UNIT -1

TAXABLE INCOME AND TAX LIABILITY:

What is Taxable Income?

Taxable income refers to any individual’s or business’ compensation that is used to

determine tax liability. The total income amount or gross income is used as the basis
to calculate how much the individual or organization owes the government for the
specific tax period.

Types of Taxable Income

Every taxpayer knows that failure to file a report for one’s income tax can lead to
serious consequences. So, to be sure about paying taxes, here’s a list of the types of
income:

1. Employee compensation and benefits

These are the most common types of taxable income and include wages and
salaries, as well as fringe benefits.
2. Investment and business income
For people who are self-employed, they are also subject to tax liability,
specifically through their business’ income. For example, net rental income and
partnership income qualify as taxable income.
3. Miscellaneous taxable income
This includes income that doesn’t fit into the other types. It includes things such
as death benefits, life insurance, and cancelled debts. Alimony, items involved in
barter trading, and income from one’s hobby are also miscellaneous taxable
income.

What Is Tax Liability?

A federal tax liability is an amount that's owed to the government in taxes. It can
include income taxes on earnings and capital gains taxes on assets. Both are based on
brackets, a percentage of the money earned, and brackets are determined by various
factors.

A liability can be owed by an individual, business, or other entity. It can be owed to a

state or local tax authority as well as to the federal government.

MINIMUM ALTERNATE TAX (MAT):

The *MAT (Minimum Alternate Tax) * is a provision in the Indian Income Tax Act,
introduced to ensure that companies, especially those that take advantage of various
exemptions, deductions, and incentives to reduce their taxable income significantly,
still pay a minimum amount of tax.

Background of Minimum Alternate Tax (MAT):

Purpose: The concept of MAT was introduced to address the issue where companies,
despite having substantial profits, paid little or no tax due to the availability of various
exemptions, deductions, and incentives under the tax laws. The MAT ensures that such
companies contribute to the tax revenues.

India's Context: MAT was first introduced in India in 1987 by the Finance Act, under
Section 115J of the Income Tax Act. Initially, it required companies to pay a minimum
amount of tax based on their book profits (the profits declared in their financial
statements), if their taxable income (after claiming all deductions and exemptions)
was below a certain threshold.

FEATURES OF MAT:

1) Applicability: MAT applies to all companies, including domestic companies and

foreign companies operating in India, that are required to prepare their financial
statements in accordance with the Companies Act, 2013.
2) Calculation Basis: MAT is calculated based on the book profit of a company,
which is the profit as per the company's financial statements prepared under the
Companies Act, rather than taxable income.
3) MAT Rate: The rate of MAT is set at 15% of the book profit, plus applicable
surcharge and cess.
4) Minimum Tax Floor: MAT ensures that companies pay at least a minimum
amount of tax, even if their tax liability under the regular provisions of the Income
Tax Act is lower due to deductions and exemptions.
5) MAT Credit: Companies that pay MAT are entitled to carry forward the MAT
credit. This credit can be set off against future tax liabilities under the regular tax
provisions if the regular tax payable exceeds the MAT in subsequent years.
6) No Deduction Adjustments: MAT does not take into account certain deductions
or exemptions available under the Income Tax Act. It is based solely on the book
profit of the company.
7) Applicability on Companies: MAT is specifically applicable to companies, not to
individuals or other entities.
8) Regular Tax vs. MAT: Companies must pay the higher of their regular tax
liability (as per the normal provisions) or the MAT liability.
These features help ensure that companies contribute a minimum amount to the tax
revenues, even if they utilize various exemptions and deductions available under the
law.

ADVANTAGES OF MAT:

1. *Revenue Generation for Government: * MAT ensures that companies with

large profits but low tax liabilities due to various exemptions still contribute to
the government's revenue.
2. *Fairness in Taxation: * It prevents companies from using loopholes to avoid
paying taxes, ensuring that all profitable companies contribute to the tax system.
3. *Encourages Transparent Accounting: * MAT encourages companies to
maintain transparent accounting records, as they need to report a minimum profit
for tax purposes.
4. *Stability in Tax Collection: * By imposing a minimum tax, MAT provides a
stable tax collection mechanism, reducing the impact of fluctuations in revenue
due to companies exploiting exemptions.
5. *MAT Credit Carry Forward: * If a company pays MAT in a particular year
and in subsequent years its tax liability under normal provisions is more than the
MAT, it can carry forward and set off the MAT credit for up to 15 years. This
helps companies manage their tax outflows more effectively.
6. *Promotes Equity Among Companies: * MAT ensures that all companies,
regardless of the extent of exemptions they claim, contribute to the public
finances, promoting equity and fairness in the tax system.

MAT CREDIT:

 Companies paying MAT are allowed to carry forward the MAT paid over and
above their regular tax liability as a credit. This MAT credit can be carried
forward and set off against future tax liabilities (under regular tax) for up to 15
years.
 MAT Credit* refers to the concept where a company that has paid Minimum
Alternate Tax (MAT) in a financial year can carry forward the excess amount
paid over the normal tax liability and set it off against future tax liabilities.

Here’s how MAT credit works:

1. *MAT Liability: * If a company's tax liability under the normal provisions of the
Income Tax Act is less than 15% (the MAT rate) of its book profit, it has to pay
MAT.
2. *MAT Credit: * The difference between the MAT paid and the normal tax
liability can be carried forward as MAT credit. This credit can be used in future
 years to reduce the company's tax liability, provided the normal tax payable
exceeds the MAT for that year.
3. *Carry Forward Period: * MAT credit can be carried forward for up to 15
assessment years following the year in which the MAT was paid.
4. *Utilization of MAT Credit: * In subsequent years, if the tax liability under the
normal provisions exceeds the MAT, the company can use the MAT credit to pay
the difference, thereby reducing its effective tax outgo.
5. *Example: *
a. Year 1: Company’s normal tax liability is ₹50 lakh, but MAT is ₹70 lakh.
The company pays ₹70 lakh and receives a MAT credit of ₹20 lakh.
b. Year 2: The normal tax liability is ₹80 lakh, and MAT is ₹75 lakh. The
company will pay ₹80 lakh but can use ₹5 lakh from the MAT credit,
reducing the tax payment to ₹75 lakh.
6. *Disclosure: * Companies must disclose MAT credit details in their financial
statements, ensuring transparency in tax computations and future obligations.

MAT credit helps companies manage their cash flow by allowing them to use the
excess tax paid in one year to offset the tax payable in subsequent years.

Exemptions and Reliefs:

 Companies in certain sectors or engaged in specific activities (like life insurance

business, certain income of foreign companies, etc.) might be exempt from MAT.
 MAT provisions do not apply to foreign companies where they do not have a
permanent establishment in India or have not derived income through a business
connection in India.

International Context:

MAT or its equivalents exist in other countries as well, under different names:

1. Alternative Minimum Tax (AMT) in the United States: Designed to prevent

high-income taxpayers from avoiding income tax through deductions and credits.
2. Global Minimum Tax (Globe) under the OECD’s BEPS framework: A newer
concept aiming to set a global minimum corporate tax rate, part of the Pillar Two
of the BEPS 2.0 project.

Impact:

 MAT has ensured that companies contribute to the tax base, even if they are
legally reducing their taxable income to very low levels through exemptions.
However, it has also added complexity to the tax system and required companies
to plan their finances and tax payments more carefully.
  The concept of MAT continues to evolve, especially with the ongoing global
discussions about minimum corporate tax rates, which might further influence its
provisions and application in the future.

TAX INCENTIVES TO THE EXPORTERS.

Tax incentives for exporters are designed to encourage businesses to engage in

international trade by reducing their tax liabilities. These incentives can take various
forms, such as exemptions, deductions, rebates, and credits, and are typically provided
by governments to promote exports, increase foreign exchange earnings, and improve
the competitiveness of domestic industries in the global market.

Common Tax Incentives Provided to Exporters:

1. Export Promotion Capital Goods (EPCG) Scheme:

 Allows exporters to import capital goods at zero customs duty, provided they
commit to exporting goods worth several times the duty saved.
 Its Purpose is to enable exporters to upgrade their production facilities and
improve product quality to meet international standards.

2. Duty Drawback Scheme:

 A refund of duties and taxes paid on imported inputs that are used in the
production of exported goods.
 Its Purpose is to reduce the cost of production for exporters by reimbursing the
customs duties paid on imported raw materials.

3. Advance Authorization Scheme:

 Allows exporters to import raw materials, components, or other inputs duty-

free, provided that these inputs are used to produce goods for export.
 Its Purpose is to reduce the cost of raw materials and inputs for exporters.

4. Special Economic Zones (SEZs):

 Businesses operating in SEZs are offered various tax benefits, such as

exemptions from customs duties, central excise duties, service tax, and income
tax for a certain number of years.
 Its Purpose is to create an export-friendly environment by providing
infrastructure, simplified regulations, and tax incentives.

5. Interest Equalization Scheme:

  Provides an interest rate subsidy on pre- and post-shipment export credit for
specific categories of exporters, primarily MSMEs and labour-intensive
sectors.
 Its Purpose is to reduce the cost of credit for exporters, making their products
more competitive in international markets.

6. Exemption from GST (Goods and Services Tax):

 Exports are generally treated as zero-rated supplies under GST, meaning that
exporters can claim a refund of the GST paid on inputs used to produce
exported goods.
 Its Purpose is to avoid double taxation and reduce the tax burden on exporters.

7. Income Tax Exemptions:

 Export-oriented units (EOUs) and units operating in SEZs may be eligible for
income tax exemptions or deductions for a specified period.
 Its Purpose is to boost profitability and encourage investment in export-
oriented businesses.

8. Rebate of State and Central Taxes and Levies (Roskill):

 It Provides rebates on state and central taxes and levies for exporters of
garments and made-ups.
 Its Purpose is to offset the taxes that are not refunded under the GST regime,
thereby reducing the overall tax burden on exporters.

9. Export Development Fund:

 Financial assistance provided to exporters for market development, product

development, and promotional activities.
 its Purpose is to help exporters penetrate new markets and enhance their global
presence.

10. Export Credit Insurance:

 Insurance products offered by government-backed agencies (like the Export

Credit Guarantee Corporation (ECGC) in India) that protect exporters against
the risk of non-payment by foreign buyers.
 Its purpose is to mitigate the financial risks associated with exporting and
encourage more businesses to engage in international trade.

11. Merchandise Exports from India Scheme (MEIS) (Now Replaced by Rode):
  It was a Provided duty credit scrips to exporters as a reward for exporting
certain goods to specified countries.
 MEIS was replaced by the Remission of Duties and Taxes on Exported
Products (RoDTEP) scheme in 2021, which aims to refund embedded taxes and
duties that are not refunded under other mechanisms.

12. Tax Exemptions on Export Profits:

 In some countries, a portion or all of the profits derived from export activities
may be exempt from income tax.
 Its Purpose is to incentivize companies to increase their export activities by
making it more profitable.

Country-Specific Examples:

o India: Export incentives like SEZ benefits, duty drawback, EPCG scheme, and
GST refunds are significant components of the tax structure aimed at boosting
exports.
o United States: The U.S. offers various export financing programs and tax
incentives through agencies like the Export-Import Bank of the United States
(EXIM) and the Foreign Sales Corporation (FSC) provisions (though FSC was
largely phased out, elements still exist under newer frameworks).
o European Union: The EU provides incentives for exports through various
programs aimed at reducing barriers to international trade, including VAT
exemptions on exports.

Impact of Tax Incentives on Exporters:

 Tax incentives reduce the cost of exporting and enhance the profitability of
export-oriented businesses. They also help domestic industries become more
competitive in the global market by offsetting higher production costs and
allowing access to global markets. However, these incentives must be managed
carefully to comply with international trade regulations and avoid disputes
under World Trade Organization (WTO) rules.
 By leveraging these incentives, exporters can optimize their cost structures,
expand their market reach, and contribute to the growth of the economy through
increased foreign exchange earnings.
 UNIT-2

CORPORATE TAX MANAGEMENT

RETURN OF INCOME ASSESSMENT

Income Tax Returns (ITR)

An individual whose income for the financial year exceeds basic exemption limits
files a statement to the income tax department containing information related to
income and deductions, called income tax returns.

Income Tax Assessment

- The income tax returns filed by individuals are scrutinized and reviewed by the
income tax authorities at the end of every financial year; this is called income tax
assessment.
- In India, the income tax provisions have a structural flow of tax assessment, which
must be adhered to by the individuals and the income tax department. The flow of
assessments laid down by the Income Tax Act are,

 Self-assessment, section 140A

 Summary-assessment, section 143(1)

 Scrutiny-assessment, section 143(3)

 Best judgment-assessment, section 144

 Income escaping assessment, section 147

DIFFERENT TYPES OF INCOME TAX ASSESSMENT

1. Self-assessment:
 In self-assessment, the assessee must compute income tax returns on his own,
calculating the income earned against loss incurred and other deductions. If the
amount computed exceeds the tax deducted at source (TDS) or the advance tax,
he must pay the outstanding amount before filing the income tax returns, which is
known as self-assessment tax.

 In simple words, self-assessment tax is the remaining amount the assessee must
pay to the income tax department when the tax arrived at exceeds the tax
deducted at source TDS and advance tax.
 The excess amount can occur when the taxpayer acquires capital gains or any
other income on which TDS is deducted at a lower rate but the taxpayer is
 coming under higher slabs. If the assessee files income tax returns without self-
assessment tax, such filing will be considered void and subject to interest on
account of nonadherence to provisions of the law.
2. Summary assessment:
Summary assessment is the first stage of tax assessment, where overview scrutiny
will be conducted; no detailed scrutiny will be there to check plausible clerical
errors such as,
a) Mathematical miscalculations or arithmetical errors in the return.
b) Incorrect claim
c) Incorrect disallowance
d) Errors occurring from form16, 16A, or 26AS.
e) Disallowance of expenses u/s 10AA, 80 IA to 80 IE if the return is
furnished beyond the due date specified u/s 139(1).
f) No such adjustment shall be made unless an intimation is given to the
assessee of such adjustment in writing or electronic mode.
3. Scrutiny assessment:
 An officer will be assigned to review the filings carefully and ensure that the
computed tax liability is not under or overstated by the assessee. The objective
of this assessment is to confirm that the taxpayer has not understated the
income, has not computed excessive loss, or has not underpaid the tax in any
manner. Detailed scrutiny will be conducted.
 In case a mismatch is found in the submitted statement, the assessee could
agree with the claim, or if he has some dissatisfaction, he could appeal to the
commissioner of income tax appeals (CITA) further to the income tax
appellate tribunal (ITAT), high court or supreme court respectively.
4. Best judgment-assessment:
In the best judgment assessment, the assessing officer base the assessment on his
best judgment i.e. he must not act dishonestly or capriciously. Best judgment
assessment refers to a situation where the officer computes the tax payable as the
assessee does not comply to provide or maintain necessary source documents or
book of accounts to support the claim when requested to submit.
In this scenario, the officer computes the tax liability based on his best judgment.
The Income Tax Act specifies certain situations under which the income tax officer
can compute tax liability based on best judgment,
 When the assessee does not file an income tax return
 When the assessee does respond to the notice requesting the submission of
documents
 The response of the assessee has crossed the limit permitted by the Central
Board of Direct Taxes (CBDT)
 When the officer is not satisfied with the documents provided.
5. Income escaping-assessment:
When the assessing officer has reasons to believe that any income chargeable to
tax has escaped assessment for a financial year, an income escaping-assessment
will be conducted. In such case, the income tax department holds full authority to
revisit and review 6 years’ tax filing, if the alleged amount is Rs. 1,00,000 or more.
As per budget 2021, the time limit for opening the case has been reduced from 6
years to 3 years. However, for cases where concealment of income exceeds Rs.50L
(Serious Tax evasion cases), cases can be opened for 10 years.
Circumstances under which income is deemed to have escaped assessment are,
 When the assessee is found to have taxable income but has not filed income
tax returns for the financial year.
 The submitted income tax return is under or overstated
 Failure to furnish information relating to international income
 Unaccounted overseas assets
 When the income of the assessee exceeds the tax exemption limit but has
not filed income tax returns.

Penalty for non-filing of income tax returns:

 If the return is filed after the due date, then 3 scenarios will be there-
1) If the Gross Total Income is Rs.2.5 lakh or less, then the penalty will be Nil.
2) If total income is more than Rs.2.5 lakhs and up to Rs. 5 lakhs then the penalty
will be 1000.
3) If the total income is more than 5 lakhs, then the penalty will be Rs.5,000.
 As per the last budget, after 31st Dec, returns will not be filed, and the penalty
cannot be levied. However, for FY20-21, the last date of filing has been extended
 When the date of filing u/s 139) (1) has been exceeded, the assessee will not be
able to carry forward losses except for House Property Losses incurred for the
financial year.
 Pending for unpaid taxes would be chargeable 1% of tax liability for every month
or part of the month until the payment of the amount. However, for FY20-21, the
due date for filing ITR is 30th September, but if self-assessment tax liability
exceeds one lakh, then tax needs to be paid before 31st July 2021 to avoid 1%
interest u/s 234A.

ADVANCE PAYMENT OF TAX

Advance tax is the income tax that is paid in advance instead of lump sum payment at
the end of the financial year. It is the tax that you pay as you earn. These payments
have to be made in instalments as per due dates provided by the income tax
department.
Advance tax is a tax payable by individuals on income sources beyond their regular
salary, including earnings from rent, capital gains, lottery earnings, fixed deposits and
more. Payments can do online or through specified banks.

Who Should Pay Advance Tax?

 Salaried individuals, freelancers and businesses– If your total tax liability

is Rs 10,000 or more in a financial year, you have to pay advance tax. The
advance tax applies to all taxpayers, salaried individuals, freelancers, and
businesses.
 Senior citizens– People aged 60 years or more who do not run a business
are exempt from paying advance tax. So, only senior citizens (60 years or
more) having business income must pay advance tax.

 Presumptive income for businesses–The taxpayers who have opted for the
presumptive taxation scheme under section 44AD have to pay the whole amount
of their advance tax in one instalment on or before 15th March. They also have
the option to pay all of their tax dues by 31st March.

 Presumptive income for professionals– Independent professionals such as

doctors, lawyers, architects, etc. come under the presumptive scheme
under section 44ADA. They have to pay the whole of their advance tax liability
in one instalment on or before 15th March. They can also pay the entire amount
by 31st March.

FY 2024-25 for both individual and corporate taxpayers

Due Date Advance Tax Payment Percentage

On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax (-) advance tax already paid
On or before 15th December 75% of advance tax (-) advance tax already paid
On or before 15th March 100% of advance tax (-) advance tax already paid

For taxpayers who have opted for Presumptive Taxation Scheme under sections
44AD & 44ADA – Business Income
Due Date Advance Tax Payment Percentage
On or before 15th March 100% of advance tax
How Advance Tax Payment Calculated?

Below are the steps to compute your advance tax liability:

Step 1: Estimate your total income for the financial year from the various sources
including capital gains, rental income, professional income, income from fixed
deposits, salary and any other sources.

Step 2: From the gross receipts, reduce various deductions under section 80C, 80D,
etc.

Step 3: Compute the tax payable on the basis of the current tax slab rates.

Step 4: Subtract any Tax Deducted at Source (TDS) that has already been deducted
or is expected to be deducted based on the TDS rates.

If your tax liability after deducting TDS exceeds 10,000, you must pay the advance
tax.
INCOME ESTIMATION FOR AMOUNT AMOUNT
ADVANCE TAX (Rs) (Rs)
Income from profession:
Gross receipts 20,00,000
Less: Expenses 12,00,000 8,00,000

Income from other sources:

Interest from fixed deposit 10,000
GROSS TOTAL INCOME 8,10,000
Less: Deduction under section 80C
Contribution to PPF 40,000
LIC premium 25,000
65,000
Deduction under section 80D 12,000 77,000
TOTAL INCOME 7,33,000

TAX PAYABLE 59,100

Add: Education cess @ 4% 2,364
61,464
Less: TDS 30,000
TAX PAYABLE IN ADVANCE
31,464
(as it exceeds Rs.10,000)
 ADVANCE TAX PAYMENTS

Due date Advance tax payable Amount (Rs)

15th June 15% of Advance tax 4,700

15th September 45% of Advance tax 9,400 (14,100-4700)

15th December 75% of Advance tax 9,400 (23500-14100)

Note:

1) The above example of tax liability is calculated under the old tax regime since
deductions under section 80C are beneficial to the assessee & the said section is
available only in the case of the old tax regime.

2) In the above case, the assessee is not liable to pay any advance if the net tax liability
is not more than Rs.10,000, although the tax liability before deducting TDS and
advance exceeds Rs 10,000.

Tax payable/Tax Refundable

Advance tax is the payment of tax during the financial year in 4 instalments based on
the estimated income for the year to avoid lump sum tax payment at the year end. If
there is a shortage/excess of tax payment after adjusting advance tax, tax deducted at
source & tax collected at source, the assessee would arrive at the tax payable or tax
refundable, respectively.

TAX DEDUCTED AT SOURCE AND TAX COLLECTED AT SOURCE:

TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) are two instances
of Indirect Taxes imposed by the government. It is a common misconception that TDS
and TCS are the same for taxation purposes, but that is not the case. There is a
significant difference between TDS and TCS.
The distinction between TDS Vs TCS deviates at the tax deduction and collection
level, as well as who is responsible and who is applicable.

TDS Meaning

Tax Deducted at Source was introduced to capture tax revenue at the source.
However, as a result, when a taxpayer pays another taxpayer, they must subtract TDS
and compensate it to the Central Government.

TCS Meaning

TCS mandates that the seller of goods overseas tax collection from the purchaser of
said goods. The seller deposits the money to the national government's credit after
collecting the tax.

Collection incidents occur when receiving sales proceeds or debiting accounts,

depending on which occurs first. Section 206C of the Income Tax Act, 1961 lists the
items subject to TCS.

Differences Between TDS & TCS

TCS vs TDS is two distinct concepts with utterly different uses. So, let us examine
what is the difference between TDS and TCS here in detail-

Characteristics TDS TCS

Meaning The idea of TDS was introduced to A seller of certain goods may
collect tax from the very source of collect tax from the buyer in
income. According to this idea, a addition to the sale price and
person (detector) who is required to remit it to the government on
make a payment of a specific nature their behalf through Tax
to another person (deductee) must Collection at Source (TCS).
withhold tax at source and remit it
into the Central Government's
account.

Transactions Interest, Wages, Brokerage, Timber, Scrap Metal,

Included Professional Fees, Commissions, Minerals, Alcoholic
Purchases of Goods, Rent, and other Beverages, Tendu Leaves,
items are all subject to TDS. Forested Goods, Automobiles,
and Toll Tickets are all
subject to TCS.
Responsibility When a payer (deductor) makes a The seller's only
for Tax defined payment to another person responsibility is to collect
Collection or (deductee), the tax is deducted at the TCS from the buyer and remit
Deduction source and returned to the Central it to the Central Government.
Government. Additionally, TDS
exemption can be obtained by
submitting Form 26AS (TDS
certificate).

Limits TDS is levied on purchases of goods TCS is levied on the sale of

that exceed ₹50 lakhs, according to goods if the amount exceeds
Section 194Q. ₹50 lakhs, according to
Section 206C (1H).

Tax Deduction TDS is taken out whenever a On the other hand, TCS is
or Collection payment is made, regardless of collected at the time of sale by
Period when it becomes due. the seller.

Returns Filing Quarterly Quarterly

 Form 24Q – Salary, Form  Form 27EQ

26Q – Other than Salary,

 Form 27Q – Deductee is an

NRI

Due Date for The due date for depositing TDS is Per the rules, TCS will be
Payment to the the 7th of every month. Note that deducted during the month the
Government TDS returns are required to be supply is made. Note that it
submitted quarterly. will be deposited within ten
days from the end of the
month of supply to the
government's credit.

GST Provisions for TDS and TCS

 TDS: The rate is 2% (1% CGST + 1% SGST or 2% IGST for inter-state

supplies).

 TCS: The rate is 1% (0.5% CGST + 0.5% SGST or 1% IGST for inter-state
supplies).
Effects of Failing to Deposit TDS or TCS

Failing to collect or deposit TDS (Tax Deducted at Source) or TCS (Tax Collected at
Source) can result in several consequences under Indian tax laws. The repercussions
are:

1. Interest on Late Payment

 TDS: 1% per month from the date the tax was deductible until the date it is
actually deducted.

 TCS: 1% per month from the date the tax was collectable until the date it is
actually collected.

2. Penalty: The Assessing Officer may impose a penalty equal to the amount of tax
that was not deducted or collected.

3. Prosecution: Severe cases of non-compliance, such as wilful neglect or

fraudulent activities, can lead to prosecution. The punishment can range from
rigorous imprisonment of three months to seven years, along with a fine.

4. Late Fee: Failure to file TDS/TCS returns on time attracts a late filing fee of
₹200 for a day until the return is filed. However, the total fee cannot exceed the
amount of TDS/TCS.

 Latest News and Updates of TDS and TCS

 TDS:
 The updated TDS rate chart for FY 2024-2025 includes various
categories like salaries, interest payments, rent, commissions,
and more to ensure compliance with tax laws and avoid
penalties.
 Significant amendments were made in the Finance Bill 2024,
including adjustments to TDS on PF withdrawals and
clarifications on the place of supply for custodial services by
Indian banks to Foreign Portfolio Investors.
 TCS:
 A significant change announced in Budget 2023 was the hike in
the TCS rate on foreign remittances under the Liberalised
Remittance Scheme and for overseas tour packages went from
5% to 20% on amounts exceeding Rs 7 lakh. This change, which
initially took effect in July 2023, was postponed to October
2023.
  Other notable decisions include exempting taxpayers with an
annual revenue of up to Rs. 2 crores from filing specific GST
forms and reducing the reporting threshold for B2C inter-state
supplies from Rs. 2.5 lakh to Rs. 1 lakh.

APPEALS AND REVISIONS IN INCOME TAX:

The provisions for appeals and revisions are designed to offer taxpayers a structured
path to contest and rectify decisions that affect their financial liabilities. Appeals allow
taxpayers to seek a higher authority’s review of an assessment order, whereas
revisions enable certain authorities to correct errors or address issues in the orders
passed by lower authorities.

Appeal in Income Tax:

 An appeal process begins with an assessment order passed by the Assessing

Officer (AO) under various sections such as Section 143(3), 144, 153A and
147(1). When an assessee is dissatisfied with such an order, the first level of
appeal is to the Commissioner (Appeals) under Section 264A within 30 days of
the order’s issuance.
 The specific time limit for filing an appeal under Section 249(2) is within 30
days from the date of service of the assessment order. However, if the
Commissioner is satisfied that there was sufficient and reasonable cause for the
delay, the appeal may be admitted even after the expiry of the given time limit.
 The appeal process has been streamlined to be conducted electronically using
Form 35. The second level of appeal is to the Income Tax Appellate Tribunal
(ITAT), which must be filed under Section 253 within 60 days of the order
passed in the first appeal. This level of appeal is open to both the assessee and
the AO, unlike the first appeal, which is available only to the assessee.
 The ITAT is the highest fact-finding authority. An appeal to the High Court is
permissible under Section 260A only when a substantial question of law is
involved. With the leave of the High Court, the assessee can approach the
Supreme Court under Section 261. Additionally, an assessee can file a Special
Leave Petition under Article 136 of the Constitution.

Revision Under Section 263 of the Income Tax Act:

The Commissioner of Income Tax (CIT) may call for and examine the records of any
proceeding under the Income Tax Act if he is of the opinion that the order passed is
erroneous and prejudicial to the interest of the revenue. In such cases, the CIT has the
power to hear both sides, modify or enhance the assessment or cancel the assessment
and order a fresh one.

This revisionary power ensures that any detrimental errors in the assessment process
are corrected to protect the revenue’s interest. If the assessee is aggrieved by the order
under Section 263, they can appeal to the Income Tax Appellate Tribunal (ITAT) under
Section 253.

Revision Under Section 264 of the Income Tax Act:

Under Section 264, the CIT has the authority to call for any records and make
inquiries as deemed fit, provided the action is not prejudicial to the assessee. This can
be done either Suo moto or on an application by the assessee. Unlike Section 263,
there is no provision for a higher appeal against an order under Section 264 within the
Income Tax Act. The only recourse for the assessee in this scenario is to file a writ
petition under Article 226 of the Constitution in the High Court.

Section 264 empowers the CIT with a wide range of revisionary authority to revise
assessment orders, acting as a quasi-judicial function. The CIT must exercise this
power judiciously, without being influenced by irrelevant issues or directives from
other authorities, including circulars. The CIT can grant relief to the assessee or
choose not to interfere but cannot enhance the assessment. This authority allows the
CIT to consider new arguments or deductions not previously raised before the
Assessing Officer.

Difference Between Appeals and Revisions in Income Tax:

Appeals and revisions in income tax serve distinct purposes and follow different
procedures. While both mechanisms allow taxpayers to challenge assessment orders,
they have unique characteristics and applications. Here’s a comparative overview of
appeals and revisions:

Aspect Appeals Revisions

To seek redressal against an To correct errors or address issues in

Purpose
assessment order an assessment order
Aspect Appeals Revisions

Commissioner of Income Tax (CIT)

Initiated by Assessee (primarily)
or assessee

Relevant Sections 246A, 253, 260A and

Sections 263 and 264
Sections 261

30 days (to Commissioner 1 year from the date of the order or

Time Limit
(Appeals)), 60 days (to ITAT) its communication

Electronic filing via Form 35,

CIT examines records, may call for
Process hearings before appellate
additional inquiries
authorities

Correction of errors prejudicial to

Review of factual and legal
Scope revenue (Section 263) or providing
issues
relief to assessee (Section 264)

Commissioner (Appeals),
Decision
ITAT, High Court, Supreme Commissioner of Income Tax
Authority
Court

Available, can escalate to

Higher Limited, only writ petition under
higher authorities (ITAT, High
Appeal Article 226 for Section 264
Court, Supreme Court)

On revenue for proving errors under

Burden of
Typically, on the assessee Section 263; assessee for relief
Proof
under Section 264

Nature of Quasi-judicial (administrative

Judicial (structured hearings)
Proceedings discretion with legal guidelines)

Examples of Ena Chaudhuri v. CIT, L.M.L. Rastriya Vikas Ltd. vs CIT, Dwarka
 Aspect Appeals Revisions

Cases Fibres Ltd. v. Dy. CIT Nath v. ITO

Appeals focus on providing a structured judicial review of assessment orders,

allowing both factual and legal challenges. They involve a tiered process, starting
from the Commissioner (Appeals) and potentially escalating to the Supreme Court. On
the other hand, revisions primarily aim to rectify errors or provide relief under the
CIT’s administrative discretion, with limited options for further appeal.

INCOME TAX AUTHORITIES:

Income Tax Authorities Income tax or the tax taken by the government on an
individual on his earnings is income tax. The government has set up various
authorities for lawful execution of the income Tax Act and to oversee the righteous
functioning of the income tax department. The various income tax authorities for the
purposeful existence of the Act are:

1. CBDT or the Central Board of Direct Taxes which has been constituted under
the Central Board of Revenue Act 1963
2. Director general of income tax
3. Chief commissioner of income tax
4. Directors and commissioner of income tax
5. Additional directors and additional commissioners of income tax
6. Joint directors and joint commissioners of income tax
7. Deputy directors and deputy commissioners of income tax
8. Assistant directors and assistant commissioners of income tax
9. Income tax officers
10. Income tax inspectors

It is a joint role of all these authorities that tax payer abides by the rule mentioned in
the beginning of every financial year and pay their taxes accordingly.

The supreme body with reference to the direct tax setup in India is the Central Board
of Direct Taxes. This board comprises of a leading Chairperson and a body of 6
members.

Appointment of Income Tax Authorities:

 The Central Government can appoint those persons whom it thinks are fit to
become Income Tax Authorities.
 The Central Government can authorize the Board or a Director-General, a
Chief Commissioner or a Commissioner or a Director to appoint income tax
authorities below the ranks of a Deputy Commissioner or Assistant
Commissioner,
 According to the rules and regulations of the Central Government controlling
the conditions of such posts.

Powers of income tax authorities:

Given below are some of the important powers of the Income Tax Authorities and
their scope as given in the Sections provided under the Income Tax Act, 1961:

 Power to Transfer Cases [Section 127]:

CBDT can transfer the case from Assessing Officer to another A.O. subordinate to
him after giving a reasonable opportunity of being heard to the concerned assessee.
However, no opportunity of being heard shall be required if the case is to be
transferred from one A.O. to another A.O. within the same city, town or locality.
Disputes regarding jurisdiction shall be resolved by the concerned CCIT or CIT on
mutual understanding. However, for any disagreement, the matter shall be referred
to CBDT and CBDT shall resolve the dispute by way of issuing a notification in
the Official Gazette of India.

 Opportunity of Being Reheard [Section 129]:

Whenever, an Income Tax Authority ceases to exercise jurisdiction over a

particular case and is being succeeded by another Income Tax Authority, then the
successor Income Tax Authority shall continue the pending proceeding from the
same stage at which it was left over by the predecessor Income Tax Authority.
There shall be no requirement on the part of the successor Income Tax Authority to
reissue any notice already issued by his predecessor. However, if the
concerned assessee demands that before the successor Income Tax Authority
continues the proceeding, he shall be given an opportunity of being reheard to
explain his case to the successor Income Tax Authority, then in such case, an
opportunity of being reheard has to be given to the assessee. (However, such an
opportunity of being reheard is required to be given only if the
concerned assessee demands for it and not otherwise). The time of A.O. lost in
giving such opportunity of being reheard to the assessee, shall be excluded while
calculating time limit to complete the assessment.

 Discovery, Production of Evidence etc. [Section 131]:

The Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner,
Commissioner (Appeals), the Chief Commissioner and the Dispute Resolution
Panel referred to in section 144C have the powers vested in a Civil Court under the
Code of Civil Procedure, 1908 while dealing with the following matters:

(i) discovery and inspection;

(ii) enforcing the attendance of any person, including any officer of a banking
company and examining him on oath;

(iii) compelling the production of books of account and documents; and

(iv) issuing commissions

 Search and Seizure [Section 132]:

Today it is not hidden from income tax authorities that people evade tax and keep
unaccounted assets. When the prosecution fails to prevent tax evasion, the
department has to take actions like search and seizure. Under this section, wide
powers of search and seizure are conferred on the income-tax authorities. The
provisions of the Criminal Procedure Code relating to searches and seizure would,
as far as possible, apply to the searches and seizures under this Act. Contravention
of the orders issued under this section would be punishable with imprisonment and
fine under section 275A.

 Power to Requisition Books of Account etc. [Section 132A]:

Where the Director or the Director-General or Commissioner or the Chief

Commissioner in consequence of information in his possession, has reason to
believe that (a), (b), or (c) as mentioned under section 132(1) and the book of
accounts or other documents or the assets have been taken under custody by any
authority or officer under any other law, then the Chief Commissioner or the
Director General or Director or Commissioner can authorize any Joint Director,
Deputy Director, Joint Commissioner, Assistant Commissioner, Assistant Director,
or Income tax Officer to require the authority to provide sue books of account,
assets or any documents to the requisitioning officer, when such officer is of the
opinion that it is no longer necessary to retain the same in his custody.

 Application of Retained Assets [Section 132B]:

This section provides that the seized assets can be appropriated against all tax
liabilities of the assessee. However, if the nature of source of acquisition of seized
assets is explained satisfactorily by the assessee, then, such assets are required to
be released within a period of 120 days from the date on which last of the
authorisations for search under section 132 is executed after meeting any existing
liabilities. For this purpose, it has been provided that the assessee should make an
application to the Assessing Officer within a period of 30 days from the end of the
month in which the asset was seized. The assessee shall be entitled to simple
interest at ½% per month or part of a month, if the amount of assets seized exceeds
the liabilities eventually, for the period immediately following the expiry of 120
days from the date on which the last of the authorisations for search under section
132 or requisition under section 132A was executed to the date of completion of
the assessment under section 153A or under Chapter XIV-B.

 Power to call for information [Sections 133]:

The Commissioner the Assessing Officer or the Joint

Commissioner may for the purpose of this Act:

(a) Can call any firm to provide him with a return of the addresses and names of
partners of the firm and their shares;

(b) Can ask any Hindu Undivided Family to provide him with return of the
addresses and names of members of the family and the manager;

(c) Can ask any person who is a trustee, guardian or an agent to deliver him with
return of the names of persons for or of whom he is an agent, trustee or guardian
and their addresses;

(d) Can ask any person, dealer, agent or broker concerned in the management of
stock or any commodity exchange to provide a statement of the addresses and
names of all the persons to whom the Exchange or he has paid any sum related
with the transfer of assets or the exchange has received any such sum with the
particulars of all such payments and receipts;

 Power of Survey [Section 133A]:

The term 'survey' is not defined by the Income Tax Act. According to the meaning
of dictionary 'survey' means casting of eyes or mind over something, inspection of
something, etc. An Income Tax authority can have a survey for the purpose of this
Act. The objectives of conducting Income Tax surveys are:

(a)To discover new assessees;

(b)To collect useful information for the purpose of assessment;

(c)To verify that the assessee who claims not to maintain any books of accounts is
in-fact maintaining the books; (d)To check whether the books are maintained,
reflect the correct state of affairs.

 Power to Collect Certain Information [Section 133B]:

For the purpose of collection of information which may be useful for any purpose,
the Income tax authority can enter any building or place within the limits of the
area assigned to such authority, or any place or building occupied by any person in
respect of whom he exercises jurisdiction.

 Power to Inspect Registers of Companies [Section 134]:

The Assessing Officer, the Joint Commissioner or the Commissioner (Appeals), or

any person subordinate to him authorised in writing in this behalf by the Assessing
Officer, the Joint Commissioner or the Commissioner (Appeals), as the case may
be, may inspect and if necessary, take copies, or cause copies to be taken, of any
register of the members, debenture holders or mortgagees of any company or of
any entry in such register.

 Other Powers [Sections 135 and 136]:

The Director General or Director, the Chief Commissioner or Commissioner and

the Joint Commissioner are competent to make any enquiry under this act and for
all purposes they shall have the powers vested in an Assessing Officer in relation
to the making of enquiries. If the Investigating officer is denied entry into the
premises, the Assessing Officer shall have all the powers vested in him under
sections 131(1) and (2). All the proceedings before Income tax authorities are
judicial proceedings for purposes of section 196 of the Indian Penal Code, 1860,
and fall within the meaning of sections 193 and 228 of the Code. An income-tax
authority shall be deemed to be a Civil Court for the purposes of section 195 of the
Criminal Procedure Code, 1973.

SETTLEMENT OF CASES:

Section 245 of the Income Tax Act, 1961, deals with the concept of Settlement
Commission. The provisions of this section empower the Settlement Commission
to resolve disputes relating to income tax, wealth tax and other tax-related matters.
This blog will discuss the various aspects of Section 245, including its meaning,
scope, and implications.

Scope of Section 245

The Settlement Commission can settle disputes relating to income tax, wealth tax,
and other tax-related matters. The Commission can settle disputes that arise from
assessments made by the Income Tax Department, appeals filed against such
assessments, or any other tax-related matter. The Commission has the power to
grant immunity from prosecution and penalty to taxpayers who disclose their
undisclosed income. The Commission can also pass orders to provide for the
distribution of assets in cases where the taxpayer is not able to pay the entire tax
liability.

Implications of Section 245

The provisions of Section 245 have significant implications for taxpayers and the
Income Tax Department. The Commission provides taxpayers with an opportunity
to settle their tax disputes and avoid lengthy and costly legal proceedings. The
Commission has the power to grant immunity from prosecution and penalty to
taxpayers who disclose their undisclosed income. This provides a strong incentive
for taxpayers to come forward and disclose their undisclosed income.

On the other hand, the Income Tax Department may not be able to recover the
entire tax liability in cases where the taxpayer is not able to pay the entire amount.
The Commission can pass orders to provide for the distribution of assets in such
cases. This may lead to a loss of revenue for the government.

Benefits of Section 245

 The Settlement Commission provides taxpayers with an opportunity to

resolve their tax disputes in a quick and efficient manner.
 The Commission has the power to settle disputes by making a binding
order, which is final and cannot be appealed.
 This provides certainty to taxpayers and reduces the risk of future
litigation.
 Another significant benefit of Section 245 is the power of the Settlement
Commission to grant immunity from prosecution and penalty to taxpayers
who disclose their undisclosed income.
 This provides a strong incentive for taxpayers to come forward and
disclose their undisclosed income, leading to increased compliance with
tax laws.

Procedure for approaching the Settlement Commission

1. The procedure for approaching the Settlement Commission is laid out in

Section 245B of the Income Tax Act. Any taxpayer can approach the
 Commission by filing an application in the prescribed format. The
application must be filed within six months from the end of the month in
which the assessment order was received by the taxpayer.
2. The application must contain details of the tax dispute, the grounds for
settlement, and the amount of tax in dispute. The taxpayer must also pay a fee
of Rs. 1,000 along with the application.
3. Once the application is filed, the Settlement Commission will examine it and
may call for additional information or documents. The Commission will then
issue a notice to the taxpayer and the Income Tax Department to appear
before it on a specified date.
4. The Settlement Commission will hear both parties and may call for any
additional information or documents. After considering all the facts and
circumstances, the Commission will pass an order, which is binding on both
parties.

Limitations of Section 245

Despite the benefits of Section 245, there are also some limitations to the
Settlement Commission’s powers. For example, the Commission cannot settle
cases where the disputed tax liability exceeds Rs. 50 lakhs, or where the tax
liability arises out of search and seizure proceedings. Additionally, the
Commission cannot entertain cases where the tax liability is pending before any
appellate authority.

Another limitation of Section 245 is the lack of transparency in the settlement

process. The Settlement Commission operates in a closed-door environment, and
its proceedings are not open to the public. This has led to concerns about potential
abuse of power and lack of accountability.

Recent Developments

 In recent years, there have been some changes to the Settlement Commission’s
functioning. For example, in 2019, the government introduced a new scheme,
the Vivad se Vishwas Scheme, aimed at reducing litigation and settling
disputes related to direct taxes.
 Under this scheme, taxpayers can settle their tax disputes by paying a reduced
amount of tax, interest, and penalty.
 The scheme has been well-received and has resulted in a significant reduction
in the number of pending cases before various appellate forums.
 However, it remains to be seen whether the Settlement Commission’s role will
be affected by the new scheme.
ADVANCE RULING FOR NON-RESIDENTS & FOREIGN COMPANIES:

As per Section 245N of the Income Tax Act, 1961, advance ruling in relation to non-
residents is defined as:

 Authority determination on transactions that have been undertaken or are

proposed to be undertaken by any non-resident, or

 Authority determination on transactions that have been undertaken or are

proposed to be undertaken by a resident with a non-resident.

 As per the law, authorities are required to make a decision within six months
of receiving a request. These rulings bind both the applicants and the tax
department. Two additional institutions were established in 2014 in New Delhi
and Mumbai, which are headed by retired Supreme Court judges.
 The authority has, over the years, formed a professional legal structure
pertaining to the interpretations of tax treaties and various disputes related to
international taxation through its decisions.

 Hardly a fraction of its decisions was challenged in the Supreme Court through
writ petitions and most of the decisions were upheld by both sides.

 Although the decisions have no precedential value, they are widely reported in
various legal publications and cited by Courts of Appeal and even the Supreme
Court for their persuasive value.

 As such, the supervisory authority has become credible and considered to have
a genuine legal standing in the eyes of potential applicants. The activities of the
Agency have proved to be very useful, especially for foreign persons doing
business in India.

Following is the fee structure that must be complied with during advance ruling
applications:
 Category of Case (for which ruling is sought) Fee

When the amount of one or more transactions performed or proposed to INR 2

be performed is not more than INR 100 crores. lakhs

When the amount of one or more transactions performed or proposed to INR 5

be performed is more than INR 100 crores but less than INR 300 crores. lakhs

When the amount of one or more transactions performed or proposed to INR 10

be performed is more than INR 300 crores. lakhs

According to Section 245R of the Income Tax Act 1961, the authority will not accept
the application of an applicant in the following cases:

 The matter is already pending in the Income Tax Office/Court/Tribunal.

 Includes determining the fair market value of property.

 A transaction aimed at avoiding taxation.

However, a domestic or public sector company or even a foreign company may

investigate if such a transaction has been proposed as an impossible arrangement.

Applicants can submit an advance ruling request either themselves or through an

authorized representative. The authority shall announce its decision within six months
after the authority has received the application and a copy of the judgment duly signed
and attested by the members, sent to the applicant and the Commissioner of Income
Tax.

As per Section 245W of the Income Tax Act, 1961, appeals can be filed in the High
Court against the order that was passed, BAR’s rulings, the Authorized Officer on the
directions of Principal Commissioner of Income Tax (PCIT) or Commissioner of
Income Tax (CIT) within a period of 60 days from the date of communication about
the ruling or order. Besides, the appeal can be filed by both individual applicants or
the Department.

SEARCH AND SEIZURES:

Section 132 of the Income-Tax Act, 1961, empowers the tax authorities to conduct
searches and seizures of persons and properties, without any prior judicial warrant, if
they have a “reason to believe” that the person has concealed or evaded income.

o It grants authorities the power to search buildings, places, vehicles, or

aircraft based on suspicion of hiding financial assets.

o It allows for the seizure of books of account, money, bullion, jewellery,

or other valuable items discovered during the search. Additionally, tax
officials can seize such items found in the possession of any person
during a search or survey under the Act.

Objectives of Income Tax Search and Seizure

The Income Tax Department exercises its right of search and seizure to achieve the
following objectives:

1. To address problems and issues due to evasion and avoidance of tax

2. To address the menace of unaccounted and black money

3. To uphold the law and ensure tax related compliance.

4. To deal with any threat to social security

Who can conduct Income Tax Search?

As per Section 132 (1) of the Income Tax Act, the Additional Director or Additional
Commissioner, Joint Director or Joint Commissioner or Assistant Director or Dy
Director or Asst. Commissioner or Dy. Commissioner or any other Income Tax Officer
on being authorised by Principal Director General or Director General or Principal
Director or Director of Principal Chief Commissioner or Principal Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner can conduct a Tax
Search.

Reasons For Income Tax Search

The Income Tax Department can conduct Search on individuals or groups for a wide
range of reasons. The most important ones are outlined below:
a. Where the department has gathered evidence substantiating that an assessee is
in possession of income or assets that have not been disclosed, and where the
amount of tax that would be normally paid on such income or assets exceeds
Rs 1 crore.
b. Where the department suspects an individual or group are in possession of
unaccounted for assets and which are suspected to have been used for the
purpose of smuggling, public disorder, fraud and terrorism etc
c. Where the department has intimation of lavish expenditure at marriages and
other functions
d. Where the department has gathered information and evidence relating to the
evasion of tax gathered through informers or by revenue intelligence
e. Where money has been confiscated by any state or central government law
enforcement agency and the same has been reported to Income tax department
f. Where the department has gathered data or information on perusal of tax
assessment files.
g. Where the department has gathered evidence of the manipulation of books of
accounts, documents and invoices.
h. Where the department has gathered evidence of the possession of substantial
amounts of income with the assessee, at the resident, bank lockers, residence
of the assessee, or partner or employees.
i. Where intimation of person arrival at any of the airports in India with the
possession of substantial sums of money, precious metals etc
j. Where the department has gathered evidence of disproportionate income to
known sources of income
k. Where the department has gathered credible information, data and evidence
from other governmental departments.
l. Where the department has gathered information that
m. any hawala activities and transactions that have taken place within the
functioning of any business.
n. the assessee making investments in benami
o. undisclosed sums of money and investments held with banks under the name
of the assessee or any of his or her family members, business associates,
relatives etc
p. of any undisclosed share investments, demat or forex accounts under the name
of the assessee or any of his or her family members, business associates,
relatives etc
q. of the commercial transactions from organisations which are non-existing
r. heavy cash transactions and investments in real estate
s. large amount of non-existing sundry creditors
t. huge discrepancies in stock quantities, inventory, production etc
 u. non-filing of income tax returns by the assessee
v. individuals in possession of many Permanent Account Numbers (PAN) and
filing income tax returns from different locations
w. Any other reason that may be deemed valid or confidential by the Authorities.

What are the assets that cannot be seized

1. Stock in trade except cash

2. Assets that were declared in tax returns

3. Assets and cash that were recorded in books of accounts

4. Gold up to 500 grams for each married lady 250 gms for each unmarried lady
and 100 gms per every male member

Powers of Income Tax Authorities in search and seizure:

The income tax officers who are authorised to conduct Search have the following
rights:

1. Enter and search the premises where reason to suspect that books of accounts,
records, documents, money and other valuable article representing undisclosed
income are kept

2. Take extract or copies of the books of account and other documents and place
marks of identifications also

3. Break open the locks if keys are not made available during Search

4. To carry out personal search of persons present in the premises Searched who
are suspected to have secreted any items.

5. Examine on oath any person who is found to be in possession or control of any

books of account, documents or assets and any statement made by any such
person may thereafter be used as evidence in any proceedings under the Act.

6. To mark and seize valuables, books of accounts and records, computers and
data storage devises.

7. Seize any documents relating to properties

8. All India jurisdiction: Investigation Wing has Pan India jurisdiction and can
carry out searches all across India simultaneously. Ordinarily, Investigation
Wing carries out search where it is located. However, to unearth total
 concealment, it must cover factories, godowns, branch offices, stockists,
dealers and at times close relatives, employees etc., of the assessee who might
be located all over the country.

PENALITIES AND FINES:

An assessee who commits an offence under the provisions of The Income Tax Act,
1961 shall be subject to penalty. The penalty is an additional amount levied and is
different from the tax payable. The penalty is levied based on the law at the time of
the offence being committed and not as it stands in the financial year for which the
assessment is being made. The list of penalties for assessment year 2024-25 are:

Sl
Section No. and Description Penalty
No

 Minimum - 100% of the

tax payable on
undisclosed income

 Maximum - 300% of the

tax payable in respect of
Section 158BFA- Determination of the undisclosed income
undisclosed income for the block period,
when a search is initiated under section This penalty will be
1)
132 or books of account, other documents levied only on that
or any assets are requisitioned under portion of the income
section 132A in the case of any person which was determined by
the ITO in excess of the
ITR furnished by the
assessee u/s 158BC and
an appeal is not filed
against such assessment

2) Section 221(1)- Default in making Amount as directed by the

payment of taxes assessing officer. However, the
amount of penalty cannot exceed
 the amount of tax in arrears.

Section 234E- Failure to file return in Rs.200 for every day until you
respect of TDS/TCS within the time file the return
3)
prescribed as given under section The penalty cannot be more than
200(3)/206C (3) the TDS/TCS amount.

Rs.5,000 if return is furnished

before 31st December of the
assessment year.
Section 234F- Default in furnishing of
4) return under section 139(1) within the time
Note: If the income does not
prescribed
exceed Rs.5 Lakhs then the
penalty shall not exceed
Rs.1,000

Section 270A- - 50% of the amount of tax

payable on under-reported
5) - Penalty for under-reporting of income income.
- Penalty for under-reporting on account of - In case of misreporting, 200%
misreporting of income of the amount of tax payable on
under-reported income

Section 271A- Failure to keep, maintain or

6) retain the books of account, documents as Rs. 25,000
required under Section 44AA

7) Section 271AA (1)- Penalty in respect of 2% of the value of each

an international transaction/specified international transaction or
domestic transaction with regard to: specified domestic transaction
entered into.
-failure to keep and maintain any such
information and document as required by
 Section 92D (1) or 92D (2)
-failure to report such transaction which is
required to be done
-Maintaining or furnishing incorrect
information or document

Section 271AA (2)- Failure to furnish

information and document to the authority
8) Rs.5,00,000
prescribed as required under Section 92D
(4)

Section 271AAA- Where search has been

10% of the undisclosed income
9) initiated under Section 132 between 1st
of the specified previous year
day of June, 2007 and 1st day of July, 2012

10) Section 271AAB (1)- Where search was a) 10% of the undisclosed
initiated after 1-7-2012 but before 15-12- income if: Assessee admits the
2016 and undisclosed income was found undisclosed income along with
the manner of deriving the
same.
-Substantiates the manner in
which undisclosed income was
derived
-Pays the tax along with interest
and furnishes the return of
income for the specified
previous year declaring
undisclosed income on or before
the specified date

b) 20% of the undisclosed

income if: The assessee does not
admit the undisclosed income
-Declares the income for the
specified previous year and pays
the tax along with interest on the
 undisclosed income on or before
the specified date

c) 60% of the undisclosed

income: If not covered under
clause (a) or (b) above

a) 30% of the undisclosed

income if: -Assessee admits the
undisclosed income along with
the manner of deriving the
same.
- Substantiates the manner in
which undisclosed income was
derived
Section 271AAB(1A)- Where search was
- Pays the tax along with interest
11) initiated after 15-12-2016 and undisclosed
and furnishes the return of
income was found
income for the specified
previous year declaring
undisclosed income on or before
the specified date

b) 60% of the undisclosed

income if it is not covered under
the provisions of clause (a)

12) Section 271AAC- Income under sections At the rate of 10% on tax
68,69,69A,69B,69C,69D determined by payable under Section 115BBE
the assessing officer if not included by
assessee or tax under Section 115BBE not
paid

*Section 68- Cash Credits

Section 69- Unexplained Investments
Section 69A- Unexplained money Section
69B-Amount of investments not fully
disclosed in books of account Section
 69C-Unexplained expenditure

If any assessing officer finds-

a) A false entry, or
b) An omission of any entry
which is relevant for the
computation of the total income
of an assessee.

He may direct the assessee to

pay a penalty of an amount equal
to the sum of such false or
omitted entries.
Section 271AAD- Penalty for false entry,
13) The false entry here means the
fake invoices etc. in books of account
following:
a) Forged or false documents
such as a fake invoice
b) Any invoice of supply or
receipts of goods or services
issued by any person without
actual supply or receipt of goods
or services
c) An invoice in respect of the
supply or receipt of goods or
services or both to or from a
person who does not exist

In the case of business: One-

Section 271B- Failure to get the accounts half per of the total
14) audited or furnish the report as required sales, turnover/gross receipts.
under Section 44AB or
Rs.1,50,000, whichever is less

15) Section 271BA- Failure to furnish a report Rs. 1,00,000

from an accountant to be furnished by
 persons entering into an international
transaction or specified domestic
transaction under Section 92E

Section 271BB- Failure to subscribe to the

16) eligible issue of capital referred to in 20% of such amount
Section 88A (1)

Section 271C- Failure to deduct tax at A sum equal to the amount of tax
17)
source not paid or failed to deduct

Section 271CA- Failure to collect tax at A sum equal to the amount of tax
18)
source not collected

Section 271D- Accepting loan or deposit

A sum equal to the loan or
19) or specified sum in contravention of
deposit or specified sum taken
Section 269SS

Section 271DA- Receiving any sum (Rs. 2

A sum equal to the amount of
20) Lakhs or more) in contravention to the
receipt
provisions of Section 269ST

Section 271DB-Penalty for failure to

comply with the provision of section a sum of Rs 5,000, for every day
21) 269SU with regard to providing a facility during which such failure
for accepting payment through the continues
prescribed electronic modes of payment

Section 271E- Failure to comply with the

Sum equal to the amount of
provisions of Section 269T with regard to
22) loan/deposit/specific advance
the repayment of loan/deposit/specific
repaid.
advance
 Section 271F- Failure to furnish the
returns as required under Section 139(1) or
23) by its proviso before the end of the Rs.5,000
relevant assessment year Note: Applicable
up to AY 2017-18

Section 271FA- Failure to furnish a

statement of financial transaction or Rs.500 for every day during
reportable account under Section 285BA which the failure continues
(1)
24)

Failure to furnish the statement within the Rs.1,000 for every day during
period specified in the notice issued under which the failure continues
Section 285BA (5)

Section 271FAA- Furnishing inaccurate

25) statement of financial transaction or Rs.50,000
reportable account.

Section 271FAB- Failure to furnish

statement/information/document by an
26) eligible investment fund within the time Rs.5,00,000
prescribed as provided under Section 9A
(5)

Section 271FB- Failure to furnish a return

Rs.100 for every day during
27) of fringe benefits as required under Section
which the failure continues
115WD (1) within the prescribed time
 Section 271G- Failure to furnish 2% of the value of the
information under Section 92D (3) in international transaction or
28)
relation to an international transaction or specified domestic
specified domestic transactions transaction for each such failure.

Section 271GA- Failure by the Indian

concern to furnish any information or
document under Section 285A

Section 285A-
- Where any interest/share in an entity - 2% of the value of the
registered outside India obtains its value transaction in respect of which
29)
from assets located in India and such failure has taken place if
- Where such foreign company holds assets such transaction had the effect of
in the Indian concern Such an Indian directly or indirectly transferring
concern shall, for the purposes of the right of management/control
determination of any income accruing or in relation to the Indian concern.
arising in India, furnish the documents
within the prescribed time - Rs. 5,00,000 in any other case

30) Section 271GB- - For delay of:

a) less than one month: Rs.5,000
for every day of default
- Failure to furnish the report/submitting an b) more than one month:
inaccurate report by the reporting entity Rs.15,000 for every day of
which is required to furnish a country-by- default
country report as required under Section c) Continuing default even after
286. service of notice under either (a)
or (b) above penalty would be
Rs.50,000 for every day of
default.

- Rs.5,000 for every day of

default starting after the period
for furnishing the document
- Failure to produce the documents within expires.
30 days of notice as prescribed under
 Section 286(6).

- Furnishing inaccurate information in the

report which is to be furnished under - Rs.5,00,000
Section 286(2).

Section 271H- Failure to furnish TDS/TCS

statements of furnishing incorrect
information within the prescribed time Minimum: Rs.10,000
31)
Maximum: Rs.1,00,000
Note: Applicable to TDS/TCS statements
to be delivered after 01-07-2012

Section 271I- Failure in furnishing the

information related to the payment made to
a non-resident, which is not a
32) Rs.1,00,000
company/foreign company of any sum
(even though not chargeable under the
provisions of this act)

Section 271J- Incorrect information in

reports/certificates by an Rs. 10,000 for each such
33)
accountant/merchant banker/registered report/certificate
valuer

Section 271K-Penalty for failure to

Minimum: Rs.10,000
34) furnish statements under section
Maximum: Rs.1,00,000
35(1) ,80G (5)

35) Section 272A (1)- Any person fails/refuses Rs. 10,000 for each default
to:
- Answer questions put by the IT authority
- Sign statements which the IT authority
 requires him to do
-Give evidence or produce the books under
summons issued under Section 131(1)
-Comply with the notice issued under
Section 142(1) or 143(2) or 142(2A)

36) Section 272A(2)- Failure to: Rs 500 for every day during
- Furnish the statement regarding which the failure continues
ownership/beneficial interest in the In sections related to TDS/TCS,
securities in order to determine whether tax the amount of penalty shall not
is borne on the same as required under exceed the amount of tax-
Section 94(6) deductible/collectible.

- Furnish the notice of discontinuance

within 15 days under section 176(3)

- Furnish information, TDS return, TCS

returns and submission of statements by
producers of cinematograph films under
section 133/206/206C/285B

- To allow inspection/copies of the register

under Section 134

-To furnish return of income under Section

139(4A) or 139(4C)

-To deliver a copy of the declaration for

transactions where no TDS needs to be
deducted as given under Section 197A

-To furnish a certificate for TDS/TCS

under section 203/206C

-To deduct and pay tax in respect of salary

as referred to in Section 226

-To furnish a statement to the person

 receiving the salary complete particulars of
perquisites or profits in lieu of salary under
section 192(2C)

-To deliver in due time a copy of

declaration as required under Section
206C(1A) -To deliver statements
pertaining to TDS/TCS under section
200(3) or 206C(3)

-To furnish quarterly returns in respect of

payment of interest to residents without
deduction of tax within the prescribed time
and in a prescribed manner under section
206A(1)

-To furnish a statement in respect of sums

credited to the Central Government under
Section 200(2A) or Section 206C(3A).

Section 272AA- Failure to comply with

Section 133B wherein an income tax
37) Maximum: Rs. 1,000
authority has the power to call for
information

38) Section 272B- Rs.10,000

Failure to comply with Section 139A with

regard to a permanent account number
(PAN) or Aadhar number

-PAN is to be quoted in the documents as

prescribed by the Board under Section
139(5)(c)
-PAN is to be furnished to the person
 deducting tax by the person receiving the
income PAN is to be furnished to the
person responsible for collecting tax by the
buyer/licensee/lessee.

If in any of the circumstances the PAN

furnished is false or the person believes it
to be false then he shall be liable to a
penalty

Section 272BB- Failure to apply/quote the

tax deduction/tax collection number
39) Tax deduction number/ tax collection Rs.10,000
number falsely quoted or the person
believes it to be false.

Section 272BBB - Penalty for failure to

comply with the provisions of section
40) Rs.10,000
206CA before the 1st day of October,
2004

UNIT -3 CORPORATE TAX PLANNING

Introduction of tax planning:

Tax planning refers to the process of arranging financial affairs in a way that
maximises tax benefits and minimises tax liabilities. It involves analysing an
individual's or an organisation's income, expenses, investments, and other financial
activities to identify potential tax-saving opportunities.

Importance of Tax Planning

 Taxes are a guaranteed expense, but unlike fixed costs, they can be influenced
by your financial decisions. Tax planning empowers you to navigate the tax
regulations and strategically use available deductions, exemptions, and rebates
to reduce your tax burden.
 This translates into increased cash flow, which you can then channel towards
achieving your financial goals, such as saving for retirement, investing in your
child's education, or building an emergency fund.
 Effective tax planning ensures financial stability, increased savings, and the
ability to achieve long-term financial goals. It is a proactive strategy for building
wealth and securing your financial future. It allows you to take control of your
finances and keep more of your money working for you.

Objectives of Tax Planning

The objectives of tax planning revolve around minimising tax liability and
maximising savings. Here are some key objectives of tax planning:

1. Cutting Down Taxable Income: The primary objective of tax planning is to reduce
your taxable income by utilising various deductions, exemptions, and credits offered
by the tax laws. By effectively managing income, expenses, investments, and other
financial transactions, you can lower your overall tax liability.

2. Decrease Tax-Related Legal Problems: Efficient tax planning helps you avoid
tax-related legal problems by ensuring compliance with tax laws. By staying informed
about tax regulations and utilising legal methods to optimise tax savings, you can
avoid penalties, fines, and audits.

3. Increase Your Savings: Tax planning aims to maximise savings by optimising tax
deductions, credits, and incentives. By utilising various tax-saving avenues,
individuals can increase their savings and allocate more funds towards financial goals,
investments, and wealth accumulation.

4. To Secure Financial Stability: Planning taxes helps individuals and businesses

achieve financial stability by optimising their tax liabilities. By effectively managing
taxes, individuals can allocate resources towards essential expenses, savings, and
emergency funds. This helps in safeguarding against unforeseen financial crises and
ensures a secure future.

5. To Increase Productivity: Efficient tax planning allows individuals and businesses

to focus on their core activities rather than being burdened by complex tax issues. By
streamlining tax-related processes, individuals and companies can enhance
productivity and allocate more time towards revenue-generating activities.

6. To Achieve Financial Goals: Tax planning allows you to allocate funds efficiently
to accomplish your financial objectives, whether that is retirement planning, education
expenses, or purchasing assets.

7. To Manage Risk: Tax planning allows you to manage financial risks associated
with taxes. By diversifying investments and optimising tax liabilities, you can mitigate
risks arising from fluctuating tax rates and economic uncertainties.

Different Tax Planning Strategies in India:

In India, different tax planning strategies can help individuals and businesses optimise
their tax liabilities. Here are some commonly used strategies for planning your taxes:

1. Short-term Tax Planning:

Short-term tax planning focuses on minimising tax liability for the current financial
year. It involves analysing your income, expenses, and investments to ensure efficient
tax management within a shorter time frame.

2. Long-term Tax Planning:

Long-term tax planning involves comprehensive financial planning for the future,
considering multiple financial goals and priorities. It aims to achieve tax efficiency
over an extended period by strategically managing investments, assets, and income.

3. Permissive Tax Planning:

Permissive tax planning involves utilising the exemptions, deductions, and credits
provided by the tax laws to legally minimise the tax liability. Taxpayers can take
advantage of specific provisions to maximise their savings.

4. Purposive Tax Planning:

Purposive tax planning aligns financial decisions with specific tax-saving objectives.
It involves strategically structuring income, expenses, and investments to achieve
desired financial outcomes rather than selecting as many tax benefits as possible.
5. Marginal Tax Planning:

Marginal tax planning involves analysing the effects of additional income or expenses
on the tax liability to optimise tax savings. By optimising income within lower tax
brackets, taxpayers can reduce their overall tax liability.

6. Structural Tax Planning:

Structural tax planning involves restructuring business or personal finances to benefit

from tax exemptions, deductions, or incentives provided under the current tax laws. It
includes strategies like forming partnerships, utilising trusts, or setting up tax-efficient
entities to minimise tax obligations

TAX PLANNING CONCERNING FORMS OF BUSINESS, NATURE OF

BUSINESS AND LOCATION OF BUSINESS:

TAX MANAGEMENT IN LOCATION OF THE NEW BUSINESS

1. Sec. [ 10A]: Tax Holiday for newly established undertaking in Free Trade Zone:
First 5 Years – 100 % of profits and gains is allowed as deduction Next 2 Years:
50% of such Profit and Gains is deductible for further 2 assessment years. Next 3
Years: for the next three consecutive assessment years, so much of the amount not
exceeding 50% of the profit as is debited to the profit and loss account year in
respect of which the deduction is to be allowed and credited to a reserve account
(to be called the ''Special Economic Zone Re-investment Allowance Reserve
Account'') to be created and utilised for the purposes of the business of the
assessed
2. Sec. [ 80IA] : an [undertaking] which,—(a) is set up in any part of India for the
generation or generation and distribution of power if it begins to generate power at
any time during the period beginning on the 1st day of April, 1993 and ending on
the 31st day of March, 2010; (b) starts transmission or distribution by laying a
network of new transmission or distribution lines at any time during the period
beginning on the 1st day of April, 1999 and ending on the 31st day of March,
2010. (c) undertakes substantial renovation and modernisation of the existing
network of transmission or distribution lines at any time during the period
beginning on the 1st day of April, 2004 and ending on the 31st day of March,
2010. Deductions allowed is 100% or 30% of profits from such eligible business
3. Sec. [80IB]: Deduction in respect of Profits of Industrial Undertaking located in
backward State or District. Deduction allowed is either 100% and /or 30% for 10
years depending upon case to case.
4. Sec. [80IB (11B)]: The amount of deduction in the case of an undertaking deriving
profits from the business of operating and maintaining a hospital in a rural area
 shall be 100% of the profits and gains of such business for a period of five (5)
consecutive assessment years, beginning with the initial assessment year.
5. Sec. [ 80IC]: Profits from Industrial Undertaking located in the specified States,
States are State of Jammu & Kashmir, Himachala Pradesh, Uuttaranchal and North
Eastern States. Deduction allowed is 100% of such profit.
6. Sec.[ 80 LA] : Where the gross total income of an assessed,— (I) being a
scheduled bank, or, any bank incorporated by or under the laws of a country
outside India; and having an Offshore Banking Unit in a Special Economic Zone;
or (ii) being a Unit of an International Financial Services Centre , there shall be
allowed a deduction from such income, of an amount equal to— 100% of such
income for five consecutive assessment years beginning with the assessment year.

TAX MANAGEMENT IN NATURE OF THE NEW BUSINESS

1) Sec. [ 10(1)]: Agricultural Income– fully exempted (100%.

2) Sec. [10(23FB)]: Dividend or Long-Term Capital Gain (LTCG) accruing to
Venture Capital or a Venture Company – 100% tax exempted. ―venture capital
company‖ means such company— (I) which has been granted a certificate of
registration under the Securities and Exchange Board of India Act, 1992 ―venture
capital fund‖ means such fund— (I) operating under a trust deed registered under
the provisions of the Registration Act, 1908 or operating as a venture capital
scheme made by the Unit Trust of India established under the Unit Trust of India
Act, 1963; (ii) which has been granted a certificate of registration under the
Securities and Exchange Board of India Act, 1992 .
3) Sec. [ 33 AB) ] : Tea Development Account, Coffee Development Account and
Rubber Development Account : Where an assesses carrying on business of
growing and manufacturing tea or coffee or rubber in India has, before the expiry
of six months from the end of the previous year or before the due date of
furnishing the return of his income, whichever is earlier,— deposited with the
National Bank any amount or amounts in an account the assesses shall be allowed
a deduction of— (a) a sum equal to the amount or the aggregate of the amounts so
deposited ; or (b) a sum equal to 40% [forty] per cent of the profits of such
business (computed under the head ―Profits and gains of business or profession‖
before making any deduction under this section), whichever is less :
4) Sec. [ 35 D ] : Amortization of Certain Preliminary Expenses : Where an assesses,
being an Indian company or a person (other than a company) who is resident in
India, incurs, after the 31st day of March, 1970, any expenditure specified in sub-
section (2),— (i) before the commencement of his business, or (ii) after the
commencement of his business, in connection with the extension of his [industrial]
undertaking or in connection with his setting up a new [industrial] unit, the
assesses shall be allowed a deduction of an amount equal to one-tenth (1/10 the )
 of such expenditure for each of the ten successive previous years beginning with
the previous year in which the business commences or the new [industrial] unit
commences production or operation :
5) Sec. [ 35 E ] : Profits from Prospecting Certain Minerals : Where an assesses,
being an Indian company or a person (other than a company) who is resident in
India, is engaged in any operations relating to prospecting for, or extraction or
production of, any mineral and incurs, after the 31st day of March, 1970, any the
assesses shall be allowed for each one of the relevant previous years a deduction of
an amount equal to one-tenth (1/10) of the amount of such expenditure.
6) Sec. [ 35 ABB]: Expenditure for obtaining licence to operate telecommunication
services: In respect of any expenditure, being in the nature of capital expenditure,
incurred for acquiring any right to operate telecommunication services and for
which payment has actually been made to obtain a licence, there shall be allowed a
deduction equal to the appropriate fraction of the amount of such expenditure.
7) Sec. [ 36(1)(viii) ] : Special Reserve Created by Financial Corporation : in respect
of any special reserve created and maintained by a specified entity, an amount not
exceeding 20% of the profits derived from eligible business computed under the
head ―Profits and gains of business or profession‖ (before making any deduction
under this clause) carried to such reserve account: Provided that where the
aggregate of the amounts carried to such reserve account from time to time
exceeds twice the amount of the paid up share capital and of the general reserves
of the specified entity, no allowance under this clause shall be made in respect of
such excess.
8) Sec. [ 42]: Special provision for deductions in the case of business for prospecting,
etc., for mineral oil: For the purpose of computing the profits or gains of any
business consisting of the prospecting for or extraction or production of mineral,
there shall be made in lieu of, or in addition to, the allowances admissible under
this Act
9) Sec. [ 44BB ] : Special provision for computing profits and gains in connection
with the business of exploration, etc., of mineral oils : If an assesses engaged in the
business of providing services or facilities in connection with, or supplying plant
and machinery on hire used in the prospecting for, or extraction or production of,
mineral oils, then 10% of the aggregate of the amounts shall be deemed to be the
profits and gains of such business chargeable to tax under the head ―Profits and
gains of business or profession‖
10)Sec. [ 44 AD ] : Special provision for computing profits and gains of business of
civil construction, etc. : in the case of an assesses engaged in the business of civil
construction or supply of labour for civil construction, a sum equal to 8% of the
gross receipts paid or payable to the assesses in the previous year on account of
such business or, as the case may be, a sum higher than the aforesaid sum as
 declared by the assesses in his return of income, shall be deemed to be the profits
and gains of such business chargeable to tax under the head "Profits and gains of
business or profession":
11)Sec. [ 44 AE ] : Special provision for computing profits and gains of business of
plying, hiring or leasing goods carriages : If an assesses engaged in the business of
plying, hiring or leasing such goods carriages and who owns not more than 10
goods carriages and, the income of such business chargeable to tax under the head
"Profits and gains of business or profession" shall be deemed to be the aggregate
of the profits and gains, computed as follows : (i) An amount equal to Rs.3,500
[three thousand five hundred rupees] for every month or part of a month for a
heavy goods vehicle. (ii) An amount equal to Rs. 3,150) [three thousand one
hundred and fifty rupees] for every month or part of a month for other than a heavy
goods vehicle.
12)Sec. [ 44 AF]: Special provisions for computing profits and gains of retail
business: If the assesses engaged in retail trade in any goods or merchandise, a
sum equal to 5% (five per cent) of the total turnover shall be deemed to be the
profits and gains of such business chargeable to tax under the head ―Profits and
gains of business or profession‖.
13)Sec. [ 44B]: Special provision for computing profits and gains of shipping
business in the case of non-residents.: in the case of an assesses, being a non-
resident, engaged in the business of operation of ships, a sum equal to 7½ %
(seven and a half per cent) of the aggregate of the amounts shall be deemed to be
the profits and gains of such business chargeable to tax under the head ―Profits
and gains of business or profession‖.
14)Sec. [ 44 BBA]: Special provision for computing profits and gains of the business
of operation of aircraft in the case of non-residents: in the case of an assesses,
being a non-resident, engaged in the business of operation of aircraft, a sum equal
to 5% (five per cent) of the aggregate of the amounts shall be deemed to be the
profits and gains of such business chargeable to tax under the head ―Profits and
gains of business or profession‖.
15)Sec. [ 44 BBB ] : Special provision for computing profits and gains of foreign
companies engaged in the business of civil construction, etc., in certain turnkey
power projects : in the case of an assesses, being a foreign company, engaged in
the business of civil construction or the business of erection of plant or machinery
or testing or commissioning thereof, in connection with a turnkey power project
approved by the Central Government, a sum equal to (10%) ten per cent of the
amount paid or payable (whether in or out of India) to the said assesses or to any
person on his behalf on account of such civil construction, erection, testing or
commissioning shall be deemed to be the profits and gains of such business
chargeable to tax under the head ―Profits and gains of business or profession‖.
16)Sec. [ 44 D ] : Special provisions for computing income by way of royalties, etc.,
in the case of foreign companies : in the case of an assesses, being a foreign
company,— (a) the deductions admissible under the said sections in computing the
income by way of royalty or fees for technical services received shall not exceed in
the aggregate 20% (twenty per cent) of the gross amount of such royalty or fees ;
(b) no deduction in respect of any expenditure or allowance shall be allowed under
any of the said sections in computing the income by way of royalty or fees for
technical services received.
17)Sec. [ 80 IA]: Deductions in respect of profits and gains from industrial
undertakings or enterprises engaged in infrastructure development, etc.:
Deductions allowed is 100% or 30% of profits from such eligible business. The
profits from such business shall be computed as if such eligible business were the
only source of income of the assesses. Nature of Industry Assessed Period of
commencement of business Deductions Infrastructure facility (new undertaking;
agreement with the Central Govt.) Indian Company On or after 1-4-1995 100% for
10 years out of 20 years. In case of Port out of 15 years. Telecommunication (New
undertaking: new Plant) Any undertaking. In case of domestic satellite Indian
Company 1-4-95 to 31-3-2005 100% for first 5 years; 30% for next 5 years.
Industrial Park or SEZ Any undertaking IP- 1-4-97 to 31-3-2006. SEZ- on or after
1-4-2001 to 31-3-2006 100% for 10 years out of 5 years Power (New undertaking:
New Plant) Any undertaking new network – 1-4-99 to 31-3-2006. Substantial
renova. – 1-4- 2004 to 31-3-2006. 100% for 10 years out of 15 years
18)Sec. [ 80-IA (2A)]: the deduction in computing the total income of an undertaking
providing telecommunication services shall be 100% (hundred per cent) of the
profits and gains of the eligible business for the first five assessment years
commencing at any time during the periods and thereafter, thirty per cent. of such
profits and gains for further five assessment years;
19)Sec. [ 80-IB (11A)]: The amount of deduction in a case of an undertaking deriving
profit from the business of processing preservation and packing of fruits or
vegetables or from the integrated business of handling, storage and transportation
of foodgrains, shall be 100% (hundred per cent) of the profits and gains derived
from such undertaking for five assessment years and thereafter, 25% (twenty-five
per cent) or 30% (thirty per cent. where the assesses is a company) of the profits
and gains derived from the operation of such business in a manner that the total
period of deduction does not exceed ten consecutive assessment years.
20)Sec. [ 80 –IB (11B)]: The amount of deduction in the case of an undertaking
deriving profits from the business of operating and maintaining a hospital in a rural
area shall be 100% (hundred per cent) of the profits and gains of such business for
a period of five consecutive assessment years, beginning with the initial
assessment year.
21)Sec. [ 80- IB (11)]: the amount of deduction in a case of industrial undertaking
deriving profit from the business of setting up and operating a cold chain facility
for agricultural produce, shall be 100% (hundred per cent). of the profits and gains
derived from such industrial undertaking for five assessment years beginning with
the initial assessment year and thereafter, 25% (twenty-five percent) or 30% (thirty
per cent) where the assesses is a company) of the profits and gains derived from
the operation of such facility in a manner that the total period of deduction does
not exceed ten consecutive assessment years.
22)Sec. [ 80-IB (7A)]: The amount of deduction in the case of any multiplex theatre
shall be 50% (fifty per cent) of the profits and gains derived, from the business of
building, owning and operating a multiplex theatre, for period of five consecutive
years beginning from the initial assessment year in any place:
23)Sec. [ 80-IB (7B)]: The amount of deduction in the case of any convention centre
shall be50% (fifty per cent) of the profits and gains derived, by the assesses from
the business of building, owning and operating a convention centre, for a period of
five consecutive years beginning from the initial assessment year;
24)Sec. [ 80-JJA ] : Deduction in respect of profit and gains from business of
collecting and processing of bio-degradable waste.: Where the gross total income
of an assesses includes any profits and gains derived from the business of
collecting and processing or treating of biodegradable waste for generating power,
or producing bio-fertilizers, bio pesticides or other biological agents or for
producing bio-gas or], making pellets or briquettes for fuel or organic manure,
there shall be allowed a deduction of an amount equal to the whole of such profits
and gains for a period of five consecutive assessment years beginning with the
assessment year relevant to the previous year in which such business commences.
25)Special Provisions under section 115A, 115AB, 115AC, 115AD, 115B, 15BB,
115BBA and 115D

TAX PLANNING VS TAX MANAGEMENT:

 DIFFERENCE BETWEEN TAX PLANNING, TAX AVOIDANCE, TAX
EVASION & TAX MANAGEMENT:

Point Tax
Tax Planning Tax Avoidance Tax evasion
of distinction management

It is the way to
It is the way to
reduce tax bill by It is a
It is the way to reduce tax bill by
using advantages procedure to
reduce tax bill deliberately
downed by the tax fulfil all
Definition by bending the supressing
through various requirements of
law without income or over
exemptions, the income tax
breaking it showing
deduction and act
expenditure etc,
relief

It is
It is immoral in It is illegal, hence the duty to
Nature It is moral in nature
nature but illegal immoral in nature comply with the
law

Benefit arises in Benefit arises in No benefit arises It

Benefit
short run as well as short run but causes penalty avoids penalty,
 interest and
long run and precautions
prosecution

To reduce tax To reduce tax bill To

To reduce tax bill
bill following without by any comply with the
Object featuring script and
script butt not means whether requirements of
moral of the law
moral of law legal or illegal the law

It takes
Treatment of It takes advantage advantages of It
It violates the law
law gifted by law loopholes in the follows the law
law

It is a
It is a practice of It is a practice of It is a practice of
practice practice of tax
tax saving tax saving tax concealment
administration