DEEPAK R GORAD

Basis of Charge

The basis of charge of income under the head „income from house property‟ is the Annual Value of the property. Annual Value is inherent capacity of the property to earn an income. It is the amount for which the property might reasonably be expected to let from year to year.

Income from house property is charged to tax on Notional Basis, as generally tax is not on receipt of income but on the inherent potential of the house property to generate income.

Conditions to be Satisfied

The property must consist of buildings or lands appurtenant to such buildings.

The assessee must be the owner of such house property.

The property should not be used by the owner thereof for the purpose of any business or profession carried on by him, the profits of which are chargeable to tax.

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Computation of Gross Annual Value (GAV)

Particulars Amount Amount

(a) Fair Rent of the House xxx

(b) Municipal Value of House xxx

(c) Whichever is more of (a) and (b) XXX

(d) Standard Rent xxx

Expected Rent [whichever is less of (c) and (d)] XXX

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Step 1 : Calculate Expected Rent as follows:-

Contd…

Step 2 : Compare Expected Rent & Actual RentReceivable (ARR).

Where the property or any part thereof is let out, If ARR is more than ER referred to in Step 1, then,

GAV = ARR If ARR is less than ER and it is due the vacancy of

property then, GAV = ARR If ARR is less than ER not owing to vacancy GAV =

ER

Note: ARR = Rent Received / Receivableless Unrealized Rent

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Net Annual Value (NAV)

Net Annual Value is the sum computedafter deducting from Gross Annual Value,the taxes levied by any local authority inrespect of the property.

NAV = GAV – Municipal Taxes Paid

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Meaning

Municipal Valuation :- For collecting municipal taxes, local authorities make a periodical survey of all building in their jurisdiction. Such valuation may be taken as strong evidence representing the earning capacity of a building.

Fair Rent of the Property :- Fair rent of the property can be determined on the basis of a rent fetched by a similar property in the same or similar locality.

Standard Rent :- Standard rent is the maximum rent which a person can legally recover from his tenant under a Rent Control Act.

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VANITA AHIRE

Basis of Charge

Capital Gain‟s tax liability arises only when the following conditions are satisfied

There should be a capital asset.

The capital asset is transferred by the assessee

Such transfer takes place during the previous year.

Any profit or gains arises as a result of transfer.

Such profit or gains is not exempt from tax under section 54, 54B, 54D, 54EC, 54F, 54G, and 54GA

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Capital Assets

“Capital asset” is defined to include property of any kind, whether fixed or circulating, movable or immovable, tangible or intangible. However, following are excluded from the definition of “capital assets”:

Any stock-in-trade, consumable stores or raw material held for the purposes of business or profession.

Personal effects of the assessee, that is to say, movable property including wearing apparel and furniture held for his personal use or for the use of any member of his family dependent upon him. However, Jewellery,ArchaeologicalCollections, Drawings,Paintings, Sculptures, or Art Work will not be considered as “personal effects”.

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Short-term / Long-term Capital Assets

“Short term capital asset” means a capital asset held by an assessee for not more than 36 months, immediately prior to its date of transfer. In other words, if a capital asset is held by an assessee for more than 36 months, then it is known as “long term capital asset.”

However in following cases 36 months will be replaced by 12 months :-

Equity or preference shares in a company Listed Securities

Units of UTI

Units of a mutual fund specified under section 10(23D)

Zero coupon bonds

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POOJA CHAUDHARY

Important Terms

1. Transfer of Capital Asset :- Transfer, in relationto capital asset, includes sale, exchange orrelinquishment of the asset or theextinguishment of any rights therein or thecompulsory acquisition thereof under any law[sec. 2(47)].

2. Full Value of Consideration :- The expression “fullvalue” means the whole price without anydeduction whatsoever.

3. Expenditure on Transfer :- The expression“expenditure on transfer” means expenditureincurred which is necessary to effect the transfer.

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Contd…

4. Cost of Acquisition :- Cost of acquisition ofan asset is the value for which it wasacquired by the assessee. In case ofDepreciable Asset COA is the WDV of asset inthe beginning of the year. In case of SlumpSale COA is the Net Worth of theundertaking.

5. Cost of improvement :- Cost of improvementis capital expenditure incurred by anassessee in making anyadditions/ improvement to thecapital asset.

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Contd…

6. Indexed Cost of Acquisition :- the amountwhich bears to the COA, the same proportionas CII for the year in which the asset istransferred bears to the CII for the first year inwhich the asset was held by the assessee or on01.04.1981, whichever is later.

7. Indexed Cost of Improvement :- an amountwhich bears to the COI, the same proportion asCII for the year in which the asset istransferred bears to the CII for the year ofimprovement.

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Capital Gain Exemption

1. Profit on sale of property used for residence [S.54]:- Available to Individual & HUF on transferof Long-term Residential Property and newresidential House property is purchased orconstructed.

2. Capital gains on transfer of agricultural land[S.54B]:- Available to Individual on transfer ofAgricultural land used by individual or his parentfor agricultural purposes during 2 yearpreceding date of transfer andAgricultural land (urban or rural) is

purchased.

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HARSHAL BHARAMBHE

Section 56 to 59 of Income Tax Act, 1961 deal with this.

Acc to Section 56(1), income of every kind which is includible in total income under this Act, but which is not chargeable to income-tax under any of four head, shall be chargeable to income-tax under this head.

Thus any income which satisfies the following two conditions will be taxed under this head-

Income is chargeable to tax under this Act.

• Such income is not chargeable to tax under any of four heads i.e. Income from salaries, Income from property, Profits and gains of business or profession, Income from capital gains.

Income From Other Sources

Income by way of winning from lottery or

crossword puzzles or horse race or card game or any

other game is subject to deduction of tax at 30% (plus

surcharge, education cess and secondary and higher

education cess).

For resident or non-resident rate of TDS is 30.9%

(up to income 10.00.000) or 33.99% ( more than

10,00,000).

For domestic company rate of TDS is 33.99%.

For non-domestic company rate of TDS is

31.6725%.

Security is a documentary evidence of

loan, rate of interest, conditions for the

repayment of loan and time of repayment is

specifically and clearly noted and which is

signed by debtor himself or any other person

authorized on his behalf.

Share is not a security.

Acc to sec 2 (28-B), interest on following

securities is chargeable to tax:-

a. Int on securities of Central or State Gov.

b. Int on debenture or other securities for

money issued by or on behalf of- a local

authority, a company or a corporation

established by Central, State or

provincial Act.

INTEREST ON SECURITIESWINNING FROM LOTTORIES, CROSSWORD PUZZLES, RACES AND CARD GAMES

4. CONTRIBUTION RECEIVED FROM EMPLOYEES

Acc to section 2(24)(x), if an assesses receives any of following amounts from his employees, he is

chargeable to tax:-

a. Contribution to an provident fund

b. Contribution to superannuation fund

c. Contribution to any fund set up under Employees’ State Insurance Act, 1948

d. Contribution to any other fund for welfare of employees.

5. INCOME FROM MACHINERY, PLANT OR FURNITURE LET ON HIRE

6. INCOME FROM COMPOSITE LETTING OF BUILDINGS, MACHINERY,

PLANT OR FURNITURE

ANMOL GAWLI Contd..

8. INTEREST ON KISAN VIKAS PATRA

9. INTEREST ON INDIRA VIKAS PATRA

10. INTEREST ON NATIONAL SAVINGS CERTIFICATES

11. INTEREST ON SOCIAL SECURITY CERTIFICATE

7. RECEIPT WITHOUT COONSIDERATIONAs per section 56 (2) (vi), if any sum of money exceeds Rs. 50,000 is received without any

consideration by an individual or a HUF, in any previous year from any person or persons on or after April 1, 2006,

then the whole of such sum shall be taxable.

Exceptions-

a. Any sum of money received from any relative

b. Any sum of money received on occasion of marriage of individual

c. Any sum of money received under a will or inheritance

d. Any sum of money received in contemplation of death of payer

e. Any sum of money received from any fund or foundation of university or other educational institutions or hospital

or other medical institution.

f. Any sum of money received from any trust or institution.

Besides these income, the following income are also chargeable to income-tax

under ‘Income from other sources’:-

1) Agricultural income received from outside India

2) Interest on securities of foreign Government or authority

3) Salaries due to a member of Parliament

4) Compensation received for use of business assets

5) Any fee, commission, reward or other remuneration received by an employee from a person other than

his employer, e.g., examination remuneration received by teacher, tips received by a waiter etc.

6) Income from sub-letting of property

7) Royalties or rent of mines received or receivable by owner of a coal mine

8) Income from fisheries

9) Amount received for loss of income from land

10) Interest other than interest on securities such as int. on loan, on bank deposit and on provident fund etc

11) Int. on employee’s contribution to unrecognized provident fund

12) Gratuity received by director, who is not employee of company

13) Income of cricket players who have been selected to play for India. Following rules are applicable:-

a. 25% of income received from cricket Control Board of India for test matches played in India

b. 50% of income received for matches played outside India

c. Income from other matches played in India is tax-free if income is received from Cricket Control Board

of India.

14) Interest earned by a company on deposits during pre-production period

15) Director’s fee or salary to a director employee

16) Rent received from leasing out the trademark

17) Income from buster lands

18) Income from units of Unit Trust of India