Important Income Tax Provisions

1. SALARY:

Transport Allowance: Rs.800/- per month

Education Allowance: Rs. 100/- per month per child upto 2 Children.

House Rent Allowance (Sec. 10(13A) and Rule 2A)

Least of the following is exempt from tax:

  • 50 % of (Salary + DA) for Metro/ 40 % of Salary for other cities.
  • HRA Received.
  • Rent paid – 10 % of Salary.

Valuation of unfurnished rent free accommodation [ Rule – 3(1)] for Private Sector Employee

  • For Population exceeding 25 Lakhs – 15 % of Salary (Basic + DA + Bonus + All taxable allowances)
  • For Population exceeding 10 Lakhs but less than 25 Lakhs -  10 % of Salary (Basic + DA + Bonus + All taxable allowances)
  • Any other – 7.5 % of Salary (Basic + DA + Bonus + All taxable allowances)

Leave Travel Concession or Assistance (LTC/LTA) Section 10(5)

The Exemption shall be allowed subject to the following:

  • Where journey is performed by air – Maximum upto air economy fare of the National Carrier by the shortest route
  • Where places of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than air – Maximum upto air conditioned first class rail fare by the shortest route.
  • Where places of origin of journey and destination or part thereof are not connected by rail and the journey is performed between such places:

-   Where a recognized public transport system exists – Maximum upto 1st Class or deluxe class fare by the shortest route.

-   Where no recognized public transport system exists – Maximum upto air conditioned 1st Class rail fare by the shortest route.

Sec 16(iii) Deduction of any sum paid on account of tax on employment

 

2. HOUSE PROPERTY  

Net Annual Value = Gross Annual Value - Municipal Tax paid by Landlord

Deductions u/s 24:

    1. i)Standard deduction u/s 24(a): 30 % of Net Annual Value.
    2. ii)Interest on borrowed capital u/s 24(b): Deduction is available on accrual basis.
    3. iii)Interest payment for self occupied house for acquisition or construction upto Rs. 1,50,000/-.
    4. iv)Interest payment for re-construction, repairs or renewals upto Rs. 30,000/-.

 

3. CAPITAL GAIN

 

Deduction u/s 80C to 80U not allowed on STCG (u/s 111A) and any LTCG

Long Term Capital Gain – Exemption

u/s 54

u/s 54B

u/s 54EC

u/s 54F

a.

Who can claim exemption

Individual/ HUF

Individual/ (HUF w.e.f FY 2012-13)

Any person

Individual/ HUF

b.

Eligible Asets sold

A Residential House Property

Agricultural Land which has been used by assessee himselfor by his parents for agriculture purposes immediately preceding 2 years from the date of transfer

Any long term capital assets.

Any long term asset (other than a residential house property) provided on the date of transfer, the taxpayer does not own more than one residential house property (except the new house) from the assessment year 2001-02.

c.

Assets to be acquired for

Residential House Property

Another Agricultural Land (Urban or Rural)

Bond of NHAI or REC

Residential House Property

d.

Time Limit for acquiring the new assets

Purchase: 1 year before or 2 years forward.

Construction: 3 years forward

2 years forward

6 months forward

Purchase: 1 year before or 2 years forward.

Construction: 3 years forward

e.

Exemption Amount

Investment in the new assets or capital gain, whichever is lower

Investment in the agricultural land or capital gain, whichever is lower.

Investment in the new assets or Capital Gain, whichever is lower (maximum Rs. 50 Lakhs in a FY)

Investment in the new assets/ ( Net Sale Consideration X Capital Gain)

f.

Whether deposit in “Capital Gain Account scheme” is applicable

Yes

Yes

-

Yes

Important definitions under Capital Gain:

Jewelry:
(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel;
(b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel.

Rural Agricultural Land:
Rural Agricultural Land means an agricultural land in India:
(a) If situated in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town committee or by any other name) and its population should be less than 10,000 as per the last published census, or
(b) If situated outside the limit of municipality, etc., it should be situated certain kilometres away from the local limits of any municipality, etc. as may be specified by the Central government in the official Gazette. The Central government can notified urban land upto maximum 8Kms from the limits of municipality, etc.

 

 4. BUSINESS INCOME

 

Partner’s Remuneration u/s 40(b) w.e.f  AY 2010-11

   Book Profit of Business/ Profession

   Amount deductible

   If Book Profit is negative

   Rs. 1,50,000/-.

   In case Book Profit is positive:

 

-         On first Rs. 3 Lakhs of Book Profit

   Rs. 1,50,000/- or 90 % of book profit, whichever is more.

-         On the balance of Book Profit

   60 % of Book Profit.

 

5. CARRY FORWARD AND SET-OFF OF LOSSES

Loss on

Set-off during the year

Carry Forward and Set-off

 

Same Head

Another Head

Against

C/F           

Years       

Against profits from

  1. House Property

Yes

Yes

-          

Yes

8 years

Same Head

  2. Speculation Business

Yes

No

From Speculation Profits

Yes

4 years

Same/ Another Speculation Business

  3. Unabsorbed Depreciation/ Capital Expenditure on Scientific Research/ Family  Planning

Yes

Yes

Any Income

Yes

No Limit

Any Income (Other than Salary)

  4. Non Speculative Business or Profession

Yes

Yes#

Any Business Profits

Yes

8 years

Same Head

  5. Long Term Capital Losses

Yes

No

LTCG

Yes

8 years

LTCG

  6. Short Term Capital Losses

Yes

No

STCG/ LTCG

Yes

8 years

STCG/ LTCG

  7. Owning/ Maintaining race horses

Yes

No

Same Income

Yes

4 years

Same Income

  8.  Income from Other Sources (except if exempt)

Yes

Yes

NA

No

NA

NA

  9. Specified Business u/s 35AD

Yes

No

Specified Business Profits

Yes

No Limit

Any Specified Business