CMA Inter Paper 7 (DITX) cheat sheet

Section 2(24) defines income inclusively: profits, gains, dividends, allowances, perquisites, and any receipt specifically deemed income by the Act are all chargeable.

Section 5 charges total income by residential status: a resident is taxed on global income; a non-resident only on income received or accruing in India, plus first-degree nexus rules.

Section 6 basic test: an individual is resident if present in India 182 days or more in the previous year, or 60 days or more in the year plus 365 days over the prior four years.

Exceptions to the 60-day limb: Indian citizens leaving for employment abroad or as crew, and PIOs visiting India, use the 182-day threshold only.

Deemed resident under Section 6(1A): an Indian citizen with Indian income above Rs 15 lakh, not liable to tax elsewhere, is deemed resident but not ordinarily resident.

Resident but not ordinarily resident (RNOR) under Section 6(6): non-resident in 9 of 10 prior years, or presence in India 729 days or less in the prior 7 years.

Residential status for a company: Indian company is always resident; a foreign company is resident only if its place of effective management in that year is in India.

HUF, firm, and AOP are resident unless control and management of affairs is wholly outside India; a partner's residence does not determine firm residence.

Previous year under Section 3 is the year in which income is earned; assessment year under Section 2(9) is the following 12 months beginning 1 April in which it is assessed.

Section 15 charges salary on due or receipt basis, whichever is earlier; advance salary is taxed on receipt and not again when it falls due.

Section 17(1) salary includes wages, annuity, gratuity, fees, commission, perquisites, and profits in lieu of salary, but excludes employer PF contributions up to 12% of salary.

Standard deduction under Section 16(ia) is Rs 50,000 or the amount of salary, whichever is lower; professional tax and entertainment allowance (government employees) are the other Section 16 deductions.

House rent allowance exemption under Rule 2A is the least of: actual HRA, 50% of salary (metro) or 40% (non-metro), or rent paid minus 10% of salary.

Gratuity exemption under Section 10(10): government employees fully exempt; others least of Rs 20 lakh, 15/26 of salary per year of service, or actual gratuity.

Leave encashment on retirement under Section 10(10AA): government employees fully exempt; others least of Rs 25 lakh, 10 months' average salary, cash equivalent of leave days, or actual amount.

Perquisite valuation under Rule 3: rent-free unfurnished accommodation is 10% of salary (metro, population above 40 lakh) or 7.5% (other cities), reduced by rent paid by employee.

Employer contribution to a recognised PF exceeding Rs 7.5 lakh in aggregate in a year is a taxable perquisite under Rule 3(7)(i).

Section 89 relief applies where salary is received in arrears or in advance, computed as excess tax over tax on salary spread across the relevant years.

Section 22 charges the annual value of property consisting of buildings or land appurtenant thereto, owned by the assessee and not used for own business or profession.

Annual value under Section 23(1)(a) is the sum for which the property might reasonably be let, subject to municipal value and standard rent caps under Section 23(1)(b) and (c).

Section 23(2): where the owner occupies the property for residence, annual value is nil; a second self-occupied house can be claimed as nil only if no other house benefit is claimed.

Section 24(a) allows a flat 30% standard deduction on net annual value, regardless of actual expenditure; Section 24(b) allows interest on borrowed capital subject to limits.

Interest deduction for a self-occupied house under Section 24(b) is capped at Rs 2 lakh where the loan is for purchase or construction and completed within 5 years.

Pre-construction interest is deductible in five equal instalments beginning in the year of completion, subject to the Rs 2 lakh overall cap for self-occupied property.

Section 25A: unrealised rent is deducted from annual value if the conditions of Rule 4 are met - the tenancy was bona fide and the tenant vacated.

Section 27 deems the transferor, holder of an impartible estate, member of a co-operative society, and a buyer in possession under Section 53A as the owner for tax purposes.

Loss from house property under Section 71(3A) is set off against other heads only up to Rs 2 lakh per year; the balance carries forward for eight years against house property income only.

Section 28 charges profits of business or profession, including compensation on termination of agency, income of speculative transactions, and export incentives.

Section 30 to 37 allow rent, rates, repairs, insurance, depreciation, and other revenue expenditure laid out wholly and exclusively for the business.

Depreciation under Section 32 uses the block-of-assets method on written-down value; rates are 5% to 40% by asset class, with 15% for plant and machinery generally.

Additional depreciation under Section 32(1)(iia) is 20% for new plant and machinery in manufacturing, available to the extent of 50% if used for less than 180 days.

Section 36(1)(vii) allows bad debts written off in the accounts; Section 36(1)(viia) allows a provision for bad debts for banks and financial institutions.

Section 37(1) denies deduction for expenditure prohibited by law, including penalty for infraction of law, and for personal or capital expenditure.

Section 40(a) disallows 30% of payments to residents and 100% of payments to non-residents for TDS default; Section 40A(3) disallows cash payments above Rs 10,000 to a person in a day.

Section 43B allows deductions only on actual payment for statutory dues, bonus, leave encashment, and interest to banks; the proviso permits payment by the due date of filing the return.

Section 44AA prescribes books of account above Rs 25 lakh (Rs 10 lakh for specified professions) and Section 44AB prescribes tax audit above Rs 1 crore turnover, or Rs 10 crore with 95% digital receipts.

Section 2(14) defines capital asset, excluding stock-in-trade, personal effects, agricultural land outside specified areas, and gold bonds; Section 2(47) defines transfer broadly.

Short-term capital asset under Section 2(42A) is held 36 months or less; listed securities, units, and immovable property use a 24-month threshold, and listed shares and units use 12 months.

Section 48 computes capital gains as full value of consideration less cost of acquisition, cost of improvement, and expenditure on transfer; indexation is available only for long-term assets.

Section 112 taxes long-term capital gains at 20% after indexation, or 10% without indexation for listed securities under Section 112A, subject to Rs 1 lakh annual exemption.

Section 54 exempts long-term residential property gains if reinvested in one residential house in India within one year before or two years after transfer, or constructed within three years.

Section 54EC exempts gains up to Rs 50 lakh invested in NHAI or REC bonds within six months; the bonds must be held five years.

Section 56(2)(x) taxes gifts of money or property exceeding Rs 50,000 in aggregate as income from other sources, with exemptions for relatives and marriage.

Section 56(2)(viib) taxes excess share premium above fair market value received by a closely held company as income; startup and specified fund exemptions apply.

Section 57 allows deductions against other-source income, including interest on loans used to acquire the asset, but not for personal expenses or Section 56(2)(x) gifts.

Chapter VI-A deductions are allowed from gross total income, subject to the aggregate ceiling under Section 80C, 80CCC, and 80CCD(1) of Rs 1.5 lakh.

Section 80C covers LIC premium, PPF, ELSS, NSC, tuition fees, principal repayment of housing loan, and five-year fixed deposits, capped at Rs 1.5 lakh.

Section 80CCD(1B) allows an additional Rs 50,000 for NPS contributions by an individual, over and above the Section 80C ceiling.

Section 80D allows health insurance premium up to Rs 25,000 for self and family, Rs 50,000 for senior citizens, plus Rs 25,000 to Rs 50,000 for parents.

Section 80G allows deduction for donations to specified funds at 50% or 100%, with the qualifying amount limited to 10% of adjusted gross total income for certain funds.

Section 80TTA allows interest on savings bank accounts up to Rs 10,000 for individuals below 60; Section 80TTB allows Rs 50,000 for senior citizens.

Section 80JJAA allows an additional 30% of employee cost for three years for new regular employees earning less than Rs 25,000 per month.

Section 80-IA and 80-IB deductions for infrastructure and industrial undertakings are available only under the old regime; the new regime under Section 115BAC excludes most Chapter VI-A deductions.

Total income computation order: apply Section 14 head-wise, set off intra-head losses under Section 70, inter-head under Section 71, then carry forward under Section 72 to 80.

Section 139 requires a return for companies, firms, and audit cases; individuals must file if income exceeds the basic exemption, and the due date is 31 July or 31 October for audit cases.

Belated return under Section 139(4) may be filed up to 31 December of the assessment year with a fee under Section 234F of Rs 1,000 to Rs 5,000.

Revised return under Section 139(5) may be filed up to the end of the assessment year or completion of assessment, whichever is earlier.

Section 143(1) is summary processing of the return; an intimation is issued and adjustments can be made for arithmetical errors and disallowances apparent from the return.

Section 143(3) scrutiny assessment requires a notice under Section 143(2) within three months from the end of the financial year in which the return is filed.

Section 148 reassessment requires prior approval and is governed by the three-year and ten-year limitation rules; a notice beyond three years needs evidence of escaped income of Rs 50 lakh or more.

Section 142(1) allows inquiry before assessment; Section 142(2A) allows special audit with the approval of the Principal Chief Commissioner where accounts are complex.

Section 246A provides appeal to the Commissioner (Appeals) within 30 days of the assessment order; further appeal lies to the Income Tax Appellate Tribunal under Section 253.

Section 271(1)(c) penalty for concealment ranges from 100% to 300% of tax sought to be evaded; Section 270A provides a 50% or 200% penalty for under-reporting or misreporting.

Section 192 requires an employer to deduct TDS on salary at the average rate of tax applicable to the employee's estimated annual income.

Section 194C applies to payments to contractors at 1% for individuals and HUFs and 2% for others, with a threshold of Rs 30,000 per contract or Rs 1 lakh in a year.

Section 194J applies professional fees at 10% and technical services at 2%, with a threshold of Rs 30,000 per payee per year.

Section 194I applies rent at 10% for land and building and 2% for plant and machinery, with a threshold of Rs 2.4 lakh per year.

Section 194Q requires a buyer with turnover above Rs 10 crore to deduct 0.1% on purchases above Rs 50 lakh from a seller; Section 206C(1H) applies to sellers with a similar threshold.

Section 194-IA applies 1% TDS on transfer of immovable property for consideration of Rs 50 lakh or more; Form 26QB is used.

Section 206AA requires deduction at the higher of the specified rate or 20% where the deductee fails to furnish PAN; Section 206AB applies to non-filers.

Advance tax under Section 208 applies where tax liability is Rs 10,000 or more; instalments are 15%, 45%, 75%, and 100% by 15 June, 15 September, 15 December, and 15 March.

Section 234B charges 1% per month interest for default in advance tax; Section 234C charges 1% per month for deferment of instalments; Section 201(1A) charges 1% or 1.5% for TDS default.

Tax planning is lawful arrangement within the provisions; tax avoidance uses the letter of the law to defeat its intent; tax evasion is illegal, involving concealment or false claims.

Section 96 of the General Anti-Avoidance Rules (GAAR) defines an impermissible avoidance arrangement by reference to substance over form and lack of commercial substance.

GAAR applies to arrangements with a tax benefit above Rs 3 crore, is invoked by the Commissioner with approval of the Principal Chief Commissioner, and applies from AY 2018-19.

Section 90 and 90A provide relief for double taxation through exemption, credit, or deduction; Section 91 gives unilateral relief where no treaty exists.

Section 92 to 92F contain transfer pricing rules for international transactions between associated enterprises; the arm's length principle governs.

Section 80-IA and 80-IB tax holidays have sunset; Section 80-IAC provides a 100% deduction for three years for eligible startups.

Tax planning through HUF splitting, family arrangements, and income diversion must satisfy the clubbing provisions of Section 60 to 64.

Section 271AAB penalises undisclosed income found in a search; the Income Disclosure Scheme and Vivad se Vishwas are statutory amnesty routes.

The new regime under Section 115BAC offers lower slab rates but removes most exemptions and deductions, including HRA and Chapter VI-A items, so regime choice is a planning decision.

Section 6 and Section 9 determine scope: income accruing or arising in India, or deemed to accrue, is taxable for non-residents; Section 9(1)(i) covers business connection.

Section 9(1)(vi) taxes royalty and Section 9(1)(vii) taxes fees for technical services deemed to accrue in India, with the make-available rule for treaty partners.

Section 90 provides treaty relief; where a treaty is more beneficial, its provisions prevail over the Act under Section 90(2).

Permanent establishment under Article 5 of the OECD and UN models includes fixed place, construction PE, dependent agent, and service PE, and determines business profits taxation.

Section 92E requires a report in Form 3CEB for international transactions; the threshold for specified domestic transactions is Rs 20 crore.

Transfer pricing methods under Section 92C: comparable uncontrolled price, resale price, cost plus, profit split, and transactional net margin; the most appropriate method applies.

Section 92CA allows reference to the Transfer Pricing Officer; a secondary adjustment under Section 92CE applies where the primary adjustment exceeds Rs 1 crore.

Equalisation levy at 6% applies to online advertisement services and 2% to e-commerce supplies by non-residents, subject to thresholds.

Section 195 requires TDS on payments to non-residents at the rates in force; Section 197A and a certificate under Section 197 can lower the rate.

GST is a destination-based value-added tax with four slabs of 5%, 12%, 18%, and 28%, plus cess on demerit goods; petroleum and alcohol are outside GST.

Section 7 of the CGST Act defines supply to include sale, transfer, barter, exchange, licence, rental, and lease, for consideration in the course or furtherance of business.

Schedule I covers supplies without consideration, such as permanent transfer of business assets and supplies between related persons; Schedule III lists non-supplies like services by employees.

Input tax credit under Section 16 requires a tax invoice, receipt of goods or services, and payment of tax to the government; Section 17(5) blocks credits on motor vehicles, food, and club membership.

Composition scheme under Section 10 allows a manufacturer or trader with turnover up to Rs 1.5 crore to pay 1% or 0.5%; service providers up to Rs 50 lakh pay 6%.

Registration under Section 22 is required above Rs 40 lakh for goods and Rs 20 lakh for services; special category states use Rs 20 lakh and Rs 10 lakh.

Return filing: GSTR-1 for outward supplies by the 11th, GSTR-3B for summary and tax payment by the 20th, and GSTR-9 annual return by 31 December.

Reverse charge under Section 9(3) and 9(4) shifts the liability to the recipient for notified goods and services and for purchases from unregistered persons in specified cases.

GST is not deductible for income tax under Section 37 as it is a tax; credit availed reduces cost, and interest and penalty on GST are not allowable under Section 37(1).