month is exempt

23.

Sec. 10(14) read with Rule 2BB

Compensatory Modified Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations)

Up to Rs. 1,000 per month is exempt

24.

Sec. 10(14) read with Rule 2BB

Counter Insurgency Allowance granted to members of Armed Forces operating in areas away from their permanent locations. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations)

Up to Rs. 3,900 per month is exempt

25.

Sec. 10(14) read with Rule 2BB

Underground Allowance to employees working in uncongenial, unnatural climate in underground mines

Up to Rs. 800 per month is exempt

26.

Sec. 10(14) read with Rule 2BB

High Altitude Allowance granted to armed forces operating in high altitude areas (Subject to certain conditions and locations)

a) Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet) is exempt

b) Up to Rs. 1,600 per month (for altitude above 15,000 feet) is exempt

27.

Sec. 10(14) read with Rule 2BB

Highly active field area allowance granted to members of armed forces (Subject to certain conditions and locations)

Up to Rs. 4,200 per month is exempt

28.

Sec. 10(14) read with Rule 2BB

Island Duty Allowance granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island (Subject to certain conditions and locations)

Up to Rs. 3,250 per month is exempt

29.

10(14)

City Compensatory Allowance

Fully Taxable

30.

10(14)

Fixed Medical Allowance

Fully Taxable

31.

10(14)

Tiffin, Lunch, Dinner or Refreshment Allowance

Fully Taxable

32.

10(14)

Servant Allowance

Fully Taxable

33.

10(14)

Project Allowance

Fully Taxable

34.

10(14)

Overtime Allowance

Fully Taxable

35.

10(14)

Telephone Allowance

Fully Taxable

36.

10(14)

Holiday Allowance

Fully Taxable

37.

10(14)

Any Other Cash Allowance

Fully Taxable

38.

10(5)

Leave Travel Concession or Assistance (LTC/LTA), extended by an employer to an employee for going anywhere in India along with his family*

*Family includes spouse, children and dependent brother/sister/parents. However, family doesn’t include more than 2 children of an Individual born on or after 01-10-1998.

(Subject to certain conditions)

The exemption shall be limited to fare for going anywhere in India along with family twice in a block of four years:

• Where journey is performed by Air - Exemption up to Air fare of economy class in the National Carrier by the shortest route

• Where journey is performed by Rail - Exemption up to air-conditioned first class rail fare by the shortest route

• If places of origin of journey and destination are connected by rail but the journey is performed by any other mode of transport - Exemption up to air-conditioned first class rail fare by the shortest route.

• Where the places of origin of journey and destination are not connected by rail:

* Where a recognized public transport system exists - Exemption up to first Class or deluxe class fare by the shortest route

* Where no recognized public transport system exists - Exemption up to air conditioned first class rail fare by shortest route.

Notes:

i. Two journeys in a block of 4 calendar years is exempt

ii. Taxable only in case of Specified Employees [See note 4]

B.

Perquisites

39.

17(2)(i)/(ii)

read with

Rule 3(1)

Rent free unfurnished accommodation provided to Central and State Government employees

License fees determined in accordance with rules framed by Government for allotment of houses shall be deemed to be the taxable value of perquisites.

40.

17(2)(i)/(ii)

read with

Rule 3(1)

Unfurnished rent free accommodation provided to other employees

Taxable value of perquisites

i. If house property is owned by the employer, the taxable value of perquisite shall be:

A. 15% of salary, if population of city where accommodation is provided exceeds 25 lakhs

B. 10% of salary, if population of city where accommodation is provided exceeds 10 lakhs but does not exceed 25 lakhs

C. 7.5% of salary, if accommodation is provided in any other city

ii. If house property is taken on lease or rent by the employer, the taxable value of perquisite shall be:

i. Lease rent paid or payable by the employer or 15% of the salary, whichever is lower

*Salary includes:

a) Basic Pay

b) Dearness Allowance (only to the extent it forms part of retirement benefit salary)

c) Bonus

d) Commission

e) All other allowances (only taxable portion)

f) Any monetary payment which is chargeable to tax

But does not include

i. Value of any perquisite

ii. Employer’s contribution to PF

iii. Benefits received at the time of retirement like gratuity, pension etc.

Note:

 1) Rent free accommodation is not chargeable to tax if provided in remote area.

 2) Rent free accommodation provided to High Court or Supreme Court Judges, Union Ministers, Leader of Opposition in Parliament, an official in Parliament and Serving Chairman and members of UPSC is tax free perquisite.

 3) The value so determined shall be reduced by the amount of rent, if any,  recovered from the employee.

 4) If employee is transferred and retain property at both the places, the taxable value of perquisites for initial period of 90 days shall be determined with reference to only one accommodation (at the option of the assessee). The other one will be tax free. However after 90 days, taxable value of perquisites shall be charged with reference to both the accommodations.

41.

17(2)(i)/(ii)

read with

Rule 3(1)

Rent free furnished accommodation

Taxable value of perquisites shall be computed in following manner:

a) Taxable value of perquisite assuming accommodation to be provided to the employee is unfurnished

b) Add: 10% of original cost of furniture and fixtures (if these are owned by the employer) or actual higher charges paid or payable (if these are taken on rent by the employer).

c) Less: The value so determined shall be reduced by the amount of rent, if any, recovered from the employee

42.

17(2)(i)/(ii)

read with

Rule 3(1)

Accommodation provided in a hotel

Hotel accommodation will not be chargeable to tax if :

a) It is provided for a total period not exceeding in aggregate 15 days in the financial year; and

b) Such accommodation in hotel is provided on employee’s transfer from one place to another place.

Taxable value of perquisite shall be lower of following:

a)  Actual charges paid or payable by the employer to such hotel; or

b)  24% of salary

43.

17(2)(viii)

read with Rule 3(2)

Motor Car / Other Conveyance

Taxable value of perquisites (See Note 1 below)

44.

17(2)(viii)

read with Rule 3(3)

Services of a domestic servant including sweeper, gardener, watchmen or personal attendant (taxable only in case of specified employee [See Note 4])

Taxable value of perquisite shall be salary paid or payable by the employer for such services less any amount recovered from the employee.

45.

17(2)(viii)

read with Rule 3(4)

Supply of gas, electricity or water for household purposes

Taxable value of perquisites:

➢ Manufacturing cost per unit incurred by the employer., if provided from resources owned by the employer;

➢ Amount paid by the employer, if purchased by the employer from outside agency

Note:

1. Any amount recovered from the employee shall be deducted from the taxable value of perquisite.

2. Taxable in case of specified employees only [See note 4]

46.

17(2)(viii)

read with Rule 3(5)

Education Facilities

Taxable value of perquisites (See Note 2 below)

47.

17(2)(viii)

read with Rule 3(6)

Transport facilities provided by the employer engaged in carriage of passenger or goods (except Airlines or Railways)

Value at which services are offered by the employer to the public less amount recovered from the employee shall be a taxable perquisite

48.

17(2)(v)

Amount payable by the employer to effect an insurance on life of employee or to effect a contract for an annuity

Fully Taxable

49.

17(2)(vi) read with Rule 3(8)/3(9)

ESOP/ Sweat Equity Shares

Fair Market value of shares or securities on the date of exercise of option by the assessee less amount recovered from the employee in respect of such shares shall be the taxable value of perquisites.

Fair Market Value shall be determined as follows:

a) In case of listed Shares: Average of opening and closing price as on date of exercise of option (Subject to certain conditions and circumstances)

b) In case of unlisted shares/ security other than equity shares: Value determined by a Merchant Banker as on date of exercise of option or an earlier date, not being a date which is more than 180 days earlier than the date of exercise of the option.

Note:

The Finance Act, 2020 has deferred the taxation of perquisite in case of start-ups from date of allotment to the earliest of the following three dates:

1. Expiry of 48 months from the end of the relevant assessment year;

2. Sale of such shares by the employees;

3. Date on which employee ceases to be employee of the start-up.

The eligible start-up shall accordingly, be required to deposit tax with the government within 14 days of the happening of any of the above events (whichever is earlier).

However, Section 17(2)(vi) has not been amended, thus the income shall be computed in the year in which shares are allotted but tax shall be paid in subsequent year.

50.

17(2)(vii)

Employer’s contribution towards superannuation fund

Taxable in the hands of employee to the extent such contribution exceeds Rs.1,50,000

51.

17(2)(viii) read with Rule 3(7)(i)

Interest free loan or Loan at concessional rate of interest

Interest free loan or loan at concessional rate of interest given by an employer to the employee (or any member of his household) is a perquisite chargeable to tax in the hands of all employees on following basis:

 1) Find out the “maximum outstanding monthly balance” (i.e. the aggregate outstanding balance for each loan as on the last day of each month);

 2) Find out rate of interest charged by the SBI as on the first day of relevant previous year in respect of loan for the same purpose advanced by it;

 3) Calculate interest for each month of the previous year on the outstanding amount (mentioned in Step 1) at the rate of interest given in Step 2

 4) From the total interest calculated for the entire previous year (step 3), deduct interest actually recovered, if any, from employee

 5) The balance amount (Step 3-Step 4) is taxable value of perquisite

Nothing is taxable if:

a) Loan in aggregate does not exceed Rs. 20,000; or

b) Loan is provided for treatment of specified diseases ( Rule 3A) like neurological diseases, Cancer, AIDS, Chronic renal failure, Hemophilia (specified diseases). However, exemption is not applicable to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.

52.

17(2)(viii) read with Rule 3(7)(ii)

Facility of travelling, touring and accommodation availed of by the employee or any member of his household for any holiday

a) Taxable value of perquisite shall be expenditure incurred by the employer less amount recovered from employee.

b) Where such facility is maintained by the employer, and is not available uniformly to all employees, the value of benefit shall be taken to be the value at which such facilities are offered by other agencies to the public.

53.

17(2)(viii) read with Rule 3(7)(iii)

Free food and beverages provided to the employee

 1) Fully Taxable: Free meals in excess of Rs. 50 per meal less amount paid by the employee shall be a taxable perquisite

 2) Exempt from tax: Following free meals shall be exempt from tax:

a) Food and non-alcoholic beverages provided during working hours in remote area or in an offshore installation;

b) Tea, Coffee or Non-Alcoholic beverages and Snacks during working hours are tax free perquisites;

c) Food in office premises or through non-transferable paid vouchers usable only at eating joints provided by an employer is not taxable, if cost to the employer is Rs. 50(or less) per meal.

54.

17(2)(viii) read with Rule 3(7)(iv)

Gift or Voucher or Coupon on ceremonial occasions or otherwise provided to the employee

a) Gifts in cash or convertible into money (like gift cheque) are fully taxable

b) Gift in kind up to Rs.5,000 in aggregate per annum would be exempt, beyond which it would be taxable.

55.

17(2)(viii) read with Rule 3(7)(v)

Credit Card

 a)  Expenditure incurred by the employer in respect of credit card used by the employee or any member of his household less amount recovered from the employee is a taxable perquisite

 b)  Expenses incurred for official purposes shall not be a taxable perquisite provided complete details in respect of such expenditure are maintained by the employer

56.

17(2)(viii) read with Rule 3(7)(vi)

Free Recreation/ Club Facilities

 a)  Expenditure incurred by the employer towards annual or periodical fee etc. (excluding initial fee to acquire corporate membership) less amount recovered from the employee is a taxable perquisite

 b)  Expenses incurred on club facilities for the official purposes are exempt from tax.

 c)  Use of health club, sports and similar facilities provided uniformly to all employees shall be exempt from tax.

57.

17(2)(viii) read with Rule 3(7)(vii)

Use of movable assets of the employer by the employee is a taxable perquisite

Taxable value of perquisites

a) Use of Laptops and Computers: Nil

b) Movable asset other than Laptops, computers and Motor Car*: 10% of original cost of the asset (if asset is owned by the employer) or actual higher charges incurred by the employer (if asset is taken on rent) less amount recovered from employee.

*See Note 1 for computation of perquisite value in case of use of the Motor Car

58.

17(2)(viii) read with Rule 3(7)(viii)

Transfer of movable assets by an employer to its employee

Taxable value of perquisites

a) Computers, Laptop and Electronics items: Actual cost of asset less depreciation at 50% (using reducing balance method) for each completed year of usage by employer less amount recovered from the employee

b) Motor Car: Actual cost of asset less depreciation at 20% (using reducing balance method) for each completed year of usage by employer less amount recovered from the employee

c) Other movable assets: Actual cost of asset less depreciation at 10% (on SLM basis) for each completed year of usage by employer less amount recovered from the employee.

59.

17(2)(viii) read with Rule 3(7)(ix)

Any other benefit or amenity extended by employer to employee

Taxable value of perquisite shall be computed on the basis of cost to the employer (under an arm’s length transaction) less amount recovered from the employee.

However, expenses on telephones including a mobile phone incurred by the employer on behalf of employee shall not be treated as taxable perquisite.

60.

10(10CC)

Tax paid by the employer on perquisites (not provided for by way of monetary payments) given to employee

Fully exempt

61.

Proviso to section 17(2)

Medical facilities in India

 a)  Expense incurred or reimbursed by the employer for the medical treatment of the employee or his family (spouse and children, dependent - parents, brothers and sisters) in any of the following hospital is not chargeable to tax in the hands of the employee:

  i.  Hospital maintained by the employer.

  ii.  Hospital maintained by the Government or Local Authority or any other hospital approved by Central Government

  iii.  Hospital approved by the Chief Commissioner having regard to the prescribed guidelines for treatment of the prescribed diseases.

 b)  Medical insurance premium paid or reimbursed by the employer is not chargeable to tax.

However, the medical facility is taxable only in case of Specified Employees [See note 4]

62.

Proviso to section 17(2)

Medical facilities outside India

Any expenditure incurred or reimbursed by the employer for medical treatment of the employee or his family member outside India is exempt to the extent of following (subject to certain condition):

  a.  Expenses on medical treatment - exempt to the extent permitted by RBI.

  b.  Expenses on stay abroad for patient and one attendant - exempt to the extent permitted by RBI.

  c.  Expenditure incurred on travelling of patient and one attendant- exempt, if Gross Total Income (before including the travel expenditure) of the employee, does not exceed Rs. 2,00,000.

63.

Proviso to section 17(2)

Medical facility or reimbursement for COVID-19 treatment

Any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family in respect of any illness relating to Covid-19, shall not be taxable as perquisite in the hands of the employee. However, this benefit shall be allowed subject to certain conditions as may be notified by the Government in this behalf. [applicable w.e.f. Assessment Year 2020-21]

C.

Deduction from salary

2.

16 (ii)

Entertainment Allowance received by the Government employees (Fully taxable in case of other employees)

Least of the following is exempt from tax:

a) Rs 5,000

b) 1/5th of salary (excluding any allowance, benefits or other perquisite)

c) Actual entertainment allowance received

3.

16(iii)

Employment Tax/Professional Tax.

Amount actually paid during the year. However, if professional tax is paid by the employer on behalf of its employee than it is first included in the salary of the employee as a perquisite and then same amount is allowed as deduction.

D.

Retirement Benefits

Leave Encashment

1.

10(10AA)

Encashment of unutilized earned leave at the time of retirement of Government employees

Fully Exempt

2.

10(10AA)

Encashment of unutilized earned leave at the time of retirement of other employees (not being a Government employee)

Least of the following shall be exempt from tax:

a) Amount actually received

b) Unutilized earned leave* X Average monthly salary

c) 10 months Average Salary**

d) Rs. 3,00,000

* While computing unutilized earned leave, earned leave entitlements cannot exceed 30 days for each completed year of service rendered to the current employer

** Average salary = Average Salary*** of last 10 months immediately preceding the retirement

***Salary = Basic Pay + DA (to the extent it forms part of retirement benefits)+ turnover based commission

Retrenchment Compensation

3.

10(10B)

Retrenchment Compensation received by a workman under the Industrial Dispute Act, 1947 (Subject to certain conditions).

Least of the following shall be exempt from tax:

a) Amount calculated as per section 25F(b)of the Industrial Disputes Act, 1947;

b) Rs. 5,00,000; or

c) Amount actually received

Note:

i. Relief under Section 89(1) is available

ii. 15 days average pay for each completed year of continuous service or any part thereof in excess of 6 months is to be adopted under section 25F(b) of the Industrial Disputes Act,1947

Gratuity

4.

10(10)(i)

Gratuity received by Government Employees (Other than employees of statutory corporations)

Fully Exempt

5.

10(10)(ii)

Death -cum-Retirement Gratuity received by other employees who are covered under Gratuity Act, 1972 (other than Government employee) (Subject to certain conditions).

Least of following amount is exempt from tax:

 1. (*15/26) X Last drawn salary** X completed year of service or part thereof in excess of 6 months.

 2. Rs. 20,00,000

 3. Gratuity actually received.

*7 days in case of employee of seasonal establishment.

** Salary = Last drawn salary including DA but excluding any bonus, commission, HRA, overtime and any other allowance, benefits or perquisite

6.

10(10)(iii)

Death -cum-Retirement Gratuity received by other employees who are not covered under Gratuity Act, 1972 (other than Government employee) (Subject to certain conditions).

Least of following amount is exempt from tax:

1. Half month’s Average Salary* X Completed years of service

2. Rs. 20,00,000

3. Gratuity actually received.

*Average salary = Average Salary of last 10 months immediately preceding the month of retirement

** Salary = Basic Pay + DA (to the extent it forms part of retirement benefits)+ turnover based commission

Pension

7.

-

Pension received from United Nation Organization by the employee of his family members

Fully Exempt

8.

10(10A)(i)

Commuted Pension received by an employee of Central Government, State Government, Local Authority Employees and Statutory Corporation

Fully Exempt

9.

10(10A)(ii)

Commuted Pension received by other employees who also receive gratuity

1/3 of full value of commuted pension will be exempt from tax

10.

10(10A)(iii)

Commuted Pension received by other employees who do not receive any gratuity

1/2 of full value of commuted pension will be exempt from tax

11.

10(19)

Family Pension received by the family members of Armed Forces

Fully Exempt

12.

57(iia)

Family pension received by family members in any other case

33.33% of Family Pension subject to maximum of Rs. 15,000 shall be exempt from tax

Voluntary Retirement

13.

10(10C)

Amount received on Voluntary Retirement or Voluntary Separation (Subject to certain conditions)

Least of the following is exempt from tax:

1) Actual amount received as per the guidelines i.e. least of the following

a) 3 months salary for each completed year of services

b) Salary at the time of retirement X No. of months of services left for retirement; or

2) Rs. 5,00,000

Provident Fund

14.

-

Employee’s Provident Fund

For taxability of contribution made to various employee’s provident fund and interest arising thereon see Note 3.

Any payment from the National Pension System Trust to an assessee on closure of his account or on his opting out of the pension scheme referred to in section 80CCD, to the extent it does not exceed 60% of the total amount payable to him at the time of such closure or his opting out of the scheme.

Note: Partial withdrawal from NPS shall be exempt to the extent of 25% of amount of contributions made by the employee.

E.

Arrear of Salary and relief under section 89(1)

1.

15

Arrear of salary and advance salary

Taxable in the year of receipt. However relief under section 89 is available

2.

89

Relief under Section 89

If an individual receives any portion of his salary in arrears or in advance or receives profits in lieu of salary, he can claim relief as per provisions of section 89 read with rule 21A

3.

89A

Relief under 89A

Relief from taxation in income from retirement benefit account maintained in a notified country in accordance with Rule 21AAA.

F.

Other Benefits

1.

-

Lump-sum payment made gratuitously or by way of compensation or otherwise to widow or other legal heirs of an employee who dies while still in active service [Circular No. 573, dated 21-08-1990]

Fully exempt in the hands of widow or other legal heirs of employee

2.

-

Ex-gratia payment to a person (or legal heirs) by Central or State Government, Local Authority or Public Sector Undertaking consequent upon injury to the person or death of family member while on duty [Circular No. 776, dated 08-06-1999]

Fully exempt in the hands of individual or legal heirs

3.

-

Salary received from United Nation Organization [Circular No. 293, dated 10-02-1981]

Fully exempt

4.

10(6)(ii)

Salary received by foreign national as an officials of an embassy, high commission, legation, consulate or trade representation of a foreign state

Fully exempt if corresponding official in that foreign country enjoys a similar exemption

5.

10(6)(vi)

Remuneration received by non-resident foreign citizen as an employee of a foreign enterprise for services rendered in India, if:

 a)  Foreign enterprise is not engaged in any trade or business in India

 b)  His stay in India does not exceed in aggregate a period of 90 days in such previous year

 c)  Such remuneration is not liable to deducted from the income of employer chargeable under this Act

Fully exempt

6.

10(6)(viii)

Salary received by a non-resident foreign national for services rendered in connection with his employment on a foreign ship if his total stay in India does not exceed 90 days in the previous year.

Fully exempt

7.

-

Salary and allowances received by a teacher /professor from SAARC member state (Subject to certain conditions).

Fully exempt

S. No.

Circumstances

Engine Capacity up to 1600 cc

Engine Capacity above 1600 cc

1

Motor Car is owned or hired by the employer

1.1

Where maintenances and running expenses including remuneration of the chauffeur are met or reimbursed by the employer.

1.1-A

Used wholly and exclusively in the performance of official duties.

Fully exempt subject to maintenance of specified documents

Fully exempt subject to maintenance of specified documents

1.1-B

Used exclusively for the personal purposes of the employee or any member of his household.

Actual amount of expenditure incurred by the employer on the running and maintenance of motor car including remuneration paid by the employer to the chauffeur and increased by the amount representing normal wear and tear of the motor car at 10% per annum of the cost of vehicle less any amount charged from the employee for such use is taxable value of perquisite.

1.1-C

The motor car is used partly in the performance of duties and partly for personal purposes of the employee or any member of his household.

Rs. 1,800 per month (plus Rs. 900 per month, if chauffeur is also provided to run the motor car) shall be taxable value of perquisite

Rs. 2,400 per month (plus Rs. 900 per month, if chauffeur is also provided to run the motor car) shall be taxable value of perquisite

Nothing is deductible in respect of any amount recovered from the employee.

1.2

Where maintenances and running expenses are met by the employee.

1.2-A

Used wholly and exclusively in the performance of official duties.

Not a perquisite, hence, not taxable

Not a perquisite, hence, not taxable

1.2-B

Used exclusively for the personal purposes of the employee or any member of his household

Expenditure incurred by the employer (i.e. hire charges, if car is on rent or normal wear and tear at 10% of actual cost of the car, if car is owned by the employer) plus salary of chauffeur if paid or payable by the employer minus amount recovered from the employee.

1.2-C

The motor car is used partly in the performance of duties and partly for personal purposes of the employee or any member of his household

Rs. 600 per month (plus Rs. 900 per month, if chauffeur is also provided to run the motor car) shall be taxable value of perquisite

Rs. 900 per month (plus Rs. 900 per month, if chauffeur is also provided to run the motor car) shall be taxable value of perquisite

Nothing is deductible in respect of any amount recovered from the employee.

2

Motor Car is owned by the employee

2.1

Where maintenances and running expenses including remuneration of the chauffeur are met or reimbursed by the employer.

2.1-A

The reimbursement is for the use of the vehicle wholly and exclusively for official purposes

Fully exempt subject to maintenance of specified documents

Fully exempt subject to maintenance of specified documents

2.1-B

The reimbursement is for the use of the vehicle exclusively for the personal purposes of the employee or any member of his household (taxable in case of specified employee as well as non-specified employee)

Actual expenditure incurred by the employer minus amount recovered from the employee

2.1-C

The reimbursement is for the use of the vehicle partly for official purposes and partly for personal purposes of the employee or any member of his household.

Actual expenditure incurred by the employer minus Rs. 1800 per month and Rs. 900 per month if chauffer is also provided minus amount recovered from employee shall be taxable value of perquisite.

Actual expenditure incurred by the employer minus Rs. 2400 per month and Rs. 900 per month if chauffer is also provided minus amount recovered from employee shall be taxable value of perquisite.

3

Where the employee owns any other automotive conveyance and actual running and maintenance charges are met or reimbursed by the employer

3.1

Reimbursement for the use of the vehicle wholly and exclusively for official purposes;

Fully exempt subject to maintenance of specified documents

Fully exempt subject to maintenance of specified documents

3.2

Reimbursement for the use of vehicle partly for official purposes and partly for personal purposes of the employee.

Actual expenditure incurred by the employer as reduced by Rs. 900 per month

Not Applicable

Facility extended to

Value of perquisite

Provided in the school owned by the employer

Provided in any other school

Children

Cost of such education in similar school less Rs. 1,000 per month per child (irrespective of numbers of children) less amount recovered from employee

Amount incurred less amount recovered from employee (an exemption of Rs. 1,000 per month per child is allowed)

Other family member

Cost of such education in similar school less amount recovered from employee

Cost of such education incurred

Particulars

Taxable Value of Perquisites

Reimbursement of school fees of children or family member of employees

Fully taxable

Free educational facilities/ training of employees

Fully exempt

Particulars

Statutory provident fund

Recognized provident fund

Unrecognized provident fund

Public provident fund

Employers contribution to provident fund

Fully Exempt

Exempt only to the extent of 12% of salary*

Fully Exempt

-

Deduction under section 80C on employees contribution

Available

Available

Not Available

Available

Interest credited to provident fund
See Note

Fully Exempt

Exempt only to the extent rate of interest does not exceed 9.5%

Fully Exempt

Fully Exempt

Payment received at the time of retirement or termination of service

Fully Exempt

Fully Exempt (Subject to certain conditions and circumstances)

Fully Taxable (except employee’s contribution)

Fully Exempt

Particulars

Amount

Gross Annual Value

-

Less: Municipal Taxes

-

Net Annual Value

****

Less: Standard deduction at 30% [Section 24(a)]

-

Less: Interest on borrowed capital [Section 24(b)]

-

Income from house property

****

Description

Nature of Deductions

Municipal Taxes

Municipal taxes including service-taxes levied by any local authority in respect of house property is allowed as deduction, if:

a) Taxes are borne by the owner; and

b) Taxes are actually paid by him during the year.

Standard Deduction[Section 24(a)]

30% of net annual value of the house property is allowed as deduction if property is let-out during the previous year.

Interest on Borrowed Capital *

[Section 24(b)]

a) In respect of let-out property, actual interest incurred on capital borrowed for the purpose of acquisition, construction, repairing, re-construction shall be allowed as deduction

b) In respect of self-occupied residential house property, interest incurred on capital borrowed for the purpose of acquisition or construction of house property shall be allowed as deduction up to Rs. 2 lakhs. The deduction shall be allowed if capital is borrowed on or after 01-04-1999 and acquisition or construction of house property is completed within 5 years.

c) In respect of self-occupied residential house property, interest incurred on capital borrowed for the purpose of reconstruction, repairs or renewals of a house property shall be allowed as deduction up to Rs. 30,000.

S. No.

Property Type

Gross Annual Value of the property

Deduction for municipal taxes

Net Annual Value of the property

Standard Deduction

Interest on borrowed capital

1.

Self-occupied house property/properties

Nil

Nil

Nil

Nil

Aggregate Deduction for interest on borrowed capital is allowed up to Rs. 30,000 or Rs. 2,00,000, as the case may be.

2.

House property could not be occupied by the owner due to employment or business carried on at any other place

Nil

Nil

Nil

Nil

Deduction for interest on borrowed capital is allowed up to Rs. 30,000 or Rs. 2,00,000, as the case may be.

3.

Let out property

To be computed as per provisions of Section 23(1)

Allowed on actual payment basis

Gross annual value less Municipal taxes

30% of Net Annual Value

Entire amount of interest paid or payable on borrowed capital shall be allowed as deduction. Pre-construction interest shall be allowed as deduction in 5 annual equal installments (Subject to certain conditions).

4.

More than two-self occupied properties

Only two properties selected by the taxpayer will be considered as self-occupied house properties and all other properties shall be deemed to be let-out for the purpose of computation of income under the head house property.

5.

Self-occupied property/properties let-out for the part of the year

The house will be taken as let-out property and no concession shall be available for the duration during which the property was self-occupied.

6.

One part of the property is let-out and other part is used for self-occupied purposes

Each part of the property shall be considered as separate property and income will be computed accordingly

S. No.

Section

Particulars

1.

28(i)

Profit and gains from any business or profession carried on by the assessee at any time during the previous year

2.

28(ii)

Any compensation or other payment due to or received by any specified person

3.

28(iii)

Income derived by a trade, professional or similar association from specific services performed for its members

4.

28(iiia)

Profit on sale of a license granted under the Imports (Control) Order 1955, made under the Import Export Control Act, 1947

5.

28(iiib)

Cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of Government of India

6.

28(iiic)

Any duty of Customs or Excise repaid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971.

7.

28(iiid)

Profit on transfer of Duty Entitlement Pass Book Scheme, under Section 5 of Foreign Trade (Development and Regulation) Act, 1992

8.

28(iiie)

Profit on transfer of Duty Free Replenishment Certificate, under Section 5 of Foreign Trade (Development and Regulation) Act 1992

9.

28(iv)

Value of any benefits or perquisites arising from a business or the exercise of a profession.

10.

28(v)

Interest, salary, bonus, commission or remuneration due to or received by a partner from partnership firm

11.

28(va)

 a) Any sum received or receivable for not carrying out any activity in relation to any business or profession; or

 b) Any sum received or receivable for not sharing any know-how, patent, copyright, trademark, licence, franchise, or any other business or commercial right or information or technique likely to assist in the manufacture of goods or provision of services.

12.

28(vi)

Any sum received under a Key man Insurance policy including the sum of bonus on such policy

13.

28(vii)

Any sum received ( or receivable) in cash or in kind, on account of any capital assets (other than land or goodwill or financial instrument) being demolished, destroyed, discarded or transferred, if the whole of the expenditure on such capital assets has been allowed as a deduction under section 35AD

14.

Explanation to section 28

Income from speculative transactions. However, it shall be deemed to be distinct and separate from any other business.

15.

41(1)

• Remission or cessation of liability in respect of any loss, expenditure or trading liability incurred by the taxpayers

• Recovery of trading liability by successor which was allowed to the predecessor shall be chargeable to tax in the hands of successor. Succession could be due to amalgamation or demerger or succession of a firm succeeded by another firm or company, etc.

• Any liability which is unilaterally written off by the taxpayer from the books of accounts shall be deemed as remission or cessation of such liability and shall be chargeable to tax.

16.

41(2)

Depreciable asset in case of power generating units, is sold, discarded, demolished or destroyed, the amount by which sale consideration and/ or insurance compensation together with scrap value exceeds its WDV shall be chargeable to tax.

17.

41(3)

Where any capital asset used in scientific research is sold without having been used for other purposes and the sale proceeds together with the amount of deduction allowed under section 35 exceed the amount of the capital expenditure, such surplus or the amount of deduction allowed, whichever is less, is chargeable to tax as business income in the year in which the sale took place.

18.

41(4)

Where bad debts have been allowed as deduction under Section 36(1)(vii) in earlier years, any recovery of same shall be chargeable to tax.

19.

41(4A)

Amount withdrawn from special reserves created and maintained under Section 36(1)(viii) shall be chargeable as income in the previous year in which the amount is withdrawn.

20.

41(5)

Loss of a discontinued business or profession could be adjusted from the deemed business income as referred to in section 41(1), 41(3), (4) or (4A) without any time limit.

21.

43CA

Where consideration for transfer of land or building or both as stock-in-trade is less than the stamp duty value, the value so adopted shall be deemed to be the full value of consideration for the purpose of computing income under this head.

However, no such adjustment is required to be made if value adopted for stamp duty purposes does not exceed 110% of the sale consideration.
Note:
To boost the demand in the real-estate sector and to enable the real-estate developers to sell their unsold inventory at a lower rate, the safe harbour limit is increased from existing 10% to 20% in case of transfer of residential property during the period from 12-11-2020 to 30-06-2021 by way of the first-time allotment to any person. Further, the consideration received or accruing as a result of such transfer should not exceed Rs. 2 crores.

The profits and gains arising from construction contract or a contract for providing service is to be determined on the basis of percentage completion method, in accordance with the notified ICDS.

In case of contract for providing services with duration of not more than 90 days, the profits and gains shall be determined on basis of project completion method.

While as in case of contract for providing services with indeterminate number of acts over a specified period of time shall be determined on basis of straight line method.

22.

43D

As per RBI Guidelines, Interest on bad and doubtful debts of Public Financial Institution or Scheduled Bank or [a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank] or State Financial Corporation or State Industrial Investment Corporation, shall be chargeable to tax in the year in which it is credited to Profit and Loss A/c or year in which it is actually received, whichever happens earlier.
With effect from Assessment Year 2020-21, the Finance (No. 2) Act, 2019 has covered ‘Deposit Taking NBFCs’ and ‘Systemically Important Non-deposit Taking NBFCs’ in the ambit of 43D. Hence, such NBFCs shall be able to recognize interest on bad and doubtful debts in the year in which it is credited to Profit and Loss A/c or year in which it is actually received, whichever happens earlier.
Deposit Taking NBFC’ means a NBFC which is accepting or holding public deposits and is registered with the RBI.
‘Systemically Important Non-deposit Taking NBFC’ means a NBFC which is not accepting or holding public deposits and having total assets of not less than Rs. 500 crore as per the last audited balance sheet and is registered with the RBI.

23.

43D

Similarly as per NHB Guidelines, Interest on bad and doubtful debts of housing finance company, shall be chargeable to tax, in the year it is credited to P & L A/c or year in which it is actually received by them, whichever is earlier.

Assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Govt. or State Govt. or any authority or body or agency to the assessee would be included in definition of income as referred to in Section 2(24). However, in the following cases subsidy or grant shall not be treated as income:

 i)  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;

 ii)  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 a State Government, as the case may be.

Section

Nature of expenditure

Quantum of deduction

Assessee

30

Rent, rates, taxes, repairs (excluding capital expenditure) and insurance for premises

Actual expenditure incurred excluding capital expenditure

All assessee

31

Repairs (excluding capital expenditure) and insurance of machinery, plant and furniture

Actual expenditure incurred excluding capital expenditure

All assessee

32(1)(i)

Depreciation on

i) buildings, machinery, plant or furniture, being tangible assets;

ii) know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession, being intangible assets

Allowed at prescribed percentage on Straight Line Method for each asset

Provided that where an asset is acquired by the assessee during the previous year and is put to use for a period of less than one hundred and eighty days in that previous year, the deduction in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset.

Assessees engaged in business of generation or generation and distribution of power

Note:

Taxpayers engaged in the business of generation or generation and distribution of power shall have the option to claim depreciation either on basis of straight line basis method or written down value method on each block of asset.

Depreciation on

i) buildings, machinery, plant or furniture, being tangible assets;

ii) know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession, being intangible assets

Allowed at prescribed percentage on WDV method for each block of asset

Provided that where an asset is acquired by the assessee during the previous year and is put to use for a period of less than one hundred and eighty days in that previous year, the deduction in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset.

Additional depreciation on new plant and machinery (other than ships, aircraft, office appliances, second hand plant or machinery, etc.).

(subject to certain conditions)

Additional depreciation shall be available @20 % of the actual cost of new plant and machinery.

Provided that where an asset is acquired by the assessee during the previous year and is put to use for a period of less than one hundred and eighty days in that previous year, then deduction of additional depreciation would be restricted to 50% in the year of acquisition and balance 50% would be allowed in the next year

All assessee engaged in

- manufacture or production of any article or thing; or

- generation, transmission or distribution of power (if taxpayer is not claiming depreciation on basis of straight line method)

Additional depreciation on new plant and machinery (other than ships, aircraft,office appliances, second hand plant or machinery, etc.))

(Subject to certain conditions)

Additional depreciation shall be available @35 % of the actual cost of new plant and machinery.

Provided that where an asset is acquired by the assessee during the previous year and is put to use for a period of less than one hundred and eighty days in that previous year, then deduction of additional depreciation would be restricted to 50% of actual cost in the year of acquisition and balance 50% would be allowed in the next year

Note:

1. Manufacturing unit should be set-up on or after 1st day of April, 2015.

2. New plant and machinery acquired and installed during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020

32AC

Deduction under section 32AC is available if actual cost of new plant and machinery acquired and installed by a manufacturing company during the previous year exceeds Rs. 25/100 Crores, as the case may be.(Subject to certain conditions)

15% of actual cost of new asset

Company engaged in business or manufacturing or production of any article or thing

Investment allowance shall be available @15 % of the actual cost of new plant and machinery in the year of installation of new asset.

Note:-

1) New asset should be acquired and installed during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020.

2) Manufacturing unit should be set-up on or after 1st day of April, 2015.

3) Deduction shall be allowed under Section 32AD in addition to deduction available under Section 32AC if assessee fulfils the specified conditions

33AB

Amount deposited in Tea/Coffee/Rubber Development Account by assessee engaged in business of growing and manufacturing tea/Coffee/Rubber in India

Deduction shall be lower of following:

a) Amount deposited in account with National Bank for Agricultural and Rural Development (NABARD) or in Deposit Account of Tea Board, Coffee Board or Rubber Board in accordance with approved scheme; or

b) 40% of profits from such business before making any deduction under section 33AB and before adjusting any brought forward loss.

(Subject to certain conditions)

All assessee engaged in business of growing and manufacturing tea/Coffee/Rubber

33ABA

Amount deposited in Special Account with SBI/Site Restoration Account by assessee carrying on business of prospecting for, or extraction or production of, petroleum or natural gas or both in India

Deduction shall be lower of following:

a) Amount deposited in Special Account with SBI/Site Restoration Account; or

b) 20% of profits from such business before making any deduction under section 33ABA and before adjusting any brought forward loss.

(Subject to certain conditions)

All assessee engaged in business of prospecting for, or extraction or production of, petroleum or natural gas or both in India

35(1)(i)

Revenue expenditure on scientific research pertaining to business of assessee is allowed as deduction (Subject to certain conditions).

Entire amount incurred on scientific research is allowed as deduction.

Expenditure on scientific research within 3 years before commencement of business (in the nature of purchase of materials and salary of employees other than perquisite) is allowed as deduction in the year of commencement of business to the extent certified by prescribed authority.

All assessee

35(1)(ii)

Contribution to approved research association, university, college or other institution to be used for scientific research shall be allowed as deduction (Subject to certain conditions)

100% of sum paid to such association, university, college, or other institution is allowed as deduction.

All assessee

35(1)(iia)

Contribution to an approved company registered in India to be used for the purpose of scientific research is allowed as deduction (Subject to certain conditions)

100% of  sum paid to the company is allowed as deduction

All assessee

35(1)(iii)

Contribution to approved research association, university, college or other institution with objects of undertaking statistical research or research in social sciences shall be allowed as deduction (Subject to certain conditions)

100% of sum paid to such association, university, college, or other institution is allowed as deduction

All assessee

35(1)(iv) read with 35(2)

Capital expenditure incurred during the year on scientific research relating to the business carried on by the assessee is allowed as deduction (Subject to certain conditions)

Entire capital expenditure incurred on scientific research is allowed as deduction.

Capital expenditure incurred within 3 years before commencement of business is allowed as deduction in the year of commencement of business.

Note:

i. Capital expenditure excludes land and any interest in land;

ii. No depreciation shall be allowed on such assets.

All assessee

35(2AA)

Payment to a National Laboratory or University or an Indian Institute of Technology or a specified person is allowed as deduction.

The payment should be made with the specified direction that the sum shall be used in a scientific research undertaken under an approved programme.

100% of payment is allowed as deduction (Subject to certain conditions).

All assessee

35(2AB)

Any expenditure incurred by a company on scientific research (including capital expenditure other than on land and building) on in-house scientific research and development facilities as approved by the prescribed authorities shall be allowed as deduction (Subject to certain conditions).

Expenditure on scientific research in relation to Drug and Pharmaceuticals shall include expenses incurred on clinical trials, obtaining approvals from authorities and for filing an application for patent.

100% of expenditure so incurred shall be allowed as deduction.

Note:

i. Company should enter into an agreement with the prescribed authority for co-operation in such research and development and fulfils conditions with regard to maintenance of accounts and audit thereof and furnishing of reports in such manner as may be prescribed.

Company engaged in business of bio-technology or in any business of manufacturing or production of eligible articles or things

Deduction will be available in equal installments starting from the year in which actual payment is made and ending in the year in which spectrum comes to an end.

Note:

If spectrum fee is actually paid before the commencement of business, the deduction will be available from the year in which business is commenced.

35ABB

Capital expenditure incurred for acquiring any license or right to operate telecommunication services shall be allowed as deduction over the term of the license.

Deduction would be allowed in equal installments starting from the year in which such payment has been made and ending in the year in which license comes to an end.

All assessee engaged in telecommunication services

35AC

Expenditure by way of payment of any sum to a public sector company/local authority/approved association or institution for carrying out any eligible scheme or project (Subject to certain conditions).

Actual payment made to prescribed entities. However, a company can also claim deduction for expenditure incurred by it directly on eligible projects.

Note:-

No deduction in any A.Y. commencing on or after the 1st day of April, 2018

All assessee. However, deduction for direct expenditure is allowed only to a company

35AD

Deduction in respect of `expenditure on specified businesses, as under:

a) Setting up and operating a cold chain facility

b) Setting up and operating a warehousing facility for storage of agricultural produce

c) Building and operating, anywhere in India, a hospital with at least 100 beds for patients

d) Developing and building a housing project under a notified scheme for affordable housing

e) Production of fertilizer in India

(Subject to certain conditions)

150% of capital expenditure incurred for the purpose of business is allowed as deduction provided the specified business has commenced its operation on or after 01-04-2012.

100% of capital expenditure will be allowed to be deducted from the assessment year 2018-19 onwards

Note: If such specified businesses commence operations on or before 31-03-2012 but after prescribed dates, deduction shall be limited to 100% of capital expenditure.

Note: No deduction of any capital expenditure above Rs 10,000 shall be allowed if it is incurred in cash.

All assessee

35AD

Deduction in respect of expenditure on specified businesses, as under:

a) Laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network;

b) Building and operating, anywhere in India, a hotel of two-star or above category;

c) Developing and building a housing project under a scheme for slum redevelopment or rehabilitation

d) Setting up and operating an inland container depot or a container freight station

e) Bee-keeping and production of honey and beeswax

f) Setting up and operating a warehousing facility for storage of sugar

g) Laying and operating a slurry pipeline for the transportation of iron ore

h) Setting up and operating a semi-conductor wafer fabrication manufacturing unit

 i)  Developing or maintaining and operating, or developing, maintaining and operating a new infrastructure facility

(Subject to certain conditions)

100% of capital expenditure incurred for the purpose of business is allowed as deduction provided specified businesses commence operations on or after the prescribed dates.

Note: No deduction of any capital expenditure above Rs 10,000 shall be allowed if the payment for such expenditure is made otherwise than by an account payee cheque/draft or ECS or through prescribed electronic mode of payment.

All assessee

Note: Such deduction is available to Indian company in case of following business, namely;-

 i) Business of laying and operating a cross-country natural gas or crude or petroleum oil pipeline network

ii)  Developing or maintaining and operating or developing, maintaining and operating a new infrastructure facility.

35CCA

Payment to following Funds are allowed as deduction:

a) National Fund for Rural Development; and

b) Notified National Urban Poverty Eradication Fund

Actual payment to specified funds

All assessee

35CCC

Expenditure (not being cost of land/building) incurred on notified agricultural extension project for the purpose of training, educating and guiding the farmers shall be allowed as deduction, provided the expenditure to be incurred is expected to be more than Rs. 25 lakhs (Subject to certain conditions).

100% of the expenditure (Subject to certain conditions)

All assessee

35CCD

Expenditure incurred by a company (not being expenditure in the nature of cost of any land or building) on any notified skill development project is allowed as deduction (Subject to certain conditions).

100% of the expenditure (Subject to certain conditions)

Note:

 (i) No deduction shall be allowed to a company engaged in manufacturing alcoholic spirits or tobacco products.

Company engaged in manufacturing of any article or providing specified services

35D

An Indian company can amortize certain preliminary expenses (up to maximum of 5% of cost of the project or capital employed, whichever is more) (Subject to certain conditions and nature of expenditures)

Qualifying preliminary expenditure is allowable in each of 5 successive years beginning with the previous year in which the extension of undertaking is completed or the new unit commences production or operation.

Indian Company

35D

Non-corporate taxpayers can amortize certain preliminary expenses (up to maximum of 5% of cost of the project) (Subject to certain conditions and nature of expenditures)

Qualifying preliminary expenditure is allowable in each of 5 successive years beginning with the previous year in which the extension of undertaking is completed or the new unit commences production or operation.

Resident Non-corporate assessees

35DD

Expenditure incurred after 31-3-1999 in respect of amalgamation or demerger can be amortized by an Indian Company

Expenditure is allowed as deduction in five equal installments in 5 previous years starting with the year in which amalgamation or demerger took place.

Indian Company

35DDA

Expenditure incurred under Voluntary Retirement Scheme is allowed as deduction.

Each payment under VRS is allowed as deduction in five equal installments in 5 previous years.

All assessee

35E

Qualifying expenditure incurred by resident persons on prospecting for the minerals or on the development of mine or other natural deposit of such minerals shall be allowed as deduction (Subject to certain conditions).

Eligible expenditure is allowed as deduction in ten equal installments in 10 previous years.

Resident persons

36(1)(i)

Insurance premium covering risk of damage or destruction of stocks/stores

Actual expenditure incurred

All assessee

36(1)(ia)

Insurance premium covering life of cattle owned by a member of co-operative society engaged in supplying milk to federal milk co-operative society

Actual expenditure incurred

All assessee

36(1)(ib)

Medical insurance premium paid by any mode other than cash, to insure employee’s health under (a) scheme framed by GIC of India and approved by Central Government; or (b) scheme framed by any other insurer and approved by IRDA

Actual expenditure incurred

All assessee

36(1)(ii)

Bonus or commission paid to employees which would not have been payable as profit or dividend if it had not been paid as bonus or commission

Actual expenditure incurred

All assessee

36(1)(iii)

Interest on borrowed capital (Subject to certain conditions)

Interest paid in respect of capital borrowed for the purposes of the business or profession shall be allowed as deduction. However, if capital is borrowed for acquiring an asset, then interest for any period beginning from the date on which capital was borrowed till the date on which asset was first put to use, shall not be allowed as deduction.

All assessee

36(1)(iiia)

Discount on Zero Coupon Bonds (Subject to certain conditions)

Pro-rata amount of discount on zero coupon bonds shall be allowed as deduction over the life of such bond

Specified Assessee

36(1)(iv)

Employer’s contributions to recognized provident fund and approved superannuation fund [subject to certain limits and conditions]

Actual expenditure incurred

All assessee

36(1)(iva)

Any sum paid by assessee-employer by way of contribution towards a pension scheme, as referred to in section 80CCD, on account of an employee.

Actual expenditure not exceeding 10% of the salary* of the employee

*Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits)+ turnover based commission

All assessee - Employer

36(1)(v)

Employer’s contribution towards approved gratuity fund created exclusively for the benefit of employees under an irrevocable trust shall be allowed as deduction (Subject to certain conditions).

Actual expenditure not exceeding 8.33% of salary of each employee

All assessee - Employer

36(1)(va)

Deposit of employee’s contributions in their respective provident fund or superannuation fund or any fund set up under Employees’ State Insurance Act, 1948

Actual amount received if credited to the employee’s account in relevant fund on or before due date specified under relevant Act

All assessee - Employer

36(1)(vi)

Allowance in respect of animals which have died or become permanently useless (Subject to certain conditions)

Actual cost of acquisition of such animals less realization on sale of carcasses of animals

All assessee

36(1)(vii)

Bad debts which have been written off as irrecoverable (Subject to certain conditions)

Actual bad debts which have been written off from books of accounts

Note:-

However, if amount of debt or part thereof has been taken into account in computing the income of assessee on basis of income computation and disclosure standards notified under Section 145(2) without recording the same in accounts then, such debt shall be allowed in the previous year in which such debt or part thereof becomes irrecoverable. It shall be deemed that such debt or part thereof has been written off as irrecoverable in the accounts.

All assessee

36(1)(viia)

Deductions for provision for bad and doubtful debts created by certain banks, financial institutions and non-banking financial company (Subject to certain conditions).

Note

Deduction in respect of bad debts actually written off under section 36(1)(vii) shall be limited to that amount of bad debts which exceed the provision for bad and doubtful debts created under section 36(1)(viia).

Deductions for provision for bad and doubtful debts shall be limited to following:

(a) In case of scheduled and non-scheduled banks: Sum not exceeding aggregate of 8.5% of total income (before any deductions under this provision and Chapter VI-A) and 10% of aggregate average advances made by rural branches of such bank;

(b) In case of Financial Institutions: Up to 5% of total income before any deductions under this provision and Chapter VI-A; and

(c) In case of foreign banks: Up to 5% of total income before any deductions under this provision and Chapter VI-A

(d) In case of non-banking financial company: Up to 5% of total income before any deduction under this provision and chapter VI-A

36(1)(viii)

Deduction under this provisions is allowed to following entities in respect of amount transferred to special reserve account:

a) Financial Corporation which is engaged in providing long-term finance for industrial or agricultural development or development of infrastructure facility in India; or

b) Public company registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of residential houses in India.

[Subject to certain conditions]

Deduction shall be allowed to the extent of lower of following:

a) Amounts transferred to special reserve account

b) 20% of profits derived from eligible business

c) 200% of paid-up capital and general reserve (on last day of previous year) minus balance in special reserve account (on first day of previous year)

Specified financial corporations or public company

36(1)(ix)

Expenditure incurred by a company on promotion of family planning amongst employees is allowed as deduction

1) Entire revenue expenditure is allowed as deduction

2) Capital expenditure shall be allowed as deduction in five equal installment in five years

Company

36(1)(xii)

Any expenditure incurred by a notified corporation or body corporate constituted or established by a Central, State or Provincial Act, for the objects and purposes authorized by the respective Act is allowed as deduction

Actual expenditure incurred (not being in the nature of capital expenditure)

Notified corporations

36(1)(xiv)

Contribution to Credit Guarantee Trust Fund for micro and small industries is allowed as deduction

Actual expenditure incurred

Public Financial Institutions

36(1)(xv)

Securities Transaction Tax paid

Actual expenditure incurred if corresponding income is included as income under the head profits and gains of business or profession

All assessee

36(1)(xvi)

Amount equal to commodities transaction tax paid by an assessee in respect of taxable commodities transactions entered into in the course of his business during the previous year is allowed as deduction

Actual expenditure incurred if corresponding income is included as income under the head profits and gains of business or profession

All assessee

Deduction would be allowed the extent of lower of following:

a) Actual purchase price of sugarcane, or

b) Price of sugarcane fixed or approved by the Government

37(1)

Any other expenditure [not being personal or capital expenditure and expenditure mentioned in sections 30 to 36] laid out wholly and exclusively for purposes of business or profession

Note: With effect from assessment year 2022-23, a new Explanation 3 has been inserted in section 37(1) to clarify that expenditure incurred to provide perquisite, in whatever form to any person, irrespective of whether the recipient is engaged in any business or profession, where the acceptance of such benefit or perquisite is a violation of any rule, law or regulation, which governs the recipient, shall be deemed to have not been incurred for business or profession and accordingly, the deduction for the same shall not be available. Furthermore, the expenditure, whether constituting an offence as per the prevailing laws in India or outside India, or prohibited by any law in force – whether in India or outside India, shall not be eligible for deduction under section 37(1).

Actual expenditure incurred

All assessee

37(2B)

Expenditure on advertisement in any souvenir, brochure etc. published by a political party shall not be allowed as deduction

Not Allowed

All assessee

Section

Description

40(a)(i)

Any sum (other than salary) payable outside India or to a non-resident, which is chargeable to tax in India in the hands of the recipient, shall not be allowed to be deducted if it was paid without deduction of tax at source or if tax was deducted but not deposited with the Central Government till the due date of filing of return.
Where deductor has failed to deduct the tax and he is not deemed to be an assessee in default under first proviso to section 201(1), then it shall be deemed that the deductor has deducted and paid the tax on the date on which the payee has furnished his return of Income.

However, if tax is deducted or deposited in subsequent year, as the case may be, the expenditure shall be allowed as deduction in that year.

40(a)(ia)

Any sum payable to a resident, which is subject to deduction of tax at source, would attract 30% disallowance if it was paid without deduction of tax at source or if tax was deducted but not deposited with the Central Government till the due date of filing of return.

However, where in respect of any such sum, tax is deducted or deposited in subsequent year, as the case may be, the expenditure so disallowed shall be allowed as deduction in that year.
Where deductor has failed to deduct the tax and he is not deemed to be an assessee in default under first proviso to section 201(1), then it shall be deemed that the deductor has deducted and paid the tax on the date on which the payee has furnished his return of Income.

Any sum paid or payable to a non-resident which is subject to a deduction of Equalisation levy would attract disallowance if such sum was paid without deduction of such levy or if it was deducted but not deposited with the Central Government till the due date of filing of return.

However, where in respect of any such sum, Equalisation levy is deducted or deposited in subsequent year, as the case may be, the expenditure so disallowed shall be allowed as deduction in that year.

Note: This provision has been inserted by the Finance Act, 2016, w.e.f. 1-6-2016

40(a)(ii)

Any sum paid on account of any rate or tax levied on the profits and gains of business or profession is not deductible

Note: Tax shall include ‘surcharge or cess’.

40(a)(iia)

Wealth-tax or any other tax of similar nature shall not be deductible

40(a)(iib)

Amount paid by way of royalty, license fee, service fee, privilege fee, service charge or any other fee or charge, by whatever name called, which is levied exclusively on (or any amount appropriated) a State Government undertaking by the State Government shall not be deductible.

40(a)(iii)

Salaries payable outside India, or in India to a non-resident, on which tax has not been paid/deducted at source is not deductible.

40(a)(iv)

Payments to provident fund or other funds for employees’ benefit shall not be deductible if no effective arrangements have been made to ensure deduction of at source from payments made from such funds to employees which shall be chargeable to tax as ‘salaries’.

40(a)(v)

Tax paid by the employer on non-monetary perquisites provided to employees is not deductible if the tax so paid is not taxable in the hands of employees by virtue of Section 10(10CC).

40(b)

Following sum paid by a partnership firm to its partners shall not be allowed to be deducted:

1) Salary, bonus, commission or remuneration paid to non-working partners;

2) Remuneration or interest paid to the partners is not in accordance with the terms of the partnership deed;

3) Remuneration or interest to partners is in accordance with the terms of the partnership deed but relates to any period prior to the date of the deed;

4) Interest to partners is in accordance with the terms of the partnership deed but exceeds 12% per annum;

5) Remuneration to partners is in accordance with the terms of the partnership deed but exceeds the following permissible limit:

a) On first Rs. 3 Lakhs of book profit or in case of loss - Rs. 1,50,000 or 90% of book profit, whichever is more;

b) On the balance of the book profit - 60% of book profit

40(ba)

Interest, salary, bonus, commission or remuneration paid by Association of Persons or Body of Individuals to its members shall not be allowed as deduction (Subject to certain conditions).

40A(2)

Any payment to related parties (relatives, directors, partner, member of HUF/AOP, person who has substantial interest in business of the taxpayer, etc.) in respect of any expenditure shall be disallowed to the extent such expenditure is considered excessive or unreasonable by the Assessing Officer having regard to its fair market value.

40A(3)/(3A)

An expenditure, which is otherwise deductible under any provision of the Act, shall be disallowed if payment thereof has been made otherwise than by account payee cheque/bank draft or use of electronic clearing system through a bank account or through other prescribed electronic mode of payment and it exceeds Rs. 10,000 (Rs. 35,000 in case of payment made for plying, hiring or leasing goods carriages) in a day (Subject to certain conditions and exceptions).

40A(7)

Provision for payment of gratuity to employees, other than a provision for contribution to approved gratuity fund, shall not be allowed as deduction (Subject to specified conditions).

Gratuity actually paid (or payable) during the year and contribution to approved gratuity fund is allowed as deduction.

40A(9)

Any sum paid as an employer for setting up or as contribution to any fund, trust, company, AOP, BOI, Society or other institution (other than recognized provident fund, approved superannuation fund, approved gratuity fund or pension scheme referred to in section 80CCD) shall not be allowed as deduction if such contribution or payment is not required by any law.

Section

Particulars

Provision

42

Special allowance in case of business of prospecting etc. for mineral oil (including petroleum and natural gas) in relation to which the Central Government has entered into an agreement with the taxpayer for the association or participation (Subject to certain conditions).

Following deductions shall be allowed as deductions:

a) Any infructuous exploration expenditure

b) Expenditure on drilling or exploration activities or services, etc.

c) Allowance in relation to depletion of mineral oil, etc.

43A

Special provisions consequential to changes in rate of exchange of Currency (Subject to certain conditions).

Any increase or decrease in the liability incurred in foreign currency (to acquire a capital asset) pursuant to fluctuation in the foreign exchange rates shall be adjusted with the actual cost of such asset only on actual payment of the liability.

43C

Acquisition of any asset (except stock-in-trade) by the taxpayer in the scheme of amalgamation or by way of gift, will etc.

Cost of acquisition of any asset (except stock-in-trade) acquired by the taxpayer in the scheme of amalgamation or by way of gift, will etc. from the transferor (who sold it as stock-in-trade) shall be the cost of acquisition in the hands of transferor as increased by cost of any improvement made

Section

Particulars

Limit of exemption or Computation of income/deduction

Available to

44B read with 172

Income from shipping business shall be computed on presumptive basis (Subject to certain conditions).

7.5% of specified sum shall be deemed to be the presumptive income

Non-resident engaged in shipping business

44BB

Income of a non-resident engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils shall be computed on presumptive basis (Subject to certain conditions).

10% of specified sum shall be deemed to be the presumptive income

Non-resident engaged in activities connected with exploration of mineral oils

44BBA

Income of a non-resident engaged in the business of operation of aircraft shall be computed on presumptive basis (Subject to certain conditions).

5% of specified sum shall be deemed to be the presumptive income

Non-resident engaged in the business of operating of aircraft

44BBB

Income of a foreign company engaged in the business of civil construction or the business of erection of plant or machinery or testing or commissioning thereof, in connection with turnkey power projects shall be computed on presumptive basis (Subject to certain conditions).

10% of specified sum shall be deemed to be the presumptive income

Foreign Company

44C

Deduction for Head office Expenditure (Subject to certain conditions and limits)

Deduction for head-office expenditure shall be limited to lower of following:

a) 5% of adjusted total income*

b) Head office exp. as attributable to business or profession of taxpayer in India

* In case adjusted total income of the assessee is a loss, adjusted total income shall be substituted by average adjusted total income

** Adjusted total income or average adjusted total income shall be computed after prescribed adjustments i.e. unabsorbed depreciations, carry forward losses, etc.

Non-resident

44DA

Deduction of expenditure from royalty and FTS received under an agreement made after 31-03-2003 which is effectively connected to the PE of non-resident in India (Subject to certain conditions)

Expenditure incurred wholly and exclusively for the business of PE or fixed place of profession in India shall be allowed as deduction.

Non-resident

Section

Particulars

Threshold

44AA

Compulsory maintenance of prescribed books of account - Specified Profession

(Subject to certain conditions and circumstances)

Persons carrying on specified profession and their gross receipts exceed Rs. 1,50,000 in all the three years immediately preceding the previous year

44AA

Compulsory maintenance of books of account - Other business or profession

(Subject to certain conditions and circumstances)

1) If total sales, turnover or gross receipts exceeds Rs. 25,00,000 in any one of the three years immediately preceding the previous year; or

2) If income from business or profession exceeds Rs. 2,50,000 in any one of the three years immediately preceding the previous year

44AB

Compulsory Audit of books of accounts (Subject to certain conditions and circumstances)

1) If total sales, turnover or gross receipts exceeds Rs. 2 Crore in any previous year, in case of business; or

Note:

a) Provided that this section is not applicable to the person, who opts for presumptive taxation Scheme under Section 44AD and his total sales or turnover does not exceed Rs 2 crores.

b) Threshold limit of Rs. 1 crore shall be increased to Rs. 10 crore in case where the cash receipt and payment made during the year does not exceed 5% of total receipt or payment the business

2) If gross receipts exceeds Rs. 50 Lakhs in any previous year, in case of profession.

Section

Nature of business

Presumptive income

44AD

Income from eligible business can be computed on presumptive basis if turnover of such business does not exceed two crore rupees.

Note: If an assessee opts out of the presumptive taxation scheme, after a specified period, he cannot choose to revert back to the presumptive taxation scheme for a period of five assessment years thereafter. [section 44AD(4)]

(Subject to conditions)

Presumptive income of eligible business shall be 8% of gross receipt or total turnover.

Note: Presumptive income shall be calculated at rate of 6% in respect of total turnover or gross receipts which is received by an account payee cheque or draft or use of electronic clearing system or through any other electronic mode as may be prescribed.

Income from eligible profession u/s 44AA(1) can be computed on presumptive basis if the total gross receipts from such profession do not exceed fifty lakh rupees in a previous year.

(Subject to conditions)

44AE

Presumptive income from business of plying, hiring or leasing of goods carriage if assessee does not own more than 10 goods carriage.

For Heavy Goods Vehicle:

Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during which the heavy goods vehicle is owned by assessee.

For Other Goods Vehicle:

Rs. 7,500 for every month or part of a month during which the goods carriage is owned by assessee.

Note: 'Heavy goods vehicle' means goods carriage vehicle the gross vehicle weight of which exceeds 12,000 kilograms.

 1)  Date of purchase (through stock exchanges) of shares and Securities

 2)  Date of transfer (through stock exchanges) of shares and securities

3)  Date of purchase/transfer of shares and securities (transaction taken place directly between parties and not through stock exchanges)

 4)  Date of purchase/sale of shares and securities purchased in several lots at different points of time but delivery taken subsequently and sold in parts

 5)  Transfer of a security by a depository (i.e., demat account)

 a)  Date of purchase by broker on behalf of investor.

 b)  Date of broker's note provided such transactions are followed up by delivery of shares and also the transfer deeds.

 c)  Date of contract of sale as declared by parties provided it is followed up by actual delivery of shares and the transfer deeds.

 d)  The FIFO method shall be adopted to reckon the period of the holding of the security, in cases where the dates of purchase and sale cannot be correlated through specific number of scrips.

 e)  The period of holding shall be determined on the basis of the first-in-first-out method.

Conversion of stock-in-trade into capital asset

The period of holding of such converted asset shall be reckoned from the date of conversion.

Section

Particulars

46(1)

Distribution of asset in kind by a company to its shareholders at the time of liquidation

47(i)

Distribution of capital asset on total or partial partition of HUF

47(iii)

Transfer of capital asset under a gift or will or an irrevocable trust

47(iv)

Transfer of capital asset by a company to its wholly owned subsidiary company

47(v)

Transfer of a capital asset by a wholly owned subsidiary company to its holding company

47(vi)

Transfer of capital assets in a scheme of amalgamation

47(via)

Transfer of shares in an Indian company held by a foreign company to another foreign company under a scheme of amalgamation of the two foreign companies

47(viaa)

Transfer of capital assets in a scheme of amalgamation of a banking company with a banking institution

47(vib)

Transfer of capital assets by the demerged company to the resulting company in a demerger

47(vic)

Transfer of shares held in an Indian company by a demerged foreign company to the resulting foreign company

47(vica)

Any transfer of a capital asset by the predecessor co-operative bank to the successor co-operative bank in a business reorganization.

47(vicb)

Any transfer of capital asset (being shares) held by a shareholder in the predecessor co-operative bank if the transfer is made in consideration of the allotment to him of any shares in the successor co-operative bank in a scheme of business reorganization

47(vid)

Transfer or issue of shares by the resulting company to the shareholders of the demerged company in a scheme of demerger

47(vii)

Allotment of shares in amalgamated company in lieu of shares held in amalgamating company

47(viia)

Transfer of capital assets (being foreign currency convertible bonds or GDR) by a non-resident to another non-resident

Any transfer of following capital assets by a non-resident on a recognised stock exchange located in any International Financial Services Centre:

 a)  Bond or GDR

 b)  Rupee Denominated Bond of an Indian Co.

 c)  Derivative

 d)  Such other Securities as may be prescribed.

47(viiac)

Any transfer of a capital asset by original fund to the resulting fund in a relocation.

47(viiad)

Transfer of capital asset (being share, unit, interest), by a shareholder or unit holder or interest holder, held by him, in original fund in consideration for share or unit or interest in the resultant fund in a relocation.

47(viiae)

Transfer of capital asset by India Infrastructure Finance Company to an institution established for financing the infrastructure and development.

47(viiaf)

Transfer of capital asset, under a plan approved by the Central Government, by a public sector company to another public sector company

47(viib)

Transfer of capital assets (being a Government security carrying periodic payment of interest) outside India through an intermediary dealing in settlement of securities by a non-resident to another non- resident

47(ix)

Transfer of a capital asset (being work of art, manuscript, painting, etc.) to Government, University, National museum, etc.

47(x)

Transfer by way of conversion of bonds or debentures into shares

47(xa)

Transfer by way of conversion of bonds [as referred to in section 115AC(1)(a)] into shares or debentures of any company

47(xi)

Transfer by way of exchange of a capital asset being membership of a recognized stock exchange for shares of a company

47(xii)

Transfer of land by a sick industrial company which is managed by its workers’ co-operative

47(xiii)

Transfer of a capital asset by a firm to a company in the case of conversion of firm into company

47(xiiia)

Transfer of a capital asset being a membership right held by a member of a recognized stock exchange in India

47(xiiib)

Transfer of a capital asset by a private company or unlisted public company to an LLP, or any transfer of shares held in the company by a shareholder, in the case of conversion of company into LLP

47(xiv)

Transfer of a capital asset to a company in the case of conversion of proprietary concern into a company

47(xv)

Transfer involved in a scheme of lending of securities

47(xvi)

Transfer of a capital asset in a transaction of reverse mortgage made under a scheme notified by the Government

47(xvii)

Transfer of a capital asset (being share of a special purpose vehicle) to a business trust in exchange of units allotted by that trust to the transferor

Short-term capital assets

[Section 48]

Long-term capital assets

[Section 48]

Depreciable asset

[Section 50]*

Full value of consideration

Less: Cost of acquisition of asset

Less: Cost of improvement

Less: Expenditure incurred wholly and exclusively in connection with such transfer

Full value of consideration

Less: Indexed Cost of acquisition (See Note 1)

Less: Indexed Cost of Improvement (See Note 1)

Less: Expenditure incurred wholly and exclusively in connection with such transfer

WDV of block of asset at the beginning of previous year

Add: Actual cost of assets falling within that block acquired during the year

Less: Full value of consideration of assets transferred during the year

Less: Expenditure incurred wholly and exclusively in connection with such transfer

Section

Capital Asset

Transferor

Fourth proviso to section 48

Bonds or debentures.

Note: However, indexation benefit is available on two type of bonds, namely,-

  •  Capital indexed bonds (issued by the Government)

  •  Sovereign Gold Bond (issued by the RBI under the Sovereign Gold Bond Scheme, 2015)

Any person

112

Capital gains arising from transfer of unlisted shares (which is taxable at concessional rate of 10%) as calculated without giving effect to first proviso to Section 48

Non-resident

For Heavy Goods Vehicle:

Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during which the heavy goods vehicle is owned by assessee.

For Other Goods Vehicle:

Rs. 7,500 for every month or part of a month during which the goods carriage is owned by assessee.

50A

Depreciable asset (other than an asset used by a power generating unit eligible for depreciation on straight line basis)

Any person

50B

Undertaking/division transferred by way of slump sale as covered by section 50B

Any person

115AB

Units purchased in foreign currency as given in section 115AB

Offshore fund

115AC

Global depository receipts (GDR) purchased in foreign currency as given in section 115AC

Non-resident

115ACA

Global depository receipts (GDR) purchased in foreign currency as given in section 115ACA

Resident individual - employee

115AD

Securities as given in section 115AD

Foreign Institutional

Investors

S. No.

Nature of transaction

Section

Full Value of Consideration

1.

Money or other asset received under any insurance from an insurer due to damage or destruction of a capital asset

45(1A)

Value of money or the FMV of the asset (on the date of receipt)

2.

Conversion of capital asset into stock-in-trade

45(2)

FMV of the capital asset on the date of conversion

3.

Transfer of capital asset by a partner or member to firm or AOP/BOI, as the case may be, as his capital contribution

45(3)

Amount recorded in the books of accounts of the firm or AOP/BOI as the value of the capital asset received as capital contribution

4.

Distribution of capital asset by Firm or AOP/BOI to its partners or members, as the case may be, on its dissolution

45(4)

FMV of such asset on the date of transfer

5.

Money or other assets received by share- holders at the time of liquidation of the company

46(2)

Total money plus FMV of assets received on the date of distribution less amount assessed as deemed dividend under section 2(22)(c)

6.

Buy-back of shares and other specified securities by a company

46A

Consideration paid by company on buyback of shares or other securities would be deemed as full value of consideration. The difference between the cost of acquisition and buy-back price (full value of consideration) would be taxed as capital gain in the hands of the shareholder.

However, in case of buy-back of shares by a domestic company (whether listed* or unlisted), the company shall be liable to pay additional tax at the rate of 20% under section 115QA on the distributed income (i.e., buy-back price as reduced by the amount received by the company for issue of such shares). Consequently, capital gain arising in hands of shareholder shall be exempt by virtue of section 10(34A) in such cases.
*With effect from 05/07/2019, section 115QA has been amended to levy additional tax on buy back of shares by listed companies as well. Consequently, section 10(34A) has also been amended to exempt income arising in hands of shareholder on account of buy back of shares by listed companies. x

7.

Shares, debentures, warrants (‘securities’) allotted by an employer to an employee under notified Employees Stock Option Scheme and such securities are gifted by the concerned employee to any person

Fourth Proviso to Section 48

Fair Market value of securities at the time of gift

8.

In case of transfer of land or building, if sale consideration declared in the conveyance deed is less than the stamp duty value

50C

The value adopted or assessed or assessable by the Stamp Valuation Authority shall be deemed to be the full value of consideration. However, no such adjustment is required to be made if value adopted for stamp duty purposes does not exceed 110% of the sale consideration.

Note: Where the date of agreement (fixing the amount of consideration) and the date of registration for the transfer of property are not the same, the value adopted or assessed or assessable by Stamp Valuation Authority on the date of agreement may be taken as full value of consideration.

9.

If consideration received or accruing as a result of transfer of a capital asset is not ascertainable or cannot be determined

50D

FMV of asset on the date of transfer

S. No.

Particulars

Notional Cost of Acquisition

1.

Additional compensation in the case of compulsory acquisition of capital assets

Nil

2.

Assets received by a shareholder on liquidation of the company

FMV of such asset on the date of distribution of assets to the shareholders

3.

Stock or shares becomes property of taxpayer on consolidation, conversion, etc.

Cost of acquisition of such stock or shares from which such asset is derived

4.

Allotment of shares in an amalgamated Indian co. to the shareholders of amalgamating co. in a scheme of amalgamation

Cost of acquisition of shares in the amalgamating co.

5.

Conversion of debentures into shares

That part of the cost of debentures in relation to which such asset is acquired by the assessee

6.

Allotment of shares/securities by a co. to its employees under ESOP Scheme approved by the Central Government

a) If shares are allotted during 1999-2000 or on or after April 1, 2009, FMV of securities on the date of exercise of option

b) If shares are allotted before April 1, 2007 (not being during 1999-2000), the amount actually paid to acquire the securities

c) If shares are allotted on or after April 1, 2007 but before April 1, 2009, FMV of securities on the date of vesting of option (purchase price paid to the employer or FBT paid to employer shall not be considered)

Higher of :

 (i)  Cost of acquisition of such asset; and

 (ii)  Lower of:

(A)  The fair market value of such asset; and

(B)  The full value of consideration received or accruing as a result of transfer of such asset.

Note: For meaning of 'Fair market Value' refer Explanation to Section 55(2)(ac).

7.

Property covered by section 56(2)(vii) or (viia) or (x)

The value which has been considered for the purpose of Section 56(2)(vii) or (viia) or (x)

8.

Allotment of shares in Indian resulting company to the existing shareholders of the demerger company in a scheme of demerger

Cost of acquisition of shares in demerged company ? Net book value of assets transferred in demerger ? Net worth of the demerged company immediately before demerger

9.

Cost of acquisition of original shares in demerged company after demerger

Cost of acquisition of such shares minus amount calculated above in point 8.

10.

Cost of acquisition of assets acquired by successor LLP from predecessor private company or unlisted public company at the time of conversion of the company into LLP in compliance with conditions of Section 47(xiiib)

Cost of acquisition of the assets to the predecessor private company or unlisted public company

11.

Cost of acquisition of rights of a partner in a LLP which became the property of the taxpayer due to conversion of a private company or unlisted public company into the LLP

Cost of acquisition of the shares in the co. immediately before conversion

12.

Depreciable assets covered under Section 50

Opening WDV of block of assets on the first day of the previous year plus actual cost of assets acquired during the year which fall within the same block of assets

13.

Depreciable assets of a power generating unit as covered under Section 50A*

WDV of the asset minus terminal depreciation plus balancing charge

14.

Undertaking/division acquired by way of slump sale as covered under Section 50B

Net worth of such undertaking

15.

New asset acquired for claiming exemptions under sections 54, 54B, 54D, 54G or 54GA if it is transferred within three years

Actual cost of acquisition minus exemption claimed under these sections

16.

Goodwill of business/profession or trade mark or brand name associated with business or right to manufacture, produce or process any article or thing or right to carry on any business or profession, tenancy right, stage permits or loom hours

a) If such asset were acquired by the assessee by purchase from a previous owner; cost of acquisition means amount of purchase price;

b) In the case falling under sub-clauses(i) to (iv) of sub-section (1) of section 49 and such asset was acquired by the previous owner by purchase; cost of acquisition means amount of purchase price for such previous owner; and

c) in any other case, cost of acquisition shall be taken to be nil.

17.

Right shares

Amount actually paid by assessee

18.

Right to subscribe to shares (i.e., right entitlement)

Nil

19.

Bonus shares

a) If allotted to the assessee before April 1, 1981: Fair market value on that date

b) In any other case: Nil

20.

Allotment of equity shares and right to trade in stock exchange, allotted to members of stock exchange under a scheme of demutualization or corporatization of stock exchanges as approved by SEBI

a) Cost of acquisition of shares: Cost of acquisition of original membership of the stock exchange

b) Cost of acquisition of trading or clearing rights of the stock exchange: Nil

21.

Capital asset, being a unit of business trust, acquired in consideration of transfer as referred to in section 47(xvii)

Cost of acquisition of shares as referred to in section 47(xvii) [applicable from AY 2015-16]

24.

Any other capital asset:

 a)  If it became property of taxpayer before April 1, 2001 by gift, will, etc., in modes specified in section 49(1): Cost of acquisition to the previous owner or FMV as on April 1, 2001, whichever is higher

 b)  If it became property of taxpayer before April 1, 2001 : Cost of acquisition or FMV as on April 1, 2001, whichever is more

 c)  If it became property of taxpayer after April 1, 2001 by gift, will, etc., in modes specified in section 49(1): Cost of acquisition to the previous owner

 d)  If it became property of taxpayer after April 1, 2001 : Actual cost of acquisition

S. No.

Particular

Cost of Improvement

1.

In relation to goodwill of a business, right to manufacture, produce any article or thing or right to carry on business or profession

2.

In relation to capital asset which becomes property of the assessee or previous owner before 01-04-2001

Any expenditure of capital nature incurred on or after 01-04-2001

3.

In relation to capital asset which becomes property of the assessee or previous owner before 01.04.2001 by way of any mode specified under Section 49(1)

Any expenditure of capital nature incurred on or after 01-04-2001 by the assessee or the previous owner

4.

In relation to capital asset which becomes property of the assessee or previous owner on or after 01.04.2001

Any expenditure of capital nature incurred by the assessee or the previous owner

5.

In relation to capital asset which becomes property of the assessee or previous owner on or after 01-04-2001 by way of any mode specified under Section 49(1)

Any expenditure of capital nature incurred by the assessee or the previous owner

Particulars

Section 54

Section 54B

Section 54D

Section 54EC

Section 54F

Section 54G

Section 54GA

Section 54GB

Eligible taxpayers

Individual and HUF

Individual and HUF

Any person

Any person

Individual and HUF

Any person

Any person

Capital gains eligible for exemption

Long-term

Short-term or Long-term

Short-term or Long-term

Long-term

Long-term

Short-term or Long-term

Short-term or Long-term

Capital gains arising from transfer of

Residential House property

Agriculture land used by taxpayer or by his parents or HUF for agriculture purposes in last 2 years before its transfer

Compulsory acquisition of land or building forming part of industrial undertaking (which was used for industrial purposes for at least 2 years before its acquisition).

Any long-term capital asset being Land or Building or Both

Any long term asset (other than a residential house property) provided on date of transfer taxpayer does not own more than one residential house property (except the new house)

Land, building, plant or machinery, in order to shift industrial undertaking from urban area to rural area.

Land, building, plant or machinery, in order to shift industrial undertaking from urban area to SEZ.

Assets to be acquired for exemption

One residential house property

Or

Two residential house properties

Note:

With effect from Assessment Year 2020-21, a taxpayer has an option to make investment in two residential house properties in India. This option can be exercised by the taxpayer only once in his lifetime provided the amount of long-term capital gain does not exceed Rs. 2 crores.

Agricultural land (may be in urban area or rural area)

Land or building for shifting or reestablishing said industrial undertaking

Bond of NHAI or REC, etc.

One residential house property

Land, building, plant or machinery, in order to shift industrial undertaking to rural area.

Land, building, plant or machinery, in order to shift industrial undertaking to SEZ.

Time limit for acquiring the new assets

Purchase: within 1 year before or 2 years after date of transfer

Construction: within 3 years after date of transfer

Within 2 years after date of transfer

Within 3 years from date of receipt of compensation

Within 6 months from date of transfer

Purchase: within 1 year before or within 2 years after date of transfer

Construction: within 3 years after date of transfer

within 1 year before or 3 years after date of transfer

Within 1 year before or within 3 years after date of transfer

Exemption Amount

Investment in new assets or capital gain, whichever is lower

Investment in agricultural land or capital gain, whichever is lower

Investment in new assets or capital gain, whichever is lower

Investment in new assets or capital gains, whichever is lower, however, subject to Rs. 50 lakhs.

Investment in new assets X capital gain/net consideration

Investment in new assets or capital gain, whichever is lower

Investment in new assets or capital gain, whichever is lower

Withdrawal of exemption

If new asset is transferred within 3 years of its acquisition

If new asset is transferred within 3 years of its acquisition

If new asset is transferred within 3 years of its acquisition

If new asset is transferred or it is converted into money or a loan is taken on its security

within 5 years of its acquisition

a) If new asset is transferred within 3 years of acquisition,

b) if another residential house is purchased within 2 years of transfer of original asset;

c) if another house is constructed within

3 years of transfer of original asset

If new asset is transferred within 3 years of acquisition

If new asset is transferred within 3 years of acquisition

Deposit in Capital gains deposit scheme before due date under Sec. 139(1)

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes

S. No.

Nature of income taxable as residuary income

1.

Dividends

2.

Income by way of winnings from lotteries, crossword puzzles, races including horse races, card games, gambling or betting of any form or nature whatsoever

3.

Any sum received by an employer from his employees as contribution towards PF/ESI/ Superannuation Fund etc., if same is not deposited in the relevant fund and it is not taxable under the head ‘Profits and Gains from Business or Profession’.

4.

Interest on securities, if not taxable under the head ‘Profits and Gains of Business or Profession’

5.

Income from machinery, plant or furniture belonging to taxpayer and let on hire, if income is not chargeable to tax under the head ‘Profits and Gains of Business or Profession’

6.

Composite rental income from letting of plant, machinery or furniture with buildings, where such letting is inseparable and such income is not taxable under the head ‘Profits and Gains of Business or Profession’

7.

Any sum received under Keyman Insurance Policy (including bonus), if not taxable under the head ‘Profits and Gains of Business or Profession’ or under the head ‘Salaries’

8.

In the following cases, any sum of money or property received by a person from any person (except from relatives or member of HUF or in given circumstances, see note 1) shall be taxable under the head ‘Income from other sources’:

a) If any sum is received without consideration in excess of Rs. 50,000 during the previous year, the whole amount shall be chargeable to tax;

Though the provisions relating to gift applies in case of every person, but it has been reported that gifts by a resident person to a non-resident are claimed to be non-taxable in India as the income does not accrue or arise in India. To ensure that such gifts made by residents to a non-resident person are subjected to tax in India, the Finance (No. 2) Act, 2019 has inserted a new clause (viii) under Section 9 of the Income-tax Act to provide that any income arising outside India, being money paid without consideration on or after 05-07-2019, by a person resident in India to a non-resident or a foreign company shall be deemed to accrue or arise in India.

b) If an immovable property is received without consideration and the stamp duty value exceeds Rs. 50,000, the stamp duty value of such property shall be chargeable to tax;

c) If immovable property is received for consideration which is less than the stamp duty value of property by higher of following amount the difference is chargeable to tax:

  (i)  the amount of Rs. 50,000

  (ii)  the amount equal to 10% of consideration.

d)  If movable properties* is received without consideration and the aggregate fair market value of such properties exceeds Rs. 50,000, the whole of aggregate fair market value of such properties shall be chargeable to tax

e)  If movable properties is received for consideration which is less than the aggregate fair market value of properties by an amount exceeding Rs. 50,000, the difference between the aggregate fair market value and the consideration is chargeable to tax.

Note:

1. Any sum of money received by an individual, from any person, in respect of any expenditure actually incurred by him on his medical treatment or treatment of any member of his family in respect of any illness related to COVID-19, shall not be considered as income of such person. (subject to certain conditions)

2. Any sum of money received by family member of a person who died due to COVID-19, the money so received shall not be considered as income of the family member where such money is received from the employer of deceased person. Where the money is received from any other person or persons, the exemption amount shall be limited to Rs. 10 lakh in aggregate. (subject to certain conditions

9.

If shares in a closely held company are received by a firm or another closely held company from any person without consideration or for inadequate consideration, the aggregate fair market value of such shares as reduced by the consideration paid, if any, shall be chargeable to tax.

Note: Nothing would be chargeable to tax if taxable amount doesn’t exceed Rs. 50,000.

10.

If a closely held public company receives any consideration for issue of shares which exceed the fair market value of such shares, the aggregate consideration received for such shares as reduced by its fair market value shall be chargeable to tax.

Note: This provision is not applicable in the following cases:

a) Where the consideration for issue of shares is received by a venture capital undertaking from a venture capital company or venture capital fund or a specified fund.

“Specified fund” means a fund established or incorporated in India in the form of a trust or a company or a LLP or a body corporate which has been granted a certificate of registration by SEBI as a Category I or Category II Alternative Investment Fund (AIF).

b) Where the consideration for issue of shares is received by company from class or classes of person as notified by the Government.

In this regard, the Government has provided that section 56(2)(viib) shall not apply where consideration is received by a start-up company in respect of shares issued to a resident person. However, a start-up company shall fulfil the condition mentioned in the Notification No. 127(E), dated 19-02-2019 issued by the Department for Promotion of Industry and Internal Trade (DPIIT).

With a view to ensure compliance to the conditions specified in the said notification, the Finance (No. 2) Act, 2019 reiterates that in case of failure to comply with the conditions specified in the notification, the consideration received from issue of shares as exceeding the fair market value of such shares, shall be deemed to be income of the company chargeable to tax for the previous year in which such failure takes place. Further, it shall be deemed that the company has misreported the said income and, consequently, a penalty of an amount equal to 200% of tax payable on the underreported income (i.e., difference between issue price and fair market value of shares) shall be levied as per section 270A.

11.

Interest received on compensation or enhanced compensation

12.

Any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset shall be charged to tax under this head, if:

a) Such sum is forfeited; and

b) The negotiations do not result in transfer of such capital asset.

S.N.

Section

Nature of Income

Deductions allowed

1.

57(i)

Dividend or Interest on securities

Any reasonable sum paid by way of commission or remuneration to banker or any other person for purpose of realizing dividend or interest on securities

2.

57(ia)

Employee’s contribution towards Provident Fund, Superannuation Fund, ESI Fund or any other fund setup for the welfare of such employees

If employees’ contribution is credited to their account in relevant fund on or before the due date

3.

57(ii)

Rental income letting of plant, machinery, furniture or building

Rent, rates, taxes, repairs, insurance and depreciation etc.

4.

57(iia)

Family Pension

1/3^rd of family pension subject to maximum of Rs. 15,000.

5.

57(iii)

Any other income

Any other expenditure (not being capital expenditure) expended wholly and exclusively for earning such income

6.

57 (iv)

Interest on compensation or enhanced compensation

50% of such interest (subject to certain conditions)

7.

58(4) Proviso

Income from activity of owning and maintaining race horses.

All expenditure relating to such activity.

S.N.

Section

Nature of Income

1.

58(1)(a)(i)

Personal expenses

2.

58(1)(a)(ii)

Interest chargeable to tax which is payable outside India on which tax has not been paid or deducted at source

3.

58(1)(a)(iii)

‘Salaries’ payable outside India on which no tax is paid or deducted at source

4.

58(1A)

Wealth-tax

5.

58(2)

Expenditure of the nature specified in section 40A

6.

58(4)

Expenditure in connection with winnings from lotteries, crossword puzzles, races, games, gambling or betting