CHSE Odisha Vocational Tax Assistance cheat sheet

Income tax in India is levied under the Income-tax Act, 1961, and administered by the Central Board of Direct Taxes (CBDT) through the Income Tax Department.

The Finance Act passed each year fixes the rates of income tax and prescribes amendments to the Act for that assessment year.

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

Person under section 2(31) includes an individual, HUF, company, firm, AOP/BOI, local authority and artificial juridical person.

Assessee means a person liable to pay tax or any other sum under the Act, including a deemed assessee and a person against whom proceedings are initiated.

Residence-based taxation: residents are taxed on global income subject to exemptions, while non-residents are taxed only on India-sourced income.

Income is classified under five heads: salaries, house property, business/profession, capital gains, and other sources; total income is computed after applying Chapter VI-A deductions.

Administrative machinery includes Assessing Officer, Joint/Additional Commissioner, Commissioner (Appeals), ITAT, High Court and Supreme Court.

Basic condition: resident if stay in India is 182 days or more in the PY, or 60 days or more in the PY plus 365 days or more in the preceding four PYs.

The 60-day limb does not apply to an Indian citizen leaving India for employment or as crew, or to a person of Indian origin visiting India; only 182 days applies.

Additional condition for resident-and-ordinarily-resident (ROR): resident in at least 2 of the 10 preceding PYs and stay of 730 days or more in the 7 preceding PYs.

Deemed resident under section 6(1A): Indian citizen with Indian income above Rs 15 lakh, not liable to tax in any other country, and stay under 120 days; treated as non-resident for some purposes.

ROR: global income taxable unless exempt. RNOR: foreign income taxable only if derived from a business controlled in or profession set up in India.

Non-resident: only income received or accruing in India, or deemed to accrue or arise in India, is taxable.

Income deemed to accrue in India includes income from property, asset or source of income in India, and salary for services rendered in India.

Residential status is determined for each PY separately and is not elective except where the Act expressly provides an option.

Salary is taxable on due or receipt basis, whichever is earlier; advance salary is taxed on receipt and not again on becoming due.

Standard deduction under section 16(ia) is Rs 50,000 or the amount of salary, whichever is less, for the old regime; the new regime under section 115BAC allows Rs 75,000.

Basic salary, dearness allowance, bonus, commission and taxable allowances form part of salary; fully exempt allowances include transport allowance for disabled employees and certain court/UPSC allowances.

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

House rent allowance exemption requires actual payment of rent; if annual rent exceeds Rs 1 lakh, the landlord's PAN must be reported.

Gratuity exemption under section 10(10): for non-government employees covered by the Payment of Gratuity Act, the least of Rs 20 lakh, 15/26 of salary for each year of service, and actual gratuity.

Leave encashment on retirement for non-government employees is exempt up to the least of Rs 25 lakh, actual amount, average salary of 10 months, and cash equivalent of leave.

Perquisites are valued under section 17(2) and Rule 3; rent-free accommodation, motor car, interest-free loans and ESOPs are common taxable perquisites.

Profession tax and entertainment allowance (for government employees) are deductions under section 16; entertainment allowance deduction is limited to Rs 5,000 or 20% of salary.

Annual value is the higher of municipal value or fair rent, capped by standard rent under the Rent Control Act; if the property is let, actual rent received is compared with this amount.

Deduction under section 24(a) is a flat 30% of net annual value, irrespective of actual expenditure, plus interest on borrowed capital under section 24(b).

Interest deduction for a self-occupied house is capped at Rs 2 lakh where the loan is for purchase or construction and is completed within 5 years; otherwise Rs 30,000.

Pre-construction interest is allowed in five equal annual instalments starting from the year of completion.

Loss from house property can be set off against other income up to Rs 2 lakh per year; the balance is carried forward for 8 years against house property income only.

Business income is computed under section 28 after deducting allowable expenses wholly and exclusively incurred for the business; personal and capital expenses are not allowed.

Depreciation on plant and machinery is allowed under section 32 on the written-down value method; additional depreciation of 20% applies to new plant and machinery in manufacturing.

Presumptive schemes: section 44AD allows 6% (digital receipts) or 8% of turnover as income for eligible businesses up to Rs 2 crore (Rs 3 crore with 95% digital receipts); section 44ADA allows 50% for specified professions up to Rs 50 lakh (Rs 75 lakh with digital condition).

Books of account under section 44AA are mandatory for specified professions and for businesses exceeding prescribed turnover or income thresholds; tax audit under section 44AB applies above Rs 1 crore (Rs 10 crore with 95% digital receipts).

Short-term capital asset: listed equity shares and equity mutual funds held 12 months or less; unlisted shares and immovable property held 24 months or less; other assets 36 months or less.

Long-term capital gains on listed equity shares and equity mutual funds are taxed at 12.5% under section 112A beyond the Rs 1.25 lakh annual exemption, without indexation.

Long-term capital gains on immovable property are taxed at 12.5% without indexation for transfers on or after 23 July 2024; short-term gains are taxed at slab rates.

Section 54 exemption: LTCG on a residential house reinvested in one residential house in India, subject to conditions on purchase within 1 year before or 2 years after transfer, or construction within 3 years.

Section 54F exemption applies to LTCG on any asset other than a residential house reinvested in a residential house; the exemption is proportionate to the amount invested.

Section 54EC allows investment in specified bonds up to Rs 50 lakh within 6 months of transfer, with a 5-year lock-in.

Income from other sources under section 56 includes interest, dividends, winnings from lotteries and gifts; gifts exceeding Rs 50,000 in aggregate from non-relatives are fully taxable.

Relatives for gift exemption include spouse, siblings, parents, lineal ascendants/descendants and their spouses; gifts on marriage and under a will are exempt.

Interest on savings bank accounts is deductible up to Rs 10,000 under section 80TTA (Rs 50,000 under 80TTB for senior citizens).

Section 80C allows up to Rs 1.5 lakh for LIC premium, PPF, EPF, ELSS, NSC, tuition fees, principal repayment of housing loan and 5-year bank deposits.

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

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

Section 80E allows interest on an education loan for self, spouse or children for 8 years, with no monetary cap.

Section 80G allows deduction for donations to specified funds and charitable institutions, ranging from 50% to 100% of the amount, subject to qualifying limits.

Section 80TTA gives Rs 10,000 deduction on savings bank interest for non-seniors; section 80TTB gives Rs 50,000 for senior citizens on all deposit interest.

The new regime under section 115BAC offers lower slab rates but disallows most Chapter VI-A deductions except 80CCD(2), 80JJAA and a few others; it is the default regime.

Tax planning is legitimate arrangement within the law, whereas tax evasion is illegal suppression of income and tax avoidance exploits loopholes without commercial substance.

Section 87A rebate: under the new regime, no tax is payable if total income does not exceed Rs 12 lakh (rebate up to Rs 60,000), subject to special-rate income being excluded.

Steps: compute income under each of the five heads; set off intra-head and inter-head losses under sections 70 and 71; apply Chapter VI-A deductions; compute tax on total income.

Losses under capital gains, business and other sources can be carried forward for 8 years; house property loss for 8 years; unabsorbed depreciation can be carried forward indefinitely.

Specified speculative business losses can be set off only against speculative income and carried forward for 4 years.

Tax is computed by applying slab rates to normal income and special rates to incomes under sections 111A, 112, 112A and 115BB; surcharge and health and education cess at 4% are added.

Surcharge rates under the new regime: 10% above Rs 50 lakh, 15% above Rs 1 crore, 25% above Rs 2 crore; the 37% rate applies only under the old regime above Rs 5 crore.

Marginal relief applies where crossing a surcharge threshold results in tax exceeding the additional income above the threshold.

Slab rates for individuals under the new regime for AY 2025-26: nil up to Rs 4 lakh, 5% for Rs 4-8 lakh, 10% for Rs 8-12 lakh, 15% for Rs 12-16 lakh, 20% for Rs 16-20 lakh, 25% for Rs 20-24 lakh, 30% above Rs 24 lakh.

Old regime slabs for individuals below 60: nil up to Rs 2.5 lakh, 5% for Rs 2.5-5 lakh, 20% for Rs 5-10 lakh, 30% above Rs 10 lakh.

Advance tax is payable in instalments of 15%, 45%, 75% and 100% by 15 June, 15 September, 15 December and 15 March respectively.

Section 192: employer deducts TDS on salary at average rate of tax computed on estimated salary income for the year.

Section 194A: TDS at 10% on interest other than securities if paid to a non-bank payer exceeds Rs 50,000 (Rs 1 lakh for senior citizens) in a financial year.

Section 194C: TDS at 1% for individual/HUF payees and 2% for others on contract payments exceeding Rs 1 lakh in aggregate or Rs 30,000 in a single payment.

Section 194J: TDS at 10% on professional fees, and 2% on technical services, where payment exceeds Rs 50,000 per year.

Section 194I: TDS at 10% on rent of land, building or furniture and 2% on plant and machinery, where annual rent exceeds Rs 2.4 lakh.

Section 194IA: TDS at 1% on transfer of immovable property where consideration is Rs 50 lakh or more; Form 26QB is used for the challan-cum-statement.

Advance tax is not payable if tax liability after TDS is below Rs 10,000; interest under section 234B (1% per month) applies for shortfall, and 234C for deferment of instalments.

ITR forms: ITR-1 (Sahaj) for resident individuals with income up to Rs 50 lakh from salary, one house property and other sources; ITR-4 (Sugam) for presumptive income; ITR-2 for capital gains and more than one house property.

Due date for filing ITR for non-audit individuals is 31 July of the assessment year; belated return can be filed up to 31 December, with late fee under section 234F up to Rs 5,000.

GST is a destination-based, multi-stage value-added tax on supply of goods and services, introduced on 1 July 2017 under the CGST Act, 2017.

Taxable event is supply; section 7 covers supply for consideration in the course of business and specified supplies without consideration, such as gifts above Rs 50,000 to related persons.

Registration is mandatory once aggregate turnover exceeds Rs 40 lakh for goods and Rs 20 lakh for services (Rs 20 lakh and Rs 10 lakh in special category states).

Composition scheme under section 10 allows a turnover limit of Rs 1.5 crore (Rs 75 lakh for special category states) with tax at 1% for traders and manufacturers and 5% for restaurants.

Input tax credit under section 16 requires a valid tax invoice, actual receipt of goods or services, payment of tax to the government by the supplier, and filing of returns; ITC must be claimed by 30 November following the financial year.

Returns: GSTR-1 for outward supplies, GSTR-3B for monthly summary and payment, GSTR-4 for composition dealers, GSTR-9 annual return; QRMP scheme allows quarterly returns with monthly payment.

Reverse charge mechanism shifts the liability to pay GST from the supplier to the recipient, applicable to specified goods and services such as legal services and import of services.

E-way bill is required for movement of goods where value exceeds Rs 50,000; for intra-state movement, state-specific limits may apply.

Place of supply determines whether a supply is inter-state or intra-state; inter-state supplies attract IGST, while intra-state supplies attract CGST plus SGST.