DIRECT TAXATION INTERMEDIATE - icmai.in

1 INTERMEDIATESTUDY NOTESINTERMEDIATE : paper -7 DIRECT TAXATIONThe Institute of Cost Accountants of IndiaCMA Bhawan, 12, Sudder Street, Kolkata - 700 016 SYLLABUS - 2016 First Edition : January, 2018 Revised Edition : June, 2018 Revised Edition : January, 2019 Edition : August, 2019 Revised Edition : January, 2020 Revised Edition : January, 2021 Published by :Directorate of StudiesThe Institute of Cost Accountants of India (ICAI)CMA Bhawan, 12, Sudder Street, Kolkata - 700 at :M/s. SAP Print Solutions Pvt. , Lakshmi Industrial Estate,S. N. Path, Lower Parel (W), Mumbai - 400 013, of these Study Notes is reserved by the Institute of Cost Accountants of India and prior permission from the Institute is necessary for reproduction of the whole or any part - 2016 paper 7.

2 DIRECT TAXATION (DTX)Syllabus StructureAIncome Tax Act Basics10%BHeads of Income and Computation of Total Income and Tax Liability70%CTax Management, Administration Procedure and ICDS20%ASSESSMENT STRATEGYT here will be wirtten examination paper of three To gain knowledge about the DIRECT tax laws in force for the relevant previous year and to provide an insight into procedural aspects for assessment of tax liability for various AimsThe syllabus aims to test the student s ability to : Understand the basic principles underlying the Income Tax Act, Compute the taxable income of an assessee, Analyze the assessment procedureSkill sets requiredLevel B : Requiring the skill levels of knowledge, comprehension, application and : Subjects related to applicable statutes shall be read with amendments made from time to A : Income Tax Act Basics10%1.

3 Introduction to Income Tax Act, 19612. Income which do not form part of Total Income (Section 10, 11 to 13A)Section B : Heads of Income and Computation of Total Income and Tax Liability70%3. Heads of Income and Computation of Total Income under various heads4. Clubbing Provisions, Set off and Carry forward of Losses, Deductions5. Assessment of Income and tax liability of different personsSection C : Tax Management, Administrative Procedures and ICDS20%6. TDS, TCS and Advance Tax7. Administrative Procedures8. ICDSC20%A10%B70%Section A : Income Tax Act Basics (10 Marks)1. Introduction to Income tax Act, 1961a. Constitutional Validityb.

4 Basic Concepts and definitionsc. Capital and Revenue Receiptsd. Basis of charge and scope of total incomee. Residential status and incidence of tax (excluding section 9A)2. Income, which do not form part of total income [Sec. 10, 11 to 13A]Section B : Heads of Income and Computation of Total Income and Tax Liability [70 marks]3. Heads of income and computation of total income under various headsa. Salariesb. Income from House Propertyc. Profits and Gains of Business or Profession (excluding 42 to 44DB but including sections 43A, 43B, 43AA, 44AB, 44AD, 44 ADA and 44AE)d. Capital Gainse. Income from Other Sources4. Clubbing Provisions, set off and carry forward of losses, deductionsa.

5 Income of other persons included in assessee s total incomeb. Aggregation of income and set off and carry forward of lossesc. Deductions in computing total incomed. Rebate and Reliefse. Applicable Rates of tax and tax liability5. Assessment of income and tax liability of different personsa. TAXATION of individual (including AMT but excluding non-resident)b. HUFc. Firms, LLP and Association of Personsd. Co-operatives SocietiesSection C : Tax Management, Administrative Procedures and ICDS [20 Marks]6. TDS, TCS and Advance Taxa. Tax Deduction at Source (excluding sections relevant to non-residents)b. Tax Collected at Sourcec. Advance Tax7.

6 Administrative Proceduresa. Return & PANb. Intimationc. Brief concepts of Assessment u/s 140A, 143 and 1448. ICDSa. Basic Concepts of ICDSSECTION A - INCOME TAX ACT BASICSS tudy Note 1 : Basic Introduction DIRECT Tax & Indirect Tax Constitutional Validity of Taxes Administration of Tax Laws Sources of Income Tax Laws in India Basic Principles for Charging Income Tax [Sec. 4] Assessment Year ( ) [Sec. 2(9)] Previous Year or Uniform Previous Year [Sec. 3] Assessee [Sec 2(7)] Person [Sec. 2 (31)] Income [Sec. 2(24)] Heads of Income [Sec. 14] Gross Total Income (GTI) [Sec. 80B(5)] Rounding - off of Total Income [Sec.]

7 288A] Rounding - off of Tax [Sec. 288B] Capital Tax Planning, Tax Evasion and Tax Avoidance Diversion & Application of Income 15 Study Note 2 : Residential Introduction General Points to be kept in Mind Regarding Residential Status of a Person Determination of Residential Status Incidence of Tax [Sec. 5] Income Received in India Income Deemed to be Received in India Income Deemed to Accrue or Arise in India [Sec. 9] 29 ContentsStudy Note 3 : Agricultural Meaning Instances of Agricultural (Agro) Income Instances of Non-agricultural (Non-agro) Income Treatment of Partly Agricultural & Partly Non-agricultural Income [Rule 7] Impact of Agricultural Income on Tax Computation 39 Study Note 4 : Income, which do not Form Part of Total Income Exempt from Tax 41 SECTION - BHEADS OF INCOME AND COMPUTATION OF TOTAL INCOME AND TAX LIABILITYS tudy Note 5 : Income under Head Basic Elements of Salary Definition of Salary [sec.

8 17(1)] General Notes Basis of Charge [Sec. 15] Computation of Salary, at a glance Gratuity Leave Salary Encashment Pension [Sec. 17(1)(ii)] Retrenchment Compensation Compensation Received at the time of Voluntary Retirement [Sec. 10(10C)] Annuity [Sec. 17(1)(ii)] Salary Received in Lieu of Notice Period Profits in Lieu of Salary [Sec. 17(3)] Allowances Perquisite [Sec. 17(2)] Valuation of Accomodation Insurance Premium Payable by Employer Valuation of Sweat Equity Shares Allotted or Transferred to the Assessee Valuation of Perquisites in respect of Motor Car [rule 3(2)] Valuation of Perquisites in respect of Vehicle Other than Motor Car Valuation of Perquisites in respect of Free Domestic Servants [Rule 3(3)] Gas, Electricity or Water Facility [Rule 3(4)] Valuation of Perquisites in respect of Free Education [Rule 3(5)] Valuation of Perquisites in respect of Free Transport [Rule 3(6)

9 ] Valuation of Perquisites in respect of Interest Free Loan or Concessional Rate of Interest [Rule 3(7)(i)] Travelling/Touring/Holiday Home Expenditure on Holiday [Rule 3(7)(ii)] Valuation of Perquisites in respect of Free Meals [Rule 3(7)(iii)] Gift, Voucher or Token given by Employer [Rule 3(7)(iv)] Credit Card [Rule 3(7)(v)] Club Expenditure [Rule 3(7)(vi)] Valuation of Perquisites in respect of Use of Movable Assets [Rule 3(7)(vii)] Valuation of Perquisites in respect of Movable Assets sold by an Employer [Rule 3(7)(viii)] Medical Facility [Proviso to Sec. 17(2)] Leave Travel Concession [Sec. 10(5)] Other Perquisites Provident Fund Standard Deduction [Sec.

10 16(ia)] Entertainment Allowance [Sec. 16(ii)] Tax on Employment or Professional Tax [Sec. 16(iii)] 116 Study Note 6 : Income from House Chargeability [Sec. 22] Some Special Cases Exempted Properties Computation of Income Let out Property [Sec. 23(1)] Taxes Levied by Local Authority (Municipal Tax) [Proviso to Sec. 23(1)] Deduction u/s 24 Self-occupied Property [Sec. 23(2)(a)] Unoccupied Property [Sec. 23(2)(b)] Deemed to be Let-out House Property [Sec. 23(4)] Partly Self-Occupied and Partly Let-out [Sec. 23(3)] Recovery of Unrealised Rent and Arrerars Rent [Sec. 25A] 149 Study Note 7 : Income under Head Profits and Gains of Business or Meaning of Business & Profession Income chargeable under the head Profits and gains of business or profession [Sec.