CMA Inter Paper 7 (DITX) flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Previous year

The financial year in which income is earned, running from 1 April to 31 March, defined in Section 3 and immediately preceding the assessment year.

Deemed resident

An Indian citizen with Indian income above Rs 15 lakh who is not liable to tax abroad is deemed resident under Section 6(1A), but always resident but not ordinarily resident.

Place of effective management

The place where key management and commercial decisions necessary for the conduct of a company's business are made in substance, determining residence of foreign companies.

Standard deduction

A flat deduction of Rs 50,000 or the amount of salary, whichever is lower, allowed under Section 16(ia) from salary income regardless of actual expenditure.

House rent allowance exemption

Least of actual HRA, 50% of salary in metro cities or 40% elsewhere, and rent paid minus 10% of salary, computed under Rule 2A.

Gratuity exemption limit

For non-government employees, the least of Rs 20 lakh, 15/26 of salary per completed year of service, and actual gratuity received, under Section 10(10).

Rent-free accommodation valuation

Perquisite value is 10% of salary in cities above 40 lakh population and 7.5% elsewhere, reduced by rent paid by the employee, under Rule 3.

Annual value

The sum for which a property might reasonably be let, subject to municipal value and standard rent caps, on which house property income is computed under Section 23.

House property interest cap

Interest on borrowed capital for a self-occupied house is deductible up to Rs 2 lakh where the loan is for purchase or construction completed within five years.

House property loss set-off

Loss from house property is set off against other heads only up to Rs 2 lakh per year; the balance carries forward eight years against house property income.

Block of assets

A group of assets of the same class and same depreciation rate; depreciation under Section 32 is computed on the written-down value of the block.

Section 43B deduction

Statutory dues and specified expenses are deductible only on actual payment, though payment by the due date of filing the return suffices for the year.

Tax audit threshold

Audit under Section 44AB is required above Rs 1 crore turnover, or Rs 10 crore where cash receipts and payments are each within 5%.

Cash payment disallowance

Section 40A(3) disallows a business expense paid in cash exceeding Rs 10,000 to a single person in a single day, subject to specified exceptions.

Long-term capital asset

An asset held more than 36 months, or 24 months for unlisted shares and immovable property, or 12 months for listed securities and units.

Section 54 exemption

Long-term gains on a residential house are exempt if a new house in India is purchased within two years or constructed within three years of transfer.

Section 54EC bonds

Long-term gains up to Rs 50 lakh invested in NHAI or REC bonds within six months are exempt, provided the bonds are held for five years.

Gift taxation

Money or property received without consideration or at inadequate consideration exceeding Rs 50,000 in aggregate is taxed under Section 56(2)(x), with relative exemptions.

Section 80C ceiling

The aggregate deduction under Sections 80C, 80CCC, and 80CCD(1) is capped at Rs 1.5 lakh per year for an individual or HUF.

NPS additional deduction

Section 80CCD(1B) allows an extra deduction of up to Rs 50,000 for contributions to the National Pension System, over the Section 80C ceiling.

Health insurance deduction

Section 80D allows up to Rs 25,000 for self and family, Rs 50,000 for senior citizens, plus similar amounts for parents, with preventive health check-ups capped at Rs 5,000.

Belated return

A return filed after the due date under Section 139(4), permitted up to 31 December of the assessment year on payment of a fee under Section 234F.

Scrutiny assessment

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

Reassessment notice

A notice under Section 148 to assess escaped income, subject to three-year and ten-year limits, with sanction requirements depending on the amount involved.

Advance tax instalments

Cumulative percentages of tax payable by 15 June, 15 September, 15 December, and 15 March are 15%, 45%, 75%, and 100% respectively under Section 211.

Section 194Q TDS

A buyer with turnover above Rs 10 crore deducts 0.1% TDS on purchases exceeding Rs 50 lakh from a seller in a financial year.

Higher TDS for no PAN

Section 206AA requires deduction at the higher of the specified rate or 20% where the deductee does not furnish a PAN, subject to exceptions.

GAAR threshold

The General Anti-Avoidance Rules apply to an impermissible avoidance arrangement yielding a tax benefit exceeding Rs 3 crore, invoked with prescribed approvals.

Tax avoidance

Arranging affairs within the letter of the law to reduce tax without concealment, distinguishable from evasion, which is illegal, and from legitimate planning.

Arm's length price

The price charged in a comparable uncontrolled transaction between unrelated parties, used to adjust profits from international transactions under Section 92C.

Permanent establishment

A fixed place of business or dependent agent through which a non-resident carries on business in a treaty country, giving that country taxing rights over business profits.

Input tax credit

Credit for GST paid on inputs and input services used in business, available under Section 16 on possession of a tax invoice and actual receipt of the supply.