Income Tax Mini Ready Reckoner

CONTENTS AT A GLANCE
DIVISION 1
Compact Referencer

CR-1 Amendments brought in the Income-Tax Act, 2026 by the Finance Act,
2026 …………………………………………………………………………………………………………….1
CR-2 Rates of Taxation…………………………………………………………………………………………47
CR-3 Direct Tax Rates for Last Ten Assessment Years ……………………………………………..67
CR-4 Cost Inflation Index & Exemptions Available in Computation of Capital
Gain …………………………………………………………………………………………………………..82
CR-5 TDS & TCS at a glance…………………………………………………………………………………86
CR-6 Time Limit, Form & Fees for Filing an Appeal ………………………………………………101
CR-7 Prescribed Audit Reports under the Income-tax Rules/Act……………………………….103
CR-8 Prescribed Reports/Certificates from an Accountant………………………………………..105
CR-9 Gold & Silver Rates since 1-4-2001………………………………………………………………107
CR-10 Investment Planner …………………………………………………………………………………….109
CR-11 Repeal and Savings…………………………………………………………………………………….129

DIVISION 2
Income Tax

Chapter 1: Introduction
1.1 Income Tax Law…………………………………………………………………………………………..137
1.2 Scheme of Taxation ………………………………………………………………………………………140
1.3 Important concepts………………………………………………………………………………………..140
1.3-a Person [Section 2(77) (erstwhile section 2(31)]………………………………………140
1.3-b Assessee [Section 2(11) (erstwhile Section 2(7) of ITA, 1961)]…………………140
1.3-c Definition of “tax year” [Sections 3 (erstwhile definition of “Previous
Year” was given under Section 3)]………………………………………………………..141
1.3-d Charge of income-tax. [Section 4 (erstwhile Section 4)]…………………………..142
1.3-e Total Income …………………………………………………………………………………….143
1.3-f Rounding off of amount of total income, or amount payable or
refundable. [Section 516 (erstwhile Section 288A & 288B merged)]………….146
1.3-g How to compute tax liability on Total Income ……………………………………….147
Chapter 2: Scope of Total Income and Residential Status
2.1 Scope of Total Income/Incidence of tax. [Section 5 (erstwhile Section 5)]…………….148
2.1-a In the case of Resident in India (resident and ordinarily resident in
case of individual or HUF) [Section 5(1)] ……………………………………………..148
2.1-b In the case of a Resident but not Ordinarily Resident in India (In the
case of individuals and HUF only) (including an individual who is
deemed to be resident in India) [Section 5(1) (erstwhile Section 5(1)
and its proviso)]…………………………………………………………………………………148
2.1-c In the case of Non-Resident [Section 5(2) (erstwhile Section 5(2))]…………..149
2.2 Need to determine Residential Status……………………………………………………………….151
2.3 Basic rules for determining residential status of an assessee………………………………..151
2.4 Residence in India [Section 6 (erstwhile Section 6)]…………………………………………..152
2.5 Residential status of an individual …………………………………………………………………..152

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2.5-a Rules for determining the residential status of an individual [Section 6]…….152
2.5-b When an individual is said to be resident in India?………………………………….152
2.5-c Citizen of India shall be deemed to be resident in India in certain cases
[Section 6(7) (erstwhile Section 6(1A))]………………………………………………..154
2.5-d When is an individual said to be resident but not ordinarily resident in
India? [Section 6(13) (erstwhile Section 6(6))]……………………………………….155
2.5-e When an individual is said to be resident and ordinarily resident in
India?……………………………………………………………………………………………….156
2.5-f When an individual is said to be non-resident in India [Section 2(72)
(erstwhile Section 2(30))]……………………………………………………………………156
2.6 Residential Status of Hindu Undivided Family (HUF) [Section 6(9)]……………………157
2.6-a When is HUF is a resident in India? ……………………………………………………..157
2.6-b When is HUF a Non-Resident? ……………………………………………………………158
2.6-c When is HUF resident but not ordinarily resident in India? [Section
6(13)(a)] …………………………………………………………………………………………..158
2.6-d When is HUF said to be a resident and ordinarily resident in India? ………….158
2.7 Residential Status of Firm, Association of Persons (AOP), Body of Individuals
(BOI) [Section 6(9)] and of other persons (excepting companies) [Section
6(11)]………………………………………………………………………………………………………….158
2.7-a When is a Firm, other association of persons or every other person
except company resident in India?……………………………………………………….159
2.7-b When is a Firm, other association of persons or every other person
except company Non-Resident in India? ……………………………………………….159
2.8 Residential Status of a Company …………………………………………………………………….159
2.8-a When a company is said to be resident in India [Section 6(10)]………………..159
2.8-b When a company is said to be non-resident in India………………………………..159
2.9 Incomes received in India ………………………………………………………………………………159
2.10 Income deemed to be received and dividend deemed to be income in a tax
year. [Section 7 (erstwhile Section 7 and 8 merged)]………………………………………….160
2.11 Income on receipt of capital asset or stock-in-trade by specified person from
specified entity. [Section 8 (erstwhile Section 9B)]…………………………………………….161
2.12 Incomes which accrue or arise in India …………………………………………………………….162
2.13 Incomes deemed to accrue or arise in India [Section 9] [Erstwhile Section 9
and 9A merged)…………………………………………………………………………………………….162
2.13-a Income referred to in sub-section (2) to (8) of section 9 to be deemed
to accrue or arise in India. [Section 9(1)]……………………………………………….163
2.13-b Income accruing or accruing or arising, directly or indirectly, through
or from (A) any asset or source of income in India; or any property in
India; or (B) the transfer of a capital asset situated in India, to be
deemed to accrue or arise in India or (C) any business connection in
India; [Section 9(2)] (Erstwhile Section 9(1)(i) of ITA, 1961)…………………..163
2.13-c Any income from salary (A) for services rendered in India; and (B)
payable by the Government to an Indian citizen for services rendered
outside India [Section 9(3)] [Erstwhile Section 9(1)(ii) and (iii)] ………………167
2.13-d Dividend paid by the company outside India. [Section 9(4)][Erstwhile
Section 9(1)(iv)]…………………………………………………………………………………168
2.13-e Interest payable outside India [Section 9(5)] [Erstwhile Section
9(1)(v)] …………………………………………………………………………………………….168
2.13-f Royalty payable outside India [Section 9(6)] [Erstwhile Section
9(1)(vi)]……………………………………………………………………………………………169
2.13-g Fee for technical services payable outside India [Section 9(7)]
[Erstwhile Section 9(1)(vii)] ………………………………………………………………..169

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2.13-h Deemed accrual of gift made to Non-resident or not ordinarily
resident. [Section 9(8)][Erstwhile Section 9(1)(viii)]……………………………….170
2.14 Fund management activities not to constitute business connection in India
[Section 9(12) (Erstwhile section 9A)]……………………………………………………………..170
Chapter 3: Incomes which do not Form Part of Total Income ………………………………….172
3.1 Incomes not included in total income of any person. [Section 11(1) & (2)
(erstwhile Section 10)]…………………………………………………………………………………..172
3.2 Incomes not included in total income of political parties and electoral trusts.
[Section 12 (erstwhile Sections 13A & 13B merged)]…………………………………………197
Chapter 4: Computation of Total Income [Sections 13 & 14]
&
Income under the Head “Salaries” [Sections 15 to 19] …………………………….201
4.1 Heads of Income [Section 13 (erstwhile Section 14)] …………………………………………202
4.2 Income not forming part of total income and expenditure in relation to such
income. [Section 14 (erstwhile Section 14A)] ……………………………………………………202
4.3 Basis of Charge [Section 15 (erstwhile Section 15)]…………………………………………..203
4.3-a Arrears of Salary ……………………………………………………………………………….204
4.4 Meaning of Salary…………………………………………………………………………………………204
Treatment of various incomes to be included in gross salary
4.5 Wages…………………………………………………………………………………………………………205
4.6 Annuity……………………………………………………………………………………………………….205
4.7 Retirement benefits……………………………………………………………………………………….206
4.8 Treatment of Bonus ………………………………………………………………………………………206
4.9 Salary in lieu of notice period …………………………………………………………………………206
4.10 Fee and Commission……………………………………………………………………………………..206
4.11 Overtime Payments……………………………………………………………………………………….206

Allowances

4.12 Meaning and Type of Allowances …………………………………………………………………..206
4.13 Any special allowance from employer i.e., House Rent Allowance — Section
11(1) read with Sl. No. 11 of Schedule III and Rule 279 (erstwhile Section
10(13A) and Rule 2A) (exemption under this section shall be allowed only if
the employee opts to be taxed under old regime)……………………………………………….207
4.13-a Limits for the purposes of Schedule III (Table: Sl. No. 11) (Rule 279)
(Erstwhile Rul 2A)…………………………………………………………………………….207
4.14 Any special allowance or benefit to the extent to which such expenses are
actually incurred for that purpose [Section 11(1) read with Sl. No. 12 of
Schedule III (erstwhile Section 10(14)(i))…………………………………………………………209
4.15 Any allowance granted to the employee to meet his personal expenses or to
remunerate or compensate him for performing duties of a special nature.
[Section 11(1) read with Sl. No. 13 of Schedule III] (erstwhile Section
10(14)(ii)) ……………………………………………………………………………………………………209
4.16 Prescribed allowances for the purposes of Schedule III (Table: Sl No. 12 &
13) (Rule 280) (Erstwhile Rule 2BB)……………………………………………………………….210
4.16-a B. Allowances to meet personal expenses which are exempt to the extent of
amount received or the limit specified, whichever is less [Following
allowances (except given in Sl. No. 10), shall be exempt only if the employee
opts to be taxed under old regime] [Rule 280(2) read with Schedule III (Table
Sl. No. 13)]. …………………………………………………………………………………………………211
4.17 Allowances which are exempt in case of certain persons…………………………………….213

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4.18 Allowances which are fully taxable under both the regimes………………………………..214

Perquisites

4.19 Definition of “Perquisite” as per Section 17 (erstwhile Section 17(2))…………………..214

Taxability of Perquisites

4.20 Perquisites which are taxable in the hands of all categories of employees……………..217
4.21 Perquisites which are taxable only in the case of specified employees ………………….218
4.21-a Who is a specified employee [Section 17(1)(c) (erstwhile Section
17(2)(iii))] ………………………………………………………………………………………..218

Valuation of Perquisites

4.22 Rent free accommodation or accommodation provided at concessional rate
[Rule 15]……………………………………………………………………………………………………..219
4.23 Valuation of monetary obligation of the employee discharged by the employer
[Section 17(1)(f)]………………………………………………………………………………………….224
4.24 Valuation of Life Insurance premium/deferred annuity premium paid/ payable
by the employer [Section 17(1)(g)]………………………………………………………………….225
4.25 Value of any specified security or sweat equity shares [Section 17(1)(d)]……………..226
4.26 Contribution made by the employer in a recognised provident fund, in the
pension scheme referred to in section 124(1); and in an approved
superannuation fund exceeding ₹7,50,000 [Section 17(1)(h) (erstwhile Section
17(2)(vii))]…………………………………………………………………………………………………..228
4.27 Annual Accretion to the balance at the credit of the fund or scheme referred to
in section 17(1)(h) [Section 17(1)(i) (erstwhile Section 17(2)(viia))]…………………….228
4.27-a Annual accretion referred to in in section 17(1)(i) of the Act. [Rule 16] …….228
4.28 Any other benefit or amenity shall be taxable perquisites in the hands of all
employees [Section 17(1)(e) (erstwhile Section 17(2)(viii)) and rule 15(5)
(Erstwhile Rule 3(7)] …………………………………………………………………………………….229
Perquisites taxable in the hands of specified employees

4.29 Valuation of motor car/other vehicles [Rule 15(3)(Erstwhile Rule 3(2)]………………..235
4.29-a Where more than one motor car is provided (Rule 15(3)(b))…………………….239
4.29-b Specific documents to be maintained for S. No. (1)(a) or S. Nos. (2)
and (3) of the above table ……………………………………………………………………239
4.30 Provision by the employer of services of a sweeper, a gardener, a watchman or
personal attendant [Sl. No. 1 to Table III under Rule 15(4) (Erstwhile Rule
3(3)]……………………………………………………………………………………………………………240
4.31 Value of benefit to the employee resulting from the supply of gas, electric
energy or water for household consumption [Sl. No. 2(a) and (b) to Table III
under Rule 15(4) (Erstwhile Rule 3(4))] …………………………………………………………..240
4.32 Valuation in respect of free or concessional educational facilities to any
member of employees’ household [Sl. No. 3(a), (b) and (c) to Table III under
Rule 15(4) (Erstwhile Rule 3(5)]……………………………………………………………………..241
4.33 Personal or Private journey at free or concessional rate given to the transport
employees and members of their household [Sl. No. 4 to Table III under Rule
15(4) (Erstwhile Rule 3(6)]…………………………………………………………………………….241
4.34 Tax-free Perquisites (for all employees) …………………………………………………………..242
4.35 Treatment of medical facilities/reimbursement [Section 17(2) (erstwhile
Proviso to Section 17(2))]………………………………………………………………………………244
4.35-a Prescribed diseases or ailments [Rule 18(3) (Erstwhile Rule 3A(2)]…………..246
4.36 Treatment of Leave Travel Concession (LTC) [Sl. No. 8 of Table under
Schedule III (erstwhile Section 10(5) and Rule 278)] [Exemption available

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only if the employee does not opt to be taxed under section 202 [Erstwhile
Section 115BAC(1A)]…………………………………………………………………………………….247
4.36-a Conditions for the purpose of Schedule III (Table: Sl. No. 8) [Rule 278
(Erstwhile Rule 2B)]…………………………………………………………………………..247
4.36-b How many times can exemption be claimed?…………………………………………248
4.36-c Exemption available only in respect of two children (Rule 278(5) and
(6)……………………………………………………………………………………………………249
4.37 Definition of “Profits in lieu of salary” [Section 18 (erstwhile Section 17(3))]……….249

Treatment of retirement benefits

4.38 Gratuity……………………………………………………………………………………………………….251
4.39 Treatment of Pension …………………………………………………………………………………….252
4.40 Treatment of Leave Salary……………………………………………………………………………..252
4.41 Retrenchment Compensation ………………………………………………………………………….252
4.42 Compensation received on Voluntary Retirement………………………………………………253
4.43 Deductions from salaries. [Section 19 (Erstwhile Sections 16 and exemption
which was allowed under erstwhile sections 10(10), 10(10A), 10(10AA),
10(10B) & 10(10C) now allowed as deduction after including the entire
amount received in the meaning of salary)] ………………………………………………………253
4.43-a Tax on employment [Sl. No. 1 of table under section 19 (erstwhile
section 16(iii)]. ………………………………………………………………………………….253
4.43-b Standard deduction [Sl. No. 2 of table under section 19 (erstwhile
section 16(ia)]……………………………………………………………………………………253
4.43-c Deduction on account of gratuity received [Section 19(1)]……………………….253
4.43-d Deduction on account of Commuted pension [Section 19(1)] …………………..257
4.43-e Retrenchment Compensation [Section 19(1) read with Sl. No. 10 & 11
of Table under this section (erstwhile Section 10(10B))]………………………….259
4.43-f Compensation received on Voluntary Retirement [Section 19(1) read
with Sl. No. 12 of table under this section (erstwhile Section 10(10C))] …….261
4.43-g Treatment of Leave Salary…………………………………………………………………..262
4.44 Contribution by the employer to recognised provident fund ………………………………..265
4.45 Interest credited to recognised provident fund …………………………………………………..265
4.46 Amount comprised in the transferred balance……………………………………………………265
4.47 Treatment of Provident Fund ………………………………………………………………………….265
4.47-a Kinds of Provident Funds……………………………………………………………………266
4.47-b Treatment of Provident Fund for Income-tax Purposes……………………………267
4.47-c Amount comprised in the transferred balance of Unrecognised
Provident Fund (URPF) when it is converted into recognised provident
fund …………………………………………………………………………………………………269
4.48 Relief when salary is paid in arrears or in advance, etc. [Section 157 (erstwhile
Section 89)/Rule 73 (Erstwhile Rule 21A] ………………………………………………………..270
4.48-a Relief under section 157(1) when salary is paid in arrears or in advance,
gratuity, etc. [Rule 73 (Erstwhile Rule 21A and 21AA]……………………………………….270
4.48-b Whether relief under Section 157(1) (Erstwhile section 89) is available for the
compensation under voluntary retirement scheme (Section 157(2) (Erstwhile
Proviso to Section 89)……………………………………………………………………………………275
Chapter 5: Income under the Head “Income from House Property” [Sections 22
to 25] ……………………………………………………………………………………………………276
5.1 Chargeability [Section 20 (erstwhile Section 22)]………………………………………………276
5.1-a Which income is chargeable under the head “house property” [Section
20(1)]……………………………………………………………………………………………….276

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5.1-b Section 20(1) not to apply to such portions of the property which the
assessee may occupy for his business or profession [Section 20(2)]…………..276
5.2 Basis of Charge…………………………………………………………………………………………….276
5.3 Essential conditions for taxing income under this head……………………………………….276
5.4 Deemed ownership [Section 25 (erstwhile Section 27)]………………………………………277
5.5 Income from letting out of a residential house to be taxed under the head
“Income from house property” and not under the head “profits and gains of
business or professions” [Section 26(4) (erstwhile Explanation 3 to Section
28)] …………………………………………………………………………………………………………….278
5.5-a Exceptions to the rule that income from house property is taxable
under the head “Income from house property” ……………………………………….278
Determination of Annual Value

5.6 What is Annual Value? ………………………………………………………………………………….279
5.7 Determination of annual value. [Section 21 (erstwhile Section 23)] ……………………..279
5.8 Treatment of unrealised rent [Section 21(4) (erstwhile Explanation to section
23(1))]…………………………………………………………………………………………………………283
5.8-a Rule for unrealised rent [Rule 21 (erstwhile Rule 4)] ………………………………283
5.9 Deductions from income from house property which is let [Sections 22(1) &
22(3) (erstwhile Section 24)]…………………………………………………………………………..283
5.9-a Interest attributable to the period prior to completion of construction
[Section 22(1)(c) (erstwhile Explanation to section 24)]………………………….284
5.9-b Deduction of Interest payable outside India. [Section 22(6) (erstwhile
section 25)]……………………………………………………………………………………….284
5.10 House property which is self-occupied for own residence or could not actually
be occupied due to any reason. [Section 21(6) (erstwhile section 23(2)] ……………….284
5.10-a Deduction in respect of self-occupied house where annual value is nil ………285

5.11 Computation of income of house property which is partly let and partly self-
occupied………………………………………………………………………………………………………286

5.12 Annual value of house property held as stock-in-trade and is not let wholly or
partly at any time during the tax year [Section 21(5) (erstwhile Section 23(5))]……..287
5.13 Arrears of rent and unrealised rent received subsequently. [Section 23
(erstwhile section 25A)]…………………………………………………………………………………287
5.14 Property owned by Co-owners [Section 24 (erstwhile Section 26)]………………………287
5.15 Can Annual Value (Net Annual Value) be negative?………………………………………….288
5.16 Can there be any loss under the head “income from house property”? ………………….288
Chapter 6: Income under the Head “Profits and Gains of Business or
Profession” [Sections 26 to 66]……………………………………………………………….289
6.1 Income chadrgeable under the head “Profits and gains of business or
profession” [Section 26]…………………………………………………………………………………290
6.1-a General and specific provisions of chargeability of tax under section
26(2)(a) to 26(2)(k) (erstwhile section 28(i) to section 28(vii)) …………………290
6.1-b Speculative business to be distinct and separate from any other
business [Section 26(3) (erstwhile Explanation 2 to section 28)] ………………292
6.2 Income from business or profession — how to be computed……………………………….294
6.3 Method of Accounting [Section 276 (erstwhile Section 145)]………………………………294
6.3-a Income Computation and Disclosure Standards ……………………………………..295
6.4 Expenses which are expressly allowed as a deduction [Sections 28 to 34,
Sections 44 to 49 and sections 51, 52 (erstwhile Sections 30 to 37)] …………………….296
6.5 Rent, rates, taxes, repairs and insurance [Section 28 (erstwhile Sections 30, 31
& 38 merged)]………………………………………………………………………………………………296

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6.5-a Where the premises, machinery, plant or furniture is wholly or
exclusively used for the purpose of business or profession [Section
28(1)]……………………………………………………………………………………………….296
6.5-b Where premises, building, machinery, plant or furniture is partly used
or not wholly or exclusively used for the purpose of business or
profession [Section 28(2) (erstwhile section 38)] ……………………………………297
6.6 Deductions related to employee welfare. [Section 29 (erstwhile Sections
36(1)(iv), (iva), (v), (va) with Explanation, 40A(7)(b) & 40A(9) merged]……………..297
6.6-a Sum paid by way of contribution towards a recognised provident fund
or an approved superannuation fund [Section 29(1)(a) (erstwhile
section 36(1)(iv))]………………………………………………………………………………297
6.6-b Employer’s contribution towards a pension scheme referred to in
section 124 [Section 29(1(b) (erstwhile Section 36(1)(iva))]…………………….298
6.6-c Employer’s contribution to an approved gratuity fund or Provision
made for the purpose of making contribution towards approved
gratuity fund or for the purpose of payment of any gratuity [Section
29(1)(c) & (d)]…………………………………………………………………………………..298
6.6-d Sum received by the assessee from his employees as contribution to
certain funds, if credited to the account of the employee in the relevant
funds by the due date [Section 29(1)(e) (erstwhile Section 36(1)(va))] ………299
6.7 Deduction on certain premium [Section 30 (erstwhile Sections 36(1)(i), (ia),
(ib) merged)]………………………………………………………………………………………………..299
6.8 Deduction for bad debt and provision for bad and doubtful debt [Section 31
(erstwhile Sections 36(1)(vii), 36(1)(viia) & 36(2) merged)] ……………………………….300
6.8-a Deduction for provision for bad and doubtful debts [Section 31(1)
(erstwhile Section 36(1)(viia)]……………………………………………………………..300
6.8-b Deduction for bad debts [Section 31(2)]………………………………………………..301
6.8-c Provision for bad and doubtful debts not eligible for deduction and deduction
for amount of bad debt which was taken into computation of income as per
ICDS [Section 31(3) (erstwhile section 32(1)(ii))]……………………………………………..302
6.9 Other deductions [Section 32 (erstwhile Sections 36(1)(ii), (iii), (iiia), (viii)
and Explanation, 36(1)(xii), (xvii), (xviii), 36(1)(ix, 36(1)(vi), 36(1)(xvi) &
40A merged)]……………………………………………………………………………………………….302
6.9-a Bonus or Commission to employees [Section 32(a) (erstwhile Section
36(1)(ii))]………………………………………………………………………………………….302
6.9-b Interest on borrowed capital [Section 32(b) (erstwhile Section
36(1)(iii))] ………………………………………………………………………………………..302
6.9-c Discount on issue of zero coupon bonds to be allowed as deduction on
pro rata basis [Section 32(d) (erstwhile Section 36(1)(iiia))]…………………….304
6.9-d Marked to market loss or other expected loss to be allowed [Section
32(h) (erstwhile Section 36(1)(xviii))] …………………………………………………..304
6.9-e Securities Transactions Tax and Commodities Transactions Tax paid
to be allowed as deduction [Section 32(k) (erstwhile Section Section
36(1)(xv) & 36(1)(xvi) merged)] ………………………………………………………….304
6.10 Depreciation [Section 33 (erstwhile Section 32)]……………………………………………….304
6.10-a What is ‘block of assets’ [Section 2(17) (erstwhile section 2(11)]………………305
6.10-b How to compute written down value of depreciable asset [Section 41
(erstwhile Section 43(6)] …………………………………………………………………….309
6.10-c Relevance of actual cost and its computation [Section 39]………………………312
6.10-d When is interest included/not included in cost of the asset……………………….313
6.10-e Notional Actual Cost [Section 39(4) (erstwhile Explanations to section
43(1)]……………………………………………………………………………………………….314
6.10-f Computation of depreciation ……………………………………………………………….318

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6.10-g Steps for computing depreciation …………………………………………………………318
6.10-h Depreciation on asset in the tax year of acquisition if the asset is put to
use for less than 180 days during that tax year [Section 33(4)]………………….319
6.10-i Cases where WDV of a block at the end of the year shall be reduced to
Nil and hence no depreciation shall be computed……………………………………319
6.10-j Is it mandatory to claim depreciation [Section 33(7)]………………………………321
6.11 Special provisions for depreciation in certain cases……………………………………………321
6.11-a Depreciation for undertakings engaged in the generation or generation
and distribution of power [Section 33(2) (erstwhile Section 32(1)(i))]……….321
6.11-b Proportionate depreciation allowed in certain cases [Section 33(5)
(erstwhile Sixth Proviso to section 32)]…………………………………………………322
6.11-c Depreciation on the super structure constructed on leased building……………323
6.11-d How to claim depreciation when the asset is not exclusively used for
the purpose of business or profession [Section 33(3)(b) (erstwhile
Section 38)] ………………………………………………………………………………………323
6.11-e Additional deduction in respect of depreciation on new machinery or
plant [Section 33(8) (erstwhile section 32(iia))] (Additional deduction
in respect of depreciation is not available if tax is payable under the
new regime, i.e., under section 199, 200, 201, 203, 204 read with
section 205 and section 202 (erstwhile Section
115BA/115BAA/115BAB/ 115BAC/115BAD/ 115BAE))…………………………..323

6.12 Carry forward and set off of unabsorbed depreciation [Section 33(11)
(erstwhile Section 32(2))]……………………………………………………………………………….325
6.13 Amortisation of certain preliminary expenses [Section 44 (erstwhile Section
35D)] ………………………………………………………………………………………………………….325
6.14 Expenditure on Scientific Research [Section 45 (erstwhile Section 35)]………………..327
6.15 Deduction in respect of expenditure on specified business [Section 46
(erstwhile Section 35AD)]………………………………………………………………………………330
6.16 Expenditure on agricultural extension project and skill development project.
[Section 47 (erstwhile Sections 35CCC & 35CCD merged)]……………………………….331
6.17 Tea Development Account, Coffee Development Account and Rubber
Development Account [Section 48 (erstwhile Section 33AB)]……………………………..331
6.18 Site Restoration Fund [Section 49 (erstwhile Section 33ABA)]…………………………….331
6.19 Amortisation of expenditure for prospecting certain minerals [Section 51
(erstwhile Section 35E)]…………………………………………………………………………………332
6.19-a Deduction equal to 1/10th of the expenditure referred to in section
51(2) to be allowed in each of relevant tax year [Section 51(1)] ……………….332
6.19-b Amount of expenditure referred to in section 51(1) [Section 51(2)]…………..332
6.19-c Quantum of deduction [Section 51(5)] …………………………………………………332
6.19-d Audit of Accounts [Section 51(7)]………………………………………………………..333
6.20 Amortisation of expenditure for telecommunications services, amalgamation,
demerger, scheme of voluntary retirement, etc. [Section 52 (erstwhile Sections
35ABA, 35ABB, 35DD & 35DDA merged)]………………………………………………………333
6.21 General conditions for allowable deductions. [Section 34 (erstwhile Section
37)]…………………………………………………………………………………………………………….333
6.21-a Revenue expenditure other than specified in sections 28 to 33, 44 to
49, 51 and 52 to be allowed as deduction [Section 34(1) (erstwhile
section 37(1))] …………………………………………………………………………………..333
6.21-b Expenditure incurred for purpose which is an offence or prohibited by
law and on the activities relating to CSR or on certain advertisements
not to be allowed as deduction [Section 34(2) (erstwhile Explantaions
1 & 2 to section 37(1) and section 37(2B))] …………………………………………..333

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Contents xv
6.21-c Interest on Delayed Payments to Micro and Small Enterprises not to
be allowed as deduction………………………………………………………………………335

Expenses not deductible

6.22 Amounts not deductible in certain circumstances. [Section 35 (erstwhile
Section 40)]………………………………………………………………………………………………….335
6.22-a Tax paid not to be allowed as deduction [Section 35(a) (erstwhile
section 40(a)(ii) and section 40(a)(v)] …………………………………………………..335
6.22-b Sum paid or payable to a resident/non-resident from which tax is
required to be deducted at source and payment to a provident or other
fund established for the benefit of employees not to be allowed as
deduction in certain cases……………………………………………………………………336
6.22-c Salary payable outside India or to a non-resident [Section 35(c)
(erstwhile Section 40(a)(iii))] ………………………………………………………………338
6.22-d Royalty, certain fee, charge, etc., in the case of State Government
Undertakings [Section 35(d) (erstwhile Section 40(a)(iib))]……………………..338
6.22-e Certain expenditure incurred by a partnership firm (including LLP)
[Section 35(e) (erstwhile Section 40(b))]……………………………………………….338
6.22-f Certain expenditure incurred by AOP/BOI [Section 35(f) (erstwhile
Section 40(ba))]…………………………………………………………………………………338
6.23 Expenses or payments not deductible in certain circumstances. [Section 36
(erstwhile Section 40A)]…………………………………………………………………………………338
6.23-a Section 36(1) to have overriding effect relating to computation of
income under the head “Profits and gains of business or profession
[Section 36(1)]…………………………………………………………………………………..338
6.23-b Expenses or payments not deductible where such payments are made
to relatives or close associates of the assessee [Section 36(2) (erstwhile
Section 40A(2))] ………………………………………………………………………………..339
6.23-c Disallowance of 100% of expenditure if payment is made by any
mode other than specified banking or online mode[Section 36(4)
(erstwhile Section 40A(3))]………………………………………………………………….339
6.23-d Situation where payment is made in subsequent year although
deduction for the expense was already allowed in any earlier year
[Section 36(5) (erstwhile Section 40A(3A))]…………………………………………..340
6.23-e Threshold in case of payment made for plying, hiring or leasing goods
carriage…………………………………………………………………………………………….340
6.23-f Exceptions to section 36(4) and 36(5) [Section 36(7) and Rule 26
(erstwhile proviso to 40A(3A) and Rule 6DD)]……………………………………….340
6.23-g No person can enforce that payment exceeding ₹10,000/35,000 should
be made in cash or in mode other than specified banking or online
mode [Section 36(8) (erstwhile Section 40A(4))]…………………………………….342

6.24 Marked to market loss or other expected loss not to be allowed except
provided in section 32(h) (erstwhile section 36(1)(xviii)) [Section 36(9)
(erstwhile Section 40A(13))]…………………………………………………………………………..343
6.25 Certain deductions allowed on actual payment basis only. [Section 37
(erstwhile Section 43B)]…………………………………………………………………………………343
6.25-a Certain deduction to be allowed only in the tax year in which such
sums are actually paid [Section 37(1)]…………………………………………………..343
6.25-b Nature of sums payable and stiputlated time period in which the
amount so payable is to be paid [Section 37(2) & section 37(3)]……………….343
6.26 Certain sums deemed as profits and gains of business or profession. [Section
38 (erstwhile Section 41)]………………………………………………………………………………344

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Special provisions under the head “business and profession”
6.27 Special provision for computation of cost of acquisition of certain assets to
check tax avoidance in case of transfer [Section 40 (erstwhile Section 43C)]…………348
6.28 Full value of consideration for transfer of land and building or both (other than
being a capital asset) in certain cases. [Section 53 (erstwhile Section 43CA)] ………..349
6.28-a Stamp duty value to be deemed consideration in certain cases [Section
53(1) (erstwhile Section 43CA(1))]……………………………………………………….349
6.28-b Section 53(1) not to apply if the stamp duty value does not exceed
110% of the consideration received or accured [Section 53(2)
(erstwhile Proviso to section 43CA)]…………………………………………………….349
6.28-c Stamp duty value on the date of agreement to be deemed consideration
[Section 53(3) (erstwhile Section 43CA(3))]…………………………………………..349
6.28-d Provisions of section 43CA(3) to apply only if the consideration is
received by by specified banking or online mode [Section 53(4)
(erstwhile Section 43CA(4))]……………………………………………………………….350
6.28-e Provisions of section 78(2) and (3) made applicable to section 53
[Section 53(5) (erstwhile Section 43CA(2))]…………………………………………..350

6.29 Revenue recognition for construction and service contracts [Section 57
(erstwhile Section 43CB)]………………………………………………………………………………350
6.29-a Profits and gains from construction contract or a contract for providing
services to be determined on the basis of percentage of completion
method [Section 57(1) (erstwhile Section 43CB(1))]……………………………….350
6.29-b Profit and gain arising from contract for providing services in certain
cases to be determined on the basis of project completion method or
straight line method instead of percentage of completion method
[Section 57(2)]…………………………………………………………………………………..350
6.29-c Treatment of retention money and incidental income in the nature of
interest, dividends or capital gains [Section 57(3) (erstwhile Section
43CB(2))] …………………………………………………………………………………………351
6.30 Special provision for computing profits and gains of business or profession on
presumptive basis in case of certain residents [Section 58 (erstwhile Sections
44AD, 44ADA & 44AE merged)]…………………………………………………………………….351
6.30-a Sections 26 to 54 to the extent contrary to section 58 not to apply in
certain cases [Section 58(1)]………………………………………………………………..351
6.30-b Manner of computation of Profits and gains of the specified business
and the conditions to be satisfied thereof [Section 58(2)]…………………………351
6.31 Special provision for computation of income on presumptive basis in respect
of certain business activities of certain non-residents [Section 61 (erstwhile
Sections 44B, 44BB, 44BBA, 44BBB, 44BBC and 44BBD merged)]……………………..358
6.31-a Sections 26 to 54 to the extent contrary to section 61 not to apply in
certain cases [Section 61(1)]………………………………………………………………..359
6.31-b Manner of computation of Profits and gains of the specified business
and the conditions to be satisfied thereof [Section 61(2)]…………………………359
6.32 Maintenance of books of account [Section 62 (erstwhile Section 44AA)]………………364
6.32-a Person carrying on specified profession or carrying on business or any
non-specified profession to maintain books of account [Section 62(1)
(erstwhile Section 44AA(1))] ……………………………………………………………….364

6.32-b Conditions in respect of any persons carrying on, business; or non-
specified profession [Section 62(2)]……………………………………………………..364

6.32-c Maintenance of books of account under section 62. [Rule 46] ………………….366
6.33 Tax audit [Section 63 (erstwhile Section 44AB)] ……………………………………………….368
6.33-a Person carrying on business or profession fulfilling certain conditions
to get his accounts audited [Section 63(1) (erstwhile Section 44AB)]…………368

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Contents xvii
6.33-b Provisions of section 63 not to apply in certain cases [Section 63(2)] ………..369
6.33-c Assessee to furnish the report of the audit by the specified date
[Section 63(3)]…………………………………………………………………………………..369
6.33-d No separate tax audit is required if the accounts of the business or
profession are audited under any other law, but report of accountant to
be submitted [Section 63(4)] ……………………………………………………………….370
6.33-e Report of audit of accounts to be furnished under section 63. [Rule 47
(erstwhile Rule 6G)]…………………………………………………………………………..370
Chapter 7: Income under the Head “Capital Gains” [Sections 67 to 91] ……………………371
7.1 Basis of Charge [Section 67(1) (erstwhile Section 45(1))]…………………………………..371

(A) There must be a capital asset

7.2 Capital gain arises only when a capital asset is transferred. If the asset
transferred is not a capital asset, it will not be covered under the head ‘Capital
Gain’……………………………………………………………………………………………………………371
7.2-a What is a capital asset [Section 2(22) (erstwhile Section 2(14))]……………….371
7.2-b Types of capital assets………………………………………………………………………..373
7.2-c Determination of the period of holding of an asset [Section 2(101)(c)
(erstwhile Explanation 1(i) to section 2(42A))] ………………………………………373
(B) Capital asset must have been transferred

7.3 Capital gain arises only when there is a transfer of capital asset: ………………………….377
7.3-a What is transfer [Section 2(109) (erstwhile Section 2(47)]……………………….377
7.3-b Transactions not regarded as transfer [Section 68 and 70 (erstwhile
Sections 46 and 47)]…………………………………………………………………………..378
(C) Capital gain should arise in the tax year in which transfer took place
7.4 Normally, capital gain arises in the tax year in which the transfer of the asset
takes place even if the consideration for the transfer is received or realised in a
later year. There are, however, three exceptional cases where capital gain is
chargeable to tax not in the year of transfer of the asset, but in some other
year. These exceptions are: …………………………………………………………………………….384
(D) Profits or gains as a result of such transfer will be known as capital gain
7.5 Computation of capital gains [Section 72 (erstwhile section 48)]…………………………385
7.6 Full value of consideration……………………………………………………………………………..387
7.7 Expenses on transfer……………………………………………………………………………………..390
7.8 Cost of acquisition ………………………………………………………………………………………..391
7.9 Advance money received [Section 81 (erstwhile Sections 51 and Section
56(2)(ix))] ……………………………………………………………………………………………………405
7.10 Cost of improvement [Section 90(1) & (2) (erstwhile Section 55(1)(b))]……………….406
7.10-a Cost of improvement [Section 90(1)] ……………………………………………………406
7.11 Indexation of cost of acquisition and cost of improvement not to be allowed in
case of long-term capital gain …………………………………………………………………………407
7.12 Computation of capital gain in special cases [Section 67]……………………………………407
7.12-a Taxation of zero coupon bonds…………………………………………………………….407
7.12-b Capital gain in case of amount received from an insurer on account of
damage to or destruction of any capital asset [Section 67(2) to (4)
(erstwhile Section 45(1A))]………………………………………………………………….408
7.12-c Profits or gains arising from receipt of the amount on maturity of high
premium unit linked insurance policy chargeable to tax under the head
“Capital gains” [Section 67(5) (erstwhile Section 45(1B))] ………………………409

7.12-d Capital gain on conversion of capital asset into stock-in-trade or stock-
in-trade into capital asset …………………………………………………………………….409

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7.12-e Transfer of securities by depository [Section 67(7) (erstwhile Section
45(2A))]……………………………………………………………………………………………410
7.12-f Capital gain on transfer of capital asset by a partner/member to a
firm/AOP/BOI as capital contribution [Section 67(9) (erstwhile
Section 45(3))]…………………………………………………………………………………..411
7.12-g Profits or gains from receipt of money or capital asset or both by
specified person from a specified entity on reconstitution of specified
entity shall be chargeable to income-tax as income of such specified
entity under the head “Capital gains” [Section 67(10)………… (erstwhile Section
45(4))] ……………………………………………………………………………………………..411
7.12-h Capital gain on transfer by way of compulsory acquisition of an asset
[Section 67(12) (erstwhile Section 45(5))]……………………………………………..415
7.12-i Special provisions for computation of capital gains in case of joint
development agreement [Section 67(14) (erstwhile Section 45(5A))]…………417
7.13 Computation of capital gain in certain other cases……………………………………………..419
7.13-a Capital gain on conversion of debentures into shares ………………………………419
7.13-b Conversion of preference shares into equity shares…………………………………419
7.13-c Capital gains on distribution of assets by companies in liquidation
[Section 68 (erstwhile Section 46)]……………………………………………………….420
7.13-d Goodwill of a business or profession, or a trade mark or brand name
associated with a business or profession, or any other intangible asset,
or a right to manufacture, produce or process any article or thing, or a
right to carry on any business or profession, or tenancy rights, or stage
carriage permits, or loom hours, or any other right………………………………….421
7.13-e Capital gain on transfer of depreciable assets forming part of block of
assets [Section 74 (erstwhile Section 50)]………………………………………………422
7.13-f Sale of depreciable asset on which depreciation is charged on straight
line method [Section 75 (erstwhile Section 50A)]……………………………………424
7.13-g Special provision for computation of capital gains in case of Market
Linked Debenture [Section 76 (erstwhile Section 50AA)]…………………………425
7.13-h Special provisions for computation of capital gains in case of slump
sale [Section 77 (erstwhile Section 50B) read with Section 2(103)
(erstwhile Section 2(42C))]………………………………………………………………….426
7.13-i Special provision for full value of consideration for computation of
capital gains in real estate transactions [Section 78 (erstwhile Section
50C)] ……………………………………………………………………………………………….431
7.13-j Special provision for full value of consideration for transfer of share
other than quoted share [Section 79 (erstwhile Section 50CA)]…………………432
7.13-k Capital gain on re-purchase of Units of Mutual Funds under Equity
Linked Saving Schemes [Section 67(17) (erstwhile Section 45(6))]…………..433
7.13-l Capital gains on purchase by company of its own shares or other
specified securities. [Section 69 (Erstwhile Section 46A)]………………………..433
7.13-m Taxation of capital gain on transfer of property (received without
consideration or for inadequate consideration), if sold subsequently………….434
7.13-n Capital gain on conversion of a company to Limited Liability
Partnership………………………………………………………………………………………..435

7.13-o Capital gain in the case of transfer of shares/debentures by non-
residents [Section 72(6) (erstwhile First proviso to section 48 and Rule

52 (Erstwhile Rule 115A)]…………………………………………………………………..437
7.13-p Exemption of long-term capital gains arising to non-resident Indian on
transfer of ‘foreign exchange asset’ [Section 215 (erstwhile Section
115F)]………………………………………………………………………………………………437

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Contents xix
7.13-q Option not to avail of the provisions of section 215 [Section 218
((erstwhile Section 115-I)]…………………………………………………………………..438
7.14 Reference to Valuation Officer [Section 91 (erstwhile Section 55A) and Rule
55 (Erstwhile Rule 111AA)]……………………………………………………………………………439

Exemption of capital gains

7.15 Types of exemption of capital gains…………………………………………………………………439
7.15-a Capital gain on transfer of units under section 64 exempt if transfer
takes place on or after 1.4.2002 [Sl. No. 14 of the Table under
Schedule II (erstwhile Section 10(33))] …………………………………………………440
7.15-b Exemption of capital gains on compensation received on compulsory
acquisition of agricultural land situated within specified urban limits
[Sl. No. 18 of Table under Schedule III (erstwhile Section 10(37))]…………..440
7.15-c Income from capital gain to a political party to be exempt [Section 12]……..440
7.16 Profit on sale of property used for residence [Section 82 (erstwhile Section
54)] …………………………………………………………………………………………………………….440
7.17 Capital gains on transfer of land used for agricultural purposes not to be
charged in certain cases [Section 83 (erstwhile Section 54B)] ……………………………..443
7.18 Capital Gain on compulsory acquisition of land and buildings forming part of
an industrial undertaking [Section 84 (erstwhile Section 54D)]……………………………445
7.19 Capital gains not to be charged on investment in certain bonds [Section 85
(erstwhile Section 54EC)]………………………………………………………………………………446
7.20 Capital gains on transfer of certain capital assets not to be charged in case of
investment in residential house [Section 86 (erstwhile Section 54F)]……………………447
7.21 Exemption of capital gains on transfer of assets in cases of shifting of
industrial undertaking from urban area [Section 87 (erstwhile Section 54G)]…………456
7.22 Exemption of capital gain on transfer of assets in cases of shifting of industrial
undertaking from urban area to any Special Economic Zone [Section 88
(erstwhile Section 54GA)]………………………………………………………………………………458
7.23 Extension of time limit for acquiring new asset or depositing or investing
amount of capital gains, in case of compulsory acquisition [Section 89
(erstwhile Section 54H)] ………………………………………………………………………………..458
7.24 Tax on short-term capital gains in certain cases [Section 196 (erstwhile
Section 111A)] ……………………………………………………………………………………………..459
7.25 Tax on long-term capital gains [Section 197 (erstwhile Section 112)]…………………..460
7.26 Excess income tax computed as under, to be ignored in case of an individual
or HUF being a resident and having long-term capital gain from the transfer of
land or building or both acquired before the 23.7.2024 [Section 197(3)]……………….465
7.27 Concept of Indexation (Applicable only for the purpose of Section 197(3)):………….466
7.27-a Indexation of cost of acquisition and cost of improvement to be
allowed in case of long-term capital gain (indexation applicable upto
22.7.2024) ………………………………………………………………………………………..466
7.27-b Computation of indexed cost of acquisition……………………………………………467
7.27-c Computation of Indexed cost of improvement (Section 72(8)(c)
[Erstwhile Explanation (iv) to Section 48)] ……………………………………………470
7.28 Tax on long-term capital gains in certain cases [Section 198 (erstwhile Section
112A)]…………………………………………………………………………………………………………477
Chapter 8: Income under the Head “Income from Other Sources” [Sections 92
to 95] ……………………………………………………………………………………………………489
8.1 Chargeability [Section 92(1) (erstwhile Section 56)]………………………………………….489
8.2 Method of Accounting …………………………………………………………………………………..489

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8.3 Specific incomes included under ‘Income from Other Sources’ [Section 92(2)
(erstwhile Section 56(2)]………………………………………………………………………………..489
8.4 Taxability of Dividend [Section 92(2)(a) (erstwhile Section 56(2)(i))]………………….492
8.4-a What is dividend………………………………………………………………………………..492
8.4-b Dividends not to include the following:…………………………………………………494
8.4-c Meaning of Accumulated profits:…………………………………………………………494
8.4-d Deductions for expenses from dividend income other than referred to
in section 2(40)(f) or from income from units of mutual fund [Section
93(2) (erstwhile Proviso to Section 57]…………………………………………………495
8.5 Winnings from Lotteries, Crossword Puzzles, Horse Races and Card Games
[Section 92(2)(b) (erstwhile Section 56(2)(ib))]…………………………………………………495
8.5-a Grossing up of lottery income, etc………………………………………………………..495
8.5-b Special rate of income-tax in case of winnings from lotteries,
crossword puzzles, races, etc. [Sl. No. 1 of Table under Section 194(1)
(erstwhile Section 115BB)]………………………………………………………………….496
8.6 Special rate of income-tax in case of winnings from online games [Sl. No. 5 of
the Table under section 194(1) (erstwhile Section 115BBJ)] ……………………………….496
8.7 Interest on Securities [Section 92(2)(e) (erstwhile Section 56(2)(id))]…………………..496
8.7-a Chargeability of Interest on Securities…………………………………………………..497
8.7-b Accrual of Interest……………………………………………………………………………..497
8.7-c Grossing up of interest………………………………………………………………………..497
8.7-d Deductions for expenses from Interest on Securities [Section 93
(erstwhile Section 57(i) and (iii))] ………………………………………………………..497

8.8 Income from letting out of machinery, plant or furniture [Section 92(f)
(erstwhile Section 56(2)(ii))]…………………………………………………………………………..498
8.8-a Income from composite letting of machinery, plant or furniture and
buildings [Section 92(g) (erstwhile Section 56(2)(iii))]……………………………498
8.8-b Deductions permissible from letting out of machinery, plant or
furniture and buildings [Section 93(1)(c) (erstwhile Section 57(ii) and
(iii))]………………………………………………………………………………………………..498
8.9 Family pension payments received by the legal heirs of a deceased employee ……….498
8.10 Income of any person to include not only gift of money from any person or
persons but also the gift of property (whether movable or immovable) or
property acquired for inadequate consideration [Section 92(2)(m) (erstwhile
Section 56(2)(x))]………………………………………………………………………………………….499
8.10-a Money or asset received without consideration or for an inadequate
consideration: Where any person receives in any tax year, from any
person or persons any money, moveable or immoveable property
without consideration or for an inadequate consideration, it shall be
taxable as under:………………………………………………………………………………..499
8.10-b Provisions of section 92(2)(m) not to apply in certain cases [Section
92(3)]:………………………………………………………………………………………………501
8.10-c Certain points to be considered in case of immoveable property
[Section 92(4)]…………………………………………………………………………………..502
8.11 Interest on compensation or enhanced compensation [Section 92(2)(i) and
Section 93(1)(f) (erstwhile Section 56(2)(viii) and section 57(iv))] ………………………502
8.12 Forfeiture of advance received for transfer of capital asset [Section 92(2)(h)
(erstwhile Section 56(2)(ix))]………………………………………………………………………….502
8.13 Taxability of compensation in connection with termination of employment
[Section 92(2)(j) (erstwhile Section 56(2)(xi))]………………………………………………….503
8.14 Any sum including bonus received from LIC to be taxed, if the same is not
exempt under Sl. No. 2 of Table under Schedule II or it is taxable under this
head or any other head [Section 92(2)(l) (erstwhile 56(2)(xiii)) ]………………………….503

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Contents xxi
8.15 Other incomes taxable under this head……………………………………………………………..503
8.15-a Deduction allowable for earning other income ……………………………………….504
8.16 Amounts not deductible in computing the income under the head ‘Income from
Other Sources’ [Section 94 (erstwhile Section 58)]…………………………………………….504
8.16-a Certain expenses/payment not deductible in computing the income
under the head “Income from other sources” [Section 94(1)] ……………………504
8.16-b Provision of sections 29, 35((b)(i) and 36 of PGBP to apply for
income from other sources [Section 94(2)]…………………………………………….504
8.16-c No deduction for any expenditure or allowance to be allowed in
computing the income from winnings from lotteries, crossword
puzzles, races etc. [Section 94(4)] ………………………………………………………..505
8.16-d Section 94(4) not to apply in computing the income from the activity
of owning and maintaining such horses [Section 94(5)]…………………………..505
8.17 Deemed income chargeable to tax [Section 95 (erstwhile Section 59)]………………….505
Chapter 9: Income of Other Persons Included in Assessee’s Total Income
(Clubbing of Income) [Sections 96 to 100] ………………………………………………506
(A) Income of other persons included in the assessee’s total income
9.1 Transfer of income without transfer of assets [Section 90 (erstwhile
Section 60)]………………………………………………………………………………………………….506
9.2 Chargeability of income in transfer of assets [Section 97 (erstwhile
Section 61)]………………………………………………………………………………………………….506
(B) Income of other persons included only in the individual’s total income
9.3 Income of an individual to include income of spouse, minor child, etc.
[Section 99 (erstwhile Section 64)]………………………………………………………………….507
9.3-a Remuneration of spouse from a concern in which the other spouse has
substantial interest [Section 99(1)(a)(i)] ………………………………………………..507
9.3-b Income from assets transferred to the spouse [Section 99(1)(a)(ii)
(erstwhile Section 64(1)(iv))]……………………………………………………………….509
9.3-c Income from assets transferred to son’s wife [Section 99(1)(b)
(erstwhile Section 64(1)(vi))]……………………………………………………………….510
9.3-d Amount to be included in total income of an individual when
transferred asset is invested in business by the spouse or son’s wife
[Section 99(2)]…………………………………………………………………………………..510
9.3-e Income from assets transferred to any person for the benefit of his/her
spouse or his son’s wife of the transferor [Section 99(1)(d) (erstwhile
Section 64(1)(vii))] …………………………………………………………………………….510
9.3-f Clubbing of income of a minor child [Section 99(1)(c) (erstwhile
Section 64(1A))] ………………………………………………………………………………..511
9.3-g Property owned by an individual converted into property belonging to
his HUF [Section 99(3) (erstwhile Section 64(2))] ………………………………….512
9.4 Liability of person, i.e., the transferee in respect of income included in the
income of another person, i.e., transferor [Section 100 (erstwhile Section 65)] ………514
Chapter 10: Unexplained Credits, Investments, Asset, Expenditure, etc.
[Sections 102 to 107] ……………………………………………………………………………..515
10.1 Unexplained credits [Section 102 (erstwhile Section 68)]……………………………………515
10.1-a Conditions to be satisfied for applicability of section 102 (erstwhile
section 68)………………………………………………………………………………………..516
10.2 Unexplained investment. [Section 103 (erstwhile Sections 69 & 69B merged)] ……..516
10.3 Unexplained asset. [Section 104 (erstwhile Sections 69A & 69B merged)]…………….517

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10.4 Unexplained expenditure. [Section 105 (erstwhile Section 69C)]…………………………517
10.5 Amount borrowed or repaid through negotiable instrument, hundi, etc.
[Section 106 (erstwhile Section 69D)] ……………………………………………………………..518
10.6 Charge of tax [Section 107] ……………………………………………………………………………518
10.7 Tax on income referred to in sections 102 to 106. [Section 195 (erstwhile
Section 115BBE)]………………………………………………………………………………………….518
Chapter 1: Set off or Carry Forward and Set off of Losses [Sections 108 to 121]………..520
11.1 Set off of losses under same head of income [Section 108 (erstwhile Section
70)] …………………………………………………………………………………………………………….520
11.2 Set off of losses under any other head of income. [Section 109 (erstwhile
Section 71)]………………………………………………………………………………………………….521
11.3 Carry forward and set off of losses ………………………………………………………………….524
11.3-a Submission of return for losses. [Section 121 (erstwhile Section 80)]………..524
11.4 Carry forward and set off of loss from house property [Section 110 (erstwhile
Section 71B)] ……………………………………………………………………………………………….525
11.5 Carry forward and set off of loss from Capital gains. [Section 111 (erstwhile
Section 74)]………………………………………………………………………………………………….525
11.6 Carry forward and set off of business loss [Section 112 (erstwhile Section 72)]……..526
11.7 Set off and carry forward of losses computed in respect of speculation
business. [Section 113 (erstwhile Section 73)]…………………………………………………..529
11.8 Set off and carry forward of losses computed in respect of specified business.
[Section 114 (erstwhile Section 73A)]………………………………………………………………530
11.9 Set off and carry forward of losses from specified activity [Section 115
(erstwhile Section 74A)]…………………………………………………………………………………531
11.10 Brought forward losses must be set off in the immediately succeeding year/
years……………………………………………………………………………………………………………531
11.11 Special provisions of set off of losses in case of an individual or HUF or
AOP/BOI or Artificial Juridical Person who is taxable under section 202
(erstwhile section 115BAC(1A))………………………………………………………………………532
11.12 Special provisions of set off of loss in case of a company which has opted to
be taxed as per provisions of Section 200 [Section 200 (erstwhile section
115BAA)]…………………………………………………………………………………………………….532
11.13 Carry forward and set off of the accumulated losses and unabsorbed
depreciation allowance in amalgamation or demerger, etc…………………………………..533
11.14 Carry forward and set off of losses not permissible in certain cases. [Section
119 (erstwhile Sections 78 & 79 merged)]………………………………………………………..535
11.14-aChange in the constitution of a firm [Section 119(1) (erstwhile section
78(1))……………………………………………………………………………………………….535
11.14-bCarry forward and set off of losses on succession of business or
profession by another person otherwise than by inheritance [Section
119(2) (erstwhile section 78(2))]………………………………………………………….536
11.14-cCarry forward and set off of losses in case of closely held company
[Section 119(3) (erstwhile Section 79)] …………………………………………………536

11.15 No set off of losses against undisclosed income consequent to search,
requisition and survey [Section 120 (erstwhile Section 79A)]………………………………538
Chapter 12: Deductions to be Made in Computing Total Income [Sections 122 to
154 (Chapter VIII)]……………………………………………………………………………….539
12.1 Basic rules of deductions [Section 122 (erstwhile Sections 80A/80AB/AC)]…………..540
12.2 Deduction for life insurance premia, deferred annuity, contributions to
provident fund, etc. [Section 123 (erstwhile Section 80C)]………………………………….542

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Contents xxiii
12.3 Deduction in respect of employer and assessee contribution to pension scheme
of Central Government [Section 124 (erstwhile Section 80CCD)]………………………..542
12.4 Deduction in respect of contribution to Agnipath Scheme [Section 125
(erstwhile Section 80CCH)]……………………………………………………………………………545
12.5 Deduction in respect of health insurance premia [Section 126 (erstwhile
Section 80D)]……………………………………………………………………………………………….545
12.6 Deduction in respect of maintenance including medical treatment of a
dependant who is a person with disability [Section 127 (erstwhile Section
80DD)]………………………………………………………………………………………………………..550
12.7 Deduction in respect of medical treatment, etc. [Section 128 (erstwhile Section
80DDB and Rule 62 (erstwhile Rule 11DD)]…………………………………………………….551
12.8 Deduction in respect of interest on loan taken for higher education. [Section
129 (erstwhile Section 80E)]…………………………………………………………………………..552
12.9 Deduction in respect of interest on loan taken for residential house property
[Section 13 (erstwhile Section 80EE)] ……………………………………………………………..552
12.10 Deduction in respect of interest on loan taken for certain house property
[Section 131 (erstwhile Section 80EEA)]………………………………………………………….553
12.11 Deduction in respect of purchase of electric vehicle [Section 132 (erstwhile
Section 80EEB)]……………………………………………………………………………………………554
12.12 Deduction in respect of donations to certain funds, charitable institutions, etc.
[Section 133 (erstwhile Section 80G)] ……………………………………………………………..554
12.13 Deductions in respect of rent paid [Section 134 (erstwhile Section 80GG)]……………558
12.14 Deduction in respect of certain donations for scientific research or rural
development [Section 135 (erstwhile Section 80GGA)]………………………………………558
12.15 Deduction in respect of contributions given by companies to political parties
[Section 136 (erstwhile Section 80GGB)]…………………………………………………………559
12.16 Deduction in respect of contribution given by any person to political parties
[Section 137 (erstwhile Section 80GGC)]…………………………………………………………560
Deduction in respect of certain incomes

12.17 Deductions in respect of profits and gains from industrial undertakings or
enterprises engaged in infrastructure development, etc. [Section 138 (erstwhile
Section 80-IA)]……………………………………………………………………………………………..560
12.17-aEssential conditions for enterprises carrying on the business of
infrastructure facility [Section 80-IA(4)(ii)]…………………………………………..561
12.18 Deductions in respect of profits and gains by an undertaking or enterprise
engaged in development of Special Economic Zone [Section 139 (erstwhile
Section 80-IAB)] …………………………………………………………………………………………..561
12.19 Special provision in respect of specified business. [Section 140 (erstwhile
Section 80-IAC)]…………………………………………………………………………………………..562
12.20 Deduction in respect of profits and gains from certain industrial undertakings
[Section 141 (erstwhile Section 80-IB)]……………………………………………………………566
12.21 Deductions in respect of profits and gains from housing projects [Section 142
(erstwhile Section 80-IBA)]…………………………………………………………………………….566
12.22 Special provisions in respect of certain undertakings in North Eastern States
[Section 143 (erstwhile Section 80-IE)]……………………………………………………………567
12.23 Special provisions in respect of newly established Units in Special Economic
Zones. [Section 144 (erstwhile Section 10AA)]………………………………………………….569

12.24 Deduction for businesses engaged in collecting and processing of bio-
degradable waste [Section 145 (erstwhile Section 80JJA)]………………………………….569

12.25 30% of additional employee cost to be allowed as deduction for 3 consecutive
tax years to an assessee whose accounts are required to be audited [Section
146 (erstwhile Section 80JJAA)]……………………………………………………………………..569

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12.26 Deductions for income of Offshore Banking Units and Units of International
Financial Services Centre [Section 147 (erstwhile Section 80LA)] ……………………….572
12.27 Deduction in respect of certain inter-corporate dividends [Section 148
(erstwhile Section 80M)]………………………………………………………………………………..574
12.28 Deduction in respect of income of Co-operative Societies [Section 149
(erstwhile Section 80P)]…………………………………………………………………………………574
12.29 [Deduction in respect of income of federal co-operative. [Section 150] ………………..577
12.30 Deduction in respect of royalty income, etc., of authors of certain books other
than text books [Section 151 (erstwhile Section 80QQB)]…………………………………..578
12.31 Deduction in respect of royalty on patents [Section 152 (erstwhile Section
80RRB)]………………………………………………………………………………………………………579
12.32 Deduction for interest on deposits [Section 153 (erstwhile Section 80TTA &
80TTB merged)]……………………………………………………………………………………………581
12.33 Deduction in case of a person with disability [Section 154 (erstwhile Section
80U)] ………………………………………………………………………………………………………….582
Chapter 13: Agricultural Income and Its Tax Treatment [Sections 2(5) and 11
read with Schedule II (Table: Sl. No. 1)]…………………………………………………583
13.1 What is Agricultural Income? …………………………………………………………………………583
13.2 Certain incomes not to be included in agricultural income ………………………………….584
13.3 What does agriculture include?……………………………………………………………………….584
13.4 Income which is partially agricultural and partially from business ……………………….584
13.5 Tax on non-agricultural income if the assessee earns agricultural income also……….586
13.5-a Computation of tax on non-agricultural income where there is
agricultural income also………………………………………………………………………586
Chapter 14: Computation of Tax Liability of Various Categories of Persons……………..589
14.1 Rates of income-tax on certain specified incomes for all categories of persons………589
14.2 Rates of income tax on normal income for all categories of persons …………………….590
14.2-a In the case of every Individual or Hindu Undivided Family or
Association of Persons (AOP) (other than a Co-operative Society) or
Body or Individuals (BOI), whether incorporated or not, or an
Artificial Juridical Person (AJP)…………………………………………………………..590
14.2-b In the case of every co-operative society ……………………………………………….592
14.2-c In case of a firm (including limited liability partnership) or every local
authority …………………………………………………………………………………………..593
14.2-d In the case of a company …………………………………………………………………….593
14.3 Marginal Relief…………………………………………………………………………………………….595
14.4 Cess ……………………………………………………………………………………………………………595
14.5 Assessment of an individual …………………………………………………………………………..596
14.5-a An individual is liable to pay tax in respect of the following incomes………..596
14.5-b Incomes received from firm/AOP/HUF which are exempt in the hands
of an individual………………………………………………………………………………….597
14.5-c Apportionment of income between spouses governed by Portuguese
Civil Code [Section 10 (erstwhile Section 5A)] ………………………………………597
14.5-d Computation of total income and tax liability…………………………………………598
14.5-e Rate of Tax……………………………………………………………………………………….598
14.5-f Rebate of income-tax in case of certain individuals [Section 156
(erstwhile Section 87A)] ……………………………………………………………………..602
14.5-g Alternate Minimum Tax (AMT) on all persons other than companies
[Section 206(2) (erstwhile Sections 115JC to 115JF Chapter XII-BA)]

,
Contents xxv
applicable only when the person other than a company is under old
regime………………………………………………………………………………………………605
14.6 Assessment of Hindu Undivided Family…………………………………………………………..608
14.6-a Computation of Total Income of HUF…………………………………………………..609
14.6-b Steps for computation of income-tax of HUF…………………………………………610
14.6-c Rates of income-tax for assessment year 2026-27 …………………………………..611
14.6-d Partition of HUF………………………………………………………………………………..611
14.6-e Assessment after partition of Hindu undivided family. [Section 315
(erstwhile Section 171)]………………………………………………………………………612
14.6-f Alternate… Minimum Tax (AMT) on all persons other than companies [Section
206(2) (erstwhile Sections 115JC to 115JF Chapter XII-BA)]
applicable only when the person other than a company is under old
regime………………………………………………………………………………………………614
14.7 Assessment of firm (including LLP)………………………………………………………………..614
14.7-a Position of Firm under the Income-tax Act…………………………………………….614
14.7-b Essential conditions to be satisfied by a firm to be assessed as firm and
to be eligible for deduction of interest, salary, etc., to the partners
[Section 325 (erstwhile Section 184)]……………………………………………………616
14.7-c Deduction allowable on account of remuneration and interest to the
partners of the firm (including Limited Liability Partnership)…………………..618
14.7-d Meaning of “Book Profit” and its computation [Section 35(e)(v)(A)
(erstwhile Explanation 3 to section 40(b))] ……………………………………………619
14.7-e Provisions regarding set off and carry forward of losses of firms………………620
14.7-f Carry forward and Set off of losses under any head in case of change
in constitution of firm [Section 119(1) & (2) (erstwhile Section 78)]…………620
14.7-g Computation of Total Income of Firm (including Limited Liability
Partnership) ………………………………………………………………………………………621
14.7-h Rate of Tax……………………………………………………………………………………….622
14.7-i Alternate Minimum Tax (AMT) on all persons other than companies
[Section 206(2) (erstwhile Sections 115JC to 115JF Chapter XII-BA)]
applicable only when the person other than a company is under old
regime, however there is only one regime for the firms……………………………622
14.7-j Treatment of share of profit, interest and remuneration received by a
partner from a firm (including Limited Liability Partnership) …………………..622
14.8 Assessment of Association of Persons (AOPs)/Body of Individuals (BOIs)…………..623
14.8-a Rate of tax of AOP or BOI (other than the assessees mentioned in box
above)………………………………………………………………………………………………624
14.8-b Treatment of share of income in the hands of a member of AOP/BOI ……….626
14.8-c Alternate Minimum Tax (AMT) on all persons other than companies
[Sections 115JC to 115JF Chapter XII-BA] …………………………………………..627
14.9 Assessment of Companies ……………………………………………………………………………..627
14.10 Special provision for minimum alternate tax [Section 206(1) (erstwhile
Section 115JA, 115JAA, 115JB merged)]………………………………………………………….627
Chapter 15: Return of Income and Procedure of Assessment [Sections 262 to 291]…….628
15.1 Permanent Account Number [Section 262 (erstwhile Section 139A & 139AA
merged) and Rule 158 (erstwhile Rule 114)]……………………………………………………..628
15.2 Furnishing of return of income [Section 263 (erstwhile Section 139, 139C &
139D merged)]……………………………………………………………………………………………..644
15.3 Submission of return of loss [Section 263(1)(a)(viii) read with Section 121
(erstwhile Section 139(3) read with section 80)]………………………………………………..653

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15.4 Scheme for submission of returns through tax return preparers [Section 264
(erstwhile Section 139B)]……………………………………………………………………………….654
15.5 Return by whom to be verified [Section 265 (erstwhile Section 140)]…………………..655
15.6 Self-assessment [Section 266 (erstwhile Section 140A)]……………………………………..657
15.7 Tax on updated return [Section 267 (erstwhile Section 140B)]…………………………….660
15.8 Inquiry before assessment [Section 268 (erstwhile Section 142)] …………………………665
15.9 Estimation of value of assets by Valuation Officer [Section 269 (erstwhile
Section 142A)] ……………………………………………………………………………………………..668
15.10 Processing of return [Section 270(1) to (7) (erstwhile Section 143(1))]…………………670
15.11 Regular/Scrutiny Assessment — On the basis of return of income and after
hearing additional evidence [Section 270(10) (erstwhile Section 143(3))]……………..672
15.11-aCompulsory Service of Notice [Section 270(8) (erstwhile section
143(2))] ……………………………………………………………………………………………672
15.11-bNotice deemed to be valid in certain circumstances [Section 523
(erstwhile Section 292BB)]………………………………………………………………….673
15.11-cConsequences of failure to comply with notice under section 270(8)…………673
15.12 Assessment after evidence [Section 270(10) (erstwhile Section 143(3))]……………….673
15.12-aNo order of assessment of entities referred to in section 270(12) to be made
without giving exemption available under section 11 unless certain procedure
is followed [Section 270(11) (erstwhile first and second provisos to section
143(3))]……………………………………………………………………………………………………….674
15.12-bAssessment of non-profit organization where it has has committed any
specified violation [Section 270(13)]…………………………………………………….674
15.12-cAssessment of entity referred to in section 45(3)(a) where the activities
of such entity are not being carried out as per the conditions which are
approved [Section 270(14)]…………………………………………………………………675
15.12-dTreatment of tax and interest paid under section 270(1) [Section
270(15)]……………………………………………………………………………………………675
15.13 Best Judgment Assessment [Section 271 (erstwhile Section 144)]………………………..675
15.14 Power of Joint Commissioner to issue directions in certain cases. [Section 272
(erstwhile Section 144A)]……………………………………………………………………………….676
15.15 Procedure before issuance of notice under section 280 [Section 281 (erstwhile
Section 148A)] ……………………………………………………………………………………………..677
15.16 Issue of notice where income has escaped assessment [Section 280 (erstwhile
Section 148)]………………………………………………………………………………………………..679
15.17 Time limit for notices under sections 280 and 281 [Section 282 (erstwhile
Section 149)]………………………………………………………………………………………………..681
15.18 Sanction for issue of notice [Section 284 (erstwhile Section 151)] ……………………….681
15.19 Income escaping assessment [Section 279 (erstwhile Section 147)] ……………………..681
15.19-aTime limit for completion of assessment and reassessment under
section 279 [Sl. No. 4 of the Table under Section 286 (erstwhile
Section 153(2))]…………………………………………………………………………………682
15.19-bRate at which income assessed or reassessed to be taxed [Section
285(1) (erstwhile Section 152(1)]…………………………………………………………682
15.19-cWhen can the proceedings under section 279 be dropped [Section
285(2) (erstwhile Section 152(2))]………………………………………………………..682
15.19-dPenalties in case of income escaping assessment [Section 439(1)
(erstwhile Section 270A(1))]………………………………………………………………..683
15.20 Provision for cases where assessment is in pursuance of an order on appeal,
etc. [Section 283 (erstwhile Section 150)]…………………………………………………………683
15.21 Time limit for completion of assessment, reassessment and recomputation
[Section 286 (erstwhile Section 153)]………………………………………………………………684
15.22 Rectification of mistakes [Section 287 (erstwhile Section 154)]…………………………..690
15.23 Other amendments. [Section 288 (erstwhile Section 155)]…………………………………..692

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Contents xxvii
15.24 Notice of demand. [Section 289 (erstwhile Section 156)]……………………………………699
15.25 Modification and revision of notice of demand in certain cases. [Section 290
(erstwhile Section 156A)]……………………………………………………………………………….700
15.26 Intimation of loss. [Section 291 (erstwhile Section 157)]…………………………………….701
Chapter 16: Deduction and Collection of Tax at Source [Sections 390 to 402]…………….702
16.1 Deduction or collection at source and advance payment [Section 390
(erstwhile Sections 190, 199 & 202 merged)]……………………………………………………702
16.2 Direct payment. [Section 391 (erstwhile Section 191)]……………………………………….702

[A] Deduction of Tax at Source

16.3 Deduction of tax at source from salary and accumulated balance due to an
employee. [Section 392 (erstwhile Section 192, 192A merged)]…………………………..704
16.3-a Tax on income of an employee if he does not opt to be taxed under old
regime. [Section 202(1) (erstwhile Section 115BAC(1A))]……………………….708
16.4 Tax ..to be deducted at source [Section 393 (all erstwhile sections of TDS (except s. 192 &
192A), 196, 197A & 195 merged)]…………………………………………………………………..710

[B] Collection of tax at source

16.5 Collection of tax at source [Section 394 (erstwhile Section 206C)] ………………………748
16.6 Certificates. [Section 395 (erstwhile Sections 197, 206C(9), 203 & 206C(5)
merged)] ……………………………………………………………………………………………………..753
16.7 Tax deducted is income received. [Section 396 (erstwhile Section 198)]……………….757
16.8 Compliance and reporting. [Section 397 (erstwhile sections 203A, 206CA)]…………757
16.9 Consequences of failure to deduct or pay or, collect or pay. [Section 398
(erstwhile Sections 201 & 206C merged)] ………………………………………………………..766
16.10 Processing of the statements. [Section 399 (erstwhile Sections 200A & 206CB
merged)] ……………………………………………………………………………………………………..768
16.11 Bar against direct demand on assessee. [Section 401 (erstwhile Section 205)] ……….769
Chapter 17: Advance Payment of Tax [Sections 403 to 410]………………………………………770
17.1 Liability for payment of Advance Tax [Section 403 (erstwhile Section 207)] ………..770
17.2 Conditions of Liability to pay Advance Tax [Section 404 (erstwhile Section
208)] …………………………………………………………………………………………………………..770
17.3 Computation of Advance Tax [Section 405 (erstwhile Section 209)]…………………….770
17.4 What constitutes Current Income? …………………………………………………………………..772
17.5 Payment of advance tax …………………………………………………………………………………772
17.6 Instalments of advance tax and due dates [Section 408 (erstwhile Section 211)]…….775
17.7 Payment of advance tax in case of capital gains, dividend income, winning of
lotteries etc. [Section 425(4) (erstwhile Proviso to section 234C)]……………………….776
17.8 When assessee is deemed to be in default. [Section 409 (erstwhile Section
218)] …………………………………………………………………………………………………………..776
17.9 Credit for Advance Tax [Section 410 (erstwhile Section 219)]…………………………….777
17.10 Consequences if Advance Tax is not paid or paid less or if there is deferment
of payment of Advance Tax……………………………………………………………………………777
Chapter 18: Interest and Fee Payable [Sections 398(3), 411(3), 411(6), 423, 424,
425, 426, 427, 428, 429, 430 & 437 (Erstwhile Sections 201(1A),
206C(7), 220(2), 234A, 234B, 234C, 234D, 234E, 234F, 234G,234H &
244A]……………………………………………………………………………………………………778
(A) Interest payable by Assessee

18.1 Interest for defaults in furnishing return of income under section 263(1) or
263(4) (Erstwhile section 139(1) and (4)) or in response to a notice under

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xxviii Contents
section 268(1) (erstwhile section 142(1)) [Section 423 (erstwhile Section
234A(1))] …………………………………………………………………………………………………….779
18.2 Interest for defaults in payment of advance tax. [Section 424 (Erstwhile
Section 234B)] ……………………………………………………………………………………………..783
18.3 Interest for deferment of advance tax [Section 425 (Erstwhile Section 234C)]……….786
18.4 Interest on excess refund. [Section 426 (Erstwhile Section 234D)]……………………….788
18.4-a Interest under section 426 (Erstwhile section 234D) cannot be levied at
the time of reassessment under section 279 (Erstwhile section 147) if
an assessment had already been completed under section 270(10)
(Erstwhile section 143(3)) …………………………………………………………………..789
(B) Fee payable by the Assessee

18.5 Fee for default in furnishing Statements …………………………………………………………..790
18.5-a Fee for default in furnishing TDS/TCS Statements [Section 427(1) and
(2) (erstwhile Section 234E)]……………………………………………………………….790
18.5-b Fee for default in furnishing statement of financial transaction or
reportable account under Section 508(1) (Section 427(3) (Erstwhile
Section 271FA(1)) ……………………………………………………………………………..790
18.6 Fee for default in furnishing return of income, audited accounts and reports………….791
18.6-a Fee for default in furnishing return of income by the due-date [Section
428(1)(a) (erstwhile Section 234F)]………………………………………………………791
18.6-b [Fee for furnishing revised return of income beyond nine months
[Section 428(1)(b)]…………………………………………………………………………….791
18.6-c Fee for failure to get accounts audited and furnish tax audit report
(Section 428(c) (erstwhile section 271B))………………………………………………791
18.6-d Fee for failure to furnish T.P. report from accountant as required under
Section 172 (Section 428(d) (erstwhile section 271BA)) ………………………….791
18.7 Fee for default relating to statement or certificate [Section 429 (erstwhile
Section 234G)]……………………………………………………………………………………………..792
18.8 Fee for default relating to intimation of Aadhaar number [Section 430
(erstwhile Section 234H)] ………………………………………………………………………………792
18.9 Interest for late payment of demand of tax, interest, penalty, etc. [Section
411(3) (Erstwhile Section 220(2)]……………………………………………………………………793
18.9-a Can interest payable under section 411(3) (erstwhile section 220(2))
be increased or decreased [Section 411(6) (Erstwhile First and Second
proviso to section 220(2)]……………………………………………………………………793
18.9-b For charging interest under section 411(3), the amount specified in the
notice of demand issued under section 289 shall be deemed to be valid
till the disposal of appeal by the last appellate authority or disposal of
proceedings [Section 411(2) (Erstwhile Section 220(1A)]]……………………….794
18.9-c Reduction or waiver of interest payable under section 411(3)
(erstwhile section 220(2)) [Section 411(7) (Erstwhile Section
220(2A))]………………………………………………………………………………………….795
18.9-d Interest under section 411(3) (Erstwhile section 220(2)) not leviable if
charged under section 398(3) (Erstwhile section 201(1A)) read with
section 399 (Erstwhile section 200A(1)) [Section 411(4) (Erstwhile
Section 220(2B))] ………………………………………………………………………………795
18.10 Failure to deduct or collect and pay tax at source [Section 398(3)(a) (Erstwhile
Section 201(1A) and Section 206C)]………………………………………………………………..795
18.10-aInterest under section 398(3)(a) (erstwhile section 201(1A)(i)) is still
payable even if tax, which was not deducted at source, was paid by the
deductee [Section 398(3)(c) (Erstwhile Proviso to section 201(1A)]:…………796
18.11 Waiver of interest………………………………………………………………………………………….797

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(C) Interest payable to assessee

18.12 Interest on refund [Section 437 (Erstwhile Section 244A] …………………………………..801
18.12-aEntitlement to Interest on Refund and Manner of Computation
[Section 437(1) (Erstwhile section 244A(1)(a)/(aa)/(b))]:…………………………801
18.12-bNo interest on refund in certain cases [Section 437(2) (Erstwhile
Proviso to Section 244A(1)(aa)]:………………………………………………………….801
18.12-cInterest on refund arising from rectification application [Section
437(3) (Erstwhile Proviso to Section 244A(1)(a)]: ………………………………….802
18.12-dAdditional 3% interest on refund where the refund arises as a result of
giving effect to order of appeal/revision [Section 437(4) (Erstwhile
Section 244A(1A)]: …………………………………………………………………………….802
18.12-eExclusion of period where refund is withheld [Section 437(5)
(Erstwhile Proviso to Section 244A(1A))]: …………………………………………….802
18.12-f Interest payable when refund is due to a deductor [Section 437(6)
(Erstwhile Section 244A(1B))]:…………………………………………………………….802
18.12-gExclusion of Period of Delay attributable to assessee/deductor [Section
437(7) (Erstwhile Section 244A(2))]:…………………………………………………….803
18.12-hDecisive authority for questions relating to period of delay under
Section 437(7) [Section 437(8) (Erstwhile Section 244A(2))]: ………………….803
18.12-i Increase or reduction of interest on refund [Section 437(9) (Erstwhile
section 244A(3)]: ……………………………………………………………………………….803
Chapter 19: Refunds [Sections 431 to 438 (Erstwhile Section 237 to 241 & 245)]…………805
19.1 Who is entitled to refund? [Section 431 (Erstwhile Section 237)]…………………………805
19.2 Person entitled to claim refund in certain special cases. [Section 432
(Erstwhile Section 238)] ………………………………………………………………………………..805
19.3 Form of claim for refund and limitation. [Section 433 (Erstwhile Section 239]………805
19.4 Refund for denying liability to deduct tax in certain cases. [Section 434
(Erstwhile Section 239A)]………………………………………………………………………………808
19.5 Refund on appeal, etc. [Section 435 (Erstwhile Section 240)] ……………………………..808
19.6 Correctness of assessment not to be questioned. [Section 436 (Erstwhile
Section 242)]………………………………………………………………………………………………..809
19.7 Interest payable to assessee [Section 244A]………………………………………………………809
19.8 Set off and withholding of refunds in certain cases. [Section 438 (Erstwhile
Section 245)]………………………………………………………………………………………………..809
Chapter 20: Penalties and Prosecutions [Sections 298, 412 & 439 to 491]…………………..810
20.1 Penalties………………………………………………………………………………………………………810
20.2 Penalty for under-reporting and misreporting of income [Section 439
(erstwhile Section 270A)]……………………………………………………………………………….832
20.3 [Waiver of penalty and immunity from prosecution.] [Section 440 (erstwhile
Section 270AA)]……………………………………………………………………………………………837
20.4 Penalty not to be imposed in certain cases [Section 470 (erstwhile Section
273B)]…………………………………………………………………………………………………………838
20.5 Procedure for imposing penalty. [Section 471 (erstwhile Section 274)]…………………838
20.6 Bar of limitation for imposing penalties [Section 472 (erstwhile Section 275)]………839

Offences and Prosecutions

20.7 Prosecution for offences committed under various provisions of Act ……………………840
20.8 Power to tender immunity from prosecution [Section 519 (erstwhile Section
291)] …………………………………………………………………………………………………………..850

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20.9 Prosecution to be at the instance of Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner [Section 491
(erstwhile Section 279(1))]……………………………………………………………………………..851
Chapter 21: Appeals and Revisions [Sections 356 to 378]………………………………………….852

A. Appeals—Chapter XVIII-A

21.1 Remedy available against the order of the Joint Commissioner (Appeals) or
the Commissioner (Appeals)/ Revision orders of CIT ………………………………………..852
21.2 Remedy against orders of Appellate Tribunal……………………………………………………853
21.3 Appeal against order of High Court to Supreme Court ……………………………………….853
21.4 First Appeal …………………………………………………………………………………………………853
21.4-a Appealable orders before Joint Commissioner (Appeals) [Section 356
(erstwhile Section 246)]………………………………………………………………………853
21.4-b Appealable orders before Commissioner (Appeals) [Section 357
(erstwhile Section 246A)] ……………………………………………………………………855
21.4-c Form of appeal and limitation. [Section 358 and Rules 167 (erstwhile
Section 249 and Rule 45)]……………………………………………………………………856
21.4-d Procedure in hearing appeal [Section 359 (erstwhile Section 250)]……………858
21.4-e Powers of the Joint Commissioner (Appeals) or the Commissioner
(Appeals) [Section 360 (erstwhile Section 251)] …………………………………….859
21.4-f Stay of disputed demand [Section 411(12) (erstwhile Section 220(6))]………860
21.5 Appeals to the Appellate Tribunal [Section 362 (erstwhile Section 253(1) and
(2))]…………………………………………………………………………………………………………….862
21.6 Orders of Appellate Tribunal [Section 363 (erstwhile Section 254)]……………………..864
21.6-a Amendment of assessment on appeal [Section 371 (erstwhile Section
267)]………………………………………………………………………………………………..866
21.7 Remedy against the order of Appellate Tribunal………………………………………………..866
21.7-a Appeal to High Court. [Section 365(1) (erstwhile Section 260A(1))] …………866
21.8 Appeal to the Supreme Court [Section 367 (erstwhile Section 261)] …………………….866
21.9 Filing of appeal by income-tax authority. [Section 373 (erstwhile Section
268A)]…………………………………………………………………………………………………………867
B.—Revision by the Principal Chief Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner Chapter XVIII-C
21.10 Revision of orders prejudicial to revenue. [Section 377 (erstwhile Section
263)] …………………………………………………………………………………………………………..872
21.11 Revision of other orders. [Section 378 (erstwhile Section 264)] …………………………..874
Chapter 22: Miscellaneous Provisions……………………………………………………………………..877
22.1 Mode of taking or accepting certain loans, deposits and specified sum [Section
185 (erstwhile Section 269SS)] ……………………………………………………………………….877
22.1-a Penalty for failure to comply with provisions of section 185. [Section
450 (erstwhile Section 271D)]……………………………………………………………..878
22.2 Mode of undertaking transactions. [Section 186 (erstwhile Section 269ST)] ………….878
22.2-a Penalty for failure to comply with provisions of section 186. [Section
451 (erstwhile Section 271DA)]……………………………………………………………879
22.3 Acceptance of payment through prescribed electronic modes. [Section 187
(erstwhile Section 269SU)] …………………………………………………………………………….879
22.3-a Penalty for failure to comply with provisions of section 187. [Section
452 (erstwhile Section 271DB)]……………………………………………………………880

22.4 Mode of repayment of certain loans or deposits or specified advances.
[Section 188 (erstwhile Section 269T)]…………………………………………………………….880

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22.4-a Penalty for failure to comply with provisions of section 188. [Section
453 (erstwhile Section 271E)]………………………………………………………………881
22.5 Creation of a charge or parting with the possession of any asset to be void in
certain cases [Section 499(1)]…………………………………………………………………………881
22.6 Provisional attachment to protect revenue in certain cases [Section 500
(erstwhile Section 281B)]……………………………………………………………………………….882
22.7 Service of notice, generally. [Section 501 (erstwhile Section 282)]………………………886
22.8 Service of notice when family is disrupted or firm etc., is dissolved. [Section
503 (erstwhile Section 283)] …………………………………………………………………………..887
22.9 Service of notice in case of discontinued business. [Section 504 (erstwhile
Section 284)]………………………………………………………………………………………………..887
22.10 Authentication of notices and other documents [Section 502 (erstwhile Section
282A)]…………………………………………………………………………………………………………888
22.11 Circumstances in which Return of income, assessment, approvals, etc., not to
be invalid. [Section 522 (erstwhile Section 292B)] …………………………………………….889
22.12 Obligation to furnish statement of financial transaction or reportable account.
[Section 508 (erstwhile Section 285BA)] ………………………………………………………….889
22.13 Annual information statement [Section 510 (erstwhile Section 285BB)]……………….901
22.14 Power of Central Government or Board to condone delays in obtaining
approval. [Section 528 (erstwhile Section 293B)]………………………………………………902
22.15 Power to withdraw approval [Section 529 (erstwhile Section 293C)]……………………902

DIVISION 3:
TABLES

Table 1 As per New Regime………………………………………………………………………………….903
Tax Deduction at source from monthly taxable salary during the TAX year
2026-27 ………………………………………………………………………………………………….903
Table 1A Tax Deduction at source from monthly taxable salary during the TAX year
2026-27 if the individual has opted FOR old regime ……………………………………..907
Table 2A as per New regime (View Important Note)…………………………………………………..912
Income Tax and Advance Tax Payable for T.Y. 2026-27 ……………………………………912
Applicable for †Individual, HUF, AOP or BOI & AJP……………………………………….912
(i.e. the assessee who has not opted for the old regime and thus by default has
to pay tax as per section 202)………………………………………………………………………….912
Taxable Income Between ₹4,00,000 And ₹4,59,000…………………………………………..912
Taxable income between ₹4,61,000 and ₹5,79,000…………………………………………….913
Taxable income between ₹5,82,500 and ₹8,00,000…………………………………………….914
Taxable income between ₹8,06,600 and ₹12,00,000…………………………………………..915
Taxable income between ₹12,06,600 and ₹16,00,000…………………………………………916
Taxable income between ₹16,06,600 and ₹20,00,000…………………………………………917
Taxable income between ₹20,06,600 and ₹24,00,000…………………………………………918
Taxable income between ₹24,08,000 and ₹32,98,000…………………………………………919
Table 2B as per old regime (View Important Note) …………………………………………………….920
Taxable income between ₹2,50,000 and ₹2,79,000…………………………………………….920
Taxable income between ₹2,79,000 and ₹3,68,000…………………………………………….921
Taxable income between ₹3,68,000 and ₹5,00,000…………………………………………….922
Taxable income between ₹5,00,010 and ₹6,20,000…………………………………………….923
Taxable income between ₹6,20,000 and ₹7,50,000…………………………………………….924
Taxable income between ₹7,50,010 and ₹10,00,000…………………………………………..925

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Taxable income between ₹10,00,010 and ₹12,50,000…………………………………………926
Taxable income between ₹12,50,010 and ₹15,00,000…………………………………………927
Taxable income between ₹15,00,010 and ₹27,50,000…………………………………………928
Table 3 as per old regime ………………………………………………………………………………………..929
Taxable Income Between ₹3,00,000 And ₹5,00,000…………………………………………..929
Taxable income between ₹5,00,010 and ₹10,00,000…………………………………………..930
Taxable income between ₹10,00,010 and ₹27,50,000…………………………………………931
Table 4 as per old regime ………………………………………………………………………………………..932
Taxable income between ₹5,00,000 and ₹10,00,000…………………………………………..932
Taxable income between ₹10,00,010 and ₹27,50,000…………………………………………933
Table 5A as per normal provisions (view important notes)…………………………………………..936
Taxable income between ₹10,000 and ₹50,00,000……………………………………………..936
Table 5B as per provisions u/s 200 (view important notes)
Taxable income between ₹10,000 and ₹50,00,000 ………………………………………..937
Table 5A as per normal provisions (view important notes)
Taxable income between ₹50,00,000 and ₹1,00,00,000 …………………………………938
Table 5B as per provisions u/s 200
Taxable income between ₹50,00,000 and ₹1,00,00,000 …………………………………939
Table 5A as per normal provisions
Taxable income between ₹1,00,00,010 and ₹1,02,38,910……………………………….940
Table 5B as per provisions u/s 200
Taxable income between ₹1,00,00,010 and ₹1,02,38,910……………………………….941
Table 5A as per normal provisions
Taxable income between ₹1,02,38,910 and ₹1,94,00,000……………………………….942
Table 5B as per provisions u/s 200
Taxable income between ₹1,02,38,910 and ₹1,94,00,000……………………………….943
Table 6A as per normal provisions
Taxable income between ₹10,000 and ₹50,00,000 ………………………………………..944
Taxable income between ₹50,00,000 and ₹1,00,00,000 …………………………………945
Taxable income between ₹1,00,00,010 and ₹1,03,09,280……………………………….946
Taxable income between ₹1,03,09,290 and ₹1,94,00,000……………………………….947
Table 6B Taxable income between ₹10,000 and ₹50,00,000 ………………………………………..950
Table 6B Taxable income between ₹50,00,000 and ₹1,00,00,000 …………………………………951
Table 6B Taxable income between ₹1,00,00,010 and ₹1,03,09,280……………………………….952
Table 6B Taxable income between ₹1,03,09,290 and ₹1,94,00,000……………………………….953
Table 7A As per old regime
Taxable income between ₹10 and ₹30,000 …………………………………………………..954
Table 7B As per provision u/s 203
Taxable income between ₹10 and ₹30,000 …………………………………………………..955
Table 7A Taxable income between ₹30,000 and ₹4,80,000 ………………………………………….956
Table 7B as per provision u/s 203
Taxable income between ₹30,000 and ₹4,80,000 ………………………………………….957