All important points related to taxation

Table of Content :

Sec 115BAC
Sec 115BAC - exemptions and deductions
Sec 288A and 288B
Section 115BBJ and 194BA
Surcharge / Rebate under section 87A
Partial Integration Scheme
Section 6(1A) Deemed Resident

All important points related to taxation for upcoming exams

1) Sec 115BAC

Application of the rates of tax on the total income
Rates prescribed under section 115BAC of the Income-tax Act for default tax regime

Section 115BAC of the Income-tax Act, 1961 provides for concessional rates of tax to individuals/HUF/AoPs/BoIs and artificial juridical persons. Under this regime certain exemptions/deductions are, however, not available like Leave Travel Concession, interest on housing loan on self-occupied property, deductions under Chapter VI-A [other than section 80CCD(2), 80CCH(2) or section 80JJAA] etc. The rates given under section 115BAC are the default tax rates unless the assessee exercises an option to shift out of the said regime. The basic exemption limit under section 115BAC is ` 3,00,000. This means that no tax is payable by an assessee with total income of upto ` 3,00,000. The tax rates under section 115BAC is as follows -

Rates prescribed by the Annual Finance Act under the optional tax regime

Individuals/HUF/AoPs/BoIs and artificial juridical persons, who exercise the option to opt out of the default tax regime under section 115BAC, have to pay tax as per normal provisions of the Act. Under the normal provisions of the Act, the rates of tax are prescribed by the Annual Finance Act of the year.

For individuals, HUF etc., the basic exemption limit is ` 2,50,000. This means that, as per the normal provisions of the Act, no tax is payable by individuals with total
income of upto ` 2,50,000. Those individuals whose total income is more than` 2,50,000 but less than ` 5,00,000 have to pay tax on their total income in excess of
` 2,50,000@5%. Total income between ` 5,00,000 and ` 10,00,000 attracts tax @20%. The highest rate is 30%, which is attracted in respect of income in excess of
` 10,00,000. The tax rates have to be applied on the total income to arrive at the income-tax liability.

For certain income (like Long Term Capital Gains, Lottery Income, Specified Short Term Capital Gains etc.), slab rates are not applicable under both the tax regimes.
These incomes are taxable at special rates of taxation under both the tax regimes. These special rates are contained in the Income-tax Act, 1961 itself

2) Sec 115BAC - exemptions and deductions

3) Sec 288A and 288B

Section 288A and 288B play crucial roles in determining the Total Income for tax purposes. Once various deductions are claimed from the Gross Total Income, the resulting figure represents the Total Income. However, according to Section 288A, this Total Income should be rounded off to the nearest multiple of `10. This rounding off ensures consistency and accuracy in tax calculations, aligning with legal requirements. It's a small but important detail that ensures precision in financial matters.

4) Section 115BBJ and 194BA

Section 115BBJ - Net winnings from online games - 30%

In case the Individual/HUF/AoP4/BoI and Artificial Juridical Person pays tax under default tax regime under section 115BAC

Income-tax computed in accordance with the provisions of section 115BAC and/ or section 111A or section 112 or section 112A or 115BBE or section 115BBJ would be increased by surcharge

Other incomes that attract special rate of tax-

section 111A - 15% Tax on Short Term Capital Gain on Shares or MF’s

section 112A - 10% Tax on Long Term Capital Gain on Shares or MF’s (on income above 1,00,000)

section 112 - 20% Tax Any other Long Term Capital Gain

section 115BB - 30% Tax on Casual Incomes other than online games

section 115BBJ - 30% tax on net winnings from online games

section 115BBE - 60% tax on Unexplained money, investment, etc

5) Surcharge / Rebate under section 87A

Surcharge: Surcharge is an additional tax payable over and above the income-tax. Surcharge is levied as a percentage of income-tax, where total income exceeds ` 50 lakhs.

Rebate under section 87A: In order to provide tax relief to the individual tax payers, section 87A provides a rebate from the tax payable by an assessee, being an
individual resident in India, whose total income does not exceed ` 7,00,000 underthe default tax regime under section 115BAC or ` 5,00,000 under the normal
provisions of the Act if he opts out of the default tax regime. Under the default tax regime, an individual whose total income exceeds ` 7 lakhs marginally is also entitled to a rebate of the difference between tax on total income and the amount by which the total income exceeds ` 7 lakhs, when the former is greater than the latter

6) Partial Integration Scheme

PARTIAL INTEGRATION OF AGRICULTURAL INCOME WITH NON-AGRICULTURAL INCOME

Agricultural income is exempt subject to conditions mentioned in the definition given under section 2(1A). However, a method has been laid down to levy tax on agricultural income in an indirect way. This concept is known as partial integration of agricultural income with non-agricultural income. It is applicable to individuals, HUF, AOPs, BOIs and artificial juridical persons. Two conditions which need to be satisfied for partial integration are:
1. The net agricultural income should exceed ` 5,000 p.a., and
2. Non-agricultural income should exceed the maximum amount not chargeable to tax. (i.e., If such person is paying tax under default tax regime u/s 115BAC, then ` 3,00,000 is the basic exemption limit irrespective of the age of the person. If such person has exercised the option to shift out of the default tax regime, then, the basic exemption limit would be ` 5,00,000 for resident individuals of the age of 80 years or more at any time during the previous year, ` 3,00,000 for resident individuals of the age of 60 years or more (but less than 80 years) at any time during the previous year and ` 2,50,000 for all others). Only if non-agricultural income exceeds this limit, partial integration would be required.

It may be noted that aggregation provisions do not apply to company, LLP, firm, co-operative society and local authority. The object of aggregating the net
agricultural income with non-agricultural income is to tax the non-agricultural income at higher rates.

Tax calculation in such cases is as follows:
Step 1: Add non-agricultural income with net agricultural income. Compute tax on the aggregate amount.

Step 2: Add net agricultural income and the basic exemption limit available to the assessee. Compute tax on the aggregate amount.
Step 3: Deduct the amount of income tax calculated in step 2 from the income tax calculated in step 1 i.e., Step 1 – Step 2.
Step4: The sum so arrived at shall be –
- increased by surcharge, if applicable,
- reduced by the rebate, if any, available u/s 87A.
Step 5: Thereafter, it would be increased by health and education cess @4%

7) Section 6(1A) Deemed Resident

Deemed resident [Section 6(1A)] – An individual, being an Indian citizen, having total income, other than the income from foreign sources [i.e., income which accrues or arises outside India (except income from a business controlled in or profession set up in India) and which is not deemed to accrue or arise in India], exceeding ` 15 lakhs during the previous year would be deemed to be resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.

However, this provision will not apply in case of an individual who is a resident of India in the previous year as per section 6(1).

• Only Indian citizen can be deemed resident. An individual who is not an Indian citizen but a person of Indian Origin cannot be deemed resident u/s 6(1A).
• Stay in India is not necessary for being a deemed resident u/s 6(1A).

Resident and ordinarily resident/Resident but not ordinarily resident

Only individuals and HUF can be “resident but not ordinarily resident” in India. All
other classes of assessees can be either a resident or non-resident. A notordinarily resident person is one who satisfies any one of the conditions specified
u/s 6(6).
(i) If such individual has been non-resident in India in any 9 out of the 10 previous years preceding the relevant previous year, or
(ii) If such individual has, during the 7 previous years preceding the relevant previous year, been in India for a period of 729 days or less, or
(iii) If such individual is an Indian citizen or person of Indian origin (who, being outside India, comes on a visit to India in any previous year) having total income, other than the income from foreign sources [i.e., income which accrues or arises outside India (other than income derived from a business controlled in or profession set up in India) and which is not deemed to accrue or arise in India], exceeding ` 15 lakhs during the previous year, who has

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