CA Inter Paper 3: Taxation cheat sheet

Previous year (PY) is the year in which income is earned; assessment year (AY) is the immediately following year in which it is taxed, e.g. PY 2024-25 → AY 2025-26.

Section 2(7) defines 'assessee' to include a person by whom tax or interest is payable, a deemed assessee under section 140A, and an assessee in default.

Income is classified under five heads: Salaries; Income from house property; Profits and gains of business or profession; Capital gains; Income from other sources.

Rates for individuals (AY 2025-26, default regime): nil up to ₹3,00,000; 5% on ₹3,00,001–7,00,000; 10% on ₹7,00,001–10,00,000; 15% on ₹10,00,001–12,00,000; 20% on ₹12,00,001–15,00,000; 30% above ₹15,00,000.

Rebate under section 87A (default regime) is up to ₹25,000 where total income does not exceed ₹7,00,000; it is a deduction from tax, not from income.

Surcharge on individuals (default regime) is 10% above ₹50 lakh, 15% above ₹1 crore, 25% above ₹2 crore; marginal relief applies at each threshold.

Health and education cess is 4% of (tax + surcharge) for all assessees.

Agricultural income is exempt under section 10(1) but is aggregated with non-agricultural income above the basic exemption limit for rate purposes.

Section 6(1): an individual is resident if in India ≥182 days in the PY, or ≥60 days in the PY plus ≥365 days in the four preceding PYs.

Exceptions to the 60-day rule: Indian citizens leaving for employment abroad or as crew, and persons of Indian origin visiting India, use 182 days instead of 60.

Resident and not ordinarily resident (RNOR) under section 6(6): non-resident in 9 of 10 preceding PYs, or ≤729 days in India in the 7 preceding PYs.

Deemed resident under section 6(1A): Indian citizen with Indian-source income above ₹15 lakh and not liable to tax in any other country, unless RNOR under 6(6).

Resident and ordinarily resident: global income taxable. RNOR: global income taxable except foreign-source income not derived from a business controlled or profession set up in India.

Non-resident: only income received or accruing in India, plus first proviso income (Indian business connection/property/assets/source), is taxable.

Section 9(1)(i) Explanation 5: salary for services rendered in India is deemed to accrue in India even if paid abroad.

Relief under section 90/90A/91 for doubly taxed foreign income is available only to residents (and RNOR for certain cases) - not to non-residents.

Section 17(1) salary includes wages, annuity, gratuity, fees, commission, perquisites, profits in lieu of salary and advance salary; salary is taxed on due or receipt basis, whichever is earlier.

Standard deduction under section 16(ia) is ₹50,000 or the amount of salary, whichever is lower; professional tax and entertainment allowance (government employees) are also deductible.

House rent allowance exemption under section 10(13A) is the least of: actual HRA, rent paid minus 10% of salary, and 50% of salary (metro) or 40% (non-metro).

Gratuity exemption under section 10(10): least of ₹20,00,000, actual gratuity, and 15/26 × last drawn salary × completed years of service (non-government employees).

Leave encashment exemption under section 10(10AA) on retirement is capped at ₹25,00,000 for non-government employees.

House property: gross annual value is the higher of expected rent and actual rent received/receivable, where the property is let throughout the year.

Section 24 deductions: 30% of net annual value as standard deduction, plus interest on borrowed capital; the 30% is a flat statutory deduction regardless of actual expenditure.

Self-occupied property: annual value is nil; interest deduction is capped at ₹2,00,000 for acquisition/construction (₹30,000 otherwise), and the loss under house property can be set off against other heads up to ₹2,00,000.

Section 28 business income includes profits, compensation on termination of agency, export incentives, and value of any benefit arising from a business connection.

Depreciation under section 32 is allowed on block of assets at prescribed rates (e.g. 15% plant and machinery, 40% for certain assets); block ceases if all assets are sold.

Section 37 allows expenditure wholly and exclusively for business, excluding personal expenses, capital expenditure, and offences/prohibited payments.

Section 36(1)(vii) bad debts are allowed only if the amount was included in income or represents money lent in the ordinary course of a banking business.

Section 40A(3) disallows cash payments exceeding ₹10,000 (₹35,000 for transporters) to a single person in a day otherwise than by prescribed modes.

Short-term capital gains on listed equity shares/equity mutual funds attract section 111A at 15% if STT is paid; long-term gains under section 112A are taxed at 10% above ₹1,00,000.

Unlisted shares and immovable property: long-term if held over 24 months; listed securities and units: 12 months; other assets: 24 months.

Section 54 exemption on residential house: LTCG on a residential house reinvested in one residential house in India, capped at ₹10 crore of cost.

Section 56(2)(x) taxes gifts of money or property exceeding ₹50,000 in aggregate from non-relatives as income from other sources.

Relatives under section 56(2)(x) include spouse, siblings, parents, lineal ascendants/descendants, and their spouses; gifts from them are fully exempt.

Section 57 allows deductions from other-source income, e.g. interest on loans taken to acquire the source, and 50% of family pension subject to ₹15,000.

Section 60–63 clubbing: income transferred to spouse (unless for adequate consideration) or minor child is taxed in the transferor's hands; minor child exemption up to ₹1,500 per child under section 10(32).

Section 64(1A) clubbing of minor's income applies unless the income arises from the minor's manual work or skill/talent.

Intra-head set-off under section 70 is exhaustive within a head; inter-head set-off under section 71 cannot be made against capital gains or lottery/racehorse income.

Loss under house property can be set off against other heads only up to ₹2,00,000 per year; the balance carries forward for 8 years against house property income only.

Business loss carries forward 8 years (only if return filed by due date); unabsorbed depreciation carries forward indefinitely; speculative business loss 4 years against speculative income only.

Section 80C: ₹1,50,000 aggregate cap for LIC premium, PPF, ELSS, tuition fees, housing loan principal, and specified investments.

Section 80CCD(1B): additional ₹50,000 for contributions to the National Pension System, over and above the 80C limit.

Section 80D: health insurance premium up to ₹25,000 (₹50,000 for senior citizens), plus ₹25,000/₹50,000 for parents; preventive health check-up capped at ₹5,000 within the limit.

Section 80E: interest on education loan is fully deductible for 8 assessment years starting from the year repayment begins; no monetary cap.

Section 80G: donations to specified funds/charities; 100% or 50% deduction, with qualifying limit of 10% of adjusted gross total income for certain funds.

Section 80TTA: interest on savings bank deposits deductible up to ₹10,000 for non-senior individuals/HUF; section 80TTB gives ₹50,000 for senior citizens on all deposit interest.

Section 80U: flat deduction of ₹75,000 (disability) or ₹1,25,000 (severe disability) for a resident individual with disability.

Deductions under Chapter VI-A generally cannot exceed gross total income; most are unavailable under the default (new) tax regime except 80CCD(2), 80JJAA and a few others.

Total income = gross total income minus Chapter VI-A deductions, rounded to the nearest ₹10 under section 288A; tax payable rounded to the nearest ₹10 under section 288B.

Rebate under section 87A is available to resident individuals only; total income must not exceed ₹5,00,000 (old regime, rebate up to ₹12,500) or ₹7,00,000 (default regime, up to ₹25,000).

Section 89 relief covers salary received in arrears or advance; Form 10E must be filed before filing the return to claim it.

Section 90/91 relief for foreign tax paid: deduction is the lower of foreign tax paid and Indian tax on that doubly taxed income.

Marginal relief applies where income marginally exceeds ₹50 lakh, ₹1 crore, ₹2 crore or ₹5 crore thresholds so that tax plus surcharge does not exceed tax on the threshold plus the excess income.

Advance tax is payable if tax liability after TDS is ₹10,000 or more; instalments: 15% by 15 June, 45% by 15 September, 75% by 15 December, 100% by 15 March.

Interest under section 234B applies for shortfall in advance tax (1% per month from April of the AY); section 234C applies for deferred instalments (1% per month for 3 months).

Section 234A interest is 1% per month for late filing of return, computed on tax on total income less prepaid taxes.

Section 139(1) due dates: 31 July for non-audit individuals/HUF, 31 October for audited assessees, 30 November for transfer pricing cases.

Belated return under section 139(4) may be filed up to 31 December of the AY, with late fee under section 234F (₹1,000 or ₹5,000) and loss of certain carry-forwards.

Self-assessment tax under section 140A is payable before filing the return, along with interest under sections 234A/234B/234C.

Section 192 TDS on salary applies at average rate of tax; section 194A TDS on interest other than securities is 10% above ₹50,000 (₹1,00,000 for senior citizens).

Section 194C TDS: 1% for individual/HUF payees, 2% for others; threshold ₹30,000 single payment or ₹1,00,000 aggregate in a year.

Section 194Q TCS/TDS: buyer with turnover above ₹10 crore deducts 0.1% on purchases above ₹50 lakh from a single seller.

Section 206AA: if PAN is not furnished, TDS/TCS is at the higher of the specified rate and 20% (or the rate in force).

Revised return under section 139(5) can be filed up to 31 December of the AY; updated return under section 139(8A) within 24 months of the AY, with additional tax.

Section 7: supply includes sale, transfer, barter, exchange, licence, rental, lease, disposal, and import of services for consideration in the course or furtherance of business.

Schedule I covers supplies without consideration (e.g. permanent transfer of business assets, supplies between related persons, principal-agent supplies); Schedule III lists non-supplies (e.g. employee services, actionable claims other than specified).

Composite supply is naturally bundled and supplied in conjunction with a principal supply, taxed at the principal supply's rate; mixed supply is two or more independent supplies for a single price, taxed at the highest rate.

Levy under section 9: CGST plus SGST on intra-State supply, IGST under section 5 on inter-State supply; petroleum crude, high-speed diesel, petrol, natural gas and ATF are outside GST as of now.

Place of supply for goods (section 10): where goods are delivered to the recipient; for goods requiring movement, the location where goods are handed over for movement.

Place of supply for services (section 12): generally the location of the registered recipient; for services related to immovable property, the property's location.

Time of supply for goods: earlier of date of invoice or date of payment; if invoice not issued within the prescribed period, earlier of date of payment or date of completion of supply.

Time of supply for services: earlier of invoice date (if issued within 30 days) or payment date; for reverse charge, earlier of payment date, invoice date, or entry in books.

Section 15 value of supply is the transaction value, being the price actually paid or payable, where the supplier and recipient are unrelated and price is the sole consideration.

Inclusions in value under section 15(2): taxes other than GST, incidental expenses, third-party payments, interest/late fees, and subsidies directly linked to price.

Exclusions under section 15(3): discounts given before or at the time of supply and recorded in the invoice; post-supply discounts only if established by prior agreement and linked to specific invoices.

Valuation rules (Rules 27–35) apply where consideration is not wholly in money, between related persons, or where price is not the sole consideration; Rule 27 uses open market value.

Notification 12/2017-CT(R) exempts specified services including certain health care, education, agricultural produce, and services by way of pure labour for individual house construction.

Reverse charge under section 9(3)/9(4): recipient pays tax on notified supplies, e.g. goods transport agency services, legal services by advocates, and sponsorship services.

Under reverse charge, the recipient cannot claim ITC on the tax paid unless the same is used for business; time of supply is the earlier of payment, invoice, or book entry.

Composition scheme under section 10: manufacturers/traders up to ₹1.5 crore turnover pay 1% (0.5% CGST + 0.5% SGST); restaurants 5%; service providers up to ₹50 lakh pay 6%.

Section 16(2) conditions for ITC: possession of tax invoice/debit note, receipt of goods or services, tax actually paid by the supplier, return filed, and invoice details furnished by the supplier.

Section 17(5) blocked credits include motor vehicles for passenger transport (seating up to 13), food and beverages, club membership, health insurance, works contract for immovable property, and goods lost/stolen/destroyed.

Section 17(1)–(2): ITC is restricted to the extent of business use; common credits are apportioned using the formula in Rule 42/43 for inputs and capital goods.

Section 16(4): ITC on an invoice cannot be availed after 30 November following the end of the financial year, or the date of filing the annual return, whichever is earlier.

Registration under section 22 is required where aggregate turnover exceeds ₹40 lakh for goods (₹20 lakh for services); special category states have lower thresholds.

Section 24 mandates compulsory registration for inter-State suppliers, casual taxable persons, persons liable under reverse charge, and those availing e-commerce operator services.

Tax invoice under section 31 must be issued within 30 days of supply of services (45 days for banks/NBFCs); for goods, before or at the time of removal/delivery.

E-invoicing applies to registered persons with aggregate turnover exceeding ₹5 crore; e-way bill is required for goods movement above ₹50,000.

GSTR-1 (outward supplies) is due by the 11th of the following month; GSTR-3B (summary return and tax payment) by the 20th; GSTR-9 annual return by 31 December following the FY.

QRMP scheme allows quarterly GSTR-1 and GSTR-3B for taxpayers with turnover up to ₹5 crore, with monthly payment via PMT-06 by the 25th.

Section 49: electronic cash ledger, credit ledger, and liability ledger; ITC can be used only against output tax, not against interest or penalty.

Interest under section 50 is 18% per annum on delayed payment; 24% applies where ITC is wrongly availed and utilised.

Section 54 refund: application within 2 years of the relevant date; refund of unutilised ITC allowed for zero-rated supplies and inverted duty structure.

Section 54(3) provides a provisional refund of 90% of the claim for zero-rated supplies, subject to conditions.

Section 61 scrutiny of returns and section 62 assessment for non-filers (best judgment assessment after 30 days' notice); section 63 assesses unregistered persons.

Section 73 covers non-fraud cases (penalty 10% of tax or ₹10,000, whichever is higher); section 74 covers fraud/suppression (penalty 100% of tax).

Section 107: first appeal to the Appellate Authority within 3 months of communication of the order, with a pre-deposit of 10% of the disputed tax (maximum ₹20 crore CGST).

Section 112: appeal to the GST Appellate Tribunal within 3 months of the order, with an additional pre-deposit of 10% (maximum ₹20 crore CGST).

Section 97: advance ruling can be sought on supply classification, place of supply, time of supply, valuation, ITC eligibility, and registration liability.

Advance ruling application must be decided within 90 days by the Authority for Advance Ruling; appeal to the Appellate Authority for Advance Ruling within 30 days.

Advance ruling is binding on the applicant and the concerned officer in respect of the applicant; it is binding unless there is a change in law or facts.

Section 122 penalties: ₹10,000 or the tax involved, whichever is higher, for specified offences (e.g. issuing invoices without supply, not issuing invoices).

Section 132: offences such as issuing invoices without supply and evading tax above ₹5 crore are punishable with imprisonment up to 5 years and fine.

Section 129 detention/seizure: penalty equal to 200% of tax payable on goods in transit for contravention; section 130 confiscation applies for specified serious offences.

When a transaction involves both income-tax and GST, determine GST liability first (supply, place, time, value, ITC), then the income-tax treatment (head of income, deduction, TDS).

Export of goods is zero-rated under GST (refund of ITC allowed), while export profits may qualify for income-tax deductions like section 10AA in SEZ units.

Inter-State supply attracts IGST and generally requires GST registration; the same transaction may attract TDS under section 194C/194Q on the payment side.

GST paid on inputs is not deductible under income-tax as an expense if ITC is availed; if ITC is not availed, the GST becomes part of the cost of the asset/expense.

Interest on delayed GST payment is not allowable as a business expense under section 37 as it is a penalty for infraction of law.

Turnover for GST registration (aggregate turnover) and the income-tax presumptive limit under section 44AD/44ADA are separate thresholds; do not conflate them.

Composite works contracts: GST is charged on the full contract value, while income-tax allows the project completion method for recognising revenue in construction contracts.

In case of a supply between related persons, GST value is open market value (Rule 28), while income-tax applies section 40A(2) to disallow excessive payments to related parties.