Systematic Approach to Taxation – Containing Income Tax & GST

Chapter 1 Introduction ………………………………………………………………………………………………………………………………..3

[Sections 1 to 4]

1.1 Income Tax Law……………………………………………………………………………………………………………………………………………3
1.2 Scheme of Taxation……………………………………………………………………………………………………………………………………….5
1.3 Important Concepts ……………………………………………………………………………………………………………………………………….6
Theoretical Questions…………………………………………………………………………………………………………………………………..25
Multiple Choice Questions……………………………………………………………………………………………………………………………25
Chapter 2 Scope of Total Income & Residential Status ………………………………………………………………………………..32

[Sections 5 to 9B]

2.1 Definition of Total Income [Section 2(45)]……………………………………………………………………………………………………..32
2.2 Scope of Total Income/Incidence of tax [Section 5]…………………………………………………………………………………………32
2.3 Need to determine Residential Status? ……………………………………………………………………………………………………………34
2.4 Basic rules for determining residential status of an assessee………………………………………………………………………………34
2.5 Rules for determining the residential status of an individual [Sections 6(1) & 6(1A)] …………………………………………..34
2.6 Residential Status of Hindu Undivided Family (HUF) [Section 6(2)]…………………………………………………………………43
2.7 Residential Status of Firm, Association of Persons (AOP), Body of Individuals (BOI) and of other persons (except
companies) [Sections 6(2) and 6(4)]………………………………………………………………………………………………………………44
2.8 Residential Status of a Company [Section 6(3)] ………………………………………………………………………………………………44
2.9 Incomes received or deemed to be received in India [Section 7]………………………………………………………………………..45
2.10 Incomes which accrue or arise in India or are deemed to accrue or arise in India [Section 9]…………………………………45
2.11 Fund management activities not to constitute business connection in India [Section 9A] ………………………………………48
2.12 Income on receipt of capital asset or stock in trade by specific person from specified entity. [Section 9B]………………48
2.13 The provisions regarding incidence of tax above may be summarised in the following table: ………………………………..49
Theoretical Questions…………………………………………………………………………………………………………………………………..52
Multiple Choice Questions……………………………………………………………………………………………………………………………52
Chapter 3 Incomes which do not form part of Total Income…………………………………………………………………………56

[Sections 10, 10AA and 11 to 13A]

3.1 Agricultural Income [Section 10(1)]………………………………………………………………………………………………………………58
3.2 Sum received by a Member from HUF [Section 10(2)]…………………………………………………………………………………….58
3.3 Share of Profit of a Partner from a Firm [Section 10(2A)]…………………………………………………………………………………58
3.4 Interest on Non-resident (External) Account [Section 10(4)] …………………………………………………………………………….58
3.5 Travel concession or assistance received by an individual from his employer [Section 10(5)]……………………………….58
3.6 Remuneration to persons who are not citizens of India [Section 10(6)]……………………………………………………………….58
3.7 Allowances or perquisites outside India [Section 10(7)]……………………………………………………………………………………58
3.8 Death-cum-retirement gratuity received by an employee [Section 10(10)] ………………………………………………………….59
3.9 Payment in commutation of pension received by the employees [Section 10(10A)] ……………………………………………..59
3.10 Leave Encashment [Section 10(10AA)]…………………………………………………………………………………………………………..59
3.11 Compensation on retrenchment [Section 10(10B)]…………………………………………………………………………………………..59
3.12 Payments under Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 [Section 10(10BB)]…………………………59
3.13 Exemption for compensation received or receivable on account of any disaster [Section 10(10BC)]………………………59

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3.14 Amount received on voluntary retirement [Section 10(10C)]…………………………………………………………………………….59
3.15 Tax on non-monetary perquisites paid by employer [Section 10(10CC)]…………………………………………………………….59
3.16 Amount received under a life insurance policy [Section 10(10D)]……………………………………………………………………..59
3.17 Provident Fund [Section 10(11)]……………………………………………………………………………………………………………………60
3.18 Interest and withdrawals from Sukanya Samriddhi Account [Section 10(11A)]……………………………………………………60
3.19 Payments from Recognised Provident Fund [Section 10(12)]……………………………………………………………………………60
3.20 Amount payable at the time of closure or opting out of National Pension Scheme to be exempt to the extent of 60% of
the total amount payable [Section 10(12A)]…………………………………………………………………………………………………….60
3.21 Tax-exemption to partial withdrawal from National Pension System (NPS) by an employee [Section 10(12B)]………61
3.22 Tax-exemption to partial withdrawal from National Pension System (NPS) by parent or guardian of a minor
[Section 10(12BA)]………………………………………………………………………………………………………………………………………61
3.23 Any payment from an approved Superannuation Fund [Section 10(13)]……………………………………………………………..61
3.24 House rent allowance [Section 10(13A)]…………………………………………………………………………………………………………61
3.25 Notified special allowance [Section 10(14)]……………………………………………………………………………………………………61
3.26 Interest, premium or bonus on specified investments [Section 10(15)]……………………………………………………………….61
3.27 Scholarships granted to meet the cost of education [Section 10(16)]…………………………………………………………………..61
3.28 Daily and constituency allowance, etc., received by MPs and MLAs [Section 10(17)]………………………………………….61
3.29 Award or Reward [Section 10(17A)]………………………………………………………………………………………………………………62
3.30 Pension received by certain awardees/any member of their family [Section 10(18)]…………………………………………….62
3.31 Exemption of the family pension received by the family members of armed forces (including para-military forces)
personnel killed in action in certain circumstances [Section 10(19)]…………………………………………………………………..62
3.32 Annual value of one palace of the ex-ruler [Section 10(19A)]……………………………………………………………………………62
3.33 Income of a local authority [Section 10(20)]……………………………………………………………………………………………………62
3.34 Income of an approved research association [Section 10(21)]……………………………………………………………………………62
3.35 Income of certain funds of national importance [Section 10(23C)]…………………………………………………………………….62
3.36 Income of notified mutual funds [Section 10(23D)] …………………………………………………………………………………………63
3.37 Distributed income received by a unit holder from the business trust [Section 10(23FD)]…………………………………….63
3.38 Income of trade union [Section 10(24)] ………………………………………………………………………………………………………….63
3.39 Income of a member of Scheduled Tribe residing in certain specified areas [Section 10(26)]………………………………..63
3.40 Income of an individual being a Sikkimese [Section 10(26AAA)]………………………………………………………………………63
3.41 Income of minor clubbed in the hands of a parent [Section 10(32)]……………………………………………………………………64
3.42 Income arising to a shareholder on account of buy back of shares [Section 10(34A)]……………………………………………64
3.43 Income received from securitisation trust [Section 10(35A)]……………………………………………………………………………..64
3.44 Exemption of capital gains on compensation received on compulsory acquisition of agricultural land situated within
specified urban limits [Section 10(37)]…………………………………………………………………………………………………………..64
3.45 Exemption of specified income from international sporting event held in India [Section 10(39)] …………………………..64
3.46 Exemption of amount received by an individual as loan under reverse mortgage scheme [Section 10(43)]……………..64
3.47 Exemption of income of New Pension Scheme Trust [Section 10(44)]……………………………………………………………….64
3.48 Specified income arising to a notified body/authority/board/trust/commission [Section 10(46)]…………………………….64
3.49 Exemption in respect of income received by certain foreign companies [Section 10(48)]……………………………………..65
3.50 Exemption in respect of income a foreign company on account of storage of crude oil in a facility in India and sale of
crude oil therefrom [Section 10(48A) & 10(48B)] ……………………………………………………………………………………………65
3.51 Exemption in respect of certain income of Indian Strategic Petroleum Reserves Limited [Section 10(48C)]……………65
3.52 Income of a notified institution established for financing infrastructure and development to be exempt [Section
10(48D)]…………………………………………………………………………………………………………………………………………………….65
3.53 Income of a Developmental Financing Institution to be exempt [Section 10(48E)]………………………………………………65
3.54 Deduction allowed to newly established Units in Special Economic Zones …………………………………………………………66
3.55 Exemption under sections 11 to 13…………………………………………………………………………………………………………………67
3.56 Which income will be exempt under section 11……………………………………………………………………………………………….68
3.57 Accumulation of income in excess of 15% of the income earned [Section 11(2)]…………………………………………………71
3.58 Certain points for consideration …………………………………………………………………………………………………………………….72

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3.59 Treatment of business income of a trust [Section 11(4A)]…………………………………………………………………………………72
3.60 Registration of Trust [Section 12A]………………………………………………………………………………………………………………..72
3.61 Sections 11 and 12 not to apply in certain cases [Section 13]…………………………………………………………………………….72
3.62 Incomes which are exempt [Section 13A]……………………………………………………………………………………………………….74
3.63 Income of an Electoral Trust shall be exempt [Section 13B]……………………………………………………………………………..74
Theoretical Questions…………………………………………………………………………………………………………………………………..74
Multiple Choice Questions……………………………………………………………………………………………………………………………74
Chapter 4 Income under the Head “Salaries” ……………………………………………………………………………………………..81

[Sections 15 to 17]

4.1 Computation of Income under the head Income from “Salaries” ………………………………………………………………………..82
4.2 Basis of Charge [Section 15]…………………………………………………………………………………………………………………………84
4.3 Meaning of Salary ……………………………………………………………………………………………………………………………………….86
4.4 Wages………………………………………………………………………………………………………………………………………………………..86
4.5 Annuity………………………………………………………………………………………………………………………………………………………86
4.6 Retirement benefits………………………………………………………………………………………………………………………………………87
4.7 Treatment of Bonus……………………………………………………………………………………………………………………………………..87
4.8 Salary in lieu of notice period………………………………………………………………………………………………………………………..87
4.9 Fee and Commission ……………………………………………………………………………………………………………………………………87
4.10 Overtime Payments ……………………………………………………………………………………………………………………………………..87
4.11 Meaning and Type of Allowances………………………………………………………………………………………………………………….87
4.12 House Rent Allowance [Section 10(13A) and Rule 2A]…………………………………………………………………………………….88
4.13 Prescribed allowances which are exempt to a certain extent [Section 10(14)]………………………………………………………91
4.14 Treatment of Entertainment Allowance…………………………………………………………………………………………………………..93
4.15 Allowances which are exempt in case of certain persons if such person opts to be taxed under the old regime…………95
4.16 Allowances which are fully taxable under both the regimes………………………………………………………………………………95
4.17 What are perquisites? …………………………………………………………………………………………………………………………………..96
4.18 Definition of ‘Perquisite’ as per section 17(2)…………………………………………………………………………………………………..97
4.19 Perquisites which are taxable in the hands of all categories of employees……………………………………………………………99
4.20 Perquisites which are taxable only in the case of specified employees………………………………………………………………..99
4.21 Rent free accommodation or accommodation provided at concessional rate ………………………………………………………101
4.22 Valuation of monetary obligation of the employee discharged by the employer …………………………………………………108
4.23 Valuation of Life Insurance premium/deferred annuity premium paid/payable by the employer …………………………..108
4.24 Fringe benefits or amenities which shall be taxable perquisite in the hands of all employees……………………………….108
4.25 Valuation of motor car/other vehicles [Rule 3(2)] ………………………………………………………………………………………….115
4.26 Provision by the employer of services of a sweeper, a gardener, a watchman or personal attendant [Rule 3(3)]……..118
4.27 Value of benefit to the employee resulting from the supply of gas, electric energy or water for household
consumption [Rule 3(4)] …………………………………………………………………………………………………………………………….119
4.28 Valuation in respect of free or concessional educational facilities to any member of employees’ household [Rule 3(5)]
………………………………………………………………………………………………………………………………………………………………..119
4.29 Free or concessional journey given to the transport employees and their family members [Rule 3(6)] ………………….119
4.30 Value of any specified security or sweat equity shares ……………………………………………………………………………………120
4.31 Contribution made by the employer in a recognised provident fund, in the scheme referred to in section 80CCD(1);
and in an approved superannuation fund exceeding ₹7,50,000 [Section 17(2)(vii)]…………………………………………….121
4.32 Annual Accretion to the balance at the credit of the fund or scheme referred to in section 17(2)(vii)
[Section 17(2)(viia)]…………………………………………………………………………………………………………………………………..121
4.33 Annual accretion referred to in the sub-clause (viia) of section 17(2) of the Act. [Rule 3B]…………………………………121
4.34 Contribution made by the Central Government in the previous year, to the Agniveer Corpus Fund account of an
individual enrolled in the Agnipath Scheme referred to in section 80CCH. ……………………………………………………….123
4.35 Tax-free Perquisites……………………………………………………………………………………………………………………………………124
4.36 Treatment of medical facilities [Proviso to section 17(2)]……………………………………………………………………………….125
4.37 Treatment of Leave Travel Concession or Assistance (LTC/LTA) [Section 10(5)] …………………………………………….127

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4.38 Profits in lieu of salary [Section 17(3)]…………………………………………………………………………………………………………128
4.39 Gratuity…………………………………………………………………………………………………………………………………………………….129
4.40 Treatment of Pension [Section 17(1)(ii)] ………………………………………………………………………………………………………135
4.41 Treatment of Leave Salary ………………………………………………………………………………………………………………………….137
4.42 Retrenchment Compensation [Section 10(10B)]…………………………………………………………………………………………….139
4.43 Compensation received on Voluntary Retirement [Section 10(10C)]………………………………………………………………..140
4.44 Contribution by the employer to recognised provident fund …………………………………………………………………………….141
4.45 Interest credited to recognised provident fund ……………………………………………………………………………………………….141
4.46 Amount comprised in the transferred balance ………………………………………………………………………………………………..141
4.47 Standard deduction [Section 16(ia)]……………………………………………………………………………………………………………..141
4.48 Entertainment Allowance [Section 16(ii)]……………………………………………………………………………………………………..141
4.49 Tax on Employment (Professional Tax) [Section 16(iii)]………………………………………………………………………………..141
4.50 Treatment of Provident Fund……………………………………………………………………………………………………………………….143
4.51 Relief when salary is paid in arrears or in advance, etc. [Section 89/Rule 21A] ………………………………………………….147
4.52 Deduction from gross total income……………………………………………………………………………………………………………….149
4.53 Summarised provisions ………………………………………………………………………………………………………………………………153
Theoretical Questions…………………………………………………………………………………………………………………………………170
Multiple Choice Questions………………………………………………………………………………………………………………………….170
Chapter 5 Income under the Head “Income from House Property”……………………………………………………………184

[Sections 22 to 27]

5.1 Chargeability [Section 22]…………………………………………………………………………………………………………………………..185
5.2 Basis of Charge………………………………………………………………………………………………………………………………………….185
5.3 Essential conditions for taxing income under this head……………………………………………………………………………………185
5.4 Cases of Composite Rent…………………………………………………………………………………………………………………………….186
5.5 When income from house property is not charged to tax …………………………………………………………………………………187
5.6 What is Annual Value?……………………………………………………………………………………………………………………………….187
5.7 Computation of annual value of a property [Section 23(1)]……………………………………………………………………………..187
5.8 Treatment of unrealised rent [Explanation to section 23(1)] ……………………………………………………………………………191
5.9 Deductions from income from house property [Section 24] …………………………………………………………………………….193
5.10 Computation of Income of a property which is self-occupied for residential purposes or which could not actually be
self occupied for any reason [Section 23(2), (3) & (4)] …………………………………………………………………………………..196
5.11 Computation of income of house property which is partly let and partly self occupied………………………………………..200
5.12 No notional income for house property held as stock-in-trade for a period upto two years [Section 23(5)]…………….201
5.13 Interest when not deductible from “Income from House Property” [Section 25]…………………………………………………201
5.14 Special provision for arrears of rent and unrealised rent received subsequently [Section 25A]……………………………..201
5.15 Property owned by Co-owners [Section 26]…………………………………………………………………………………………………..201
5.16 Can Annual Value (Net Annual Value) be negative?………………………………………………………………………………………202
5.17 Can there be any loss under the head income from house property?………………………………………………………………….202
Theoretical Questions…………………………………………………………………………………………………………………………………211
Multiple Choice Questions………………………………………………………………………………………………………………………….212
Chapter 6 Income under the Head “Profits and Gains of Business or Profession”……………………………………….216

[Sections 28 to 44D]

6.1 Business or Profession………………………………………………………………………………………………………………………………..219
6.2 Chargeability/scope of income under the head ‘Profits and gains of business or profession’ [Section 28] ………………219
6.3 Rationalisation of provision relating to conversion of inventory into Capital Asset [Section 28(via)]……………………221
6.4 Profits and gains of business ……………………………………………………………………………………………………………………….222
6.5 Business must be carried on during the previous year……………………………………………………………………………………..222
6.6 Business loss……………………………………………………………………………………………………………………………………………..222
6.7 Legal business v. illegal business…………………………………………………………………………………………………………………223
6.8 Cases where income from certain business is not taxable under the head ‘Profits and gains of business’ ………………..223

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6.9 Income from business or profession — how to be computed……………………………………………………………………………224
6.10 General principles for allowability of deductions……………………………………………………………………………………………224
6.11 Losses and expenditure……………………………………………………………………………………………………………………………….224
6.12 Method of Accounting [Section 145]……………………………………………………………………………………………………………224
6.13 Expenses which are expressly allowed as a deduction [Sections 30 to 37]…………………………………………………………227
6.14 Rent, rates, taxes, repairs and insurance for buildings [Section 30]…………………………………………………………………..227
6.15 Repairs and insurance of machinery, plant and furniture [Section 31]……………………………………………………………….228
6.16 Depreciation [Section 32]……………………………………………………………………………………………………………………………228
6.17 Special provisions for depreciation in certain cases ………………………………………………………………………………………..243
6.18 Carry forward and set off of unabsorbed depreciation [Section 32(2)]………………………………………………………………248
6.19 Tea Development Account, Coffee Development Account and Rubber Development Account [Section 33AB]……..249
6.20 Site Restoration Fund [Section 33ABA]………………………………………………………………………………………………………..252
6.21 Expenditure on Scientific Research [Section 35]……………………………………………………………………………………………253
6.22 Expenditure for obtaining licence to operate telecommunication services and amortisation of spectrum fee for
purchase of spectrum………………………………………………………………………………………………………………………………….257
6.23 Deduction in respect of expenditure on specified business [Section 35AD]……………………………………………………….261
6.24 Expenditure by way of payments to associations and institutions for carrying out Rural Development Programmes
[Section 35CCA] ……………………………………………………………………………………………………………………………………….263
6.25 Deduction for expenditure incurred on agricultural extension project [Section 35CCC]………………………………………263
6.26 Deduction for expenditure incurred by a company on skill development project [Section 35CCD] ………………………264
6.27 Amortisation of certain preliminary expenses [Section 35D and Rule 6AB] ………………………………………………………264
6.28 Amortisation of expenditure in case of amalgamation or demerger [Section 35DD] …………………………………………..266
6.29 Amortisation of expenditure incurred under voluntary retirement scheme [Section 35DDA] ……………………………….266
6.30 Deduction for expenditure on prospecting, etc., for certain minerals [Section 35E and Rule 6AB]………………………..266
6.31 Other deductions [Section 36]……………………………………………………………………………………………………………………..267
6.32 General Deductions [Section 37(1)]……………………………………………………………………………………………………………..271
6.33 Advertisement to political parties [Section 37(2B)]………………………………………………………………………………………..273
6.34 Building, plant and machinery or furniture not exclusively used for the purpose of business or profession [Section 38]
………………………………………………………………………………………………………………………………………………………………..273
6.35 Amounts not deductible [Section 40]……………………………………………………………………………………………………………273
6.36 Expenses or payments not deductible in certain circumstances: [Section 40A]…………………………………………………..276
6.37 Disallowance in respect of contributions to non-statutory funds [Section 40A(9)]………………………………………………279
6.38 Marked to market loss or other expected loss not to be allowed except provided in section 36(1)(xviii) [Section
40A(13)] …………………………………………………………………………………………………………………………………………………..279
6.39 Certain deductions to be allowed only on actual [Section 43B]………………………………………………………………………..279
6.40 Special provision for full value of consideration for transfer of assets other than capital assets in certain cases [Section
43CA]………………………………………………………………………………………………………………………………………………………282
6.41 Computation of income from construction and service contracts [Section 43CB]……………………………………………….283
6.42 How to compute the income from business or profession………………………………………………………………………………..283
6.43 Undisclosed income and investments taxed as deemed income ………………………………………………………………………..284
6.44 Deemed profits chargeable to tax …………………………………………………………………………………………………………………285
6.45 Maintenance of accounts by certain persons carrying on profession or business [Section 44AA and
Rule 6F]……………………………………………………………………………………………………………………………………………………287
6.46 Compulsory audit of accounts [Section 44AB]……………………………………………………………………………………………….289
6.47 Special provisions for computing profits and gains of any business (excluding the business covered under section
44AE) [Section 44AD]……………………………………………………………………………………………………………………………….291
6.48 Special provision for computing profits and gains of profession on presumptive basis [Section 44ADA] ………………293
6.49 Special provisions for computing profits and gains of business of plying, hiring or leasing goods carriages [Section
44AE] ………………………………………………………………………………………………………………………………………………………295
6.50 Special provisions for computing profits and gains [Sections 44B, 44BB, 44BBA, 44BBB, 44BBC and 44BBD]…….297
Theoretical Questions…………………………………………………………………………………………………………………………………320
Multiple Choice Questions………………………………………………………………………………………………………………………….321

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Chapter 7 Income under the Head “Capital Gains” …………………………………………………………………………………..338

[Sections 45 to 55A]

7.1 Basis of Charge [Section 45(1)]…………………………………………………………………………………………………………………..340
7.2 There must be a capital asset ……………………………………………………………………………………………………………………….341
7.3 Capital asset must have been transferred……………………………………………………………………………………………………….345
7.4 Capital gain should arise in the previous year in which transfer took place………………………………………………………..349
7.5 Computation of capital gains [Section 48]…………………………………………………………………………………………………….349
7.6 Full value of consideration ………………………………………………………………………………………………………………………….351
7.7 Expenses on transfer…………………………………………………………………………………………………………………………………..352
7.8 Cost of acquisition [Section 55(2)]……………………………………………………………………………………………………………….352
7.9 Treatment of advance money received if forfeited [Section 56(2)(ix)]………………………………………………………………361
7.10 Cost of improvement [Section 55(1)(b)]……………………………………………………………………………………………………….361
7.11 Computation of capital gain in special cases………………………………………………………………………………………………….361
7.12 Transfer of securities by depository [Section 45(2A)]……………………………………………………………………………………..386
7.13 Withdrawal of exemption in certain cases [Section 47A]…………………………………………………………………………………387
7.14 Capital gain in the case of transfer of shares/debentures by non-residents [Proviso 1 to section 48 and Rule 115A] .388
7.15 Types of exemption of capital gains……………………………………………………………………………………………………………..390
7.16 Profit on transfer of house property used for residence [Section 54]…………………………………………………………………390
7.17 Capital Gain on transfer of land used for agricultural purposes [Section 54B]……………………………………………………393
7.18 Capital Gain on compulsory acquisition of land and buildings forming part of an industrial undertaking
[Section 54D]……………………………………………………………………………………………………………………………………………395
7.19 Capital gain on transfer of long-term capital assets being land or building or both not to be charged on investment in
certain bonds [Section 54EC]………………………………………………………………………………………………………………………397
7.20 Capital Gain on transfer of asset, other than a residential house [Section 54F]…………………………………………………..398
7.21 Capital gain on transfer of assets in cases of shifting of industrial undertakings from urban areas [Section 54G]……402
7.22 Exemption of capital gain on transfer of assets of shifting of industrial undertaking from urban area to any Special
Economic Zone [Section 54GA]…………………………………………………………………………………………………………………..404
7.23 Exemption of long-term capital gains tax on transfer of residential property if invested in a new manufacturing SME
company [Section 54GB] ……………………………………………………………………………………………………………………………404
7.24 Extension of time limit for acquiring new asset or depositing or investing amount of capital gain, in case of
compulsory acquisition [Section 54H]………………………………………………………………………………………………………….404
7.25 Tax on short-term capital gains in certain cases [Section 111A]……………………………………………………………………….405
7.26 Computation of tax on long-term capital gains [Section 112]…………………………………………………………………………..406
7.27 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) ………………………………………………………………………………………………………………………….407
7.28 Indexed cost of improvement [Explanation (iv) to Section 48]…………………………………………………………………………409
7.29 Tax on long-term capital gains in certain cases [Section 112A]………………………………………………………………………..420
7.30 Summarised Provisions………………………………………………………………………………………………………………………………426
Theoretical Questions…………………………………………………………………………………………………………………………………434
Multiple Choice Questions………………………………………………………………………………………………………………………….434
Chapter 8 Income under the Head “Income from Other Sources” ……………………………………………………………..447

[Sections 56 to 59]

8.1 Chargeability …………………………………………………………………………………………………………………………………………….448
8.2 Method of Accounting………………………………………………………………………………………………………………………………..448
8.3 Specific incomes included under ‘Income from Other Sources’ [Section 56(2)]………………………………………………….448
8.4 Other incomes which are normally included under the head ‘Income from Other Sources’ …………………………………..449
8.5 Taxability of Dividend [Section 56(2)(i)] ……………………………………………………………………………………………………..449
8.6 Winnings from Lotteries, Crossword Puzzles, Horse Races and Card Games [Section 56(2)(ib)]…………………………452
8.7 Special rate of income-tax in case of winnings from online games [Section 115BBJ] …………………………………………453
8.8 Interest on Securities [Section 56(2)(id)]………………………………………………………………………………………………………453
8.9 Income from letting out of machinery, plant or furniture [Section 56(2)(ii)]………………………………………………………454

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8.10 Income of any person to include not only gift of money from any person(s) but also the gift of property (whether
movable or immovable) or property acquired for inadequate consideration [Section 56(2)(x)] …………………………….454
8.11 Share premium in excess of the fair market value to be treated as income in the hands of closely held company
[Section 56(2)(viib)]…………………………………………………………………………………………………………………………………..457
8.12 Interest on compensation or enhanced compensation [Section 56(2)(viii)]…………………………………………………………457
8.13 Forfeiture of advance received for transfer of a capital asset to be taxed under the head “income from other sources”
[Section 56(2)(ix)]……………………………………………………………………………………………………………………………………..458
8.14 Any sum received, including the amount allocated by way of bonus, at any time during a previous year, under a life
insurance policy, which is not exempt under Section 10(10D) [Section 56(2)(xiii)] ……………………………………………458
8.15 Family pension payments received by the legal heirs of a deceased employee……………………………………………………458
8.16 Contribution of the employee towards his welfare fund, deducted/received by the employer [Section 56(2)(ic)]……459
8.17 Any other income taxable under this head……………………………………………………………………………………………………..459
8.18 Amounts not deductible in computing the income under the head ‘Income from Other Sources’ [Section 58] ………..459
8.19 Deemed income chargeable to tax [Section 59]……………………………………………………………………………………………..460
Theoretical Questions…………………………………………………………………………………………………………………………………462
Multiple Choice Questions………………………………………………………………………………………………………………………….462
Chapter 9 Income of Other Persons Included in Assessee’s Total Income (Clubbing of Income)…………………..467

[Sections 60 to 65]

9.1 Transfer of income where there is no transfer of assets [Section 60]…………………………………………………………………468
9.2 Revocable transfer of assets [Section 61]………………………………………………………………………………………………………468
9.3 Income of an individual to include income of spouse, minor child, etc. [Section 64]…………………………………………..469
9.4 Clubbing of income of a minor child [Section 64(1A)]……………………………………………………………………………………472
9.5 Income from self-acquired property converted to joint family property [Section 64(2)]………………………………………473
9.6 Under which head of income will the clubbed income be assessed …………………………………………………………………..473
9.7 Liability of person i.e. the transferee in respect of income included in the income of another person i.e. transferor
[Section 65]………………………………………………………………………………………………………………………………………………474
Theoretical Questions…………………………………………………………………………………………………………………………………475
Multiple Choice Questions………………………………………………………………………………………………………………………….476
Chapter 10 Set off or Carry Forward and Set off of Losses ………………………………………………………………………….479

[Sections 70 to 80]

10.1 Set off of loss from one source against income from another source under the same head of income [Section 70]….480
10.2 Set off of loss from one head against income from another head (Inter-head adjustment) [Section 71]………………….481
10.3 Carry forward and set off of losses……………………………………………………………………………………………………………….483
10.4 Carry forward and set off of loss from house property [Section 71B]………………………………………………………………..484
10.5 Carry forward and set off of business losses [Section 72]………………………………………………………………………………..484
10.6 Set off and Carry forward and Set off of Speculation Loss [Section 73]……………………………………………………………486
10.7 Set off and carry forward and set off of loss of a specified business referred to in section 35AD [Section 73A]……..486
10.8 Carry forward of losses under the head ‘capital gains’ [Section 74]…………………………………………………………………..486
10.9 Set off and carry forward and set off of loss from activity of owning and maintaining race horses [Section 74A]…..487
10.10 Brought forward losses must be set off in the immediately succeeding year/years………………………………………………487
10.11 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 115BAC(1A)…………………………………………………………………………………………………………..487
10.12 Carry forward and set off of the accumulated business losses and unabsorbed depreciation allowance in amalgamation
or demerger, etc. [Section 72A]……………………………………………………………………………………………………………………488
10.13 Losses of firms ………………………………………………………………………………………………………………………………………….489
10.14 Carry forward and set off of losses on succession of any person [Section 78(2)]………………………………………………..489
10.15 Carry forward and set off of losses in case of certain companies [Section 79]……………………………………………………489
10.16 Summarised provisions ………………………………………………………………………………………………………………………………491
Theoretical Questions…………………………………………………………………………………………………………………………………494
Multiple Choice Questions………………………………………………………………………………………………………………………….495

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Chapter 11 Deductions to be made in Computing Total Income …………………………………………………………………..499

[Sections 80A to 80U (Chapter VIA)]

11.1 Basic rules of deductions [Sections 80A/80AB/80AC]…………………………………………………………………………………….502
11.2 Deduction on account of certain payments are allowed from sections 80C to 80GGC.Deduction in respect of Life
Insurance Premium, deferred annuity, contributions to provident fund, subscription to certain equity shares or
debentures, etc. [Section 80C]……………………………………………………………………………………………………………………..503
11.3 Deduction in respect of contribution to certain pension funds [Section 80CCC]…………………………………………………508
11.4 Deduction in respect of contribution to pension scheme of Central Government by Central Government or any other
employer or to NPS Vatsalya Scheme by a Parent or Guardian of a minor [Section 80CCD] ………………………………509
11.5 Limit on deductions under sections 80C, 80CCC and 80CCD [Section 80CCE] ………………………………………………..511
11.6 Deduction in respect of contribution to Agnipath Scheme [Section 80CCH]……………………………………………………..511
11.7 Deduction in respect of Medical Insurance premia [Section 80D]…………………………………………………………………….511
11.8 Deduction in respect of maintenance including medical treatment of a dependant who is a person with disability
[Section 80DD] …………………………………………………………………………………………………………………………………………514
11.9 Deduction in respect of medical treatment, etc. [Section 80DDB]…………………………………………………………………….515
11.10 Deduction for interest paid on loan taken for pursuing higher education [Section 80E]……………………………………….516
11.11 Deduction in respect of interest on loan taken for residential house property [Section 80EE] ………………………………517
11.12 Deduction in respect of interest on loan taken for certain house property [Section 80EEA]………………………………….517
11.13 Deduction in respect of purchase of electric vehicle [Section 80EEB]………………………………………………………………518
11.14 Deduction in respect of donations to certain funds, charitable institutions, etc. [Section 80G]……………………………..518
11.15 Deductions in respect of rent paid [Section 80GG]…………………………………………………………………………………………523
11.16 Deduction in respect of certain donations for scientific research or rural development [Section 80GGA]………………526
11.17 Deduction in respect of contributions given by companies to political parties [Section 80GGB]…………………………..526
11.18 Deduction in respect of contribution given by any person to political parties [Section 80GGC]……………………………527
11.19 Deduction in respect of employment of new employees [Section 80JJAA]………………………………………………………..527
11.20 Deduction in respect of royalty income, etc., of authors of certain books other than text books [Section 80QQB] ….528
11.21 Deduction in respect of royalty on patents [Section 80RRB] ……………………………………………………………………………529
11.22 Deduction in respect of interest on deposits in savings accounts to the maximum extent of ₹10,000
[Section 80TTA]………………………………………………………………………………………………………………………………………..529
11.23 Deduction in respect of interest on deposits in case of senior citizens [Section 80TTB]……………………………………….530
11.24 Deduction in case of a person with disability [Section 80U] ……………………………………………………………………………530
Theoretical Questions…………………………………………………………………………………………………………………………………535
Multiple Choice Questions………………………………………………………………………………………………………………………….535
Chapter 12 Agricultural Income & its Tax Treatment ………………………………………………………………………………..548

[Sections 2(1A) and 10(1)]

12.1 Summarised definition of Agricultural Income [Section 2(1A)]……………………………………………………………………….548
12.2 What does agriculture include? ……………………………………………………………………………………………………………………550
12.3 Agricultural income……………………………………………………………………………………………………………………………………551
12.4 Non-agricultural income……………………………………………………………………………………………………………………………..551
12.5 Income which is partially agricultural and partially from business……………………………………………………………………551
12.6 Tax on non-agricultural income if the assessee earns agricultural income also …………………………………………………..552
Theoretical Questions…………………………………………………………………………………………………………………………………555
Multiple Choice Questions………………………………………………………………………………………………………………………….555
Chapter 13 Assessment of Individuals…………………………………………………………………………………………………………558
13.1 An individual is liable to pay tax in respect of the following incomes……………………………………………………………….558
13.2 Computation of total income and tax liability ………………………………………………………………………………………………..559
13.3 For the assessment year 2026-27, the following deductions are available to an individual under Chapter VIA provided
he opts to be taxed under old regime …………………………………………………………………………………………………………….560
13.4 Taxation of income of a member of Scheduled Tribe [Section 10(26)]……………………………………………………………..561
13.5 Taxation of income of Sikkimese Individual [Section 10(26AAA)]…………………………………………………………………..561

Contents xix
13.6 Tax on income of an Individual/HUF or AOP/BOI or Artificial juridical person [Section 115BAC(1A)]……………….561
13.7 Rates of income-tax under old and new regime ……………………………………………………………………………………………..564
13.8 Rebate of tax for resident individuals [Section 87A]……………………………………………………………………………………….566
13.9 Alternate Minimum Tax (AMT) on all persons other than companies [Section 115JC to 115JF Chapter XII-BA]….574
Theoretical Questions…………………………………………………………………………………………………………………………………592
Multiple Choice Questions………………………………………………………………………………………………………………………….592
Chapter 14 Return of Income ……………………………………………………………………………………………………………………..596

[Sections 139 to 140A]

14.1 Submission of return of income [Section 139(1)]…………………………………………………………………………………………..596
14.2 New Scheme to facilitate submission of returns through Tax Return Preparers [Section 139B]……………………………599
14.3 Mandatory to file return before due date if certain losses are to be carried forward [Section 139(3)]…………………….599
14.4 Provisions of section 139 to apply, if a return of income is furnished after the order of condonation of delay
[Section 139(9A)]………………………………………………………………………………………………………………………………………600
14.5 Belated return [Section 139(4)]……………………………………………………………………………………………………………………600
14.6 Return of income of charitable trust and institutions [Section 139(4A)]…………………………………………………………….600
14.7 Return of income of political party [Section 139(4B)]…………………………………………………………………………………….601
14.8 Return of income of certain associations and institutions [Section 139(4C)] ……………………………………………………..601
14.9 Certain university or college, etc. to file return of income/loss [Section 139(4D)]………………………………………………601
14.10 Business trusts will also be required to file return of income [Section 139(4E)]…………………………………………………601
14.11 Investment fund referred to in section 115UB mandatorily required to furnish return of income [Section 139(4F)]..602
14.12 Form and manner of furnishing return of income [Rule 12]…………………………………………………………………………….602
14.13 Preparation of return by authorised representative [Rule 12A] …………………………………………………………………………605
14.14 Revised return [Section 139(5)] …………………………………………………………………………………………………………………..605
14.15 Updated return [Section 139(8A) and Section 140B]………………………………………………………………………………………606
14.16 Defective return [Section 139(9)]…………………………………………………………………………………………………………………607
14.17 Power of Board to dispense with furnishing documents, etc. with the return [Section 139C]……………………………….608
14.18 Filing of return in electronic form [Section 139D]………………………………………………………………………………………….608
14.19 Permanent account number [Section 139A] …………………………………………………………………………………………………..608
14.20 Quoting of Aadhaar number [Section 139AA] ……………………………………………………………………………………………….612
14.21 Return by whom to be verified [Section 140] ………………………………………………………………………………………………..613
14.22 Self assessment and tax on updated return …………………………………………………………………………………………………….614
14.23 Processing of return [Section 143(1)]……………………………………………………………………………………………………………617
14.24 Assessment after hearing evidence/scrutiny assessment [Section 143(3)]………………………………………………………….618
14.25 New scheme for scrutiny assessment [Section 143(3A)/(3B)/(3C)]…………………………………………………………………..618
14.26 Best judgment assessment [Section 144] ………………………………………………………………………………………………………618
Theoretical Questions…………………………………………………………………………………………………………………………………619
Multiple Choice Questions………………………………………………………………………………………………………………………….619
Chapter 15 Deduction and Collection of Tax at Source ……………………………………………………………………………….627

[Sections 190 to 206AA]

15.1 Deduction at source and advance payment [Section 190]………………………………………………………………………………..628
15.2 Direct payment [Section 191]………………………………………………………………………………………………………………………628
15.3 Deduction of tax from salary [Section 192] …………………………………………………………………………………………………..629
15.4 Deduction of tax from accumulated balance of the recognized provident fund withdrawn by the employee [Section
192A]……………………………………………………………………………………………………………………………………………………….635
15.5 Deduction of Tax from Interest on Securities [Section 193]…………………………………………………………………………….636
15.6 Deduction of tax from dividends [Section 194] ……………………………………………………………………………………………..638
15.7 Interest other than interest on securities [Section 194A]………………………………………………………………………………….639
15.8 Winnings from lottery, crossword puzzle, card game, etc. [Section 194B]…………………………………………………………641
15.9 Winnings from online games [Section 194BA]………………………………………………………………………………………………642
15.10 Winnings from horse races [Section 194BB] …………………………………………………………………………………………………644

xx Contents
15.11 Payment to resident contractor [Section 194C]………………………………………………………………………………………………644
15.12 Insurance Commission [Section 194D]…………………………………………………………………………………………………………646
15.13 TDS from non-exempt payments made under life insurance policy [Section 194DA]………………………………………….647
15.15 Commission, etc. on sale of lottery tickets [Section 194G] ……………………………………………………………………………..648
15.16 Commission and Brokerage [Section 194H]………………………………………………………………………………………………….649
15.17 Rent [Section 194-I]…………………………………………………………………………………………………………………………………..650
15.18 Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land)
[Section 194-IA]………………………………………………………………………………………………………………………………………..651
15.19 TDS from payment of rent by certain Individuals or HUF [Section 194-IB]………………………………………………………652
15.20 TDS from payment under specified agreement referred to in section 45(5A) [Section 194-IC]…………………………….653
15.21 Fees for professional or technical services [Section 194J]……………………………………………………………………………….654
15.22 Income in respect of units [Section 194K] …………………………………………………………………………………………………….655
15.23 Payment of compensation on acquisition of certain immovable property [Section 194LA]…………………………………..656
15.24 Payment of certain sums by certain individuals or Hindu undivided family [Section 194M]………………………………..657
15.25 Payment of certain amounts in cash [Section 194N]……………………………………………………………………………………….658
15.26 TDS from Payment of Certain Sums by E-commerce Operator to E-commerce Participant
[Section 194-O]…………………………………………………………………………………………………………………………………………659
15.27 Deduction of tax in case of specified senior citizen. [Section 194P]…………………………………………………………………660
15.28 Deduction of tax at source on payment of certain sum for purchase of goods [Section 194Q]………………………………660
15.29 TDS on benefit or perquisite in respect of business or profession [Section 194R] ………………………………………………661
15.30 Where no tax is to be deducted at source [Second & third provisos to section 194R(1)] ……………………………………..662
15.31 TDS on Payment on Transfer of Virtual Digital Asset [Section 194S]………………………………………………………………662
15.32 Other sums [Section 195]……………………………………………………………………………………………………………………………663
15.33 Income payable ‘Net of Tax’ [Section 195A]………………………………………………………………………………………………….664
15.34 Interest or dividends or other sums payable to Government, Reserve Bank or certain corporations [Section 196]…..664
15.35 General provisions……………………………………………………………………………………………………………………………………..665
15.36 No deduction to be made in certain cases [Section 197A]………………………………………………………………………………..665
15.37 Lower deduction in certain cases for a limited period [Section 197B]……………………………………………………………….666
15.38 Tax deducted is income received [Section 198]……………………………………………………………………………………………..666
15.39 Credit for tax deducted [Section 199] …………………………………………………………………………………………………………..666
15.40 Tax deduction and collection account number [Section 203A and Rule 114A]……………………………………………………667
15.41 Mandatory Requirement to furnish permanent account number [Section 206AA]……………………………………………….667
15.42 Profit and Gains from the Business of trading in Alcoholic Liquor, Forest Produce, Scrap, etc. [Section 206C]…….668
15.43 Tax to be collected at source in case of Parking Lot, Toll Plaza or Mining and Quarrying [Section 206C(1C)] ……..670
15.44 TCS on remittance out of India under LRS and on overseas tour programme package [Section 206C(1G)]…………..670
15.45 Higher rate of TCS if PAN is not furnished by collectee [Section 206CC] ………………………………………………………..671
Theoretical Questions…………………………………………………………………………………………………………………………………672
Multiple Choice Questions………………………………………………………………………………………………………………………….672
Chapter 16 Advance Payment of Tax ………………………………………………………………………………………………………….679

[Sections 207-211, 217 & 219]

16.1 Liability for payment of Advance Tax [Section 207]………………………………………………………………………………………679
16.2 Senior citizen not required to pay advance tax [Section 207(2)]……………………………………………………………………….679
16.3 Conditions of Liability to pay Advance Tax [Section 208]………………………………………………………………………………680
16.4 Computation and Payment of Advance Tax where the calculation is made by the assessee himself
[Section 209(1)(a) & (d)]……………………………………………………………………………………………………………………………680
16.5 What constitutes Current Income?………………………………………………………………………………………………………………..680
16.6 Payment of advance tax………………………………………………………………………………………………………………………………680
16.7 Instalments of advance tax and due dates [Section 211]………………………………………………………………………………….681
16.8 Payment of advance tax in case of capital gains/casual income [Proviso to section 234C]…………………………………..684
16.9 Assessee Deemed to be in Default [Section 218]……………………………………………………………………………………………685

Contents xxi
16.10 Credit for Advance Tax [Section 219] ………………………………………………………………………………………………………….685
16.11 Interest payable if Advance Tax is not paid or paid less than 90% [Section 234B]……………………………………………..685
16.12 Interest for deferment of advance tax [Section 234C]……………………………………………………………………………………..685
Theoretical Questions…………………………………………………………………………………………………………………………………686
Multiple Choice Questions………………………………………………………………………………………………………………………….686
Chapter 17 Case Scenarios (Direct Tax)………………………………………………………………………………………………………688

Part II

Goods and Services Tax (GST)

Chapter 1 Basic Concepts of Indirect Taxes and Introduction of GST………………………………………………………..709
1.1 Constitutional Background [Pre-GST Regime]………………………………………………………………………………………………709
1.2 Constitution (101st Amendment) Act, 2016 (For introduction of GST Law) ……………………………………………………..710
1.3 Comparative constitutional provisions of pre-GST regime and GST regime in respect of indirect taxes………………..713
1.4 Revised Schedule VII after 101st Constitution Amendment…………………………………………………………………………….714
1.5 Need for GST ……………………………………………………………………………………………………………………………………………714
1.6 Taxes subsumed in GST……………………………………………………………………………………………………………………………..715
1.7 Taxes not subsumed into GST……………………………………………………………………………………………………………………..715
1.8 Benefits of GST…………………………………………………………………………………………………………………………………………715
1.9 Historical perspective …………………………………………………………………………………………………………………………………717
1.10 Salient Features of GST………………………………………………………………………………………………………………………………718
1.11 Acts and Rules passed for implementation of GST…………………………………………………………………………………………720
1.12 Provisions of Central Goods and Service Tax Act, 2017 are also applicable to IGST Act & UTGST Act………………720
Theoretical Questions…………………………………………………………………………………………………………………………………722
Multiple Choice Questions………………………………………………………………………………………………………………………….723
Chapter 2 Supply under GST……………………………………………………………………………………………………………………725
2.1 Meaning of the word “supply” [Section 7 of the CGST Act, 2017]……………………………………………………………………725
2.2 Activities or transactions which constitute a “supply” to be treated as either supply of goods or supply of services as
referred to in Schedule II [Section 7(1A)]……………………………………………………………………………………………………..733
2.3 Necessary elements that constitute supply under CGST/SGST Act…………………………………………………………………..737
2.4 Types of supply …………………………………………………………………………………………………………………………………………740
2.5 Activities which shall be treated neither as a supply of goods nor a supply of services [Section 7(2) CGST Act]……741
2.6 Power of the Government to specify the nature of certain transactions of supply [Section 7(3)]…………………………..743
Theoretical Questions…………………………………………………………………………………………………………………………………743
Multiple Choice Questions………………………………………………………………………………………………………………………….743
Practical Questions…………………………………………………………………………………………………………………………………….745
Chapter 3 Levy and Collection (Taxable Event)…………………………………………………………………………………………747
3.1 Levy and Collection under CGST Act, IGST Act and UTGST Act…………………………………………………………………..747
3.2 Tax payable on reverse charge basis [Section 9(3) of CGST Act, section 5(3) of IGST Act and section 7(3) of the
UTGST Act]……………………………………………………………………………………………………………………………………………..749
3.3 Tax payable on reverse charge basis if specified categories of supplies are made to a specified class of registered
persons [Section 9(4)] ………………………………………………………………………………………………………………………………..756
3.4 Kinds of supply on which tax is leviable under GST ………………………………………………………………………………………756
3.5 Levy of GST on Intra-State supply……………………………………………………………………………………………………………….757
3.6 Levy of GST on Inter-State supply……………………………………………………………………………………………………………….758
3.7 Zero Rated Supply [Section 16]…………………………………………………………………………………………………………………..759
Theoretical Questions…………………………………………………………………………………………………………………………………760
Multiple Choice Questions………………………………………………………………………………………………………………………….760
Chapter 4 Exemption from GST……………………………………………………………………………………………………………….764
4.1 Meaning of “exempt supply” [Section 2(47)]…………………………………………………………………………………………………764

xxii Contents
4.2 Power to grant exemption from tax [Section 11 of the CGST Act, 2017 and section 6 of the IGST Act, 2017]………..764
4.3 Goods exempt from GST…………………………………………………………………………………………………………………………….765
4.4 Services exempt from GST………………………………………………………………………………………………………………………….765
Theoretical Questions…………………………………………………………………………………………………………………………………779
Multiple Choice Questions………………………………………………………………………………………………………………………….779
Chapter 5 Taxability of Composite and Mixed Supply ……………………………………………………………………………….784
5.1 Tax liability on composite and mixed supplies [Section 8]………………………………………………………………………………784
Theoretical Questions…………………………………………………………………………………………………………………………………787
Multiple Choice Questions………………………………………………………………………………………………………………………….787
Practical Questions…………………………………………………………………………………………………………………………………….788
Chapter 6 Location of the Supplier and Place of Supply of Goods and Services…………………………………………..789
6.1 Location of Supplier of Goods …………………………………………………………………………………………………………………….789
6.2 “Location of the supplier of services” [Section 2(15)]…………………………………………………………………………………….789
6.3 Place of supply of goods other than supply of goods imported into, or exported from India
[Section 10 of IGST Act, 2017] ……………………………………………………………………………………………………………………790
6.4 Place of supply of goods imported into, or exported from India [Section 11 of IGST Act, 2017]…………………………..792
6.5 Place of supply of services where location of supplier and recipient is in India [Section 12 of IGST Act, 2017]……..792
6.6 Place of supply of services where location of supplier or location of recipient is outside India
[Section 13 of IGST Act, 2017] ……………………………………………………………………………………………………………………796
6.7 Special provision for payment of tax by a supplier of online information and database access or retrieval services
(OIDAR Services) [Section 14 of IGST Act, 2017]…………………………………………………………………………………………799
Theoretical Questions…………………………………………………………………………………………………………………………………802
Multiple Choice Questions………………………………………………………………………………………………………………………….802
Practical Questions…………………………………………………………………………………………………………………………………….804
Chapter 7 Composition Levy (Composition Scheme)………………………………………………………………………………….806
7.1 Composition levy (Composition Scheme) [Section 10(1) of CGST Act, 2017]……………………………………………………806
7.2 Restrictions on the registered person availing composition levy [Section 10(2) of CGST Act, 2017] …………………….807
7.3 Composition scheme primarily for supplier of services [Section 10(2A) of CGST Act, 2017] ………………………………808
7.4 Lapse of the option of composition scheme [Section 10(3) of CGST Act, 2017]…………………………………………………808
7.5 Person who opts for composition scheme shall not collect any tax and shall not be eligible for input tax credit
[Section 10(4) of CGST Act, 2017]……………………………………………………………………………………………………………….808
7.6 Consequences of wrongful availment of composition scheme [Section 10(5) of CGST Act, 2017]………………………..808
7.7 Inclusion in and exclusion from “aggregate turnover” for determining the eligibility to pay tax under composition levy
— Inserted with effect from 01.01.2020 — Explanation 1 to Section 10 of the CGST Act…………………………………….809
7.8 Exclusions from the “turnover in State/Union territory” for determining the tax payable under composition levy —
Explanation 2 to Section 10 of the CGST Act…………………………………………………………………………………………………809
7.9 Meaning of “Aggregate turnover” –Section 2(6) of the CGST Act, 2017…………………………………………………………..809
7.10 Meaning of registered person – ……………………………………………………………………………………………………………………809
7.11 Relevant rules for composition levy ……………………………………………………………………………………………………………..809
7.12 Benefits of composition scheme…………………………………………………………………………………………………………………..812
7.13 Statement of payment of self-assessed tax to be filed on quarterly basis……………………………………………………………812
7.14 Annual furnishing of return …………………………………………………………………………………………………………………………812
Theoretical Questions…………………………………………………………………………………………………………………………………813
Multiple Choice Questions………………………………………………………………………………………………………………………….813
Practical Questions…………………………………………………………………………………………………………………………………….815
Chapter 8 Time of Supply…………………………………………………………………………………………………………………………817
8.1 Time of supply of goods [Section 12 of CGST Act, 2017]……………………………………………………………………………….817
8.2 Time of supply of services [Section 13 of the CGST Act, 2017]……………………………………………………………………….821

Contents xxiii
8.3 Time of supply where there is change in rate of tax in respect of supply of goods or services or both [Section 14 of
CGST Act, 2017] ……………………………………………………………………………………………………………………………………….825
Theoretical Questions…………………………………………………………………………………………………………………………………829
Multiple Choice Questions………………………………………………………………………………………………………………………….829
Practical Questions…………………………………………………………………………………………………………………………………….830
Chapter 9 Value of Supply………………………………………………………………………………………………………………………..833
9.1 Where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply
[Section 15(1)] ………………………………………………………………………………………………………………………………………….833
9.2 Where the value cannot be determined under the above provisions [Section 15(4)] ……………………………………………837
9.3 Value of supply in case of lottery, betting, gambling and horse racing. [Rule 31A]…………………………………………….839
9.4 Value of supply in case of online gaming including online money gaming. [Rule 31B]………………………………………840
9.5 Value of supply of actionable claims in case of casino. [Rule 31C] ………………………………………………………………….840
9.6 Value in case of notified supplies [Section 15(5)] ………………………………………………………………………………………….840
9.7 Value of supply inclusive of integrated tax, central tax, state tax, union territory tax – Rule 35 ……………………………843
Theoretical Questions…………………………………………………………………………………………………………………………………844
Multiple Choice Questions………………………………………………………………………………………………………………………….844
Practical Questions…………………………………………………………………………………………………………………………………….846
Chapter 10 Input Tax Credit and its Utilisation…………………………………………………………………………………………..848
10.1 Eligibility and conditions for taking input tax credit [Section 16 of the CGST Act, 2017] ……………………………………848
10.2 Apportionment of input tax credit [Section 17(1), (2) & (3) of CGST Act, 2017]……………………………………………….854
10.3 Availability of credit in special circumstances [Section 18]…………………………………………………………………………….861
10.4 Taking input tax credit in respect of inputs and capital goods sent for job work [Section 19 of the CGST Act, 2017] 867
10.5 Input Service Distributor …………………………………………………………………………………………………………………………….867
10.6 Availment of input tax credit [Section 41]…………………………………………………………………………………………………….869
10.7 Utilisation of input tax credit [Section 49]…………………………………………………………………………………………………….869
10.8 Restrictions on use of amount available in electronic credit ledger [Rule 86B]…………………………………………………..876
10.9 Commissioner or its authorised officer authorised to disallow debit of electronic credit ladger and Block the Credit
[Rule 86A of CGST Rules]…………………………………………………………………………………………………………………………..877
Theoretical Questions…………………………………………………………………………………………………………………………………878
Multiple Choice Questions………………………………………………………………………………………………………………………….878
Practical Questions…………………………………………………………………………………………………………………………………….881
Chapter 11 Tax Invoice, E-Way Bill and Credit & Debit Notes ……………………………………………………………………885
11.1 What is an invoice ……………………………………………………………………………………………………………………………………..885
11.2 Tax invoice [Section 31]…………………………………………………………………………………………………………………………….885
11.3 Amount of tax to be indicated in tax invoice and other documents [Section 33]…………………………………………………890
11.4 Issue of one or more Credit and Debit Notes [Section 34 of the CGST Act, 2017]………………………………………………890
11.5 E-Way Bill………………………………………………………………………………………………………………………………………………..896
Theoretical Questions…………………………………………………………………………………………………………………………………902
Multiple Choice Questions………………………………………………………………………………………………………………………….902
Practical Questions…………………………………………………………………………………………………………………………………….905
Chapter 12 Registration……………………………………………………………………………………………………………………………..906
12.1 What are the advantages of taking registration in GST? ………………………………………………………………………………….906
12.2 Registration is PAN based and State/UT specific …………………………………………………………………………………………..906
12.3 Persons liable for registration [Section 22 of the CGST Act, 2017]……………………………………………………………………906
12.4 Persons Registered Under any pre-GST law Liable to be registered under GST [Section 22(2)]…………………………..909
12.5 Liability of registration in case of transfer of business [Section 22(3) & (4)]……………………………………………………..909
12.6 Person not liable for registration [Section 23 of CGST Act]……………………………………………………………………………..909
12.7 Compulsory Registration by Certain Persons irrespective of threshold registration limit [Section 24]…………………..911
12.8 Procedure for registration [Section 25] …………………………………………………………………………………………………………912

xxiv Contents
12.9 Deemed registration/rejection of registration …………………………………………………………………………………………………922
12.10 Special provisions relating to casual taxable person and non-resident taxable person [Section 27]……………………….922
12.11 Amendment of registration [Section 28]……………………………………………………………………………………………………….924
12.12 Cancellation or suspension of Registration and Revocation of Cancellation of registration [Sections 29 & 30]………925
Theoretical Questions…………………………………………………………………………………………………………………………………933
Multiple Choice Questions………………………………………………………………………………………………………………………….934
Practical Questions…………………………………………………………………………………………………………………………………….937
Chapter 13 Payment of Tax, TDS & TCS under GST ………………………………………………………………………………….939
13.1 Introduction ………………………………………………………………………………………………………………………………………………939
13.2 Payment of tax, interest, penalty and other amounts……………………………………………………………………………………….940
13.3 Order of utilization of ITC Available in the Electronic Credit Ledger [Section 49(5)] ………………………………………..941
13.4 Refund of the Amount Available in electronic cash ledger (ECL) or electronic credit ledger (ECrL) [Section 49(6)]943
13.5 Electronic Liability Register (ELR) to be maintained in Form GST PMT-01 for recording all liabilities
[Section 49(7)] ………………………………………………………………………………………………………………………………………….943
13.6 Order of Discharge of Tax and Other Dues [Section 49(8)]……………………………………………………………………………..943
13.7 Deemed passing on the Full Incidence of CGST/SGST/IGST [Section 49(9)]……………………………………………………944
13.8 Transfer of any amount available in the ECL under CGST Act to the ECL for integrated tax, central tax, State tax,
Union territory tax or cess [Section 49(10)]…………………………………………………………………………………………………..944
13.9 Any amount transferred to the ECL under the CGST Act shall be deemed to deposit in the said ledger
[Section 49(11)]…………………………………………………………………………………………………………………………………………944
13.10 Government may specify such maximum proportion of output tax liability which may be discharged through the
electronic credit ledger [Section 49(12)]……………………………………………………………………………………………………….944
13.11 Interest on delayed payment of tax only on net tax liability payable in cash [Section 50 ]……………………………………944
13.12 TDS under GST [Section 51 of the CGST Act, 2017] …………………………………………………………………………………….945
13.13 TCS under GST [Section 52] ………………………………………………………………………………………………………………………948
Theoretical Questions…………………………………………………………………………………………………………………………………951
Multiple Choice Questions………………………………………………………………………………………………………………………….951
Practical Questions…………………………………………………………………………………………………………………………………….953
Chapter 14 Returns ……………………………………………………………………………………………………………………………………955
14.1 Return, furnishing details of outward supplies during a tax period [Section 37] …………………………………………………955
14.2 Communication of details of inward supplies and input tax credit (ITC) [Section 38]…………………………………………958
14.3 Furnishing of returns by registered person, Form GSTR-3B [Section 39]………………………………………………………….960
14.4 First return [Section 40] ……………………………………………………………………………………………………………………………..967
14.5 Annual return [Section 44]………………………………………………………………………………………………………………………….967
14.6 Final return on cancellation of registration [Section 45]………………………………………………………………………………….969
14.7 Details of inward supplies of persons having Unique Identity Number [Rule 82]……………………………………………….969
14.8 Notice to return defaulters [Section 46] ………………………………………………………………………………………………………..969
14.9 Levy of late fee for not filing the return within the prescribed date [Section 47] ………………………………………………..969
14.10 List of GST Returns/Statements to be furnished by Registered Persons…………………………………………………………….970
Multiple Choice Questions………………………………………………………………………………………………………………………….971
Practical Questions…………………………………………………………………………………………………………………………………….974
Chapter 15 Accounts & Records…………………………………………………………………………………………………………………975
15.1 Accounts and other records [Section 35]……………………………………………………………………………………………………….975
15.2 GST Audit [Section 35]………………………………………………………………………………………………………………………………976
15.3 Period of retention of accounts [Section 36]………………………………………………………………………………………………….976
15.4 Type of accounts & records to be maintained ………………………………………………………………………………………………..976
Multiple Choice Questions………………………………………………………………………………………………………………………….978
GST-16-Case Scenarios (GST)…………………………………………………………………………………………………………………………….979