Business Taxation — BBA 6th Sem | BDBBA 308

UNIT 01

Income Tax Law — Basic Concepts

15 Lectures

📌 Key Definitions You MUST Know

Income Tax Act 1961 — Governs direct taxes in India. Came into force 1 April 1962.
Previous Year (PY) — Year in which income is EARNED (FY 2024-25 = Apr 2024–Mar 2025).
Assessment Year (AY) — Year following PY in which tax is assessed (AY 2025-26).
Assessee — Person who is liable to pay tax or any sum under IT Act.
Person (Sec 2(31)) — Individual, HUF, Company, Firm, AOP/BOI, Local Authority, Artificial Juridical Person.
Income (Sec 2(24)) — Includes: salary, profits, dividends, perquisites, capital gains, winnings, gifts above ₹50,000, etc.

Basis of Charge — Sec 4 & 5


Tax is charged on TOTAL INCOME of every person for every AY.

Total Income is computed at rates prescribed by Finance Act for that year.


Scope (Sec 5):

• Resident & Ordinarily Resident (R&OR) → Taxed on GLOBAL income

• Resident but Not Ordinarily Resident (RNOR) → India income + foreign income from India business

• Non-Resident (NR) → ONLY India-sourced income

Old Regime — Below 60 yrs

Up to ₹2,50,000NIL

₹2,50,001 – ₹5,00,0005%

₹5,00,001 – ₹10,00,00020%

Above ₹10,00,00030%

Senior Citizen (60–79) Exemption₹3,00,000

Super Senior (80+) Exemption₹5,00,000

New Regime — FY 2024-25 (Default)

Up to ₹3,00,000NIL

₹3,00,001 – ₹7,00,0005%

₹7,00,001 – ₹10,00,00010%

₹10,00,001 – ₹12,00,00015%

₹12,00,001 – ₹15,00,00020%

Above ₹15,00,00030%

Q.1

Define: Previous Year, Assessment Year, Assessee, and Person. Give examples for each.

Exam FavTheory+Practical

▼

Term	Meaning	Example
Previous Year	FY in which income is earned (1 Apr–31 Mar)	FY 2024-25 = PY for AY 2025-26
Assessment Year	Year following PY; when tax is calculated and paid	AY 2025-26 (1 Apr 2025–31 Mar 2026)
Assessee	Person liable to pay tax or file return u/s 139	Mr. Raj with salary ₹6L — he is assessee
Person	Includes 7 categories u/s 2(31)	Individual, HUF, Company, Firm, AOP, BOI, Local Authority, AJP

Key PointException to PY=AY rule: Shipping business (Sec 172), persons leaving India (Sec 174), AOP/BOI dissolved (Sec 176) — these may be assessed in same year as income.

Q.2

Mr. Arvind (Indian citizen) was in India: PY 2024-25 = 190 days. Last 4 years combined = 300 days. NR for all last 10 years. Determine his residential status and tax incidence.

Exam Fav

▼

Residential Status Tests — Sec 6(1)

Condition 1: Present in India ≥ 182 days in PY
Condition 2: Present ≥ 60 days in PY AND ≥ 365 days in last 4 PYs
Satisfy ANY ONE → RESIDENT. Satisfy NONE → NON-RESIDENT.
Note: Indian citizens going abroad for employment → only Condition 1 applies (60-day rule not applicable).

Step 1 — Test Condition 1

190 days in PY ≥ 182 days ✅ → He IS a Resident.

Step 2 — Check if R&OR or RNOR

RNOR conditions (Sec 6(6)): (a) Non-Resident in 9 of last 10 PYs, OR (b) Present in India ≤729 days in last 7 PYs.
Given: NR in ALL last 10 years → Satisfies condition (a).
Result: He is RNOR (Resident but Not Ordinarily Resident)

Income Type	R&OR Taxable?	RNOR Taxable?	NR Taxable?
Income earned in India	✅ Yes	✅ Yes	✅ Yes
Income received in India	✅ Yes	✅ Yes	✅ Yes
Foreign income from India business	✅ Yes	✅ Yes	❌ No
Other foreign income	✅ Yes	❌ No	❌ No

Final AnswerMr. Arvind = RNOR. Foreign income (not from India business) NOT taxable in India. Only India-income + India-business foreign income taxed.

Q.3

Mr. Ram (45 yrs, resident). Total Taxable Income = ₹12,50,000 (Old Regime). Compute tax payable including cess.

Exam FavEasy

▼

Slab	Calculation	Tax (₹)
Up to ₹2,50,000	NIL	0
₹2,50,001–₹5,00,000	5% × ₹2,50,000	12,500
₹5,00,001–₹10,00,000	20% × ₹5,00,000	1,00,000
₹10,00,001–₹12,50,000	30% × ₹2,50,000	75,000
Income Tax		1,87,500
Health & Education Cess @ 4%	4% × ₹1,87,500	7,500
Tax Payable		1,95,000

Final AnswerMr. Ram's Tax Payable = ₹1,95,000 | No Surcharge (income < ₹50L) | No 87A rebate (income > ₹5L)

UNIT 02

Heads of Income + Clubbing + Deductions

15 Lectures

📋 Salary Computation Format (Sec 15–17)


Basic + DA + HRA received + All Allowances + Perquisites = GROSS SALARY
− HRA Exemption u/s 10(13A) [Min of 3 values]
− Other exemptions (LTA etc.)
= Net Salary
− Standard Deduction ₹50,000 u/s 16(ia)
− Entertainment Allowance u/s 16(ii) [Govt employees only]
− Professional Tax u/s 16(iii)
= INCOME FROM SALARY

HRA Exempt = Minimum of:
  (i) Actual HRA Received
  (ii) Rent Paid − 10% of (Basic + DA)
  (iii) 50% of (Basic+DA) [Metro] / 40% [Non-Metro]
Metro cities: Delhi, Mumbai, Kolkata, Chennai

Q.4

Mr. Rajan works in Mumbai. Basic = ₹45,000/m, DA = ₹9,000/m (for retirement), HRA received = ₹20,000/m, Rent paid = ₹16,000/m. Professional Tax = ₹2,400/yr. Medical Insurance by employer = ₹8,000. Compute Income from Salary.

Exam Fav

▼

Given Data (Annual)

Item	Monthly	Annual
Basic Salary	₹45,000	₹5,40,000
DA (forms part of salary)	₹9,000	₹1,08,000
HRA Received	₹20,000	₹2,40,000
Rent Paid	₹16,000	₹1,92,000
Professional Tax	—	₹2,400

Step 1 — HRA Exemption (Mumbai = Metro → 50%)

Basic + DA = ₹5,40,000 + ₹1,08,000 = ₹6,48,000

(i) Actual HRA = ₹2,40,000
(ii) Rent − 10%(B+DA) = ₹1,92,000 − ₹64,800 = ₹1,27,200
(iii) 50% × ₹6,48,000 = ₹3,24,000

HRA Exempt = Min(₹2,40,000 ; ₹1,27,200 ; ₹3,24,000) = ₹1,27,200

Step 2 — Salary Computation

Particulars	₹
Basic Salary	5,40,000
Dearness Allowance	1,08,000
HRA Received	2,40,000
Medical Insurance by Employer (Perquisite — taxable)	8,000
Gross Salary	8,96,000
Less: HRA Exemption u/s 10(13A)	(1,27,200)
Net Salary	7,68,800
Less: Standard Deduction u/s 16(ia)	(50,000)
Less: Professional Tax u/s 16(iii)	(2,400)
Income from Salary	7,16,400

Final AnswerIncome from Salary = ₹7,16,400

📋 House Property Formula (Sec 22–27)


LET-OUT PROPERTY:
  GAV = Higher of (Expected Rent OR Actual Rent Received)
  [Expected Rent = Higher of Municipal Value or Fair Rent, capped at Standard Rent]
  − Municipal Taxes paid by owner
  = Net Annual Value (NAV)
  − 30% of NAV [Standard Deduction u/s 24(a)]
  − Interest on Home Loan u/s 24(b) [No cap for let-out]
  = Income from House Property

SELF-OCCUPIED (SOP):
  GAV = ₹0 → NAV = ₹0 → Std Ded = ₹0
  − Interest on loan u/s 24(b) [Cap: ₹2,00,000 if loan after 1.4.1999]
  = LOSS (up to ₹2,00,000 — can set off against salary)

Q.5

Mr. Suresh owns two properties. House A (self-occupied): Home loan interest = ₹2,80,000. House B (let-out): Actual rent = ₹15,000/m, Municipal Value = ₹1,40,000, Fair Rent = ₹1,60,000, Standard Rent = ₹1,50,000, Municipal tax = ₹12,000 (paid by owner), Home loan interest = ₹60,000. Compute HP income.

Exam FavImportant

▼

House A — Self-Occupied Property

GAV (SOP = Zero)	0
NAV	0
Interest on loan (actual ₹2,80,000, cap ₹2,00,000)	(2,00,000)
Loss from House A (SOP)	(2,00,000)

House B — Let-Out Property: Find GAV

Actual Rent = ₹15,000 × 12 = ₹1,80,000
Expected Rent = Higher(MV ₹1,40,000 or FR ₹1,60,000) = ₹1,60,000 → BUT capped at Standard Rent ₹1,50,000
Expected Rent (after cap) = ₹1,50,000
GAV = Higher(Expected ₹1,50,000 or Actual ₹1,80,000) = ₹1,80,000

GAV	1,80,000
Less: Municipal Tax (paid by owner)	(12,000)
NAV	1,68,000
Less: 30% of NAV u/s 24(a)	(50,400)
Less: Interest on loan u/s 24(b) [No cap — let-out]	(60,000)
Income from House B	57,600

Combined HP Income

Income from House A (SOP)	(2,00,000)
Income from House B (Let-out)	57,600
Net Income from House Property	(1,42,400) — Loss

Final AnswerNet HP Loss = ₹1,42,400. This can be set off against salary income (max ₹2L limit per year) and balance carried forward 8 years.

Q.6

M/s Sharma Traders (Firm) P&L shows Net Profit ₹3,80,000. Items included in P&L: Income Tax paid ₹25,000; Personal expenses of partner ₹12,000; Donation to charitable trust ₹15,000; Book depreciation ₹30,000; Fine for traffic violation ₹3,000. IT Depreciation allowed = ₹40,000. Compute Income from Business.

Exam FavFirms asked!

▼

⚠ Why We Add Back These Items

The P&L already subtracted these expenses to get ₹3,80,000 net profit. IT Act does NOT allow these as deductions. So we must REVERSE (add back) them, then subtract what IT Act allows separately.

Particulars	₹
Net Profit as per P&L Account	3,80,000
ADD BACK — Disallowed Expenses (charged in P&L, not allowed by IT Act)
Income Tax paid (personal liability, not business expense)	25,000
Personal expenses of partner (not wholly for business)	12,000
Donation (claimed u/s 80G separately, not u/s 37)	15,000
Book Depreciation (IT has own method)	30,000
Fine for traffic violation (penalty — not deductible u/s 37)	3,000
Total after additions	4,65,000
DEDUCT — Amounts Allowed by IT Act
IT Depreciation u/s 32	(40,000)
Income from Business/Profession	4,25,000

Final AnswerBusiness Income = ₹4,25,000

📋 Capital Gains (Sec 45–55)


STCG = Sale Price − Transfer Expenses − Cost of Acquisition − Cost of Improvement
[No indexation. Taxed at slab rates OR 15% for listed shares u/s 111A]

LTCG = Sale Price − Transfer Expenses − INDEXED Cost of Acquisition − INDEXED Cost of Improvement
[Indexed Cost = Original Cost × (CII of Sale Year ÷ CII of Purchase Year)]
Tax: 20% with indexation u/s 112

Holding Period:
 Land/Building/Unlisted shares → STCA if ≤24 months
 Listed Shares/Equity MFs → STCA if ≤12 months

Q.7

Mrs. Priya sold her flat for ₹25,00,000 on 15 Dec 2024. Purchased on 1 Apr 2010 for ₹8,00,000. Registration charges at purchase = ₹60,000. Brokerage on sale = ₹50,000. CII 2010-11 = 167, CII 2024-25 = 363. Compute LTCG and tax.

Exam Fav

▼

Step 1 — Confirm LTCG (Flat = Land/Building, held 14+ years > 24 months)

Step 2 — Indexed Cost of Acquisition

Cost of Acquisition = Purchase Price + Registration = ₹8,00,000 + ₹60,000 = ₹8,60,000
(Registration at purchase = part of cost of acquisition ✅)

Indexed Cost = ₹8,60,000 × (363 ÷ 167) = ₹8,60,000 × 2.174 = ₹18,69,640

Sale Price (Full Value of Consideration)	25,00,000
Less: Brokerage on sale (Transfer expenses)	(50,000)
Net Sale Proceeds	24,50,000
Less: Indexed Cost of Acquisition	(18,69,640)
Long Term Capital Gain (LTCG)	5,80,360

Tax on LTCG

LTCG Tax @ 20% u/s 112	1,16,072
+ 4% Cess	4,643
Tax Payable on LTCG	1,20,715

💡 Sec 54 Exemption (Exam Often Asks)

If Mrs. Priya buys another residential house within 1 year before / 2 years after sale OR constructs within 3 years → LTCG reinvested amount is EXEMPT. Balance LTCG taxed @ 20%.

Final AnswerLTCG = ₹5,80,360 | Tax = ₹1,20,715 (before any Sec 54 exemption)

Clubbing of Income — Sec 60–65

Sec 60: Income transferred without transferring asset → clubbed with transferor.
Sec 61: Revocable transfer of assets → income clubbed with transferor.
Sec 64(1): Income of spouse from a concern in which person has substantial interest → clubbed with the person.
Sec 64(1A): Income of minor child (except disability) → clubbed with parent having HIGHER income. Exemption = ₹1,500 per minor child.
Sec 64(2): Husband gifts property to wife → income from that property clubbed with husband.

Q.8

Mr. Arun gifts ₹5,00,000 to his wife Sita. She invests in FD earning ₹40,000 interest. Their minor son Rohan (age 10) earns ₹25,000 from a competition prize. Arun earns ₹8L, Sita earns ₹6L. How is clubbing applied?

Exam Fav

▼

Wife's Income from Gift Money — Sec 64(2)

Arun gifted ₹5L to Sita → she earned ₹40,000 FD interest from that gifted amount.
This ₹40,000 is clubbed back with Arun (the husband/donor).
Reason: Husband cannot reduce tax by transferring assets to wife.

Minor Child's Income — Sec 64(1A)

Rohan's prize = ₹25,000.
Clubbed with parent having HIGHER income = Arun (₹8L > Sita ₹6L).
Exemption u/s 10(32) = ₹1,500 per child.
Clubbed amount = ₹25,000 − ₹1,500 = ₹23,500 added to Arun's income.

Person	Own Income	Clubbed	Total
Mr. Arun	8,00,000	40,000 (wife's FD) + 23,500 (son's prize)	8,63,500
Mrs. Sita	6,00,000	NIL (clubbing removed her FD income)	6,00,000

Final AnswerArun's Taxable Income = ₹8,63,500 | Sita's = ₹6,00,000

📋 Chapter VI-A Deductions (Old Regime Only)


80C  — LIC + PF + PPF + ELSS + Tuition fees + Home loan principal — Max ₹1,50,000
80CCC — Pension fund contribution — within 80C limit
80CCD(1B) — NPS contribution — EXTRA ₹50,000 above 80C limit
80D  — Health Insurance: Self+family ₹25,000; Parents (senior) ₹50,000
80E  — Education loan interest — Full amount, 8 years max
80G  — Donations — 50% or 100% depending on institution
80TTA— Savings bank interest — Max ₹10,000
80TTB— Senior citizen interest income — Max ₹50,000

Q.9

Mr. Deepak: GTI = ₹9,00,000. Investments: LIC ₹60,000, PPF ₹50,000, ELSS ₹60,000, NPS u/s 80CCD(1B) = ₹40,000, Medical Insurance (self) = ₹22,000, Medical Insurance (senior parents) = ₹55,000, Education loan interest = ₹18,000. Compute Total Income.

Exam Fav

▼

Compute Chapter VI-A Deductions

Sec 80C: LIC ₹60,000 + PPF ₹50,000 + ELSS ₹60,000 = ₹1,70,000 BUT ceiling = ₹1,50,000 → Deduction = ₹1,50,000

Sec 80CCD(1B): NPS ₹40,000 — this is SEPARATE from 80C limit → full ₹40,000 deductible

Sec 80D: Self insurance ₹22,000 (limit ₹25,000 — OK ✅) + Senior parents ₹55,000 (limit ₹50,000 → cap at ₹50,000) = ₹72,000

Sec 80E: Education loan interest ₹18,000 — full amount (no cap) = ₹18,000

Gross Total Income	9,00,000
Less: 80C (capped at ₹1,50,000)	(1,50,000)
Less: 80CCD(1B) — NPS	(40,000)
Less: 80D — Health Insurance	(72,000)
Less: 80E — Education Loan Interest	(18,000)
Total Income (Taxable)	6,20,000

Final AnswerTotal Income = ₹6,20,000

Q.10

M/s ABC Firm (partnership). Business Income = ₹8,00,000. Salary to partners: A = ₹1,20,000, B = ₹1,20,000 (as per deed). Interest paid to partners @ 12% on capital ₹5,00,000. Compute tax of the firm.

Firm AssessmentExam Fav

▼

Assessment of Firms — Key Rules

Tax Rate: Partnership firms taxed at flat 30% + 4% cess (no slab benefit).
Salary to partners: Allowed u/s 40(b) — limited to: Book Profit ≤ ₹3L → 90% or ₹1,50,000 whichever more; Above ₹3L → 60% of book profit.
Interest to partners: Allowed u/s 40(b) — max 12% p.a. simple interest.
Share of profit received by partners = EXEMPT in their hands (Sec 10(2A)).

Step 1 — Compute Book Profit

Book Profit = Business Income before salary/interest deduction
But first check: Interest @ 12% × ₹5,00,000 = ₹60,000 (12% = allowed, so deductible) ✅
Book Profit = ₹8,00,000 − ₹60,000 (interest) = ₹7,40,000

Step 2 — Maximum Salary Allowed u/s 40(b)

First ₹3,00,000: 90% × ₹3,00,000 = ₹2,70,000 OR ₹1,50,000 — whichever MORE = ₹2,70,000
Remaining ₹4,40,000 (₹7,40,000−₹3,00,000): 60% × ₹4,40,000 = ₹2,64,000
Max allowed salary = ₹2,70,000 + ₹2,64,000 = ₹5,34,000
Actual salary paid = ₹1,20,000 + ₹1,20,000 = ₹2,40,000 (within limit ✅ — fully allowed)

Business Income	8,00,000
Interest to partners (allowed @ 12%)	(60,000)
Salary to partners (within 40(b) limit)	(2,40,000)
Taxable Income of Firm	5,00,000
Tax @ 30% flat	1,50,000
+ 4% Cess	6,000
Tax Payable by Firm	1,56,000

Final AnswerFirm's Tax = ₹1,56,000 | Partners' share of profit = EXEMPT u/s 10(2A)

UNIT 03

GTI + Set-Off + Tax Liability + ITR

15 Lectures

📋 Complete Computation Flow


Income from Salary
+ Income from House Property (or Loss)
+ Profits from Business/Profession
+ Capital Gains (Short-Term + Long-Term)
+ Income from Other Sources
= GROSS TOTAL INCOME (GTI)
− Chapter VI-A Deductions (80C, 80D etc.)
= TOTAL INCOME (Taxable Income)
Apply slab rates → Income Tax
+ Surcharge (if income > ₹50L)
+ 4% Health & Education Cess
− Rebate u/s 87A (if Total Income ≤ ₹5L → max ₹12,500)
= TAX PAYABLE
− TDS Already Deducted
− Advance Tax Paid
= BALANCE TAX / REFUND DUE

Set-Off and Carry Forward Rules

Intra-head Set-Off: Loss from one source under a head can set off gain from another source under same head.

Inter-head Set-Off: Loss from HP (up to ₹2L) can set off against Salary. Business loss can set off against all except salary. Capital loss CANNOT set off against salary/business.

Carry Forward:

HP Loss → 8 years (only against HP income)
Business Loss → 8 years (against business income)
STCL → 8 years (against STCG or LTCG)
LTCL → 8 years (ONLY against LTCG)
Speculative Loss → 4 years (only against speculative profits)

Q.11

COMPREHENSIVE: Mr. Mohan (40 yrs, Delhi, resident, Old Regime). Basic ₹50,000/m, DA ₹8,000/m, HRA ₹22,000/m, Rent ₹18,000/m, Prof Tax ₹2,400. HP Loss (SOP loan interest) = ₹1,80,000. Business income ₹2,20,000. LTCG ₹90,000. FD Interest ₹28,000. LIC ₹80,000, PPF ₹40,000, 80D ₹18,000. Compute Total Income & Tax.

MOST LIKELY EXAM Q

▼

1 — Salary Income

Annual: Basic ₹6L, DA ₹96K, HRA ₹2,64,000 | Basic+DA = ₹6,96,000
HRA Exempt = Min of: (i) ₹2,64,000 (ii) ₹2,16,000−₹69,600=₹1,46,400 (iii) 50%×₹6,96,000=₹3,48,000 = ₹1,46,400

Gross Salary (6L+96K+2.64L)	9,60,000
HRA Exempt	(1,46,400)
Standard Deduction + Prof Tax	(52,400)
Income from Salary	7,61,200

2 — All Heads of Income & Set-Off

Income from Salary	7,61,200
HP Loss (SOP) — set off against salary (cap ₹2L, actual ₹1,80,000)	(1,80,000)
Business Income	2,20,000
LTCG (u/s 112 — taxed separately @ 20%)	90,000
Other Sources (FD Interest)	28,000
GROSS TOTAL INCOME	9,19,200
80C: LIC ₹80K + PPF ₹40K = ₹1,20,000 (within ₹1.5L cap)	(1,20,000)
80D: Medical Insurance ₹18,000	(18,000)
TOTAL INCOME	7,81,200

3 — Tax Computation

Note: LTCG ₹90,000 taxed separately @ 20% = ₹18,000. Remaining income = ₹7,81,200 − ₹90,000 = ₹6,91,200 at slab rates.
Slab on ₹6,91,200: ₹0 to ₹2.5L = NIL | ₹2.5L–₹5L = ₹12,500 | ₹5L–₹6.91L = 20% × ₹1,91,200 = ₹38,240

Tax on normal income (₹6,91,200) at slabs	50,740
Tax on LTCG @ 20%	18,000
Total Income Tax	68,740
+ 4% Cess	2,750
Tax Payable	71,490

Final AnswerTotal Income = ₹7,81,200 | Tax Payable = ₹71,490

Q.12

Mr. Vijay estimates his tax liability for FY 2024-25 as ₹80,000. Show the advance tax payment schedule. What interest is charged if he fails to pay the June instalment?

Important

▼

Due Date	% Cumulative	Cumulative Amount	This Instalment
On/before 15 June 2024	15%	₹12,000	₹12,000
On/before 15 Sept 2024	45%	₹36,000	₹24,000
On/before 15 Dec 2024	75%	₹60,000	₹24,000
On/before 15 March 2025	100%	₹80,000	₹20,000

Interest u/s 234C (for deferring instalment): 1% per month for 3 months on shortfall.
If June instalment (₹12,000) not paid → Interest = 1% × ₹12,000 × 3 = ₹360.
Interest u/s 234B (for not paying 90% of tax): 1% per month from April of AY till payment.
Exception: If tax liability ≤ ₹10,000 → no advance tax required.

Final AnswerJune instalment = ₹12,000. Failure → 234C interest = ₹360 (1%/month × 3 months)

Q.13

Explain the process of e-filing of Income Tax Return (ITR). What are the due dates, types of ITR forms, and consequences of late filing?

Exam FavTheory Q

▼

ITR Form	Who Files It
ITR-1 (Sahaj)	Resident individuals — Salary + HP + Other Sources — Income ≤ ₹50L
ITR-2	Individuals with capital gains or foreign income
ITR-3	Individuals/HUF with business/profession income
ITR-4 (Sugam)	Presumptive business income u/s 44AD/44ADA/44AE
ITR-5	Firms, AOP, BOI, LLP

Category	Due Date (AY 2025-26)
Individuals (non-audit)	31 July 2025
Audit cases (businesses)	31 October 2025
Belated Return	31 December 2025
Late Fee u/s 234F	₹5,000 (income >₹5L) \| ₹1,000 (income ≤₹5L)

E-Filing Steps:
1. Login to incometax.gov.in using PAN
2. Select correct ITR form
3. Fill pre-filled data (salary from Form 16, TDS from 26AS)
4. Enter deductions (80C, 80D etc.)
5. Compute tax → pay any balance via challan 280
6. Submit → Verify via Aadhaar OTP / Net Banking / Digital Signature

ITR-V: Acknowledgement sent to email. Must be verified within 30 days.

Key PointE-filing is MANDATORY if income >₹2.5L or if foreign income exists or refund is claimed.

Q.14

Ms. Asha (28 yrs). Salary income = ₹3,80,000. FD interest = ₹30,000. 80C = ₹50,000. Compute tax. Show 87A rebate.

Easy + TrickyExam Fav

▼

Salary Income	3,80,000
Other Sources (FD)	30,000
GTI	4,10,000
Less: 80C	(50,000)
Total Income	3,60,000
Tax: 5% × (₹3,60,000−₹2,50,000) = 5% × ₹1,10,000	5,500
Less: Rebate u/s 87A [Tax ₹5,500 < ₹12,500, total income ≤ ₹5L] ✅	(5,500)
Tax after Rebate	0
Cess on ₹0	0
Tax Payable	ZERO

Final AnswerTax = ₹ZERO. Sec 87A wipes out entire tax since Total Income (₹3,60,000) ≤ ₹5,00,000.

UNIT 04

Goods & Services Tax (GST)

15 Lectures

🔑 What is GST? Key Features

GST = One Nation, One Tax. Implemented from 1 July 2017 replacing VAT, Service Tax, Excise Duty etc.

Dual GST Structure:

CGST — Central GST (collected by Central Govt)
SGST — State GST (collected by State Govt)
IGST — Integrated GST (on inter-state supply — collected by Centre, shared with states)
UTGST — Union Territory GST

Rates: 0%, 5%, 12%, 18%, 28% (with cess on luxury/sin goods).
Threshold for Registration: Aggregate turnover > ₹40 lakh (goods) / ₹20 lakh (services) [₹10L for special category states].

CGST vs SGST vs IGST — Application


Intra-State Supply (within same state): CGST + SGST (each = half the GST rate)
  Example: Delhi seller → Delhi buyer, GST 18% → 9% CGST + 9% SGST

Inter-State Supply (between different states OR import): IGST
  Example: Delhi seller → Mumbai buyer, GST 18% → 18% IGST

Import of Goods: IGST + Customs Duty

Export of Goods/Services: ZERO rated (0% GST, ITC refundable)

Q.15

M/s Krishna Traders (Delhi) sells goods worth ₹1,00,000 to Raj Pvt Ltd (Delhi) [Intra-state] and goods worth ₹2,00,000 to Star Ltd (Mumbai) [Inter-state]. GST rate = 18%. Show the GST treatment for both.

GSTExam Fav

▼

Transaction A — Intra-State (Delhi to Delhi): CGST + SGST

Particulars	₹
Sale Value (Taxable Value)	1,00,000
+ CGST @ 9% (half of 18%)	9,000
+ SGST @ 9% (half of 18%)	9,000
Total Invoice Value	1,18,000

Transaction B — Inter-State (Delhi to Mumbai): IGST only

Sale Value	2,00,000
+ IGST @ 18% (full rate)	36,000
Total Invoice Value	2,36,000

RuleSame state = split (CGST+SGST) | Different state = IGST only. Never charge CGST+SGST on inter-state!

Q.16

Explain Place of Supply with examples. Why is it important to determine CGST+SGST vs IGST?

GSTImportant

▼

Place of Supply — Sec 10 & 12 (IGST Act)

Place of Supply determines WHETHER to charge CGST+SGST or IGST.

Type of Supply	Place of Supply	Tax
Supply of Goods (movement involved)	Where goods delivered to recipient	IGST if different state
Supply of Goods (no movement)	Where goods located at time of delivery	CGST+SGST if same state
Services — General Rule	Location of recipient of service	Based on where recipient is
Restaurant/Hotel Services	Where hotel/restaurant located	CGST+SGST of that state
Transport Services	Location of registered recipient	As per recipient's registration
Import of Goods	Location of importer	IGST always

Importance: Determines which government gets the revenue. If you wrongly charge CGST+SGST on an inter-state transaction (where IGST should apply), there are penalties. The recipient also cannot claim ITC of wrong tax type.

Q.17

ABC Ltd supplies goods to XYZ Ltd on 15 Sept 2024. Invoice raised on 20 Sept 2024. Payment received on 30 Oct 2024. Determine the Time of Supply of Goods.

GSTExam Fav

▼

Time of Supply — Sec 12 (Goods)


Earlier of:
  (a) Date of Issue of Invoice OR last date by which invoice must be issued
  (b) Date of Receipt of Payment (if advance received)
  
For Services — Sec 13:
Earlier of:
  (a) Date of Invoice
  (b) Date of Receipt of Payment
  (c) Date of Completion of Service (if invoice not raised within 30 days)

Event	Date
Date of Supply of Goods	15 September 2024
Date of Invoice	20 September 2024
Date of Payment	30 October 2024

For goods: Time of supply = Earlier of (Invoice Date OR Payment Date)
Invoice Date = 20 Sept | Payment Date = 30 Oct
Time of Supply = 20 September 2024

This is when GST liability arises and must be paid to government.

Final AnswerTime of Supply = 20 September 2024 (Date of Invoice — earlier of invoice and payment)

Q.18

Who is liable for GST Registration? Mr. Ravi runs a business with annual turnover ₹35 lakh (goods, one state). Is he required to register? What is the procedure?

GSTImportant

▼

Category	Registration Threshold
Normal states — Goods	Turnover > ₹40 lakh
Normal states — Services	Turnover > ₹20 lakh
Special Category States (NE + others)	Turnover > ₹10 lakh
E-commerce operators	COMPULSORY regardless of turnover
Casual Taxable Person / NRI	COMPULSORY regardless of turnover
Reverse Charge cases	COMPULSORY regardless of turnover

Mr. Ravi's turnover = ₹35 lakh < ₹40 lakh threshold for goods.
He is NOT required to register compulsorily.
However, he may opt for Voluntary Registration if he wants to claim ITC.

Registration Process (Sec 25):
1. File Form GST REG-01 on GST portal (gst.gov.in)
2. Submit: PAN, Aadhaar, business address proof, bank details, photos
3. Verification by officer within 3 working days
4. GSTIN (15-digit number) allotted — Format: State Code (2) + PAN (10) + Entity (1) + Blank (1) + Check digit (1)

Penalty for non-registration: ₹10,000 or tax amount — whichever higher.

AnswerMr. Ravi NOT required to register (₹35L < ₹40L limit). Optional voluntary registration available.

Q.19

XYZ Ltd sells goods for ₹1,00,000 + packing charges ₹5,000 + freight ₹3,000 + insurance ₹2,000. Discount ₹8,000 given at time of supply (mentioned in invoice). GST = 18%. Find taxable value and GST.

GST ValuationExam Fav

▼

GST Valuation Rules (Sec 15)


Taxable Value = Transaction Value (price actually paid)
INCLUDE in Taxable Value:
  + Taxes/duties EXCEPT GST itself
  + Packing charges
  + Freight and insurance (if supplied by supplier)
  + Any other amount charged
EXCLUDE from Taxable Value:
  − Post-supply discounts (mentioned in contract before supply)
  − Pre-supply discounts SHOWN IN INVOICE ✅ allowed

Particulars	₹
Price of goods	1,00,000
+ Packing charges (includible)	5,000
+ Freight charges (includible)	3,000
+ Insurance (includible)	2,000
Subtotal	1,10,000
− Discount (on invoice at time of supply — excludible) ✅	(8,000)
TAXABLE VALUE	1,02,000
+ GST @ 18%	18,360
Invoice Total	1,20,360

Final AnswerTaxable Value = ₹1,02,000 | GST = ₹18,360 | Invoice Total = ₹1,20,360

Q.20

What are the mandatory contents of a GST Tax Invoice? What is an E-way Bill and when is it required?

GST BillingImportant

▼

GST Tax Invoice — Mandatory Fields

#	Mandatory Content
1	Name, address and GSTIN of supplier
2	Consecutive invoice number (series-wise)
3	Date of invoice
4	Name, address, GSTIN of recipient (if registered)
5	Description, quantity and value of goods/services
6	Taxable value and applicable discounts
7	Rate and amount of CGST, SGST, IGST, UTGST separately
8	Place of supply (for inter-state)
9	Signature / digital signature of supplier

E-Way Bill

E-way Bill = Electronic document required for movement of goods worth MORE than ₹50,000.
Generated on ewaybillgst.gov.in.
Valid for: Up to 100 km = 1 day; for every additional 100 km = 1 more day.
Not required for: Exempt goods, goods moved by non-motorised vehicles, within customs area, for personal use.

Key PointInvoice = document for tax. E-way bill = document for transport. Both are mandatory for B2B transactions above threshold.

Q.21

List any 8 goods/services EXEMPT from GST. What is the difference between Exempt Supply, Zero-Rated Supply, and Non-Taxable Supply?

GST ExemptionImportant

▼

Type	Meaning	ITC
Exempt Supply	GST rate = 0% but covered under GST (Nil rated)	Not available
Zero-Rated Supply	Exports / SEZ supply — GST = 0% but ITC refundable	Available (refund)
Non-Taxable Supply	Not covered under GST at all (e.g. petrol, diesel)	Not applicable

Commonly Exempt Goods/Services

#	Exempt Item
1	Fresh fruits and vegetables
2	Milk, curd, lassi (non-branded)
3	Eggs, meat, fish (not frozen/processed)
4	Education services (school, college — unapproved)
5	Healthcare services by hospitals
6	Unbranded wheat, rice, flour
7	Hotel accommodation < ₹1,000 per day
8	Agricultural produce (unprocessed)

Key DifferenceExempt = 0% GST, no ITC | Zero-Rated = 0% GST but ITC available (exports) | Non-Taxable = outside GST scope entirely

UNIT 05

Input Tax Credit, Returns & Audit in GST

15 Lectures

🔑 What is Input Tax Credit (ITC)? — Sec 16

ITC = The GST paid on purchases/inputs can be deducted from the GST payable on sales. You only pay GST on VALUE ADDED.

Formula: GST payable to govt = Output Tax − Input Tax Credit

Conditions for ITC (Sec 16(2)):

Tax invoice available
Goods/services received
Tax actually paid by supplier to government
GST Return (GSTR-3B) filed
ITC for capital goods must be claimed in the year of receipt or next year

Q.22

M/s Patel Traders has: Output IGST on sales = ₹80,000. Input tax: IGST on purchases = ₹30,000; CGST on inputs = ₹15,000; SGST on inputs = ₹15,000. Compute GST payable.

ITC CalculationExam Fav

▼

ITC Utilisation Order (Priority Rules)


IGST Output can be used by:
  First → IGST ITC
  Then → CGST ITC  
  Then → SGST ITC

CGST Output can be used by:
  First → CGST ITC
  Then → IGST ITC (not SGST)

SGST Output can be used by:
  First → SGST ITC
  Then → IGST ITC (not CGST)

Particulars	IGST (₹)	CGST (₹)	SGST (₹)
Output Tax (GST on Sales)	80,000	—	—
ITC — Step 1: Use IGST ITC first	(30,000)
Balance after IGST ITC	50,000
ITC — Step 2: Use CGST ITC against IGST	(15,000)	(15,000)
Balance after CGST ITC	35,000	0
ITC — Step 3: Use SGST ITC against IGST	(15,000)		(15,000)
IGST Payable to Government	20,000	0	0

Final AnswerNet IGST payable = ₹20,000 (after setting off all ITC). CGST + SGST payable = NIL

Q.23

List the cases where Input Tax Credit is NOT allowed under GST (Sec 17(5) — Blocked Credits).

Blocked ITCExam Fav

▼

#	Blocked Credit (ITC NOT Available)
1	Motor vehicles for personal use (car for director, etc.) — Exception: used for supply of motor vehicles/transport/driving school
2	Food, beverages, outdoor catering (not if same goods supplied to customers)
3	Beauty treatment, health services, cosmetic surgery
4	Membership of club, health & fitness centre
5	Works contract for construction of immovable property (except plant/machinery)
6	Goods/services for personal consumption
7	Goods lost, stolen, destroyed, given as gifts/samples
8	Tax paid due to fraud/suppression (penalty cases)

Memory TrickMFBHWGLT — Motor, Food, Beauty, Health, Works contract, Gifts/Loss, Tax penalty cases

Q.24

Explain ITC on Capital Goods under GST. A machine purchased for ₹5,00,000 (GST @ 18% = ₹90,000). The machine is used 60% for taxable supply and 40% for exempt supply. What is the allowed ITC?

Capital Goods ITCImportant

▼

ITC on Capital Goods — Rules

ITC on capital goods is allowed in FULL if used exclusively for taxable supplies.
If used for BOTH taxable and exempt supplies → ITC proportional to taxable use only.
If exclusively for exempt supply → NO ITC.

GST Paid on Machine	₹90,000
Used for Taxable Supply	60%
Used for Exempt Supply	40%
ITC Allowed = 60% × ₹90,000	₹54,000
ITC Reversed (for exempt portion) = 40% × ₹90,000	₹36,000
Net ITC Claimable	₹54,000

Final AnswerAllowed ITC = ₹54,000 | Reversed ITC = ₹36,000 (treated as cost)

Q.25

List all major GST Return forms with due dates. What is GSTR-1 and GSTR-3B? What is the Annual Return?

GST ReturnsExam Fav

▼

Return	Who Files	What It Contains	Due Date
GSTR-1	Regular taxpayer	Outward supplies (Sales details)	11th of next month (monthly) / Quarterly
GSTR-3B	Regular taxpayer	Summary of outward+inward supplies, ITC, tax paid	20th of next month
GSTR-4	Composition dealer	Annual return for composition scheme	30th April (annual)
GSTR-5	Non-Resident taxpayer	Outward & Inward supplies	20th of next month
GSTR-6	Input Service Distributor	ITC distribution details	13th of next month
GSTR-7	TDS deductor under GST	TDS deducted under GST	10th of next month
GSTR-9	All regular taxpayers	Annual Return (full year summary)	31 December
GSTR-9C	Turnover > ₹5 crore	Reconciliation Statement (Audit)	31 December

GSTR-1: Seller uploads all sales invoices. Buyer can see it in their GSTR-2A (auto-populated).
GSTR-3B: Summary return where tax is actually paid. This is the main return. Filed monthly. Penalty for late = ₹50/day (tax) or ₹20/day (nil return), max ₹10,000.

Most ImportantGSTR-1 (sales data) + GSTR-3B (payment) = Monthly compliance. GSTR-9 = Annual reconciliation.

Q.26

What is the GST Composition Scheme? Mr. Ramu's turnover = ₹80 lakh (manufacturer). Can he opt? What are his GST rate, ITC eligibility, and restrictions?

Composition SchemeImportant

▼

Composition Scheme is a simplified GST scheme for small businesses. Instead of regular compliance, they pay a fixed % of turnover.

Eligibility: Aggregate turnover ≤ ₹1.5 crore (₹75L for special category states).
Mr. Ramu's turnover = ₹80L < ₹1.5 crore → Eligible ✅

Category	Composition Rate
Manufacturer (excluding notified goods)	1% of turnover (0.5% CGST + 0.5% SGST)
Traders/Retailers (goods)	1% of turnover
Restaurants (not serving alcohol)	5% of turnover
Other service providers (Sec 10(2A))	6% of turnover

Restriction	Impact
Cannot supply inter-state	Only intra-state supply allowed
Cannot issue Tax Invoice	Issues "Bill of Supply" instead
Cannot collect GST from customers	GST borne by supplier himself
ITC NOT available	Cannot claim ITC on purchases

Final AnswerMr. Ramu can opt. Rate = 1% of ₹80L = ₹80,000/year. But NO ITC, NO inter-state supply, NO tax invoice.

Q.27

When can a taxpayer claim GST Refund? XYZ Exports sold goods abroad worth ₹10,00,000. They paid IGST of ₹1,80,000 on inputs. Can they get a refund? Explain the process.

GST RefundImportant

▼

Grounds for GST Refund (Sec 54):
1. Export of goods/services (zero-rated supply)
2. Supplies to SEZ units
3. Excess payment of tax by mistake
4. Inverted duty structure (input tax rate > output tax rate)
5. Deemed exports
6. Refund of tax on purchases by UN/Embassy

XYZ Exports exported goods → Zero-rated supply → FULL refund of input ITC allowed.

IGST paid on inputs	₹1,80,000
Output GST on exports (zero-rated)	₹0
ITC Refund Claimable	₹1,80,000

Refund Process:
1. File Form GST RFD-01 on portal within 2 years from relevant date
2. Officer issues provisional refund (90% within 7 days for exporters)
3. Final processing within 60 days
4. If delayed beyond 60 days → 6% interest paid by government

Final AnswerXYZ can claim full refund of ₹1,80,000 as exports = zero-rated. File RFD-01 within 2 years.

Q.28

Distinguish between Tax Invoice, Debit Note, and Credit Note under GST. When is each issued? Give examples.

GST DocumentsImportant

▼

Document	When Issued	Effect	Example
Tax Invoice	At time of supply of goods/services	Records original transaction, GST charged	A sells goods ₹1L to B → issues tax invoice
Debit Note	When ORIGINAL invoice value was LESS than actual (under-charged)	Increases seller's output tax liability	Invoice said ₹1L but actual = ₹1.2L → seller issues Debit Note for ₹20,000
Credit Note	When ORIGINAL invoice value was MORE (overcharged) or goods returned	Reduces seller's output tax liability; reduces buyer's ITC	Goods returned by buyer → seller issues Credit Note

Time Limit: Debit Note / Credit Note must be issued before September 30th of the next financial year OR date of filing annual return — whichever earlier. After this, adjustments cannot be made.

Key PointsInvoice = original supply | Debit Note = seller charges more later | Credit Note = seller reduces amount / goods returned

Q.29

What is Audit under GST? Who conducts it? What are the different types of GST audit?

GST AuditImportant

▼

Type of Audit	Who Conducts	When/Why
Statutory Audit (GSTR-9C)	Chartered Accountant/CMA	Mandatory if turnover > ₹5 crore. Reconciliation statement between books and returns filed.
Departmental Audit (Sec 65)	Commissioner of GST	Audit of taxpayer's records at taxpayer's business premises. 15 days notice given.
Special Audit (Sec 66)	CA/CMA nominated by Commissioner	When officer suspects complex transactions or special circumstances. Cost borne by government.

Purpose of Audit: Verify correctness of turnover declared, ITC availed, taxes paid, refund claimed, and compliance with GST provisions.
After Audit: Officer issues audit report within 30 days. If discrepancy found → demand notice issued for recovery of unpaid tax + interest + penalty.

Key PointAudit = verify GST compliance. GSTR-9C = CA-certified reconciliation for large taxpayers. Dept audit can happen to ANY registered taxpayer.

Q.30

COMPREHENSIVE NUMERICAL: M/s Bright Electronics (Mumbai, monthly filer). Sales (intra-state, 18% GST) = ₹5,00,000. Purchases (intra-state, 18% GST) = ₹2,00,000. ITC opening balance CGST = ₹8,000, SGST = ₹8,000. Compute GST payable for the month.

Full GST ComputationEXAM FAV

▼

Step 1 — Compute Output Tax (on Sales)

Sales (Taxable Value)	5,00,000
CGST @ 9% (intra-state = CGST+SGST)	45,000
SGST @ 9%	45,000

Step 2 — Compute Input Tax Credit (on Purchases)

Purchases (Taxable Value)	2,00,000
CGST ITC @ 9%	18,000
SGST ITC @ 9%	18,000
Opening ITC balance — CGST	8,000
Opening ITC balance — SGST	8,000
Total CGST ITC Available	26,000
Total SGST ITC Available	26,000

Step 3 — Net GST Payable

Tax	Output Tax	ITC Available	Net Payable
CGST	45,000	(26,000)	19,000
SGST	45,000	(26,000)	19,000
Total GST Payable	90,000	(52,000)	38,000

Pay ₹19,000 CGST + ₹19,000 SGST using: 1. Electronic Credit Ledger (ITC balance) → First use ITC 2. Electronic Cash Ledger → Pay remaining cash via challan PMT-06

Final AnswerCGST Payable = ₹19,000 | SGST Payable = ₹19,000 | Total = ₹38,000 cash payment required

Q.31

BONUS: Mr. Sanjay (35 yrs, Old Regime). Has following incomes for PY 2024-25: Salary ₹7,00,000 (after std deduction). HP income (let-out) ₹55,000. HP loss (SOP) ₹1,20,000. Business income ₹1,50,000. STCL ₹40,000. LTCG ₹1,20,000. Interest income ₹25,000. Carried forward STCL from last year ₹30,000. 80C=₹1,20,000. 80D=₹22,000. Compute Total Income and Tax.

Full Paper Question

▼

Step 1 — Intra-head Set-off (within Capital Gains)

LTCG ₹1,20,000 − Current STCL ₹40,000 = Cannot! STCL can set off against STCG or LTCG. Here no STCG exists.
So: LTCG ₹1,20,000 − STCL ₹40,000 = Net LTCG ₹80,000 ✅ (STCL can set off against LTCG)
C/F STCL from prev year ₹30,000 — still carried forward (no current year STCG/remaining LTCG after above)

Step 2 — Intra-head HP Set-off

HP Income (let-out) ₹55,000 − HP Loss (SOP) ₹1,20,000 = Net HP Loss ₹65,000 (HP losses can offset within same head first)

Step 3 — Inter-head Set-off

HP Net Loss ₹65,000 set off against Salary ₹7,00,000 → Salary after HP set-off = ₹6,35,000

Head	₹
Salary (after HP set-off)	6,35,000
Business Income	1,50,000
LTCG (after STCL set-off)	80,000
Other Sources (Interest)	25,000
Gross Total Income	8,90,000
Less: 80C	(1,20,000)
Less: 80D	(22,000)
Total Income	7,48,000

Tax Computation

Normal income (excl LTCG) = ₹7,48,000 − ₹80,000 LTCG = ₹6,68,000
Tax on ₹6,68,000: NIL(2.5L) + 5%(2.5L=12,500) + 20%(1.68L=33,600) = ₹46,100
LTCG tax @ 20% = ₹80,000 × 20% = ₹16,000
Total IT = ₹62,100 | Cess 4% = ₹2,484

Income Tax (slab + LTCG)	62,100
+ 4% Cess	2,484
Tax Payable	64,584

Final AnswerTotal Income = ₹7,48,000 | Tax = ₹64,584 | C/F STCL ₹30,000 to next year

Q.32

What is Reverse Charge Mechanism (RCM) in GST? Give 3 examples. If a registered company hires a transport service (GTA) for ₹50,000 — who pays GST?

RCMImportant

▼

Normal GST: Supplier collects GST from buyer and pays to government.
Reverse Charge Mechanism (RCM): In certain specified cases, the RECEIVER of goods/service pays GST directly to government (not the supplier).

Why RCM? When supplier is unregistered, small, or in informal sector — hard to collect tax from them. So liability is shifted to registered recipient.

#	Service/Goods	Recipient (who pays GST)
1	Goods Transport Agency (GTA) services	Recipient of service (company/registered person)
2	Legal services by advocate to business entity	Business entity receiving legal service
3	Services by Director to company	Company
4	Sponsorship services	Body corporate / partnership firm
5	Unregistered supplier → Registered recipient (specified goods)	Registered recipient

Answer to the Specific Case

GTA (Goods Transport Agency) service ₹50,000 to a registered company.
RCM applies to GTA services → Company pays GST directly to government.
GST on GTA = 5% (no ITC) OR 12% (with ITC) — recipient's choice.
If 5%: GST = 5% × ₹50,000 = ₹2,500 — paid by company under RCM.
Company can also claim this ₹2,500 as ITC in same month.

Final AnswerCOMPANY pays GST ₹2,500 under RCM (not GTA). Company can also claim same amount as ITC.

BUSINESS TAXATION ✦ By Vishal For Sakshi ✦

Income Tax Law — Basic Concepts

📌 Key Definitions You MUST Know

Basis of Charge — Sec 4 & 5

Residential Status Tests — Sec 6(1)

Heads of Income + Clubbing + Deductions

📋 Salary Computation Format (Sec 15–17)

📋 House Property Formula (Sec 22–27)

⚠ Why We Add Back These Items

📋 Capital Gains (Sec 45–55)

💡 Sec 54 Exemption (Exam Often Asks)

Clubbing of Income — Sec 60–65

📋 Chapter VI-A Deductions (Old Regime Only)

Assessment of Firms — Key Rules

GTI + Set-Off + Tax Liability + ITR

📋 Complete Computation Flow

Set-Off and Carry Forward Rules

Goods & Services Tax (GST)

🔑 What is GST? Key Features

CGST vs SGST vs IGST — Application

Place of Supply — Sec 10 & 12 (IGST Act)

Time of Supply — Sec 12 (Goods)

GST Valuation Rules (Sec 15)

Input Tax Credit, Returns & Audit in GST

🔑 What is Input Tax Credit (ITC)? — Sec 16

ITC Utilisation Order (Priority Rules)

ITC on Capital Goods — Rules

BUSINESS TAXATION
✦ By Vishal For Sakshi ✦