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so let's begin the income tax revision for September 24 exams and even this is applicable for January 25 attempt uh first of all the most important thing that we must understand is what is the finance act applicable for the exam whether it is September 24 or even January 25 the finance act applicable is finance act 2023 the finance act applicable is finance act 2023 and the material as per ICI book The material what is the latest ICI material that is available right now is uh some September 2023 Edition in the 2023 year I has released one income tax book that is what the latest edition that is available even now those of you who are planning for September attempt or those of you who are planning for January attempt whatever it is the material is same and many students are worried about applicability of the latest recent Finance act in finance act 2024 where so many amend ments and all has come that is not applicable which is post election after post formation of the new government getting it the finance act has been there right in July month that is not applicable for the September exams that is not applicable for the January exams both so make it clear if at all any of you are planning for Mid 25 attempt for that Finance act 2024 is applicable straight away which the IC has not yet released the book the book is yet to be released which will be somewhere around September 2024 or maybe October 1st week once that book gets released that is applicable for January uh sorry May 2025 exam very simple for May September January same book is applicable same Finance Act is applicable again that next way onward cycle changes now the moment when we say Finance act 2023 what is the previous year that is applicable previous year 23 24 very simple once a law has come the law is applicable for the previous period of prospective generally prospective so Finance act 2023 came somewhere in February March so obviously it's applicable for subsequent period obviously it's applicable for subsequent so the next financial year after 2023 February is what 2324 for that corresponding assessment year is 2425 and in the entire income tax in the entire taxation the only chapter where we are concerned about Finance act especially the assessment year previous year is capital gains where index number is there luckily in the recent Finance act which is applicable from may25 examinations the indexation concept is removed okay it's partially removed not completely it's not even a against partially removed it is removed for certain period and prospectively it is it is not at all there concept of indexation is completely removed which is a very big relaxation very big relaxation removal of indexation from from CS students point of view because it is highly comfortable because it is highly comfortable to solve problems to solve capital gains because with indexation without indexation what is said that that remembering itself will be challenging that CA inter there are only one or two topics but in CF final we have so many topics that deals with indexation that deals without indexation you you remember like there is a series called 115 Series in 115 series there are more than 20 sections which are there and all of them are dealing mainly with capital gains there are many capital gains Provisions which are there so which you will get in CF final so they all dealing with capital gains with indexation without indexation so much of nonsense that end all is now removed so Finance act 24 that is but for September attempt and January attempt obviously indexation concept is still applicable because for us the questions will be based upon Finance act 2023 which is based upon the latest addition of the ICS study material first that's that's an important point then coming to the latest addition of I material 2023 is released in September 2023 whereas for us the Amendments up to February are applicable since we are writing exam in September the Amendments up to February 2024 they are all applicable like precisely speaking for US amendments up to February end are applicable because exactly for us what are all amendments applicable generally for exams 6 months before March April May June July August September is the exam month so ignore the exam exam month before 6 months that is the these six months whatever amendments comes they won't apply before 6 months before the exam month so any amendments that arise preceding the month of the exam six months preceding the month of the exam they don't apply I mean during the 6 months preceding the exam they don't apply any amendments that were there preceding 6 months before the exam month they are all applicable correct so technically 20 29th February 2024 until then but there were no amendments after May 2024 exams amend for example you see supplementary material released for May 2024 supplementary material released for May 2024 is between 1st May 2023 to 31st October 2023 one small correction I want to make the last 2023 book is there right income tax that was released in April month 2023 April or May 2023 it was released actually not September generally books are released during August and September but the last time alone the income tax book was released in yeah yeah April 2023 getting the point so that's what uh the June uh somewhere June 23 Edition that was exactly what June 23 Edition which The Institute would have prepared somewhere in May or April now if you see this is the actual supplementary material applicable for May 24 in this the first page contains index of amendments the first page contain index of amendments exactly you see SE September related supplementary material for income tax by the way I'm not talking about GST for GST there might be circulars there might be notifications so I'm not talking about GST I'm only talking about what income tax so now for income tax you see the same amendments were applicable suppose you see salaries okay there is some R RFA related may also the same yes or no then with respect to some 35d preliminary expenditure same thing and here also 101d guidelines for 101d like 10 subsection 10 D which is regarding maturity proceeds of life insurance policies whether are the exempt or taxable how toal exemption all that the same thing is here yes or no and here also you see manner of computation of insurance policy maturity proceeds Clause number 13 the same correct Advanced Tax and teds related some three amendments were there which are applicable for the first time for May 24 exam the same thing is even applicable for September and the finally in Return of income there are some Provisions related to pan number getting it and the same provision is applicable so technically whatever amendments that were there for May 24 exams the same will be applicable for September 24 also and I'm telling you for January also the same there won't be many changes for January if at all for January attempt if any Amendment comes there will be some one or two amendments or three amendments that's it majorly it won't come it will be hardly a discussion of 15 minutes for January attempt if at all any amendment is there it is a matter of just 15 minutes discussion not more than that confident now many students who are watching this particular revision class might be either registered under old scheme students or registered under new scheme students new scheme if at all a student registered under old scheme before introduction of the new scheme probably they might have studied the subject on finance act 2022 they might have studied the subject based on finance act 2022 now what about them for them they just have to read Finance act 2022 plus there is a supplementary material released by The Institute I mean actually for you know you studied you have Finance act 2022 study material right for that I have released my own supplementary material for the purpose of May 24 exams which contains the changes between Finance act 22 and finance act 23 plus supplementary material for May 2024 you're getting it like Suppose there is a website we have a website uh you know in our in our websites rest website if you go if you go to group one I'll just show you for your understanding paper three taxation because know in the students whoever watching there are all these categories of students so you must have Clarity on first of all what resources applicable which many lack so in this you see there's a supplementary material this is nothing but what amendments in finance act 23 plus supplementary material which is released for May 24 exams where amendments up to October 2023 are considered now you see I have given clearly like any of you if at all you following an income tax book which is belonging to original applicability is for May 23 number 23 if at all any of you are following income tax book where the applicability for the first time is what for that book May 23 number 23 not May 24 which means you are following Finance act 22 book for that what modifications were there these are all the modifications these are all the modifications for that and for this I have already given an amendment session so you need not worry getting it right now see mainly the major amendment that is that we generally find is in the major Amendment between Finance act 2022 and finance act 2023 the major amendment of course there are couple of amendments but the major amendment is in 115 BAC which is a default tax res that was the major Amendment between 11 between Finance act 22 and finance act 23 you're getting it so that's why in order to avoid confusion what I am doing is I am taking up the basic concepts revision at first I'm going to take up basic concepts revision at first which is finance act 23 which is applicable for May 24 September 24 Jan 25 so basic concepts amended provision we are going to discuss in the basic concepts what we are discussing actually nothing but computation of tax rates how to how to how to compute tax I mean what are the various basic provisions of income tax how to compute taxes for various SES how to compute such charge marginally for all that so that's it you got an idea so whereas any of you who have who are exclusively and for the first time registered under new skill for you directly anyhow Finance act 2023 book is there and right now supplementary material for September 2024 exam if you follow that's enough even this you can ignore May 2424 already supplementary material is there right even if at all you already covered that you are well versed with amendments you you are done with amendments that's it for September there are no separate amendments this is the composition of the material that you need to have an idea now let's begin the basic concepts okay so let's begin basic concepts by the way I will discuss basic concepts topic and TDS TCS topic revision directly from The Institute material because everyone will have that material so Institute material I'm discussing directly from the IC material I'll be discussing basic concepts and TDS now in basic concepts there are no amendments because it's already Finance act 2023 whereas in TDS and TCS there were minor amendments there were some clarifications in fact I I must say there are some clarifications which are released during may attempt itself for may attempt itself these clarifications applicable the same clarifications we are going to discuss simultaneously along with the TDS revision when we are doing TDS TCS revision simultaneously we are also going to discuss those clarifications so that if you watch this TS TCS revision video you need not even look for any Amendment related portion entire comprehensive I'm going to cover including problem solving if possible I will also do solve problems with the TDS and TCS provision okay are you all ready yes let's begin the game so now let's begin the basic concepts of income tax we all know there's a section called section four which is charging section Okay so so there shall be leved a tax on total income of the S if it exceeds maximum amount not chargeable to tax that is nothing but basic exemption is leviable at the rates mentioned in the relevant Finance act so no and the finance act right now is finance act 2023 so what are the rates of tax that are applicable generally what are the rate of tax that are applicable for us generally suppose no if the SS is following default tax reg what do you mean by default tax reing by default these are the tax rates applicable for the SS unless he shift to to opt out unless he shift to opt out if the SSA specifically opted out of default tax regime only normal tax resum is applicable this is called as optional tax resim this is optional SS if at all he want to choose he can choose this optional tax resim is nothing but normal tax resim which is also called as what normal tax resim now many students what I notice is they mainly focus on DTR but in exam they won't ask ask DTR related questions you see descriptive questions all the questions are normal tax SS has shifted SS has opted out of default tax res opted out of 115 BAC in fact the wordings will be S has exercised the option of opting out the SS has exercised shifting I mean the SS has exercised the option of opting out of 115 BC option of opting out of means what default tax regim is not going he's choosing what normal tax regime in problem they will not say SS is choosing normal tax regime they will say that SS is opting out of 115 BC s has exercised the option of opting out of DTR now how do they say if the SS is going with the DDR how do they reply how do they mention in the question that SS is going with 115 BSC SS has not not SS has not exercised the option of opting out of 115 BC no complicated sentence right SS has not exercised the option of opting out of DTR nothing but they going with DTR not exercised and exercised if the wordings are exercised the option of opting out of DTR then it is DTR sorry normal tax region I'm just testing you okay it's just normal tax regum so otherwise it's called default tax resum so so optional tax regime here we need to classify the SSS by the way right now I'm discussing in the context of individuals HF aop Boi and artificial judicial persons I'm not going into in detail of what are they I hope you're aware of it I have I have the assump I have right to assume that you're aware of it because this is a marathon class revision Clause yes or no 115 BC so for these SS's what is the R of tax applicable see for for Huf aop Boi as ajp artificial judicial person there is only one basic exemption limit that is 2.5 lakh whereas for individuals the basic exemption is divided into three categories by the way when I'm talking about basic exemption limit and age factor I am talking about Resident individuals with whom I'm talking about Resident individuals who is a resident who is a non-resident entire the discussion will be there in the Resident like residential status chapter is there you can find that in time stamp so there you can find so individuals are broadly classified into three categories like super senior citizen senior citizen normal citizen senior citizen is also called as uh I mean super senior citizen is also called as very very I mean very senior citizen in some context it also called as what very senior citizen or super senior citizen whatever the word comes you need to remember now what is that basic basic limit applicable up to 250,000 the tax rate is zero and 2.5 lakh to 5 lakh the tax rate is 5% 5 lakh to 10 lakh the tax rate is 20 percentage Beyond 10 lakhs the tax rate is 30% and by the way these tax rates are called as what slab rates more clearly speaking I am talking about normal rates of tax I am talking about normal rates of tax what do you mean by normal rates of tax the rates of tax that is applicable based upon the SS type the rates of tax that is applicable based upon SS type if the SS in individual what is the rates of tax applicable if the SS is a company what is the rate of tax applicable if the SS is a firm what is the rate of tax applicable the rates of tax normal rates means SS specific rates what are they SS specific rates now there are some other rates of tax which are Income specific which are Income specific for example we have a cap we have a tax rate called ltcg 1112a if you're transferring any list Equity shares Equity oriented mutual funds units of business trust getting it if at all if at all you're transferring any of this if you're transferring any of these assets where St is paid both at the time of purchase and at the time of sale getting it then the rate of tax applicable is 10% on the long-term capital gain portion exceeding one lakh rupe exceeding one lakh rupe this is this is a tax rate whether the SS is individual company partnership form ajp it doesn't matter yes here tax rate is based upon the income based upon the type of income whereas these tax rate which I'm talking about right now is normal rates of tax so rates of tax are again two types right now I'm talking about what normal rates of tax which are called as SS specific rates normal rates of tax which are called as s specific rate means except special rates except incomes that are chargeable under special rate what are the incomes that are chargeable under special rate one2 year long-term capital gain taxable at 10% normal 112 long-term capital gain taxable at 20 per Tri 1A short-term capital gain chargeable at 15 for both of this 112a and tri1 generally the assets are common the conditions are generally common getting it and 115b 115 BB the tax rate is 30% 115 BBJ online gaming the tax rate is 30% 115 BB BBC PBE the tax rate is 30% is what is BBE unex Ed income ah all that the tax rate is 60% the tax rate is what 60% tax tax rate on undisclosed income discovered cash credit 68 69 a 69b 69 C 69d in all these sections the tax rate applicability is what 60% getting it now on all these incomes remember this is a new section came in the finance act 2023 what is that 115 BBJ tax on net winnings on online games tax on net winnings on online games so the tax rate is 30% technically speaking they can merge it under 115b 115 BB itself but they they gave it separately they could have done merger in the same provision so these are all tax rates that are applicable based upon the type of income these are called as special rates of tax these are called as what special rates of tax and these tax rates are same irrespective of the type of s correct irrespective of the type of s by default basic exemption limit is not available for them yes or no by default basic exemption limit is not available for special rates of income however for 112a and 112 Tri 1A for 112 112a tri1 a for these three nothing but for capital gains income for capital gains income if at all not normal incomes of the SS if at all normal incomes of the ssse are less than basic exemption limit that balance limit is there right that's called unavail basic exemption or unexhausted basic exemption limit it is actually called as what unavail basic exemption or unexhausted basic exemption limit that can be set off if at all SS has normal income see generally the basic exemption whatever two and half lakh for senior citizen three lakhs for super senior citizen it is 5 lakh so these are all the basic exemption up to which you need not pay tax on which income normal income on which income normal income suppose if at all SS has normal income normal income means what other than these incomes suppose if the SS has normal incomes excluding special incomes the total of normal income the total of normal income by the way which income taxable income only we should take total income we should take total income composing what normal incomes Again by the way how this total income is computed gross total income minus chapter 6 year deductions this introduction is very important keenly observe gross total income and minus chapter 6A deduction is equal to you will get total income when you're solving a total income problem the moment when you arrive gross total income don't directly reduce six deductions students will directly blindly do mistake here reducing total chapter six Direction chapter six Direction they computed correctly all section wise break up everything they did they did very right very much right but what they do you know he so let us assume chapter six reduction total is three lakhs the student got act answer for chapter six reduction is three lakhs gross total income is 5 lakhs student will directly reduce and say total income is 2 lakhs since it is less than basic exemption no tax but actually this gross total income has 4 lakhs long-term capital gain only one lakh is other income which is a normal rate now chapter 6 year deduction is not available against long-term capital gain short-term capital gain1 a 1112a 115 bb15 BBC all the or no special incomes against special incomes capital I mean chapter six deductions you can't claim correct so though you have eligible chapter 6A deduction of three lakh by the way I am talking about entire chapter 6A entire chapter 6A means what 80c 8U the total chapter 6 reduction though it is three lakh but I can claim only how much 1 lakh which means what is my total income four This Is The Answer getting it now on this you should compute tax how I should compute tax on this when I'm Computing tax this four lakhs I need to split into two parts how what are the incomes that are taxable at special rates what are the incomes that are taxable at normal rates first what I will do for special rates no I will allocate this four lakhs let us assume this four lakhs one lakh is short-term capital gain Tri 1A and another one lakh is long-term capital gain 12 a another one lak is long-term capital G 112 Lottery income and all not there let us assume now okay only these three are special incomes in this case for example or else or else let's continue with the same example why why to modify because again some some of you might have a confusion so 4 lakhs is the total income right what is the entire four lakhs actually entire four lakhs is what long-term capital gain what is the normal income zero but I have 2.5 lakh basic exemption what I can do I can set set off against is normal capital gain long-term capital gain I can set off 2.5 lakh I set off these two I set off 1.5 lak is the balanced long-term capital gain on this 1.5 LH I will apply 20% tax rate because this is 20% related so I will get a tax amount of how much 30,000 rupees then we have rebate discussion all that which I will discuss later so how you should compute tax Whenever there is a total income which consist of special incomes and normal incomes you must split like this the moment you come to total income before Computing tax split the total income into multiple Parts same way the moment when you're claiming chapter six inductions before reducing it first to look at how much gross total income consist of what gross total income consist of how much is normal income how much is special income how to derive normal income allocate special incomes from the gross total income amount allocate special income balancing figure is normal income and total of chapter 6 deduction cannot exceed normal income this is the procedure yes or no now now tell me these are the tax rate that are applicable for these are the tax that are applicable under normal tax re for senior citizen up to 3 lakhs zero 3 to 5 lakhs 5 percentage 5 to 10 lakhs 20 per Beyond 10 lakhs 30% for super for super senior citizen up to 5 lakhs zero directly 5 to 10 20 per Beyond 10 lakhs 30% this is the tax rate whereas if the SS is choosing default tax re let us use about this word if the SSC is not exercising the option of opting out or shifting out then the tax rates are applicable what up to 3 lakhs Z correct zero 3 to 6 lakhs 5 percentage 6 to 9 lakhs 10 percentage 9 to 12 lakhs 15 percentage 12 to 15 lakh 20% Beyond 15 lakh 30% there is no 25% slab just that you remember every three lakhs the limit changes 0 to three 0 sorry 0 to 3 yeah zero 3 to 6 5 6 to 9 10 6 9 to 12 15 uh 9 to 12 15 12 to 15 20% and directly Beyond 15 30% this is the default tax now this is also called as SSC choosing concessional rates of tax this is also expressed as what SS choosing concessional rates of tax for example if you look at for example if the SS is having 15 lakhs income net income is 15 lakhs let us assume how much tax you will get under normal tax regime you know 5 into 30 1 and half lakh plus 1 lak 12,500 up to 10 lakhs I hope you know this numbers 2 lakh 62,500 whereas under default tax regime up to 10 lakhs it is uh 1 lakh no no no no 3 to 6 lakhs 3 lakhs into 5 percentage 15,000 3 lakhs into 10 percentage 30,000 9 to 12 lakhs 3 lakhs into 15% is 40,000 12 to 15 3 lakhs into 20% is 60,000 how much is the total 60 + 60 1.5 lakh how much it is 1.5 lakh that tax amount if the SSC total income is 15 lakh under default tax resum is only 1.5 by the Which tax amount I'm talking about basic tax I'm talking about basic tax amount it is 1.5 LH if the SSA total income is 15 L if the SS total income under normal regime is 15 his tax amount is coming going to be how much 2.62 see how much variation is there indirectly s if at all he is declaring income under 11 BC if at all he's declaring income under 115 BC for him concessional rates of tax applicable rate the tax is given as a concession rate the tax rates are concessional rate that's why it's called as what concessional tax rates but 115 BAC is not given just like that they have given so many conditions what are the conditions you cannot claim so many deductions what are the deductions you cannot claim for example in my supplementary material I have this uh I have this discussion uh just just a minute so what are the deductions he cannot claim so I have given headwise the classification okay I mean I'll directly explain so what are all the deductions that he cannot claim under under salaries under salaries he cannot claim entertainment elevance deduction yes or no but anyhow entertainment elevance is eligible only for government employee yes or no moreover 5,000 only maximum deduction that's not a big deal and profession tax most of the questions profession tax is 2,400 or 2,500 or 3,000 rupees correct so these two deductions he will not get leave travel concession he will not get house rent Elance he cannot claim deduction and 10 subsection 14 personal expenses related some elanes he will get that he cannot claim deduction yes or no whereas traveling Elance daily Elance conveyance Elance elements payable outside India generally these are the elements given for official duties there you can claim deduction whether it is default tax regime or normal tax racing doesn't matter because these elements are generally given for official purpose and transport elements only a deaf blind dumb employee will get that fellow will get whether he is opting for 115 BC or not opting for 115 BSC for specially abled people this Elance will be given getting it these are the disales under what income from salaries these are the deductions which an SS will not get under salaries head of income under house property head of income he will not get deduction for interest on loan borrowed for self-occupied property we all know that under house property for two properties we can claim sop exemption unoccupied property or self-occupied property exemption where we straight away start the problem with n is equal to Z where we straight away solve the problem with n equal to Z now we know that under normal tax re if at all we started problem with nav is equal to zero in the sense s has chosen s or UOP benefit for two properties the interest is restricted to 2 lakhs under normal tax regime interest is restricted to 2 lakhs maximum reduction subject to some conditions three conditions were there if at all that conditions are not satisfed 30,000 is the limit so interest is restricted to 2 lakhs now that interest also you will not get under default tax receipt if at all the SS is going for default tax regime interest he cannot claim for self-occupied property what about let out property and what about deemed let out property no restriction on a default tax re but he cannot set off loss under the head house property with other heads of income if the SS is going with 115 BAC if the SS is going with 105 BSC he cannot set off loss under the head house property with other heads of income correct literally house property head of income is Untouchable under default tax res correct next what about pgbp related restrictions I cannot claim additional depreciation I cannot claim scientific research related contributions only remember only contributions donations you can't claim but if at all you are spending scientific expenditure on your own Revenue expenditure or capital expenditure under 35 subsection one Clause one and Clause four getting it you can still claim deduction only for donations to scientific research Association social Association iita all this you cannot claim deduction so deduction donations related scientific research and social research donations you can't claim deduction self expenditure inhouse reseearch expenditure you can still claim deduction whether it is default tax reim or normal tax reim further you cannot claim investment link deduction expenditure which expenditure by the way capital expenditure for specified businesses if at all the SS is engaged in 14 specified businesses any capital expenditure he spent generally he can CL deduction under normal tax regime but if at all you're choosing concessional tax regime optional tax I mean this concessional tax rates that is default tax if you're choosing you cannot claim investment link deduction and I'm telling you if at all any s having these deductions no he will not come for default tax res why he will come for default tax res just to save that one lakh rup these deductions he will forego obviously not correct and one more important point at salaries I want to tell in finance act 2022 standard deduction also is not eligible but in finance act 2023 onwards irrespective of regime standard deduction is eligible correct how much is the standard Direction exactly now in the recent Amendment no for May 25 they increased it to 75,000 they increased it to 75 okay but don't write that in examp next then what are the exemptions that are dened what are the other conditions or see the moment you choose default tax reim so many deduction and exemptions will be denied for you what are the exemptions denied under other sources daily Elance for MPS and mlas if at all the MP and ml is choosing default tax regime at the time of filing return of income whatever daily Elements which they're getting which is generally exempt under 10 Clause 17 is not exempt and exemption in respect of minor child how much ah per anim per child correctly so th there is no restriction on two children by the way getting it that only restriction of two children comes only in salary set of income nowhere else it will come so minors for minor no clubbing when we apply 64 Clause 1A 64 subsection one when you apply clubbing minded income is clubbed with the hands of the parents 1500 rupees up to you can claim deduction per minor child that you will not get and these are now if you see there is no restriction for capital gains with respect to capital gain set of income there are no conditions attached for 115 BAC why most of the capital gains are taxable at special rates you getting the point there is only one type of capital gain that is taxable at normal rates short-term capital gains short-term capital gains other than triple 1 year all short-term capital gains other than triple 1 yet they are the only one taxable at normal rates and that short-term capital gain how we how we will compute tail consideration Minus cost of acquisition cost of improvement what else other deduction is available to restrict are you getting it that's why they ignore capital gains you're getting the point whereas remaining heads of income they covered next now under chapter 6 also you cannot claim any deduction under ATC to U you cannot claim entire chapter 6 deduction under atc2 U except three sections one is atcd subsection two deduction claimed by SSC for employers contribution to National pension system central government Health scheme whatever or deduction deduction can be claimed by SSC in respect of central government contribution to agnipath scheme that one he can claim deduction and 0 jjaa in respect of additional employee cost 30% of additional employee cost can be claimed as deduction under 80 JJ don't worry you go chapter 6 here you know probably this entire income tax division I upload in Parts part one will have some chapters part two will have some chapters so chapter 6A will be there probably in the part two video inside the time stamp 80 JJ is there you can just open directly and then read it you can understand you we will get 30% of the additional employee cost as a deduction under ad jjaa this deduction you can claim whether it is normal tax regime or default tax generally under normal tax regime all chapter 6 we can claim but under default tax resim only three sections 0 JJ AA and 0 C CD subsection 2 atcc subsection 2 remember at CCD subsection 1 1B no atcc h subsection one no no deduction if it is if you're going for default tax receive now loss under the head house property you cannot set up with other heads of income under default tax moreover for self-occupied property you can't claim interest also as a deduction further any brought forward loss that that is there from the earlier assessment here that loss belonging to any of the above deductions any brought forward loss is there from earlier years for example last year I am normal tax re I claimed house property loss self-occupied property loss I brought forward it to this year now in the current year default tax regime current year loss I current year interest amount I cannot claim what about brought forward house property loss in self-occupied property that I have to ignore that I have to ignore okay I will ignore house property loss because the default tax last year I have I have claimed depreciation additional depreciation and I have a loss where I have calculated business loss and depreciation loss both I have carry forward it this year I have a brought forward business loss I have a brought forward depreciation loss both now what about this brought forward business law set up against business income even though you are going the default tax I will not object what about brought forward depreciation loss split that into two categories how much of this depreciation loss is belonging to normal depreciation how much of this is belonging to additional depreciation you decide normal depreciation you set off no problem additional depreciation loss is there right don't set off now because I am choosing default tax regime I am losing the benefit of additional depreciation the current year okay current year I will not claim okay fine what about brought forward depreciation you are not letting me to cling but you know what this entire depreciation I reduced in the block asset block value and I'm claiming only on the revised value depreciation this year but technically you didn't tell me deduction without allowing deduction for depreciation I reduced in the block value now you are denying depreciation benefit for me brought forward depreciation current year I didn't claim okay leave it what about previous year brought forward depreciation I reduce in the block value and I'm unable to set off now I will add back to I will add back to block value that is what the last condition this additional point is there example in the default tax 115 BC this is what suppose if the SS has any brought forward depreciation loss brought forward depreciation loss that to which depreciation loss additional depreciation loss which SSC cannot set off because in the current year he is choosing default tax regime that brought forward depreciation law which could not be set off against by the against the income by the SS because of DTR that amount of loss will be added back to block value and depreciation will be computed revised on the revised block value in the current year are you getting it if at all a tough question has to come on this Z ask if a tough if paper has to be you know like if if they have to test if they have to test in a tough way they will ask this question that's it entire default tax resim Provisions we understood and I'm telling you in exam you will only get questions on normal tax resim trust me mcqs only there is a possibility of default tax re direct descriptive questions only normal tax re and I'm telling you there will be one total income problem of 12 marks either 10 sorry 10 marks question or maybe 14 marks question directly okay one problem will be there that total income problem will be predominantly based on salaries or this total income problem will be predominantly based on pgb Provisions either the total income problem major testing point will be pgbp or major testing point will be salaries any of this will be there mostly at the end of the problem whenever you're solving descriptive paper in income tax first before reading the question come to the last parts of the question see which methodology they are asking under which mechanism they are asking are they asking us to compute total income not exercising 115 BAC opting out or exercising opting out from previous that you figure out so interpret twice that line and decide which method is applicable sometimes if a question is given for 14 marks they will ask you both they will ask you both very simple how to solve it very simple I have explained it in the further I have explained it in the further like when you watch the video continuously you will understand you know like what are the adjustments to be done headwise so that from normal tax resim to default tax resim how to bring the income from default tax resim to normal tax resim how to bring the income are you clear next so that is tax rates normal tax rates default tax rates and special rates of tax all that now you know how to compute tax you know whenever because definitely tax computation problem will be there how to compute tax you know have a standard format like this first you should compute basic tax how you should first you should compute what basic tax just a minute basic tax is equal to First you should compute basic tax full yeah perfect okay first you should compute basic tax for that you will add Sarge if applicable for that you will add what Sarge if applicable then you will get subtotal what is it called as subtotal how basic tax is computed very simple total income you take divide that into two parts first allocate what are all the special incomes ltcg stcg 1121a 112a and finally we have 115b all that Lottery all that so allocate income allocate income if any balancing figure is there that is called as normal income and on this apply 20% apply 15 percentage apply 10% after reducing one lakh and on the balance cap I mean lotteries and all apply at 30% you will get tax amount yes or no and armal normal income apply SL La limits in case of individual you will get tax amount entire this total is called as what basic tax first whatever tax we are Computing is called as what basic task so one point I just want to clarify here I started our discussion with un unexhausted basic exemption limit yes or no unexhausted basic exemption limit there I have unexhausted unutilized basic exemption is there and I also have longterm capital gain 112 which is taxable 20% that income is there I also have short-term capital gain 1 year 15% income is there and I also have 112 year long-term capital gain whenever 112 year income is there minus one lakh you eliminate and then balance only you should compute tax always when you're Computing tax on 112a see remember when you're calculating total income you should never reduce at one lakh total income means 11 to your total capital gain is part of total income but when you're Computing tax only that one L has to be eliminated they have not given exemption Direct from total income they have given exemption from tax computation 112a the exemption is given on tax computation up to one lakh it's not Exempted from taxation it is taxable 11 to a entire income is taxable but when you're Computing long-term capital gain tax under 112a up to one lakh tax is not applicable you are getting the point now this is just like a slab limit this is just like what slab limit suppose my income total income is 7 lakhs can I say my total income after eliminating basic exemption can I say to people what is your total income after elimate basic exemption will I tell no well Computing tax basic exemption elment and then compute same way long-term capital gain tax 112a how much is the income 5 lakhs I have got how much is taxable four lakhs only taxable how much is total income in that four L sorry five lakhs five lakhs is total income example entire 5 lakhs is total income but how much on how much you apply tax only on four lakhs I apply tax understood so like this you comp then what you get is actually called as what basic tax for that basic tax you should add what Sarge how to add I mean what are the sarge rates we have again you know again Sarge rates are dependent upon whether you are going with normal tax regime or whether you are going with default tax regime suppose no I'm talking about individual HF aop Boi artificial judicial person I'm talking about only these categories of sses so normal tax regime what is the rates of Sarge applicable a minute I'm just checking recording going on or so Sarge under normal tax regime if the total income exceeds 50 lakhs but not exceeding 1 CR the rate of sarge is 10% the rate of sarch charge is 10 percentage I thought you will remind me at least if the total income is more than 1 CR but not exceeding 2 CR that sub charge rate is 15% in both these cases total income includes dividend income long-term capital gain short-term capital gain all that are you getting it all special incomes no bifurcation total income how much which income in that I I'm not asking which income like special income no no no without any without any consideration to type of income what is the SS total income is it more than 50 lakh yes is it less than or equal to 1 CR including all these incomes yes it is 10% is a such charge the SS total income crosses 1 CR but not exceeding 2 CR including all these incomes 15% suppose if the SS total income cross 2 CR if the SS total income cross 2 CR but not exceeding ah but not exceeding 5 CR now SS total income Crossing 2 CR but not exceeding 5 CR right this is excluding what is this excluding dividend income excluding longterm capital gain 112 excluding longterm capital gain 112a excluding shortterm capital gain Tri 1A many students think Lottery income also excluded no Lottery income is not excluded are you getting it so if the total income of the S cross 2 CR but not exceeding 5 CR which includes dividend income long-term capital gain short-term capital gain sorry sorry excluding these incomes if at all the total income is more than 2 CR then the rate of sarch charge is rate of sarch charge is on tax portion on on tax portion on dividend income long-term capital gain short-term capital gain on this tax portion the rate of search charge will be 15 only on remaining tax portion on remaining tax portion the rate of surcharge is 20 5% are you getting it if you recollect dividend income is taxable at normal rates only dividend income is always taxable at what rate normal income whether it is declared dividend de dividend whatever it is dividend is always taxable at normal rates so now the PO the provision is this the sarge rate on the tax portion on dividend income Sarge rate on long-term capital gain tax and short-term capital gain tax Tri one year by the way remember not every short-term capital gain Tri one year short-term capital gain 112 long-term capital gain 112 year long-term capital gain and dividend income on this whatever tax is there right on that Sarge shall not exceed 15% on that S charge shall not exceed 15% that's the rule suppose if your total income is more than 5 CR total income is more than 5 CR excluding what dividend income LTC is 112 112a stcg 111a excluding this your total income is how much 5 CR then what is the tax rate then what is the tax rate on tax portion on dividend long-term capital gain short-term capital gain 1A the Char is 15% only again on remaining tax portion 37% now what they are saying you know under default tax regime this tax rate is also 25% only under default tax regime what they said total maximum Sarge rate cannnot exceed 25 are you getting that's why you will not find in default tax regim separately more than five more than 2 CR only last why after income cross two gr maximum such charge rate is 25% only understood or not in the ICI book they gave two Sarge rates tables unnecessary yes or no second S one one of the sarge table is talking about default tax rese another Sarge table is talking about normal tax resim under normal tax you have four categories and there is fifth category also what is fifth category suppose if the SSC total income is more than 2 CR including dividend including long-term capital gain including short-term capital gain getting it 2 CR but does not come under earlier four categories does not come under earlier four categories for him the search charge 15% for them the sarge rate is what whether the sarch charge is on tax I normal tax normal incomes related tax portion or special incomes tax portion whatever it isch charged it is 15% what is this exactly here is where many confused nor my normal income is actually 1.2 CR and I have long-term capital gain which is 1 CR I have a long-term capital gain which is 1 CR now let us fit that situation here let us fit that situation here I have normal income more than one CR 1 point I mean normal income 1.25 long-term capital gain one my total income is 2.25 CR is my total income including dividend long-term capital all this is it my more than 50 or less than one CR no is it more than one CR and less than two no or my excluding long-term capital E it income is more than no are excluding this is it more than five no which it applicable to me then ah the last category indirectly what are they saying is if at all SSC total income exceeds 2 CR just because of dividend income long-term capital gain 112 112a and shortterm capital gain Tri 1A because of this only more than 2 CR cross otherwise it is less than two only normal incomes are less than two only generally if normal income is less than two what is the such as appliable 50 what is the sarge rate applicable on long-term capital gain 112 1112 A1A and dividend income what is the sarate applicable on this 50 that's what 15 are you getting it all of you when I will have 25% sub charge rate and 37% sub charge rate if my income other than dividend other than ltcg other than stcg if that income crosses to then I have 25% if that income crosses 5 then I have 37% don't worry I'll solve one problem also are you getting it I'll solve one problem also next that is sub charge rate whereas if if the SS is going for default tax regime if the SS is going for default tax reim only up to more than 2 CR logic only there directly 25% maximum sub charge rate is 25% excluding which income dividend ltcg stcg tri1 stcg remaining incomes Lottery income or normal rates of tax income that all the tax amounts what is the such charge rate Max what is the sarge rate maximum 25% whereas on dividend all these incomes what is the maximum such charge rate 15 percentage understood so now you will compute S charge like this okay you will compute S charge accordingly based on the rate so in this tax no you split you will have to split this tax how you have to split this tax how much of this tax belongs to Dividend how much of this taxs belong to ltcg how much of this STX belong to stcg how much of this tax belong to 112 2 a so allocate the amount balancing figure will be this tax on this 25% or 37% or 15% will apply whereas on this tax amount straight away 15% charge like that you compute the amount and add it here now here the problem comes where you know how much is the dividend related tax portion how much is the dividend related tax portion how much is the tax portion related to dividend this is where the question comes generally average rate of tax we apply what we apply average rate of tax very simple like basic tax you will compute right basic tax you will compute right in this basic tax when you're Computing tax know generally when you're Computing basic tax know how do you compute basic tax total income I divide them into you know how total income I divide them into special incomes for example for example the total income is 1.5 CR the total income is how much or else let me take this example my total income is approximately 3 CR total income is three out of this long-term capital gain is 50 lakh which one 112 again I have a long-term capital gain 112a which is some 30 lakh again I have short-term capital gain approximately let us assume uh Tri 1A approximately I have you know yeah 10 lakhs approximately I have how much 10 or else this one no this one you let us keep it as 20 and my dividend income my dividend income is equal to 20 lakhs how much it is 50 20 70 + 10 okay let us let us put 10 only let us put 10 dividend income so these are the incomes remaining incomes are called as normal incomes in this know Lottery income might be there might not be there let us ignore it let us ignore it normal income or else or else will do one thing Lottery income is also there how much is the lottery income 10 lakhs how much is the remaining normal income balancing figure balancing figure okay here it is yes exactly 2 CR not even two let us put Lottery income 8 lakhs so how much is this 2.02 CR since I want to exceed two I want the number exceeding two okay now tell me here excluding dividend excluding ltcz excluding 112a excluding 31a is my total income excluding these incomes is my total income more than 2 CR yes in that case on this whatever tax amount you compute whatever tax amount you compute getting it how much what is the rate of sub charge 25% correct whereas on this whatever tax amount we compute what is the rate of sarch charge ah 15% but remember dividend is not taxable at any special rate dividend also be added to normal income while Computing tax so how much is the revised normal income because on dividend I will not compute tax separately I will add it to this income so 2 CR 12 lakhs yes or no now on this first what I have to compute I have to compute basic tax I have to compute basic tax let us assume SS is a normal citizen what is the basic exemption limit available 2 and half lakh what is the basic exemption available 2 and half lakh so now 2 CR 12 lakhs right can I get some calculator yeah so 2 CR 12 lakhs right minus 2 lakh I mean 2 CR 12 lakhs minus 10 lakhs I will remove straight away 2 2 lakhs is there right why I remove to 10 lakhs because up to 10 lakhs tax liity is what ah 1 lak 12,500 into 30% how much 60 lakh 60,000 or no are you all with me all of you then balance up to 10 lakhs income how much is the income one how much is the tax 1 lakh 12,500 sorry 1 12,500 what is the total basic tax 61 lakh 72,500 now what is the rate of suchar as applicable 25 percentage wrong in this tax in this tax there is an amount of tax involved related to Dividend also dividend related tax portion how much is the maximum such charge I can be now in this tax how much is the tax amount belonging to Dividend that is question in this tax how much taxes belonging to Dividend that is a question very simple 61 lakh 72,500 is the basic tax on total income including dividend excluding ltcz excluding stcg excluding Tri I mean 112a 1112 and even Lottery Also let's exclude it so 61 multiplied by this much taxes for how much amount 2 CR 12 lakhs 212 dividend is how much in this 212 10 lakh is equal to how much into 10 / 212 is equal how much 2 lakh 91,5 this much is dividend related tax now I will reallocate how I will reallocate out of this 2 lakh 91,5 I will reduce what is the balance amount 61 72,500 is equal to how much it is 58 lak 813 44 whereas an dividend tax amount is how much 2 lak 91,5 whereas we have long short Lottery also 8 L into 30% how much 2 2 lakh 40,000 correct then on this 25% such charge will apply on this how much will apply 25% whereas on this how much 15% not only this we have other incomes into 20 percentage into I mean minus 1 lakh is equal to 19 lakh into 10 per equal to 1.9 lakh is equal to 10 lakh yes or no is equal 1.9 into 15 percentage is equal to 1.5 lakh correct what is the total tax on these items 10 + 1 10 lakhs + 1.9 + 1.5 is equal to 13 lakh on this how much such charge rate is applicable into 15 percentage how much it is 2 lakh 1,000 now on dividend plus these incomes s charg is how much 291 plus 2 lakh 1,000 this is a total search charge on this and this is a total search charge on huh sorry for dividend I added here ah okay okay sear charge on dividend is how much I'm just observing you very sharp okay 55 2 lak 91155 into 15 percentage ah very good 43,6 73 this plus this both put together is S charge on dividend plus long-term capital gain Tri 1A and 112a correct remaining tax amount Sarge avable at 15% sorry 25 percentage in this question because the remaining income is more than 2 CR understood how to compute if dividend is there how to split dividend related basic tax portion so that we can apply sarch charge only 15% whereas remaining tax portion we can apply sarch charge at 25 or 37 whatever the case may be understood have you tried this problem earlier huh no you didn't remember next so that's how sear charge has to be computed correct okay now once I understood how to compute Sarge once I understood how to compute Sarge PKA tax computation problem will be there PKA no doubt there will be a tax computation problem once sech charge is over what is the tax computation format I said basic Tax Plus S charge you will get subtotal minus either you get rebate 87a or either you get marginal relief correct H then if you reduce that you again you get subtotal for that add sess at 4 percentage then you will get the gross tax liability from that already you might have paid something called Advanced Tax already you might have paid TDS TCS like you didn't pay you got net amount only they collected already tax they deducted tax from you balance tax payable how much this is called 140 years self assessment tax are you getting it this is how the tax computation format now in this we understood basic tax such charge and now will we will understand marginal relief okay let us understand marginal relief how to calculate marginal Relief by the way since we have multiple limits since we have multiple limits one example I will take how to calculate margin and relief in the easiest way I will take getting it now let's calculate marginal suppose you know I have my total income which is exactly 2 CR 1 lakh I have exactly how much income 2 CR 1 lakh 2 CR 1 lakh is my income or else I will take two examples better I'll take two examples first I will take this example I have exactly 51 lakh income normal income entirely normal income let us not complicate it 51 lakh is my normal income how to compute tax on this 51 lakh generally how to compute tax on this 51 lakh so on 41 lakhs 30 percentage which is 123,000 plus up to 10 lakhs 1 L 12,500 so basic tax is how much 13h 42,500 plus since total income cross 50 lakhs you know 1 lakh 34,2 rupees such charge is applicable yes or no yes sir how much is the tax so 13 42,500 plus 134,50 ah 14 lak 76750 now SSC got a doubt sir it is because of 51 lakhs income let us assume sir I have only 50 lakh income let us assume I have only 50 lakh income what is the basic Tax Plus charge you tell me he asked how much 50 lakhs means 40 LH into 30 per plus 1 L 12,500 13 lakh 12,500 since it is only 15 lakhs such charge will not apply what is the tax 13 12,500 what is the excess amount we are asking 1476 750 minus 13 12,500 oh my God 1 lak 64250 rupees just because one lakh income difference just because I have earned 1 lakh extra income you are asking me to pay 1 lakh 64 250 tax more than my income you're asking worst case if anybody if a situation comes like this what I am ready to lose I'm ready to lose that one lakh rather than paying 1.64 correct so I will be ready to lose 1.64 lakh if you want sorry I will be ready to lose that one lakh if you want you take one lak income itself forget about tax income itself you take don't ask me this tax am correct which means how much relief I am asking 64 250 I am asking relief I am ready to pay 1 lakh you are getting the point how this is exhibited in marginally Formula you know first step one compute basic tax on total income total income including I mean total income plus plus sarg at applicable rate first compute step two in this example what is it tax amount on 50 lakh rupee what is the tax amount on 50 lakh Which tax by the way basic tax only s reate and all no discussion only basic tax how much is that you compute plus you are ready to pay what whatever amount I have more than 50 I will pay you that much amount total income which is 51 lakhs minus 50 lakh yes or no I'm ready to pay one lakh and tax on total income is how much it is up to 15 lakh 13 lak 12,000 500 I am ready to pay tax on 50 lakh which is 1 L 12,500 plus that one lakh income also I'll give you which I have got don't ask me 14 76,2 yes or no I am ready to pay 142,500 132,000 is my tax 1 lakh my income itself I pay please give me relief of this much Step 1 minus step two 14 lakh 76,000 250 minus 142,500 is equal to 64250 relief you give me them ask in step three the answer is positive only there is a relief suppose if the answer gets negative no relief in such a case what I will do you know I will compute like this marginal relief is how much not applicable I will put in the in this question relief positive amount came now step three so I will claim 64250 I will claim what is the sub total again now tell me 1476 750 minus 64250 is equal to how much 142,500 plus I'm ready to pay s on that plus 4% 14 69,000 total tax I'll pay are you clear that's it another example I will take so that you will have a concrete understanding now I have exactly income 2 CR 1 lakh I'm exactly having income how much 2 CR 1 lakh okay on 2 CR 1 lakh how how to compute tax I will first apply remember SAR charge is a flat system not a slap system so no flat 2 CR 1 lakh so almost 1.91 CR correct 1.91 CR into 30 per plus 1ak 12,500 is equal to how much 58 lakh 42,500 this is the basic tax if at all I have total income how much 2 CR 1 lakh for that I will add such charge since income exits 2 CR S charge is how much directly 25 percentage how much is that 14h 6,625 so total tax how much 5842 500 + 14 60 625 is equal to 73 lakh 3,125 subtotal before s so you're asking me this much fine let us assume that one lak is not there let us assume I have only 2 CR income what is the basic tax 1 9 CR into 30 per plus 1 lak 12,500 is equal to how much is the basic tax 58 lakh 12,500 and I know very well since the income is only 2 CR that charge rate is only 15% thatch charge rate is how much 15% how much is the S charge 8 lakh 7187592183 also I did the same just one lakh income difference just one lakh difference how much is the tax you're asking me 73 L 3,125 6 lakh 18,750 this much you are asking me to pay extra just for one lakh extra income correct if you want what I'm ready I will pay tax on 60 I will pay tax on 2 CR plus I will add one lakh also to you no problem so 66 lakh 8437514266 to income I'll pay 67 lakh 8437514266 tax totally if you want what I'm ready on two 66 lakh I will pay that one lakh also I'll pay to you indirectly what am I asking this amount I'm ready to pay plus one lakh extra income ready to pay 6 lakhs don't ask me 1 lakh I pay 5 lakh 18,000 relief I'm asking how to compute this in a formula version in how are what are we saying department is asking step one tax on total income including S charge in this case at 25% what I am telling I will pay tax on 2 CR Plus S charge at 15% plus total income minus 2 CR there whatever am I pay that income that's how the logic and step three if it is positive give me relief if it is negative now no relief which means no relief means what negative means what you know the total amount of tax extra that I'm paying compared to my extra income is less only then only relief will come negative that's so you should calculator easy formula method I told Common Sense method I told next that is marginal relief computation so basic tax add SAR charge subtotal minus relief then we have another concept called rebate we have another concept called rebate which is 878 we have two provisions on rebate one is normal tax regime another one is default tax regime once we complete this it will be over basic concepts topic will be over predominantly getting it I will brush up remaining topics briefly I will show you and then we'll wind up this particular session basic concepts will be over next normal tax resm rebate what are they saying if at all your total income what is it total income excluding including no nothing such total income how much is it less than or equal to 5 lakhs H yes sir it is less than or equal to 5 LX then up to 12,500 rupees discount I will give you from basic tax from where basic tax I will give you not from C before c you tell me what is the basic tax up to how much 12,500 if it cross even 10 Rupees 5 CR I will not give you this benefit sorry 5 lakhs I will not give you this benefit if your total income is not exceeding 5 lakh compute basic tax how much whatever I don't care minus 12,500 balance add 4% pay tax enough sir after reducing rebit no it is zero or negative coming then make it zero after claiming re tax cannot be negative tax can only be either zero or positive tax cannot be negative yes or no so make it zero don't pay any tax correct now under default tax resem this threshold limit what is it called as threshold limit is increased to 7 lakhs and the rebate amount is increased to 25,000 means if the SSC is going for default tax res the threshold limit applicable for the SS is what 7 lakhs and the re amount is applicable how much 25,000 now let us calculate here one small suppose know s has 710,000 income exactly how much income SS has 7 lakh 10,000 since SS has 7 lakh 10,000 will he be eligible for rebate under 87a under default tax regime no no 7 lak 10,000 wait I will compute don't worry I'll tell you getting it correct now tell me I will calculate first basic tax on this I will calculate basic basic tax on this how to get up to 3 lakh Z here here citizen age is unnecessary resident individual age is unnecessary yes or no so like by the way when a person is treated as senior citizen or super senior citizen if at all he completed 60 years by first April suppose right now previous year is what 23 24 suppose if the s birthday comes on 2024 1 April 2024 s birthday comes but his age is completed that full by previous day itself right if the SS birthday is if the SSC birthday is on or before 1 April of the immediate assessment year on or before 1 April of the assessment you if birthday comes like 60th birthday comes 60th birthday comes on or before tell me when do we celebrate birthday on the day we born after completing one year ah exactly 60th birthday means what does it mean after completing 60 years after you were born correct so birthday is celebrated only for the completed year then you will enter into the next year suppose I am celebrating my 60th birthday on 1 April 2024 for example I'm celebrating my first birth I mean sorry 60th birthday on 1st April 2024 what does it mean I completed 60 years on 31st March so if the SSC birthday 60th birthday or 80th birthday is on or before first April of the assessment year relevant assessment year then he is a senior citizen or super senior citizen accordingly correct in default tax regime this age criteria is not applicable whoever the SS limit is only 3 lakhs suppose in B in default tax re my income is 7 lakh 10,000 how should we compute basic tax 7 lakh 10,000 how should we compute basic tax up to 3 lakhs how much zero 3 to 6 lakh how much 5 percentage 15,000 then 6 lakh to 9 lakh 6 lakh to 9 lakh but here it is 7 lak1 only 1 lak1 into 10% how much 11,000 so total tax how much 26,000 correct but you know what department told me if at all I have income exactly up to 7 lakh suppose if this 10,000 is not there if this 10,000 is not there let me calculate if this 10,000 is not there what is the tax let me calculate that it is exactly 25,000 it is exactly how much 25 you are giving me 25,000 rupees benefits directly just because I got 10,000 rupees extra income you are taking away from me 25,000 worth of benefit just because I have 10,000 income if you want what I'm ready to do 10,000 I'll pay you okay give me 15,000 relief I'm ready to pay how much 10,000 give me 15,000 relief correct see very simple so uh 7ak 10,000 right so 26,000 is the total tax including I mean whatever this on on the basic tax just because of 10,000 extra income you are asking me to pay 26,000 Rupees amount of tax what I am ready to pay I'm ready to pay 10,000 if you want just give me 10 10 it's what how much 7 lak 10,000 ah if you want 10,000 I'll be ready to pay just give me benefit of how much 15 not 16 how much it is 16,000 I am ready to pay 16,000 I will only pay 10,000 rupees balance plus how much 4% is equal to 10,400 just a minute just a minute how to calculate this rebate I mean how to calculate this rebate so step one as usual basic tax you calculate step two uh LC once okay that logic suddenly forgot let see once ah yeah yeah yeah correct only first first let us calculate first let us calculate what is the total income minus 7 lakhs that is the extra income which I got right how much is that how much is that 10,000 I have derived that particular thing that notes I've G I've given so total income how much in our example 7 lakh 10,000 minus uh in our example it is 7 lakhs compute tax payable on total income generally right now in an example how much 26 correct only now yeah 26,000 correct only if B is greater than a correct no in this example here it is how much 10,000 if B is greater than a yeah it is greater than a obviously then rebate under 87 a would be B minus ay correct only my answer is now you doubted me so 16,000 then balance 10 plus 4% how much 10,400 I will do mistake fine correctly because know whatever EXT have to pay for sure same marginal logic only here also no change that's it so and Studio how to compute so if at all your income is somewhere close to 25 23,000 rupees approximately after 7 L for sure rebate will be there like this for sure some amount 500 rupes or th000 some rebate will be there clear suppose if is 7 lakh 1,000 same concept 7 lakh 1,000 also same concept th000 rupes only tax will come until you have income up to 725,000 your tax will not exceed 25,000 logic correct until your tax is until until your total income is up to 7 lakh 25,000 your tax liability will not increase by more than 25 Beyond 7 up to 725 what is your total income that much only your tax plus 4% say simple logic that's it so that's rebate over now after reducing rebate again sub tootal we will get then whatever on that sub tootal 4% say we will add and find fin amount of tax we will compute that's that's called as not tax payable that's called as gross tax liability minus Advanced Tax minus TDS and TCS then finally you will get tax payable that you will have to pay before filing the return of income that's called self assessment acts under 140a correct that's it most of the basic concepts topics will be completed default tax resume you know what I have not covered I have not covered what are the cases income will be assessed in the same previous non-resident shipping business like that some Provisions were there s leaving outside India business s some doubts on the S like that there are some four cases are there then I am not covering undisclosed income discovered 68 69 a 69 B 69 C 69 only these two I'm not covering and I'm not I am not also covering I'm not I mean I'm not covering what is the rate of tax applicable for companies societies partnership forms this I am not covering it's okay they are not tested at CA inter level generally are you getting it individual tax rates is important Sarge rates is important marginal is important default tax resm is important right now whatever analysis we did is applicable for individual HF Boi aop artificial judicial person that's it with this basic basic concept chapter is over clear all of you thank you you know what in the entire income tax basic concepts is only toughest honestly you see because like you can't understand if at all in the tax computation problem long-term capital gain given short-term capital1 is given 112a gain is given 115 BB Lottery income is given and you were given normal incomes and dividend income and exactly two CR scenario how to compute tax on dividend all that definitely if this question comes they'll give you high weightage six marks only only for tax compation they'll give you don't think like they it won't be asked they are asking no in mcqs they're asking tax computations only or no so we'll take a short break and immediately start TDS TCS Provisions we'll rock that Provisions okay by the way those who are watching on YouTube you continue watching without missing the time stamp you can come TDS later no problem yes uh one doubt which many students are asking I I thought of clarifying I forgot what about within the rebate within the rebate if the if the total income is more than 7 lakh under default tax receive we are having a concept of marginal relief right it's a it's a kind of relief correct if at all I have income up to 725,000 rupees only just now I told up to 25,000 whatever extra income is at that much LP tax extra tax you we are asking it as a relief indirectly reate computation itself is containing relief without using the word relief it's actually a relief kind only that kind of concept ccept is not there for normal tax rese suppose in normal tax rese if the SS total income is 55,000 he must pay full tax 5 lakh 5,000 means what up to 2 and half lakh 5% 12,500 and 5,000 into 20% th000 13,500 plus 4% say he has to pay can he claim 12,500 benefit sir his tax his income is just 5,000 extra for that you asking him to pay tax no extra excuse the reason is very simple the department want to encourage only default tax regime where department will compute tax on income without they are worrying about fake deductions claimed by SSS there are many SSS who are claiming fake deductions 8C 80 8D all these are fake deductions Department need not worry why in default tax resim no deduction for chapter 6A itself so in order to promote default tax res more benefits of computation in terms of tax and all they're giving that's why maximum such charge is restricted to 25% and um in if at all income is just more than 7 lakhs it is they are giving benefits clear that's it so that's that one clarification you just have to keep in mind so let's continue with residential status so in residential status there are three sections which are very important five six and N of course there is another section called seven deut to received in India getting it income received or deut to be received that's not a big deal anyhow so what is this particular residential status is all about see any SSC under income tax purpose we we classify them into two categories mainly resident and non-resident especially if it is an individual or HF we classify them into three categories resident and ordinarily resident resident but not ordinarily resident non-resident getting it now depending upon their residential status the income will be taxed according now how income is taxed depending upon the residential status that point is covered in scope of total income so in residential status there is a point called scope of total income directly I'll open and then show you now so like as I told you broadly three categories resident and ordinarily resident not ordinarily resident non-resident remember this word resident not ordinarily resident resident but not ordinary resident this point is applicable only for individuals and HF this point is applicable only for individuals and HF for for all other SS company partnership from local Authority Society for everybody either they are resident or they are non-resident that's it if at all they resident we classify under this particular first part if they non-resident third part the middle part this is only for whom individuals and HF now how to identify whether they are ordinarily resident or not ordinarily resident non-resident we'll discuss little later now what is the impact of these residential statuses now what it says suppose if the income is acing or erasing or deemed to ACR or Aras in India nothing but if the this is called Source based Source based taxation Source based principle if the source of income is in India for everybody it is tax whether you are staying outside India or inside India doesn't matter whether you are your resident in India or resident in us or resident outside India doesn't matter are you having income for that source is in India acal is in India place of AC is in India that's it taxable for you under Indian income tax you have to compute total income and pay tax on that suppose the source is not in India first you apply Source rule source is not in India second apply receipt rule where you received it have you received that income in India received means first time income is coming under your control suppose no you received amount you you are staying somewhere in London you have a building at London you rented that building to somebody getting the point and the other person paid rent in the London bank account which you have that amount you later remitted to your parents in India now where you received it you received it in London only first time when you get the control on the rent income in London itself so receipt is in London property situated in London source is in London so both the source and res both are outside not taxable at all so suppose if the C is in India taxable in all the cases an important thumb rule for a resident if a person is classified as a resident in case of individual and HF if a person is classified as R resident and ordinarily resident Global income is taxable whether the income source is in India receipt is in India source is outside receipt is outside doesn't matter Global income is taxable suppose if the source is outside India receipt also outside India both still it is taxable even if that income is not received in India for a Glo for a resident company for a resident partnership firm for a resident LLP for a resident and ordinary resident individual and HF Global income is taxable Global income for a nonresident for a non-resident income is taxable only if source is in India it is taxable source is not in India if receipt is in India taxable suppose source is outside receipt also outside for a non-resident nothing is taxable for a non-resident if source is outside res is outside fully Exempted not at all taxable under Indian income tax law getting it suppose for a resident but not ordinarily resident for Resident but not ordinarily see for non-resident and R and War for both of them the provision is mostly same if source is in India taxable res in India taxable if both are outside not at all taxable however for RN only even though if the business is out outside India even though if the profession is outside India suppose if the business is controlled or set up from India business is actually outside but it is controlled from India or the profession is outside India but it is set up from India what is profession setup in India simple I'm a chared accountant I opened a branch office outside India now though I opened a branch outside India that's a CA for that that particular profession has got validity through a CA degree provided in India profession set up for from India getting the point still it is taxable here actually business is outside profession is outside you are receiving also everything is outside but that business is controlled from India profession is set up from India therefore it is taxable for RN technically speaking suppose if there's a non-resident some non-resident is there he attended India and pursued chartered accountancy course got chared accountancy certificate everything let us assume for for the sake of getting it and he went abroad and settled there getting the point using this qualification he started profession and doing that this is actually a profession that is set up from India through a qualification derived from India through a skill derived from India getting the point still not at all taxable but for RN War if the profession is set up from India business is controlled from India then it is taxable see profession business control profession setup is nothing but branches nothing but it's related to branches getting the point or it may be related to franchises it may be related to franchise businesses getting the point so for R and War remember for resident resident and ordinary resident Global income is taxable no where is approval where is received that and all we don't see St is taxable for non-resident Source must be in India or resit must be in India for R and War same Source must be in India or res if both are out not at all taxable however if it is from a business control from India profession set from India then again taxable so this is regarding scope of total income next now now you see the moment we see residential St residential state so we completed scope of total income now let us understand what is the residential status how to determine residential status like scope of total income we have seen resident non-resident R RN NR we have seen how to identify them so there's a section called section six in the income tax law it says for individuals there are two subsections six subsection one six subsection 1 a this is talking about residential status of individual for HF 62 for company 63 for all others 6 subsection 4 by the way six subsection one and six subsection 6 both both are there getting it then six subsection one here so these are the sections which are dealing with residential status of various SES now individuals six subsection one and six subsection six so both put together one segment 61a another segment now in the individual residential status only many students have confusion very simple I will clear all that confusion in the next five minutes itself I believe me the kind of clarity that you get after residing to this next 5 10 minutes on individual residential status will be damn amazing now when how to determine residential status of an individual very simple they have given basic conditions two basic conditions there what are what we need to check first basic condition suppose we are talking about previous year 22 23 nothing but sment year 23 24 so for for previous year 2223 whether the individual is a resident or non-resident not ordinarily resident we want to check out how to check out very simple in the relevant previous year in the suppose if the individual if the individual stayed for 182 days 182 days or more 182 days or more in relevant previous year now what do you mean by relevant previous year suppose we are checking for 2223 then 2223 we should apply if the individual stayed for 182 days or more in the relevant previous year then B is satisfied he is a resident is simply resident resident I'm not saying R in order to identify ordinar resident see he's resident in this year in the past also he's a resident then he is a resident and ordinarily resident he is a resident in this year in this year he's staying in the past he has not stayed in India means he's a resident in this year ordinarily is he a resident no ordinar means about past years we should check current residential status first first you must be resident in current year then only we can think of whether are you ordinar resident or not ordinary resident you know depending upon your past year Sy no first current year current year are you resident or not we checking basic condition one in the current year in the relevant year if you stayed for 182 days or more you are a resident suppose you did not stay for 182 days 182 days you did not stay then condition B2 another option is there okay you you are not you have not stayed 18 days or more in the relevant year no okay then we check B2 have you stayed at least 60 days or more in the current year if at all you stayed 60 days or more in the relevant previous year and 365 days or more 365 days or more in past four years past four years preceding relevant previous year suppose I'm I'm checking for 2223 are you sir I'm an individual I just came from abroad I'm a resident did I stay have you stayed in the 2223 for 182 days need not be continuous you can stay you stayed 50 days again went back again you came back and stay another 50 days again went back you came back again stay 90 days totally 5050 plus 50 plus 90 190 huh you are resent you have not stayed for 182 then we will check B2 if B1 is failed then only we will check B2 as for that in the current year in the relevant year have you stayed for 60 or more yes before 20 to 23 last four years 2122 2021 1920 18 19 in these four years put together have you stayed for totally 365 days or more put together in all the four years yes then B2 is satisfied you are a resident so in order to become a resident either B1 should be satisfied or B2 should be satisfied sir B1 or B2 something is satisfied sir I a resident sir Global income taxable for me no no no we should check ordinarily residential status also ordinarily status me means what past year stay so additional conditions additional conditions A1 and A2 there are two more if both the additional conditions are satisfied both of these additional conditions are satisfied you are a resident and ordinarily resident if you're an ordinarily resident what happens Global income is taxable if you are not an ordinarily resident what happens only source in India taxable receipt in India is taxable business controlled business outside profession outside but controlled from India that is only tax if you're R in war if you're a non-resident source is in India taxable resent India taxable that's it no more question so whether are you ordinar resident or not we should check two more additional condition if both are satisfied if both are satisfied then you are an ordinarily resident wait in the in the book that you might have studied there might be four additional conditions where the condition is R I will come back and tell you later first focus on this understanding suppose for 2 years in last 10 10 years in the last 10 years ignore 20223 we are checking for 20223 ignore that ignoring this last 10 years for any two years at least two years are you resident at least two years are you resident means what apply B1 and B2 out of last 10 years no in the last 10 years no B1 B2 both you apply for every year either B1 or B2 something is satisfied in the last 10 years getting the point for any two years for any two years basic condition is satisf that's it you are a resident getting the point a one is satisfied for any 2 years in the last 10 years if you satisfy any for any 2 years in the last 10 years if you satisfy basic condition you are a resident and a one is satisfied getting it now A2 in the last 7 years in the last 10 7 years means ignore 20 to 23 we are checking for 20 to 23 ignore that before that 7 years 730 days or more you stayed for 730 days or more in the past 7 years put together in India you were in India for 730 days or more in the past 7 years getting it then A2 is satisfied suppose B1 or B2 anyone is satisfied A1 and A2 both are satisfied you are resident and ordinary Le resident you are what resident and ordinar Resident now these additional conditions under six subsection six were expressed in different way what is the different way I will discuss little while later I hope until now you understood now now B1 182 days criteria B2 60 + 365 days criteria A1 2 out of 10 you must be resident plus A2 here it is R A2 730 days criteria in 7 years getting it so that's it these are the criterias now if B1 or B2 any one satisfied you are a resident A1 and A2 both are satisfied you are a resident and ordinary resident suppose you satisfied either B1 or B2 only so you are a resident but A1 is not satisfied A2 is also not satisfied you are just resident but not ordinar resident suppose B1 not satisfied B2 also not satisfied you are a non-resident basic condition itself you didn't satisfy you are a non-rent if basic condition is satisfied but additional condition one failed R and if additional both are satisfied are that's the logic now now what you have to do is just one second listen the past 10 minutes clear okay now now let's go further now you know there are three cases Indian cian leaving India leaving India for employment means he want to go abroad and settle there either for job or business whatever for somewhere he's leaving India he's living India permanently Indian citizen Indian citizen working as a crew as a crew in foreign bounders ship in foreign bounders ship foreign bounders ship means uh that ship No it travels from India to abroad and abroad to India that's called foreign bound ship okay fine so Indian citizen who works as a crew now remember in both the cases in both the cases the word uses is Indian citizen Indian citizen third one Indian citizen Indian citizen are person of Indian origin third case third case person of Indian origin Indian citizen person of Indian origin visiting India visiting means what they they might have take a visitor visa and they'll come to India visiting just for visiting not for permanent settlement they'll visit and again leave leave getting it in all these three cases no in B2 60 days logic is there right instead of 60 we apply 180 days logic generally they say B2 condition do not apply it's not do not apply the section says in all these three cases in all these three cases if an Indian citizen is leaving India or Indian citizen is working as a crew member in a foreign bound ship or an Indian citizen or a person of Indian origin who settled outside visiting India in all these three cases in condition B2 also we apply 182 days logic only we apply what 182 days logic only that's what indirectly what they tell B2 don't check directly B1 you check in B1 also 18 logic in B2 also 182 in the current year plus 365 in the last four years instead of that check B1 if B1 is satisfied that's it over B2 why you should check again not Clarity if you stayed for 182 in the current year that's enough no you are a resident if at all 182 is not satisfied 60 days you stayed in current year 365 in the past four years you are a resident now in these three cases case one case 2 case three in these three cases instead of 60 days up 18 means B2 also 182 days criteria only B1 is 182 days criteria B2 also 182 so why that's what they express is what how they express it in the study material of ICA B do will not apply simply they say like that now here now 60 days will be substituted with 182 right now suppose you are an Indian cian or person of Indian origin person of Indian origin visiting India you are visiting India and and having having income from India excluding foreign sources Indian income nothing but having Indian Source income excluding foreign Source having Indian Source income exceeding 15 lakh exceeding 15 lakh you are you are an Indian you are an Indian citizen or you are a person of Indian origin you are visiting visiting India remember you're visiting India which means whatever is given in this third category no that category the third criteria case number three know relating to them they're talking you are Indian citizen or person of Indian origin you visiting India and you know what you are having more than 15 lakh Indian income Indian income means what excluding foreign sources if the place of approval of income is not in India if the place of approval of India income is in India or if it's a business controlled from India or profession set up from India only that is called only that is considered that income is exceeding 15 lakhs then not even 1. 182 120 days logic will apply what will apply 120 see B2 condition B2 condition originally 60 days for case 1 case 2 case three what is the logic 182 days B2 I'm talking only about condition B2 for case three if having Indian Source income if Case three Indian Source income exceeding 15 lakh then not even 182 then just 120 so 60 days or more plus 365 days or more in the past four years 182 days or more in the current year plus 365 days or more in the past four years 120 days in the current year 365 days or more in the past four years that's the logic so now now this is what many students confuse very simple once again let me let me revise it once again so you are an individual in the current year you stayed for 182 days that's it you a resident B2 No need no need to check directly go for additional condition A1 two out of last 10 years you are a resident satisfied a to out of seven years in the last out of out of last seven years you stayed 730 days or more you are A2 also satisfied B1 satisfied A1 and A2 both are satisfied you are a resident and ordinar Resident suppose B1 is not satisfied then we check B2 as for B2 what is the original condition 60 days in the current year 365 days in the past four years yes you are a resident now this B2 in B2 instead of 60 days we check 182 for these three cases for these three cases only in B2 also we apply 182 which cases case number one Indian citizen leaving India for employment case number two Indian citizen working as a crew member in the ship case number three Indian citizen Indian origin both are covered Indian citizen means if you are born in India or an Indian citizen Indian origin means what you did not you were not born in India you born but your parents or grandparents no they were born in India means you have Indian origin for you the roots is in India that's called Indian origin so Indian citiz or person of Indian Orin visiting India for them instead of 60 days logic 182 days only we apply and past 4 years 365 or more whatever now suppose this case three another exception is there suppose if you're an Indian citizen or person of Indian origin remember Indian origin is also covered you are visiting India you are visiting India and you are having Indian sources more than 15 lakh income from Indian sources more than 15 lakh then instead of 182 we apply 120 days Laing we apply 120 indirectly for category three people those who are visiting India getting it if they if at all they stayed in India for 120 days or more and 365 or more in the last four years getting it they are residents they are resident provided the Indian Source income is exceeding 15 L this is the rule now this point many students confused with six subsection one deed resident profession right so are you clear with B2 in condition B2 by default it is 60 days this 60 days logic will not apply 182 will apply for these three cases again if case number three if at all they're having Indian Source income more than 15 lakh then 120 generally for case number three if at all you're a person visiting India normally 180 days only we will check then only you're are a resident otherwise you're not a resident suppose if you are having 15 lakh more 15 lakh I mean more than 15 lakh income Indian Source income then not 182 120 we will check if you if at all you are in India for 120 days or more you are a residence that's it you clear so through this particular Point more people who settled abroad and visiting India getting it having Indian Source income we are bringing into residential status in India and taxing more and more income on theme next now there is a provision called deut resident 6 subsection 1 a 6 subsection 1 a what is deut resident first of all as for six subsection one and six subsection 6 you are not a resident you are not a resident just I I told no B1 B2 A1 A2 nothing is satisfied you are not a resident at all but you are an Indian citizen not Indian origin Indian origin point is not covered in 61a in 61a Indian origin point is not covered remember this question has been asked in May 23 exam also question 61a related 61 related both put together they developed a question and asked in May 23 and even in November 23 there's a chance that they will ask very important McQ or direct problematic question anything might come suppose you are an Indian citizen but you are not a resident as per B1 and B2 both are not satisfied by you you means means you are not in India for 182 days 60 days logic also everything fail you are not a resident basically as per six subsection one you are a non resident you are a non-resident as per six subsection one for you we apply this and moreover what you are an Indian citizen you are an Indian citizen not a foreign citizen you are an Indian citizen but settled abroad but you did not satisfy 18 to days logic 60 days logic both you have not satisfied for you we will check 61a what is 61a as for 61a if you are an Indian Citizen and you are having Indian Source income you are having Indian Source income of more than 15 lakh exceeding 15 L you're having Indian income source source of income is in India not outside foreign Source not a foreign Source if your total income excluding foreign sources is exceeding 50 LH that's what the provision says if the total income of an Indian citizen excluding foreign sources is exceeding 15 lakh and you are not liable to tax you are not liable to tax in other countries other territories other do getting it in other countries you are not liable to tax you are completely Exempted from income tax outside India and you are having Indian income Indian Source income exceeding 15 lakh and you are an Indian citizen you are deemed to be a resident you are deemed to be a resident so through this section the income tax department is taxing Indian citizens even though they're not visiting India you see here in 61a they don't talk about any number of days 120 days 180 days 60 days nothing are you Indian citizen yes are you Exempted from tax outside India yes are you having Indian Source income yes is it more than 15 lakhs yes you are a deut resident you are a deud resident you are a deud resident under 61a you are a Dem resident under 6 now summary so an individual is he resident in India or not that's a question basic condition one 18 days or more in the current year resident suppose basic condition one failed basic condition two 60 days or more in the current year and 365 days or in the past four years yes resident check check additional condition one additional condition two two out of past 10 years are you resident yes 730 days or more out of past 7 years you stayed in India yes you are r r now you are an Indian citizen leaving India you are an Indian citizen working as a crew member in ship you are an Indian citizen or Indian origin settled outside India but visiting India if if you fall under any of these three cases B2 condition is there in that 60 days criteria is inste of 60 182 we check now case number three Indian citizen Indian origin visiting India no and if he's having Indian Source income of 15 lakhs I mean exceeding 15 lakh no then for him in B2 60 days 182 both will not apply 120 we will check there suppose B1 B2 both are not satisfied you are not a resident then check 61a don't conclude a person is non resident if at all B1 B2 both are failed don't conclude that he's a nonresident check 61a is he Indian citizen remember under 61a Indian origin is not covered only Indian citizen is covered under six subsection 1 Indian citizen is only covered if an Indian citizen is there here number of days and not required if at all he is having total income excluding foreign sources nothing but Indian sources exing 15 lakh and not chargeable to tax under outside India he is a deut resident in India now a person who is a deed resident under six subsection 1A and a person who satisfies condition B2 because of 120 days criteria because of of 120 days criteria if a person satisfies B2 or 61 year provision deed resident these people are always RN resident but not ordinarily resident I told de Res is he r r he's always R supp if a person satisfies condition B2 if a person satisfies condition B2 A1 and A2 all are satisfied in B2 120 days logic only satisfied getting the point the person is 15 lakhs or more because of that only B2 is satisfied getting not 182 logic not 182 logic 120 days logic through that he satisfied B2 then he is a resident but not ordinarily resident so that's why you see six subsection six residential status the following people are always not ordinarily resident n out of 10 years they are non- residents in the last seven years they stayed less than 730 days they are a de resident they are a resident in India because of 120 days la it having total having Indian income exceeding 15 LHS in all these four cases they are always RN o that's how they drafted and in fact we have given the same format in the book in our book also in our book also we have given the same format additional conditions for individuals for for deciding ordinarily residential status I hope you are confident now if not one second listen you will get you know the you know Crystal Clear Clarity when days we apply when 182 we apply when 60 days we apply sorry 120 we apply in B2 in B1 is always 182 in B2 60 days normally 182 for three cases 120 for third case having Indian income more than 15 lakhs simple over suppose B12 both are not satisfied 618 having Indian Source income exceeding 15 LH are you Indian citizen not taxable anywhere outside India that's it you are a Dem resident over now so with this individual related residential status is completed individual related residential status is completed now so with this individual resident status is completed now HF now is HF resident or or non-resident or resident and ordinar resident or not ordinal how how to decide for HF there is only one basic condition one basic condition if control and management if control and management are partly in India if control and management is partly in India that's it HF is a resident if control and management 100% outside India if control and management are 100% outside for the HF entire control and management entire decisions are taken outside India 100% not even one decision 100% outside India HF is operated non-resident sir suppose no some decisions are taken India control and management is partly in India it's a resident now is it ordinar resident not ordinary resident we should check A1 and A2 for karta karta has to satisfy A1 and A2 both if karta satisfied both A1 and A2 then Huf will be a resident and ordinary resident if K satisfies both A1 and A2 HF will be resident and ordinary resent so A1 and we check for K if Kaa satisfies both A1 and HF can be ordinary resent and remember just because Kaa satisfied1 and karta is also an individual right he may not be our k B2 both are not satisfied K is a nonresident but is satisfied HF satisfied basic condition so HF will be R clear next so with this HF is over now others not companies companies I I'll cover little while later others means Farms LLP Society nothing but other than individual other than HF other than company any other how to determine residential status for them for all others how to determine residential status so just a minute if if control and management partly in India if partly in India it's a resident 100% control and management outside India it's a non-resident simple over this is applicable for LLP partnership form aop local Authority artificial judicial person for all of them this is a residential status six subsection 4 fine now six subsection 3 how to to decide residential status for companies how to decide residential status for companies now companies are broadly two types Indian companies and other companies Indian company always a resident always a resident what is it what is an Indian company a company which has registered Incorporated under companies act 2013 companies act 1956 or a 12 whatever previous Act all Indian companies they're all was resent other companies if poem is in India if poem place of effective Management in India they are resident if place of effective management outside India they are non-resident simple that's it so for Indian company it's always resident for remaining companies where is players of effective Management in substance where the decisions are taken majorly if it is in India then it's then it's a resident that foreign company will become a resident in India if effect of management is outside India substance in substance majority decisions are taken outside India then it's a non-resident as simple as such so poem is in India it's a resident poem is outside India it's a non-resident over that's it residential status is almost completed now we still have to discuss now whatever the points I've told no everything is covered here everything is covered here so for a crew member know how to decide residential status for a crew member 182 days logic only be apply only if the crew member of Indians ship getting it he stayed in India getting it for 18 days then only he's a resident a person living India he stayed in India for then only is a resident a person who is visiting India 180 he must then only is in India but suppose if the person visiting India having Indian income more than 15 lakh then for him 20 120 days logic also be apply then he may become resident as for that also now for a crew member no CDC period we will exclude CDC period continuous certificate that period no we will treat it as outside India state so total 365 minus CDC period is equal to what is the balance number if it is 182 or more then is a resent otherwise is a non-resident remember the crew member must be Indian citizen then 61a that is also given here completely HF I already told for aop fir boa company and any other persons artificial judicial person all that everything is covered scope of total income have covered so income acre de to acre raise in in this many students have doubts on the interest royalty and Technical Services many students have doubt on the interest royalty suppose if any dividend is paid by Indian company you a foreigner dividend is paid by Indian company it's a it's a source of income is in India so it's a income de to AC is in India if it is salary paid by government though you are working outside but salary is by Indian government it's a source of income is in India acal is in India now interest income interest income suppose an interest income no you are earning interest you are earning interest you are actually a non-resident you are a non-resident you are staying somewhere abroad now you rent you gave some loan to Indian government the Indian government is paying interest you now where is the source of income approval of income approval of income is from the Indian government so source of income is in India so that interest is deemed to AC or arise in India accordingly Source in India it is taxable whether you're a non-resident or resident doesn't matter suppose you are a non-resident I am a non-resident I am getting interest income from who from a person resident in India okay a person who is residing in India he's paying me Interest getting it so I gave a loan he's paying me Interest now will that be treated as Indian income source of income is in India straight away no let us look at let us look at what what are they suppose no I am I am I am I a nonr I'm not staying in India but I give a loan to my friend who is in India he's paying me interest you know what whatever loan I gave to him he's investing outside India completely he did not even take in his India he completely invested that outside India for business profession whatever he is not using it in India he's using it everywhere outside India suppose I I I am staying in Canada my friend is there in India I gave a loan to him he's paying me Interest he's staying in India he's a resident in India first of all as for Section six is a resident this fell paying me interest income technically what we assume since uh resident person is paying interest to me source is in India like that b but not this fellow whatever loan I gave he invested that in London so in London he purchased some property or some business he invested there completely so from that business he's getting profit out of that he's paying interest which means I am getting interest income from the business where he invested in London source is not in India so where the interest is payable in respect of debt which is used for the purpose of business which is outside India or for any other source outside India it is not deemed to AC or arise in India it is not not treated as Indian income getting it I know resident person only paying he's a resident in India he is only paying interest on loan but that is not that interest income which is received by lender that is not treated as source of income in India if that entire loan is invested outside India that entire loan is used for business or some other purpose outside India that's the point next suppose sir I'm a nonresident I'm staying in Canada and I have another person who is also in Canada my friend I gave a loan to him and what you know that loan this fellow invested in India this fellow invested that entire Loan in India for doing business or profession or for some other activity getting it sorry for doing business or profession only business or profession so I give a loan to my friend who is in Canada I'm staying in Canada I'm a non-resident he's also non-resident from Indian Point of View getting it this fellow I give a loan right this fellow took that loan and invested in India pgbp business or profession how whatever interest I'm getting from my friend no te to a crew or arise in India suppose if a person who is a non-resident this fellow is paying you know interest getting it uh where the loan is used for the purpose of business carried on by him business or profession carried on by him getting the point so if a nonresident is paying interest to another nonresident the interest received by a non-resident is De to AC or arise in India if it is used for business or profession in India exception suppose if the interest Borrowed by non-resident for any purpose in India other than business or profession that is not de to India very simple so I gave a loan I'm I'm a Canadian citizen so so I'm a non-resident I'm a non-resident Mr Ram is a non-resident he's staying in Canada Canada getting it he gave a loan he gave a loan to so you know Hanuman example getting it this fellow is also staying in Canada Canada both are non-resident but can Hanan whatever the loan he took know he invested in India he invested in business or profession in India now whatever interest he is paying me whatever interest Ram is receiving no that is deemed to ACW or arise in India suppose no Hanuman invested this entire Loan in some other business not in India but outside India that is notw or Aras in India suppose Hanuman invested this this particular amount in shares of a company for getting dividend income now shares of a company dividend income means for Hanuman is it a business income no no if a non-resident gave a loan to another non-resident that non-resident who received the loan invested in business or profession in India then only interest on that loan is De to AC or arise in India suppose if a non-resident invested that loan in not a business some other head of income only he is getting that is not deemed to AC or arise in India next same way royalty also similarly royalty supp if the royalty is received from government of India always source of income is India if a royalty is received from a resident person in India Source in India however exception suppose I'm receiving royalty from a resident Indian but that Indian paying me royalty in respect of services used for business or profession outside India whatever service I provided for which he's giving royalty that service is used outside India business or profession or some other source then that income is not de to or arise in India where it is payable in respect of transfer of any right or use of any property for utilization of any service you know for business or Prof outside India or for purpose of earning any income outside India simple I'm getting royalty for some service I ended this service is used where outside India whatever income I'm getting royalty fully I mean this is not treated as acrew or Aras in India this is not treated as de to Aras in India suppose I am receiving royalty from non-resident I'm a nonresident and another nonresident is paying me royalty so both of us are non-residents example so a non-resident is paying me royalty uh this is not de to AR in India however the royalty which I'm receiving no from a non-resident from a non-resident uh I'm rendering that service whatever service I'm rendering that is used for business in India or that is used for some other profession or some other activity in India means whoever is the person who is paying me royalty he's paying me royalty by using my services for some source of income in India it may be business or non- business doesn't matter for some source of income in India getting it whatever service I render he's using there and paying royalty means Indian origin is there no Indian connection is there no for my income it is deemed to AC or arise technical service also exactly same if I'm getting any fees for providing Technical Services from government of India sources in India taxable if I'm getting from a person resident in India for using for business in India or any Source in India it's a DE to AC suppose if I'm getting for Technical Services from a resident in India for services which I provided which are used completely outside India then it is not deemed to AG or arise in India I'm getting fees from a non-resident for Technical Services these services are used in India business or profession or in India for some other income then again it is deed to AC arise in India in all these three cases royalty Technical Services interest in all the cases common point is very simple are you getting it from government it is always uh de to AR in are you getting it from somebody else yes if you're getting from somebody else maybe resident in India or non doesn't matter if it is used for business or profession in India if it is used for some other activity in India that's it it's aced in India only for interest income only for interest income if the business is in India then only interest income received from non-resident is taxable if it is for some other purpose I gave a loan and it is invested for non- bus activity in India getting the point whatever interest on that that is not de to arise in India that's a loophole in drafting very simple that's a loophole in drafting that to for non-resident only all this logic will apply so here we have given an example also getting it that's it if at all you have not at all studied this section and right now you did not understand fully properly ignore it no don't even read this only you already analyzed this section somewhere you're having little doubt then listen to this past 15 20 minutes whatever I have covered the section 9 related listen to it once again that's it with this res status is completed entire Crux confusion part in residential stat completed that's it take care so the next chapter what I'll upload is house property that next salary that next pgb that next capital gain that next I'll upload clubbing setup and carry forward chapter 6 getting it so that next depending upon my energy and my time all that tedious topic I'll upload that's it so let's uh start income from salaries revision so the moment you think of salary it is a first head of income where the charging section is section 15 and in salaries we only have three sections one is 15 another one is 17 and 16 nothing but 15 16 17 16 talks about deductions from salary 15 talks about charging section whereas 17 talks about getting it what do you mean by salary what are other things that are taxable under the head salaries so 17 subsection 2 says perquisites is also treated as salary because per quisite is a benefit received from employer by an employee profit in le le of salary instead of salary you're receiving something else lumps of money that is also taxable under the head salary because it is received from past employer or current employer so that is what you know uh salaries is essentially talking about now charging section what the charging section says first of all before I even discuss about charging section what is the overview of salary you see you know under income tax under the head salary if an employee is receiving any benefit from employee getting it these benefits are taxable under the head salary now the benefits are broadly divided into two categories benefits received when I am when the employee is working so I'm working in a company so every month in this year whatever the financial year I'm working I'm getting some benefits so benefits during the service and I may receive certain benefits at the time of retirement generally at the time of retirement we generally receive monetary benefits whereas when we are in service we receive two categories of benefits that is monetary benefit non-monetary benefit and what are all the monetary benefits that you receive what are all the non-monetary benefits that we receive is what given here as a list I'm giving you this list which is important from exam point of view more than this let us assume if in salary we are discussing some 50 issues 50 types of benefits out of 50 I have covered almost 40 items here 10 items are not at all relevant that no use at all getting the point so all the benefits that are important from exam point of view I'm covering getting it now so what various benefits that we get we have listed out now these benefits in the be act in the section 17 the benefits watchever whatever I have showed right now getting it overview they are classified into three categories some benefits no they are called as salary some benefits which s receives which employee receives either monetary or non-monetary they are called as perquisite some benefits are taxed under profit in Du of salary now many students get confused what do you mean by salary versus peris how they both are different salary means something I pay to employee and I don't ask him any question what what purpose is spending doesn't matter to me all the elanes getting it basic salary dearness elevance whether this da is for retirement benefit or not retirement benefit you know in exam they may give you for retirement or forming part of terms of employment any word they can give nothing but this dearness Elance is something which is considered for you know retirement computation benefits of that employee remember da you will find only in government companies and government organizations not in private sector de Elance is not compulsory in private you don't find in any private sector da and bonus commission commission is again two types percentage of turnover and fixed commission getting it there are two types of commission either it is given as a percentage of turnover or fixed commission getting it so bonus commission da basic entertainment elevance h house rent elevance leave encashment gratuity getting it so all these items contribution by employer to Provident Fund in excess of 12% of salary contribution by employer towards interest in excess of 99.5% rate of interest contribution by employer to pension scheme all these are monitary benefits which are directly given for the purpose of employee directly monetary benefits these are all as salary within the meaning of 17 subsection one now what are all perquisites perquisites means salary is something which I give and I don't ask any question or on the employee I will give some benefit to the employee monetarily that and all salary now the perquisites again this may be two types either the perquisite is reimbursement or the perquisite can be non-monetary facility the perquisite can be either a non-monetary benefit facility or it can be a re reimbursement remember only reimbursement and non-monetary benefit given to an employee comes under perquisite getting the point suppose no employee is incurring some medical expenditure we are reimbursing that compan is reimbursing it's a perquisite taxable in the hands of employee of course we have some exemptions we'll discuss later getting it and suppose we have given a car facility it's a perquisite whatever the valuation rule perquisite valuation rule we compute some value we will tax it accordingly we are G some furniture to the employee for usage it's a benefit given to the employee it's a perquisite non-monetary so perquisites are basically reimbursement and non-monetary benefit reimbursement means what first of all perquisite means something which is given for personal benefit of the employee perquisites are nowhere related to official purpose they are absolutely completely for personal benefit only employee will get benefit there no benefit to organization so those are called as perquisites these personal benefits are either reimbursement reimbursement means what employee incurred some expenditure for personal reason that that amount he showed me Bill we reimbursing it suppose employee went and bought some you know spectacles yes or no or lens or he went for laser treatment of ice whatever something company reimbursed the expenditure he spent showed the bill we gave the money it's reimbursement it's a perquisite or facility like car getting it education facility medical facility various transport facility getting it so these are all facilities both are treated as perquisites because these are used for personal benefit of the employee perquisites are taxable we have some exemption rules now sir reimbursement means suppose company reimbursed one lakh if say employees spend one lakh for personal company reimbursed one lakh accordingly one lakh is taxable sir how to tax non-monetary item suppose company give car sir car facility okay how to tax this item valuation rules were given for perquisites those valuation rules we have to apply getting it fine so salary means all monetary items which we give to the employee we don't ask any question there okay basic salary I'm paying BM da I am paying some elanes I'm paying bonus giving commission whatever getting it all these items are salaries these are all elanes all items which are in the nature of Elance which are in the nature of Elance Elance means what I pay money at first I don't ask what he did with that money so those kinds of money whatever I give that's called salary suppose an employee joined in organization you are paying 50,000 salary to him monthly do you ask him what is the breakup of 50,000 for what he's spending no that's a salary all the items that are salary or in Elance in the nature of salary that and all taxable under 17 subsection one they are all treated as salary all the items which are personal purpose where you are reimbursing or where you are giving a facility whatever the value you are giving that is taxable as perquisite perquisite is also treated as salary able to understand now charging section what the charging section says any salary sorry any sum you from an employer by an employee any sum due from the employer during the previous year is taxable for salary second any sum received from employer is taxable for salary nothing but if you collectively read if if any amount is due from the employer or received from the employer whichever is happened earlier so it is taxable that's why they call it as due basis or AC receipt basis whichever is earlier due is different approval is different suppose if April month salary current month salary is due on 1 May then first May April month salary is taxable when first May is taxable May month salary is taxable in which month June 1 March month salary is taxable in April 1 March 2023 salary is taxable in April 1 2023 April 1 2023 comes under 23 24 previous year you understand acal means what April month salary taxable in April only when you pay doesn't matter Marchman salary taxable in March only when you are paying doesn't matter that's the difference between due and approval salaries head off income salary is taxable on what basis due basis it is taxable able to understand so what are all the due dates are there in the previous year salary due dates check out on these due dates how much amount of salary became due check out that much only taxable sir the amount of salary was due no that is belonging to last previous year doesn't matter it become due in this current year it is taxable in current year same way uh same way if at all an employee received salary in advance salary received in advance next month salary I received in March month only I received next year April and May month salary in advance and I told employee not to pay me April and May again amount received in advance is taxable in the year in which it is received suppose if I receive a loan from employer which is where employer will deduct from my salary in 20 months that's a loan loan is not a salary it is not taxed as income however on the loan interest amount I'm not paying to the company I I took a loan from the company but I'm not paying any interest to the company it's a benefit received by me it is treated as perquisite for that valuation rule is that we will discuss I hope now you understood the charging section briefly getting it now what are all the elements that are there in salary there are various elements you have something called salary which which is including basic da whether for retirement or not for retirement retirement is also expressed as terms of employment in example they may give you da for retirement benefit or within bracket they may give you terms of employment bonus commission whether it is percentage of turnover or fixed commission everything is monetary benefit transport elements children education elements children hosital elements H telephone element medical element medical reimbursement remember reimbursement is a perquisite lunch Elance is a salary gift Elance is a salary interest free loan is a perquisite contribution to RPF is a salary interest on RPF that is a salary leave travel concession is a salary yes or no tax paid by employer you know on the salary of employee that is Exempted life insurance policy on the employee is Exempted medical policy on the employees Exempted all these points now we are going to cover are you clear now now at the time of retirement a person might get gratuity pension pension there are two types because it is not at all important from exam point of view further he will get non-monetary benefits like accommodation mobile asset car medical facility telephone facility all that now one by one we will be discussing now so you know we will be discussing accommodation facility at last so first I will be discussing if at all an employee is retiring what benefits he is getting so one benefit which employee might get is gratuity one benefit which employee might get is gratuity remember if gratuity is received on retirement exemption under 10 Clause 10 is available there is a section called 10 Clause 10 in that Clause exemption is given for gratuity received on retirement if at all gratuity is received before retirement during the service fully taxable now if the gratuity is received by government employee for him it is fully exempt if the gratuity is received by non- government employee then it is having exemption under 10 10 Clause 10 to to certain limits so suppose if gratuity is received by an employee for whom payment of gratty act applies suppose an employee is receiving gratuity where for him act is applicable or suppose if the gratuity ised by an employee where payment of gradu act not applicable now how to calculate exemption now exemption is lower of the following lower of the following how much Exempted actual amount how much because exemption can be more than actual suppose you receive 10 lakhs grat how much is Exempted maximum 10 lakhs statutory limit of exemption is 20 lakh or 15 by 26 into L drawn salary into completed years of service or part thereof in excess of 6 months what does it mean suppose if an employee completed 30 years 7 months it is treated as 31 years if an employee completed 30 years 5 months only it is treated as 30 years only so if at all an employee who has completed an year who has completed more than six months in a year it is treated as full year otherwise it is treated as no year at all getting it now at the time of retirement what is L drawn salary at the time of retirement what is your salary so that is called L drawn salary now sir salary means what you are saying salary includes so many what are they here for the purpose of gratuity where gratuity Act is applicable basic plus da for sorry basic plus dness elements here any da you may consider salary means that so take what is the last last drawn monthly salary last drawn monthly basic salary how much D El any retirement non doesn't matter now multiply with 15 by 26 15 by 26 into basic plus da any da of that last month multipli by how many years he completed or more than six months if at all he completed any other year that also you take it as full year so that you apply you get some amount now among these three lowest amount is exempt so employee received something exemption is something balance amount is is taxed as you know salary under 17 subsection one this is gratuity where Act is applicable now you see sir I told here I told no salary means this you know in in this salaries chapter in salaries chapter we have mainly three salary definitions three definitions for salary suppose know if you if you if at all the word salary is used for exemption under gratuity when you're calculating exemption under gratuity no where gratuity Act is applicable no they have given three criterias one of the criteria is what 15 by 26 multipli by lost drawn salary what does it mean salary at the time of retirement salary means what basic plus any dearness elements plus nothing so basic plus any de so that is what salary at the time of retirement now now here in in in while calculating gratuity exemption where Act is applicable they have used the word salary right salary means this now same way the word salary has been used at various locations recognized Provident fund employers contributing to RPF in excess of 12% of salaries taxable Beyond 12% of salar taxable now 12% of salary means what salary means what basic plus da for retirement plus commission only percentage of turnover fixed commission you should not take here da only if it is for retirement benefits you should take other other da you should not take getting the point now this salary definition is applied at five places RPF H gratuity leave encashment wall retirement compensation in all these five cases in all these Clauses in all these exemptions if the word salary is used salary means these three components suppose if it is used for gratuity where Act is applicable this one suppose if it is for gratuity where Act is not applicable an employee received gratuity at the time of retirement but for his for him gratuity act do not apply still he received gratty now for him how to calculate exemption they have given a criteria in that criteria the word has been used in fact average salary word is used salary means what this one now suppose no employee was given rentree accommodation accommodation facility now accommodation facility the company gave any accommodation to employee know so how much is benefit value perquisite valuation rules says some percentage of salary salary means what basic plus da for retirement plus any commission bonus taxable portion of elanes actually for RFA if you see orig salary definition given in the book it is very comprehensive very big that if you convert it into a particular meaning as a formula this is the definition if you apply this formula I am telling you you will get absolutely correct answer so basic salary so while you are Computing accommodation benefit salary means these components you take anyhow when I'm discussing that I will once again come back and show you what are all this so I'm just giving you a brief idea getting it so very is by the way if at all any of you are looking for these three points you can you can take note of it or alternatively you download rest for CSM application you download rest for CM application just a minute you download rest of for CSM application so just a minute Ma sorry so inside that there is a course called group one open this group one so inside this content November 23 getting it so inside this P4 taxation is there P4 yeah taxation is there inside the salaries chapter is there inside this you can download salaries overview file accommodation facility these two PDFs are unlocked you can download this getting it so anyhow so that's it now let's let's continue with gratuity so if an employee who is receiving gratuity where he's covered under grad act which of these three these three items were the right least of them is Exempted suppose if an employee is receiving gratuity but he is not covered under gratuity act how much is Exempted actual 20 lakh 15 by 15 by 30 nothing but half half a month salary multiplied by average salary multiplied by completed years of service only more than 6 months point is not there suppose if an employee completed 30 years 11 months 10 days we still consider it as 30 only sir 11 months extra he work no we don't consider so only completed years we look into multipli by average salary salary means what basic plus da for retirement plus commission as a percentage of turnover now that salary you should take which salary average you should take average of how many months last 10 months preceding the month in which employee retired so in which month employee retired check out before that last 10 months basic total it da for retirement total it commission as a percentage of turnover whatever is there in the last 10 months total it divide it with 10 you will get average salary so that amount you keep it here now 1x2 into average salary into completed years of service so this is what treated as you know third criteria so among the whichever is lower that much is Exempted from the grude received by the employee so first what is amount received minus these three whichever is lower that is Exempted are you clear don't worry at the end of this video you will find you know you will find Once Theory concept provision discussion is over you will find problem solving also so don't worry so most of the adjustments whatever most of the provisions whatever we are discussing we have solved it in the form of problem next next now uh so this is regarding gratuity over now in this not they have given certain points this 20 lakhs is Lifetime limit suppose if an employee is getting gratuity from two or three employers from all the employers put together exemption cannot exceed 20 lakhs next next so what is the next benefit so now right now we have covered gratuity point we have covered gratty so whatever I have covered now I will highlight it with green color so now let's continue pension pension so how to understand pension how to how to calculate pension value now the pension is of two types pension generally pension is received at the time of retirement or after retirement you will receive pension that you receive generally monthly that's called uncommited pension what is it called as uncommitted suppose you may also receive in lumsum that is called commuted pension that is called commuted suppose after you retire no company offered you ,000 rupees monthly pension okay they offered you 15,000 rupees monthly monthly pension 15,000 they offered you alternatively you can take 15 lakh lumsum also they they told you these two options you can take 15 lakhs lumsum or take 15 lakh 15,000 monthly pension what you did you know sir you give me 5,000 rupees monthly 10 lakhs I will take lumsum you gave this option called Sir take I will take 10 lakhs Lum sir 5 lakhs I don't want instead of that 5,000 you give me monthly you told this proposal to the company company agreed now you are getting monthly how much 5,000 whatever number of months were there in that year that is fully taxable whether the employee is a government employee or non-government employee monthly pension received is fully taxable now you are receiving lumps what about this there's a section 10 Clause 10A there is a 10 subsection 10A they refer it as but it's actually Clause 10 Clause 10A so this Clause say lumsum pension received is Exempted as per below how much is exemp suppose if the if the employee is receiving gratuity if the employee is receiving gratuity he's receiving gratuity claiming exemption also for the gratuity then how much is Exempted 1/3 of full pension value whatever full pension value is there in that one3 is Exempted so how much amount received check out minus 1/3 of full pension value is exempt now full pension value how to calculate in this case you see in this case you see monthly he's getting 15 originally but he only took 5,000 how much he sacrific 2/3 of the monthly pension he sacrificed monthly he's getting 15,000 but he is only receiving 50 5,000 10,000 he sacrificed so in 15,000 10,000 proportion is what 23 he sacrificed for sacrificing 23 lumsum how much is getting 10 LH now for 23 lumsum amount is 10 lakhs for full amount how much so you know 10 lakhs is for 2/3 so it is for two portion so which means three portion means what full value is 15 lakh 15 into 1 by3 how much 5 lakh employee received how much pension 10 lakh in our example how much is exempt five so 5 lakh is taxable if you want once repeat this video last five minutes once again if at all you did not understand just repeat this video so in exam they'll give you employee commuted 60% of the pension for three lakh employee commuted 40% for 2 lakh employee commuted 70% of the pension for 5 lakh how to identify full value how much amount received divided by what is the commutation percentage apply you will get full value on that full value how much is Exempted 1/3 that is Exempted value Exempted value you should reduce from which value full value no no no you should reduce Exempted value from pension received in lson suppose if the employee is not receiving gratuity he's not receiving gratuity then how much he received pension identif l in our example 10 lakhs received now how much is exempt half of full pension value full pension value is 15 laks in our question so half of full pension value mean 7.5 lakh is exempt so 10 lakhs he received 7 and half exempt 2 .5 LH is tax and remember if commuted pension is received by a government employee it is fully exemp commuted pension received by non- government employee then it is Exempted as for the below if he's receiving gratuity then how much Lums some pension he receive put it minus half one3 of full value full pension value full pension value commuted value they'll give no divided by how much percentage the commuted check out apply that you will get full value so 1 by3 into full value amount you will get that you reduce from amount received from lamon taxable amount you get same way half of full pension value if the employee is not receiving gratty then from the total pension received Lum minus half of full pension value is exempt that's it so this is related to pension I hope you are clear I hope you clear now so I discussed both what is 10A exemption for government employeed fully exempt for non- government just now we discussed then we have something called leave encashment what is meant by leave encashment what is meant by sorry what is meant by leave encashment very simple every year company is giving me some 40 or 50 days leave every year I can take these many leaves 20 30 years I worked in this company 20 years I worked in this company so every year 40 days I can take 20 into 40 800 leaves I can take but you know what I only took 400 leaves 400 leaves company extra gave me but I didn't use now these 400 Days I told Company please give me cash now I came and work no even though you gave leave I came and work so you give me cash for that 400 leaves so company gave me so what I did whatever leave I have no accumulated leave I encashed it that's called leave encashment that's called salary for the leave period that's called leave salary so if an employee is receiving leave salary government employee fully exempt non-government employee under 10 class AA 10 class 10aa under this leave encashment is Exempted to the extent of least of the following so actual amount one criteria 3 lakh 10 months multiplied by average salary then then unu you know how much is unutilized leave unutilized identify unutilized leave identify divided by 30 multiplied by average salary this much out of these four categories whichever is lower that is exam now what do you mean by how do you calculate unutilized leave how do you calculate this unutilized leave first of all leaves granted perom by the company are 30 days perom whichever is lower this you calculate perom multiplied by completed years of service part there of in excess of six months don't consider so leaves perom how much or 30 days perom whichever is lower if company is giving 40 days leave every year 30 days only we should consider every year so 30 or 40 whichever is lower so 30 into complete years 30 so total you are eligible for 00 how many this is a total leave availed minus total leave available minus you already availed means utilized 400 leaves means 500 is unutilized leave so for 500 so for 30 days this much is the average salary for 30 days this much is the average salary for unutilized how much this much is exempt are you getting it so in these four whichever is lower is exempt so 10 months into average salary one criteria unutilized leave divided by multipli by average salary is another criteria how to calculate this unutilized leave very simple total leave minus utilized leave unutilized total leave how you should calculate how many years you worked in this company multiplied by how many leaves you are eligible in a year if you are eligible in a year more than 30 days leave then take 30 if you're eligible every year less than 30 then take actual leave per year into total years minus leave utilized by you during this 30 years then you will get unutilized leave for 30 days you are getting this much average salary for un utiliz how much that is fourth criteria listen to the past five minutes once again you will get clarity most of the students at CA inter do wrong in leave encashment problems the reason is they don't understand the fourth criteria up to third criteria everybody will do correct these three everybody will do correct answer fourth criteria many will do mistake why they do mistake is they don't understand the concept of unutilized Li how to compute unutilized Li they don't understand how to compute unutilized leave total leave minus utilized leave utiliz leave they'll give you the problem always getting it totally how to calculate actual leave per available or 30 days per whichever is lower multiplied by number of years employee completed service is equal to Total leave minus utiliz they will give you the problem you will get unutilized leave divided by 30 multip average Sal over fourth criteria among these four whichever is lower that much is exam so how much you receive 10 lakhs here you calculate lowest value 2 lakhs you got so 2 lakhs 8 lakhs is taxable that's it you clear so that's leave Eng casement now here also they have used the word salary what do you mean by salary salary means basic plus da for retirement plus commission percentage of turnover so gratuity where Act is applicable basic plus NDA grad where Act is not applicable basic plus da for retirement plus commission percentage of turnover HR sorry leave and cash basic plus DF for retirement plus commission percentage of turnover are you clear getting it by the way whatever I'm explaining that and all were there you see here directly I'll go to you know uh gradu point so here it is pension point is given pension pension point is given here itself pension this is our main book you can download this book in application or even on the website you go to website cm.com there you can download so pension commuted pension book like this also if you just download this workbook from our website also if you solve this workbook completely I'm telling you 99.99% questions will be from this workbook only just numbers will be changed that's it all the adjustments that that are going to be asked in exam all are covered here so pension Point here I have given entire thing whatever I have told gratuity point you know gr government employees exempt defense people exempt other employes non- Government Act is applicable I have already told Act is not applicable I have told what do you mean mean by salary when Act is not applicable what do you mean by salary when Act is applicable everything have covered then we also covered right now leave encashment leave salary for government employees is fully exempt for non- government employee four categories we have four criterias so how much you receive minus out of these for least amount that much is exam so salary means what I have already told that's it so which means which means leave encashment is also completed now leave encashment pension monthly pension uncommited gratuity all these are tax under 17 subsection as part of salary now voluntary retirement compensation what is it BRS BRS is taxable as profit in Le of salary of course at the end of the day it is taxable but how it is taxed gratuity pension leave en cment these are taxed as salary whereas this is taxed as profit in view of salary so now you know public sector companies or private sector companies or private companies or some governmental organizations only they are eligible to give vrs if they are giving any V r s compensation to employee getting it as under a scheme of voluntary retirement company want to reduce the stack overall St of the company should reduce and if an employee in a scheme of vs program receiving compensation from the company for voluntary retirement and this employee has completed 10 years of service or has 40 years of age then this person is eligible to get exemption under tency suppose if an employee who has not completed 10 years of service if this fellow is getting vs fully taxable no exemption if an employe complet compl 10 years of service and receiving vrs under a scheme of vrs approved scheme of vrs then tendy exemption is available how much is Exempted for V very simple actual amount 5 lakh 5 LH just a minute sorry so many limits sometimes laks 3 laks or some amount is there just a minute it is there in profit in of salary sorry it is there in profit in Le of salary huh only always just just confirmation 5 lakhs only 3 laks limit is only for leave en cment in all other cases it is either 5 LHS or 20 LHS okay fine so 5 lakhs are three months into average salary yes or no three months of salary for three months salary for each completed year for how many completed years is there into three months salary salary means L on salary that's enough third criteria salary at the time of retirement nothing but salary multiplied by number of months service left if at all are not retiring how many more months you can service for the company that many months multiplied by last dra salary that is one criteria second criteria is what three into completed years of service into salary L run salary salary means what for vs basic plus da for retirement plus commission percentage of turnover then actual amount or three lakh or uh you know uh this one three into completed years into L on salary fourth criteria uh number of months service left multiplied by salary salary means what basic plus reement plus commission so find out these four four criterias whichever is lower that much is Exempted for under vs 10 that's it so with this we have even completed you know retirement benefit now all the retirement benefits that generally be asked in exam we have completed no more retirement benefit now let us come to now let's discuss you know monetary benefits which an employe will get suppose in the question they're giving you basic salary fully taxable ba for retirement fully taxable da normally they nothing is mentioned they just said DNS elements nothing is nothing they spoke that's a normal D not for retirement fully taxable bonus is taxable commission is taxable fixed commission is taxable transport elements now what is this transport elements getting it just a so transport ele you know so there is something called transport elements transport elements suppose if transport is given to a blind DEA dumb or orthopedically handicapped orthopedically handicapped to these people if an employee who is a blind deaf dumb or orthopedically nothing but physically handicapped person in lower extremities of the Body for him if at all we give any uh transport elements what is transport elements for for transer coming from home to office then returning to home nothing but for commutation between home and office for that purpose companies even transport Elance then up to 3,200 is exempt whether the employee is choosing 115 BAC or not he may be choosing optional tax regime he may not be choosing optional tax regime irrespective of that up to 3,200 birth of Transport Elance received by him is Exempted suppose if transport elevance is given to a person working in transport sector he's working in transport of Passenger or transport of goods so I'm working in a Transport company I am receiving transport delance how much is exempt 70% of ele received 70% of ele received is exempt but maximum exemption is 10,000 per month suppose if company is paying me 10,000 monthly exactly let's assume compan is paying 10,000 monthly and the person is working in transport sector how much is exam enter exemp wrong students do this mistake if at all you're receiving 10,000 you are work you are receiving 10,000 transport elements every month and you are working in transport sector how much is exempt 70% that's equal to 7,000 or 10,000 whichever reason lower 7,000 only Exempted so if an employee working in transport sector if he is receiving transport element how much is exemp 70% of the El received or 10,000 whichever is lower that much only exempt in addition to this company may give transport facility getting the point transport facility means what company itself is arranging bus for the employee to come from home to office office to home fully exempt fully exempt transport facility is fully exempt able to understand suppose if the company is giving transport facility for employee tour purpose employees going on a tour for personal reason vacation for that compan is giving transport facility whatever market value is that much is perquisite if it is given in Railway whatever the railway fair is that is perquisite if at all if it is given in Airway Airway is the perquisite able to understand if it is for personal reason but anyhow transport facility point is not at all important from exam point of view therefore right now what we have completed regarding transport we have completed transport ele point I hope now you to transport element is understood transport facility also we have completed so whatever we have highlighted in green we completed now next children education elements children education elements what is this you know an employee you know he may give either education ele education ele or employer may give education facility employer may give education facility suppose if education facility is given to Children of the employee if the education facility education facility means what employer is having a school or employee had tied up with one particular School in that school only these employer children only this company employees their children only will join in that school because the employer company has a tie up with that school now in that school employee joined his childrens getting the point now that entire cost of Education employer is only bearing getting it it is not reimbursement employers is only bearing it completely the facility you told employee go and join your children in that school or we have our own school so I told employees to join their children in our school itself education facility now what is the perquisite if uh if cost of what is it if cost of Education in similar Institute is less than or equal to 1,000 rupees per month then it is fully exempt if cost of Education in a similar school is exceeding thousand it is fully taxable fully taxable what do you mean by fully taxable exiting thousand no suppose no my employee I am I am working in a company my children I joined an employer school that's an international school similar education cost is 20,000 per month entire 20 is taxable because the cost of Education per month exceed th000 therefore enti taxable sir th000 exceeding means only 19,000 you can tax no monthly why entire 10 why entire 20 you are taxing because this th000 Rupees is a threshold limit this is not a slab limit what they said they only talk about exemp what they told if cost of Education in similar institution does not exceed th000 it is exempt what does it mean if it exceed th000 fully taxable alternatively many others what they are doing is up to th000 they are claiming exemption excess amount facility cost they tax it any way you can follow in exam but you should mention alternative view as a note Point compulsory suppose if education facility is given for any other member of the employee if any other person on behalf of employees taking education facility compan is bearing cost fully taxable whatever cost of Education in similar school is there no fully taxable No th000 rupes Limit also fully taxable suppose compan is not giving facility we are giving El we are giving Elance to employee El Elance means what I give some money whether he will spend it or not that is his choice 11 education Elance is exempt up to 100 rupees per month perch maximum two children maximum for two children 100 rupees per month per child Exempted now suppose no for one of the children company paid 120 rupees for another children company paid 90 rupees El getting the point 90 rupees only El company the El itself is 90 rupees it for one children we get 120 100 is exempt here 90 only exempt so 20 is taxable here zero is taxable some students what they do is they merge these two two now up to up to two children 100 100 exam no 200 so they only tax and 10 that's wrong answer you should calculate children wise exemption and children wise El taxability you should calculate remember careful so education elements education facility both are over I hope you are able to recollect all the concepts so education facility is over now suppose no employee children are staying in Hostel for that purpose we are giving hostel elements also employee for employee children hostile purpose employer company is giving some elements it is Exempted up to three 300 per month per child so per child per month how much is Exempted 300 maximum for two children iting it so hostile elements is also over hostile elements is also over next we will discuss house rent Elance what is it house rent Elance now look at carefully house rent Elance so you know a company know whenever a company recruit an employee know companies know they generally give accommodation to employees accommodation to employee accommodation is a facility accommodation facility means companies having staff quarters in that quarters one bungalo is allocated to employee that's a facility given to employee so that's a that's a perquisite which is valued as for valuation group alternatively company may give rental elevance that's called house rent elevance what is it called as house rent elements so for rental expenditure purpose we are giving house rent elements now if house rent elements is given there is a an exemption given for that under 10 Clause 13A how much is exempt how much amount actually received per month how much is rent paid in that month minus 10% of salary minus 50% of salary if at all you are paying rent in a city Delhi Kolkata Mumbai Chennai then 50% or 40% of salary if at all you're paying rent in any other City suppose if at all you are staying on in a rented accommodation you are paying rent that accommodation is in some other City not Delhi Kolkata Mumbai Chennai then 40% of salary is one criteria if at all you staying in a rented house in Delhi Kolkata Mumbai Chennai then 50% of salary second criteria how much you are paying rent monthly minus 10% of salary salary means what basic da for retirement commission percentage of turnover I told you for five purposes salary means same RPF H gradu Act is not applicable leave en cment BRS in all these five cases salary means basic plus da for da for commission percentage of turnover we already completed gradu where Act is not applicable so one time salary we discussed BRS we completed leave and cment we discussed H now we are discussing RPF is spending where this salary definition is applicable correct I hope you're able to recollect what I'm explaining getting it you just listen to this carefully you listen once again problems are also given you you just observe those problems believe me you are done with salary shter so how much is exempt so actual amount how much you received rent paid minus 10% of salary suppose you have paid rent zero for some two or three months you did not pay rent at all for those three months you will not get H exemption at all remaining 9 months you paid rent for those 9 months H exemption you will calculate so if for any month you don't have rental expenditure at all for those months whatever H you received from the company is fully taxable remember H you have to calculate month-wise if all the months you have stayed in rented house all the months salary information is same you know H amount is same rent paid expenditure is same city is same then entire 12 months put together at time you can calculate getting the point so this is H computation so actual rent paid minus 10% of salary 50% of salary or 40% of salary as a case maybe now salary means what basic DF retirement plus commission suppose sir we are giving an employee accommodation facility sir we are giving the employee accommodation always remember this thumb rule in salary whenever you have a in problem accommodation facility is there you need to Value the perquisite calculate this at last calculate this at last getting it so how to calculate income under salary first calculate gross salary minus deductions then you will get income from salary getting it deductions means what I have already told no deductions you have three deductions standard deduction entertainment elevance profession tax anyhow we will discuss that later so always whenever you're Computing problem on salaries no accommodation related perquisite valuation do it at last just before you compute gross salary total compute accommodation perquisite next so right now what is over which means house rent Elance is over next telephone Elance you know what if employer company give telephone facility to employ fully exemp nothing is taxable if Elance is given Elance means what I give money whether he will use telephone or not doesn't matter that is his choice if I give telephone Elance fully sorry fully taxable telephone Elance is fully taxable are you getting it suppose I gave an employee medical elements medical elements Again Medical elements means I have I have points to say suppose you know employee employee for medical purpose we are giving elements we are giving elements or we are giving reimbursement or we are giving facility employer is having a hospital medical you know hospital is there in that Hospital employee and his household member getting treatment fully exempt what is it fully exam now employee plus household member household member means family family means what children spouse dependent parents dependent brother or sister only these are covered within the definition of family if employee or his family members getting medical treatment in employer Hospital employer maintained hospital it is fully exempt suppose employ employee is not employer is not having hospital so employee spending money getting reimbursement from the company he's spending money for medical treatment of himself and family family means only these people man remember so for these people he's spending money medical expenditure then getting reimbursement from the company now this reimbursement is exempt this reimbursement is exempt only if the medical treatment is held in if the medical treatment is taken in government hospital or if medical treatment is for prescribed diseases given by Chief Commissioner of income tax or principal Chief Commissioner of income tax or if the medical treatment expenditure is for covid illness of the employee or family member for these purpose he spend some medical expenditure companies reimbursing then only except suppose if employee or family member they are getting medical treatment in a private Clinic they are getting medical treatment in nursing home they getting medical treatment somewhere in a family doctor and employer is reimbursing it fully taxed fully taxed suppose if employer suppose employee suffering from some particular problem he went abroad for that he went abroad and took medical treatment for that medical treatment company reimbursed now to travel abroad travel expenditure also company paid now in abroad they stayed for some number of days stay expenses also company paid so if employee who has taken medical treatment outside India treatment cost traveling cost boarding and lodging cost completely company only you know reimbursed what about that medical treatment abroad it is Exempted to the extent Exempted by RBA why whatever RBA allowed to that extent whatever employer reimbursed Exempted suppose no employees spent 10 lakhs expenditure entire 10 lakhs company gave but RBA gave N9 lakhs only permit one lakh is taxable now on transport travel expenditure 5 lakhs employees spent company reimbursed entire five but RBI gave 4 lakhs only limit then one lakh taxable further further for travel expend abroad travel for medical treatment that is Exempted w only to the extent of RPA that to this exemption when you know if gross total income of the employee does not exceed 2 lakhs if employee gross total income is less than or equal to 2 lakhs then only this travel expenditure is Exempted which is reimbursed by the company you getting the point how to identify gross total income compute income from salary all perquisites elanes everything even medical reimbursement taxable items everything even medical treatment at abro taxable person add it everything you total except this five lakhs except five lakhs travel reimbursement rest everything you total taxable items identify income from salary identify other heads gross total income if it is less than or equal to 2 lakh then travel reimbursement for abroad medical treatment is Exempted otherwise it is fully taxable able to now travel reimbursement for employee or the family member who is suffering illness plus one attendant for them only company will give that is only Exempted suppose no I am giving month some fixed Elance I'm giving some monthly some amount whether he will spend it or not doesn't matter elevance is fully taxable reimbursement is exempt only if it is in a med government Hospital prescribed disease covid treatment at abroad to the extent permitted by RBI travel and stay expenses to the extent permitted by RB is Exempted provided gross total income do not exceed 2 LH over suppose if on employee and family members name company took a medical policy company's paying premium fully exempt suppose employee only purchased medical policy he is paying premium I am reimbursing it fully exempt elements of medical medical elements is fully taxable please remember that's it so so medical reimbursement we discussed medical elements we discussed yes or no we have covered medical elements and medical reimbursement all that just a minute I think something is missing here ah here you see here let me copy this page copy the page I will paste it below that I will paste it below that so so next page yes continuation that's it so we have even completed what we have completed what medical policy on the employee it is fully exempt suppose company has taken accident insurance policy accident insurance policy on the employee name fully Exempted able to understand next suppose compan is offering lunch getting it if at all compan is giving El no money is given to buy the company to employee employer gave lunch Elance fully taxable suppose no company is having a food cat to the employee I give a lunch voucher he can use that voucher and to buy the food only see if I give Elance whether he will spend or not I don't know I give money monthly some amount I gave for lunch purpose or tiffen purpose whatever some Elance I gave for hood and beverages fully taxable suppose if I give him he cannot use it anywhere else he can only use it for food Redemption if I give a voucher lunch voucher up to 50 rupees per meal is Exempted getting it that's it so lunch facility if I give lunch Facility by voucher up to 50 rupees per meal is Exempted gift suppose no employee did something well in this month so company want to give a gift to him to reward his service so we give GI cash we give fully tax suppose you give a voucher or kind some non monetary thing you give if the value is not exceeding 5,000 fully except in the entire year if the value is not exceeding 5,000 fully exemp if the value is exceeding 5,000 fully taxable alternative treatment up to 5,000 exempt beyond that whatever the value of the gift is it that is taxable so gift 11 gift gift in kind so gift in kind I did not write here so gift Elance so gift Elance is taxable so here you have you add one more Point gift in kind so that also we have covered yes or no understood or not I hope you're able to recollect these many points you have studied in you know this one next contribution to RPF in excess of 12% interest on RPF in excess of 9.5 what does it mean suppose employer is contributing monthly to recognize the Provident Fund in the name of employee employee is also contributing out of his salary to Provident fund for him it's a ADC deduction now compan is contributing in your name for your future benefit that's a benefit for you right so if companies contributing for your future you know some amount to The Provident fund authorities how much if it is if it is up to 12% of salary company contributed fully exemp if it is beyond 12% of salary that excess amount over and about 12% of salary if employer is contributing in the name of employee to The Provident fund authorities in excess of 12% of salary fully taxable 12% of salary means what salary means what basic da for retirement commission percentage of turnover so in reality in problem what they will they will tell you is employer contributed 20% of basic to RPF employer contributed 15% of salary to RPF like that they'll give you first how much he contributed money convert it into money first from that reduce 12% of salary identify salary basic DF for retirement commission percentage identifying the problem amount apply 12% value identify how much value amount contributed how much amount Exempted balance if at all positive tax it otherwise Exempted able to understand some students what they do is in exam they give you employer contributed 20% of basic salary to PF directly this fellow will do 8% tax 8% he will tax it directly because 12% Exempted you should not do like that you will get a wrong answer if you do always take a working note how actual amount contributed how much identify 20% of basic basic is what check out 20 apply amount you put minus 12% of salary salary means what basic da for retirement commission percent of turnover amount amount amount total it getting it apply 12% value you will get amount contributed 10 lakh value 9 lakh 1 lakh is taxable able to you should always compute like this in a working mode only then you will get marks now so in excess of 12% of salary exceeding 12% of salary if any contribution is there only that is taxable same way in that RPF no company will be adding interest every year if the interest rate is 9.5% perom that interest is Exempted if the interest is more than 99.5% per suppose if compan is paying 13% interest the 3.5% interest is tax they'll give you interest amount so 14% interest is equal to 14,000 rupees now 9.5 means how much 9,500 so 4,500 is perquisite 4,500 is salary not a perite salary taxable next leave travel concession what is leave travel concession this is if an employee and along with family personal reason they're going for a journey they're going for a holiday in a block of four years what is it in a block of four years 2022 to 2025 right now the ongoing block is this one 22 to 25 this provision is added in 1986 so 1986 87 88 89 that is one block 1991 92 93 one block 94 95 96 97 one block like that right now what is a block 2022 2023 2024 2025 this is a block sir Financial calendar year calendar year in this four calendar years if you go for two holiday trips you and your family family means what spouse and children children means how many two children getting the point two children two children means what two children only suppose if at all Twins were born or triplets were born getting first time employee has been blessed with one boy second time he was blessed with two boys at a time twins they are treated as two children only now this employee went for a holiday trip now entire trip cost not staying in lodging only travel cost company reimbursed fully entire travel expenditure which employee went on leave leave travel that entire travel expenditure company only paid for the journey entire amount is Exempted entire amount of leave travel is Exempted provided the Le travel must be within India not outside India So within Le if any leap travel facility is taken by employee within India whatever travel expenditure company is bearing that is fully exam now how many holidays employee can take two holidays two Journeys what is it two Journeys it is Exempted two Journeys every year no no no in a block of four calendar years two holiday trips employee can take up two holiday trips whatever traveling cost is it that is Exempted in a block of four years sir suppose no there is one block 22 23 24 25 in these four years I haven't not I have not you know I did not went any place at all no leave travel benefit I takeen now what to do can I carry forward two into the next block 26 27 28 29 in this next can I carry forward to no if at all an employee did not utilize leave travel benefit under 10 Clause five under 10 CLA 5 in a block he didn't use at all one one leave one holiday can be carry forward to next block accordingly in the next block three leaves he can use three holidays he can use provided the carry forwarded no that should be used within the first year in the next block then suppose employer know my tax liability employee tax liability employer feay you know I'm earning salary right on this salary I have to pay tax this tax also compan is only paying So Good by Bosses so on the perquisite which I'm getting company is only paying salary the salary paid by company on my salary sorry my tax my income tax they paid it's a pit to me now it is taxable in my hands now but it is Exempted it is Exempted now you know what compan is paying income tax no my income tax for them it's an expenditure at the end of the day because my expenditure they pay so it's a business expenditure but they cannot claim deduction under 40 subsection clear disan point if a company if if if any tax is paid on not non monetary perquisite given to an employee the tax paid is not allowed as deduction for the employer who is a business person under pgb he will not get deduction for me under salary is it taxable no almost one hour almost one hour all these points have covered still we have few more points if at all we discuss these points I'm telling you majority of the salary Provisions we have covered next he already GI in kind is there m sorry I wrote here GI in kind is there next you know there are some facilities like what medical facility which I already told you telephone facility servant facility Gas and Water Facility by the way telephone facil is fully exempt medical facility already discussed facilities they are taxable only for specified employees perquisites no perquisites are two types reimbursement facilities reimbursements are always taxable for every employee if at all any exemption is there that exemption generally most of the reimbursements are fully taxable facilities no they are taxable only for specified employee specified employee means what if an employee is a director in the company he's a specified employee if an employee is having more than 20% ownership in the company more than 20% profit sharing ratio in the employer business is a specified employee if an employee monetary salary what is it monetary salary amount is more than 50,000 per anom is a special employee right now if you apply the definition no right now this definition was defined 25 30 years ago specified employee definition the same thing is continued even now now tell me even a Watchman security guard is getting yearly 3 lakhs amount he's a specified employee so right now if you apply specified employee definition everybody is a specified employee in reality but exam point of view they still they still they testing mcqs so specified employee point they will test so accordingly accordingly facility what facilities is what facilities gas facility servant facility getting it trans facility education facility medical facility telephone facility all these are Exempted all these are sorry all these are by the way telephone facili fully Exempted that is given specifically so medical facility education facility let me highlight with red color medical facility just a minute yeah so medical facility we have covered already now medical facility medical facility education facility transport facility servant facility gas water electricity facility these facilities no only if a specified employee get this it is taxable for you if a normal employee also getting these facilities fully exempt for you it is not taxable so these facilities are taxable only for specified employees for normal employee we won't tax it getting it so servant facility how much we will tax it by the way whatever servant salary company is paying no that is benefit in the hands of employee that is taxable gas water electricity if company is buying from somebody and then giving gas water electricity whatever company paying them no that is perquisite that is taxable suppose if company only manufacturing and giving it to employee manufacturing cost is the benefit in the hands of employee that is perquisite over so no servant over gas water electricity over then telephone facility fully exempt not at all taxable then suppose if a company is giving a car to an employee so before car I will discuss mov ass topic movable asset what is a movable asset what is a movable asset very simple suppose know company gave Furniture to the employee for usage since he's using Furniture yes or no it's a benefit to the employee how much is the value of the benefit that is taxable how much is the value of the benefit that is taxable the value of benefit of furniture given to an employee nothing but movable asset suppose if the company is giving movable asset for usage movable asset for usage so company is giving mobile asset for usage of the employee how much is the perquisite 10% perom of original cost suppose if the asset is wounded by the company suppose company purchases some asset that asset is given to employee for usage for personal purpose what is the benefit value how much is the benefit employe is getting because of using it 10% perom is the benefit suppose if the employee is using it only for 6 months only for 6 months he has taken that facility then 10% perom into 6 months into original cost so for how many months he is using that facility enjoying that facility only for that many months only mobile asset perquisite we calculate suppose no company is taking the asset on rent giving it to employee suppose company has taken AC on rent and installed it in employee house AC rent itself is perquisite so rental expenditure is perquisite rental expenditure is treated as perquisite see at the end of this entire chapter I will give one summary like what are all these points I'll give Comm sense based summary if you listen to that that's enough suppose no for employee I give laptop and computer for usage fully exempt if the mobile asset is laptop and computer which is given for employee whether for official personal doesn't matter fully exemp if any other asset is given for employee usage mobile asset 10% per of the original cost if it is one asset rental expenditure incurred by the employer if at all it is rented and then given to employee it suppose no company purchased some asset that asset is sold to employee movable asset movable asset is sold to employee on this I have explained a problem already in that problem also once again I repeated the provision movable asset I sold to employee suppose if the company is selling immovable asset to employee that's a transfer of capital ass Capital Gams will apply if I give movable asset to employee in the course of employment he purchased the mobile asset from the company suppose no employee has purchased computer send electronic items from the company okay for company no company originally purchased at 1 lakh whereas now employee paid 10,000 rupees and purchased it now 90,000 rupees discount that's a benefit no you should not calculate like this the benefit perquisite valuation rule says for computer and electronics company has to claim noal now some asset belonging to the company I purchased is there any benefit in this purchase derived by me how to calculate this benefit look at original cost of the asset minus claim notional depreciation reduce notional depreciation for every completed year of usage for every completed year of usage by the company so for how many years company user that asset in their own name for how many years that asset is in the name of the company for completed years of usage by the company in case of car and sorry in case of computers and electronic items 50% w basis we claim notional depreciation so three completed years company purchased the computer on first May 2019 this employee purchased when company when company purchased just a minute when company purchased the computer 1st May 2019 company purchased the computer what price 1 L getting it now the employee purchased this computer from the company on 10th June 2022 employee purchase at what price he just paid 10,000 rupees and bought or let's assume he paid 1,000 rupees only 1,000 rupees he paid and purchased at this computer now is employee got any benefit in this let's check out 1 lakh is the original cost right now since the item is a computer and electronic item notional depreciation as per perquisite valuation rule is 50% wdv basis suppose if it is car 20% WB basis if it is any other which is sold by company to employee 10% slm basis these are the valuation rules National depreciation valuation rules one lak now first of all now company purchased it on 1st May 2019 and sold to employee on 10th June which means these the Gap who is the owner company only owner for how many years company is owner from 1st May 2019 to 10th June it is more than 3 years exactly speaking 3 years two months approximately now how many completed years company's owner only three completed years only company's owner only for completed years of ownership only for that CLA notional depreciation so 1 lak minus 50% you will get 50,000 minus again 50% this is for first year this is for second year 25,000 again claim depreciation for third year 12,500 50% so what is the value 12,500 so value of the asset is 125 Company employee paid how much, rupees he paid and got 12,500 worth of ET 11,000 ,500 is taxed as perquisite 11,500 Rupees is treated as perquisite in the hands of employee suppose if it is motor car then instead of 50% we will calculate 20% 20% 20% if it is any other asset slm 10% slm basis means what on original cost we will calculate 10% 10% 10% 3 years so when a company sells any asset mobile asset to employee certain price are zero free whatever what is the value of the movable asset how to AR the value of the asset given to employee very simple computer electronic items 50% on WB basis reduce for every completed year of ownership with the company we hope I am giving you Clarity by the way I have given problems also if you if you look at these problems I'm telling you most of these adjustments have covered in these problems getting it so movable asset usage everything sale both are complete deleted just a minute yes that's it now let's continue with motar car so suppose compan is giving car facility car facility is taxable only for specified employees first of all facility now how to tax car facility very simple very simple suppose no no car facility cars are divided broadly into two categories less than 1.6 CC more than or equal to sorry not exceeding 1.6 CC more than 1 .6 CC getting it so if the CC is up to 1,600 then perquisite value is different if the CC is more than 1,600 the perquisite value is different exceeding 1,600 suppose no company gave car facility company only owns the car employer owns the car company wants the car expenses of the car they are also employer only bearing suppose if this car is completely for official purpose if the car is completely for official purpose no benefit to employee what is the perquisite value what is the taxable value zero suppose if it is for personal purpose personal purpose now company gave car expenses also they only bearing now car no company car I'm using no use of movable asset so use of movable asset what is the perquisite 10% perom for using the car less expenses of the car company only bearing no actual expenses that itself both put together is taxable in the hands of employee so actual expenses means what fuel maintenance repair driver salary everything compan is only paying everything and remember this entire car is completely for personal purpose only so whatever actual expenses company spent no that is for employee benefit personal benefit fully taxable car is company own car 10% perom of the original cost suppose company took the car on rent and gave it to employee rent expenditure is forent whether whether it is more than less than 1.6 or more than 1.6 is it doesn't matter suppose car is used for official plus personal both the purposes employees using now I cannot ask full benefit no how much perquisite valuation rule says if the car is owned by company or rented whatever company is providing the car company is providing the car if is completely personal we havec if it is completely official zero zero perquisite if it is completely personal use of mobile plus actual expenditure is perquisite very simple if it is official and personal how to Value then if it is complete if it is official plus personal no if the car capacity is less than 1,600 CC then 1,800 per month is the purpose if the car capacity is more than 1,600 CC 2,400 per month is treated as perquisite Val suppose if company give driver also and the driver is also used both officially and personally then 900 Rupees is perquisite in the hands of employee so what are they saying if you're using car for both official and personal car is given by company expenses are Bor by the company but it is used for both official and personal so personal portion how much we assume we assume this much is the benefit of personal portion actual expenditure doesn't matter this is deemed to be the personal portion benefit accordingly this much is taxable over second part suppose car is employee only taking the car his car only car is owned by employ his car only out of his own money he bought but expenses of the car running and maintenance employer company is weing suppose compan is bearing the expenses no completely suppose if the car is used for complete official perquisite is 0 completely personal actual expenditure completely personal actual expenditure s for car a car employee car man 10% per original that and all don't apply that is that that when when we will apply that point the company provided the car here car is owned by employee only expens we are giving him expenses are completely for personal purpose car expenses entire expenses is perquisite suppose here official plus personal both are there car owned by employee employees car that is but expenses are given by company maintenance running everything and this car is used for both official and personal then look at what is the actual expenditure check out minus if the car capacity is less than 1,600 1,800 per month you reduce suppose if driver is also given 900 per month you reduce balance if any is there if balance if any is there this is only perquisite if balance if any is there this is only perquisite suppose if it is more than 1,600 then what is the actual expenditure company spent minus 2,400 per month you reduce minus 900 per month if driver is also given reduce balance only per this is car suppose if company suppose employees having two wheer company is only giving entire you know running and maintenance cost then actual minus 900 per month reduce it balance is perquisite that's it car is over suppose if employees given two or more than two cars two or more than two cars able to understand any one car we will apply this rule remaining cars which company give we will treat as if it is for completely personal F that's it so car related principle is over motor car related principle is over I hope you getting because I need to explain you the things I'm explaining you in fact I'm explaining I'm not just simply reading opening the book I'm not reading suppose company is giving ye of shares or S Equity so since my employe is working superbly fine he has contributed a lot we allotted stock options or we allotted SP Equity shares or we allotted preference shares or debenture something some Securities we allotted recognition for him now we allotted Shar and securities no whatever the market value of the shares and securities is there that is the benefit in the hands of employee and that is tax now you see these many items we are saying taxable taxable taxable that is gross value of perquisite suppose no we recovered something from employee in return return that you reduce balance benit only tax it right now whatever I told is benefit valuation from the benefit value if employee repaid anything to the employee reduce that balance only people tax that's common sense for almost we have discussed many points now contribution to 8ccd contribution to atcd suppose if companies contributing to National pension scheme referred under atcd on employee name for future benefit whatever I contribute it is treated as salary income under 17 subsection one fully taxable in gross salary whatever employer contribution is there now under atcd subsection 2 employee can take deduction under 8 C CD chapter 6A in chapter 6A Marathon video it is covered check out there then finally suppose if company is giving accommodation facility if company's giving accommodation facility how to tax this perquisite for this I have a diagram just wait a minute just wait a minute now you see so how to Value accommodation facility suppose no if a government employer if he gave staff quarters or accommodation or Bangla to their employee getting it employee and his family and all they can stay happily in that bang now they're getting rentree Bangla rentree house which means employees getting some benefit what is the value of the benefit so that we can tax it how much amount we can tax it what is the value of the benefit that we can tax it very simple whatever license fee determined by the government per month that is treated as value of the house per month getting it so this is taxable purpose for government EMP suppose if the employer is not a government non-government and you know company has their own staff quarters that quarters is given to employee for his residential purpose then what is the value of the perquisite so that we can tax it suppose we have given accommodation in a city where population is more than 25 lakh then the value of the perquisite is 15% of salary suppose sir what is salary I'll come back wait suppose if the accommodation is given in a city where population is more than 10 lakh but not exceeding 25 then perquisite is 10% of salary suppose if accommodation is given in any other city where population is less than 10 lakh then perquisite value is 7.5% of salary suppose no company don't have own premises they rented one they leased one premises that amount that premises we gave it to employee for his residential purpose means rented accommodation then what is the perquisite value 15% of salary or actual rent which of is lower suppose company is giving accommodation to employee not in a rented premises but in a hotel then 24% of salary or actual amount paid to the hotel whichever is lower that is the benefit we are giving house to employee own house we give to employee for stay or rented house we gave him for stay in that we give Furniture also Furniture is given movable asset is given for personal use what is the perquisite 10% perom of the original cost for furniture owned by the company or if at all furniture is hired outside that furniture is given to employee for personal use rental expenses so first identify accommodation so if accommodation is given for employee residential purpose how to tax this is the perquisite value in addition to that furniture is also given then this is the perquisite value how calculate the purpos like this if at all employee repaid company some amount monthly reduce that balance about the benefit only tax simple accommodation provision over now what do you mean by salary now you see the word salary salary is used in these many sections while calculating taxable amount so for accommodation salary is used salary means what basic da for retirement any commission bonus taxable portion of elementes so how to apply this definition we have I have added a problem also so you can find out there getting it basic da any commission bonus taxable portion of element whereas for RPF in excess of 12% of salar is taxable H rent paid minus 10% of salary 40% of salary 50% of salary salary means what gratuity where Act is not applicable 15 by 30 nothing but 1 by2 into average salary means completed years of Sal salaries means what leave en cment 10 into average salary salary unutilized leave divided by 30 multip by average salary salary salary means what BRS three into completed years of service into salary number of months service left multiplied by salary salary means what basic da for retirement commission percentage of turnover suppose if an employee has received gratuity and he's covered under gratuity act now 15 by 26 into last drawn salary into completed years of service or part of in ex of six months salary means what basic plus any so whatever salary definition that is used in salaries chapter broadly three definitions for RFA salary means apply this definition for these five purposes salary means apply this definition for grity where graduate Act is applicable apply this salary definition be able to understand getting it so that's it with this with this even accommodation facility point is also completed with this salaries chapter Provisions we have now very simple once again I'll come to the overview getting it so first know in salaries how to compute first you should compute gross salary how to compute gross salary first compute taxable salary under subsection one then compute perquisite values that are taxable how to compute perquisites they can be reimbursement or they can be facility how to compute taxable facility education facility medical facility uh accommodation facility car facility we discussed if at all reimbursements fully taxable medical reimbursement in government Hospital exemp medical reimbursement for specific disase Co disease exempt Prof in your salary vs I told yes or no salary meaning basic da bonus commission gratuity retirement gratuity exemption we have discussed leave encashment on retirement exemption discussed pension on retirement we discussed monthly pension fully taxable so like this you compute what is gross salary compute all taxable items then from gross salary we have deductions three deductions standard deductions up to 50,000 entertainment 11 deduction for entertainment elements no is available only for government employee first of all if entertainment elements is there first we will tax it gross salary we will tax it as part of salary you will tax it we have a deduction 1th of basic salary 5,000 rupees in a year actual amount of Elance received whichever is lower that is that is deductible profession tax paid if employees paying profession tax to the state state government whatever amount of profession tax you pay that you can claim deduction suppose if profession tax is paid by employer first to treat it as income from salary under salary then the amount paid by employee you will claim deduction under 16 again so from gross salary you claim this deduction then you will get income from salary in exam they'll give you entire problem they may ask you either gross salary or they may ask you income from salary if gross salary is asked before deductions whatever amount is there that is gross salary if income from salary or taxable salary they ask then the net salary this is the answer I hope you are clear oh my God almost one and a half hour we spent just to revise the content okay in reality in my regular class I will be taking 9 hours 8 to 9 hours on this chapter only concept discussion with illustrations here I'm giving you one and half hour and 1 hour problems hardly two and half hours I'm finishing that's a revision no it's a Marathon Man first of all understand it's not a detailed regular class it's a marathon still I have covered all the provisions clearly with explanation and Logics okay that's it take care all the very best with this salaries is STO provision is over now continuation watch problems solving of problem is also important I I told you the provision now I'm going to apply the provision in the problems some six to some five to six problems have given you just watch these problems believe me you will get complete Clarity on the salary septer remember salaries weightages minimum 8 marks to 12 marks or even sometimes 14 marks that straight question will come okay that's it take care continue watching the problems so let's begin with the salaries related amendments for May 24 or even September 24 exams so in this we have Finance act 2023 Amendments of course we also have supplementary material related Amendment especially this rentree accommodation valuation has changed now even those of you who follow latest latest IC study material applicable for may you have to go through this particular Amendment so this is very important Amendment no doubt about it this is going to be tested for sure I'm thinking so heing it so rentree accom accomodation the limits the perquisite valuation rules have been changed that two only for one property if employer is providing employer is providing a rentree accommodation or concessional accommodation to an employee which is wounded by employer but other than a government employer nothing but a private sector employer other than a government employer if at all he is providing rentree accommodation to an employee what is the perquisite valuation rule that we already know it depends the world rule is what what is the world limit if at all the population is more than 25 lakhs in in the locality where the accommodation is provided 15% of the salary if the population is between 10 to 25 lakh 10% of salary if the population is other cases nothing but 10 lakhs less below below 10 lakhs population 7.5% of the salary this is the perquisite rule yes or no this this much should be the value so value of perk is equal to you know 15 or 10 or 7.5 percentage as the case maybe now these percentages have been modified population limit has been modified now the population limit is taken as per 2011 census as for 2011 census the first category top category the population in a city is more than 40 lakhs where the accommodation is provided 10% of the salary is a perquisite value if the population is provided in a city between 15 to 40 lakhs 7 and a half percentage of the salary and if it is any other area 5 percentage technically speaking the perquisite value has been decreased because earlier it is 15 now it is 10 earlier it is 10 here it is 7 and half earlier it is 7 and half here it is five the value of perquisite has been changed because know these limits and all were given in World these limits and all were given in somewhere in 20056 time they drafted at the time salary amount is low so value of accommodation 15% is very high but now salary amounts have increased like anything right nowadays people are having at least 8 9 10 11 12 15 lakhs 20 lakhs 30 lakhs packages yes or no salaries have been increased so accommodation value generally be the rental expenditures generally be the 10 to 15% or less than 10 to 15% is on that logic the percentages have been liberalized the percentages have been relaxed getting it they reduced it so now maximum rent free accommodation perquisite value is how much now 10% of salary remember this is only only if the accommodation is wounded what about rented accommodation provided there there is no change 15% of salary or actual lease rental whichever is higher yes or no sorry whichever is lower in case of Hotel accommodation if the accommodation is provided in hotel 24% of salary or actual rent whichever is lower all that we know that exactly same no changes in that only if the accommodation is wounded by an employer other than government employer and if the salary if if the population in the city is more than 40 lakhs 10% of the salary is a perquisite if the population is between 15 to 40 L 7 and half percentage if the pop in any other area 5 percentage and this is one Amendment this is one Amendment there is one more big amendment in RFA there is one more very big amendment in RFA cost inflation index something like capital gains topic has been brought many students they are only thinking about this is the major Amendment this is nothing Juju percentage change nothing nothing big in this just a inste of 15 10 instead of 25 L 40 LH instead of 10 to 25 15 to 40 and 10 7.5 7.55 this is not a big deal this is not an amendment according to me this is not a big deal at all the big deal is the second value of perquisite is restricted to cost inflation index generally how perquisite is valued every year suppose 20 to 23 Financial Year my salary details basic salary is this much da is this much commission various elanes all that is this much we have salary definition we have a salary definition I explained you rent free accommodation clearly along with the salary definition how to compute RFA value in the marathon clearly getting it you can absolutely watch that Marathon only amended portion you watch this enough getting it because in the main material this is not amended this this amendment has been given only in the supplementary material getting it now salary means what basic plus uh salary means what actually basic plus da for retirement plus commission percentage of sorry it's actually any commission basic plus DF for retirement plus any commission plus bonus plus taxable portion of elanes this is the salary definition which I drafted whatever the definition they gave no for perquisite valuation what do you mean by salary what are the included in salary what are excluded in the salary by thoroughly analyzing it that definition can be drafted as like this so This logic I clearly covered in the marathon go to Marathon income from salary time stop inside that you'll find RF related thing you just find that so now so every year we have to compute perit value based upon the salary figures of the every year correct now first year suppose you know suppose from previous year 23 24 onwards or from the year in which accommodation is actually provided to the employee whichever is later whichever is later which means suppose I am working in a company from past 5 six years I was given accommodation long back from 2324 onwards from 2324 onwards accomodation valuation changes for 23 24 what is your basic salary da all that apply apply this at 10% 7 and half 5% as usual Logic for 232 24 Financial year consider that as a first year nothing but consider that as a first year in which employee got accommodation consider 23 24 as the first year for which employee got accommodation getting the point so consider and C Cal 10% 7.5% 5% as the case may be consider compute you know first year accommodation perquisite value now 2425 next year suppose the employee was given the same accommodation employee continue to St the same accommodation next year also in the previous year 2425 how to compute R how to compute perquisite value generally how do we compute in 2425 basic how much do how much commission how much bonus how much all this we will take and apply 10% or 7.5 or five that is the normal rule but now for 23 24 you compute perquisite value right by taking 10% of salary 7 and half% of salary 5% of salary where you take salary various components for 2324 you compute right 2324 value you take it as base year you take that value as what base year value in the first previous year that is actually called as what first previous year multiplied by now 2425 previous year 2425 what is the perquisite value for rent free accommodation don't take 24 25 salary figures take 23 24 perquisite value take 23 24 per perquisite value multiplied with CA of 2425 CIA of 2324 C II of 2425 CI of cost inflation index of 23 24 something like indexed cost of acquisition concept is applied here this change has been brought what the section says is like first I'll read and then again once again I'll give you a detailed explanation where the accommodation is W or taken on lease or rent whatever it is doesn't matter the same accommodation is continued to be provided to the same employee for more than one year the value of perquisite calculated above shall not exceed the amount so calculated for first previous year whatever accommodation value you're calculating it should not previous year multiplied by look at this multiplied by amount of which the ratio of C of the previous year for which you are calculating and denominator CIA of the previous year in which accommodation was initially provided to the employee you getting the point so initially when it was provided to the employee so nothing but first previous year means so 23 24 are the previous year in which accommodation was provided to the employee whichever is later just a yes sir fine so once again once again look at this so the value of perquisite for subsequent years of the rent for accommodation how it shall be calculated it shall not exceed amount so calculated for first year first previous year means what either 23 24 or the year in which accommodation is actually given to employee whichever is later suppose employee he's working in the company from long ago even 23 24 is working but he didn't take accommodation facility 25 26 year he got accommodation facility 25 26 will be the first year for him getting it if at all I got accommodation from long ago 23 24 will be the first year are you getting it nothing but what they saying is suppose no 2324 23 24 my basic salary is some amount my da amount is some amount you know bonus is some amount various so rent free accommodation we calculated on all this we applied some 10 percentage we calculate let us 150,000 1 lakh 50,000 is the accommodation value we calculated now 2324 is called as first previous year because you got accommodation earlier long long back so in the year in which you got accommodation or 23 24 whichever is later so that is called as first previous year for the purpose of rentree accommodation valuation of perquisite so 150,000 is the first previous year now 2425 previous year 24 25 previous year I'm going to the next year next year my basic da everything are different numbers technically speaking on this I should apply 10% no don't don't follow like this the rentree accommodation value shall not exceed first previous year value multiplied by CIA of current year divided by CA of first previous year this was this is what they're saying so previous year value is how much 150,000 multipli by CIA of first previous year is what 348 CA of 2425 year might be it might be some 370 something that number is not at relist I'm just so that will be the value of the perit for the next year that next year what is the value of peris in 26 27 take same first previous year perquisite value multiplied by 395 let us assume 2728 divided by first previous year 348 so that will the perquisite value in 20 by 26 26 27 same index number based which means first time when we are calculating perquisite value to an employee first time when we are calculating perquisite value to an employee who was given rent free accommodation either in the either in the 23 24 or later or before 23 24 year is the base year for them if at all already accommodations provided suppose if the employee itself joined for the company joined the company or employee for the first time got accommodation employee got accommodation in 20 25 26 only for the first time then this is the base year for him this is the base year for him supp the employee got accommodation long back 23 24 is a base year are you getting the point so this is the base year so this is base year is called as first previous year and for this employee base year is called as 25 26 is called as first previous year so first previous year you calculate by applying 10 percentage 7.5 percentage 5 percentage logic rent fre accommodation value you calculate you calculate by applying all these percentages now next year next year how to calculate what is the first previous year value multiply with CIA of the relevant previous year divided by CA of first previous year first previous year might be 23 24 or the accommodation where he got whichever is later this kind of amendment was brought I don't think they will test it now this May 24 because for May 24 the problems are generally based upon 23 24 previous year which means for 23 24 previous year you generally have to compute the next previous year probably for May 25 January 25 exams onwards they will be testing subsequent year logic and in fact I have you know I I am very clear on this amendment I got very good Clarity on this amendment but I felt it is better if CBD gives some guidelines on this in fact this formula is derived By Me based on the text whatever I read this formula is developed by me getting it so something like capital gains concept so now on wordss rre accommodation every year you need not compute by applying percentage on salary first time you compute next year on Words remember this this CIA technique this cost inflation Index this cost inflation index technique is same whether it's a own accommodation or Leed or rented accommodation also even Leed or rented accommodation first year you compute as per perquisite valuation rule second year onwards you have to compute the accommodation value for that employee as per this logic cbdt at all they give a clarification with some examples it would be good because now in the supplementary material also they have not given any any details on this in the supplementary material also they have not given any details on this they just mentioned like this they just mentioned it you know as a paragraph which which I felt very challenging which I felt very challenging for government employer no problem generally for government employer no no problem so probably for government employe license that concept and all is there for private employers only this problems now in this amendment no third Point employees serving on deputation so this is another point which is added which I have not covered here you see that's why I said refers supplementary material for additional points so in the supplementary material no where accommodations provided by Central government or state government to an employee who is serving on deput dep deputation with any body or undertaking under the control of the government so government is giving accommodation to an employee who is serving with a body corporate or undertaking some undertaking the the employer of such employee shall be deemed to be the body or undertaking where he's actually serving suppose there's a central government employee now he's working with Food Corporation of India getting it so though he's a central government employee now he's working with food food corporation of India right under deputation he is a treated as Food Corporation of India employee not government employee accordingly as per 2A valuation is applicable as per 2A means in this diagram 2A means 10% 7.5 5% that logic 2 a 2A where accommodation is wounded by employer 2 a this logic is applicable you know this table they have given right entire this table is same like old you know previous whatever you have seen in the is study material only this 2A box changed only this is changed everything else is same that's why I'm not covering entire this provision why to discuss unnecessarily once again only when accommodation is owned by employer and provided to an employee own accommodation not a government employer what is the perquisite valuation rule we all know it depends upon the population criteria if it is more than 40 LS 10% of the salary if it is between 25 to 40 lakh sorry yeah uh 15 to 40 40 lakh then it is 7.5% of the salary in any other case 5% of the salary that's it that's it and if at all along with accommodation we provided furniture all the discussion I have clearly discussed in Marathon class getting you watch in that Marathon salaries related time stamp you will clearly understand at the end of the salaries time stamp you will find this amendments video whatever you're watching you will find this also there getting it so with this uh accommodation uh major amendment in salaries is completed I hope you understood this point I hope you understood this logic getting it if not just once again listen to it once again you will you will definitely get clarity next and in finance act 2023 leave encashment leave encashment where there are four criterias for leave encashment right so one of the one of the criteria is statut limit 3 lakhs that is increased to 25 lakh the maximum exemption for leave encashment is now increased to 25 lakh getting it then definition of salary under 17 subsection one is you know definition of salary has been changed they have added one more Clause Clause number nine salary definition is is there under income from salaries chapter inside that ninth Clause is added you know one of the Clause Already There Is What You Know contribution contribution by employer to National pension system under atcd subsection two contribution by employer that ised as first salary the the employee the same amount employee can claim deduction under atcd subsection two similarly there is a scheme called agnipath schemee more information depth information I will discuss in chapter 6 year related amendments video so you will just you continue watching you'll find chapter 6 time stamp Amendment video there you will understand fine what is agnipath scheme agnipath scheme is something which is launched in 2022 where the government is giving an option opportunity for the Youth who are aged between 17 to 21 22 years 17 to 22 years so some age some one or plus or minus one year I'm not sure exactly so 17 to 21 22 aged people you can join in Indian army and serve for four years how many years four years now for these four years no the government will take care of you know some fitment test everything that and all health related test and all everything they do and they recruit you once they recruit you they will pay every month to you some remuneration from that remuneration 30% approximately 30% you have to contribute to agnipath scheme you have to contribute to agnipath Corpus getting it I'll show you agir Corpus fund so the government has created a fund called AGN Corpus fund something like National pension system so government has created an Corpus fund whoever is joining in agip scheme getting it for four years serving the country getting it they'll be getting every month some salary from the government rate remuneration from the government honorum from the government on that whatever you getting from that 30 percentage contribute to this not only you central government will give equal contribution how AG is contributing AG means the person who joined in the scheme is called as agiv the person who joined in this agnipath scheme is called as AG getting it so AG is nothing but employee of the government now he's getting salary from the government every month on that salary 30% you have to contribute to the ag ag be Corpus fund equal amount government also will contribute in this four years so long you're serving the country you cannot withdraw single rupe after four years you withdraw you will get exemption all that so that withdrawal now you're contributing right agir is from the salary whatever he's getting he's contributing to agnir Corpus fund right he will get a chapter 6A deduction now government also contributing right that also you can claim under chapter 6A now on my name government is contributing to agir Corpus fund is it a benefit to me or not yes that is treated as salary the contribution made by central government in the previous year to AGN Corpus fund account of an individual who is enrolled in agip scheme so that is treated as salary means first it is taxed as income then under chapter 6 deduction 80 cc Subs ction to employer contribution government contribution you can claim deduction first it is tax then you can claim deduction getting it agnipath scheme is a central government scheme launched in 2022 for enrollment of Indian youth for four years to serve the country so in pursuance of that in pursuance of that uh the government want to create a agiv corpus fund dedicated non-aps Fund in that no fixed percentage of monthly salary would be contributed by agne and matching amount will also be given by the government central government this fund is defined as a fund which is CONSOL this this point is not required from exam point of view key point now you see central government contribution to agnir Corpus fund would be treated as salary first it is tax whatever government is contributing in your name that is First Tax as salary and not only that okay salary you can claim deduction ma while Computing total income who is enrolled in AIP scheme being an s a deduction under atcc is allowed in respect of contribution getting you will get ATC deduction whatever amount you contributed you can claim deduction 80 cc 80 cc has two subsections one subsection two one agir contribution subsection two subsection two is what central government contribution and you know your contribution is the r you can claim 80 cc reduction but you cannot claim this you cannot claim this if at all you're choosing 115 BAC but you can still claim central government employer contribution 0 CC subsection 2 80 cc subsection 2 0 jjaa these three sections related contributions under chapter 6 you can claim even if you are going with default tax regime so deduction under atcc H subsection one for employee contribution nothing but AG be contribution is available only if you opt out of the default tax which means you are not choosing default tax res and whatever central government is contributing no under 0 C subsection 2 you can claim irresp of any regime and that's it that's about AG scheme salary definition Amendment Three Amendments have covered one rent fre accommodation two another amendment which I have covered is definition of salary Third Amendment which I have covered is agnipath scheme and of course standard deduction under salaries chapter you will get 50,000 flat deduction from the gross salary whether you are going with the default tax regime or not doesn't matter in the world no Finance act 2022 no standard direction is not there but now from 23 24 previous year from M year 2425 onwards standard deduction up to 50,000 Rupees can be claimed from gross salary whether or not you are under default tax regime or not so that's it a standard deduction will be given and I showed you already how to compute salaries 115 BAC income to normal provision income I showed the format already in the iCal itself in the DTR default tax when I'm explaining itself I clearly should you I hope you confident on salaries related amendments that's it only these amendments nothing else so you need not worry if at all you studied based on finance act 2022 you need not worry if at all you are you understood these few amendments four amendments more than enough here is an important clarification on rentree accommodation perquisite valuation as we all know I already gave an amendments video even in the part one income tax Marathon if at all you're watching this Marathon just go if at all you're watching Marathon go through with that in that salaries amendments we have covered one of the amendment is rentree account accomodation related perquisite valuation limits have been changed now many are having a confusion on these limits will these limits be applicable from the for the entire previous year 23 24 or you know for part of a previous year these limits for part of a previous year old limits the part of a previous year old limits is applicable for part of previous year new limits is applicable you see here this notification is with effect from 1st September 2023 which means the new are applicable from 1 September onwards only suppose if an employee is given suppose if an employee is given accommodation throughout 23 24 April to March for example first five months which means up to August depending upon the world limits perquisite value has to be computed from 1st September as for these rates the perquisites have to be computed the perquisite has to be computed as per the new rates what are the new rates if at all the population is more than 40 lakhs 10% of the salar is perquisite if the population is between 15 to 40 lakhs 7 and a half percentage and remaining cases 5% is the value of the perit whereas in old old provision if population is more than 25 and 15% 10 to 25 10% is other cases 7 and half percentage these limits are applicable up to August month and these limits are applicable from September onward that's it now this has been evidenced by in mtp2 there is a question just just go through let's just you can directly open mtp2 you can just open mtp2 question number three inside that some party I guess so okay that is dealing with the income from salaries related problem especially inside that they even done the exact treatment see you know there's a confusion actually because no perquisite value of the subsequent years is decided based upon the 23 24 year so maybe earlier you know uh until I have seen this until I this problem I was in an assumption that these limits are retrospective though the supplementary material used the word with effect from but anyhow ignore all the discussion in 2324 up to 31st August 2023 these limits are applicable from 1st September 2023 these limits are applicable 24 25 onwards straight away new limits fully are you clear so this just important clarification please make a note of it so if at all you watched this video definitely exam if this question comes definitely strikes it foret so now what we have seen the perquisite valuation like 10 7 and half 5 percentages for one accommodation what if the employer has taken a premises on rent and given to employee up to 31st up to 31st August 15% of salary or actual rent for that period whichever is lower correct whereas from 1 September onwards 10% of salary or actual rent paid by the employer whichever is lower so even for hotel accommodation also you have to I mean sorry even for a rented accommodation also you have to remember this up to 31st October 15% of salary of those five months or actual rent paid for those five months whichever is lower whereas from 1 September 10% of salary or actual rent whichever is lower so that is that that's even for rented accommodation also the same dates will apply so continue um continue revision next uh discussion is house property so income from house property so this is not a very complicated chapter but when a question has been designed exclusively on house property there were many students who are doing mistakes again on this getting it of course in every topic they're doing mistakes not just one or two specifically especially students do mistakes on preconstruction period interest computation and gross annual value in fact only these two one is interest on loan and gross annual value only these are the two things if you learned correctly these two house property chapter is over and we all know charging section is 22 annual value of any property consisting of building or land attached there to for which s is the owner is chargeable tax under house property if the building is used for S own business or profession then that is not liable if the SSC business itself is letting out the properties then also the property is not liable for business I mean not liable for house property provision and here in house property what is taxable is annual value is taxable not rent received now what do you mean by what do you mean by annual value section 23 subsection one talks about that now uh so what do you mean by annual value so you know to compute annual value we have SIMPLE Three Steps step number one step number two step number three very simple step number three step one or step two whichever is higher getting it in Step number three there is one there are two cases case number one is step one or step two whichever is higher case two case two gross annual value or else let me do one thing uh so fine let us come in the proper order better okay now what is Step number one identify expected rent first you have to compute what expected rent expected rent is computed for the period of ownership for how many months you are the owner of the property for that that many months it will be computed generally we will be owner for the entire 12 months in the previous year suppose if we purchase the property in this year only the property came into existence the property came into existence only on so and so date let us assume the property construction is completed on 30th June which means property came into existence from 1st July 2022 in this case expected rent will be computed only for 9 months annual value will be computed only for 9 months annual value means what value for per anom from this property per anom how much value we can expect what we what is the value of this property perom perom value nothing but now perom means what annual when when we when we calculate full perom when we are the owner for entire 12 months first year when you completed the construction or when you purchased the property you are owner not for the 12 months see if you purchase the property on first April itself or if you if you construct the property construction is completed as on first April itself then 12 months you are the owner for 12 months annual value will be completed supp if the property came into existence only on first July 9 months only you will compute annual value if the property came into existence only on first November 5 months only you compute annual value so you need to remember this point in the exam you suppose you're doing we are doing answer for previous year 22 23 so in this year if at all property was acquired in this year only construction was completed keep a note annual value you should not compute for 12 months you should only compute from the date of coming into existence till 31st months later on onwards F year so that's it so expected rent is computed for the period of ownership number of months whatever your owner in that year for that many months provided the property is in existents now how to compute this annual value how to compute this annual value the the annual value comparation is very simple getting it fa rent or similar property rent whichever is higher fa rent or similar property rent whichever is higher so which is restricted to uh you know standard rent which is restricted to standard rent suppose if pay rent is 10,000 per month similar profer rent is 15,000 so whichever is higher 15 but as per rent control act you cannot expect more than 12,000 per month rent if you try to expect if you try to charge more than 12,000 they will they will punish you so maximum how much you can expect you can expect only that much permitted in law so expected rent is equal to 12,000 per month let us assume SS is owner for entire 12 months entire 12 months property is there so expected rent is 1ak 144,000 are you clear now step two compute actual rent received compute actual rent received how to compute this actual rent received very simple first identify how much is receivable minus minus how much is unrealized rent there is a rule called Rule Number Four as for that some conditions were there then only you can reduce this unrealized rent then what you will receive is called as actual rent received now here received means acal basis only not cash basis getting it now receivable means what suppose I rented this property for 9 months only only 9 months tenant stayed for this 9 months I rented this property at 15,000 per month so 15 into 9 what is the amount so 135,000 is the amount that I have to receive out of this 9 months one month rent tenant did not pay one month rent tenant did not pay 15,000 rupees amount out of this 9 months remaining 12 months 3 months property is vacant let's assume 3 months is 3 months property is vacant or 3 months I am only staying let us assume I only staying let us not discuss vacancy right now 3 months I only staying 9 months I for 9 months 15,000 is the rent which I charged 135 15,000 rupes rent tenant did not give me you know I filed a case against him it's a Bonafide tency is a Bonafide it's a genuine tency contract getting it and I filed a case I am trying to recover all the steps I'm I'm I'm I'm I'm I'm taking all the steps to recover the rent getting the point and I made him to get the property immediately everything is done so this 15,000 I can reduce so what is the actual run received 1ak 120,000 now step number three step number three case number one now by the way here here Step One is higher step two is lower getting the point now generally in Step number three this is where many students do generally what is gross annual value step one or step two whichever is higher this is general rule suppose remember if at all step number two the answer is less than step one if step two our value is less than step one then you should check one more point is there is the proper vacant during the year in our example 3 months owner stayed 9 months tenant stayed which which means entire 12 one somebody's occupying the property is not empty therefore you need not worry about other exception you can straight away say step one or step two whichever is higher gross annual value is equal to 1ak 144,000 getting the point see if at all if at all here step two is 150 let us assume if at all step two is50 you need not even think about anything step one or step two whichever is higher suppose if step two actual rent received is less than step one then you should check is there a vacancy if at all there is no vacancy no need to worry step one or step two Which is higher if there is a vacancy suppose let us assume let us assume now now you understood rate case number one suppose no suppose no I told right uh 9 months tenant stade 3 month months I stay let us assume 3 months the property is vacant even I also not stay 3 months the property is vacant it's empty unoccupied for three months getting the point now now look at now look at case number two now by the way step number one computation is say 1 L 44 step number two computation is same same logic no changes in step one step two whether vacancy is there or vacancy is not doesn't doesn't matter getting it step number one we comput generally for 12 months step number two whatever actual period tenant has stayed for that many months multiplied by actual rent per month is equal to so and so minus unrealized rent is equal to actual rent received getting it now the answer for step two we got and step two answer is lesser than step one in step two the answer is 120 whereas step one 144 it is less than step one and 3 months property is vacant even after vacancy the actual rent is20 now you need to see is step two less than step one yes is there vacancy for 3 months yes what if what if what is step two value 120 what if there is no vacancy what if the 3 months also you have rented what if the 3 months also tenant State example another 45,000 I will be receiving my step two would have been 1ak 65,000 if at all the 3 months property is not vacant if at all the three months not vacant I received already 120 another 15,000 for each month for 3 months I will receive 45 making it 1 lak 65 Which is higher than step one if at all vacancy is not there if vacan is not there if somebody stayed if tenant has stayed getting it my step two actual rent would have been higher than step one but now tell me my step two answer is lesser amount right 1 lak2 where Step One is 144 my step two is less than step one right why it is less than step one because 3 months property is empty because of vacancy my step two actual rent is less than step one if there is no vacancy my actual rent could have been 165 my expected actual rent would have been 165 but because of vacancy it is less than step one therefore the section as per case two step two is only treated as gross annual value what is step two answer we already computed 1 lakh 120,000 would be treated as gross annual value that's it generally case one we apply step one or step two whichever iser case two check out once is the step two value less than step one value yes is the property vacant for certain number of months in this year one month or two months whatever yes it is a vacant for three months if at all there is no vacancy how much step two answer could be check out yes calculated what 1 L 65 now step two answer no without vacancy is it higher than step one yes it is higher than step one Therefore your actual step two answer one2 no it's less than step one expected R because of the vacancy which means gross annual value is equal to actual rent only indirectly department is saying suppose you kept the property for rent nobody's coming and staying in such a case we will take actual rent only for taxability purpose that's it original logic of department is what expected rent only we will calculate whether you really renting it or not doesn't matter the annual value we will tax but if at all you are renting it but nobody's coming and staying in such a case what you will do and you're keeping the property idle vacant what you can do H actual rent is less than expected rent if at all There's No Vacancy actual rent could have been higher I would have taxed Happ on actual rent only but now since the property is vacant actual rent is less than step you know expected therefore gross annual value is equal to actual rent over this is one important discussion in house property chapter are you clear now now you know so this is regarding you know this gross annual value discussion I hope you understood I hope you understood gross annual now once you compute this in our example it can be 1 lak 20 or it can be 1 lak 144 depending upon the case applicable compute now in the question they will give you Municipal Taxes paid information paid during the year Municipal Taxes aced no deduction Municipal Taxes paid you will get deduction Municipal Taxes paid in this year only but belong into last year or that last year still deduction you will get you will get deduction for Municipal Taxes on cash basis payment basis in such a case to which year it relates to we don't even look at even Municipal Taxes paid for outside India for property outside India that will also be eligible for deduction suppose you are a resident and ordinarily resident you are having house property outside India still that is assessible for income tax now now you will get from gav if I reduce Municipal Taxes what you get is called as net annual value what is it called as net annual value now now there is a provision there is a provision called 23 subsection 2 what this provision says is the SSC at his option the S at his option for any two houses for any two houses where the S is staying completely or the house was completely vacant throughout the year means unoccupied property or self-occupied property SS or his family members are staying in that house so if the SS at his option getting it for two houses which are either self-occupied or unoccupied both are self-occupied both are unoccupied doesn't matter for any two House properties owned by the S NA can be taken as zero for any two houses owned by the S the nav can be taken as what zero now by the that's that's about self-occupied property unoccupied property again I'll come back to that discussion later now you know 23 subsection 2 is what talking about this particular examination any two House properties which are used for self occupation my own residence I'm only staying I'm not renting I'm not getting any income okay na is equal to zero we don't tax it for house property don't worry unoccupied I I want to rent it but throughout 12 months nobody stayed rent received is zero completely unoccupied I did not get any benefit from the property at all nav is equal to Z Now nav is equal to Z can be claimed for how many properties in a year two properties suppose I'm having five houses and all the five houses I'm using it for my personal residence only I have a house in gur I have a house in Hy I have a house in Chennai let house in Bangalore getting it I'm having house in Mumbai and can I CLA all five houses na equal Z no any two houses you claim na equal Zer for remaining three for remaining three you didn't rent I I know you did not rent it I know but expected is there now that itself is gross an value for remaining three we will treat it as deemed let out property what is it deemed let out so 23 subsection 4 that is what deemed let out property concept I will come back to it and then discuss getting it so na is equal to zero for any two houses fine anyhow suppose it is not self occupied or it is not unoccupied it is something I rented so GV I have computed Municipal Taxes I reduced Nav Now what is the next step to compute income from house property two deductions you have 30% of nav flat whatever here amount is there now on that 30% flat amount you apply 30% perc simple calculation why sir whether you call whether you take repair for the property insurance for the property white washing painting whatever you doesn't matter how much you spent doesn't matter you you did not spend single rupe also doesn't matter on the net annual value 30% we will give for expenses maintenance expenses repairs and maintenance 30% this is a flat deduction then another deduction is interest on loan another deduction is what interest on loan borrowed getting it now to to buy this property to construct this property you borrowed some loan on that loan you are paying interest you are Inc interest expenditure whatever interest you are incurring that also you can claim deduction now once these two deductions you reduce the final figure is what called as income from house property suppose if the final figure is negative then we call it as loss from house property remember if at all this house property is a self-occupied property unoccupied property where na is equal to zero any loss because of interest you cannot claim deduction if at all you are choosing 115 BAC if you go for optional tax regime you know interest on housing loan for a self-occupied or unoccupied property where n is equal to Zer you have taken no you cannot claim are you clear fine now what is interest on loan how to compute this interest on loan under house property interest on loan is broadly classified into two categories preconstruction period interest current year interest nothing but relevant previous year interest what whatever the year for which you are doing the problem for that year for that Financial year whatever the year you're doing problem for that year whatever interest expenditure incurred aced remember interest on loan is deductable on acal basis how much you incur that's enough how much interest you actually pay doesn't matter getting it current year interest or relevant previous year interest or interest expenditure Inc during relevant previous year we call it as current year interest interest expenditure incurred before before I mean first of all what is PCP interest interest incurred during preconstruction period What is pre construction period from the date of borrowable from the date of borrowable till till end of end of previous year till end of previous year preceding preceding year of acquisition or year of construction generally PCP word comes generally in construction case year of from borrowable date from borrowable date till end of the previous year means 31st March of so and so date preceding which year preceding year of completion of construction year of completion of Construction Construction very simple suppose we completed construction on 30th June 2022 this year only property came into existence on 1 J July 2022 onwards it came into existence so for 9 months we compute gross and value all that is fine now completion is when 30th June now 30th June 2022 comes under which year 2223 for this preceding year is what 2122 preceding year end means what 31st March 2022 ah now when the loan was borrowed the loan was borrowed on 1 August 2020 so from this from the date of borrow of the loan till 31st March 2022 in this case 31st March 2022 is what it is end of a particular year end of a particular previous year end of 2122 preceding year of completion of construction 2223 is the year in which you the construction is completed suppose you were born in 2001 somewhere in the July so which year you were born 2001 you will simply say I Am 2001 born ah so date of construction completion is 30th June 2022 means in which financial year construction is completed 2223 preceding year is what 2122 for that end date is what 31st March this is pre-construction period definition from the date of borrowable Lo till the end of the previous year till the end of the previous year preceding year of completion of construction suppose if I borrow the loan if the date of borrowable of loan and construction completion both are in the same previous year preconstruction period logic will not apply okay sir fine so up to 31st March whatever amount what whatever loan whatever interest expenditure is there whatever interest expenditure is there this entire period we call it as preconstruction period interest are fine so what should I do this interest we can claim deduction in five installments this interest we can claim deduction from house property income computation in five installments first installment year of construction in our example 20 to 23 you can claim second installment 23 24 third installments 2425 fourth installment 25 26 fifth installment 2627 fine very good sir in 2223 I'm Computing right in this year also loan is outstanding sir in this year also I'm incurring interest sir what about that that interest we call it as relevant previous year interest so from 20 to 23 because in this example 20 to 23 is which year 20 to 23 is year of construction from year of completion of construction for that year whatever interest expenditure is there in this year you compute income from house property right you can claim deduction that interest so total interest is how much 1/5 of pcpi installment plus relevant previous year nothing but current year interest nothing but current year interest so these two put together we call it as total interest this interest you can claim deduction here now 30% of Na this interest put together is total now final figure what you get is income from house property loss from house property and you know what interest on Lo don't know suppose suppose if I straight away take na equal to Z in case if I am if at all I am claiming sop benefit because the property is not at all occupied by anybody I did not get single Ruby benefit from this property any is equal to z n is equal to Z and or this is unoccupied property is equal to zero if n is equal to0 30% of Na is zero only one deduction you will get that is interest on loan n is equal to Z benefit is given by Department interest on loan whatever you get you cannot claim there is a limit if if the naav is equal to Z is claimed straight away because it a self-occupied property or unoccupied property getting it where annual value is taken as zero because it is self-occupied or unoccupied for two properties on this interest on loan is deductible maximum of maximum of 2 lakh what is it what is the maximum interest reduction sir 1/5 of pcpa is some 50,000 Rupees sir and current year interest is some 3 lakh rupees sir total interest is 350 sir still maximum deduction is 2 lakhs why n is equal to zero why n is equal Z because it's a self-occupied property unoccupied property now fine sir uh maximum deduction is how much two lakhs only remember this 2 lakh tax limit is per ssse not per house property it is per s an SS maximum deduction for self-occupied un occupied property put together maximum deduction is 2 LS supp if you're having one house maximum deduction for that one house where n equal to Z is 2 lakhs if you're having two houses both the houses put together total interest deduction cannot Exceed 2 lakhs if at all both the houses Nal to Z suppose if for a particular property da be computed minus Municipal Taxes be reduced then na we computed it may be zero or may not be zero doesn't matter but you computed gross annual value straight away na equal to not zero when straight na is equal to Z if it is self occupied or unoccupied straight way you start with na equal to Z value if it is gross annual value you computed minus Municipal Taxes SP then you got equal to Z there this logic and all will not apply restriction of 2 lakhs will be applicable when straight away when you compute Nal Z when we straight comput n equal to Z where we do not compute gross and value when if the property self occupied or unoccupied now so maximum deduction is what 2 lakhs this is per SSE remember this is not per property this is per SS the maximum deduction for self occupied property or un occupant property put together for a single s for two houses put together cannot Exceed 2 lakh rupe that two conditions were there loan borrowed after 14999 loan borrowed for construction or purchase the property construction or purchase must complete within 5 Years From the end of the year in which loan was borrowed when you borrowed the loan year end date you see from that date within 5 years property acquisition should complete within 5 years construction should complete then only the maximum maximum interest will be 2 lakhs deduction per year per year it is for every year now by the way from when I will claim deduction for interest first of all can I claim interest deduction during construction period no no no you can claim interest deduction only from the in which you compute income from house property from which year I will compute income from house property from the year in which you completed the construction from that year only you can compute income from house property what about during the construction period interest that is what PCP know you will claim deduction from which year from year of construction you can claim deduction that to me how many installments five installments now there is another limit 30,000 only maximum limit not even 2 lakhs when if any of these conditions are not satisfied if the loan is B bored before $149.99 maximum interest is 30,000 rup if the loan is borrowed for repairs maintenance renovation not for purchase or construction maximum deduction is 30,000 if the if the housing if the property purchase or construction is not completed within 5 years after 5 years you completed then also maximum reduction is 30,000 rupees this is interest on loan point I hope you everyone of you are clear got it that's it so this is interest on suppose if the property the let out property where we computed gross and value some amount is there for gross and value now in that case interest on one how much 1/5 of pcpa how much plus current year interest how much whatever actual amount is that that much you can claim no limit of 2 lakhs no limit of 30 limit of 2 lakh limit of 30 per SSE these limits applicable only when when the property self-occupied unoccupied and na is equal to zero benefit you C suppose know I'm having I'm having four houses I'm having let's assume three House properties I'm having three House properties and I'm saying all the three were self occupied I'm only saying actually true I'm only I'm not ready it at all but any two House properties only n is equal to zero for these two houses put together maximum interest you can claim deduction is 2 lakh if three conditions are satisfied otherwise 30,000 is a maximum interest deduction interest deduction is equal to 15 of pcpi plus current year interest now the what about one balance house property for two only we will give that benefit for remaining one house property we assume it as let out we treat it as let out we deem it as let out deemed let out property if it is deemed let out how to compute gross and value step one I compute expected rent step two actual rent is not there now step two and all no need to compute expected rent is there no step one that itself is gross annual value for deemed let out property now for a deemed let out property gross annual value you computed which means na is equal to not not zero you computed gross anual value you did not start straight away n is equal to Z you computed G minus Municipal Taxes speed is equal to some na is there or it may be zero doesn't matter getting it you computed gav first of all if you compute GV interest on deemed let out property how much interest on loan related to deemed let out property you can claim deduction any amount no limit at all whatever interest expenditure is there 1th of P plus current year interest whatever is there that much whatever actual amount comes you can claim deduction now fine we understood how to compute GV we understood how to compute interest on all that now here let us assume there is a loss there is a loss of 3 lakh rupee first of all if it a self occupied or unoccupied property put together for two houses put together maximum loss cannot Exceed 2 lakh because maximum reduction is what 2 lakh na is equal to Zer maximum reduction 2 lakh so maximum loss is also 2 lakh in of sop or UOP unoccupied property unoccupied property means what in the same city you are not staying and in that City you have a house which is rented but nobody's trayed nobody occupied that's an unoccupied property for a let out property the loss can be more than two the loss can be suppose interest on loan can be 7 lakhs whereas net annual value is three lakh 3 lakh minus 7 net annual value is some 5 lakh Municipal tax is 2 lakh so 5 lakh minus 2 lakh - 7 l so 5 - 9 4 lakhs loss can be possible for let out property or deemed let out property four lakhs loss is there now what you can do with this loss set off with other heads how much maximum two lakhs only you set off loss from house property with other heads of income loss under the head house property can be set off with other heads of income subject to maximum of two lakh the Restriction is clearly mentioned in section 71 interhead set off so with this uh I can say deemed let out property point is completed let out property G competition is completed all that now you might have some cases sir house property is there sir for six months we stayed for six months tenant stayed sir part of your part of your self occupied no that and all no need to even think is it rented for is is it rented even for one month ah rented sir compute GV how to compute GV expected rent step two actual rent for how many months rented into so and so step three which case case number one step one or step two whichever is case number two if step two is less than step one there is a vacancy because of vacancy step two is less than step one then step two is G simple logic how many months you state how many months 10 that and all irrelevant is it rented for even one month yes compute G sir I have a property sir it has two floors one floor I saying one Flor 108 is saying ah then split and compute for 50% or 40% whatever one floor whatever the proportion they'll give you for that proportion you compute simple for self occupied or unoccupied portion n is equal to zero interest expenditure claim for for only self occupied portion for for let out portion allocate interest for self occupied portion when you're allocating interest know limit you check 2 lakhs and on all that 30,000 2 lakh all that limits you have to check now there are two some Concepts called 26 and 27 co-ownership and deemed ownership so in house property whether you actual owner or even deemed owner it is taxable suppose you transferred house property for inadequate consideration or without consideration to spouse spouse is owner but still annual value will be computed in your hands suppose if the transfer is happened because of living in par separately getting the point or you transferred it for adequate consideration then deed owner concept will not apply if you transfer house property to minor child not minor married daughter you transfer to minor child without consideration you are deemed owner and house property income will be competed in your hand suppose you transfer to minor married daughter so house property 27 clubbing 27 will not apply but clubbing 64 one year will apply getting that that's it so with this house property is completely done I think all the points have covered ah one more point is it 23 subsection 5 there is a point on 23 subsection 5 suppose I'm a real estate person I constructed a very big project in that project no some 100 Flats I sold still 100 Flats were there I am not I am not involved in renting I am not involved in let out business and these 100 Flats I'm not using it for my business I'm keeping for selling now should I compute annual value yes you have to compute annual value in respect of house property building even though you're held even though you're holding a stock in trade however for two years for two years from the end of the year in which you got completion certificate you got completion certificate Right End date you find out from that date two years for two years annual value of these properties can be zero once two years over you have to you have to calculate annual value and pay tax on the stock in trade even though pay tax on that building even though it is a stock in trade compute income from house property now remember these two years benefit is given when you know in this two years you should not rent these Flats by the way they were just kept a stock ined you're waiting for selling it if at all within this two years you are renting it the moment you rent it's a house proper income taxable again you should not rent it they were idle just you're waiting to sell them two years time per is given okay within two years you sell it you are unable to sell it we assume that you're holding it for house property income and we tax it under house property tax so that is what 235 so for two years for a real for a builder for a construction developers getting real estate dealers for two years the house property buildings which are owned by them as stock in trade for them annual value Vis will be zero for two years provided they're not renting it at all if at all they're renting it this exemption will not apply they will we will calculate annual value how to calculate annual value step one step to step the same logic this house property chapter is over I hope I have covered all the points confusing points clearly have given you explanation remember 2 lakhs limit 30,000 limit is only for self occupied unoccupied where you straight away to equal to Z like that you can claim this benefit for how many properties two properties either they should be completely vaken throughout the 12 months or you must be occupying them you're not renting simply speaking you're not getting any benefit from them if at all you're getting any benefit from them monitor or non- monetarily that's it annual value will be applicable 23 subsection one you have to compute annual value got it that's it this house property is over uh the next chapter either I will start pgbp or Capital again something I'll upload this is part number five so the next part I will upload part number six which is either pgb or capital G something okay so on 7th November I will upload this so right now it is 6th November almost night 10:40 I'm doing this recording okay tomorrow morning 7th November I will upload 8th is exam right for you that's it I'll upload on 7th okay by 7th afternoon 2 or 3:00 I will be finishing pgbp capital gains already uh some 10 days 15 days back itself I have already uploaded clubbing setup carry forward chapter 6 all that but once again tomorrow I'll upload once again in the afternoon session I'll upload all of them take care so the amendment under Finance act 2023 related to House properties actually zero no Amendment at all it's only 115 BC clarification I just want to remind you that's why I kept in this amendments material so what is this if at all you're choosing 115 BC for a self-occupied property or unoccupied property where you are declaring NV is equal to zero so for that property you cannot claim interest on loan deduction if at all you planning to declare your income under 115 BAC just a minute if at all you're planning to declare under default tax you can't claim interest suppose if at all you are having let out property or deemed let out property if at all having a let out property or deemed let out property you can claim interest deduction and all but if at all the result of the deduction is a house property loss you cannot set off this loss with other heads of income so with respect to house property 115 BC impacts only with respect to claiming of interest deduction for sop unoccupied setting off of house profit loss with other hits so if at all you're having one5 BC if at all you're declaring income under 115 BC if at all you're not exercising the option of shifting out of the default tax regime your house profit loss cannot be set off with other heads of income and for self-occupied and unoccupied property you can't even claim deduction for interest itself so let's start uh pgbp revision Marathon uh so the sections that are involved in pgbp will be 28 to 44 series these are the sections which we have now in this all the sections are classified into few categor like there are two sections like 28 and 41 which are dealing with incomes and charging section 28 is charging section anyhow the charging section is talking about what incomes are taxable under pgbp so I call it as income section 41 this is also talking about income related what are the incomes that are taxable under pgbp it's in fact called as deemed profits getting it so these two sections deal with income 29 it is talking about computation format so how to compute income under p GBP that's it literally speaking this is a very useless section next 30 to 37 now see how to compute business income income minus expenses business income minus business expenditure is equal to business profit so what is the head of income income from business or profession also called as pgbp profits and gains from business or profession so how to compute profit of a business income minus expense is equal to profit so incom are these sections what about expenses what about expenses 30 to 37 so section 32 section 30 these sections talk about expenses these expenses what we should do we should reduce we can deduct we can deduct from these incomes to arrive business profit income that's it okay now to claim these deductions to get these deductions there are some conditions there are some disilanes so the conditions are discussed under section 42 43b people call it as disal sections but I call it as conditions for deductions in order to claim these deductions there are some some conditions example everyone knows 40 a subsection 3 now suppose I I incur some expenditure I am paying salary to my employee section 37 salaries covered under 37 residu item I am paying salary I paid to employee salary more than 10,000 in cash 40 A3 says it will not be allowed as deduction so indirectly 40 A3 says what if any expenditure you want to pay more than 10,000 in cash you must pay by other than cash if at all you're paying any expenditure more than 10,000 you must to pay by other than cash permitted electronic mode account pay that so nothing but these 40 series sections they are talking about conditions for getting these deductions if you do not comply with these conditions delance will attract delance means what we will not give deduction if at all you reduce a deduction you claim a deduction weelo it we add back it getting the point now 44 yaa 44 a AA and a I just simply wrote a because of the space it's actually 44 AA 44 AB they're talking about books of accounts and audit then 44 ad 44 ad 44 AE these are talking about pris to taxation so these are the broad sections that we have in pgbp now what we are going to discuss now in this revision we are specifically going to discuss the concept of depreciation scientific research 35 ad specified businesses and dis elanes and 44 cers now you might have a doubt sir what about 41 deemed profit I will be discussing along with depreciation certain provisions of deemed profits already and I will be discussing along with 35 one one subsection of deemed profit so don't worry remaining sections also will be covered slightly along while we are discussing all this so all disant 40 series all I'm complet covering 44 series completely I'm covering only in deductions only three or four sections I am focusing that's it now without any late so let's start uh depreciation now section 32 is the section talking about depreciation Remember When you're listening to this video uh I mean I will also cover I will also cover how you have to compute the how you have to solve the problems I will explain you the solving methodology I will not solve any problem but I'll explain you how to solve getting it and there is a detailed video of me on concept of disan which I uploaded some one month ago getting it so you can watch that if at all you want to have full floser clarity on what do you mean by delance exactly but anyhow here I will be covering briefly now 32 depreciation you know in income tax we claim depreciation on block of asset approach what is it we claim depreciation on block of asset approach first of all there are two conditions there are two conditions in order to claim depreciation as on 31st March of the relevant previous year whatever the year for which you want to compute depreciation no as on the date block shall exist block shall exist means as on 31st March suppose right now in exam they they testing you on 2 to 23 previous year as on 31st March 2023 block must exist block means what some asset in that block should exist what is block I will come back to it so there must be at least one net in the block block should exist and there should be wdv for the block there should be written down value of the block so the value written down value of the block should also be existing in fact I call it as not return down value I call it as value for depreciation what is it called as value for depreciation must exist in order to calculate depreciation there must be some value so that value should also be there in the block so value should be there block asset should be there if both these conditions are satisfied then you can calculate depreciation if any of these conditions fails entire block is not there opening date of the Year block is there but by 31st March block itself is not there entire assets in the block were transferred which means short-term capital gain or short-term capital loss will apply suppose block is there but value is not there then also you cannot calculate depreciation in both the cases section 50 will apply if value is zero or value is going to be negative then depreciation will not apply section 50 capital gains will apply if block itself is not there section 32 will not apply section 50 capital gains will apply and in the capital gains part one video of the marathon getting it revision so which I have already uploaded in that you will find uh you know how to calculate capital gains on depreciable assets there I told once again all these points now what do you mean by block of asset if one or more assets which are used in your business you are using many assets right not stock in trade not Liv stock getting the point normal assets tangible touchable you know all that getting it intangible also fine so one or more assets any assets like I have a laptop phone you know all that air conditioner whatever so all these assets which you are using in the business one or more assets falling under same category falling under same category carrying same rate of depreciation one or more assets which are coming at same category and also having same rate of depreciation these can be grouped into a single block now what do you mean by category in income tax we have totally four categories we have totally four categories one intangibles intangibles two buildings three uh forniture four plant and machinary there are only four categories of you know four categories of assets under income tax any asset you buy you bought a mobile it's classified as planted mysty you bought some computer it's a plant and my you purchased books research related books a lawyer purchased research related books for him what is the books consist of in income tax we call them as plant and misser you constructed Road it's a plant and misser very simple now you constructed a building it's a building forniture means Furniture getting it sorry roads and all roads and all comes under building all immovable immobile structures they come under buildings category getting the point so mobiles uh laptops uh you know mic mic sets touchpads iPad you know air conditioners all that books that and all comes under plan industry if you purchase a vehicle car that is also plant inv so four categories in income tax assets are broadly classified into four categories getting it so immovable properties comes under building decorative items and all comes under Furniture any other item which is not an tangible which is not a building which is not a Furniture any other item you purchase it's a plant and Machinery now yeset falling at the same category carrying same rate they come under you know single block now I will show you how many blocks were there I will show you rates of depreciation getting it now you see here they have given this is there in the Ia metal itself you ignore this this block numbering is wrong absolutely wrong now you see you know what are all buildings so these are the rates which are important to remember getting it buildings which are used for residential purpose the rate of depreciation is 5% buildings which are normal buildings Office Buildings 10% now suppose know BSNL is there you know uh BSNL purchased one building to for work purpose office purpose so rate of depreciation is 10% BSNL purchased another building for employ staff quars residential purpose on the depreciation is 5% now here two blocks for there one block is buildings coming under category buildings getting it carrying rate of depreciation 5% that's block number one another building they purchased for office but it is not same Block it's a different block why rate of depreciation is 10% so these two rates important suppose if I purchase any furniture rate of depreciation is 10% for furniture but Furniture do not come under building so I have to create a separate block for furniture very good next remaining all other assets are called as plant and missionary you see what are all there in the plant and missionary cars are plant and missionary buses plant and missionary Aeroplan is planted missionary pollution equipment plant and missionary medical equipment plant and missionary energy devices plant and missionary computers books everything all these items are called as what plant and missionary I told you all these items comes under plant and missionary category but remember they all do not come under single block they don't come why yes they all come under same category but not same block why the depreciation rates are different now you see all cars motor cars getting it oil wells and any other plant and missionary example mobile phone is not covered in the above list in the above list know mobile phone is not covered so mobile phone comes under General within the planted missinary remaining planted Miss resid planted Miss we call it as 15 so mobile phones motor car which car car used for official purpose suppose know if I am renting the car I am hiring the car then rate of differenciation on that car is 30% suppose I'm using the car for my business purpose only normal my business to travel from home to office you know to travel on business purposes and all I'm not renting I'm not renting car I'm not a car dealer getting the point I am not a transport operator so for a transport operator if he purchase a car for renting the renting purpose and all hiring purpose and all for him the rate of depreciation on that particular car is 30% so motor tax is used for business on higher 30% general motor car 15% now here there is some dates this point is irrelevant not not required getting it next airplanes % air pollution equipment 40% water supply project related 40% books annual publication or normal books of 40% now you see computers books other normal books as well as this airlanes motor buses sorry sorry airlane po airplanes pollution control equipment and books all these items I will group into a single block now uh normal Ren uh this one oil wells and normal car which are used for office purposes and and mobile phones air conditioners all that comes into a single block that's it that's block of Asset definition I hope you are clear now getting it now so that's that's about the block of asset now what are the conditions to claim depreciation so now we understood when depreciation 32 will apply we understood now in order to compute depreciation what are the provisions asset must be used suppose during the year no we purchased the asset by the way wait I'm going to show you the computation format that is very very very important in this that depreciation because that is one point where generally some students do mistakes in computation of depreciation I will give you easiest technique of computation of depreciation fine so during the year if you purchase any asset you must use it if at all in this year no you did not use it at all you did not install if you did not install in this year you will not get depreciation at all on that asset whenever you purchase we add it in the block but if you want to claim depreciation on the purchases also new assets also you must have used it for at least one day in this year used means you must install it first suppose I purchased air conditioner box also I did not open means air conditioner is not installed I purchase it's there in my office but I did not even unpack it unbox it no depreciation on the AC remember you you must use the asset right that condition is there only for the first year in which you purchase the mission second year onwards whether you use it or not you can claim depreciation you can claim depreciation the moment you purchase you add it in the block first year we will see is it used or not if at all not used in this first year no depreciation at all second year onward whether you use it or not it is there part of opening WB I will show you competition form don't worry so secondary onward you will get now remember in depreciation we have two two types of depreciation normal depreciation additional depreciation again for power sector there's a concept called straight line method I will discuss at last so normal depreciation I'm talking everything about normal depreciation now what how to compute this normal depreciation computation format very important so for any block generally opening wdv on 1st April 2022 will be there let's assume in exam 22 23 year only they will test you so that's why I'm taking 14 2022 now suppose no sir this year only I started business means opening value will not be there in that case only additions opening value you will put zero simple additions actual cost of actual cost of assets acquired assets acquired and installed assets Acquired and installed during the year so how much is the actual cost of assets that you acquired now these assets acquired in this year in this year you purchased assets something you should split into two categories assets used for more than 180 days how much I'm I'm showing you by the way this format for a particular block let's assume this is a plant and missionary 15% block planted missinary 15% plant and missinary 40% plant and missinary 30% plant and missinary uh some you know 45% so planted all are planted inside blocks only but rate is different that's why they they categorized into different different different blocks next now assets used for less than or equal to 180 days assets used for less than or equal to 180 days add both so keep it outside now you will get you know you will get subtotal you will get subtotal are you getting it now from this any amount received sale value nothing but sale value or amount whatever you received because of transfer of because of transfer of part of a block if you transfer any part of a block suppose know opening some 10 missions you have in this 10 missions it may be mobile phone laptop whatever 10 items you have during the year you purchased 10 items you purchased totally how many were there in the sub tootal 20 now part of it part of it means what as on after purchasing 20 were there but in the same year you sold some items also you sold let's assume 10 items only you sold or 12 items you sold so 12 items you sold which means part of a block only you sold right suppose no you sold entire 20 items then full block is sold if full block is sold as on 31st March block itself is not there all the Assets in this block were sold completely no depreciation at all but part of a block 12 items only sold opening 10 purchases 10 minus 12 means still eight more were there getting it some value you sold minus it now you will have this value written down value of the block what is it called written down value of the block this is called as written down value of the block getting it on this value we calculate depreciation on this value we calculate depreciation which is working note number one so written down value of the block so compute return down value now here there is an important observation suppose if this return down value is coming negative suppose suppose this subtotal no this subtotal no let us assume 10 lakhs okay let us assume the sub total is 10 lakhs now minus part of a block you sold right part of a block you sold for 12 lakhs 20 assets you have 12 only you sold but the sale value of these 12 items were 20 lakh so 10 lakh minus 20 is turning negative block can never be negative WV of the block can never be negative now if at all the if at all when you transfer part of a block or full block for a value High higher than the for a value higher than value of the block this is called as value of the block value of the block means what opening plus editions that's called value of the block from that value of the block you sold some items if the value of the part of a block transfer or full block if it is more than value of the block opening plus addition the excess amount is treated as short-term capital gain suppose I sold it for 7 lakhs only part of a block which means WB of the block is how much three lakhs is there now check it check the conditions on 31st March is there a wdb of the block yes as on 31st March in this block are there any assets eight assets over there only 12 we sold so assets were there value is also there so now can I compute depreciation yes so we will compute depreciation in the working note so that computed amount you reduce it here so balance is called closing wdv of the block this will become opening value in the next year now you see here very simple so opening value how much additions when you're are adding no additions know identify based on is it used for more than 180 days or less than 180 days how to know whether it is used for more than 180 days or less than or equal to 180 days when it is installed check out if the assets if the missionary is installed if the furniture is installed if the building is install nothing but if the setet is installed before 4th October before 4th October it is used for more than 180 days it is used for more than 180 days if the asset is installed on or after 4th October 4th October or after 4th October if the yes is installed it is used for less than 180 days it is used for how many days less than 180 days or equal to less than 180 that's it so less than or equal to 180 days 4th October onwards I told right 4th October means in October month 31 minus 3 Days 1 2 3 uh 28 days October uh November 30 December 31 January 31 February 28 March 31 so totally 179 days only from October 4th to March 31st 4th date is included March both are included if you install asset on 4th October up to 31st March the number of days were less than 180 days the number of days were less than 180 days if you install the asset on third October or before third October the asset is used for more than 180 days for sure are you getting the point just a minute just a small correction if the asset is used for less than 180 more than or equal to 180 if the asset is used for 180 or more than or equal to 180 I told date wise correctly here I wrote wrongly so you may confuse again if at all you didn't observe ignore it if the asset is used for 180 days or more than 180 days full depreciation we will claim if the asset is used for less than 180 half depreciation will claim half means half rate we apply here we will apply full rate but don't conclude directly we should not apply directly we should not apply depreciation rate on these values we should derive the value of depreciation based on the WB of the block now I told right depreciation working note one now what is working note one be careful observe it working note one so WV of the block how much identify three lakhs in our example in our example 3 lakhs okay now out of this first allocate the value first allocate the value for assets purchased during the year but not installed or not used at all not used at all so first allocate the value so allocated value some now still what is the balance so what is the balance value after this allocation identif now this balance value then allocate for yes assets used for less than 180 days allocate the value still still some value is there then allocate it for assets used for more than 180 days if still some value is there then allocate it for balancing figure now on these items apply full rate applicable for the block apply here also full rate apply here half rate apply here zero rate because if the asset is not used in the year of purchase no depreciation zero here it is half rate depreciation here it is now in this case half rate means what in this example block 15% block so half means 7.5% 15% so you know uh yeah and 15 percentage that's it this is how you should allocate the value first you should allocate for assets not used assets you purchase added in this block but not used at all to that value you should allocate now s purchased installed but used for less than 180 allocate to this then now I will give you a simple calculation suppose there's a opening opening wdv of a particular block let assume 10 lakh opening value now you purchased asset on or before 3rd October on or before 3rd October you purchased some assets some assets let us assume three lakhs is the purchase value now on or after 4th October on or after 4th October again you purchased some five lakhs worth of a set are you getting it now during the year you sold part of a block only you sold part of a block not full block getting it you sold part of a block uh let us assume you sold for some 7 lakhs you sold for uh let us assume let us take some bigger value let us take some bigger value uh sale value uh one one example I will take is U one example I will take is 15 lakh one example I take is 15 lakh case number one case number two case number one is 15 uh just a minute uh let me apply let me apply clear clearcut logic so case number one 15 lakh case number one so this is this is situation one this is situation two this this is situation three right now itself I'm giving you example here okay opening wdb same 10 lakhs okay the information is same sale value only different in all the three situations okay now sale value is uh you know 17 lakh uh here let us assume sale value is only uh 10 lakhs better better let us assume sale value is 10 lakh okay sale value is 10 lakh here sale value is 17 lakh whereas here sale value is 19 lakh fine so let us say and remember it's part of a block so opening is same opening is same now if you understood this example I'm telling you any type of question in the exam in depreciation you can do very well now now now how to like uh uh now let us look at so let us assume this is the information now let us calculate let us calculate wdb of block let us calculate W DV of the block so what is it by the way all these are part of a block so first 10 + 3 13 + 5 18 - 10 8 lakhs 8 lakhs is the WD of the block here it is W of the block is 1 lakh and here it is going to be negative so when can WD of the block be negative so no it therefore no depreciation the XS one lakh negative is z that's a short-term capital gain fine now minus depreciation working note number one now how to calculate case number one what is the wdb of the block 8 lakhs now in this year uh this 8 lakhs we should allocate is there any asset which is not used at all no zero is there any asset which is purchased for less than 180 days yes how much value 5 LH now here we have 8 lakhs no I can allocate happily 5 lakhs suppose here instead of eight 3 lakhs only there let us assume here only three lakhs is there instead of 8 lakhs now how much you can allate less than 180 sir I purchased for 5 LHS so 5 lakhs I will allate no no no if the if the value available is 3 lakhs here you can only allate 3 lakhs maximum here yes or no suppose here 8 lakhs we have but can I allocate 8 lakhs here no no no less than 180 the total value itself is 5 lakhs so maximum total value of the assets purchased is 5 lakhs whereas value avable is five so which means another 3 lakh rupe so after allocating this 5 lakhs no how much balance is left still 3 lakhs now can I allocate this 3 lakhs for assets purchased for more than 180 yes here 3 lakhs is there here value also 3 lakh is there so 3 lakh iate so full rate 15% here half rate 7.5% here it is zero is there any balancing figure by the way so out of out of 8 lakhs out of 8 lakhs 5 lakh allocated here 3 lakh allocated here so 8 lakh completely allocated is there any value zero but anyhow balancing figure is zero at full rate that which is 15 so depreciation zero here it is 45,000 rupees here it is uh 5 lakh into 7.5 yeah 30 37,500 here it is zero so what is the total normal depreciation 37500 plus 45,000 82,00 500 is a normal depreciation so that's it 82,500 understood now what is the closing DB of the block 82500 is equal to 7 lakh 7 lakh 17,500 that's it now how to calculate depreciation in situation two now if you understand now what is the value of the block here one L now allocate it is there any asset which is not used at all during the year purchase but not used zero now how much is the value that I can allate for less than 180 actually 5 lakhs value is there but remember here I have allocation purpose only 1 lakh so one lak I will allocate here itself because up to 5 lakhs I have to allocate but I have only one lakh so one lakh only allocated no more than 180 nothing is there already one L fully settled so zero so at 15 percentage at 15 percentage at 7 and half percentage is equal to 7,500 at zero so total normal depreciation how much 7,500 that's it now remember here here what you have to reduce is sale value whatever amount you are receiving because of Destruction damage demolition transfer sale whatever reason part of a block for part of a block some amount you're receiving that amount received you should reduce understood or now this is regarding normal depreciation computation remember intangible asss for every category of assets you should create a separate block all intangibles except Goodwill comes under single block on Goodwill from first April 2020 onwards no depreciation at all on Goodwill so up to 31st March 20 20 you can claim depreciation on Goodwill being a part of intangible asset are you clear that's it this is regarding normal depreciation now there is a concept called additional depreciation there's a concept called additional additional depreciation what is additional depreciation additional depreciation is available for the SS's who are engaged in manufacturing sector additional depreciation is also eligible for power sector provided they are following block of asset approach you know power sector has an option to either follow block of asset approach or they can follow assetwise straight line method depreciation assetwise if power sector is choosing assetwise straight line method they don't have additional depreciation facility additional depreciation facilities available only for SS's engaged in manufacturing sector and are following block offic approach and SS is engaged in power sector and following block of asset approach what is additional depreciation 20% of new plan and missionary installed in factory installed in Factory other than Vehicles other than vehicles vehicles you don't get additional depreciation and additional depreciation you will get only on plant and missionary that if you install it in factory which means if addition if plant and miss a purchase installed in my corporate office no additional depreciation car I purchased Vehicles no additional depreciation are you getting the point so additional depreciation is only in respect of plant and missionary now how much is additional depreciation 20% of actual cost they straight away told you 20% of actual cost will be the additional decre appreciation 20% of actual cost now whatever the assets you purchase know during the plant inary find out the actual cost multip by 20 that is equal to addal depreciation in this example in this example let us assume let us assume this three lakhs is newly purchased this 5 also new planting missionary secondhand planting missionary no depreciation you see The Words which I used new planting missionary installed in Factory other than vehicle simple logic it it should not be a vehicle it should be installed in Factory it should be new which means secondhand planting missionary no additional depreciation office missionary no additional depreciation suppose if you purchase a missionary on which 100% deduction is there no additional depreciation on that if if any missionary is eligible for 100% deduction under income tax law on that additional depreciation will not be given fine now now this this three lakhs is new plantary 5 lakhs is also new plantary both are installed in office on this 20% what is additional depreciation on this because additional depreciation is calculated on actual cost not on return down value normal depreciation we calculate on return down value correct whereas additional depreciation we calculate on actual cost 20% whereas for less than 180 suppose if any asset is purchased during the year but used for less than 180 then 10% only 10% of the actual cost only can be claimed as additional depreciation so what about balance 10% you can claim it in the next year you can claim in the next year are you getting the point so now 20% means 60,000 and 10% means here 50,000 so Total 1 lak1 now here 82500 right 1 lak 10,000 will also be reduced then revised closing block is how much now in this case 8 lakh minus 82500 minus 1 lakh is equal to 6 lakh 17,500 this is a closing block are you clear that's this is additional depreciation concept now remember in order to claim additional depreciation asset must be installed suppose this year I purchased asset I did not install normal depreciation also you cannot claim in the first year but second year now I I entered into second year now second year also I did not install normal depreciation you can claim in the second year even though asset is not installed but additional depreciation until you install until you actually use you cannot claim so in the year in which you used in that year you used for more than or equal to 180 then full additional depreciation 20% otherwise half additional depreciation which is 10% are you that's it I'm doing this on 7th November tomorrow is exam for students getting it so I'm uploading from yesterday so many videos for the benefit of various students so I'm uploading anyhow that's why in order not to make you wait I'm uploading parts and parts so capital G I uploaded part one part two now this pgbp I'm uploading in multiple parts so I hope you understood regarding additional depreciation additional depreciation is available for whom power sector I mean sorry manufacturing sector and power sector service industry trading industry they don't get additional depreciation that's it so are you clear so that's it predominant concept on depreciation I have covered almost to we spent 30 minutes time 30 minutes time we spent so this is the block of asset format which I showed you getting it so that's it enough enough uh remaining points are not required unabsorbed depreciation all these points no I clearly explained in um this one set off and carry forward chapter okay that revision is also there which I long back so after finishing this part two pgb will come part three pgb will come so after that you go to chapter 6 introduction there's a video which I uploaded some 15 20 days back uh there's a video on chapter 6 clubbing setup and carry forward put together anyhow I will attach to this video that video also getting it so let us consider this as a part one section 32 now you finished watching this take some half an hour to 1 hour break again another video will come are you getting it so next video will be on 35 ad 35 scientific research and 35 ad after that I will do a video on disel after that I will do a video on 44 series we literally speaking four parts pgbp I'm uploading in four parts that's it so listen to listen continuously once this is over take a break just rise go to the next video just rece and go to that next video I hope you are confident that's it yeah so the next one is deduction in respect of scientific research I hope part one depreciation topic is completed okay part one if at all you did not watch part one please watch part one first and then come to this part two to pgbp now so in depreciation one point I forgot to mention if you purchase any asset where if the amount is paid for more than 10,000 in cash then on that asset you cannot claim depreciation the actual cost is treated as zero only if the asset value is more than 10,000 if it is paid by other than cash means uh account pay check account pay bankdraft or uh any other permitted electronic mode only then you will get deduction fine now coming to this one scientific research expenditure getting it now we have the these sections okay we have a section called 35 and 35 only one section that is 35 inside that subsection one getting it this is dealing with this is dealing with direct scientific research expenditure nothing but if you spend directly for scientific research whatever amount you are spending you will get 100% deduction so whether you're a normal person or a company doesn't matter you will get entire Revenue expenditure 100% deduction entire capital expenditure also 100% deduction under 30 by subsection one Clause one now for capital expenditure except land you will get deduction not only that before you started the business before you started the business past three years also you spent some capital expenditure that capital expenditure also is eligible for deduction 100% getting it then that remember uh the past three years expenditure is only for you know materials and salary getting it only on personal nothing but salaries and materials in the past three years if you spend Revenue expend that that you will get reduction 100% capital expenditure whatever you spend in the past 3 years before commencing the business you will get 100% reduction in the year in which you commence it business so the first year in which you started the business you can claim 100% reduction of that year expenditure revenue and capital last three years revenue and capital both you can click are you getting it remember land expenditure you will not get now there's another section 35 2ab which is exclusively created for company engaged in biotechnology now here for land and building you don't get deduction but for building there's a general SE no 35 under this itself you can claim Once Upon a Time 35 subsection 2ab has a relevance now 35 2ab section don't have any relevance at all anybody whoever is directly incurring scientific research expenditure they can claim directly under 35 subsection one itself next not only that if at all you don't have the capacity to spend you don't have time to spend you don't have time to research but some associations are doing research you want to donate them you donated you can claim deduction under 35 remember if you have pgbp income and if you are donating to scientific research Association social research Association National Laboratory all these you will get deduction under pgbp if you don't have pgb head of income itself you can claim deduction under 0 GGC sorry GGA there is a section called 0 GGA which is applicable for S who are not having pgbp income chapter 6A if they are donating to if they are donating to you know Association College University for scientific research getting it or a company for scientific research or for a college Association for social res research or for laboratory I specified person for so scientific research if you're donating without having pgbp income then ad GGA if you're having pgb income all the donations for scientific research social research statistical research 100% deduction you can click that's it don't no need to discuss too in-depth in this no formalities you know no confusion very simple are you spending directly scientific res expenditure yes 100% reduction for Revenue expenditure 100% reduction for capital expenditure except land are you donating for scientific research if it's an approved research Association if if it's an institution which is approved for scientific research whatever amount you donate it is eligible for deduction you're donating to National Laboratory iits 100% deduction you're donating for social research 100% deduction that's it so if you if you just read this table that's more than enough next 35 ad what is this 35 ad is all about this section is specifically brought to give deduction for certain businesses in respect of cash expenditure see any business Revenue expenditure whatever they inuring they can claim deduction under 30 to 37 Revenue expenses they can claim on capital expenditure what they can claim is depreciation but since some businesses which are of national importance okay which are promoting tourism sector which are promoting Health which are promoting agriculture get it so which are promoting infrastructure so the income tax has identified 14 types of businesses they have identified 14 types of businesses I'm not going into these 14 businesses okay so they have identified 14 businesses if you started these businesses getting the point if you start any of these business to start this business you are spending so much of capital expenditure right don't claim depreciation straight away 100% of that capital expenditure you claim it as reduction 100% you claim it as deduction remember if at all you're opting for concessional tax scheme 115 BAC 35 ad is not there further if you claim 35 ad Direction 115 je AMT alterate minimum tax provision will apply remember keep this point okay fine so if if you're doing any of these businesses whatever capital expenditure that you are spending 100% deduction you will get remember you will not be eligible for land Goodwill and shares and securities if at all you're buying shares and securities Financial instrument nothing but Goodwill or land that is not at all eligible for deduction not only that if at all any capital expenditure you spend 10,000 rupees EXT more than 10,000 rupees single payment you paid in cash you will not get deduction under 358 in order to get 358 capital expenditure 100% deduction you have to pay by other than cash electronic mode account pay check account pay Bank getting it not only that suppose you started business and after starting the business you are spending you will get deduction what about before starting the business I spent suppose there's a business called two star or above category Hotel two star or above category first of all I constructed the hotel only after construction I started Hotel business yes or no right from the date of boomi Puja can I do business of Hotel no so even if the capital expenditure is spent before before starting the business that capital expenditure is also eligible for deduction in which year from the year in which you started the business you can claim deduction for that capital expenditure also are you getting the point by the way in order to claim capital expenditure spent before commencement of business in order to claim deduction for that you must capitalize that in the books of accounts you must capitalize in order to capitalize you must bring Capital into the company able to understand that's it now uh first of all uh this specified business in order to start you must freshly start it should not be demerged from existing business it should not be a secondhand business in that Miss business entire planted missionary completely should be new completely new getting it up to 20% of the total planted missionary can be secondhand missionary and you know what under this 35 ad only imported planted missionary is not treated as second hand missionary yeah if you're importing from outside India for the first first time you're using in India or first time we are claiming depreciation under Section 32 of the income tax law first time suppose you imported a mission from outside India on that mission nobody claimed depreciation under Indian income tax law and nobody used it in India then that mission is treated as new Mission remember for additional depreciation purpose if the asset is imported from outside India or if the asset is purchased within India somebody used it earlier it's it's a second hand missionary additional depreciation will not come on that however for specified business no can I claim 100% deduction on that particular planted Miss even though it is a second hand yes if it is used outside India but not inside India okay and nobody claim depreciation under income tax section 32 on that mission it is treated as a new Machinery it should be outside it should be imported from outside India and no depreciation is claimed on that earlier it's a new missionary for the purpose of 35 ad but for the purpose of additional depreciation it always second hand Miss it's second missionary not at all eligible for additional depreciation uh whether it is used outside India or India doesn't matter for 35 ad if the ass is used outside India it is treated as a firstand missionary in India are you getting the point that's it and further remember in order now what benefit they giving whatever capital expenditure that you are spending whatever missionary whatever asset whatever furniture that you are buying everything is eligible for 100% deduction now there is a condition the the missionary or asset whatever in respect of which 35 ad 100% deduction you claim would no that missionary must be used for 8 years consecuted for the same business the same business you must use it eight years you know if at all if at all you're using this asset for any other purpose within this eight years whatever deduction given to you will be taxed as income minus for whatever the years you are using no noal depreciation under 32 we will provide balance amount we will retx it under 35 ad subsection 7B are you getting it once you bought an asset for specified business 100% deduction claim some fourth or fifth year you are using it for some other business non-specified business in such a case whatever deduction earlier allowed retax it minus depreciation notional depreciation claim it balance amount will be ret taxed further this balance amount is treated as actual cost for the purpose of block because you transferred it to normal business so in normal business you need to add it in the block play ah now very simple if any asset is purchased for scientific research if any asset is purchased for specified businesses single s he's also having normal business these assets scientific research asset specified business asset don't add it in the block value able to understand that's it now now uh now here in 3587 7 77b and uh 35 scientific research there is one point suppose no I purchased an inset for scientific research 100% deduction claimed I purchase an asset for specified business I claim 100% reduction now if I transfer it to normal business what is the consequence what is the consequence suppose I purchased for scientific research admission I used it for scientific research 100% reduction claimed now I transferred to my normal business so 43 subsection one explanation one there is an explanation one what it says if any asset is used for scientific research and later brought into normal business so now you need to add it in the block of asset value right how much value we will add in that particular block zero actually the provision says actual cost minus deduction claimed under Section 35 getting it so actual cost 10 lakh deduction also I claimed 10 lakh so zero that is the uh provision suppose no if any ass which is purchased for scientific research I sold directly I did not bring it to normal business after using it for certain number of time period after using it for certain number of days I sold it directly whatever sale proceeds were they write whatever sale proceeds were they write they will be taxed as business or profession income 41 subsection 3 deemed profits what is it 41 subsection 3 deemed profits it is straight away tax are you getting it suppose no if you bring into normal business added in Block zero then you sold it that sale value will be reduced from the Block see once you bring it to normal business scientific research asset you will add in the block after that you sold which means you sold part of a block means the value of sale will be reduced from the Block so this treatment will not apply when 41 subsection 3 treatment will apply if you directly sell from scientific research operations you directly sold sale proceeds will be taxable under business or profession suppose you sold it for more than original cost the excess amount Beyond original cost is taxed as you know capital gains the amount which is beyond original cost is tax r capital gains in fact it is called a short-term capital gain very simple able to understand now 35 ad suppose I purchased a mission or some asset for 3580 from 10 lakhs I claim a deduction 100% suppose for 8 years I must use the for the same activity after 8 years if I sell also no problem after 8 years I brought into my normal B no problem at all within 88 years if you bring bring it into your normal business what happened earlier given deduction minus whatever number of years no claim depreciation so balance amount will be ret taxed balance amount will be ret taxed suppose after 8 years I bring it to my normal business nothing will be ret taxed now when you're bringing scientific research 358 to normal business what is the actual cost zero after 8 years if you bring within 8 years whatever your retx know that will be treated as actual cost of the block suppose if I purchase an asset for you know specified business I sold it whether you sold within 8 years or after 8 years it doesn't matter you sold it amount the amount you received under Section 208 charging section whatever amount received is treated as pgbp income that's it so this is Cy ad I hope you are clear so with this with this 358 theme entire theme I told except what are the businesses I did not tell rest all other Provisions have covered even 35 scientific research also I have covered everything in depth are you confident so with this 35 35 ad is completed so now uh we are having another uh section called 35d preliminary expenditure preliminary expenditure so uh preliminary expenditure is whatever expenditure preliminary expenditure is something that we spend in order to start the business or preliminary expenditure is something that we spend in order to go for expansion getting it so an Enterprise before they go for expansion they will have preliminary expenditure or an Enterprise when when they about to start a business they will have preliminary expenditure now under income tax law preliminary expenditure is not deductible whatever you spent there there is a limit 5% of cost of the project so maximum preliminary expenditure can be 5% of the cost of the project so a preliminary expenditure suppose you spend 10 lakhs cost of the project is 1 CR 5% means what 5 lakh so maximum preliminary expenditure permitted for deduction is five lakhs and remember the preliminary expenditure entire amount five lakhs whatever permitted entire amount you cannot you cannot claim in single year you have to claim in five assessment years in equal installments so the preliminary expenditure whatever incurred at the time of incorporation or at the time of expansion will be restricted to 5% of the cost of the project only and that amount further can be claimed as deduction only in the five installments further in case of company 5% of capital employed are 5% of cost of the project whichever is higher so this limit is there only for the companies suppose if it's a company which is spending preliminary expenditure what is the maximum permitted preliminary expenditure 5% of capital employed 5 % of the cost of the project whichever is higher getting it so actual amount how much identify compare with this so actual amount is higher than 5% then then 5% if actual amount is less than 5% then five then actual amount only suppose if my preim expenditure is 3 l so permitted is 5 lakh then three lakhs only I can claim suppose if my preliminary expenditure is 1 lakh but permitted as per law is 5 LH then 5 lakhs only I can claim remember whatever is eligible whether it is three lakhs or whether it is five lakhs you can claim that in five installments only are you getting the point from the year in which expansion is completed from the year in which business is started from that year five installments you can click same five installments logic is applicable for any payment made under voluntary retirement scheme so if any entity is paying any amount under voluntary retirement scheme that amount is also eligible for fin installments now there is another thing called family pension capital expenditure on family pension can be claimed as deduction by a company s in F installment remember if if any Enterprise if any business organization spend on Family Planning of the employees that is eligible for deduction only for company Revenue expenditure 100% deduction capital expenditure on Family Planning only 1 of the expenditure in five installments you can claim 1th 1th so capital expenditure on Family Planning by a company can be claimed as deduction in five installments the section is section 36 you clear now in 36 there are many more deductions so all business expenses whatever comes under 30 to 36 except this if any other business expenditure is there you can claim deduction under 37 under 37 what are all covered you know a salary expenditure comes out 37 electricity comes out 37 maintenance expenditure comes under 37 any general expenses Puja expenses all that can be claimed under 37 car expenses can be covered under 37 to understand stationary you can claim under 37 fines and penalty you paid during the course of business you cannot claim because it's an offense if you pay any amount for offense you cannot claim deduction income tax first of all income tax is not a business expenditure income tax is something which is there for every s salar employee income tax is there capital gains income taxes there so it's not something for business people income tax is General obligation for everybody so income tax is not a business expenditure I hope you understood so with this 35 35 ad 35d preliminary expenditure 35 TDA vs and uh 36 one or two points and 37 one or two points have cover so that's it you see very simple these deduction spot so with this deduction spot is complete in the next video I will discuss disan part getting it where I will give little bit Focus especially many students are having confusion on 40 be assessment of FS partnership forms so how to compute income for partnership forms this many students are having confusion so by the time you finish watching this this video 40b 40a uh 401 401a 43b 40b all these sections I will upload after that I will upload 44 C so this is part to pgbp if at all you haven't watched part one go and watch part one and then come back to this that's it take care so without any delay let's discuss on dis elanes so we have various dis elanes that is one section which talks about disen is 40 subsection a 40 a inside this we have many subsections 40 A2 40 A3 and 40 A7 and 40 A9 which are not that important then we have another section 43b apart from all this there is another separate section which is 40 subsection B which is talking about partnership forms okay I'll come to 40b At Last now 40a in this there are two important sub Clauses subsections Clause subsection I mean uh yeah subsection uh getting it section 40 subsection a clause one Clause one so two important Clauses for there so first of all what is a dis Elance nothing but this these disilanes are nothing but certain expenses no if the condition given under these sections if it is not satisfied those expenses those deductions you cannot claim now how the disan and all will work exactly there's a detailed video made by me concept of disan there's a video if you watch that you will understand when to add back you know when to reduce all that very clearly so I took one PN tummy I explain in direct method indirect method in exam which method you have to follow all that I clearly explained in that full video I will attach to this video concept of disel VES or you can simply type on YouTube SI space concept of disan if you just type these words you will you will find that video it's somewhere around 40 minutes to one hour some video getting it so it's purely concept only we explained we didn't even discuss these sections now in this revision class we are discussing sections okay now so what 41 says if at all you are paying any royalty fees for Technical Services or any other sum which is chargeable under income tax getting it if at all you're paying these money to any person outside India or to a non-resident without compliance with tedious provision without compliance with tedious Provisions you have not complied with the TDS you pay directly the amount it's a business expenditure for you remember first of all it's an expenditure for you okay you pay directly to person but without compling TDS then whatever amount you paid 100% no deduction at all 100% of the amount will be disallowed now the question is what do you mean by teds complains teds complains means you must deduct a teds as per tedious provisions and you should remit to the department within due date for filing it return within due date for filing it return what is the due date for filing it return it may be 31st July or it may be 31st October of assessment year so you have to deduct a TDS within the same previous year within the same previous year in which expenditure is aced whatever the financial year or previous year in which you spend the expenditure to which year it belongs to in that you should deduct nothing but suppose if the expenditure is belonging to 2 to 23 in the same Financial year deduction should be there and remittance must be remittance must be just a minute yeah the remittance must be within the due date for filing it return generally as per TDS provision current month TDS whatever we deducted next month 7th you should pay but here for disant up to due date they have given time limit so if you deduct any TDS within the EO and remit the TDS within the 31st October or 31st July it filing due date we assume that you complied we assume that you complied with the TDS suppose you did not deduct in the same year or you deducted in the same year but not paid within the due date for filing it return which means you have not complied with the TDS non-compliance with the TS Provisions what is the consequence whatever expenditure you incurred no for the non-resident completely dis alone suppose if this expenditure is paid to resident individual sorry to resident person individual h of what the amount what you paid is to a resident then and TS non-compliance TDs is non-compliance non-c compliance means what either you failed to deduct or deducted in this year but not remitted within the due date so this is called non-compliance so if there is a non-compliance with the TS provision while you are paying any expenditure to an resident then dis allance percentage is 30% only clear now remember this is a temporary disol not a permanent disol you know disan are broadly again two types this is temporary delance this is also temporary disant these two sections whereas delance given under delance given under 40a this is permanent delance means once you dis that's it no more adjustment later on once it dis allowed dis that's it no more change later on whereas in 40 subsection here Clause one Clause one a 43b there's a section in these two sections you can rectify the dis Elance like what suppose suppose in previous year 2223 I paid some salary expenditure to a resident let us assume or um I'll take some other expenditure or else let us take uh uh some maintenance related fees or some remuneration or some professional fee I paid some professional fees so audit fees I paid audit fee deductable under Section 37 resid expenditure now you know what under audit for audit fee I have have to deduct a TDS under 194 J getting it but I did not deduct TDS I did not deduct or maybe I deduct in the same year but remitted on or before I mean but not remitted on or before due date now if if at all the auditor is non-resident 100% is allowed if the auditor is resident 30% of the expenditure I cannot clim means 70% I can claim if it is a resident are you getting the point now non-compliance means what not you have not deducted in the relevant previous or you deducted but not remitted you know within due date for assessment within due date for ID return are you clear now suppose no suppose no uh you deducted in 2223 you deducted getting it by 31st October or by 31st July you paid that to Department also TDs is complete no delance suppose you did not pay non- compliance so while filing it return this expenditure 30% or 100% you will diserve suppose in 2223 itself you did not you deducted in 23 24 then for 2223 year it you file right see let us assume 20223 originally you spent expenditure but you deducted in 232 and you paid within 31st October which is 2223 D dat itself you paid still since deduction is in 23 24 the expenditure will be allowed as deduction for 100% in that year for for this year 100% is disallowed 30% is disallowed if it is for non-resident if it is for Resident as the case maybe because deduction itself does not happen when you deducted ultimately 23 24 so when you ultimately deducted and comped with the law in 23 24 you deded of course you paid getting it in this year that 100% will be once again allowed that 30% will be once again allowed suppose 20 to 23 expenditure and you deducted in this year only but 31st October or 30 31st July whatever the DU date for it you did not remit you remitted after these dates you deducted correctly in the same year in which you incur the expenditure but you paid after that you get now suppose you paid on November November 2023 you paid November 23 comes under which previous year 23 24 for this year again you will file it return in assessment year 2425 at that time you claim that 30% at the time you claim that 100% whatever it is but for the original year 30% will be disallowed 100% will be disallowed why because you deducted but not remitted suppose you did not deduct itself you deducted late you deducted after the year you you deducted in the next year then deduction will be for the next year 30% or 100% deduction will be for the next year only this year that 100% or 30% will be dis if deduction is in this year within due date you paid this year only you will get complete deduction no dis but within the due date you did not pay then in the year in which you actually pay getting the point after due dat if you paid to the department the TDS the date comes under which year you check out the date for that year you compute income rate once again pgb that time whatever is design in this year 100% 30% that year you can claim deduction are you clear now here there are six sections 194a 194 C 194 uh J 194 I 194 H and 194r in these six sections there is a provision there is a provision what this provision says is suppose in the previous year preceding the previous year suppose let us assume 202 23 is the year for which we are doing the problem if 2122 if the turnover is less than one CR not exceeding one CR if the turnover is not exceeding one CR and the ssse for whom pgbp income you're are Computing if that SS is an individual or HF if the SS is an individual or HF and turnover in the last year from 20 to 23 previous year point of view last year is 2122 so in the last year if the turnover is not exceeding one gr these five TDS Provisions do not apply these five TDS Provisions do not apply now tell me uh 194 I know one example is rent 194 J some professional fee 194 contract this is interest so if in the last previous year if the turnover is not exceeding one CR from the business in this year these six TDS sections will not apply at all which means if I pay any amount belonging to these TDS sections I no need to deduct any TDS now 2223 I paid some 5 lakh rent actually 10% TDS 50,000 you know what I did not deduct I did not deduct why in 2122 my turnover is less than one CR therefore in this year 194 I provision will not apply for me so I did not deduct now here the SS did not deduct TDs is it a non-compliance no it's not a non-compliance what is a non-compliance if TDS provision is applicable but you have not deduct TS provision is applicable you deducted and failed to pay within the due date then only it is called non-compliance here these six sections 194 hour is perquisite for business okay in these six these six sections related amount Ed itself will not apply and you did not deduct so where is the question of non-compliance so dis Elance will not arise why TDS provision itself do not apply if TDS provision itself do not apply dis Elance provision also will not apply disol under 40 a subsection 1 a 40 a subsection 40 subsection a cluse 1 a when this is applicable TS is applicable you you failed to deduct or you deducted but failed to remit then only non- compliance then only dis EV will apply understood or not on this there is a problem in pgbp and many times on this a question has been asked in C final as well as C inter also many students do wrong why because they don't understand exactly the compliance word under TDS under 408 14 and here there is one more discussion on SS and default provision okay uh which is again a very big discussion it's not required at this CA inter level it is not required I hope you are clear with respect to 40 subsection a clause is subsection a clause 1 a next 43b 43b is what you know the section heading is like certain payments certain expenses allowed as deduction allowed as deduction only on actual payment only on actual payment within due date for filing it return only on actual payment within due date for filing it return certain expenses certain expenses there are they are allowed as deduction only if they're actually paid you know in pgp in pgbp how income is computed under income tax income is either computed on approval or cash whichever the S regularly follows for accounting suppose if the SS is maintaining books of accounts on acral pgbp income is also computed on acral basis if the books of accounts are maintained on cash then pgbp incomes and expenses are maintained deduction will be given only on cash basis now remember 43b section is applicable only for the SS who is following Mercantile basis of accounting this section is not applicable for an S who is following Cash basis Cash basis means what within 31st March if I pay any expenditure irrespective of period it belongs to irrespective of the year for which it belongs to doesn't matter I paid some expenditure I can claim deduction I received some money it is taxable that is cash basis so in cash basis from 1 April to 31st March whatever incomes I received taxable whatever expenses I paid deductible of course disan provisions all common TDS complaints everything we need to check now 43b this section says this is applicable for those SSS who are following marant what does it me marant means what if you incur expenditure you can claim deduction under pgb you whether you actually paid or not doesn't matter that's what marant however there are seven payments six to seven payments were there these seven expenses you will get deduction only if it is actually paid remaining all the deductions you can claim on approval rent expenditure you claim on approval salary you claim on approval electricity bill you claim on approval telephone expenses you claim on approval you incur you claim whether you really paid or not we don't even check but these items which are covered under 43p the SS will get deduction only if he actually pay only if he actually pay pay within 31st March no no no pay within the due date for filing it if the SS cleared these expenses within due date for filing it okay fine we assume that s really spent we will give deduction so what are those expenses what are those expenses I will directly show you uh you know taxes bonus or commission like that uh you know there are Railway expenses uh employer contribution to welfare funds I hope you remember already just I'm just reminding you so taxes and duties other than Direct Tax nothing but GST all that first of all GST is not an expense not an income but why it is why why that discussing anyhow that is not important right now but I I have discussed in regular class now don't have that much time employer contribution to Provident fund of the employee employer contribution to approved super animation fund employer contribution to gratuity fund getting it uh gradu fund is covered under 47 that is not covered here by the way okay gradu fund is not covered Provident fund employees State Insurance super animation fund all that were covered here getting it employer contribution getting it bonus or commission remember there is also something called employee contribution employee you know I hope you know employer empe contribution all that employee employee contribution what we will do while we are paying salary we deduct from that means we collect employee contribution from employee and we pay to the department suppose no amount of contribution from employee we collected we did not pay to the department within the respective law due date it is treated as income it is treated as income 36 subsection 1 Clause 5 a read with two subsection 24 income definition so this section which I wrote right now this is talking about employee contribution if a business person collected employee contribution from employee failed to pay to the concerned statutory Department within the respective due date mentioned there generally as for Provident fund law current month Provident fund contribution we should pay by next month 10th or 15th or 20 if at all you don't pay employee contribution you collected but you don't pay it is treated as income taxable in the hands of the employer business person for employer contribution my contribution is there no if I pay not within the next month due date I have due date up to 31st July 31st October it filing due date for employer contribution due date means it filing due date for employee contribution due date means next month statutory that Provident fund law due date if employee contribution is collected but not paid to the respective Department within the due date mentioned in that respective law it is treated as income it's not delance it is treated as income employer contribution which is an expenditure for him which he want to claim deduction under section 36 in order to claim deduction he must remit that amount to The Provident fund authorities to the ESI authorities within the due date for filing it return I hope you understood this difference bonus or commission interest on loans interest on loans from financial institutions nbfcs Banks so whether if you borrow any loan from Bank FIS and you know nbfcs and all whatever interest expenditure that is that you are incurring for business purpose you can claim deduction only if it is actually paid within the due dat for filing it return leave encashment suppose your employees submitted leave encashment application you created provision in the books of accounts for leave encashment you will get deduction only if you pay within 31st July within 31st October payment for Railway assets you are continuously using some Railway assets of Indian railways if you pay that amount within the due dat only then you will get deduction otherwise no deduction for this year so for a respective year for Rel year whatever expenditure you spend on approval basis getting the point you will not get deduction only until you pay within the due date if you pay within the due date you claim deduction if you do not pay no deduction subsequently next year you paid you will get deduction for that year after due dat you paid after due dat you paid so for the original year the Year in which you ultimately paid we will give deduction to you you clear that's 43b see 43b 40 subsection year Clause one Clause one year these are temporary deles why in the year in which you did not comply we deserve subsequently after d if you ultimately paid we will allow deduction for that year again whatever we dis we reallow it so that's why call this as temporary disan I hope you are clear next next uh we have 40 A3 so in this uh we have 4083 so 4 A2 if at all you're incurring any expenditure where the amount is paid to related person relative if at all any amount is unreasonable income tax officer yesing officer will disol it 48 just a 48 subsection 3 this is regarding cash expenditure suppose you are you you having so many expenses know from 30 to 37 so many expenses so many Revenue expenses which are deductable under 30 to 37 generally whatever expenditure you incur you can claim deduction subject to TDs compliance subject to 43b all that further there is one more condition if at all that expenditure is paid in other than you know if at all that expenditure is paid in cash or bear of check for an amount exceeding 10,000 rupees in a single day to a single person getting it on a single day to a single person if you pay any amount more than 10,000 rupees which is an expenditure for your business entire amount dis allowed once dis allowed that's it you can't even Rectify later this is very simple Department want to bring transparency if you pay by cash how do we know that you really spent how do we know that other person has got the income if you pay by Bank what happens you show it as expenditure other person also it is Bank White money yes or no Department can trace it so with that logic Department put this 483 are you getting it so 483 simply says if you incur any expenditure and that expenditure is for more than 10,000 rupees on a single day you paid that money to a single person exceeding 10,000 rupees in cash is allowed completely if you do not want this 40a subsection 3 if you don't want this to attract pay by account p pay by account pay demand Pay by electronic mode UPI B pay elect rtgs nft any of these methods is permitted wherever the other person is traceable that is permitted now here for transport operators suppose if you're paying any amount expenditure to a transport operator who is flying hiring leing Goods Carriage Vehicles transport operator instead of 10,000 the limit is 35,000 rupees for single day you have to pay fright charges to transporter up to 35 ,000 rupes on a single day you can pay by cash the moment it cross 35,000 entire amount is disallowed it's a threshold limit suppose no I paid 20,000 in cash up to 10,000 leave it 10,000 dis wrong it's a threshold limit if I pay 10 20,000 in cash to somebody since it is exceeding 10,000 entire 20,000 is disallow it's a threshold limit so for transport operator what is a threshold limit suppose I am paying to a transporter so trans to a transporter how much I can pay up to 35 you can the moment ex 35 end Target is alone now there is a rule called Rule 60D where they have given certain exceptions bank holiday on the day you paid expenditure this section will not apply so like that they have given certain exceptions so on those exceptions even if you pay by cash more than 10,000 more than 35 doesn't matter dis will not attract are you clear so that's it so disan are completely done I hope now you understood uh you know 40 subsection a clause 1 Clause 1 a 43b both these are temporary temporary you may disallow now for this year because you didn't comply later on if you comply again 11 will be there is 483 40 A2 once is allowed now let's look at 40b now let's look at 40b this 40b is talking about limit on interest on Capital paid to partner interest on Capital interest on Capital paid to partner by a partnership form and this is also talking about remuneration to working partner now very simple how to compute income first compute income of firm income of the firm pgbp income of the firm before interest and remuneration to Partners don't reduce interest to PID to partner paid to partner at all calculate incomes minus all the expenses you reduce all the disan 40 subsection a clause 1 Clause 1 a 43b 40 A2 40 A3 40 A7 408 all disan all deductions everything you consider but interest paid to part remuneration paid to part don't consider all other expenses you reduce all dises you apply like that compute income of the firm under pgbp first compute from that first interest on Capital you can claim deduction how much up to 12% perom simple interest you can claim reduce it to to the partners no you can pay interest on capital rate that interest on Capital you can reduce whatever interest you are paying maximum limit is 12% perom provided partnership deed should have that condition getting the point if partnership deed is not having interest on Capital condition The Firm cannot claim this deduction so the partnership firm should have deed should have and maximum deduction is how much up to 12% per only interest can be claimed as suppose if the farm is paying 177% 18% interest no deduction only only 12% of capital simple interest that two only that will be given as deduction now first what we have calculated first we have calculated income under pgbp as per pgbp provisions of the pgbp provisions for the partnership form before reducing interest before reducing remuneration first compute that getting it from that first reduce interest now what you will get you know this is called as book profit whatever the figure that you get is called as book profit many students have doubt about book profit definition book profit definition you see it it is nothing but income computed by applying all the provisions under chapter 4D nothing but bgbp yes or no before reducing interest on capit before reducing interest sorry after reducing interest but before reducing remuneration so that this is this amount is called as good profit now from this now just AE now uh so pgbp income of the firm so first compute pgbp income of the firm before reducing interest before reducing ration but after reducing all the deductions depreciation additional depreciation 35 35 ad disan everything you apply compute income of the firm pgb income of the firm now reduce interest on Capital up to 12% suppose if the farm is paying 10% then 10% only if the farm is paying 14% then 12 then what you get is book profit what you get is we call it as book profit from that the farm can claim deduction for remuneration from this the farm can claim deduction for remuneration to only working partner if at all the farm is paying remuneration to nonworking partner no deduction only to working partner if the farm is paying remuneration F will get deduction now to this remuneration there is a limit what is the limit the limit there's a limit on deduction for remuneration see for interest 12% is a limit right for remuneration also there is a limit how to identify the maximum limit it is depending upon the book profit of the firm up to 3 lakhs up to three lakhs of the book profit identify balancing figure suppose if the book profit is 2 lakhs then here 2 lakhs so balancing figure balancing figure now like like let us take an example suppose if this value if this book profit value let us came it is 10 how to split three lakhs we will allocate here 7 lakhs I will allocate here suppose this is only 2 lakhs then I will allocate up to three lakhs means 2 lakhs here here it is zero what point now up to first three lakhs up to first three lakhs 90% of the book profit are 150,000 rupees whichever is higher whichever is higher on the balancing figure book profit multiplied by 60% so here you will get some amount here you will get some amount so these two put together is the maximum permitted remuneration to working partner are you getting the point now compare this maximum amount with actually how much we pay to work in par suppose uh you know I'll take one example suppose the F book profit is let us assume 10 lakh so I will split first 3 lakhs into 90 percentage is equal to 270,000 or 150,000 whichever is higher is equal to 270,000 now what is the balancing figure here 7 lakhs out of 10 three allocated here 7 into 60% is equal to 4 lak 20,000 so if the book profit is 10 lakh 690,000 is the permitted remuneration now suppose how much F actually paid F actually paid 8 laks remuneration to working part so deduction is$ 690 if the F paid 5 lakhs only remuneration to working part then 5 lakhs only the deduction suppose no if the book profit of the firm is suppose if the book profit of the firm is you know 2.5 lakh only now up to first three lakhs means 2.5 only we have into 90% getting it so 2.2 2.5 lakh into 90% means 2 lakh 25,000 balancing figure nothing zero so this is the permitted supp the book profit of the farm is negative book profit of the farm is loss 10 lakhs up to three lakhs nothing z0 getting it now first point 90% of zero or 150,000 whichever is higher 150 so if the book profit is negative minimum remuneration Farm can pay how much 150 even if the firm is having loss book Profit book profit is minus book loss getting it Farm can pay up to 150,000 rupees remuneration to working partner if the remuneration pay to working Partners is beyond 150 then apply these limits and check out what is eligible remuneration compare with actual remuneration whichever is lower you claim deduction so that's 40 B but remember so this is so REM working partner calculate like what I told then whatever final amount which you get is called as income of the partnership form income of the firm so on this income F will pay 30% tax and after that whatever balanced profit is there Partners will distribute and that's called share of profit which is exempt in the hands of Partners under 102a now here partners are receiving interest on Capital and remuneration from The Firm no what about this in the hands of the partner it is taxable in the hands of the partner under pgbp salary received by partner from The Firm salaries income no no no it's pgbp even salary charging section 15 clearly says that provis clearly says that and even 28 charging section clearly says any remuneration or any interest received by a partner from the partnership form is taxable in the hands of the partner under pgb how much is taxable per how much deduction they claim that much is taxable suppose partner received 10 L but F we gave deduction five lakhs only five lakhs only taxable for partner how much deduction came from the firm that much only taxable for the partner for f how much we showed expenditure and income tax for somebody it's expenditure means for somebody is income whatever is show as expenditure that is only allowed as income how much actually paid doesn't matter how much firm claimed that is only taxable in the hands of the partner so that's why they say 28 any interest on capital or bonus or commission or ration salary by whatever name called received by a partner from partnership form is taxable in the hands of the partner under the head income from pgb to the extent allowed for the firm that's it so with this 40 40 subsection B is also completed now whether the remuneration to working partner interest on Capital to the interest on Capital to the partner both are allowed as deduction only if the terms are contained in Partnership deed remember if at all partnership deed do not contain now fresh partnership deed is drafted with retrospective no it is not considered no deduction at all partnership D is there now the firm is paying interest now the firm is paying remuneration allowed as deduction subject to maximum limits given under 40 subsection B I hope you are clear that's it 40 B is is also completed all the disan I completed within just 30 minutes in the next video I will talk 44 Series where I will cover 44 ad 44 a 44 ad I hope you are clear in the next video pgbp is over predominantly theme of the pgbp concept of the pgbp I clearly explain especially the computation mechanisms you know this particular this particular computation mechanism this particular computation mechanism please observe carefully many students do not understand how to compete B profit because they confus if at all you're benefited put it as a comment just put a comment below I'll be feel I'll be I'll feel very happy for you okay take care so let's start the final part of the pgb marathon this is the fourth video before this three videos I have uploaded please watch it if at all you missed to watch pgbp almost uh I can say 70% of the syllabus I uploaded in the form of revision videos for income tax fine presumptive taxation what is presumptive taxation generally in pgbp how income is computed there are VAR sections 30 to 37 deductions there are various dissol sections 40 series 40a 43b 4 A3 40 A2 40c subsection one 40 40 subsection a clause one Clause 1 a so many so we claim deduction subject to disan all that partnership form so many yes or so that's how we compute income under the head pgbp normally but you have an option to pay directly you know getting it you have an option to compute income from pgp very simply no need to look at what is your actual expenditure no need to look at depreciation additional depreciation scientific resar specified business nothing straight way on turnover some percentage can be applied that itself is treated as presumptive income by the department you know what as per 44 ad as per 44 ad as per 44 Ada as per 44 AE in all these three sections whatever the presumptive income minimum income that you you should declare this is minimum you should declare if at all you're doing business of plying hiring leasing of goods Carriage this much income minimum you must show you must offer for income tax this much income for a profession you're a notified profession like a lawyer medicine do uh chartered accountant company secretary film artist representative you know this is a minimum amount you must offer suppose if if you want to say see this you know these are the minimum amounts which SS has to offer minimum if at all you want to offer less than this if at all you want to say that your income is actually lesser than this you must go for tax AIT under Section 44 a presump to income many assume that it's optional no no no that's a minimum income that you must to show if at all you're showing this much Department cannot question anything further you need not maintain books of accounts you need not follow all the disan deductions nothing straight away declare presumptive income happily ITR 4 there's a return return called it4 file that over no tax AIT no books of accounts nothing now in order to go like this there are some conditions to be complied now like there are three sections one is 44 ad another is 44 AE another is 44 Ada ad and AE both are talking about business people Ada is talking about notified professions so if the SS is engaged in normal profession presumptive taxation is not applicable very simple no suppose if you a chart accountant lawyer doctor fil artist authorized representative interior decorator engineer technical consultant software like getting it so for all of you if you are total gross receipts if you are total gross receipts not exceeding 50 lakh maximum gross receipts in that year is less than or equal to 50 lakh happily suppose if your grass res is 40 lakhs what is your pgbp income uh how much is my actual expenditure how much is depreciation what are the block that and all no need to see 50% of 40 lakhs is equal to 20 lakhs this is your income from business or profession show it file the ID over oh so simple no all in the previous three parts we discussed so many deductions depreciation additional depreciation uh 30 deduction 31 deduction 31 deduction 37 deduction so many there so many disan that and all headache you can ignore happily on the gross receipt nothing but turnover for professions know we use the word gross receipt instead of turnover on the gross receipt straight away declare 50% which is 20 lakh in our example maximum up to 50 lakh turnover only you can go like this suppose the moment your gross res cross 50 lakh you cannot come to 44 Ada able to understand you cannot come to 44 Ada if at all your gross is more than 50 if it is up to 50 flat 50% of the gross receipts you can show and then happily file the it return every year you check suppose this year first year some 40 lakhs is here 20 L you you declare income profit file ID return pay tax on 20 lakhs fine next year your actual income is 10 lakhs only but presumptive income is coming 25 LHS file 10 lakhs only get tax audit maintain books of accounts if you want to declare income less than presumptive income under 44 ad under 44 AE if you want to say your actual income is less than these two section 44 AB tax audit provision says audit is mandatory if audit is mandatory you have to maintain books of account so that's about 44 Ada Now 44 a 44 AE is a presumptive taxation section applicable for S engaged in playing hiring leasing of goods Carriage vehicle you are you are simply a transport operator you are a transporter or you are a renting you are hiring Goods Carriage Vehicles you renting Goods Carriage Vehicles you also can have presumptive taxation now now how much is presumptive income Vehicles car Goods Vehicles know they will be classified into two types light good vehicle heavy good vehicle light good vehicle what is the presumptive income 7,000 rupees per month sorry 7,500 rupees per month for ownership period how many months you use that and all doesn't matter you are owner for 11 months H that's it for 11 months 7,500 per month you have to declare income or even suppose you are owner for 11 months 3 days still 12 months it is considered into 7,500 remember 7,500 is per vehicle this is per vehicle further under 44 AE this presumptive income can be declared by a transporter who does not own 10 Goods Carriage vehicle at any point of Time 1 April to 31st March 365 days every day how many vehicles he's having check out ownership on any single day any single day if at all the SS is owner for more than 10 Vehicles more than 10 Vehicles is owner which vehicles Goods Carriage vehicle only you should check if at all the SS is owner even for one day even for one hour more than 10 Goods Carriage Vehicles 4 4 AE will not apply so in order to apply 44 AE the number of goods Carriage Vehicles owned by you throughout the year at any point of time shall not exceed 10 if so you can declare presumptive income under 44 a how much 7,000 rupees per month or part of a month for every month of ownership for each vehicle suppose if it is a good vehicle then heavy good vehicle vehicle capacity will be given in gross vehicle weight so they will give some tons rupees per ton per month or even part of a month suppose you are having five heavy Goods vehicle you're having five heavy Goods vehicle you purchased on 29th April you know 2022 and you sold you only have five vehicles you purchased on 29th April you sold all the five vehicles on 30th April next day itself one day your owner still for five vehicles one month multiplied by these five vehicles light good vehicle 7,500 per month this much is presumptive income sir I'm owner for only still it is considered even if you own it for one month in a day sorry one day in a month sorry one day in a month if we consider that your owner for full month for entire that month presumptive income at 7,500 per vehicle will be competed now by the way 7,500 is for light good vehicle suppose if the vehicle is heavy good vehicle suppose these five vehicles are heavy good each vehicle is having 20 tons carrying capacity so 5 into 20 T into one month multiplied by 1,000 rupees per T 1,000 rupees per T per month is equal to that much is a presumptive income able to understand suppose by the way I have highlighted here some words I will discuss at last suppose you are doing any other business not profession business some other business but not applying hiring leing up boots carage now how much is presumptive income suppose you're doing some business right you will receive consideration right if you're receiving through bank bank turnover or you may be receiving in cash also cash turnover on cash turnover 8% what is it on cash turnover 8% is the presumptive income on Bank turnover 6% is the income by the way these are not tax amounts man these are Income under pgbp remember these are treated as income under pgbp 6% of turnover suppose I received in Bank 90 lakh whereas I received in cash 10 lakh 10 lakh into 8% is 80,000 and 90 lakh into 6% is 540,000 so totally my income is 620,000 from the business as per presumptive taxation that's it got Clarity so so this is presum to now for 44 ad there is a condition if you want to claim 44 ad so simple directly on turnover apply 6% Bank mode of turnover if it is Cash mode of turnover apply 8% so simple that itself is income final income under pgbp then then calculate other hits set up and carry forward clubbing gross total Finance deductions total income compute tax file ID return over now in order to go for 44 ad see when I can choose 44 Ada and I should be professional my gross rece shall not exceed 50 LH when I can go for 44 I must be engaged in this business and my number of vehicles shall not be shall not exceed 10 at any point of Time same way for 44 ad the turnover shall not exceed 2 CR in that year not last year in the respective year suppose 2223 my turnover is less than 2 CR for 2223 whatever turnover is there on that 6% or 8% as the case maybe I can apply and compute my income it's not last year preceding year turnover it's current year turnover relevant year turnover only we should see so in that year if your turnover is less than 2 you can come for 44 ad you know there is one more condition in 44 ad once you choose 44 ad once you choose 44 ad you know assessment year nothing but previous year 22 23 nothing but assessment year 23 24 so in this assessment year on this income you declared under 44 ad for the next 5 Years also nothing but 23 24 24 25 25 26 26 27 27 28 also you must declare under 44 ad this is a compulsory condition suppose if at all any one year 25 26 you failed you failed 6% 8% I have a loss I don't have profit so you you felt 6% 8% coming to some income profit but you actually have loss so you don't want to go with 44 you violated this 5 years condition what happened for this year you have to maintain books of accounts you have to get them tax audited and the next 5 years next 5 years means 26 27 27 28 28 29 29 30 30 31 for these 5 years you cannot claim 44 ad again you cannot come back so once you choose 44 ad presumptive taxation only for 44 ad this 5 years logic is applicable once you choose presumptive taxation under 44 ad and declare 6% of the bank turnover 8% of the cash turnover as presumptive income next 5 Years also declar as for 44 if you couldn't declare as for 448 in the next 5 years any one year you break that year audit is applicable books maintain next 5 Years also you cannot come back 44 ad at all this is the prohibition so this prohibition is kept under 44 ad subsection 4 this 44 ad this is very important 44 ad can be claimed only by Resident individual or HF or a firm but not LLP company cannot claim 44 Ed 44 ye like playing hiring leing Goods carries any s can claim this provision this benefit LLP company everybody again 44 ad only individual firm again LLP is not covered so presumptive taxation basically individual HF partnership form but not LLB whereas 44 AE alone any s can play be able to understand so this is pro this is prisum to taxation very simple 44 ad if the SS is engaged in any business getting it other than commission business agency business other than these businesses getting it and playing hiring leing up Goods Gage other than these three business any business can declare income under 44 ad now how much you can declare pgbp income 6% of Bank turnover plus 8% of cast that is a present what is the condition turnover in that year shall not exceed as a whole 2 getting the point further further uh once you declare income under 44 ad all the succeeding 5 Years also you should go with 44 any one year you fail that year audit is applicable books you have to maintain next 5 years you cannot come back to 44 ad one second then 44 a s is engaged in fing hiring leing good carage vehicle and uh the number of boots Carriage Vehicles wound by the S throughout the year not even one hour not even one day more than 10 then 44 a he can op as for that for light good vehicle 7,500 rupes per month straight away or part of a month is pres to income for the period of ownership for good vehicle th000 rupees per T per month or part of a month for the period of ownership will be treated as presumptive income 44 ad 50% of the gross res is presumptive income provided turnover shall not exceed 15 L now if the SS is declaring presumptive income under 44 ad or under 44 they can simply pay Advanced Tax in single installments 15th March itself generally Advanced taxes to be paid in four installments 15th June 15th September 15 December 15th March of the relevant previous year but SSS who are following these two getting it they can pay Advanced Tax by 15th March itself single installment whereas 44 Ada no exemption for Advanced Tax they have to pay all the four installments getting it all the points were covered here all that points were covered here getting it ADV tax points is covered here I think sorry I I said Ulta sorry here here 44 ad 44 ad for them Advanced Tax is single installment M 44 ad all the four installments they have to pay remember this is important for McQ they may be testing it so if the SS is engaging playing hiring leing of goods vage they have to pay four installments of advanced taxs without fail whereas 448 448 a person they can simply pay single installments of Advan tax that's it uh further further you know in case of 40 ad 40 44 ad 44 ad in these two cases all the expenses under 30 to 38 no more deduction at all even in case if it's a partnership form remuneration interest PID to partner no deduction at all 44A you know that provision is missing they can claim deduction in respect of interest on Capital remuneration PID to partner they can claim deduction after Computing presumptive income so 7,500,000 rupes per month you compute income from that you can still claim minus interest then you get book profit from that you can again claim remuneration I told you how toal remuneration eligible remuneration so in case of 44 AE how to compute book profit that 1,000 rupees or 7,000 that amount you calculate right from that amount interest on Capital to partner you reduce so whatever the amount you get no this is called as book profit on this you apply up to three LH 90% of book profit or 1.5 lakh whichever is higher balancing figure 60% of book profit yes or no this is the eligible remuneration compare with actual remuneration so if actual is less than eligible actual if actual is more than then eligible that's it so clearly I hope I clearly explained to you all the entire points so there is an illustration which is given here if you want you can solve it okay oh my God pgbp took one and half hour better then one and half hour we would be able to complete only Concepts that I can say 60% of the pgbp concepts important concept we cover some 30 to 40% we didn't cover not even 30 I can say 20% only because remaining Provisions are ju small small Provisions 80% of the pgb provisions we cover main important this pgb pres taxation is over I hope you are clear with presumptive taxation all the points have covered here so just one again you listen to this video just it is 15 16 minutes video right one second Isen to it you will have more clarity okay take care so with this pgbp marathon is also completed by the way pgb Marathon has another three parts this is fourth part so past three parts also you watch it just to go to s YouTube channel playlist you open income tax revision you will find inside that you will find okay take care so let's discuss the Amendments on business or profession chapter in this note there are two major amendments one is regarding 43b where in the finance act 2023 another Clause has been inserted that is Clause number H and another amendment is regarding presumptive taxation monetary limit in order to go with presumptive taxation under 44 ad 44 Ada the monetary limit has been increased for those SES whose predominant transactions are in other than cash so these are the two major amendments so first thing I will cover with 44 ad Ada related Amendment which is a very simple Amendment we all know the SS can offer income under the business or profession straight away as per 44 ad for all businesses except playing hiring leasing of goods Carriage vehicles for which 44 AE is available so except an necess Engaged in implying hiring leing of goods Carriage Vehicles all of SES can declare straight away 6% of turnover or 8% of turnover if the turnover is received in cash if the turnover is received in other than cash 6% of turnover as presumptive income so the SSC can directly declare a presumptive income so no further no deductions no disan nothing straight away that is treated as income under the head pgbp so we all know now in order to declare like that the maximum turnover the S shall have is 2 CR maximum turnover if at all the SS is having more than 2 CR turnover 44 ad option is not available accordingly if the SS overall turnover is more than 1 CR then he must go for tax audit if at all the overall turnover is more than 10 CR then also tax is required if at all 95% of the receipts and payments are in other than cash are you getting it now now you see so a similar logic is introduced in presumptive taxation so generally what is the limit to go for pres tax taxation 2 CR and in 44 ad we all know once 44 ad is chosen next 5 Years also we must declare like that if at all we break the chain 5 years we are prohibited to come for 448 so this all this provision and all you know and I also covered that in the marathon now let me discuss only amended part of it now you know this 2 CR limit is increased to 3 CR rupe not for every s not for every business person only for those business SES whose 95% of the receipts remember here they are only covering receipts part they are not covering payments why in presumptive taxation we are not worried about payments we are only worried about receipts yes or no we straight away declare income as a percentage of receipts straight away yes or no so Department want which criteria obviously to be very strong receipts only so here 95% of payments is not covered so the transactions in receipts the receipt transactions in cash shall not exceed 5% in other words minimum 95% of the total receipts must be other than cash here payments is not covered please remember this payments is not covered if you look at 44 AB the normal turnover is 1 CR suppose if 95% of receipts 95% of payments both are in other than cash then tax audit limit applicable in this case is 10 CR I hope you're aware of this in this case both receipts and payments in both of this 95% must be other than cash whereas in presumptive 2 cror liit is there right that is increased to 3 CR for which s for those S if 95% of receipts there is no payment condition 95% of receipts if it is in other than cash the limit applicable is three CR so up to three CR turnover you can go with the presumptive Taxation and declare just a 6% or 9 6% or 8% as the case may be of course 8% will not be possible why because majority of the reips are other than cash which means you just have to declare minimum 6% this is a minimum income and we all know if at all you want to declare lesser than this audit is required all that that's a different story altogether then with respect to professions with respect to notified professions standard limit is what 50 lakhs so any notified professional if is pres if at all gross receipts are not exceeding 50 lakhs straight away he can declare 50% of the receipts as business income correct now this 50 lakhs limit is increased to 75 lakh the 50 lakh limit is increased 2 75 for which professionals only those professionals whose 95% receipts are in other than cash remember that is minimum 95% if 100% are in other than cash well and good but minimum 95 must be other than cash and the same whatever in the ICS stud material is there the same is reproduced any business other than 44 AE business whose total turnover or receipts in the previous year is not exceeding 300 lakhs if aggregate cash receipts in the previous is not exceeding 5% for professionals not exceeding 75 lakhs getting it actually here there is a slight mistake M so whose gross res here actually it's a diagram diagram mistake 75 LS getting it so for those SES for those SES whose 95% of receipts 95% of the receipts are minimum in other than cash 75 lakhs is the limit normal ass is 50 l so this is the amendment under business or profession just a minute so that's it so this is 75 lakh is the limit fine I hope you clear on this very simple nothing no other changes in 44 ad no other changes in 44 adaa that's it so here in The Institute book itself there's a mistake it's actually 75 lakh standard liit is 50 lakh but increased limit is 75 LH so Institute while copying itself they did the mistake but of course they gave in the subsequent per clarification that 50 to 75 the limit will be from 50 to 75 at all minimum if the cash receipts are not exceeding 5% so they clearly gave a clarification later fine next uh then we have one more Amendment very important Amendment which is Clause number H insertion 43b section this is very carefully you need to observe this amendment very carefully because this Clause number H the treatment of disant for Clause number H is completely different from Clause number a to I getting it from the remaining six seven Clauses whatever we have this eth Clause is completely different what is 43b we all know 43b means here whatever expenses covered under this section like indirect taxes know interest on loan bonus or commission leave encashment like this right payments to Railways yes or no so uh like this they have covered certain payments one more payment which they have added is payments to one more expenditure that is covered is payments to msmes for goods and services procured from them purchased from them whatever suppose if our business organization is purchasing goods and services from msme getting it now Clause number H is applicable to us so generally what is 43b what the sections is actually the section says if at all any expenditure is incurred during the year martile basis so this 43b section is applicable only for SS who are following acal basis obviously so if an SS who is following acal bases only 43 applicable so if an S who is following acal basis under income tax for pgbp purpose all expenses you can claim deduction under acal basis means if you incur you can claim deduction but 43b expenses alone you can claim deduction only if those expenses were actually paid when it should be paid by 31st March no by due date for filing it for due date for filing it under 139 subsection 1 what is the due date applicable for companies and other persons for whom uh audit is applicable or for a partner of a form which is subjected to audit for all of them 31st October for transfer pricing cases 30th November any other 31st July these are the due dates that are applicable for filing it return for a particular previous year return return has to be filed by 31st July or 31st October or 30th November these are the three due dates we have within this due date if you pay that expenditure if you clear the liability n you can claim deduction on the acal basis for that previous year itself suppose if at all you paid that you incur expenditure in 2324 but by 31st July 30 30th November or 30 October you did not settle that liability you didn't pay that amount you paid after the date then what is the actual year in which it comes under that year you can claim deduction you cannot claim deduction under the relevant year where it is disel this point in detail I clearly explained the marathon please watch the mar now this Clause number H know slightly different in Clause number H what are they saying you know the MSM is no there is a law there is an msme law in the msme act itself there there is a point you know for MSM is no whatever goods and services you purchased you must pay them within 15 days this 15 days is called as appointed day what is this 15 days is called as appointed day so whenever you're transacting with msms know whenever you're purchasing any goods and services from them on credit you must settle the liability within 15 days if there is no written agreement if at all you entered into written agreement to pay the liability maximum tenure is 45 days if there is a written agreement available suppose if you entered into written agreement with msme that you will be paying within 45 days happy you have 45 days time if at all there is no written agreement you just bought and you just have to pay it's like a word of it's like a word of mouth getting it so if at all you want to pay oral contract you must pay the liability within 15 days we call this 15 days time limit or 45 days time limit as appointed day now very simple suppose know right now right now we are talking about which previous year 23 24 nothing but assessment year is what 24 25 suppose in previous year 2324 March 10th I purchased goods from msme for 10 lakh I purchased goods from msme 10 lakh observe this example very carefully this Clause number H alone has a different treatment from the entire 43b from the entire 43b the treatment is different for Clause number H the treatment is different the section treatment is different now 10 lakhs I have now now I purchased this on a written agreement I purchased this based on written agreement okay there's an agreement 40 days time I have which which means I have time up to April 25th to settle this liability April 25th 2024 I have a liability to settle suppose no if I paid within April 24 what happens you will get deduction for the actual year what is the actual year I incurred this in 23 24 I purchased Goods in 23 24 acral basis so for the same year you can claim deduction you already debited to p no treatment you are allowed with the deduction suppose if I paid on April 26th or late if I paid this amount on April 26th or later but you know what I paid within the 31st October 2024 for me the due date for filing it return for due date for filing it 139 subsection one for my entity is 31st October you know I paid somewhere on 10th may I paid I paid from the due date after 45 days from the due date after 45 days but I paid I paid it within the due date due date applicable for it no problem at all still you will not get deduction still you will not get deduction for the 23 24 year you paid on 10th May right here 10th May means what what is 10th May in our example here in this case what is the meaning of for 10th may you paid the msme the liability after 45 days of the agreement as for the agreement within 45 days you have to pay even without agreement also in agreement no suppose no if all you entered into agreement where agreement say 90 days time that's invalid with an agreement if you want to pay 45 days is a maximum criteria credit period allowed the maximum credit period allowed for the customers of msme to pay the liability to the msme is 45 days that's is a statutory limit getting it if you pay within 45 days whatever year for which you spend the money right for that year you will get deduction if you pay after 45 days you will get that as a deduction for the actual year for which it is paid for example I paid on 10th May in our example 10th May means what March 10th is a transaction 10th May is after 45 days which means you will get it you will get it as has a deduction under 2425 previous year generally remaining 43b section items what you know payments to Indian assets payments for Indian payments for using Railway assets payments to I mean payment of interest on bank loan leave and Cashman bonus or commission taxes in all these cases what is a rule you know generally 10th May if at all you paid those payments forget about a m if at all I made payment on 10th May taxes or some interest on bank loan I paid on 10th or leave encashment I paid on 10th May belonging to 232 we will just see is it paid within the due date for filing it return is it paid within the due date for filing it return yes so it is allowed as deduction for the same year no disan is required for all payments under 43b Section for all payments under 43b Section you will get deduction if the amount is paid within the due date for filing it return though you incured in 23 24 but you pay within the due dat enough you will get deduction if at all you paid after the it return filing due date you will get deduction for that but for MSM me what is what is the criteria that we see we don't see it return filing due date we see 15 days criteria 45 days criteria suppose no I purchased goods from msme on 10th February ma 25th March is the due date 45 days I paid on 27th March but you paid within the same year right 27th March also comes in within the same previous year though you paid after due date though you paid after appointed day as for the MSM law but it comes within the same Financial rate you will get deduction but what if you purchased some goods and services from msme and the amount is outstanding as on balance sheet date and then you need to check whether that amount is settled to the msme within 15 days from the transaction date or within 45 days from the transaction date check out if at all it is paid within 15 days or 45 days from transaction date you complied with the MSM law you will get deduction for the same Financial year for which you incurred if at all you paid after 15 days or after 45 days from the transaction date you will not get deduction for that Financial year if at all the amount is outstanding as on the balance sheet date and you did not pay within the 15 days or 45 days you paid after that and that date comes under the next financial year you will get deduction for the next financial year for that itself we have given we have given an example here Mr a purchased goods worth of 10,000 from a and Co msme on first March as per the WR agreement between them the payment has to be made by 5th May oh in the written agreement no they only have given 35 days time they only have given 35 days time getting maximum time is 45 days if there's a written agreement as for the agreement time period you have to pay or maximum ver case 45 days suppose if the written agreement contains 90 days then agreement is not valid 45 days only considered for law purpose getting it so 35 days only you have to pay Mr a follows Mercantile method of accounting what is your answer he's following merant so he incur expenditure for which financial year 2324 basis but can he claim this as on 31st March is outstanding he you know as for the agreement 5th may he has to pay suppose he paid on 2 May sorry 2 April he paid second April means he paid on or before the agreement date right as for the terms of msme he paid right the deduction will be allowed for the respective year he paid on 20th April since he paid after the due date mentioned in the return agreement since he paid after the due date mentioned in written agreement for that respective year he will not get deduction Mr a paid the amount beyond the time limit so reduction would be allowed in the actual year of payment 2425 therefore for previous year 23 24 that expenditure will be disallowed and that expenditure will be allowed as a deduction in the previous year 2425 getting my point now what is a micro Enterprise uh you know investment in plant and missionary if it is not exceeding one CR is not exceeding 5 CR small Enterprise means investment in plant is not exceeding 10 and turnover is not exceeding 50 CR so you see and remember here medium Enterprises not covered only micro and small Enterprises are covered medium Enterprises are not covered but actually the law is micro small and medium Enterprises msme app so only two Enterprises are covered micro and small only these two are covered so any sum payable by SS to M micro and small beyond the time limit given under section 15 of msmed act would be allowed as Direction only in that previous year in which it is actually paid if that previous year is same relevant previous year no no problem happily claim deduction if that previous year comes after the relevant year then for that year you will get deduction now section 15 of the MSM act know it mandates payment for goods and services to supplier who is msme you know uh mm buy the buyer on or before the date agreed between them in writing that is as per the agreement which cannot be more than 45 days from the acceptance or deemed to be acceptance nothing but which cannot be more than 45 days from the transaction date so through agreement you can have a lesser duration lesser days or maximum 45 days getting it if there is no such agreement if at all there is no return agreement itself then the payment must be made within 15 days that 15 days is called as appointed day if if at all some payable if at all any amount you you have to pay to a micro or small Enterprise if at all it is paid as per the agreement within 45 days or within 15 days in case there's no agreement you will get deduction on acral basis if martile basis is followed if the is payable to MSM is not paid within the agreement date or 15 days then the deduction would be allowed in the previous year in which it is actually paid suppose year beginning I did a transaction 45 days later I paid but in the same year I paid I will deduction for the same year but year end the amount is outstanding transaction happened in the year March month but the amount is outstanding on March 31st and you paid in the April or May month but if it is coming within 45 or 50 days as the case maybe you will get deduction on the approval basis if you pay after the 45 days or 50 days 15 days you will not get deduction for the respective year you will get deduction for the next year so this is the major Amendment 43p Clause H so try to try to listen to this particular part of this video once again so get clarity remember 43b Clause H for that alone due date means what 15 days or 45 days as per MSM law not due date for filing it return for remaining all other payments that are covered under 43b you incur expenditure in the current previous year you have to pay that you have to settle the liability within the it return due date if you settle it you will get deduction but for MSM payment only not it return due date is the cut off the due date is 15 days or 45 days is the cut off I hope you understood the difference you found the difference between the remaining 43b payments and this payment next next and whatever remaining amendments whatever I'm showing you here are just 115 BC 32 section under default tax res no if at all you're going for default tax res no you cannot claim you cannot claim additional appreciation and you cannot claim deduction for contributions to scientific research Association for scientific research to a company for scientific research to a research Association for social or statistical research to a National Laboratory IIT universities you cannot claim deduction but remember but remember you can still claim you can still claim deduction for in-house research for Revenue expenditure in-house research for capital expenditure for these two sections you can claim because you are spending on your own you can claim deduction for for spending on your own you can't claim deduction for contributions if possible no open IC material and solve illustration five on this it's very easy illustration okay and remember in the new scheme study material there is another section called 35 2ab nothing but expenditure incurred by an Indian company on scientific research which is engaged in biotechnology business that section is removed in the old scheme medal it is there in the new scheme medal is not there but whether this section is there now or not it doesn't make any difference because 35 subsection one Clause one is also dealing with the same 35 2ab Once Upon a Time four five years before 35 2ab has some relevance now there is no relevance that's why Institute removed it from the study material next 35 ad same 35 ad know here this is just a clarification purpose I kept this clarification purpose I kept this I think most of you probably know this okay 35 ad is what under default tax resim you cannot claim 35 ad deduction if at all you want to claim 35 ad deduction default tax 115 BC will not apply further alternate minimum tax Provisions 115 JC all that is applicable next and we all know the loss of an S who is claiming deduction under 35 ad that loss can be set off against another specified business even though it is not eligible irrespective of whether the letter is eligible for deduction or not so whether 35 ad so suppose you have one business that is not eligible for 35 ad deduction but that business falls under that 14 list you can still set off so whether you follow you know default tax scheme or not doesn't matter you can set off but of course if you follow default tax you can't claim 358 set off suppose this year for example this year no uh it's okay leave it let's not make it complicated enough enough that's 35 ad now look at the supplementary material 35d very very very basic provision M it's not a big deal in the supplementary material no they have added this you know a notification came on 1 August 2023 remember all the Amendments up to 31st October are applicable for May 2024 exam so 35d what is 35d preliminary expenditure preliminary expenditure can be claimed by domestic company as well as a resident Indian citizen if at all they incurred for starting the business or expansion of the business whatever expenditure that qualifies for PR expenditure 5% of the cost of the project or 5% of the capital employed whichever is high like that some points were there so that amount know you can claim it as deduction in five installments right now in order to claim a deduction you need a CA certificate CA has to certify this further you need to give some documents as per 35d the SS has to furnish a statement containing particulars of the expenditure how much for feasibility report how much for project report how much for Market survey report and other survey how much for Engineering Services like this you need to give some documentation to the department what documentation you should give you should give this documentation to the department so that's what the notification says technically speaking from exam point of view not a big deal this is not a big important Amendment at all so in pgbp this is not a big big Amendment or not an important Amendment but which is covered in the supplementary material so only if you have if you submit all these statements no you are eligible for amortization within the prescribed period so you are eligible for amortization you're eligible to claim five installments deduction only when you give these information to the department so accordingly Central Board of direct taxes they have inserted a rule 6A BBB to prescribe that the statement containing particulars of above expenditures required to be furnished one month when you have to furnish one month prior to the due date of Furnishing the Furnishing of the return of income nothing but tax audit due date this is something similar to tax or du dates 30th September maximum generally it is 30th September or if at all you don't you don't have a tax audit then 30th June 31st July is a due date right if you don't have tax audit 31st July is a due date one month prior means 30th June so you need to submit this information to the department within one month prior to one prior to I mean one month prior to the due date for filing it return you must submit probably this might be tested as an McQ maybe we don't know this might be tested as an McQ this one month Point might be tested as an McQ I don't think so but if at all tested you will not be missed so with this pgbp amendments or over next no we have uh capital gains related amendments capital gains related that's it this is pgbp so let's start capital gains revision so capital gains is the fourth head of income we all know and the charging section for the capital gains is section 45 and you know in 45 we have various subsections generally subsection one is predominantly recognized as charging section primary charging section for Capital GES so what the charging sections says so directly we'll open the open the book and then uh you know read so any profits and gains arising on transfer of capital asset getting it is taxable during the previous year in which transfer takes place so this is what the charging section can correct just a minute I'm opening simultaneously so you can you know along with me while while we are listening to the concept we will simultaneously revise so what is there so the charging section says any profits or gains which are erasing on transfer of capital asset in the previous year will be chargeable to tax now you see capital gains is taxable when in the previous year when the transfer is affected so whatever the year in which we transferred what you transferred Capital asset you transferred so when you transfer the capital asset in a particular year suppose I transferred Capital asset on 4th February 2023 4th February 2023 comes under which previous year it comes under previous year 22 23 so in this year on that Capital asset since you transfer getting it capital gains will attract so in this year it is taxable accordingly in the assessment year you have to file it return and pay tax on that capital gain understood now now you see in the charging section there are two important elements that is one is transfer another one is capital asset so now Capital asset is defined under 2 Clause 14 whereas transfer is defined under 2 Clause 47 now immediately we have given here here also what is a capital asset and if You observe Capital Asset definition starts with the capital asset means getting it see in capital gains R we have computation formats so the the the process of computing capital gain for non depreciable assets for depreciable assets for slum sale the process of computing capital gains is different getting it again for depreciable asset the SS is following block of asset approach under income tax law the computation logic is different for the SS who is following slm method the computation logic is different anyhow I'll come back to it let's first focus on the charging section so Capital asset means what capital asset means it's property of any kind anything anything is a capital getting it the pen which I'm holding the digital pen getting the point this this is apple pencil too getting it so this is a capital as for the definition which is held by an S whether or not connected with business or profession it doesn't matter whether it is connected with your business or personal so even every personal asset of you every business asset of you everything is a capital asset everything however however stock in trade is not a capital asset what is it stock in trade is not a capital asset so if at all you are having any assets in business no with which you are buying and selling commodities SO trading you are trading in some Goods those goods are not Capital assets however you know there's a def there's a point any Securities held by Foreign Institutional Investor or we also call them as foreign portfolio investor if at all a foreign institutional investors are holding Securities in accordance with some s regulations the Securities in the hands of foreign investor is always a capital asset what is it always a capital asset that's why you see here stock in trade is generally not a capital asset right what they mention other than Securities held by other than securi held by Foreign Institutional Investor which means suppose I'm a foreign Institutional Investor suppose my organization is a foreign Institutional Investor I am buying and selling securities regularly it's my trading activity it's my business but still we call it as capital asset only maybe the foreign institutional investors May record that in stock in trade in his books of accounts but under income tax the Securities held by Foreign institutional investors are declared as capital asset whether he's trading in them or not doesn't matter it's a capital asset so for him whenever any profit or loss that is arising on these Securities they accessible under which of income capital gains not pgbp next any unit linked insurance policy issued on or after first February 2021 if any ulip policy is issued on or after 1st February 2021 which ulip policy that ulip policy where 10 Clause T exemption do not apply if that policy that's an UL policy issued on after 1st February 2021 on that exemption under 10 do not apply why because you know the premium payable on that policy in any one year during the tenure of the policy suppose the policy tenure may be 10 years or 15 years or 5 years for any one year if the annual premium payable exceeds 2 and half lakh then that ulip policy is not exempt under 10d maturity amount is not exempt under 10d and that ulip policy is treated as capital asset that ulip policy is treated as what capital asset for ulip policy how to tax capital gains that is covered under 451b but we don't have in our syllabus at CA inter getting it so just you need to recollect this point you just have to remember so unit link insurance policy is also treated as a prop Capital actually UL policy policy is not a property first of all understand it's not a property insurance policy cannot come within the definition of immovable property movable property no way because it's an insurance policy getting the point that's why they specifically mention any unit linked insurance policy issued honor after 1st February 2021 which is not exempt under 10 Clause 10d because of the premium payable on that policy exceed two and half lak in any one year during the tenure of the policy so these are capital assets and stock in is not a capital asset and personal effect what is it personal effect also not a capital so what is the personal effect personal effect must be movable and it must be used for personal purpose if I am using some asset which is movable held for personal use then that comes under personal effects suppose I have a car which I'm using it for my personal purpose it's mobile it's a personal effect what is it it's a personal effect suppose I'm having a phone and it's my personal purpose I'm using it it's a personal effect remember suppose if I buy a laptop which is for my practice nothing but for my profession getting the point so laptop is a movable item but am I using it for my personal purpose no it's a profession business for profession purpose you using which is not personal it's a capital asset so in case of business or profession all movable items which are used for business or profession they are capital assets they are depreciable assets they are capital asset only those movable items only those movable items which are used for personal reason they are only treated as personal effect and remember a personal effect is not a capital asset accordingly whenever you buy and sell personal effect capital gains provision will not apply please make a note capital gains provision will not apply on personal effects now there are some you know items which are excluded from personal Effect definition there are some items which are excluded from personal Effect definition what are they so jeary archical collection drawing painting sculpture any work of art these items are movable these are used by you for personal purpose only but still they are not treated as personal effect remember Capital asset excludes personal effect personal effect excludes these items which means if these items are not personal effect if these items do not come under personal effect it do not come under exclusion from Capital Asset definition which means these items are treated as capital assets so if at all you you know you are wearing some gold jeer you are your wife or your family members if they sell that gold jeary even though it is personal used it is liable for capital gains not only that rural agricultural land is not a capital asset see in income tax they don't use the word rural agricultural land Urban agricultural like that they use the word agricultural land not situated in specified area they have given a word called specified area specified area is nothing but what urban area if the if the agricultural land is situated in urban area nothing but specified area it's an urban agricultural land if the agricultural land is not situated in specified area that means it's not an Urban Land which means it's a rural agricultural land so if a land is there you are using it for agricultural purpose and that agricultural land is situated within the specified area it's a capital set if it is not situated in specified area means it is there in the rural area then it is not a capital asset now how to decide what is specified area exactly specified area means generally getting it within a jurisdiction of municipality or cantonement board so within a municipality Municipal Corporation or cantonement board if at all you are having one agriculture land that's always a capital asset that's always an urban agriculture land it's always a capital asset suppose you are having the agriculture land outside the municipality limit outside the cantonement limit getting the point but you know what from the limit of the municipality within 2 kilm you have that Land from the limit of the municipality within 2 kilomet you have that land now you you are having a land within 2 kilomet from a particular municipality limit if that municipality limit if that municipality or cantonement B population as per latest sensus published if it is more than 10,000 if it is more than 10,000 if any land is situated within 2 km getting the point it's an agricultural land sorry it's an urban land it's an urban agricultur land it's a capitalism suppose your land is situated Beyond two Beyond 2 kilm nothing but you see here you know you know this is the municipality limit this is the municipality limit you are having a land within 2 kilm suppose somewhere somewhere here you are having the land which is within 2 kilm from municipality limit getting the point now if this municipality population is 10,000 minimum getting it then this land is you know Capital asset Urban Land we call it as specified limit suppose if your land is situated within 6 kilm suppose this is 6 kilm radius 6 kilm B municipality limit from the municipality your land is almost Beyond 2 km but less than six so your land is very far away from the municipality if at all this municipality population is more than one lakh which means the population is very huge which means 6 km is not a big distance from that particular limit because population is very huge so up to 6 km from the municipality definitely people will be traveling frequently therefore it's an urban agricultural land therefore it's a capital suppose if your land is situated in the 8th kilometer within the 8 kilm radius within 8 km radius from the municipality limit the municipality limit is this from this limit your land is situated within 8 km somewhere here it is situated Beyond 6 kilomet but not exceeding eight so here it is Beyond two but less than or equal to six here it is beyond six sorry Beyond six sorry Beyond 6 kilomet but less than or equal to 8 kilomet in such a case is this is this can I call this as urban area can I call this a specified area yes you can call it a specified area suppose if this municipality population is minimum 10 lakh if this municipality Corporation if this Municipal liit if that Municipal if that municipality or contonment population is minimum 10 lak then the land situated in this particular you know even if it is within 8 km we can call it as what Capital asset it is urban area suppose if the agricultural land is situated outside 8 km even though this municipality population is 1 CR doesn't matter from the limit of the municipality from the limits of the municipality Beyond 8 kilom any land is there agricultural land we call it as rural agricultural land accordingly it's not a capital asset so any land which is situated Beyond 8 kilometers we always call it as what rural agricultural land accordingly we cannot call it as a capital asset suppose no no you are having a land here no somewhere which is 10th or 11th kilometer after the municipality but if this comes under another municipality 8 km below suppose if this land see from see very simple very simple let us assume we have some cities like gur and Viada getting it so you are having a land here which is 8 kilom away from gtu but you know this is within 8 kilm from vij see 8 km 6 km 2 km from which municipality from any municipality so I have agricultural land at one place that is not falling within 8 kilomet of any municipality or contonment boat then only it's a rural agricultural land I hope you understood these you know this one then what else then what else is not a capital asset the following specified gold bonds is not a capital asset special bearer bonds is not a capital asset gold deposit bonds which are issued under gold deposit scheme gold monetization scheme 2015 or 2018 gold monetization bonds or gold deposit Bond they are not capital and you remember Sovereign Gold Bond what is it sovereign gold bonds they are always capitalized Sovereign Gold Bond is capital suppose know when I purchase you know I deposited my gold and I obtained gold deposit Bond I sold this gold deposit bond to somebody or gold monetization scheme bonds to somebody this is not at all capital asset accordly capital gain will never apply to me suppose I purchased sovereign gold B sovereign gold b means why who will purchase s in Gold B you know suppose you have money you want to invest in gold but you don't want to car the physical gold with you but you want to invest in gold but you don't want physical gold so you can buy a bond getting it suppose you want to buy 10 gram of gold rate you you buy this Bond pay the 10 Gams equivalent money to the government government will give Sovereign Gold Bond on that Bond they will mention 10 grams clearly so this bond is having some 5 years to 10 years duration so at the time you redeem it so whatever market value is there on the r of redemption of the gold value that much only you will get back Sovereign Gold Bond is a phys is a substitute for physical gold so Sovereign Gold Bond is a capital asset remember able to understand and remember Sovereign Gold Bond if you transfer you are liable to pay capital gains tax suppose no you purchase Sovereign Gold Bond you did not sell it to anybody you waited until it's maturity time you redeemed it with the government itself again getting the point Redemption of sovereign gold bond is discovered under Section 47 sir what is 47 47 talks about about transactions that are not treated as transfer you see the charging section as per charging section what is it only if there is a transfer of capital asset then only capital G Supply so what you transfer must be Capital asset and there must be transfer if at all it is not a transfer suppose sovereign gold B redeemed it is not a transfer it is not treated as transfer section 47 clearly says that therefore capital gains will not apply on that suppose if you sell sovereign gold B to somebody it is liable for capital gain stocks if you redeem if you redeem sovereign gold Bonds on maturity that is not R Stander accordingly any profit you get because of the gold value appreciation getting it not at all liable for capital gain stxs that's it this is two plusa 14 Capital Asset definition now to Clause 47 transfer definition is given that is not a very big deal sale exchange relinquishment of an asset extinguishment of an asset compulsory acquisition of you know any Capital asset conversion of capital asset into stock in trade you know all these all these items were covered under 2 Clause 47 so transfer is an inclusive definition getting the point so 2 Clause 47 is not a big deal fine so now only when there's a transfer of capital asset capital gain Supply correct now you see uh how to compute capital gains how to compute capital gains now if you recollect we have computation for the purpose of computation we have four sections one is 48 50 50 a 50b getting it so how to compute you know uh capital gains in all these cases for depreciable assets let us look at depreciable assets so for depreciable assets how to compute capital gains section 50 talks about Capital now if you recollect suppose which section 50 talks about which assets depreciable assets where the SS is following block of asset approach so block of asset approach if the SS is claiming depreciation under pgbp for depreciable assets under block of asset method so for them how to compute capital gains there's a format now there's a block of asset format right generally what is the format for block for each block opening wdv of the block opening wdv of block so something plus additions in that block so actual cost actual cost of actual cost of additions so we will generally split more than 180 days less than or equal to 180 days so we will mention like this getting it so we will get some value now you have this know this is called as gross block value this is called as what gross block value or we can also call it as value of block what we can also call it as value of block or gross block value so how to compute gross block value how to compute value of the block opening value will be there additions in that year in that block if at all any assets were purchased no if any machinaries are purchased no if any furniture is purchased in that furniture block no then that is treated as what additions so opening plus editions is equal to we call it as what value of block so you compute value of the block now from that from that I'm telling you block of format which is covered under 43 getting it which is covered under 43 subsection 1 so from that amount received amount received on on transfer destruction demolition of part of a block amount received on transfer destruction demolition of part of a block you reduce that amount then if you have some value this is called WV of the block what is it called as W DV of the block if this value is there and as on 31st March of the resp to previous year in that block some asset is physically there in the organization as on 31st March that is closing date of the relevant previous year in respect of a particular block some asset is there and there is a value wdv of the block it has a value then you will claim depreciation under Section 32 you will calculate depreciation so there are two conditions to calculate depreciation under Section 32 one in respect of a particular block as on 31st March there must be some written down value so for the block written down value should be there how to calculate the written down value how do I calculate this written down value the written down value is calculated very simple identify what is opening written down value of that block to get this opening so wdv of the block of the last year minus depreciation for last year you will get closing wdv of the Block in the last year that itself will be opening WV of the Block in the current year to that add additions whatever purchases you made know in that block so Purchase cost you add you will get gross block value from that any part of a block no either transferred by you or destroyed or demolished because of you are selling it or destroyed whatever you received sale value or you received compens from insurance company whatever amount received you reduce it amount received you reduce it then the balance is called as WB of that block now if this value is positive if wdv of the block is positive and as on 31st March of that particular year relevant previous year getting it there is physically an asset then depreciation will apply what will apply depreciation will apply so how to calculate this depreciation anyhow when I'm doing pgb prevision once again I'll be repeating that so no working Note One let us assume so return on value of the block you know this is also called as value available for depreciation what is it also called as value available for depreciation so this value split into four parts split into four four parts yot this value appropriate this value a portion this value first we will allocate this value for assets acquired during the year but not used during the year so some value getting it out of this the value allocated so then some balance value will be there now this balance value then allocate to this one assets acquir during the year but used for less than 180 days then allocate if still some value is there after allocation then allocate to assets which are purchased during the year but used more than or equal to 18 days allate if still some value is there in this getting it then balancing figure allate here so here depreciation is 0% here depreciation is half rate here depreciation is full rate here depreciation is full rate like that if you apply the value into rate you will calculate normal depreciation that normal depreciation if you reduce you will get the closing wdb of the block and remember depreciation computation we have not discussed yet you know I'm just giving you a brief idea what is important for capital gains chapter until now is only this particular only only up to this only up to this only in capital gains relevant to remember this format getting it so now if there's a positive value for this block and there's a asset as on 31st March block is exist it is not seized the block is not seized to exist block is existing and value is there then you calculate what depreciation suppose either as on 31st March block is not there or this value is turning negative you don't calculate depreciation you calculate capital gain straight away nothing but we'll look at we we'll see one small example suppose know there is a plant and missionary you know 15% blocker there is a blocker so this opening wdb you know this this plant plant and missionary opening W is 10 lakh you know during this year so let us let us let us understand it is 22 23 previous year so during this year we purchased some additions editions of plant and missionary which are carrying 15% R of depreciation we purchased 5 lakhs worth of planted mystery now tell me what is the gross block value 15 lakh in the same year in the same year we transferred we transferred part of a block we transferred what part part of a block suppose I transferred it for 5 lakhs now what is the balance only part of a block I transfer not full block so what is the WB of the block then 5 lakh 15 lakhs minus 5 10 lakh so WV of the block is there and part of a block only we transfer means part of a block is existing as on 31 we calate depreciation suppose part of a block only a transferred but a transferred for 25 lakh at what price I transferred 25 lakh this is not 5 lakhs I transferred for 25 now value is turning negative see part of a block is there as on 31st March block is still existing but I transferred part of a block higher than the gross block value higher than the value of the block what is gross block value or value of a block opening plus additions purchases cost so total it beyond that value my sale value is increasing then the difference directly how much xcess is there see now block you have to make it zero the block value have to make it zero because block is existing so you cannot close this block you cannot close this or strike this block block is existing you are continuing the block but block value will become zero so what about remaining 10 lakhs remaining 10 lakhs is treated as short-term capital gain so when you transfer part of a block either you compute depreciation or short-term capital gain you will get it understood suppose same opening 10 lakhs additions 5 lakhs value of a block how much value of a block 15 lakhs minus full block transpose if full block is transfer I don't even think about depreciation I strike away compute capital gains at what price I sold for 10 lakhs now since value of the block is 15 you sold it for 10 lakh 5 lakhs there is a loss 5 lakhs there is a loss suppose I sold it for 50 25 lakhs 10 lakhs there a profit if it is a loss it's a short-term capital loss if it is a profit it's a short-term capital gain understand in respect of depreciable asset if full block is transferred either you get shot capital gain or short-term capital loss which means there is no question there is no possibility of depreciation in respect of full block sold as on 31st March block itself is not there whereas in part of a block sale if you sell part of a block for an amount less than block value then value will be their return on value yes it is their depreciation if you transfer part of a block for higher than the amounted is more than value of the block the excess amount is short and capital I hope you are clear and remember in respect of depreciable asset block of asset approach or even approach whatever it is in respect of depreciable asset the capital gain or Capital loss that we compute is always treated as shortterm generally whether see capital gains itself means immediately you should recollect there are two types of capital gains one is long-term capital gain another one is short-term capital gain why we need to discuss like this because the tax rate for long-term capital gain is different from short-term capital gain so what how to determine how how do we know whether a gain is a long-term gain or shortterm G how do we know it depends upon nature of capital asset what is it it depends upon nature of capital asset wait I'll come to that later first let me close this block ofit approach I hope you understood depreciable asset block of asset approach how to compute capital gain clear now let's look at section 58 how to compute capital gains in respect of electricity company which are following slm method electricity companies following slm method let's assume slm method means wise they follow not block suppose electricity companies having a particular plant and missionary plant and missionary you know some code is there 15 plant and missionary some some 25 it's not rate just plant that number plant and missinary number is what 25th pled Miss so that pled Miss is there opening WV some value 10 lakhs is there opening WV is what 10 lakhs you know this planed missionary was originally purchased for what price 20 lakhs originally it was purchased for 20 so every year straight line method they claiming depreciation one lakh one lak one lak one lak one lakh like the 10 years over already right now the opening value of that particular missionary of that yeset is 10 lakhs now current year we want to calculate depreciation check as on 31st March as on 31st March is the asset is available yes available Cal depreciation find out closing value go to the next year suppose as on 31st March this asset is sold this asset is sold as on 31st March okay asset is not there as on 31st March which means no depreciation so in income tax whether it is block of asset approach or not slm approach you will calculate depreciation only on the closing date 31st March as on the date block is there value there Cal depreciation slm yes is there Cal depreciation otherwise we don't calculate depreciation straight we calculate capital gains now so as on 31st March this 25th plantary sold by the company at what price the company sold it for 5 lakhs second case company sold it for 15 lakh third case company sold it for 25 lakh okay so one case company sold this asset for 5 lakh another case company sold it for 15 another case they sold for 25 suppose suppose in this case you see case number one what is the value of that particular asset as on you know 31st March before providing depreciation 10 lakhs asset is sold for 5 lakhs which means 5 L is a loss right it is treated as it is treated as terminal depreciation it is treated as terminal depreciation under Section 32 directly this 5 LS you can claim deduction in pgbp now suppose this this value of the asset is what 10 lakh now you sold it for what 15 lakh now there is a 5 lakh profit no profit no when there is a loss you you you you are reducing under pgb when there is a profit also this is treated as balancing charge what is it what is it called as balancing chars nothing but profit on sale of asset profit on sale of asset now here here the sale price is less than original cost so any profit Which is less than original cost is a revenue profit in accounts also yes or no so this five LH is taxable under pgbp here five lakhs loss is deductable under pgbp under terminal depreciation word 5 L profit is taxable under pgbp under balancing charge word 41 subsection 2 what is it 41 subsection 2 or 41 Clause 2 understood suppose I sold it for 25 LH which means I sold this asset 10 lakhs worth of asset Beyond its original cost original cost is 20 and I sold it for 25 lakh 5 lakh Capital profit that's short-term capital gain 5 lakh and balancing charges 10 lakhs actually 10 lakhs worth of asset you sold for 25 which means 15 lakhs profit out of that 15 any profit up to original cost any profit up to original cost we call it as balancing charge which is taxable under p GBP any profit Beyond original cost that is 5 lakhs it is taxable as short-term capital gain and that's what section 508 say are you clear now you see here also here also if there is a profit it's only short-term capital game so for an electricity company which is following slm method for an asset there is no question of shortterm capital La you see here there is no short Capal loss either terminal depreciation or balancing charge both are coming under pgbp or are short-term capital gain the point so that's 50 a now now now let us understand let us understand further so uh we understood now computation we understood now the section 50 is over 50a is over now how to calculate how to calculate dep you know how to calculate capital gains for non depr non depreciable assets this is where entire capital gains discussion is about major part of the capital gains chapter is discussing about how to calculate capital gains on non depreciable Assets Now I hope until now you are clear just a minute before I continue uh you know before I continue to talk about non- depreciable asset first of all we are having two types of capital gains one is short-term capital gain another one is long-term capital gain how to decide whether capital gain Capital profit or Capital loss is it a longterm or shortterm how to decide it depends upon nature of capital Capital asset means what we know a property of any kind whether or not related to the business getting it that's that's a capital asset now nature of capital asset means what capital assets are broadly classified into two categories long-term capital asset short-term capital asset what is it long-term capital asset short-term capital asset 242a 229a so these are the sections which are talking about the definition of long-term capital Asset definition of short-term what's a long-term capital asset which is not a short-term capital asset is a long-term capital asset what is a short-term capital asset short-term capital asset no so when an asset is coming under short-term capital asset see whether an asset is a shortterm or long term it depends upon period of holding how long I am the owner for that asset for how long I am the owner how long I am holding that asset as a owner is important now they have they have given three criterias 12 months criteria less than or equal to 12 months less than or equal to 24 months less than or equal to 36 months there are three criterias which they have given getting it less than or equal to 12 months only two assets were given unlisted shares unlisted shares immovable why do why to write unnecessarily time waste so I'll directly show you in the book itself just a minut yes there are three categories so there are some capital asset for whom holding period is 12 months for whom the criteria for holding period is what 12 months for some Capital asset the holding period criteria is what 24 months for some Capital ass 36 months what is this 12 24 36 very simple when I purchased when I sold a gap if the Gap is more than 12 months for certain assets it's a long term if the Gap is more than 24 months for certain assets it's a long term for some other assets remaining assets the gap between purchase date and sale date must be more than 36 months then only they are longterm what is the purpose of knowing whether it's a long-term or short-term because long-term capital gains are subject to tax under section 112 1112a where short-term capital gains are subject to tax under Tri 1A and normal rates all short-term capital gains are generally taxable at normal rates however however if at all you are selling if at all you are transferring listed Equity shares unit of equity oriented Mutual funds units of business trust for these three assets if us STD is paid the tax rate is St 15% concessional tax rate call it as if the same meth it is long-term 1128 10% tax rate getting it if it is any other long-term capital asset if you sell generally tax rate is 20% anyhow not just this there are many provisions on this I'll come to that later so now holding period what is important to decide whether an asset is a long-term or short-term holding period if the asset is longterm if I sell asset if I get any profit that's a long-term capital gain if the asset is shortterm if I sell that asset if I have a capital gain that's a short-term capital gain getting it now so what are the assets that comes under 24 months criteria 24 months criteria will be applicable on unlisted shares land Building or both by the way if any of you want to download this particular PDF you can download it in the S application so s for CN CM there's an application is there in the Play Store you download that in that main menu is there there another option is website you just open s cma.com website PDF resources is there CA interview select group one you select paper 4 you select you will find income tax book complete income tax book you will find getting it so in that I'm just using capital gains chapter now so for unlisted shares and land Building or both right I can call it as immovable property what is it immovable property so for unlisted shares and immovable property the criteria to decide whether an asset is a longterm or shortterm is 24 months so up to 24 months I am holding and selling immediately within 24 months Gap I'm selling it's a short term otherwise it's a long term very simple suppose I purchased an immovable property on 1st May 2020 and I'm selling it on 30th April 2022 now this is a short-term capital why from 1st May to 30th April so I purchased on 1st May 2020 and 2020 to 30th April exactly 24 months exactly 24 months the Gap is it's a shortterm suppose if I sell it on 1 May 2022 if at all I sell it on first 2022 then it is more than 24 months it's a long term so that's what getting it so so for unlisted shares unlisted shares and immovable property the criteria is the criteria is 24 months whereas for listed Securities listed Securities other than units units means what in case of mutual funds in case of business trust so whenever we want to buy no we buy units not shares so there the uh instrument is called as unit whereas in a company if I want to get ownership I need to buy certain instruments that instrument is called as what sh getting it so any listed security listed Securities means what shares debentures bonds everything will come except unit getting it so which are recogniz which are listed in recognized Stock Exchange 12 months is the criteria units of equity oriented mutual fund or units of un interest of India remember only Equity oriented Mutual F what is it Equity oriented mutual fund units is only treated as you know for that only 12 months criteria suppose I want to I want suppose the capital ass is debt oriented mutual fund debt oriented mutual fund any any other unlisted Securities other than shares all unlisted Securities comes here however unlisted shares comes under 24 months category getting the point remaining all of unlisted Securities like unlisted dentur unlisted you know bonds everything comes under what 36 months criteria getting the point then zero coupon bonds so all listed Securities other than units units of equity oriented mutual fund units of unit rest of India zero C ponds for these four assets 12 months is a criteria for unlisted shares land and Building 24 months is a criteria what about remaining unlisted Securities listed Securities 12 months unlisted shares f for remaining unlisted Securities 36 months debentures debt oriented mutual funds unlisted bonds unlisted debentures all that and any other Capital asset means jewelry units of business trust jubiler units of business trust all that comes under other Capital assets which is 36 months is a criteria I hope you are clear I hope you are clear on this getting it now so this is the criteria to decide whether an asset is a longterm or shortterm so that is what you know in depth it is once again clearly explained here so water all comes under 36 months criteria water all comes Under 12 months criteria water all comes under 24 months criteria I have clearly explained now what do you mean by Equity oriented fund suppose if I buy units of a mutual fund now whatever the amount I gave know out of that amount 90% of that amount is invested by that mutual fund company in another mutual fund scheme from that scheme 90% is invested in equity shares then it's an equity oriented mutual fund or I give to mutual funds of money right that mutual fund directly using 65% minimum at least for directly buying in equity shares if the directly buy Equity shares minimum 65% investing in equity shares then it's it's Equity oriented mutual fund suppose they did not buy shares directly they invested in another mutual fund 90% of this amount is invested in another mutual fund that mutual fund another mutual fund if they also invest 90% in equity shares then it's a equity oriented mutual fund that units if I'm having for them the criteria to decide whether it's a longterm or shortterm 12 months clear or not now okay I decided whe whether it's a longterm or shortterm now I understood now what is the tax rate suppose the tax rate is as below the tax rate is as below you know suppose if I am selling listed equity share remember not listed shares listed Equity not preference share if listed Equity shares units of equity oriented fund units of business trust if at all I am transferring listed Equity shares units of equity oriented mutual fund units of business trust and St is paid on transfer whereas for listed Equity shares EST is paid on buying as well as at the time of sale so when I purchase the equ I paid STD at the time of sale also I paid STD whereas for Equity oriented fund business no at the time at the time of purchase I may be pay or I may not be but at the time when I'm selling no I paid St if that is a case if at all it's a long-term capital ass a long-term capital asset then the gain is what long-term capit gain sir how to compute gain I will come back to it first let us understand the rate of tax so if there is a long-term capital gain on transfer of listed Equity shares provided at the time of purchase and the time of sale St paid on transfer of unit of equity oriented visual fund on transfer of unit of business trust St paid in both the cases then the long-term capital gain is taxable at 10% the tax rate is 10% only for the gain if it is exceeding one lakh means up to one lakh tax amount is zero remember entire capital gain is taxable suppose 2 lakhs is treated as income 2 lakhs is treated as longterm suppose I got 2 lakhs capital G entire 2 lakhs is treated as income in total income computation but while Computing tax on that the tax is leved only on the capital gain portion which is more than one lakh so since capital gain is 2 lakhs up to one lakh no tax right Beyond one lakh tax is only uh beond one L if you have a gain only on that amount tax is levied at 10% flat rate able to understand and you know what when you are Computing long-term capital gain under 112a when you are Computing long-term capital gain under 112a getting it indexation benefit is not available you cannot claim indexation sir what is indexation don't worry generally as per provision number two to section 48 whenever whenever the asset is a long-term capital asset the cost of acquisition while Computing capital gain indexation facility is there you if at all if at all you not able to remember don't worry I'll slowly come to that getting good next next so that's it suppose no suppose no if the sameet I am selling same listed equity share units of equity fored mutual funds or units of business I'm selling and St play at the time of transfer in all these cases but they are not longterm they are not longterm they are shortterm now shortterm capital G I got now what is a consequence straight away straight away Tri 1A will apply what is it Tri 1A will apply as for tri1 a short-term capital gain is taxable at 15% sir here also do we have one lakh exemption no only with a long-term capital gain Beyond one lakh the extra gain is taxable at 10% what is short-term capital gain short-term capital G even if it is 10,000 rupees flat 15% tax rate will apply whether the SS is a company whether the SS is an individual whether the SS is a partnership doesn't matter stri by 15% which is a concessional beneficial rate even with the long-term tax rate at 10% is a very beneficial rate which is a very good rate getting the point now suppose I am selling listed Equity shares I am selling units of equity oriented mutual fund and I'm selling units of business trust but where am I selling you know I am selling through a stock exchange where the stock exchange is located in International Financial Service Center where the stock exchange is located where IFC gift City Gujarat example so in that Stock Exchange I sold this and in that Stock Exchange EST itself do not apply it's a listed share but EST itself do not because it's an ifsc Zone it's something like a special economic zone so yes is not applicable on that particular Zone since I did not pay now tell me shortterm capital G is a tax normal rate remember for a company normal rate is 30% for a partnership fir normal rate is 30% for an LLP normal rate is 30% so that shortterm capital gain will it be tax 30% because yday is not paid no no no if at all you are selling in ifsc because of that STD is not applicable because of that estd is not because in ifsc Zone special economic zone St will not apply even then even if St is not paid on that short-term capital is a transfer still 15% benefit you can claim 15% tax rate concessional tax rate benefit you can get same way for longterm also if at all you sell a listed equity share units of business oriented fund sorry units of equity oriented mutual fund units of business trust in a special economic zone like ifsc International Financial Service Center in that case EST it is not applicable and you didn't pay still the capital gain is taxable at 10% exceeding 1 lakh rupee what clarity now what about remaining Capital assets what about remaining Capital assets very simple remaining Capital assets suppose no suppose no I am selling unlisted Securities I am selling unlisted Securities unlisted Securities getting it unlisted Securities means simply they are called as shares of closely held company you may call it as unlisted security or you may call it as shares of closely held company in income tax no they don't use the word closely company we are using it for benefit for our understanding closely H closely held company means it is a company in which public is not interested public is not substantially interested getting the point so it is not a widely held company it's a closely private limited company unlisted public company like that so if you're selling unlisted shares straight away tax rate is 20% if any capital gain you have got no long-term capital gain 20% suppose if the same unlisted Securities you are selling it's a shortterm normal rates if it is shortterm normal if it is longterm straight at 20% suppose the same unlisted Securities or shares non resident is selling or a foreign company selling for them the tax rate is just 10% but you know what they don't have indexation benefit they don't have indexation benefit for a resident and Ordinary People when we are selling unlisted security we can calculate capital gain using indexation methods all that and we just we have to make 20% tax rate on the you know capital gain since indexation is not there tax rate is high if indexation is there sorry if indexation is there tax rate is high 20% if indexation is not there capital gain will be higher tax rate is lower that is 10% suppose we are residents or non-residents whoever it is we are we are selling listed security we are selling listed security Now what is a tax rate so you have given an option what is the option compute capital gain without indexation don't take indexation benefit calculate capital gain and on that gain calculate 10% tax and see how much is the tax compute another method compute capital gain after availing indexation on that apply 20% tax and see the tax amount wherever tax amount is lesser that option you choose so when you're are selling listed Securities and zero coupon Bond when you're selling listed security and zero c bond you have an option so 10% without indexation 20% with with indexation any other assets 20% is the you know any other asset any other Capital asset we are selling longterm the tax rate is straight away 20% % on the long-term capital gain portion of course indexation facility is there I think remember whenever you are having a capital gain all the capital gains are taxable at Water special bills these capital gains are not having basic exemption limit exemption getting it so if you are an S having normal income and capital gains income keep capital gain separately only short-term capital gain taxable at normal rate that is normal income remaining 112 capital gain 112a capital gain Tri 1A capital gain they're all tax rates now I have basic exemption you know my normal incomes are very less suppose I'm a super senior citizen my basic exemption is finance and my normal income is just one lakh only throughout this entire year including short and capital G normal normal short and capital gain I have four lakhs basic exemption which I'm not using if you have unutilized basic exemption limit if you have unutilized basic exemption limit that unutilized basic exemption limit can be fast utilized for long-term capital gain tax at 20% set off long-term capital gain taxable at 20% that amount comes zero after setting up with basic exemption still you have unutilized basic exemption limit then set it off against short-term capital gain taxable at 15% if you still have the amount then set it off against 112 capital gain 112a capital gain which is taxable at 10% if at all you are having basic exemption limit free unutilized limit first use it for if at all you having long-term capital G taxable at 20 then use for that set off still exemption is limit is there then use it for 15% criteria still limit is there then use it for 10% criteria getting it then after set off still 10% gain is there Beyond one tax at 10% simple L getting it then and you know on special incomes like capital gains longterm shortterm Tri one year 112112 the maximum sarg that is applicable is 15% we have seen this in introduction chapter also basic concepts getting it probably in revision I am uploading at first capital gains revision so slowly I'll upload pgbp revision all that maybe you know once I record all this I will merge all this and then upload it as a single video maybe initially initially I will be uploading each chapterwise like this I hope you are clear on rates of capital gain stocks once again frequently Within by the time we complete this revision many of times rates of capital gain stocks we will be discussing clear so by the way what are we discussing so we are discuss now we understood in capital gains we are having two types of capital gains so long-term shortterm how it is decided it depends upon the nature of the capital if I transfer long-term capital then the gain is long-term otherwise it's a shortterm so what is the long-term capital what is the short-term capital we discussed now how to tax long-term capital gain how to tax short-term capital gain so what is the tax rate we discussed now how to compute these capital gains non depreciable Assets Now let us understand so how to compute capital gains for non- depreciable assets you know uh there is a note there is a format for computation of capital Gams for non- depreciable assets you see here this is a format what is the format this is the format getting it that itself is given in this book so first see whenever how to compute capital G very simple I sold at some price so sale value minus I purchased it no acquisition cost is there no reduce it balance is what capital gain the same format is given but little bit detailed mode so you received consideration sale consideration keep that amount now here in capital gains no instead of calling it as sale consideration they are calling it as full value of consideration they are calling it as what full value of consideration received by you how much sometimes you receive consideration non-monetary plus monetary so in that case only monetary amount you putting how come you receive non monitary no that has a value no then put value so total consideration you receive what is it total value put that value so full value of consideration how much minus expenses incurred on transfer nothing but transfer selling expenses we call it as example brockerage that you reduce remember remember yes St paid just I told listed Equity if you sell no ST you paid so that St paid can I take it as transfer expenses no so St paid is not R transfer expenditure so from the full value of consideration if you reduce transfer expenses you will get net sale consideration or you may call it a simply net consideration now from that reduce cost of acquisition reduce cost of improvement suppose you purchased this asset for some price know very simple very simple suppose no I purchased you know a particular house I purchased a house for 10 lakhs I sold this house during this year for 30 lakhs so what is the full value of consideration 30 lakhs minus what is the cost of acquisition let us assume there are no brocker and all transfer expenses 10 lakhs so what is the capital gain 20 lakhs very simple as simple as such suppose if this is a long-term capital asset this cost of acquisition indexation is available if this is a long-term capital asset the cost of acquisition is having indexation facility you know you know uh for long-term capital asset for long-term capital asset the cost of acquisition will be indexed cost of improvement will also be indexed so what is cost of acquisition what is cost of improvement suppose no I purchased a I purchased a house for 10 lakhs on that I spent 5 lakhs and constructed additional floor so I purchased it in 20034 I constructed additional floor in 20078 again I constructed third floor this is actually Gess one thereafter I constructed second floor thereafter I constructed third floor so this third floor is constructed in 1780 getting it finally in 22 23 year I sold this house for one CR so what is the full value of consideration one CR what is normally without IND let us see what is cost of acquisition you you acquired it for 10 lakhs how much improvement you spent I constructed second floor and third floor this is Improvement I did so which is 15 lakh so balance is what 75h capital gain now now actually know you purchased this house in when 20034 you are selling this in when 2022 23 the Gap is what more than 24 months what is this asset long-term capital asset if the asset is long-term what is this you have indexation facility cost of improvement can be indexed so cost of acquisition can be indexed cost of improvement can also be indexed so let us understand so one CR is full value of consideration Minus indexed cost of acquisition how to index so what is the cost of acquisition 10 lakh getting it multiplied by C of year of transfer in our example 2223 is the year of transfer so cost cost inflation index of year of transfer numerator divided by cost inflation index of the year in which in which yeset is first held by the S so denominator is what cost inflation index number you have to keep for which year for the first time when you become the owner for that year you should keep index number able to understand so now so we purchased it in 20034 right in exam they'll give you what is index number for 34 year what is index number for 2223 if the transfer year is 23 24 what is index number for that year so for year of transfer for all the years whatever they use in that problem they'll give you index number you should pick the right index number getting the point so in this example indexed cost of acquisition is equal to 10 lakh MTI by 2223 index number divided by 234 index number suppose no you purchased this asset before 14201 suppose you purchase this asset before 14201 denominator is only from 0102 index numbers were given only from 20012 onwards because 20012 is the base year so for base year index number is 100 able to understand so for 2223 index number is 331 for 23 24 index number is 348 so these index numbers will be notified by the cbdd itself don't worry you need not remember index numbers all that in the book also we have given index numbers clearly so getting it now so indexed cost of acquisition what is the formula you see here what is the formula so what is actual cost of acquisition identify CIA cost inflation index for the year for the year in which asset is transferred so what is the year in which you transfer the asset for that what the index number what is the year in which you first purchased this asset or 142000 or 20012 whichever is later suppose you purchase in 20034 then 20034 number you purchase this in 95 96 then 20012 number because 20012 itself is the Bas from which indexation is available so denominator can be least amount least number in the denominator is 100 that's the least number less than 100 is not there in the denominator able to understand so like this if you compute know you will get cost of acquisition indexed cost now what do you mean by cost of acquisition you know the cost of acquisition is discussed under Section the meaning of cost of acquisition is given under 45 and 40 49 sorry 55 and 49 the definition for cost of acquisition is given under 55 and further discussion on the cost of acquisition is given under 49 now so how to uh you know like like what is 55 what is 49 what 55 says sir as per Section 5 what is cost of acquisition actual cost actual cost suppose suppose if at all you acquire the asset if at all you acquire the asset on or before 14201 then cost of acquisition shall be actual cost or FMB on 14201 whichever is higher actually the section says at the option of the S suppose no actual cost is 10 lakh I purchased the asset in 959 9596 for 10 lakhs I purchased a land in 95 96 for 10 lakhs market value on 1421 was 30 lakhs now I sold this land in 22 23 for some 1 CR now minus what is cost of acquisition since I purchased this before 14201 there's an option given to me actual cost you take or market value on 1421 whichever is optional whatever you want to choose you choose that suppose 10 lakhs is actual 30 lakhs is there which one I will choose 30 lakhs I choose why if the cost is high my capital gain will be lesser then my tax amount will be lesser so that value I will choose so actual cost or fair market value on 14201 at the option of the S so simply which one I will choose whichever is higher that value I will choose as cost of acquisition suppose no you purchased this you purchased this particular you know building somewhere in 92 93 1992 93 then after in 95 96 you constructed additional for then after in 9899 you constructed another additional for so cost of improvement is also there the section 55 clearly says any cost of improvement before 1st April 2001 what is it any cost of improvement before 1st April 2001 shall be ignored any cost of improvement before 1st April 2001 shall be ignored so getting the point so what is cost of acquisition generally how much of amount you paid suppose if you purchase this Capital asset before 14201 then cost of acquisition is actual cost you paid you know when you purchase or market value on 14201 whichever is higher any Improvement you spent before 1421 ignore suppose you spent Improvement on that asset before you sell this asset you did some improvement instument capital expenditure you spend on that whatever Improvement you you know in whatever the year in which you spend Improvement that much you can claim deduction if it is long-term indexation can also be caed so index indexed cost of improvement what what's the formula what is the cost of improvement which cost of improvement on or after 1st April 2001 only that will be considered that cost of improvement multiplied by CII of year of transfer when you sell up to that up to the year of transfer you have indexation facility CII of year of improvement CIA of year of improvement so when the Improvement happen so that year number numerator when you transferred that year index number so which means up to year of transfer inflation benefit is given so your cost can be inflated using index numbers that inflated cost can be reduced from the capital gains this indexation benefit is only for longterm not shortterm if it is shortterm what is cost of acquisition at what price I aced reduce it at what price I improved reduce it balance is the short-term capital G for a long-term capital asset only we have indexation facility and remember indexation facility is not available for the following long-term capital asset so bonds debentures we don't have indexation even for 112 year long-term capital indexation is not available so indexation is not available for bonds and debentures for 112a Capital asset indexation is not available indexation is not available for non-residents on transfer of unlisted Securities non-resident is selling some unlisted you know shares or Securities for him also indexation is not available St 10% tax rate on the capital gain so 20 lakhs is sale price you purchase it for 10 lakhs 10 lakhs is profit 10% tax rate for the non-resident for bonds and debentures also indexation is not available however Capital indexed bonds sovereign gold bonds getting it capital indexed bonds sovereign gold bonds they are eligible for getting indexation benefit zero cpon Bond No indexation benefit then your s past one hour we are revising still not yet over now you know sometimes no sometimes I did not purchase the capital asset my ancestor my father purchased the capital asset or I got a Landon building from my father my father got the same Landon building he didn't purchase he got it from my grandfather getting the point now tell me suppose you know you know I I today I sold one Landon building I sold one Landon building for 20 crew I sold one land Bing for 20 CR at what price you purchase cost ofis well I paid zero nothing I did not pay anything because I got it as an inheritance from my father so what is the cost of acquisition zero wrong there is a section called 49 subsection one what is cost of acquisition in certain special modes of acquisition what is cost of acquisition under special modes of acquisition under 49 subsection one they have given certain modes any Capital asset if I am getting as a gift will inheritance succession getting the point gift will inheritance succession any Capital asset if I receive under these methods getting it so previous owner holding period will also be considered whether an asset is a longterm or shortterm how to decide generally when I purchase when I sold I already told if the Gap is more than 12 months more than 24 months more than 36 months it's a long term otherwise it's a short term sometimes not from acquisition date when I acquire this asset not from date we consider duration we consider the duration from previous owner purchase date previous asset purchase date getting the point so the two clause 42 a no which Define shortterm Capital it has given certain cases where for determining the capital asset nature previous one or holding period will also be considered previous asset holding period will also be considered like what are they very simple so I'll directly open that text I'll directly open the text you know this you ignore 49 plus one yes suppose no you are you actually sold one land and building you how you got this land you know you sold it now but before you sell you got this land no how you got you got it on distribution of assets by HF in Partition you are actually a member of the family HF HF got partitioned on partition you received an asset or you got it as a gift or will or you got it under succession or inheritance or you got it because of the distribution of asset on liquidation company liquidated and they distributed the asset and you now you received the asset that asset you are selling subsequently or or you got it as a you got it from a trust getting it to the trust somebody given that asset now or or you are a holding company having 100% shares in one particular company so you are holding company of a company which is 100% subsidary so from that subsidary you acquired this asset or you are a subsidary company you acquired this asset from holding company in both the cases the REI the recipient transferring must be Indian company or you are an Amalgamated company suppose Syndicate Bank Amalgamated with can bank so Syndicate bank is closed can bank has received all the assets and liabilities of Syndicate bank now can Bank sold one of the land so from when holding period we will consider you know from when we consider holding period you know when The Syndicate Bank originally purchased from that date we consider holding period previous owner holding period will be considered what are all the cases where previous owner holding period will be considered the if the capital asset is received under gift will inheritance succession getting it if the capital ass is received on partition of HF if the capital asset is received by a holding company from 100% subsidiary company or if a capital asset is received by a 100% subsidiary from holding company provided in these two cases recipient transfering must to be Indian company or if a capital asset is received by Amalgamated company from amalgamating company because of amalgamation in a scheme of amalgamation provided the recipient Amalgamated companies and Indian company or if a capital asset is received by a demerged sorry if a capital is received by resulting company from the demerged company in a scheme of demerger provided resulting compan an Indian company if any Equity Shares are if any Equity Shares are received on conversion of preference shares if any Equity Shares are if any shares and securities or debentures are received on account of conversion of debentures and deposit certificates in all these cases what happened you know somebody purchased and I got it or I purchased one asset that asset converted into another asset that new asset I sold now whether the asset which I sold what is the holding period of this asset from which date I should consider from the date when I held this asset or from the date when the previous owner purchased this or from the date when the previous asset I purchased from the previous owner holding per the previous owner holding period previous asset holding period both will be considered very simple very simple simple suppose I a shareholder in Syndicate Bank I'm actually a shareholder in Syndicate Bank in 2003 2004 I purchased Syndicate Bank shares and I'm not selling it at all in 2022 23 The Syndicate bank is closed caner bank has purchased this entire Bank assets and liabilities now what happened I'm having shares no the shares were canceled for me can Bank shares were given when they gave 20 to 23 years they gave I sold it in 23 24 immediately now what is the holding period from 20 to 20 from 2223 in which I got this can Bank shares till 2324 the Gap is less than 12 months no from the date when you purchase Syndicate shares no from that date you consider holding period from which date previous yeset holding period will also be considered so earlier you are having shares in Syndicate Bank no 20034 to 2022 23 so that entire holding period will also be considered as holding period of can shares for how long you're holding canar shares you can confidently tell that I'm holding it from 20034 hey you're holding it Syndicate Bank shes no yes that company got Amalgamated with that company got Amalgamated with k bank so it's an amalgamating company I'm a shareholder of amalgamating company receiving shares of Amalgamated company in a scheme of amalgamation in Le of shares cancelled in amalgamating company able to understand same way demg also so in all these cases previous owner previous asset holding period will be considered now what is cost of acquisition can Bank shares I sold for some 10 lakhs what is the cost I did not purchase canar shares but you purchase Syndicate shares now so at the time you paid some money now H so the cost of acquisition in all these cases these are all covered under 491 492b 492c like that there are multiple sections with there in all these cases the summary is very simple you got this asset from previous one you got this asset because you are having another asset previously that asset is converted into this asset so whether you got it from previous owner or you bought it in you got it as a conversion of previous asset to current asset now this asset you sold subsequently is it a longterm or shortterm previous owner holding period you consider previous asset holding period you consider this is what the logic is able to understand getting it so so now what is the cost of acquisition of these assets cost of acquisition is nothing but cost of cost to the previous one or cost of the previous asset whatever previous asset is there suppose I purchase no Syndicate Bank shares for 10 LHS the shares were cancelled Canada Bank shares allotted now I sold Canada Bank shares for 20 L what is the cost of acquisition cost of acquisition of Syndicate B shs amalgamating company sh that's it able to understand so now on this cost of acquisition I already made a video on the YouTube getting you just type c cost of acquisition you will get exclusive video for more than one one and half hour is there so we purely talking about cost of acquisition Point getting it so you watch it you will understand better so in all these cases cost of acquisition means cost to previous own suppose previous owner purchased the asset before 142 2001 what previous owner purchased the asset before 14201 then what is the cost of acquisition previous owner purchased at some price no actual cost compare it with 1421 market value whichever is higher that itself is cost of acquisition in the hands of the current own so what is cost of acquisition you know suppose I purchased the asset before 14201 purchase price compared with market value on 14201 whichever is higher suppose previous owner purchased the asset before 14201 what is actual cost what is 1421 market value whichever is higher suppose you you or previous one whoever it is you purchased it the asset is purchased after 1421 then purchase price only the cost of acquisition if it is a long-term index it how to index it multiplied with CIA of year of transfer number divided by CIA of year of first held so when you held the asset for the first time so from that year now there is a bomb cour judgment which says suppose example my father no he purchased an immobile property in 20045 I inherited in 2022 20 23 immediately I sold it in 2023 2024 to buy some new model very modern house get it to buy that I sold This Old House in 23 24 now when my father gave me 2223 when I sold 23 24 the Gap is less than 21 can I call it a shortterm capital wrong previous owner holding period 45 to 22 23 almost 9 years is there count this also now you're holding one year plus 9 year totally 10 years is the holding period more than 24 months it's a long-term capital asset now it's a long-term capital asset right yes or no what is the cost my father purchased it at 10 lakhs so cost of acquisition is cost to previous one 10 lakhs now C of 223 24 348 is the number divided by when I first held this I said 2223 so 2223 number only you should put CIA number but you know there's a Bombay high court judgment Mula jha case what happened there you know of course in income tax there's a denominator inflation number of First held by the SS inflation number of asset first held by the S this is what they used getting the point so in income tax they used denominator first held which means in this example when the asset was first held 2223 previous year is the year in which the asset is first held but tell me whether this is a longterm or shortterm from which year we are counting from 2004 onwards we are counting which means in my hands whether this is a longterm or shortterm you are considering from 45 no holding period you are saying that I am holding this asset from 45 which is not previous own is holding but are treating that I only holding no so now why can't I claim 2 45 index number here so that my cost will increase so that my capital gain will decrease Bombay High Court agreed that Bombay High Court said yes correct for determining whether it's a longterm or shortterm previous one or holding period you are considering no you are saying that SS is deemed to be held SSE is deemed to be holding the property from 20034 you are saying that so why can't you give indexation from 20034 beneficial no so on that benefit 2003 four index number can also be taken alternative on but in exam always keep denominator first when you acquire this asset in your control that year number only you put denominator but alternate answer bomb judgment when previous one are purchased denominator that number see if the denominator is old number smaller number indexed cost will be higher if indexed cost is higher consideration minus higher cost is equal to capital gains will be lower that's a benefit are you clear so now so now we understood about cost of acquisition point now if at all you are transferring long-term capital asset if at all you are transferring long-term capital asset which is referred under 112 year remember 112 year long-term capital asset suppose if at all you are transferring this long-term capital refund 12a and you know what you purchased this before 1 February 2018 you purchased when before first February 2018 then what is cost of acquisition cost of is cost of acquisition or a B cost of acquisition just a minute cost of acquisition or B B what B point is saying fair market value on fair market value on 31st January 2018 or full value of consideration on transfer of those shes whichever is lower so identify this lower value compare it with cost suppose if these Shares are acquired no before 14201 then market value on 14201 you take it actual cost you take it among these two whichever is higher you take it so you get some value getting it here you are having some value among these two whichever is higher not understood very simple suppose I purchased one listed company shares Tata consultancy Services these company shares I purchased in 1998 99 you know 100 rupees I purchased fair market value on 14201 Fair market value on 142,000 is 1 is 500 now these tataa company shares no these T company shares no I sold for 5,000 rupees in when you know 2023 24 by the way when I purchased the shares before 14201 now very recently in the finance act 20 2018 they added one more project suppose if at all you purchased any shares before 1 February 2018 by the way this is a longterm yes only for longterm this logic we have to apply if the if the equity shes which you sold for 5,000 rupees now if is a long-term capital asset and these shares you acquired before 1 1 February 2018 then what is the cost of acquisition cost of acquisition is find out cost of acquisition using normal Provisions normal Provisions means what actual cost is equal to 100 rupees and since you purchased this before 14201 then 14201 market value will apply no 500 rupees whichever is higher is equal to how much 500 rupees compare this with compare this value with compare this value with fair market value on you know 31st January 2018 is equal to 3,000 let us assume and you sold it for sale value is how much 5,000 you sold whichever is lower is equal to how much in this case in this case how much the result is 3,000 now cost of acquisition under normal provision cost of acquisition under beneficial provision whichever is higher 3,000 is treated as cost of acquisition so 5,000 is sale value 3,000 is cost cost only balance 2,000 is capital gain so this is a beneficial provision given for long-term capital asset referred under 112a for these shares if at all you acquired before 1st February 2018 now you are selling it and it's a long term then find out cost of acquisition under normal provision compare it with beneficial provision what is beneficial provision fair market value on 31st January 2018 or actually at what price you sold now compared with these two lower that amount compared with cost of acquisition under normal provision whichever is higher that cost you take why this benefit is given I have explained in cost of acquisition video it's a regular video which I uploaded on my YouTube channel exclusively this point I covered for half an hour getting it so this point this point is what you know covered here this point is what I'm covering it here this is what so what is the long what is the cost of acquisition the cost of acquisition in relation to long-term capital asset being equ unit of equity oriented fund or unit of business trust the cost of acquisition is cost of acquisition of such what is cost of acquisition generally actual cost or if the asset is acquired before 14201 then FMB or actual cost whichever is higher so that value you compute compare it with FMV of that asset on which date 31st January 2018 FBC received on that so in our example FMV is what 2,000 3,000 fvc is what 5,000 whereas original cost purchased in 1998 is for 100 rupees fair market value on 14 500 so this will come 500 500 between these two lower means 3,000 so 500 or 3,000 whichever is higher means 3,000 getting it so listen to this video in the past 10 minutes you listen to it once again you will get clarity so in fact I clearly give explanation on one specific video you just type it in the YouTube CA cost of acquisition video you will find it so that's cost of acquisition we understood so now you see we are understanding capital gains computation so how to compute capital gains on non depreciable assets how to compute capital gains on non depreciable assets we are understanding how to compute capital gains on non- depreciable assets so what is full value of consideration first identify consideration from that eliminate transfer expenses from that reduce cost of what is cost of acquisition generally if I purchase theet I selling it cost of acquisition means purchase price if I purchase before 14201 actual price or fair market value at 1421 whichever is higher suppose if these are listed shares which are referred under 112a and I purchased them before 1 February 2018 then cost of acquisition means identify cost normal normal means what actual cost or if I purchase them before 14201 then FMV on 1421 whichever is higher that is cost of acquisition under normal provision then look at beneficial provision what is beneficial provision market value on 31st January 2018 amount at which you actually sold full value whichever is loyer that amount you compare with normal provision P whichever is higher that much you take why this entire logic has been constructed what is the logic behind this I clearly explain in my regular video of one hour which I uploaded on YouTube so just type CR space cost of acquisition you will find a video then cost of improvement so if it is a long-term Improvement cost can be indexed so if at all any Improvement expend is incurred by you or incurred by previous one whoever it is before 14201 zero so if any Improvement is spent before 1421 zero now how to index it CIA of the Year transfer year number denominator whenever Improvement took place that Improvement suppose if previous owner spent Improvement in 20034 then 20034 number if you spent some improvement in 20178 then then that improvement improvement number one by previous one Improvement number two by you Improvement number three by you so in all the three improvements you can if it is longterm in all the three indexation is available very simple so if you reduce that you will get long-term capital gain suppose if at all it is not a longterm then only direct cost direct acquisition cost direct Improvement cost you reduce no indexation then the gain you get is shortterm capital gain able to understand so you know uh all these you know all these so whatever I have told right now in the past you know half an hour to 1 hour whatever I covered almost I covered one 1 hour 20 minutes till now getting it so all the provisions I have covered here still another one hour will take for covering this capital gains revision for covering this capital gains revision so I I am slowly I'm slowly you know explaining you all the things so revision ma capital gains revision so it's not that easy it's not that easy to revise the topic is easy provided you are clear you are you are having Clarity on this so remaining Provisions no I will be discussing in the next you know I will be continuing in the reminding getting it so in the part one revision capital gains we are in the discussion of cost of acquisition where we have completed predominantly many topics so still we are left with cost of acquisition in certain cases and uh we need to discuss 45 Series where capital gains is taxable not in the year of transfer but in some other year slum sale we need to discuss and what is 50c one of the important provision in case of immovable properties so that we need to discuss and exemptions capital g account scheme extension of time limit if these items are discussed predominantly I can say 80% of the topics in the capital gains we have covered okay now so what is cost of acquisition in certain special cases Distribution on account of liquidation now you see see when a company distributed any assets on liquidation there's a section called 46 what that section says is if a company on account of liquidation Distributing any assets not cash Distributing assets transferring physical assets to the shareholders directly generally this happens in closely held companies getting it so if a company distribute any asset on account of liquidation it amounts to transfer but company is not liable to pay any tax on that particular transfer instead shareholders has to pay tax on transfer made by the company how shareholders are Redeeming the shares whatever the sh they are having they're redeeming with the company in return they are they're canceling the shares they're relinquishing the right in the company yes or no so they're canceling the shares and getting the consideration from the company in the form of assets getting the point now how to compute capital gains in the hands of shareholder on liquidation section 46 clearly says it is taxable for shareholder only not for the company so full value of consideration is nothing but fair market value of assets distributed minus deemed dividend under Section 2 plus 2 Clause 22 sub Clause C getting it so for shareholder full value of consideration is fair market value of assets on distribution date minus deemed dividend under Section 2 subsection 202 CL C so that is full value of consideration Minus cost of acquisition is what in the hands of shareholder he purchased shares now ah that cost of acquisition if it is uh if it is longterm then index it so indexed cost of acquisition that you reduce so final amount whatever you get is C called as either long-term capital gain or short-term capital gain long-term capital loss or short-term capital loss that's it now now remember now shares uh company liquidated so the shareholders have received some asset market value of the asset minus de dividend that itself is considered as capital receipt Capital consideration for that cost of acquisition is this much so balance is taxable as capital L right now I am holding this asset in my hand right now because company liquidated and they distributed me this asset I am subsequently selling to somebody else suppose uh you know when when company got liquidated I'm one of the shareholder I received 10 lakhs worth of market value of the asset in my hand de dividend considered by the company was 2 lakh so total consideration was 8 lakhs this is what considered for the purpose of capital gain taxation Minus cost of acquisition let us assume 4 lakh so I made a profit totally 4 lakh because of the liquidation and I got yeset distributed fine now this asset no which which I got market value of the asset which 10 lakhs which I got no I subsequently sold this asset to somebody else I sold it for some consideration of 25 lakhs I sold after some five years or six years I sold these assets for 25 lakhs now what is cost of acquisition this is question the cost of acquisition is fair market value of the asset distributed on the date of distribution now I got this asset how did I purchase this asset no this asset is something company distributed me at the time I already paid Capital tax remember so the asset which is distributed to me that asset market value is treated as cost of acquisition so 10 lakhs is the market value rate when the company distributed me H that is consider cost of acquisition now I sold this for 25 so balance is capital gain or loss whatever it is now here here you see now whatever asset company distributed me right that I am selling it right now is it a longterm or shortterm from which date you will consider you will consider this tenure from the date company acquired from which date from the date company acquired anyhow that is not a very big important provision also so until now you can understand are you clear next next so that is uh that is one provision so this this I completed now so this we completed now what is cost of acquisition of the asset which you received as gift if at all a shareholder received any sorry if at all any s received any asset as gift no and that gift which suppose very simple my friend gifted me land okay on some occasion he gifted me this land I am subsequently selling I'm selling it to somebody else subsequently what is the cost of acquisition what is the cost this is a provision where many will confuse now first of all you received gift no you received gift no so in the year in which you received gift no at the time is it liable for gift taxation check out is the gift received is the gift received taxable at the time of gift check out yes 56 under 56 subsection to Clause 10 or earlier we have something called Clause number seven some amount is taxed already when you received this gift then this gift if you subsequently sell it the cost of acquisition is different suppose you received gift no at the time when you received the gift it is exempt for you at the time when you received this gift no nothing is taxable you just received it as a gift nothing is taxable now you sold it now what is cost of acquisition getting it simple you received gift ma getting it you received a gift I'll just move it so you received the gift now the point is is the gift taxable under 56 subsection to class number 10 when you receive if the answer is yes how much is taxed identify now suppose the gift is Exempted when you received getting it now in these two cases subsequently what happened is this gift you sold to somebody at 25 lakh I sold this gift UL to somebody else I received gift and I sold it now what is cost of acquisition now when you received the gift no at the time it is Exempted let us assume you received this gift on the occasion of marriage let us assume you received the gift from relative let us assume you received this gift from trust or associational university some somebody getting the point Exempted now the cost of acquisition is 49 subsection one mode as per that cost to previous one so whoever gifted me know at what price he purchased that is cost of acquisition understood or not see you know when I received gift no on the date of gift on date of gift no on the date of gift no the market value is 10 lakh the market value is 10 lakh but the fellow know whoever gifted me at the time when I received this it is Exempted so 491 what it says cost to do previous owner not market value now previous owner purchased it for five lakhs only the one who gifted me he purchased it for 5 and gifted me so cost of acquisition is 5 lakh are you clear suppose when I received gift know some three years four years back I received gift on the occasion of something but it is not exempt whatever the gift I received not a relative not on the occas of marriage ex not an Exempted Source taxable Source now at the time when I received the gift entire market value is taxed entire market value is taxed under income from other sources because it is exceeding 50,000 Rupees now what is the cost of acquisition pay market value at the time of 56 subsection to Clause 10 taxation whatever market value is there no at the time of gift taxation that market value will be treated as cost of acquisition so now what is cost of acquisition 10 lakhs if you receive gift which is Exempted subsequently you sell this gift now Computing capital gains what is the cost of that gift you received it as a gift which is Exempted earlier getting it cost to previous 4 49 one you received a gift that is taxed under other sources under gift provision that gift you subsequently s what is the cost of acquisition 49 subsection 4 says the cost of acquisition is fair market value or the value that is considered for the purpose of calculation of income under 56 subsection to CL 10 the value of the gift that is considered for gift calculation under 56 subsection that is treated as cost of acquisition that's it so with this entire cost of acquisition non depreciable assets entire the discussion is completely over we understood what is capital we understood what is transfer we understood what are various you know depreciable asss how to compute capital G electricity company how to compute capital gains non debl how to compute capital gains Improvement means what acquisition means what all that issues we understood now we still have to understand special issues under capital gains what are the special issues first one 45 subsection 1 a 45 subsection one or you can also call it as Clause 1 let us call it as subsection because they are somehow related getting it so 45 subsection one is charging Section 1 a is exception to charging section nothing but generally capital gains is taxable when in the year in which you transport suppose no I have a very big you know some some some jewelry I have or let's assume you know some plant and missionary was there in my G suddenly fire accident happened complete plant and missionary was destroyed getting it completely it was destroyed now I received Insurance compensation and you know what the value of the missionary which which was destroyed the depreciable asset value block value just 10 lakh but I received insurance company compensation 25 lakh in spite I suffered a loss in spite there is a damage happened still I made a profit Department want to tax that profit that's why they brought a provision called 451 if you receive any compensation or on account of demolition destruction whatever reason getting it you are liable to pay Capital games but when not in the year in which it is destroyed but you will receive compensation within some one year or two years or three years something you receive compensation right at the end of the day somewhere in some Financial year in some previous year you will receive right in the year in which you received compensation in that year you have to pay capital gains on that particular asset which was destroyed now for the purpose of 451a what is full value of consideration whatever Compensation Insurance Company paid me money they paid me no money they paid asset only market value of the asset received getting the point minus what is cost of acquisition I the asset which was destroyed yes or no if it is a block of asset depreciable asset cost of acquisition means block value what is block value I've already told you value of the block yes or no so down value nothing but so what is the cost of asset we know so depreciable non depreciable assets cost of acquisition what is cost of acquisition you purchased then whatever the price you paid previous one you got it from previous one then cost to previous one so cost of acquisition provision is same if but it's longterm from which date you will consider longterm or shortterm from the date when you purchase or from the date when previous owner purchased from that date till from that date till the date of Destruction remember once the asset got destroyed the asset is no more so period of holding will be only up to year of Destruction year of transfer is year of Destruction indexation is available only up to year of Destruction able to understand but capital gains is taxable let us assume in 20 to 23 Financial year accident happened but insurance company paid me compensation in 2425 previous year capital gains we compute in 2425 year only we will not compute in 20 to 23 getting it but indexation facility year of transfer up to of transfer 20 to 23 only period of holding will be up to 20 to 23 only that's it that's what 451 says next 4tify subsection 2 what 4tify subsection 2 says it's nothing but it is talking about conversion of capital asset into stock interest rate Capital asset converted into stock in trade is also treated as transer now when capital gains will be computed not in the year of conversion year of transfer is year of conversion only the moment you convert you transfer the capital set by default but capital gains we will not tax immediately capital gains we will collect capital gains we will tax then you subsequently sell the stock in trade you will sell that item no in the form of stock and trade whenever you are selling at that time you will compute Capital GS H what is the full value of consideration how much whatever the price at which I sold at at that price will you tax it no very simple let's look at the calculation you know I purchased I purchased some land and building non- depreciable personal land and building I purchased it for 10 lakhs somewhere in 2004 2005 getting it now in 2021 22 I started real estate business getting it this Landon building I converted into my stock in I want to sell this Landon building I converted as on this date market value fair market value as on the date of conversion the fair market value of this particular Capital asset is let us assume one CR getting it one CR when I purchased it is 10 lakh when I converted it is one CR now in 23 24 Financial year or 2223 Financial year I sold it for 2 CR sudden rise in the real estate I sold it for 2 CR now what are the implications very simple you know in my business in my business so sale value in my business is what two gr minus what is the purchase price in my business my pgb income purchase price is market value on the rate of conversion the moment you convert that is cost of acquisition I mean that is purchase price for the business so what is the price at which you consider this a purchase price market value on the date of conversion so the moment you converted Capital into stock in trade it becomes a business asset it becomes a business purchase so at what price you will record in books of accounts as Purchase cost market value on the of conversion so one CR so one CR profit this is taxable under pgbp not only this now you see here now actually you purchased it for 10 lakhs but you are ultimately selling it for you purchased it for 10 lak you're timately selling it for 2 CR so 1.9 CR profit actually but here here we tax only 1 CR what about remaining 990 lakhs they are liable for capital G how now conversion happened when 2122 in this year this is year of transfer getting it period of holding period of holding just AE so period of holding will be considered up to conversion date indexation will be given up to conversion date now first of all to compute capital gains what is full value of consideration fair market value on date of conversion 1 CR Minus cost of acquisition as usual 10 lakh if it is indexation index it so balance is 90 LH now when you're indexing up to which year you will index yes it is sold in 2223 but conversion happened in 2122 indexation will be only up to year of conversion because that is only treated as year of transfer but taxability will be in the year in which stock in is ultimately sold so that's about uh this one subsection two now subsection five compulsory acquisition of capital asset by government if government has compulsorily aced any Capital asset what is a consequence very simple whenever asset is compulsorily acquired by the government that is zero of transfer but capital gain is not taxable in that year capital gain is taxable in the year in which you received the compensation getting the point in which you received the compensation suppose uh government no government compulsorily acquired my land so in 2122 my land has been acquired by the government compulsory acquisition by under compulsory acquisition act government acquired my land in 2122 but 20 22 23 only they paid me compensation of 25 lakh let us assume they paid me a compensation of 25 minus what is the cost of acquisition this land I only purchased not previous one let us assume so I purchased it for 5 lakh so that's it 5 lakh multiplied by indexation base the denominator is what when I purchased some four five year I purchased that index number you put now when when when I received compensation 22 23 I received no you transfer the land to government in 2122 so 2122 compulsory acquisition year that year that year index number only you should put so indexation is available only up to year of compulsory acquisition because it is only treated as year of transfer period of holding will be computed only up to year of acquisition date of acquisition compulsory acquisition are you getting the point no that's it now in this 45 subsection 5 many student are having doubt regarding final order interim order all that queries so what is that regarding I'll tell you now now you see here this this is important for McQ final order inter model 45 subsection 5 so my land is acquired by central government in 2122 right yes but I I but you know they have to pay me compensation in 2223 they have to pay me but it was not yet decided compensation how much how much to pay government not yet decided but what they did you know 10 lakh rupee amount they paid me through an interim order through an interim order they have paid me 10 lakh rupe Advance just immediately in 2122 somewhere in the March they compuls required somewhere in the April or May 2223 they paid me compensation some 10 lakhs Advance only that is not full compensation in 2324 they released final order they released a final order in this final order the compensation is fixed at 1.2 CR already 10 lakhs paid so 1.1 CR they have paid to my bank account in 23 24 ultimately now when the capital gains is taxable technically speaking the moment you receive even part of the original compensation in the year in which you received compensation that is taxable now if I want to tax in 22 23 itself I I got 10 lakhs right now can I compute capital gains you don't know what is the full consideration first of all remember as on this year you don't know how much is the consideration you received 10 lakhs as a token that's it what is the consideration you received full value of consideration to compute capital gain what is the consideration you received you must know right so so 10 lakhs Only You res as an advance ultimately in 23 24 only you came to know aha my consideration is 1.2 CR now tell me in this year consideration is 1.2 CR but you know this 1.1 CR government paid in 24 25 years let isum the 1.1 CR pending amount government paid in 24 25 year ultimately when the capital gain is taxable 23 24 only capital gain is taxable why sir we have not received fully no you received part of it already in 21 in in last 22 23 itself you already received part of it but we didn't tax no why you didn't why we didn't tax because we don't Know full consider is how much only through final order we came to know okay so once final order comes part of a consideration if it all already received whenever final order comes it is taxable suppose no I did not receive this 10 lakhs 2223 in 23 24 final order came 1.2 CR directly consideration I received in my hand only in 2425 then in 2425 capital gains is taxable if at all you receive compensation partly also whenever you receive compensation partly in that year itself full compensation whatever is there we will tax it if at all full compensation you don't know then we will wait until final order once final order comes in that year we will tax it whether you receive full compensation fully or not now in now what is cost of acquisition cost of acquisition is nothing but whatever cost of acquisition cost of improvement all that indexation everything you claim fine suppose after two years you filed a case against the government and you got additional compensation enhanced compensation you received enhanced compensation also that is also taxable in the year in which in the year in which it is ultimately received so if any enhanced compensation is received it is taxable in the year in which it is ultimately received clear now what is cost of acquisition or Improvement for enhanced compensation zero for enhanced compensation can I claim transfer expenses no however you can claim legal expenses to get this compensation so you reduce it balance amount is treated as you know balance amount is only treated as a longterm or shortterm as a case maybe if when you compute original compensation when you you got original compensation you competed capital G that time if it is longterm enhanced compensation also long gain whatever gain is there that is longterm are you clear see I'm not going in depth because this is not the time to go in depth you must know all this I'm just making you to recollect all the concepts this is a recollection this is a revision for recollecting everything getting it then sometimes along with compensation or enhanced compensation you will also receive interest because government is paying you late that interest is taxable under other sources flat % deduction is there next next so 45 subsection 5 is also completed now 455a 455a 455a is regarding specified agreement cases what is it specified agreement very simple you are having a very big land you are having a very big land so let us look at this example so you'll understand very simple okay there on this there is no problem you having a very big land so one Builder approached you so he told he will construct a very big building like this two buildings he will construct on this land land is yours only okay but the investment on this land two buildings no building one building two like this a builder will come and construct everything once everything is over once completion certificate comes what Builder told is entire building to plus land put together you only keep it now this building and this land portion I will take it so you are the owner of the land fully first of all entire land you are only owner but after after I constructed two buildings one building I gave it to you in return what you did you gave me land in return what you did you gave me the land portion so this land is not mine 50% but building is mine only so that you gave me in in return what I gave you I gave you one building earlier your is an empty land fully half the land you gave me remaining half the land I constructed building and gave it to you ah this is coming under 45 subsection 5 a what the section says if a land owner entered into a specified agreement with a builder getting it and the Builder has constructed a building getting it only on receiving completion certificate you know you are getting consideration you transferred land indirectly here 50% of the land you transfer actually speaking in the name of the Builder but in return what you got you got a building you got a share in the project yes or no share in the development project so this is a real estate development project in this you got 50% share in back getting it now now uh suppose this project started in 212 you hand over the land in 2122 or 2021 you hand over the land that time itself but at that time we will not we will not tax it at that time we will not tax capital gains when we will tax the completion certificate was issued in 2223 Financial year in this previous year completion certificate is issued in this year completion certificate is issued when 2223 so now once completion certificate is issued at that time for you capital G will apply now what is the consideration you received consideration is nothing but stamp Duty value of project value you received whatever the St Duty value of the project that you received not building the St Duty value that value on date of on date of completion certificate so that will be the full value of cons Minus cost of acquisition is what now earlier you having you are the owner of 100% of the land now 50% you transferred so whatever that 50% land you transferred no that cost only you should reduce because that 50% land you transferred on the balance that you got a building very simple simple example I'm telling you so that cost of acquisition you claim so balance will be the capital gains are you clear now this entire capital gains 45 5 what it says this is taxable in the year in which completion certificate is obtained now what is the full value of consideration stamp Duty value on the date of completion certificate plus if at all Builder pay you extra cash also that also you will add so both together is called as consideration received by you because of the transfer of land are you getting it suppose no before completion certificate issued by the local Authority before that itself you sold the share in the project see what are you getting what Builder promised dear dear so land owner out of your land give me your land I will construct to buildings 50% of the land Building I'll give it to you back 50% I will keep it this is the agreement now completion certificate is coming in 2223 but in 2122 itself the owner land owner he sold this his 50% share to somebody else at that time 45 5 will not apply getting the point 455a will apply only if the land owner keeps his ownership in the project on the date of completion certificate on the date of completion certificate still you are the owner only you did not transfer to anybody you are you you you you waited for Real Estate share project so that time this logic will apply that's it now fine right everything now now you understood right subsequently know 20 to 23 year completion certificate is issued at the time still in the particular land 50% of land and building I'm only keeping it with myself so stamp Duty of the building whatever on the completion certificate whatever I received that is consideration plus cash amount minus 50% of the land I transfer no so what is the cost of acquisition of 50% of the land which I transferred so that I reduced so balance is the capital gains fine very good now you know what happened in 2425 year in 2425 this whatever 50% of the land and building which I'm having in that project I sold to somebody I sold it for five CR now what is the cost of acquisition of that 50% you know Pro whatever what is that what is cost of acquisition that is nothing but the cost of Equis nothing but Stam Duty value on the share of project Stam Duty value in the project stamp Duty value of your share whatever is considered for 45 subsection 5A for 45 5 taxation whatever stamp Duty value that is considered no that itself is treated as cost of acquisition are you clear that's it so with this another special issue is also over which is 45 subsection 5A next slum slum sale means very simple suppose you started some business some 3 four years completed or five years completed the business has got really very good value you created lot of value now somehow you want to retire very simple you you can sell your business as it is business itself you are selling you are not selling any asset in the business you're not selling any car you're not selling any bad building of the business you are selling business itself to somebody sale of an undertaking getting the point or a unit or a division in an organization getting it you are selling that organization itself unit itself to somebody business itself to somebody so that is called slump sale lump Su sale now in slump sale how to compute capital gains how to compute capital gains in slump sale getting it what is full value of consideration nothing but full value of consideration of all the assets you transferred are full value of consideration of full value of consideration sorry fair market value of the assets transferred or fair market value of consideration rece received whichever is higher suppose no I'm transferring the business to somebody right transferring business means what I'm transferring all my assets and liabilities everything so what is the market value of the assets I transferred one group since I transferred this business I got something else the other person paid me cash or the other person paid me some land what is the market value of the consideration which I received some 1.2 grow so for slump sale what is the full value of consideration 1 CR or 1.2 whichever is 1.2 CR minus what is cost of acquisition and cost of improvement nothing but net worth of the undertaking whatever business I transferred right that business net worth value is there know that itself is treated as cost of acquisition and cost of improvement no indexation nothing getting it now how to calculate this netw worth assets minus outside liabilities getting it now assets what are they non- depreciable assets whatever balance sheet value nothing but Book value depreciable assets block values depreciable assets block value as per section section 43 subsection 6 getting it so block values we will take getting it minus outstanding liabilities outside liabilities you reduce it so you will have net worth calculation so that net worth will be treated as cost of acquisition let's assume net worth is 80 lakhs so balance 40 lakhs is treated as capital me now is this longterm or shortterm if you started this business 3 years back more than 36 months then it's a longterm if the business started so in so dat you started now you're are selling this business right if the Gap is less than 36 months then it's a uh up to 36 months if the Gap is up to 36 months then it's a shortterm then accordingly capital gain will be a short-term capital gain so what is the criteria for slump sale 36 months is a criteria to decide whether it's a longterm or shortterm why you need this criteria in order to decide rate of tax if it is a longterm flat 20% is the rate of tax if it's a shortterm normal rates of tax not Tri one year Tri 1 year is for shares ma not for slum at all but Clarity 50b is over 50b is over getting it so special issues over this is over 50b is also over now full value of consideration in case of immovable property generally if you sell immovable property what is the consideration at what price you selling check out compare that with Stam Duty value compare that price with Stam Duty value now suppose for for immovable property whenever you sell so whenever you sell any immovable property what is the full value of consideration actual consideration received or Stam Duty value whichever is higher provided provided there is one condition here no generally actual consideration suppose if Stam Duty value is more than 110% of consideration suppose if Stam Duty value is more than 11% of consideration then Stam Duty value if actual consideration if the very simple let us let us take one example suppose I sold I sold I sold it for 95 lakhs Stam Duty value is 120 lakh St value is what 120 lakh okay but I sold it for 95 LH just a minute Mar emergency call yeah sorry so I sold a land okay uh some land and building I sold it for 95 I received 95 but you know St Duty value was 120 now is 120 more than 10% of uh is a Stam Duty value more than 110% of actual consideration actual 95 right 95 + 10% 110% is 104 Stam Duty value is more than 110% of actual which means Stam Duty value 120 will be the consideration suppose no Stam Duty value is 97 LH whereas actual consideration is 95 now 95 into 110 110% is 104 getting it so if stand Duty value is greater than 110% of actual consideration then stand value otherwise actual only nothing but indirectly what the loss is is if a t St Duty value and actual cons the difference is more than 10% then take stab Duty value if the difference is not exceeding 10% up to 10% market rate and stab Duty value can vary in that case actual only we will consider if the St Duty value is more than 10% of the actual consideration then St Duty value only we will take now Stam Duty value means which Stam Duty value on the date of registration on the date of registration or on the date of agreement on which date you should take you should check the St Duty value registration date St Duty value or agreement date generally registration suppose you received some Advan amount before you sell the land you received some token amount and you received it on or before on or before date of agreement so you you enter into agreement no so on or before date of agreement you received some token amount getting the point and that amount is received by other than cash electronic mode permitted electronic mode account paycheck account pay bankdraft or any other electronic mode youed then stamp Duty value on date of agreement will prevail not date of registration suppose you have not received Advance at all or you received advance in cash or you received Advance after the date of agreement then agreement dat St Duty value will not apply St Duty value means registration date only that's it so first identify which St Duty value apply in the case in exam they'll give you a question identify which stand value registration agreement fix registration agreement something you fix then that St Duty value compare with 110% of the actual consideration if this St Duty value is higher than 110% of the actual then stand Duty value will be the full value of consideration similar logic will apply for gift taxation also if you receive any immovable property as gift stamp Duty value you need to consider which stamp Duty value stamp Duty value on the date of registration the gift is received without consideration suppose if it is for inadequate means you paid some money then stability value agreement data registration data any of these two will apply as for the provision getting the point if as on the DAT of agreement some Advance is received and the advance is received by any more other than cash then value on the of agreement will apply so that STV compare with actual if it is more than 110% and the difference is more than 50,000 Rupees then gift provision will apply 56 subsection to class 10 that's a at this Speedy teach also you should understand if you if you're unable to recollect what you read that means you you have not studied properly so with this 50c is also completed that's it next exemptions under capital gain 54 54b 103 7 54 EC 54f 54d capital g account scheme and extension of time limit so what are all this now you see you know uh some full value of consideration some 10 CR Minus indexed cost of acquisition or cost of acquisition whatever as the case may be some 7 CR getting it so what is the capital gain long-term capital gain or short-term capital gain some 3 CR now this is how you compute the game so how to compute this consideration how to compute this cost everything is what discussing all these hours now here if you go and now you got gain right suppose you don't want to pay tax on this you have an option invest this amount what invest this amount invest it as per 54 series sections as for the rules given there you invest it getting it if you invest the amount as for the 54 series whatever the amount is applicable you need not pay tax on this that 3 CR will be exempt balance taxable gain will be zero what are the Investments so there is a section called 54b and 10 subsection 37 both are talking about Urban agricultural land suppose you transport Urban agricultur Land okay this land know before you transport two years you are only using it or your parents are using it the land Urban agriculture land which you transfer no you are using it before the date of transfer for two years for agricultural purpose whether it's a longterm or shortterm or doesn't matter what you transfer is urban agricultural land before transferring you're using it suppose no the land which you transport it is through compulsory acquisition by government because of compulsory acquisition the urban agricultural land which you are having government Acquired and before acquisition two years you are only using or your parents is using then government acquired no compulsory acquisition that is also a transfer capital gains will apply rate it is Exempted 10 subsection 37 says any compulsory acquisition of urban agricultural land which is used by the s or his parents or HF or his family for two years preceding the date of compulsory acquisition the capital gain or loss whatever comes is Exempted if it is loss ignore gain Exempted sir it is not compulsory acquisition sir I have an Urban Land sir which I'm using it from the past two years or more than two years sir and I sold it to my friend I sold it to my friend so full value of consideration is there I have got a profit of three cror sir it's not compulsory 1037 will not apply what should I do buy another agriculture land what is it buy another agricultural land sir should I buy Urban no need you can buy rural also so whether you buy Urban or doesn't matter buy within 2 years within two years from the date you sell the original land within another two years you buy another agricultur land enough whatever how much price you what is the profit you got three CR I have got a three CR rupees gain so buy with another three CR land that's it so capital gain is balance zero you should buy this amount this entire three CR should be invested in another agriculture land within two years from the of transfer of the original agricultural land which is for 10 CR clear so that is 54b now now there is a condition now you are buying a new agricultural land right yes or no by buying you know what you sold an asset you got a profit that profit if you invest in another asset same asset the The Profit whatever you got is Exempted from payment of tax so now there's a condition you purchase another land r that you should not sell it for three years lock in period is there this three years there is a lock in period for how many 3 years locking period what happens if you sell the asset once again within locking period whenever you sell at the time what you are selling is a capital asset rate Capital ass rate at the time when you sell no uh let's assume uh you you you I mean you transferred it in 2223 you purchased this in 23 24 2425 this 3 CR worth of land you're selling it for 5 CR now what is the cost of acquisition you purchased it for 3 CR no minus earlier when you purchased it for three CR capital gain 3 CR is Exempted now how much is Exempted three CR so from the cost earlier Exempted capital gain reduced Balance cost is zero so 5 CR Minus cost of acquisition 5 CR is taxable in that year suppose in this case 54b no you you you uh you sold for 10 CR you purchased for three CR right this three CR if it is a rural agricultural land this rural land you sold within lockin period capital gain competition itself will not come so if Rural agricultural land is purchased under 54b that rural land is transferred within lockin period ret taxability will not apply indirectly that's a loophole created why under 54b except 54 F 54 EC except these two sections in all other sections how if a new asset is sold within lockin period how ret taxation wordings they drafted they drafted wordings like on transfer of new asset within lockin period while Computing capital gains cost of acquisition shall be reduced by earlier Exempted capital gains this word they used which means if new asset when you when you transfer within lock in period if capital gains is applicable then only ret taxation will apply you clear I hope you should be able to recollecting this I'm just reminding you I actually I thought of not to cover this point but I'm covering suddenly it came in my mind so I covered it okay because some students may not know the difference exactly how to retx you know these items so 54f 54 e see ret taxation is different 54 54 54b 54d uh in these three sections ret taxation is different in 54 54b 54d if the new asset is sold within lockin period when the new asset is sold no which means that is also a transfer of capital asset no at the time you compete capital gains no at the time you will reduce cost of acquisition no cost of acquisition means what whatever the price of the new that amount you already claimed exemption so you reduce it balance only cost of acquisition you will claim so uh that's how ret taxing will apply I cannot give detailed explanation on this I can only give that in regular class okay already one and half or 1 hour 40 minutes first part is there now already 40 40 minutes is there right now until now getting it so more than 2 hour 15 minutes until another 15 to 20 minutes will take so that's 54b next so 54b over 1037 is also over 54 be over 1037 is also over now 54 what is 54 suppose you sold a residential house property you sold what residential house property which is a long-term capital set which is a long-term capital set this one this one and this one in these three section the original asset must be longterm the original asset must be longterm whereas in 54d 54b 1037 the asset can be either shortterm Capital asset the asset can be either longterm so only in only in 54 only in 54 54 e 54 the original which you are transferring must be a longterm so you transferred a long-term residential house property under 54 you transfer a house you computed capital gain you have got some 5 CR capital G if you want to claim exemption buy another house provided in 54 no what is the capital gain am first of all what is the capital gain suppose if the capital gain is exceeding two grow you can only buy one one house property one house property either you can buy or you can construct if if you want to buy two years from the rate of transfer of original house if you want to construct three years from the rate of transfer of original house so original house whatever you transfer no on that you got some 5 CR Capital gate if you want to claim exemption for this five CR invest that five CR in another house property if you want to acquire within two years you acquire if you want to construct within 3 years you construct if the capital gain is more than two CR suppose if the capital gain is less than 2 CR if the capital gain is less than 2 CR I'll just show you yeah suppose exemption if the amount of capital gain is more than 2 CR one residential house you can buy in India okay within purchase within two years after the of transfer or construct within 3 years if you want you can even purchase in advance like before you sell the house you purchased another house you shifted into that house and then you sold it so how much in advance you can purchase one year before the transfer only you can purchase suppose I sold I purchased a new house in 202 2021 and I sold my old house in 23 24 no no no this amount is not considered as investment suppose you s you purchased a new house in January 2022 and you sold your gold house in August 2022 means when you sell the Gap is one year in advance less than one year that is only considered as investment getting it or once you sell later on you purchase that is also considered as valid investment but remember only if you invest in one house only one house investment is considered as 54 investment getting it now or you can even purchase 2 years after the date of transfer or you can construct within 3 years from the DAT of transfer getting it suppose if the capital G amount is not exceeding 2 CR then if at all it is not exceeding see whether it is less than 2 CR or more than 2 CR one house if you buy whatever the value of the house you bought that is Exempted getting it but if the capital gain is below less than or equal to two you have another you have an option you can invest in two houses whatever the investment in these two houses together you can claim for exemption so either you can purchase or construct two residential houses getting it so if it is purchased within 2 years you should complete if it is construction within 3 years you should come that's it now whether it is more than 2 CR less than 2 CR doesn't matter you purchase new house right lock in period is 3 years if you transfer the new house or houses within lockin period capital G again will be applicable earlier given exemption whatever will be reduced from cost of acquisition while Computing capital gain on transfer of the new capital set then 54d not an important provision at C leave it 54 EC here what you're doing is you are transferring long-term capital set being land or building or both remember in 54 residential house property means compulsory it's a land and building or only building doesn't matter only land if you're selling 54 section will not apply 54 easy even if you sell a land the section is applicable or only building or both land and building it can be residential or non-residential doesn't matter it can be depreciable business related building also not an issue getting it but that asset must be longterm means for this particular immovable property you are the owner for more than 24 months simple logic now if at all you got any capital G on these land or building or both the capital gain amount you invest in bonds long-term specified bonds within six months only if you invest whatever amount you invest that much is Exempted provided maximum exemption cannot exceed 50 lakh rupe maximum exemption under 54 EC in respect of a particular transfer cannot exceed 50 lakh rupe next 54f here in 54f no original asset which you are transfering is any asset which is a long-term but not residential house getting it if you sell a land no vacant land that is eligible but if you're selling a residential house 54f is not open so if you sell any asset I sold or my business itself I sold to somebody under some I have got a capital gain now whatever the amount at which you sold sale consideration if you invest sale consideration in buying a new residential house capital gain is accepted see in all very simple I'll show you a simple calculation so you just remember this point 54 if again some students some students will do mistake if if they don't remember this point suppose no I cow my asset original asset for 10 CR Minus cost of acquisition is 8 CR okay my capital gain is long-term capital gain or shortterm 3 CR minus generally if it is 54 54b 54d 54 EC if I if I invest 3 CR 3 CR I can claim deduction so balance is zero but if it is 54 F no if you want to claim 3 CR exemption you should invest net consideration suppose no I invested 10 CR in the new house then 3 CR is Exempted suppose I invested 5 CR only in this example I invested only 5 CR to new house then out of three proportionate exemption three CR see if you invest entire net consideration entire net consideration if you invest three CR is exempt but you invested only 5 CR so 1.5 CR only Exempted nothing but the amount of exemption is equal to long-term capital gain multiplied by long-term capital gain multiplied by amount invested in the new house property divided by net consideration this is the formula generally how much is Exempted amount invested or long-term capital G whichever is lower but here exemption is equal to long-term capital G multiplied by amount invested divided by long-term cap uh net conservation so here in proportion to the net consideration 54f exemption will be calculated now under 54f and 54 e no in 54 e 5 years is a locking period whereas in 54 have again 3 years locking period if you sell the assets within the Locking period earlier given exemption is ret taxed separately it is ret taxed separately it is not reduced from the cost of acquisition no nothing it is ret taxed separately what is rxed separately what is reduced from cost ofis I am unable to recollect anything regarding this point ignore it which means you did not study these Provisions properly at all ignore it don't even think about it if at all you already studied by this time you will be recollecting the points which I'm saying next so that's 54 EC and 54f okay 54 not relevant capital gain account scheme what is capital gain account scheme I'll simply tell you under 54b if you want to invest in a house property you have a time limit of 2 years for purchase 3 years for uh construction under 54b agriculture if you want to purchase 2 years time limit you have under 54 EC to buy Bond 6 months for 54 EC capital g account scheme do not apply for 54 years to purchase house property 2 years time to construct three years time now you see in order to invest in new asset you have two years three years time limit like that but you know I sold the s in this year and I have got a game and I want to invest and I have a time limit but Department don't want to wait until the time you have to file it return no immediately in the next year itself assessment year at the time of it return you told the department that sir this three CR amount I will invest sir what is the proof that you will invest okay I'll give exemption you invest I'll give exemption sir but I have time limit of two three years how come I invest immediately okay don't invest immediately deposit the capital gain whatever the amount of exemption you want to claim the amount of exemption whatever you want to claim how much ever you should invest so that you can claim this much exemption whatever the amount you have to invest so that you can claim this exemption that amount deposit in a bank account called capital gain account scheme open a bank account in a nationalized bank with a name called capital gain account scheme in that you deposit show me that proof I will give you exemption at the time of filing it return itself if you don't deposit in capital gain account scheme within 139 subsection one due date I will not give you exemption at all but sir you may say sir I have time limit of 2 years three years to buy new asset okay man you buy new asset within two three years only but that amount no what is the proof that you invest in the new asset within 2 three years what is the proof deposit in capital gain account scheme separate special bank account you deposit find new claim exemption 54 years now you see in all these sections the new asset must be purchased within 2 years from the from the date of transfer 3 years from the date of transfer 6 months from the date of transfer like that everywhere the time limit is given from the date of transfer now 54 f is in case of compulsory acquisition of original asset my original is compuls acquired by the government but 21 20 19 20 the ass is acquired but I received compensation only in 20223 now capital gains I will compute in 2223 as for 45 subsection 5 I am Computing in 2223 by this time I want to buy house but two years time is over because government acquired in 1920 two years time is already over after the after exper of 2 years as for 54 whatever the section no I received compensation now how can I CL CL exemption under capital gain so 54h department is saying in case of compulsory acquisition of capital asset for the purpose of claiming exemption under 54 54b 54d 54 EC or 54 f for the purpose of calculating these time limits date of transfer is not considered date of receiving the compensation is considered logic that's 54 H almost I spent 3 hours two and uh 2 hour 40 minutes I spent only on theory part of the capital begin getting it especially part one if at all you watching this part no sorry I should tell this disclaimer at the beginning itself you should be watching part one at first and then come come and watch this only then you will understand otherwise you will not understand this part okay take care that's it the next video which I'll upload is pgbp let's begin the capital gains related amendments part so these are the amendments that were there in the finance act 2023 in the supplementary material there are no amendments on capital gains so better watch these amendments video for sure because it is very important this capital gains related part for sure so these are the broad amendments that we have uh you know after Finance act 2022 so in the finance act 2023 these are the amendments that were brought in the capital gains in this I personally feel 50a Amendment and taxation of electronic gold receipts these two amendments are very very crucial and the next crucial is crucial amendment is section 54 and 5 54f two amendments for the section 54 and 54f where maximum maximum you know the investment in the new house property shall not exceed 10 CR indirectly the maximum exemption is restricted to 10 CR these are the main key amendments and by the way for the previous year 23 24 nothing but assessment year 2425 if at all you transfer the capital asset in 23 24 the index number is applicable is 348 which means nothing but that when you're calculating indexed cost of acquisition for long-term capital asset getting it for the purpose of computing long-term capital gain the numerator year of transfer if at all year of transfer is 2324 then 348 is the number if at all you old scheme student who prepared capital gains based upon previous year 2223 getting it where some 331 some number is there whole number if at all you followed with that just it's a number change automatically amounts will change so you need not worry about Sir you you have learned in with the finance act 2022 nothing to worry it's just a number game only the number has been changed now there are two amendments mainly 50 AA electronic gold receipts and 54 54f typically speaking I call only these two amendments are typical from my point of view fine so let's begin without any delay so by the way uh you know what is the what is the what is the index number that is applicable for the previous year 2324 348 in exam and all you need not remember index numbers they will give you index number year of transfer they will give you index number whatever Financial years they used in the question no for all those years they'll give you index number you need to clearly pick what is the right index number applicable for the given Problem by the way please watch the marathon on the capital gains open Marathon video go to the time stem capital gains time stamp watch that entire approximately some 2 to hour 15 minutes Marathon have uploaded on capital gains in that particular entire full video watch that then you continue watching this and I'm telling you you're going to get goosebumps Clarity in capital gains fine so one amendment is of course index number another amendment is 50a I'll come back to 50a a little while later first I will talk about electronic gold receipt taxation or let us do one thing let's talk about 5454 F taxation then I'll go to electronic gold res so 5454 F very simple you all know in 54 what is 54 section where you're transferring a house property you're also and you got a capital gain that it's a long-term capital gain you transfer house property which is used for residential purpose and uh you got a capital gain and the capital gain may be more than 2 CR or less than 2 CR if a is less than 2 CR you can buy two houses if the capital gain is more than two CR you can buy one house now whatever the asset that you're going to buy like new house whatever amount you invested in the new house right that is eligible for exemption that is eligible for exemption generally whether it is one house or two houses whatever it is you are having time limit of one year before the date of transfer per purchase two years from the date of transfer per purchase 3 years from 3 years in case of construction and whatever amount if at all you don't want to purchase immediately or construct immediately before filing it return due date before filing the return of income before the due date for filing it return the entire amount that you want to invest and claim exemption you have to deposit in the capital gain account scheme this is what you you learned in the 54 section correct now in the 54 section the new house that you are purchasing right if at all the new house value is more than 10 CR if at all the amount invested by you on the New Capital asset which you purchased for the purpose of claiming exemption if the amount invested is more than 10 CR the excess amount shall be ignored that excess amount shall be ignored remember they did not say exemption is restricted to 10 CR straight away here I told you for your convenience purpose in the original Law in the original Income Tax Act they did not say exemption is restricted to 10 CR they didn't say like that but the indirectly restricted exemption by saying amount invested in the new house more than 10 CR shall not be considered amount invested in the new house for more than 10 CR that exact amount is not considered even if you deposit under Section 54 in capital gain account scheme for more than 10 CR that will not be considered that's what the department set that's what the ACT Taxman set are you getting it so indirectly what are they saying amount invested in the new house cannot exceed 10 CR I mean if at all exceeds 10 CR that ta amount is ignored right indirectly maximum exemption that you you can claim you can claim under 54 maximum deduction is 10 CR similar amendment is brought even in 54f what is 54f you are transferring any long-term capital asset other than house property other than house profit you're transferring any long-term capital maybe a land also you transferring and where you are acquiring what asset you are purchasing to get exemption you are purchasing house property what you purchasing actually you are purchasing house property and if you recollect in 5 F no whatever amount you invest you will not get exemption you will get exemption based on a formula what is a capital gain and how much amount invested and what is the net consideration you got please watch the marathon if at all you unable to recollect please watch the marathon if you're unable to recollect and then continue watching this fine so how the 54f exemption is calculated what is the gain and how much amount we invested what is the net consideration actually to be invested in this proportion exemption is calculated here the amount invested more than 10 CR in the house right shall be ignored so up to 10 CR amount invested only will be considered so in 54f no maximum amount to be invested in the new house shall not exceed 10 CR for the purpose of calculating for the purpose of calculating exemption I have given you page reference you know this is the page reference page number 75 in capital gains after you just open capital gains inside that 75 getting it you open Capital G inside that 68 ICS study B I'm telling you I don't know whether you follow which material right because this video I'm going to upload on the YouTube also getting it that's it so that is these are the two amendments please remember McQ might come that's it this is one important amendment in capital gains then we have another amendment that is relating to taxation of electronic gold receipts you know sebi has given Walt manager rules there is something called Walt manager rules Walt V LT Walt means nothing but Locker they are maintaining a locker getting it so Walt manager rules in 2021 in India right now there are some three registered walet managers three registered wal managers were there in India uh just a minute right now I will show you so this is the link uh Vault managers who are registered in India I'm just showing you just two minutes hardly now you see here the the link has been opened so you see these are the three registered managers registered wal managers who got registration from 2022 year onwards 2022 year onwards getting it so what is this electronic gold resets very simple to promote electronic gold holding to promote holding of electronic gold sebi has introduced A New Concept called electronic gold I mean Walt manager electronic wal man I mean gold gold related Vault Management Services getting it so what what happens there you know very simple if you understand this you know in icer they have not given any problem but we don't know in the exam a problem might come getting it we don't know so what they're saying is suppose if I have a physical physical gold of 1 kg suppose if I have in home physical gold of 1 kg I don't want to use it anymore and I also don't want to sell it because know the gold is appreciating like anything in the past 3 four years gold is appreciating really good getting it especially China is buying gold from the past two years from 2020 2 year onwards China is aggressively buying the gold so the price is increasing steeply it is increasing so I don't want to sell the gold but the same time I don't want to maintain the physical gold in my home because of the tip bulgy all that I don't want to so what option I have one I have the option of converting this into Gold monetization Bond that option is there but I feel that is not interesting also so you do one thing you you submit your physical gold to a vault manager and get a gold receipt electron gold receipt you get get electronic gold receipt you get a receipt electronic receipt and you know what this receipt can be traded in stock exchanges this receipt can be traded in stock exchanges this is something like a script this is something like a security shares and security just like that you can trade it in yeah I'm sorry so this can be traded in the stock exchanges this can be traded in stock exchange so just like a shares and SECU electronic security kind of now one what is the capital gains treatment for electronic gold receipt if at all physical gold no I know physical gold if it is held for more than 36 months it's a long-term capital asset and if you transfer this gold you have long-term capital gains while Computing this indexation facility all that and all we know what about electronic gold receipt now you know actually what I'm doing is I am converting my physical gold into electronic gold receipt I'm converting right is this conversion treated as transfer years but section 47 7D and new Clause has been inserted in 47 where they say what they say you know conversion of physical gold into electronic gold receipt with the vault manager as per se va manager rules that is Exempted transfer means the conversion from physical gold to electronic gold rece is not finally okay I converted into receip suppose I want physical gold back suppose I sold to somebody this electronic gold receipt he want to get a physical gold for the receipt he can surrender this he can surrender this gold receipt to the vault manager and get physical gold conversion of electronic gold receipt back to Gold conversion of this receipt to Gold that is also not treated as transfer under Section 47 the 47 Clause 7D which says that conversion of physical gold into gold receipt conversion of gold receipt to physical gold is not a trans for why because we are just changing the shape of the gold that's it we are not actually is selling gold to somebody and encashing it we are just converting physical gold into a digital gold digital gold back to physical gold so where is the transferer where consideration movement where is the consideration where is the profit and all so section 47 says it is Exempted this is not a transfer fine what about okay suppose sir I have a physical gold I converted into electronic gold receipt now can I sell this gold receipt to somebody absolutely you can sell this is not exempt man this is not covered under 47 this is taxable this is taxable oh fine so if I sell electronic gold receipt if I transfer the receipt to somebody else it is taxable now how to how to compute how to compute electronic gold receipt related capital gains just like a gold suppose no I purchased my gold in 2021 April 2021 I converted this into April 2023 I converted I converted this into electronic gold reset in April 2023 I sold this in the June 2023 in the stock market to somebody this receip I sold to somebody the stock market in June 2023 now whether this electronic gold no actually what I so remember what I actually purchased is gold physical gold I converted into gold receipt this is not a transfer under Section 47 now this brait I sold to a third party this is treated as transfer capital gains will apply now my question is now my question is very simple now I sold in June right is this go gold receipt longterm or shortterm first of all for electronic gold receipt what is the period of holding criteria 36 months only now sir I I I got this receipt in April 23 sir I sold it in June itself June 23 which means less than 36 months wrong that is not the period of holding for electronic gold receipts period of holding includes previous previous asset previous asset holding per previous asset before the rece is what physical gold whatever the physical gold that you have right earlier suppose you are the original owner who converted the gold into electronic gold receipt that receipt now you are selling to somebody now this receipt is a longterm shortterm if I have to if this receipt is a longterm shortterm to consider to calculate period of holding physical gold you you held right before conversion that period will also be considered that period will also be considered which means in my hands April 20 21 I purchased physical gold right conversion happened in April 2023 right ultimately sold in 2023 June right which I sold electronic gold receipt is this a long term or shortterm from which date period of holding will you consider from the date of creation of the receipt or from the of purchase of original gold original gold since April 21 to 23 let's assume it is 2424 since April 2021 to April 2024 sorry June 2024 this entire period is considerable more than 36 months more than 36 months it's a long term accordingly indexation facility all that is available this is one clarification which they in the period of holding section 2 subsection 42a they clarified this now fine suppose know this electronic gold receip no I sold in the June month for let us assume 1.5 CR what is my cost of acquisition electronic gold receipt I got because of converting my physical gold whatever my physical gold cost is there now that is the cost of acquisition cost of acquisition of electronic gold re receipt is nothing but physical gold cost physical gold cost I got it for one multiplied by index numbers of the year of transfer index number of the year in which first held by the S so reduce that you will get whether it's a whatever the longterm or short term whatever it is so simple long story short what I'm trying to tell you if at all you purchase physical gold you convert it into gold receipt that conversion is not a transfer gold re you are selling subsequently to somebody that's a transfer what is the full value of consideration you know minus what is the cost of acquisition cost of acquisition of gold receipt is nothing but cost of acquisition of the physical gold now whether it's a longterm or shortterm from when you purchase the physical gold from that date till the date on which you are selling electronic gold receipt right that entire period is considered for determining whether it's a longterm or short-term capital asset what Clarity right now let's look at the buyer of the receipt suppose now I sold receipt to the buyer somebody suppose know Mr a sold electronic gold receip to Mr B buo so I am the one who who bought this gold receipt for me what I can do with this gold receipt I can hold it or I can submit this to Walt manager and get physical gold I can get physical gold now suppose know I purchased gold SE from you you you sold me for 1 and a half CR you sold me this electronic gold receipt for one and half CR you sold me this receipt for one and half CR for the first time I'm buying gold in the digital form that's it for me it's the first time bu for me I bought in which year I bought 23 24 or else let us assume 2 for 25 year I bought for the first year now what I can do with this I can hold it for 36 months from now I can hold it for more than 36 months and sell it and long-term capital gain might get or what I can do is 2425 I got right I went in 25 and 26 to Walt manager I went to vault manager and I surrendered this gold receipt to vault manager what I did I surrendered the gold receipt to vault manager means I am converting gold receip to physical gold I got this conversion is Exempted under 47 this conversion is Exempted fine no tax treatment as of no you know what I did in 28 29 previous year whatever physical gold is there no I sold it for three the physical gold I sold remember in the previous example I have a physical gold originally converted into receipt and sold receipt now you see I purchased receipt first then converted into physical gold that gold I am selling for 3 CR now how to compute capital gains first of all full value of consideration is what 3 CR Minus cost of acquisition of this physical gold is what originally you didn't buy the gold you bought the receipt in exchange of the gold receipt you got physical gold so the cost of acquisition of physical gold will be the cost of acquisition of the electronic gold receipt so one and half Pro now is this a longterm or shortterm you know you converted into physical gold in 25 26 right you sold it in 28 29 right now physical gold you sold from which date you will consider period of holding conversion data no no no this gold you got physically because of the gold receip conversion which you purchased in 2425 so when I purchased gold receipt no from that date period of holding I will consider you getting it from the date of purchasing gold receipt through which I got physical gold now gold receipt holding period will be considered getting it for physical gold which you got in Redemption of the gold receipt the period of holding will be considered from the date of acquisition of the gold receipt same way for physical go for gold receipt per will be considered from the date on which gold was originally purchased through which it is converted into receipt are you getting it suppose know I purchased gold receipt I did not convert into physical good I directly sold it to another party now from the date on which I purchased till the date on which I sold that is the gap I will consider if it is more than 36 months it's a long-term asset otherwise it's a short-term capital asset this is what amendment is in the finance actor 2023 so I will show you in the book don't worry so section 47 in that Clause 7D has been added what are they saying any transfer of capital asset being conversion of gold into electronic gold receipt if you're converting physical gold into receipt or conversion of electronic gold receipt back into gold getting it it is Exempted because it is covered under Section 47 this conversion to conversion from gold to receipt receipt to gold is not a transfer but if you're selling it to a third party after conversion that is a transfer now when you're now sold to third party it's a transfer it's liable for capital gains what is the cost of acquisition cost of acquisition of receipt is nothing but cost of acquisition of the gold cost of acquisition of gold is nothing but cost of acquisition of the receipt you getting it now so what is the cost of acquisition suppose if the asset is a capital asset being receipt which is issued by a vault manager you it it it became property of the person because of the conversion you converted physical gold and then got EG now EG you're selling it what is the cost of acquisition of EGR that is nothing but cost of gold you purchased getting it in whose name AGR is issued suppose where gold is released against e means you purchased easr and you surrender to the dep you surrender to VA manager and you got a physical good that physical good you selling physical good you sold physical gold you are selling what is the cost of acquisition of physical gold you sold this gold not by directly purchasing the gold you you so you got this gold by surrendering EGR EGR you paid some amount now the cost of EG GR in the hands of the person that is the cost of acquisition same way where electronic gold receipt is issued in respect of gold deposited getting it the period of holding for such gold the period for which gold was held prior to the conversion so for electronic gold receipt for electronic gold receipt while while Computing whether it's a long-term capital set or short-term capital while Computing this while considering this you have to consider gold holding period physical gold you held right that period same way when gold is released in conversion of e EGR you surrendered EGR and you got gold that gold you're selling ultimately now whether this go is a longterm or shortterm EGR holding period shall be considered the period for which EGR is held prior to conversion that will be considered in the period of folding so simple if at all you have you have not got the clarity don't worry once again play the past 10 minutes once again that's it slowly watch neatly watch don't watch at higher speed that's why you not get clarity watch it standard speed so clear example it took along with the taxation in The Institute book and all nothing they just gave these three points nothing they gave I in fact told you very clearly what is the period of holding is applicable with examples and all I told just make use of it then one more Amendment cost of improvement earlier for good Goodwill and all cost of improvement is to be taken as zero now for any other intangible asset of a business for any other intangible of a business for all intangible assets cost of improvement shall be taken taken to be nil itself straight away nil cost of improvement for all intangibles is straight taken as nil no more argument then finally one more important amendment that is section 50 AA that is section 50 AA 50 AA is talking about computation of capital gains in case of mar Market link debentures or specified mutual fund specified mutual funds are Market linked debentures so 50 50a is talking about taxation of Market link debentures specified mutual funds until before 50 AA until before 50a just a minute yeah sorry sorry for the interruption yeah so 50 AA is the new section until introduction of 50a until before 50a Market link debentures they come under 36 months criteria to decide whether it is a long-term capital asset or short-term capital asset suppose if this Market link debenture is a security listed on a stock exchange 12 months only the criteria getting if at all it is listed on a stock exchange if at all it is not listed on a stock exchange it comes under 36 months criteria debentures and bonds unlisted Securities other than shares getting is 36 months criteria but now what the what what section 50 AA says you know section 50 AA has a overriding effect in spite of anything contained in two subsection 42a 2 cluse 42a what they say you know 50 AA Market link debentures specified mutual funds they are always short-term capital asset irrespective of holding period This is the first stroke the market link debentures and specified mutual funds they are always short-term capital asset so first of all what is the market link debentures are they are they really practical yes there is a company called paml Enterprises limited which have issued Market link debur somewhere in 2019 or 18 getting it the market link debentures were getting famous now getting it in Market link debentures no principle is guaranteed by the company but the interest amount which they pay on the debenture right that is not a fixed percentage that depends upon the market movement so these debentures are B these debentures know the rate of interest the return on these debentures to investors know is decided by the market forces so it's one one more way to attract investors to attract lenders getting it that is Market linked debentures another one is what specified mutual funds here many students will not observe one point Market link debentures whether you acquire before 14 2023 or after 14 2023 when you acquire doesn't matter if you are selling it in the previous year 23 24 onwards if you're selling suppose this 23 24 year I sold some Market link Dentures it's always a short-term capitalism so when I purchased this Market link debentures you purchased in 2019 2018 2017 doesn't matter you are selling it after Finance act 20 23 is implemented it's a short-term capital sear suppose if I sold this Market Link diur in 2223 Financial year previous year at the time 36 months criteria 12 months criteria whatever is applicable that only we will see but from 1 April 2023 if at all you are selling any Market link debentures it's always a short-term capital asset no indexation of course debentures by default no indexation that's but specified mutual fund is there no specified mutual fund section 50 AA we will apply only if the specified mutual funds are purchased on or after 1st April 2023 only if the specified mutual funds are purchased on or after 1st April 2023 if the specified mutual fund is purchased after 1st April 2023 then only section 50 AA will apply suppose I purchased some mutual funds specified which comes under 50a specified mutual fund stf definition SMF definition under 50 as some mutual funds I purchased it falls within the definition but I purchased 14 2023 before 1st April 2023 I purchased it will not come under 50a getting it will not come under now if a specified mutual fund purchased before 1st April 2023 now whatever whatever criteria suppose if it's Equity oriented fund listed on the market 12 months criteria if it is debt oriented fund it will probably come under 36 months criteria but if at all the specified mutual fund you know what is a specified mutual fund very simple it's nothing but it's nothing but maximum inequity not more than than 35% of the total proceeds are invested in equity shares of domestic companies so maximum 35% so how much in this mutual fund investment goes to equity shares equities of Indian domestic companies maximum 30 maximum 35 means minimum 65% or more than or equal to 65% of the amount of the mutual fund is invested in other assets other than Equity it may be debt or it may be you know real estate assets or it may be any other assets which are there in the market so that's called specified Mutual f fund that's it now here percentage of equity shareholding will be computed based upon daily average of uh you know annual average of daily closing balances whatever daily closing balances 365 days they list out and average of annually they'll consider if it is less than 35% that's a specified mutual fund getting it what is a market link denture it's nothing but security which has an underlying principal component in the form of a debt security so underlying con it's actually a debenture where the returns are linked to market returns on other other underlying Securities or indes nifties you know sensex all that it includes any security which is classified or regulated as Market linked by SE so SE will specify the list of Securities which are trated as Market linked they are also Market linked so that is Market link debenture definition specified mutual fund definition now remember specified mutual funds 50 AA section can be applied only if the specified mutual funds are purchased onor after first April 2023 and then you sold then 50a is applicable suppose Market link denture you you may be purchasing it before 14 2023 or even after 14 20223 that doesn't matter is it a market yes it's a 50a 50a section will apply so automatically automatically to decide whether Market Lim debenture is a longterm or shortterm specified mutual fund acquired on or after 1 April 2023 longterm shortterm you need not apply all these 24 12 36 no confusion straight away there shortterm Capital set fine agreed okay now what how to compute capital gains very simple suppose I sold specified mutual funds which I purchased after 1st April 2023 I sold it now whatever sale price you getting now that itself is treated as full value of consideration received minus has reduced by at what price you purchased the debenture or at what price you purchased the unit check out and the expenditure incurred for Holy transfer expenses you reduce that cost of acquisition you reduce transfer expenses you reduceed the balance would be deed to be capital gain remember the concept of indexation will not come for Market link debentures indexation concept itself is not there but specified mutual fund remember specified mutual fund if at all they were purchased before 1 April 202 if at all they were purchased before 1st April 2023 indexation concept possibility is there indexation concept possibility is there specified mutual fund purchased before 1 April 2023 50a section will not apply so in that case this can be either a long-term capital asset or this can be either shortterm Capital asset in such a case if a long-term indexation is available are you getting it but if the specified mutual fund is purchased by the S on or after 1st April 2023 it's always a short term obviously indexation will not come into picture clear next so capital gain arising from transfer or redemption or maturity of a unit of a specified mutual fund acquired honor after 1st April 2023 are Market link debentures whether re before 1 April or after 1 April doesn't matter would be deemed to be a short-term capital gains and chargeable to tax at normal rates of tax it's a short-term capital gain remember Tri one year will not come here so it's a it's a it's a normal capital G it's a short-term capital gain which is taxable at normal rates of tax normal rates means what yes specific rates of tax what is normal rate special rate just watch the marathon basic concepts you will get a Clarity on that in the marathon just go to basic concepts time stamp that's it you'll get it Papa that's it entire capital gains amendments is also over almost 30 minutes to be spent so capital gains arising from transfer of Market link debentures and units of specified mutual funds would always be capital gains arising from short-term capital asset irrespective of period of holding of that asset that is what provided in 50a and many students here they're thinking shortterm Capital as a definition has been modified like this no no no shortterm capital a definition is not modified in the diagram I book they just mentioned for clarification purpose like this original short-term capital set definition 2 CLA 42 if you see there is no Amendment inside that 50 AA only amended 50a inserted no this have a overing effect the 50a section starts with not withstanding anything contained in 242a it start nonan Closs I hope you're confident on capital gains all the Amendments 50 AA electronic gold receipt taxation cost of improvement for intangibles is treated as n 54 maximum investment in house cannot exceed 10 CR 54 if maximum investment in house cannot exceed 10 clear by the way please watch the marathon on the capital gains open the marathon open the time stem capital gain watch that you will get a you know best Clarity let's begin the Amendments on income from other sources you know in income from other sources we totally have three amendments two amendments are given under supplementary material like it's not I can say Amendment it's a cbdt clarification on computation of exemption under 10 10d 10 Clause 10d with respect to amount received under a life insurance policy getting it how to calculate exemption especially if you are able to recollect the provision where if the insurance premium paid for any previous year is exceeding 5 lakh that insurance policy is not exempt from that insurance policy is not exempt accordingly maturity proced is fully taxable I hope you're able to recollect getting it so regarding that c you know cbdd has given a very big clarification and I'm telling you for sure a question is going to come on 10 Clause 10 for sure I'm I'm expecting a question might come on 10 CLA 10d because they have given 10 problems in the supplementary material theyve given 10 problems on 10 10d either as a single adjustment you might get or as a dedicated problem you might get even at CF final also this is one of the important Amendment for CF final direct students getting it now and another amendment that we got in finance act 2023 is winnings from online games so winnings from online games there is a separate section 115 BBJ has been introduced and corresponding 19 for BA there's a separate TDS provision is also introduced for that so we are going to discuss all that and most importantly in other sources now there's a specific section which is inserted 56 subsection to Clause 13 in the I study material it is wrongly printed as Clause 12 Clause 12 is talking about ulip taxation maturity amount from ulips CL 12 is not there in our syllabus at CA inter ulip related taxation is not there but in the IC Mater for life insurance policy maturity they wrongly referred it as Clause 12 but it's actually Clause number 13 56 subsection to Clause number 13 yes these are the three amendments we are going to discuss now straight away let's look at what is the amendment exactly is talking about now so there is a uh you know uh there is a notes like this uh which is available I'll give you I mean you can directly download this particular notes from our website so in the below comments in the YouTube video if at all you're watching in the comments the notes link is given so you just directly click on that link you you'll be directed to our website you can download that material okay this notes you can download just two pages now we all know so what I'm exactly trying to talk about is I'll open this material by the way so winnings from online games I'll get back later okay first I'll St every discuss on 10 CLA 10d what is 10 CLA T actually talking about first of all you know what is taxable under income from other sources 56 subsection to close the DAT as per Finance act any sum received if at all you receiving any amount including bonus generally whenever insurance policy matures know you will get some insured plus bonus also you'll be getting so whatever it is whatever the suured and bonus whatever you're receiving under a life insurance policy other than ulip and other than Kean insurance policy because Clause number 13 is dealing with life insurance policy not ulip ulip is dealt under Clause number 12 and key keyan insurance policy amount is always taxable 10 Clause tende if you look at 10 Clause T know it St says Kean insurance policy is taxable which is not exempt under 10d if at all you're receiving any sum from a life insurance policy which is not exempt that life insurance policy that amount so received getting it would be chargeable to tax under income from other sources now how much is chargeable to tax the sum so received exceeding aggregate premium paid for which you have you have not claimed any deduction under the provisions of the law fine let me keep this aside little while later first of all which policy is taxable that policy which is not exempt under 10 Clause standing remember I am explaining the entire provision 10 CLA 10d I'm also covering ATC point I'm also covering 194 194 D TS provision entire insurance policy related taxation I'm going to cover in this video if you watch this I'm telling you you have learned you know TS provision on the same other other sources provision on the same exemption of the same getting it three points I'm going to talk about on the same point so fine I'll talk about I'll talk about this brown color highlight part later so if a policy is not covered under 10d If you're receiving any amount from that policy that is taxable under other sources this is what through Clause number 13 that specifically clarified even before Finance act 2023 this Clause is not there at the time also we tax it under income from other sources but we tax it as a resid head of now there is this dedicated Clause there is a dedicated clause which says this income is always taxable under income from other sources fine now now let's look at actually what is this 10 Clause TD is actually talking about so straight away you can use this diagram for a simplest understanding purpose 10 Clause t 10 Clause T we all know section 10 is talking about exemptions section 10 is one thing which is talking about exemptions exemptions for what exemption exemptions for amount received under a life insurance policy amount received under a life insurance policy for a life insurance policy whatever you have joined earlier if at all you're getting any sum any money whether you call it as maturity whether you call it as uh surrender value whether you call it as bonus it doesn't matter it doesn't matter so maturity surrender value bonus whatever amount you're receiving from a life insurance policy is Exempted if at all it falls under any of these three categories if at all it falls under any of these three categories it is Exempted if at all it is not coming under these three categories it is straight away taxable now look at it suppose no if at all you have you have purchased the insurance policy on or after 1st April 2012 if at all you purchased insurance policy on or after 1st April actually there is one more date H or after 1st April 2023 sorry 2003 but before 1 April 2012 after 2003 before 2012 that that column was also there but now it is not relevant considering those policies and all were expired that's why I'm not taking those policies references okay straight away but in the material no I I gave even that also before 2003 picture I gave after 2003 picture I give after 2012 after 2013 and even now the latest Amendment after 2023 this is finance act this is finance Act act 2023 Amendment getting it on that in the supplementary material they have given 10 illustrations how to how to apply that amended portion how to apply the finance act 2023 provision they have given 10 illustrations we are going to discuss all that so what are they saying so if a policy is issued on or after 2012 but before 1st April 2013 you know if the premium paid for any previous year premium paid here premium paid is a right premium paid means what is this premium paid premium paid for any previous year any previous year so during the term of the policy suppose each policy might have a term of some 5 years 3 years 10 years like that every year how much premium you are paying for every previous year getting under income tax we only see previous year wise so in a previous year for a particular policy how much premium you paid check out okay so amount you paid what is that amount as a percentage of suured so what is the suured you see what is this amount percentage pre prum paid percentage of sum assured if at all the sum assured if the premium paid is less than or equal to 10% of sum assured that policy is treated as an Exempted policy and moreover you know very well up to 10% of some assured whatever premium that we are paying for a policy that has been taken on or after 2012 but before 2013 you can claim ATC deduction for the premium paid whatever premium that you are paying you can claim deduction moreover the premium paid is not exceeding seing 10% getting it that insurance amount is also Exempted when if at all you have taken the policy between this year 2012 to 2013 year suppose know I have taken policy after 2013 only and I am not having any U or 80ddb disability I am not having the SSC is not having any disability or any disase given under U or 80ddb same 10% only so for an SSC who is not having any disability or disease getting it if at all he has taken a policy on or after 2012 or on or after 2013 it doesn't matter 10% of the premium is the cut off 10% sorry 10% of the sum assured is the cut off if a if the premium paid for that policy in a year in a previous year do not exceed 10% of the Su assured that policy is Exempted suppose if at all the policy is taken on a disabled guy disabled S or if the policies taken in respect of a diseased you know in respect of a person suffering from 0db diseases specified diseases suppose if is having any disability or if he's having any specified diseases then up to 15% of some assured excuses given relaxation is given because know generally for handicapped people disabled persons suffering people suffering from diseases the insurance premium is generally higher getting it so compared to normal people that's why for exemption also the criteria for exemption criteria also for exemption criteria also they have increased the percentage now this this for disabled people and all the percentage is 15% when if the policy is taken honor after 2013 Suppose there is a necess he is suffering from disability under U and he took a policy on 1st July 2012 what is the percentage applicable 10 percentage only because 15% is applicable for a disabled person or having specified diseases 15% logic is applicable if the policy is taken on or after 1st April 2013 now remember whether he has taken policy here or here or here whatever it is up to 10% or up to 15% he can claim deduction under ATC whatever the premium that he's paying he can claim under 80c deduction moreover if at all premium is less than or equal to 15 less than or equal to 10 less than or equal to 10 means premium payable itself do not exceed 10 itself do not exceed 15 straight away the policy is exempt if the annual premium payable do not exceed 10% 15% straight the policy is Exempted policy when you're receiving maturity that maturity amount is also Exempted this is the amendment this is the provision which every one of us know because this provision is there from long ago now in the finance act 2023 they have added one more one more RIS if at all there's an insurance policy if at all all there is an insurance policy issued honor after 1st April 2023 issued onor after 1st April 2023 and premium payable for those policies is not exceeding 10% of suured for normal s not exceeding 15% of suured for 80 80 ddb SS or 80 U 8 or 80 ddb if the premium is not exceeding this even those policies are also Exempted provided this provision is what added in 14 2013 onwards a provision has been added the point is very simple there are many SES who are you know especially High salari individual High netw worth individual what they're doing you know you see very simple now they are claiming optional tax resm especially High salaried individuals High netw worth individuals salaried employees especially this is very popular some high paid employees where their monthly salary is 10 lakhs to 15 lakhs you know what they're doing you know they are happily going with default tax res they are going with default tax regime under 115 BSC and they are paying tax at very concessional rate even though they they their yearly package yearly salary is 5 CR to 10 CR or 10 more than 10 CR also they're happily paying sub charge at maximum 25% they're enjoying all the benefits under 115 BAC and they don't even claim ATC deduction at all because no ATC FL deduction is not a big deal for them 80d maximum deduction is how much 50,000 that is also not a big deal for them yes or no so these are all not a big deal so they don't claim any deductions under chapter 6 they straight away go with you know 115 V these people what they doing you know they take big life insurance SPS so some life insurance policies know they will be having a some insured of 10 CR 20 CR some insurance some term insurance and all they take they take term insurance where the life where the amount premium payable is you know more than 5 lakhs in a year the premium payable for those policies is more than 5 lakhs every year they pay more than 5 lakhs premium but still the premium amount which they paying it is less than 10% of the sub it is less than 15% of the sub and these people anyhow they don't have any chapter 6 and all and are buying bulk big big insurance policies and they're enjoying you know they're getting maturity amount which is also very huge amount because they buy insurance policies where the high rate of in where the return is very high getting it of course it's not UL normal insurance policy aggressive policies they buy so where the maturity amount is so big income tax department want to tax those maturity amounts especially to these high net worth high paid individuals getting they want to Department want to tax them see we gave exemption because what the all these exemptions were given for what logic what are the reason behind it because you know normal middle class or lower middle CL upper middle class whatever it is who are working as a salaried employee if at all they are saving some amount one of the savings method in India is insurance is one of the savings approach so if they're saving money and they're getting maturity amount if at all if at all it is not a commercial policy if at all it is not a commercial policy commercial policy means what where the premium is high every year non-commercial policy means what premium is not even 10% some is 100 you paying just less than 10 5 or 6% or something or less than 15 these are non-commercial policies for them income tax department gave exemption but for commercial policies even though even though premium payable in a year is not exceeding 10 not exceeding 50 but the Su insured is 5 CR some insured is 10 CR some insured is one CR term insurance and all where the SS is paying premium where the SS is paying premium in percentage point of view it is very less less than 10% less than 15 but if you look at the amount of Premium which they're paying you know the am amount which they're paying is more than 5 lakhs for a part for a single policy for a single insurance policy which the SS is taking on or after first April 2023 remember this five lakhs Amendment and all will be applicable only if the policy issued is on or after first April 2023 suppose if at all the policy is taken before 1st April 2023 and the premium that I'm paying every year is some 10 lakhs for the single policy till is that insurance policy maturity taxable exemp what criteria we check we only check these criterias we only check what 10% 15% 10% criteria we don't check all this from 1st April 2023 prospectively if at all you taking any insurance policy the premium payable is not exceeding 10% of the sum issued or not exceeding 15% of the sum issued as the case maybe is Exempted provided if at all if at all the aggregate premium in any previous year for a particular for single insurance policy for a single life insurance policy premium paid in any particular previous is exceeding 5 lakh during the term of the policy suppose the term of the policy is 10 years any one year any one year any previous year if at all aggregate premium paid in a particular previous year is exceeding 5 lakh no exemption that's a commercial policy we will not give exemption income tax department straight away denied exemption so indirectly what are the saying with effect from 1st April 2023 with effect from 1st April 2023 if I have to get exemption if I have to get an exemption for a life insurance policy maturity amount annual premium shall not exceed how much first it should not exceed 10% of the submissed in case of in case of a person with disease or disability 15% of the suiss is should Plus for that policy total premium amount in a particular year throughout the tenure of the policy throughout the term of the policy shall not exceed five if at all throughout the term of the policy suppose 10 years you paid premium every year any one year if at all premium exits 5 lakhs though I paid I paid let us assume 7 lakhs in one year sir but it is still less than 10% of submiss still it is less than 15% only doesn't matter the moment premium paid for a single insurance policy crosses 5 lakh in any previous year straight away it loses exemption under 10 straight away it loses exemption no exemption straight away the maturity amount the maturity amount is taxable as per 56 subsection to Clause 13 you see I'm not saying maturity amount is fully taxable under 562 I am saying maturity amount is taxable as per the section in the section they tell you how to tax it maturity amount first time what I'm saying right now maturity amount is taxable that's what I'm saying I'm not saying how much is taxable so no exemption fine very good right this amendment is very good but you know our s are very clever if at all for a single insurance policy if the premium amount is exceeding 5 lakh okay you will tax it what SSS will do if at all this kind of provision if at all this kind of condition is added people are very clever they take multiple policies what they do they take multiple policies where each policy premium will not exceed 5 LH for each policy no premium will not exceed five lakh so because everybody got to know about this amendment oh if I pay for a single policy more than 5 LH department will tax straight away that policy maturity amount if I get maturity that amount is fully taxable so what s cleverly can do they will take they will be they will start taking multiple policies on or after from 1st April 2023 like I'll take four policies where every policy the premium is one and half lak only every policy one and half L only premium single for for a single policy premium will not exceed 5 lakh so every policy premium is one and half lakh less than five lakh for every policy and for each policy whatever premium I'm paying it is less than 10% of the sub issue percentage wise less than 10 amount wise less than five like that I will take multiple policies and I will I will I will violate this intention of the section no that is also not possible Department added another provision if at all this is where the entire confusion for the students this provision is what entirely confusing to clarify this provision applicability only they gave in the supplementary material 10 problems 10 illustrations they give and that illustration students are struggling like anything to solve those illustrations but you see how easily I will make you how easily I'll make you to solve without even reading single line in that directly see the question and and look at the answer it will match so in such a way I'll make you listen carefully so understood right this another provision now SS is know what they do they take multiple policies after 1 April 2023 onwards they'll be taking multiple policies if at all policies are taken before 1 April 2023 5 L limit and all no need to bother I have taken policy before 1st April 2023 it is less than 10% of the submiss St exemp mat am is exempt start it no more taxability the problem is if the policy is taken for you on or after 1st April 2023 less than 10% less than 15% no doubt we will see in addition to that one more condition we will see for a single policy the premium paid is more than 5 lakh no exemption for that what about if I take multiple policies what about if I take multiple policies where in each policy premium is not exceeding 5 l in that case what will you do huh if at all aggregate premium for all those policies aggregate premium for all those multiple policies taken on or after 2023 the aggregate premium for all the policies which are taken on or after 14 2023 if the aggregate premium exceeds 5 lakh if the aggregate premium is exceeding five lakh in any previous year during the term of those policies suppose I have taken four policies 1.5 lakh 1.5 lakh 1.5 lakh 1.5 lak four polic have taken aggregate premium of these four policies how much six lakh now the six lakhs in any one year during the all these terms you know in entire the terms of this policies all these policies are valid for 10 years getting it in all the 10 years no all these four policies put together more than five or maybe 10th year only 10th year only all the four policies put together cross 5 LH up to 10th year no each policy is 1 lakh 1.2 lakh only up to 9th year less than 5 LH total am but 10th year no premium is increased in the 10th Year all four policies put together premium total how much I paid you know more than 5 laks I paid six lakhs I paid in any previous aggregate premium for such policies is exceeding 5 lakhs in any previous year during the term then exemption is available only for those policies whose aggregate premium in any previous year does not exceed 5 lakh during the term of their policy this is something similar to single insurance policy I if at all you have taken a sing insurance policy the premium payable does not exify I'm giving exemption here you have taken multiple policies multiple policies combin together what is the total premium paid not exceeding 5 LH ah then you will get exemption what does it mean you see here suppose know if this example itself I will take this example itself I will take you see here what happened I have taken four insurance policy each insurance policy is less than less than 5 lakh but aggregate of this is more than 5 lakh now you see aggre premium for all the policies which are taken on or after 1st April 2023 is exceeding 5 laks in our example yes it is exceeding sir in one of the year it is exceeding sir 10th year it is exceeding sir okay so which means this provision first party satisfied now exemption is available yes available only for those policies whose aggregate premium in any previous year only for those policies whose aggregate premium does not exceed 5 L Oho three policies if I total together no three policies put together total what is that what out of four now I will claim the exemption for three what is the premium paid for these three policies 4.5 lakh only ahuh so only those policies whose aggregate premium does not exceed 5 lakhs in any year three policies have selected these three you can claim exemption now the one policy which where if one policy which do not come under exemption this is St sir can I claim exemption for all the four are aggregate premium for all these four policies exceeding 5 lakh man getting it since it is exceeding 5 lakh Only We are giving exemption for remaining policies remaining policies whether you will take these three policies exemption whether you take these three policies whether you take only for two policies that is your choice but you have four policies totally right all the four put together premium is cross you cannot claim exemption for all the four but you can claim exemption for either three or two provided the premium for those two policies premium paid for those three policies in any previous year shall not exceed 5 in such a case you can claim exemption I hope you're clear by 90% still 10% confusion that's why I have given CB that's why CBD has given clarification with the so many examples shall we solve those examples I think you'll understand better yes let's try to go to the supplementary material and solve the examples no need to read this entire Theory you are done you know here they say situation one situation two and all not required you straight away look at this problem now straight away entire provision on the entire provision I'm applying okay just a minute yes let's look at this example straight away we'll solve examples and apply the as it is provision whatever we discussed in the past 20 minutes okay fine so what is the date of issue 1st April 2013 not after 2023 therefore five CR and all do not apply so what criter we should apply since after 1 April 2020 2013 dis disabled guy and a person having disease 15% others 10% here no they have not given any information so life insurance policy a so let us take an assumption that all the examples are from the point of view of normal guy normal human being who is not having any disability who is not having any disease under 0db so that's it so 1 14 2013 means after 2012 right now what is the Su isure 60 lakhs how much amount of annual premium which he paid 6 lakhs only now what is the percentage 10 percentage 10 sub 10 Clause 10d can I claim exemption yes absolutely because the premium paid is not exceeding 10 right it is exactly 10 if it if it crosses 10 only the problem if the annual premium payable for an insurance policy does not exceed 10 percentage means up to 10 is permitted it is Exempted now how much amount is received 70 lakh so entire 70 lakh is Exempted over the answer is over the consideration received under laa so life insurance policy a would be exempt since the annual premium does not 10% of the sum issued moreover the policy is issued before 1st April 2023 you see here the premium paid is 6 laks but it doesn't matter because the policy is issued before 1st April 2023 when amount of Premium we will see mainly whether it a single policy multiple policy whatever it is when the amount point we will see only when the policy is issued on or after 1st April 2023 amount will come into picture the you know for exemption purpose we only see percentage always amount we will see only the policy issue date is on or after 1st April 2023 correct so since the policy issued before 14223 limit of 5x is not applicable therefore it is since it is not an eligible ulip of course it is not ulip also by the way this is not a ulip they have given they have given very specifically that it's an Lac so note this note point is also not required this not point is not at all required ignore it next example number two example number two this not point is required for the later thing okay for now it is not required another another example 1 April 2023 policy is issued the moment you see 1 April 2023 immediately what it should strike amount also you should check but for calculating exemption for determining exemption amount of Premium paid annually also you should check what is the annual premium paid five lakhs only if it is more than five only the problem comes what is the sum isur 50 what is the percentage ah 10% the policy is taken honor after 1st April 2012 means 10% moreover the policy is taken onor after 1st April 2023 which means 5 lakh if at all premium paid exceeds 5 lakh obviously it is taxable so it is it is less than 10 less than or equal to 10% of the sum ised and amount is also not exceeding 5 lakh therefore amount consideration whatever you're receiving 52 lakh fly exempt so the consideration received would be exempt under 10 when it is received by the way 1 November 33 which means previous year 23 24 sorry 33 34 which means assessment year 34 35 so for the assessment year entire amount received is Exempted since the premium payable on the policy does not exceed 5 lakh and moreover it does not exceed 10% of submiss next another example example three policy policy name is a when the policy is issued 1 April 2023 immediately we should check 10% criteria plus we should also check five LS criteria how much is the pre premium paid 6 lakh what is the sum issued 60 lakh ah premium paid is less than or equal to 10% only but the policies issued on or after first April 2023 and moreover you see this is a single insurance policy only one policy data they have given yes or no for single insurance policy the premium paid is exceeding how much 5 lakh therefore entire 70 lakhs is not exempt under 10 CLA TD it is not exempt under TD the consideration received is not exempt under 10 because the annual premium payable is exceeding 5 l so simple until now I hope you're able to correlate now now let's look at this let now let's look at this this situation here they have given no circumstance eligibility for examp that and all you don't read ma if you read that you will never understand anything look at the diagram what I you know just follow the diagram which I explain not even diagram look at the content which I'm explaining and then sync it with the given examp example now you see life insurance policy policy number a policy are two policies were there okay when these two policies were issued date of issue 1 April 20123 1 April both are issued on or after 1 April 2023 which means we should see percentage first then we should also see what agregate premium for both of them put together we should check now let's see annual premium paid is how much here it is 3 lakhs some ised 30 uh so first criteria for exemption amount amount paid to some it is 10% here also amount to PID to submiss is 10% both the policies are less than 10% of less than or equal 10% so one of the criteria for exemption both the policy satisfied suppose no if at all for policy B if the premium is 2.2 lakh if the premium is 2.2 lakh which is more than 10% B St taxable no need to talk about exemption but B policy insurance policy B less than 10% insurance policy a less than 10% both are less than 10% one of the criteria for exemption they satisfied but one more criteria is there because both the policies are issued onor after 1st April 2023 we should see what the aggregate premium paid for both the policies annual premium how much they paid three lakhs per year two both the policies put together how much premium paid five lakh only aggregate premium paid for multiple insurance policies is not exceeding 5 lakh not exceeding 5 lakh there and moreover for both the policies the amount of Premium paid for each policy is less than or equal to 10% some issue and aggregate of both the policies put together 5 LH Exempted both are Exempted correctly so how now what is the maturity you received 32 lakh 21 lakh both are Exempted in this case aggregate premium payable does not exceed 5 L during the term and for moreover annual premium both of them are not exceeding 10% of some isur therefore the consideration received would be would be what exempt under 101d easy or not F let's see let's see another example let's see another example by the time we solve all the 10 examples you will be master in this provision believe me next 10 let let's see another example what is the date of issue 1st April 2023 1 April 2023 which means we need to see 10% criteria as well as we we should see five lakhs criteria both fine first let us see 10% what's the premium you are paying 4.5 submiss should is 45 LH 10% here also you are paying 5.5 lakh premium 55 lakh sub 10% both you know first criteria for exemption both the policies satisfi but you are having two policies not single policy in such a case when how exemption is to be calculated if for multiple policies if aggregate premium payable if aggregate premium payable no need to even see to that extent for one single policy itself straight away straight away aggregate also no need to check here because one policy straight away paid annual premium how much more than 5 L straight away this entire 60 lakh is not exempt you need not even check aggregate amount if at all no if at all no B policy this is also less than 5 lakh then A and B put together you should check already B only one policy straight away crossed 5 lakhs now therefore you need not see aggregate picture also single policy itself crossed 5 LS what is the question straight is not exempt what about the remaining policy huh other policies no only one policy is there where the aggregate premium in a year does not exceed 5 lakh and moreover per also not exceeding 10 per is this 52 lakhs this 52 lakh is exempt this 52 lakh is exempt under 10 Clause 10d I hope now by this time you might have got 95% Clarity not 100% you have not got 100% wait remaining illustrations once you solve you will get 100% Clarity on this okay that's it it is Exempted I hope you understood now let's look at the answer so consequently consideration received under B would not be exempt which means the consideration received under a is Exempted aggregate premium for both are exceeding five lakhs in that case what is the provision if at all SS is having multiple multiple policies if at all multiple policies put together is exceeding 5 lakh aggregate only those policies whose aggregate premum does not exedy that is Exempted however the consideration for a would be exempt because annual premium payable is not exceeding five for any previous year and moreover it does not exceed 10% but B policy is taxable because it is the single policy itself is more than five so that that itself is enough now let's look at another example example number six when the policy has been taken 1 April 2023 1 April 1 April oh all the three are taken onor after 1 April three policies s is having now what is the annual premium paid 1 lakh which is 10 per of course this is also 10 per of course this is also 10 percentage but you see insurance policy C now the amount of Premium paid is already Crossing 5 lakh already Crossing 5 lakh so only for single policy C itself it is crossing 5 lakhs forget about multiple that one policy itself is crossing already five this is straight away this is straight away taxable this is straight away taxable straight away taxable now remaining two policies put together remaining two policies put together 4.5 LH remaining two policies put together four since the remaining premium is not exceeding 5 lakh remaining policies premium is not exceeding 5 lakh these two policies I will claim exemption they they are exempt under 10 Clause 10 D 10 Clause 10 D are you getting it now I applied the provision in such a way C policy I I separately did for a and b alone I applied the provision I got the right answer but this is not the way to do the answer you need to apply seventh provision carefully if multiple SSC if at all is having multiple policies aggregate premium under all these policies are exceeding five then exemption is available only for those policies is whose aggregate premium whose aggregate premium does not exceed 5 now okay for three policies put together premium is crossing 5 lakh now exemption is only for those policies who aggregate now can I claim exemption forc no if ANC total more than five can I exemp can I claim exemption for B and C no for B and C put together is more than five can I claim exemption for A and B put together yes for a and b put together total premium is still 4 and half lak not exceeding five so I will claim exemption you should apply app the provision exactly here no even if I do not apply provision straight away for C no straight away premium is more than five so it is taxable for remaining two both put together since premium is less than 5 lakh both are Exempted so easy but this this logic may not always correct this logic you apply may not always correct in all the circumstances fine I will show you the next problem so by the way so consideration received under C alone would not be exempt C alone is not exemp which means A and B is L A and would be Exempted since aggregate premium for these two policies do not exceed 5 LH okay three insurance policies understood look at another example from here be careful from here be careful yes just observe what I am reading and explaining until I say yes example number seven is finished don't come into any conclusion so until I say example s is over and going to example 8 until that don't conclude anything about whatever I'm talking listen until I move to example 8 entire example seven you listen and then take your conclusion what is see when the policy is issued 1st April 2022 if it is issued on 1st April 2022 I will see what is the percentage 5 lakh 50 55 lakh percentage is how much 10 percentage is less than less than or equal to 10 percentage St away the amount is what Exempted under 101d sir annual premium is more than five it doesn't matter man because the policy is issued on 1st April 2022 before 2023 the policy is issued so straight away exemp good what about remaining three policies ah remaining three policies were issued on or after 1 April 2023 what is the annual premium that they're paying first 10 percentage and this is also 10 percentage of course this is also 10 percentage in all the three policies the annual premium paid is not more than 10% of the submission but you see for insurance policy C no the premium alone single premium alone is single amount the single the annual premium is more than 5 LH straight away 1010d will not apply I will say this entire 70 lakhs is not exempt this entire 70 lakhs is not exempt you see I am not looking which here it is I I'm ignoring this that that's not relevant for me right now I will discuss about this year Point later this is not for me okay so if if the SS has taken on or after 1 April 2023 multiple policies and all multiple policies premium annually is more than 5 lakh then only those policies A and B whose aggregate premium whose aggregate premium does not exceed 5 lakh will be exempt you know A and B aggregate premium is 4 and half lak throughout the term of the policy from 2023 to 2033 up to this every year premum paid is not exceeding five so for both of them I will claim exemption so it is exempt it is exempt now immediately if at all you're not getting this out very good if at all you're getting this sir what about this premium 14 this will not at all considered an aggregate premium 5 laks that criteria we don't consider this itself because the policy is taken before 2022 which means in this example this is Exempted X is Exempted a is Exempted B is Exempted only C got taxed so you see here you see here the conclusion is consequently the consideration received under l i life insurance policy C alone would not be exempt under 10 and D which means in respect of a consideration received under a would be exempt and moreover l x x policy is also uh X policy is also would be Exempted X policies also would be Exempted you know as per CBD guideline no only if a policy is taken only if a policy is taken on or after 1st April 2023 that comes under eligible policy for five criteria so X policy is not an eligible policy eligible lip what is this eligible lip eligible l means what eligible La Means those policies which are taken on or after 1 April 2023 if at all insurance policies taken before 1st April 2023 that is not an eligible policy for 5 lakhs criteria determination therefore LC policy X is not an eligible policy because it is taken before before 1st April 2020 before 1st April 2023 therefore limit of five LS is not applicable what clarity now you see Here If You observe X related Insurance maturity amount is received in uh you know 32 33 previous year previous year 32 33 nothing nothing but assessment year 33 34 in that year they claimed already exemption and moreover three Insurance maturity amounts we are getting ABC in previous year 33 34 nothing but assessment year 3435 now out of three a is exam B is examed C is taxable C is taxable under which section 56 subsection to Clause 13 it is taxable how much is taxable that amount no the cbdd has given a formula for that how much is taxable as for that we will have to compute no so that formula we will discuss later after we finish two more three two or three more examples were there after we finish that we'll discuss that I hope until now you understood example seven now it is over example number eight this the is irrelevant don't read at all you will not understand anything if you read that look at the direct question same analysis whatever analysis I'm applying same analysis you apply don't even change the analysis now example number eight little more critical be careful observe carefully because what I have seen in many students is from example 8 onwards only they are unable to understand especially example 9 and 10 many could not understand I will tell you very simple you know the problem is they are looking at the years they are looking at the ear ignore the year for the time being right now okay we will understand the year logic later now look at example number eight how many policies is having four policies x a b c when the policies were issued oh all are eligible LC only because all are issued on or after 1 April 2023 which means 10% criteria we should check five lakhs criteria we should check moreover multiple policies provision seven we should check getting it what is the percentage 10 here also 10 here also 10 here also 10 only everywhere it is 10 only but you know uh Rin learning straight away policy number c since the annual premium is more than 6 lakhs sorry more than 5 lakhs straight away straight away this is not exempt this is not exempt I will apply that in the not exempt this entire 70 lakhs is not exempt this is taxable straight up I will tax it but remember the C related maturity amount is received when oh 1 April 2034 previous year 34 35 year sessment here 35 36 oh A B C all these three are received in assessment here the previous year 34 35 fine forget about the year right now next now look at x a b okay X policy know the consideration x amount is matured in 3334 assessment year 3435 whereas A and B is matured in 34 35 35 36 assessment year forget about the year right now now look at it now C policy we understood now you see aggregate premium for more than because all these are multiple policies right multiple policies right aggregate premium is exceeding 5 lakhs yes in such a case exemption is available for only which policies exemption is available only for those policies whose aggregate premium whose aggregate premium do not exceed 5 lakh whose aggregate premium do not exceed 5 lakh now here x a b is there aggregate premium is how much your aggregate premium these three put together now 4.5 1 1.5 7 lakhs it is coming so I cannot claim exemption so can I claim exemption so these three put together is more than five l no doubt so e you know either I can claim exemption for A and B Because A and B both put together less than five LS can I claim exemption for x and a no can I claim exemption for x and B both put together aggregate premium is more than five can I claim exemption for x and a more than 5 lakh can I claim exemption for A and B yes both put together less than 5 lakh getting it remaining policies see if see straight away taxable straight away taxable because single premium policy itself more than five L for single premium policy single premium policy already more than 5 LS is St taxable what about remaining policies where annual premium of each policy is less than 5 lakh where annual premium of each policy is less than five but aggregate is more than five if a single policy is more than five straight taxable now I want you to revisit the definition now I want you revisit the definition for a single insurance policy the premum is more than 5 lakh straight away no exemption if at all multiple policies as took single policy multiple policies each policy is less than five L but aggregate premium for each of the aggregate premium for all these policies are exceeding five lakh for a single policy if at all straightway premium is more than five stra taxable for M for for multiple policies where each policy know premium every year is less than five but total is more than five now apply this Logic for remaining policies each policy premium is less than five but aggregate is more than five then exemption is available only for those policies whose total premium is less than five now Okay so X aggregate all three put together more than five then can I claim exemption for only those policies either of any two policies can CLA exemption provided these two policies premium paid put together do not exceed five so X and I want to claim both put together is crossing five so I can't claim exemption X and B I want to claim both put together it is exceeding five LHS so I can't claim exemption I want to claim both put together is not exceeding 5 lakhs so I can claim exemption so therefore therefore this is Exempted this is exempt this is exempt whereas this is not exempt this is not exempt this is not exemp now here here logic we should check once first of all if You observe no X policy is received X policy is received in X policy is received in 3334 in this example this is first year in which the maturity is received in these four policies first maturity amount happened where for 33 34 in the subsequent year in the subsequent year remaining policies were mature now suppose no if s here s has to be a tax planning carefully s has to do tax planning this is exemp exemp right now based on this we understood like this now let us see how much maturity amount received you know we should we should be very clever 50 lakhs is a maturity amount which you are saying not exempt for these two policies put together since premium is less than 5 L you are saying exempt both put together how much amount is there 30 lakh only is their maturity amount whereas for this policy know 50 L is their maturity amount now you know I said right two policies put together since premium is less than 5 LS it is exempt that's what I told right but you know I will not claim exemption for this I will not claim exemption for this no I will not claim I will claim exemption only for X because for X alone what about two polies okay let them tax because both the policies if taxed also total taxable amount is 30 LS only but for X policy now maturity amount is 50 lakhs so big amount so what I will do you know I will claim exemption for X that's why you say I wrote blue color now I'm writing my final answer I will claim exemption for X policy whereas I will I will tax a policy I will red color I WR I will tax policy number a I will tax policy number B why because for policy number a policy number we put together total amount of maturity is 30 maximum how much is taxable 30 lakhs only but if I claim exemption for these two you know what is the provision says what the provision says if at all aggregate premium payable for multiple insurance policies where each policy premium is less than five but aggregate is more than five SSC can claim exemption for any policy any policies of his option at the option of the S aggregate premium if is not exceeding five that's SS's Choice whatever policies you want to claim exemption ensure that aggregate premium for those policies not exedy now what I did originally we did these two these two comparison but we we did not immediately some students may not observe are maturity amount also you should see maturity amount also should see it's not how many policies you are claiming exemption it's for how much maturity amount you are claiming exemption that is important from tax point of view amount is important rather than the number getting the point since maturity amount in X is 50 whereas A and B put together only 30 tell me if I if I if I if I have given an option will you claim exemption for 50 lakhs or will you CLA exemption for multiple items put together 30 lakhs 50 I will claim exemption man why the so single policy alone I will claim exemption remaining two I will offer for taxation what clarity now here there is a one more here there is one more logic suppose no if at all SSC did not claim exemption for this if SSC did not claim exemption for this thinking next year A and B maturity will come now that year maturity amount will be high so I will claim exemption for that s will lose SSC will lose getting it in that case even updated return also we cannot file because updated return we can file only when there's an increas in income not decreas in income getting it so we have to be very careful so the moment when X received this this amount know you should immediately inquire with the insurance company De insurance company next year my A and B are also maturing right how much amount I'll be getting approximately ask them suppose if the insurance company says sir put together 60 lakhs you will get sir then don't claim this exemption you offer for taxation A and B are receiving next year right both put together 60 maturity amount right claim exemption for that you need to apply tax planning that's why they have given ear here to confuse you so here consequently a b c would not be exempt straight away we will claim exemption for yes as it does not exit 10% of the sumur clear not it over the game is still there we have two more examples if at all you understood example number eight 9 and 10 will be damn easy for you okay just a minute yes so example number nine in all these cases if you see the policies issued on or after 1st April 2012 23 first of all is there any single policy where the premium paid is exceeding 5 lakh yes C policy is there premium paid is straight away more than five I will tax it not exempt so St will tax it what about remaining policies premium paid for each of them is less than five but aggregate premium is more than five then exemption is available at the option of the s for those policies where aggregate premium do not exceed five x and a aggregate premium is four and half not exceeding five x and B X and B aggregate premium is five only not more than five so I can claim either exemption for x and a or X and B I can claim but let us see let us not decide based upon this let us see based upon maturity amount how much maturity amount you having 38 lakh x policy 30 lakh a policy 24 I can claim exemption either for x and a or X and b or a and b anyway I can claim exemption right now I will claim exemption for which two policies those two policies maturity amount which is high now X and A put together maturity amount is how much 30 lakhs and a 24 54 x and B maturity policy is how much 30 + 38 68 A A and B maturity amount is how much 24 + 38 uh 5062 so any two combinations I can claim I can claim either X and A or I can claim X and b or I can claim A and B now either this I can claim this I can claim this I can claim exemption but which one I claim exemption I will claim exemption for x and B policies because X and B put together the maturity amount is more than you know this this maturity amount is highest of any other two combinations therefore I will claim exemption for I will claim exemption for x and B so I will claim exemption for x and B exempt so I will tax it m i will tax a policy insurance policy number a okay here here you need to exercise this again but you see X policy is matured in one year 3334 remaining policies are matured in 3435 so here only the problem comes so what x has to do you know can he claim exemption for you know this policy in this year in the year in which he got this maturity amount he should inquire dear insurance company how much I will get for a how much I will get for B in the next year generally if the polic is maturing in the next year most of the times mature amount is very very predictable very rare cases only it is not predictable ask insurance company how much I'm going to get suppose they told you sir you are going to get this much sir for A and B then you can happily claim X policy exemption oh no insurance company said sir for a no for a policy no sir you are going to get 40 lakhs sir not 24 you're going to get 40 they said then I will do one thing I will not claim exemption this year no I will tax it A and B next year put together 40 plus 30 it's 78 claim exemption in the next year you getting the point but in this example whatever the point I told right now that's why year is given to confuse you like this year is given to confuse you like this getting it generally what happens we don't think about the next year so if you have multiple policies you should do a proper tax planning you should think about the next year maturities how much I'll be getting because in a lifetime in a lifetime if all you're having multiple policies maximum premium for not more than five laks aggregate premium of all the policies in your lifetime up to 5 lakhs getting it only that you can claim exemption able to understand two policies now you see eligibility for exemption in this case so what are the two policies I'm exempting a x and B and I'm taxing it look at the conclusion alternate answer the most beneficial treatment is claim Lix claim lip life insurance policy be as exempt this is the best answer this is the best answer so original answer no they have given so much of explanation what they it is very simple since lap X is Exempted because it is not exceeding five LS so it is Exempted they claimed X exemption aggregate amount of premium for A and B and C along with lcx exceeds five LS during the term of these policies however consideration received for A and B can be claimed as exempt under 10 and D so you can claim exemption for 10 and D for A and B if consideration received under lap is claimed to be exempt as aggregate of the annual premium payable did not exify in any previous year the consider under B would not be exempt same entire that analysis whatever analysis we know they just explaining it if consideration received under policy B is claimed to be exempt aggregate of the annual premium payable for ex did not exceed 5 LH He Man nothing but whatever analysis I told no that only they're explaining you can write this analysis in your own words it's a taxation subject not an audit subject you can write happily in your own words whatever analysis I don't know that you write if you read this and all know your mind will be corrupted unnecessarily whatever analysis we do they're explaining it the the best answer that we already if at all X was not claimed exemption 10 the consideration received under lapa would be exempt in 356 aggregate premium payable forb did not exceed five for any previous year however the most beneficial treatment is X and B UK claim exemption Not A and B getting it so that's why here and all don't see at first here don't see in exam at first don't see here maturity amount you in one of the problem they said maturity amount is received in so here look at another maturity amount is there some more maturity amount see if at all there ignore here and see this criteria and claim exemption for those two policies and give that explanation in the notes to account in the problem getting it don't worry question number 10 is even more bigger five policies were there until here at least we have only four policies but here we have five policies you see I think now you will get I think right now I think you're having already 99.9% Clarity with this you will get that even 0.01% clarity policies should is on or after 1st April 2023 all are eligible policies where you need to check 10% criteria plus 5 lakhs criteria is there any policy single policy where premium is more than 5 lakh yes straight away as per provision six taxable it is not exemp straight taxable is there any other policy which where the premium is less than five yes but aggregate is more than five yes provision seven you need to apply for all these four put together provision seven you need to apply and if You observe one policy is rece receiv received in year 1 this is year one another policies received in year 2 34 35 another policies remaining policies are received in year 3 35 36 three years the maturity amounts are received in three years in third year three maturities be received of course third one straight away we tax it the single insurance policy premium is more than straight away we tax it now so remaining policies let us see remaining policies let us see remaining policies no aggregate premium is more than 5 lakh right where insurance premium payable for single policy is not exceeding five but aggregate of premium for all multiple policies or exceeding 5 lakh at the option of the SSE at the option of the SSE he can claim exemption for all those policies whose aggregate premium does not exceed 5 lakh now X Y A B all four put together premium is exceeding five SSA can claim For What and all s can claim exemption for X and Y SS can claim exemption for y and a s can claim exemption for A and B can s claim exemption for X Y A put together again it is crossing 5 LS can the S claim exemption for yab again it is crossing 5 LHS so either you can claim X and Y or you can claim Y and a or you can claim a and b or you can claim X and A put together four lakhs only or you can claim X and B put together 5 lakhs only or you can claim Y and a put together four lakhs only or you can claim Y and B put together five lakhs only so many combinations so now which one I will claim exemption depends upon the maturity amount now look at this I will I will put this on the I will put this on the you know this one I'll put it on the paper be careful don't don't make yourself hurry don't don't don't hurry up X policy how much 12 lakhs y policy how much uh y policy is 24 lakh 24 LH a policy is how much 24 36 B is 36 a is 24 lakh B is 36 LH now by the way annual premium is how much 22 2 3 that's it 2 2 2 3 now aggregate of all these policies is more than five so you can claim exemption for any any those policies whose premium is less than five but here three means again it's more than five so any two so either these two I can claim or these two I can claim or these two I can claim or these two I can claim correct or these two I can claim or these two I can claim these two I can claim anyway now let us see suppose if I claim exemption for X and Y where both put together annual premium is how much where annual premium X and Y 4 lakh what is the maturity amount maturity amount is how much 12 + 20 24 how much is the maturity 12 + 24 36 L now okay now then X and a x and a getting it both put together 4 lakhs only premium paid is not exceeding five what is the maturity amount what is the maturity amount x a so x a x 12 + 24 oh here also the same 36 L fine then X and B I will see X and B I will see both put together maturity is how much X and B oh 5 lakh you see here you see here x and B 5 lakh what is a uh what is the X and B put together 48 lakh maturity amount then fine now let let us see XY we saw XA we saw a also we will see A and B we will see A and B put together how much it is 5 lak annual premium is five both put together how much it is exam I mean how much is a maturity 60 very good then Y and a we will see Y and a how much both put together 4 lakhs Y and da is put together 4 lakhs uh y combination has not come right y four lakhs y plus a four both put together 48 lakhs is a maturity Y and B we will see Y and B we will see Y and B both put together premium paid is 5 lakh and V and B put together premium is 60 lakh okay is there Y and X already X Y or YX both are same only so six combinations I can claim exemption I can claim exemption for either X and Y policy or I can claim exemption under XA policy or I can claim exemption for XB or AB or ya or YB now if you see and if You observe now X policy is matured in X policy is matured in year one year 1 y policies matured in year 2 A and B policies matured in year three these amounts were matured not in a single year if at all all these three are matured in a single year I can happily compare like this and claim exemption but they were matured in three different years here the problem comes but what I told ignore the first identify best combination what the best combination you identify you know what I will do I will claim exemption for I will claim exemption for y and B but actually here there are so many other factors also come into play when when you're doing tax plan but let us not go that in depth I will claim exemption for y and B I will claim exemption for y and b y and b or why I will claim exemption why you know why why wh y y I will claim exemption for policy number y you know because policy number Y is received in second year getting it so first year no I will tax x policy I will I will offer insurance company sir I will tax x policy because no I asked insurance company next year how much I'm going to get sir you're going to get y 24 lakhs that next year you're going to get a and b so I do a pre-planning getting it I'll call insurance company and ask I know what's the matur amount I'm going to get all that so accordingly I will tax X getting it and I will also tax a I will claim exemption for y I will claim exemption for B you can also claim exemption for A and B also right A and B also 60 lakhs right you can claim exemption for A and B also right no I will not do that why you know second I will claim exemption for y policy my tax level will be reduced third year if you want a will tax it time value of money interest at least I can save now exactly so Y and B I claim exemption so I will claim exemption for policy number y I will claim exemption for policy number B getting it you need to observe that's why when you're seeing when you you see now I applied time value of money technique also time value of money financial management equation also I used so when you're doing tax planning you must you must think in all the angles so which means what are the policies are Exempted Y is Exempted and B is also exempt so I will offer yeah I will tax it a and I will even tax X XI will tax it because it is only 12 laks man remaining remaining 2024 that all big amounts so XI will offer if you want first I'll pay tax on the premium I'll pay matur amount I'll pay tax on that no problem at all because the income itself is so low so this is the answer so finally the answer is what Y and B are Exempted look at the answer ultimately so look at the answer ultimately they have given so much discussion ah the consideration is received under C is not exempt that any we know C is not exempt C we tax rate we claimed exemption for y and B right they have given entire this analysis first year second year all that analysis they have given the consideration received under ABC would not be exempt since aggregate of the premium I told you ABC see anyhow taxable AB also they're not claiming exemption better than this what is what is better if at all surrender value of x was not claimed to be exempt not exempt means what if at all you tax it in our example what we did in our example we taxed a yes or no we sorry we taxed X we taxed X if at all X policy is not claimed exemption then then the consideration received for why would be exempt and consideration received either Under A or B anyone can be exempt in other words our answer y or Y plus a r b ER b a 24 lakhs B 36 LH 36 LH exemption getting it if the consideration received under a is claimed to be exempt as aggregate you know premium payable for l and y and put not exceeding five so the consider B would not be exempt but that is not a correct the consideration received under B is exempt aggregate premum payable for y and B did not exceed F the consideration received for a would not be exempt exemption for consideration under B is preferred as it is most beneficial so y + B is most beneficial treatment that's what no in our example also we solved we solved the same getting it A and B also you can claim exemption alternatively but the point is if at all I want to claim exemption for A and B why I have to tax it if I have to tax why in the year number two I have to pay tax much more in advance why to pay tax much more in advance I will differ it up to year three getting it so I exemption for I will offer a for taxation time will of money if at all you understood very good so if at all on surrender of X on maturity of Y if at all you didn't claim exemption then A and B would be exempt which is not a beneficial treatment Y andb is the most beneficial treatment so you need not write entire this analysis in exam this is just cbdt clarification for purpose in exam you stri you you straight write this answer why and B is exempt because aggregate premium is not exceeding 5 lak so now whether you claim exemption in year one or year two or year three you need to have a proper planning in the year one itself year one itself you should get the entire data and do a tax planning cly Pap so so complicated no by the way uh clarification on G component whether the premium payable or aggregate premium payable no for the policies issued on or after 1st April 2023 whatever the policies we are we are discussing on 1 2023 premium amount we are saying great is it including GST comp excluding a cbdt clarified exclusive of GST check exclusive of GST check for the policies which are issued on or after 1st April 2023 and here also term insurance policy term insurance policy me it is further clarified that that limit of five lakhs would not be applicable in case of term insurance policy where the sum is only paid to the Nomine in case of death of a person no amount is paid just for the sake of example at the beginning of the class I use the term insurance but for term insurance policy P limit and all will not apply why because you know in term insurance know maturity amount is generally received by nominees only in term insurance maturity amount will not be received by the policy holder any amount received on death of the policy holder if any amount is received under death it is always exempt getting it hence any Su received under term insurance policy will be Exempted under 10 irrespective of the premium payable further premium paid for such policies would not be counted for five lakhs limit why term insurance by definition term insurance means if the person who is insured is died only then amount will come are you getting the point in case of death not just Tera any policy if at all maturity amount is received on death it is Exempted 5 L limit and all we don't see He-Man insurance policy is always taxable ulip is taxable as per the ulip related Provisions provision number five provision number four and provision number five both are dealing with ulip where two and half limit and all is there that end all is not there in CA inter in CA inter ulip related taxation is not discussed next now how to compute taxable Portion by the way I hope you you understood right now I hope you understood right now entire 10 thoroughly so now if you go back to this diagram and read once again or even if you read in our amendments material once again so what are Exempted policy any sum received under insurance policy including bonus will not be included in total income when if the if the policy is issued onor after 2012 but before 2013 where where the premium payable for any year does not exceed 10% exemption is not available if the premium is exceeding 10 exemption is available of the premium is not exceeding 10 if policy issued honor after 1st April 1st April 2013 where it is issued for a ATU or a person having diseases then the amount is Exempted however exemption is not available if the premium payable is exceeding 15% indirectly the premium payable does not exceed 15 Exempted where insurance is on another 10% is the criteria suppose if the policy is taken honor after 1st April 2023 you must check whether it is 10% or 15% logic you should check in addition to that if at all for single policy if the premium payable is exceeding 5 lakhs exemption is not available suppose you are having multiple policies where each policy is less than five but aggregate premium payable on such policies exceed 5 lakhs in any previous year during the term of the policy exemption is available only for those policies at the option of s is whose aggregate premium does not exceed 5 lakh you see straight away I applied this provision on the problems I did not read the entire supplementary material situation one situation two cases multiple policy single policy the theory and all they gave don't even read that if you read that you will not understand straight away read the provision understand the provision apply the provision and that's what I showed you in all the 10 problems next next let's look at one more related Amendment taxability so when when the amount received under insurance policy is taxable under 56 subsection to Clause 13 if it is not exempt under 1020 it is taxable how much is taxable for that also I've given a notes how much is taxable maturity amount from life insurance policy which is not covered under 10d only income portion is taxable under other sources what is income portion taxable amount is how much maturity amount how much just know we saw 36 to 24 laks all that maturity that is maturity minus see whatever premium I'm paying no that also they're rning it back right whatever amount I that they're rning back can I call it as income but premium I paid no I claim deduction under income tax when I paid this premium I claim a deduction now I'm getting it back it is income suppose I paid premium so much ATC and all I have so many other principal housing loan principal repayment so many items I claimed in ATC getting it one and half L over limit insurance premium related I did not CLA single rupee under ATC whatever premium I paid that also they adding and then sending it me back how and how can I tax whatever amount I paid that also I'm getting in the maturity amount that I will exclude aggregate premium aggregate premium paid and not claimed as deduction under provisions of the Law whatever premium I paid in the past 5 years 10 years but I did not claim deduction that I will eliminate from the maturity amount only balance I will touch that's what the supplementary material they gave a clarification another clarification for that they used a b a minus b c minus D all that this and all is not required getting it first previous year first time when you rece maturity is called first previous year subsequent previous that all not required ma very simple have you received any amount yes minus what is the aggregate premium paid during the term till the maturity date which has not been claimed as deduction check out for each policy how much maturity you got how much premium you paid whether that premium you have claimed deduction if so don't reduce that from the maturity if at all you did not claim ruction of the premium reduce it from the maturity balance only tax for each policy B you calculate no need to apply this clarification so with this other sources other sources remember received under ulip and Kean insurance policy no uh they are always uh received under ulip and Kean insurance policy uh for them separate tax is there for Kean insurance policy it is always taxable for ulip separate taxation is there which is not discussed at CA inter level then we have one more Amendment which is 115 BB J 115 BBJ you know this 115 BBJ is regarding winnings from online games so we have already 115 BB where Lottery gambling betting any other game of sort horse Racers winnings all these are taxable 115 BB straight away5 BBJ in order to understand 115 BBJ 194 ba is also to be understood but before that before that sorry once one more provision I want to introduce related to insurance policy by the way insurance company know when they're releasing maturity amount no they should also deduct TDS on which maturity amount if at all the policy is Exempted under 10d no TDS so insurance company when they releasing maturity amount no they need to inquire they need to get the data from the whether the amount which is receiving is taxable or Exempted after deciding that they need to deduct TDS accordingly suppose if the amount which they're receiving is taxable forc insurance company has to deduct TDS at 5% 5% on the income portion only not on the maturity amount in insute material or somewhere have seen problems they they they have uh uh they have deducted TDS on the suiss only income portion income portion means what whatever is taxable for the SS under other sources that is only called as income portion on that only 5% TDS however if the aggregate payment made if the payment itself is not exceeding only if the payment is exceeding one L TDS will apply if at all payment is not exceeding one lakh less than one lakh no TDS under 194 clear so we discussed ATC point we discussed 10d point we discussed other sources taxability point we even discuss the TDS form now let's look at the final amendment that is 115 BBJ winnings from online games you know for this know what I will do is instead of discussing here I will discuss it as part of tedious amendments related video getting it you just continue watching this in the marathon or even the Amendments class the time stamp on TS is there you will get it getting it that's it with this other sources related amendment is over so let's start uh revision of clubbing provisions so clubbing Provisions were discussed under Section 60 to 65 at CA inter we don't have this section 65 in the study material it was not given that is related to sending of notice by the department to the SSC getting it so that is that we don't have that's a very small provision but anyhow we don't have in our syus now if you look at the book no like if you look at the actual chapter name given in the IC material income of other persons included in ssc's to income means actually the income is received by somebody else and that income is included in your total income in your taxable income so that is not taxable for him the recipient of income is not liable for tax but the payer I mean the the other person is liable to pay the tax getting the point like the the logic is very simple because you might have diverted the income or you might have temporarily diverted the asset so that income can be so that a slab limit can be you know utilized a benefit of slab generally when two or more members are there in a particular family if 1% of the family is earning higher income in order to minimize the tax liability they will shift income of his like they will shift his income to another family member now that shifting is also not allowed by the department if you shift the income that will be ret taxed in your hands and you have to pay tax on that so that's what clubbing provision is all about so in that the first section is section 160 so here what you what SS is doing is is simply transferring the income not transferring the asset suppose you are having some asset and from that asset you are getting some income and uh without transferring the asset you are just transferring the income suppose you have you have given somebody a loan on that you are getting interest whenever you give any loan if you are getting any interest that interest is taxable under which head of income other sources generally now you told the other person please give that interest and interest income to my son please give that interest income to my brother getting the point you diver the income now you are escaping from the Department saying no that income I'm not receiving that income is received by my brother getting it so I gave loan but I am not getting the income the the income is being received by my brother so it is not taxable in my hands no section 60 says if you transfer income without transfer of asset that the income is taxable in the hands of transferer only so in exam they'll give you you made a bank deposit you you gave a loan on that you're getting some interest that interest you told the other person to pay to somebody else but the loan or deposit that and all is in your name only so you just transferred income so that income is taxable in your hands in the hands of the transferer getting it next next now so that's about uh this one next suppose no now since this provision is saying if you don't transfer the asset and just transfer the income clubbing provision will apply what if I do transfer of asset also what if example I have a car example I'm having a car which I'm using it for renting business getting it so I'll do one thing I will transfer this car to my brother I will transfer this car to my relative or I will transfer this car to my one of my family member now see generally you know if I if I transfer this car to somebody else you know whether I S sold it or whether I gifted them permanently permanently if at all on that any income they are getting that is taxable in their hands only because the asset is not M any more what if you transferred with a condition of revocation revocation means you can reverse the transaction you can reverse the transfer so that that transfer is called as revocable transfer what is it called as revocable transfer what is a revocable transfer you transferred some asset to somebody on a condition that anytime you can get back the asset which means you did not transfer permanently if you transfer to somebody permanently you know suppose simple I purchased a car which I'm using it for my business purpose like hiring I'm renting the cars I'm getting income if I sell this car to somebody else I sold it or I gift it to somebody no more relation with that car anymore now on that car after I transfer if any income is there that is taxable in their hands only right so how the hell it is taxable in my hands no however if I transfer with an agreement mentioning I can get back this car at any time which means the underlying intention the underlying intention is very clear you are transferring to evade tax so if you are transferring any asset under revokable transfer method not a permanent transfer you're not permanently transferring to somebody see if you transfer it permanently now you can't get back even if you fight like anything you can't get back you gift it to somebody as for gift there is a there is a law for gift as for the gift once you gift it that becomes their own property you can't again claim back once you sell you can't claim back ta Goods all very clear ownership once you transfer is no more suppose if you transfer it with a condition of revocation with an agreement of revocation at any time on that income of course once you transfer to somebody with a revocable transfer I know you will revoke it after some you know five years or 6 years or 10 years whatever the timeline you will revoke it sometime you can revoke right anytime you can revoke right as long as you know revocation Clause is there in a transfer entire income on the transferred asset is not taxable for the other person is taxable in your hands only so any income arising on transfer of an asset under revocation that is taxable in the hands of transferer only now that is what section 61 says now section 63 the section 63 what it says you know see like 61 62 63 these three talks about revocation Clause only now these sections says the following transfer is not treated as revocation the following transfer is not treated as revocable generally what is a revocable transfer you know if I transfer any time if I get back even after 20 years even after 30 years if I get back the asset that's a revocable transfer only if I have a right to get back the asset later point of time I transferred today but I can get back it after 30 years again I I will get back the transfer will be reversed even if it is after 30 years even if it is after 40 years even if it is after 50 years doesn't matter it's a revocable transfer suppose know I transferred to my brother I transferred I said to my brother and in the agreement I clearly mentioned I cannot get back this asset I cannot get back this asset during the lifetime of my brother like what I mentioned I transferred this asset genuinely to support my brother for his income purpose getting it throughout his lifetime he can enjoy that asset how long how long he survived that I don't know that only God decides so I transfer the asset in such a way that my brothers throughout his lifetime whatever income is there he will only enjoy I cannot get back even if I try my best even if I go to Supreme Court even if I file a case anywhere I can't get back the asset but once my brother expires once my relative expires once the concerned person expires then I will get back this asset now here also I'm getting back technically speaking it's a revocable transfer because you're some point of time you're getting back right that's a revocable technically speaking but income tax law assumes that this is not a revocable transfer income tax assumes that this is not a revocable transfer so suppose if I transferred in 2023 24 Year to my brother one asset throughout his lifetime I cannot get back this now 23 24 onwards he's only enjoying the income now is that income subject to clubbing in my hands is that income taxable in my hands no it is not taxable this is what 61 62 63 collectively see if you transfer any asset under revokable method income on that asset is taxable in your hands only I know temporarily somebody is owner but still it is taxable in your hands only suppose if you transfer an asset to somebody on a condition that during their lifetime of the transfer or beneficiary you cannot get back the asset then that is not treated as revocable transfer accordingly if if you cannot revoke the transfer during their lifetime any income on that assert that is taxable in the hands of transfer the recipient only not transferer I hope you're clear so that's one segment of clubbing provision then now we have section 64 in section 64 we have these Clauses 64 subsection 1 64 subsection one Clause 2 Clause 4 LW six LW 7 loss eight these two provision talks about transfer of asset to daughter-in law these two Provisions talk about transfer of asset to spouse so here transfer of transfer of asset to daughter-in-law here spouse working in an organization in an organization where the other spouse where the other spouse has substantial interest so these are the remaining Provisions in the clubbing 64 subsection one Clause 2 Clause 4 Clause 6 Clause 7 Clause 8 now what are they so first let us look at this point in this many students have confusion regarding especially uh okay fine let me let me let me slowly discuss so what is that 64 subsection one Clause two by the way whatever the content I I told you that is that is given in this in our material we have even given problems and even answers also we have given at this book so you can download this book anyhow on the website cma.com in that PDF resources were there inside that P4 or P3 new scheme P3 old scheme P4 so the book is same exactly for both old and new so you can download and you know have a look at have a look at it getting it so now I'm now what I'm going to discuss is this provision this provision so 64 subsection one Clause two now what this provision says suppose no there is an organization it may be company XY Z you know limited or it may be LLP XYZ LLP or it may be partnership F XYZ enco or it may be uh you know a society or it may be my own business so proprietary concern so in my business or in an organization where I am having suppose Mr Ram suppose if I'm having in these organization substantial interest what do you mean by substantial interest subst how substantial interest means first of all more than 20% voting power more than 20% profit sharing ratio in case of company voting power is considered in case of remaining organizations profit sharing ratio is considered so if a person is having 20% or more profit sharing Ratio or 20% or more voting power in a particular organization then this person is said to be having substantial interest now to to count this substantial interest how to count 20% it is the individual whoever individual is that fellow voting power plus his relatives voting power that should also be considered now what is covered in relative brother or sister spouse getting it lineal ascendant or lineal descendant means my three generations downward three generations upward lenan descendant means parents grandparents great grandparents Leni and descendant means children grandchildren great grandchildren getting the point so that is what lenan ascendant lenan descendant refers to so now to count whether in a particular company do I have substantial interest how to count so what is my shareholding check out plus my relatives my brother my sister my spouse my parents grandparents great grandparents my children grandchildren great grandchildren so all of these voting power counted total it Sumit what is the percentage if it is 20 or more then I said to be then I said to be having substantial interest okay you are having substantial interest in one company fine what is the consequence suppose in this company know my wife is working example my wife is working or otherwise my wife is having substantial interest I am working in that company or I am having interest my wife is working in that company now immediately you have a doubt sir what if both of them are having first let me complete this provision then I'll discuss about that suppose in a company where I am having substantial interest and my wife is working as an employee whatever this company paying salary you know yearly they're paying 6 lakhs perom salary this entire salary which my wife is getting from this company in which me and my relatives put together are having substantial interest getting the point so whatever salary she's getting no that is not taxable in her hands that is taxable in my hands that is taxable in my hands as income able to understand further remember XYZ limited is a company which is paying salary to one of the employee for XYZ company it is a deduction under 37 in pgbp and remember for them 40 years subsection to will apply 4 Clause to will apply as for that this my wife know she will come under specified person able to understand getting it so if at all for XYZ limited if at all the salary paid to my wife is a specified person for them also 482 dis will apply in addition to that whatever salary they're paying to that is again taxable in my hands as income so you need to be very careful getting it so whenever this provision is given what are the tax implications you should talk about 482 and you should also talk about 64 subsection one Clause two but anyhow this much in-depth knowledge is not required at C inter level so this is enough so in a company where I am having substantial interest my wife is working whatever salary that she is receiving that entire salary is taxable in my hands very simple this clubbing clubbing means what others income is taxed in my hands clubbed means others income is clubbed in you in your income so that's what clubbing means now when this clubbing will not apply suppose you know company's paying salary right company's paying salary to my wife right if at all my wife is having any professional and Technical qualification and experience for that qualification experience only company is paying the salary if I prove to the department sir I I in this company they need an employee and my wife is having all the qualification so she's working if somebody else also is working we will pay 6 L only for her also we are paying six lakhs how come you say that I influenced and got this job so if at all my wife if at all my spouse is getting salary because of her professional and Technical qualification clubbing will not apply this is what main provision of 6412 now there is a clarification given what if in the same company both both husband and wife both of them are working and both of them are having substantial interest generally you will see these kind in private limited companies getting the point suppose husband and wife getting it both of them are having substantial interest in this company and both of them are working as directors in the company both of them are receiving remuneration now what if at all both of them are receiving remuneration from the company for the skill and talent professional qualification and education and Technical qualification and skill clubbing and all will not apply suppose if at all they don't have any qualification they don't have any professional skills and all just for tax evasion purpose they're getting salary from company and utilizing their slab limits and compan is liable for plat 30 so indirectly they're ashole tax planning they're doing if at all they're getting income both of them are they're getting income and the exception will not apply so both of them are having substantial now how to Club first of all calculate husband income separately total income excluding which income excluding amount received from XYZ excluding salary received from that organization from that concern from that entity from that Enterprise excluding the concerns income calculate total income of the husband same way calculate total income of the wife getting it excluding whatever suppose wife is getting 7 lakhs perom salary husband is getting some 8 lakhs perom salary from this particular concern where both of them are having substantial interest now excluding this 8 lakhs excluding this 7 lakhs calculate their normal total incomes as per provisions of income tax law what is total income getting it sum of all heads of incomes set of and carry forward and clubbing then you will get gross total income so minus deductions then you will get total income so that total income you calculate whose total income is higher whose total income is higher excluding this income excluding only this income whose total income is higher just check out now if a all husband's total income is higher if at all husband's total income is higher now they are getting 8 lakhs plus 7 lakhs right like they're getting 8 lakhs husband 7 lakhs entire 15 lakhs is taxable entire 15 lakhs is taxable in the hands of the hband supp if wife total income is then entire 15 lakhs is taxable in the hands of the wife that's it now once suppose the for the first time in 2223 previous year we clubbed in the hands of the husband this entire 15 lakhs we taxed for husband 23 24 no wife total income is higher now in the in that next year whatever both of them are receiving remuneration rate where it is clubbed husband only so the department we clearly said the income tax are clearly said once clubbing applied in the hands of one person the income will be clubbed in the hands of of the same person for all the succeeding assessment years unless assessing officer changes it understood or not so that's 64 subsection 1 Clause 2 then then 64 subsection 1 Clause 4 and Clause six both are more or less similar getting it now what is this here what happened is one particular spouse transferred an asset for inadequate or actually the uses the word very clear without adequate consideration without adequate consideration transfer asset other than house property what is it one spouse is there example husband or example wife transferred an asset which asset any asset other than house property if I transfer my car or if I transfer my you know some other land vacant land or if I transfer my business related building whatever getting it but not house property house property means what the that land or building I mean that building or land and building which is accessible under house property why because for house property section 27 deemed owner concept is applied I hope you remember in house property we have a concept called deed if any transfer of house property without inad without adequate consideration to the spouse then the transferer is De to be the owner however if if the transfer is in connection to LIF separately then deemed one concept will not apply so that is house property remaining all the if you trans to spouse without adequate consideration without adequate means what zero consideration or consideration is less than market value so if you transfer any asset for without adequate consideration to home to spouse to spouse now on this asset no on this asset on this asset no she is getting yearly some two lakhs income yearly some two lakhs of three lakhs or four lakhs whatever the income that entire income is taxable in the hands of the husband now you see here here it is not a revocable transfer I transferred permanently I gifted my wife the car permanently I can't take it back but since she's your wife since she spouse getting it though it is not a revocable transfer it is not covered under Section 61 perview you transferred permanently if you transfer temporarily 61 we will apply but you transferred permanently you can't take back the asset again from your spouse but but then you transfer to spouse now so we consider it as tax evasion we consider it as you're trying to reduce your tax burden by slab you ization getting the point so if you transfer any asset to spouse without adequate consideration without adequate consideration so even if you give to any your wife any property which which gets some income that income is taxable in your hands that income is taxable in the hands of the transferer so that's what this provision now for this one exception is there when this provision clubbing cannot be applied suppose if the transfer is made for adequate consideration if I sell it she bought it by paying me proper consideration I sold it and I paid even capital gain tax on that also everything is clear and if I transfer to her in an agreement to live a part in a situation of divorce getting it if both husband and wife are not living together they are living separately so in connection to that I transferred some so that she'll get income or so that he will get income clubbing will not apply what is it clubbing will not apply are you clear suppose no okay fine suppose you know husband is there he transferred some you know car to wife getting it this car know she is renting so she's getting monthly 50,000 Rupees profit on that car now this entire 50,000 is taxable in the hands of husband fine very clear suppose no husband gifted cash to wife husband gifted cash I just gave cash gift to my wife now my wife is receiving cash gift more than 50,000 Rupees let us assume I gifted 5 lak rupe okay she she received cash gift worth of more than 50,000 is it taxable in her hands and other sources no because received from relative SP so Exempted now what she did you know she's very clever she not she did not buy any s she did not buy any other shopping nothing she went and started a business or she already had a business in that business she invested as a capital contribution she just you know took that profit took that cash GI and invested in the business now from this business no she's getting some profit now from this profit whatever whatever profit due to my gifted asset due to my gifted cash whatever profit attributable that is clubbed in my hands how to identify this profit this is one topic where many students have confusion getting it if if spouse transferred any asset to wife and that asset is invested by her in a business how to apply clubbing provision on that so getting it proportionate profit is you know to be clubbed how to calculate proportionate profit you and me cannot decide law has given a formula very simple so what is it profit for that year what is the profit for that year from that business identify multiplied by what is the gifted asset value or cash cash value or gifted asset value as on first April of relevant previous year as on first April of relevant previous year what is the gifted asset value which is invested in business invested in business as on first April of the year how much is invested divided by divide by what is the total Capital total Capital means what opening Capital plus you know opening Capital which includes what which includes what you know wife's own Capital plus gifted Capital whatever husband has given that gifted Capital total Capital as on first April of relevant previous year as on first April of relevant previous year suppose know for that year she has got a profit of 5 lakhs as an opening date as on 1 April of 20 20 22 getting it because I gifted her in I gifted her on let us assume I gifted her on uh you know 15 April 2022 I gifted her Cash She immediately invested on 16th April into the business now as on 1 April how much is my gifted is it remember I gifted her on 15th April not on the 1st April so as on 1 April opening date of the financial year so how much is my Capital zero divided by what is total Capital denominator whatever the number doesn't matter the 5 multip 0al to0 so for this year clubbing will be zero I hope you're clear now you know how much I gifted by the way 5 lakhs I gifted but as on 1 April I did not gift anybody I I did not gifted her I gifted her on 15th April as per income tax circular when when when when when one spouse gifted some cash or yes to other spouse and she she invested in the business for that year she got a profit clubbing will apply only if the gifted asset is there from the beginning of the prev year not in between of the previous year if at all in between I gifted and invested clubbing for that year will not apply suppose no now clubbing will be zero suppose know uh opening Capital as on 14 2022 my wife's own Capital already there 10 lakhs 15th April how much I gifted 5 lakhs for that year profit how much 5 lakhs total closing Capital how much 20 lakhs now next year this will become opening Capital right so 23 24 no she has got a profit of 10 lakh rupe multipli by as on first as on 1 April 2023 what is the total Capital 20 out of this how much is my gifted asset very good five lakhs is my gifted asset sir last year now now you see gifted asset gifted set as on 1 April 2022 how much as on first sorry 2023 as on 20 because I'm doing for 202 23 24 so as on 1 April 2023 how much is my gift ass set out of 20 lakh mine is only 5 lakhs because she did not withdraw so she invested it in 15th April 2022 as is she brought next year also started so next year opening get how much my capital is it 5 lakhs is there now clubbing will apply so 1 4 so 10 lakhs multiped by 1 by 4 is equal to 2.5 lakh okay for the previous year 20 23 24 out of 10 lakhs what is it out of 10 lakhs profit that she is earning out of that 2.5 is subject to clubbing in my hands I hope now you are with respect to this point so very simple when I gifted her check out if I gifted her between the previous year between 1 April to 31st March between a gifted and that is invested in business for that year she got profit zero clubbing because opening date of that year how much is there my gifted said zero I gifted around 15th April not 1 April able to understand but for the next year in the next year opening date my Capital will be there now so for that year whatever profit she gets proportionately will be cled so that's it suppose no I gifted her no some money she went and invested in a partnership firm she's a partner in a partnership firm on that she's getting interest ah interest is as it is clubbed because interest on that five LS which she invested no that is out of my gift said no that will be CL suppose she's getting profit from partnership fir share of profit Exempted because share of profit received from a partnership fir is what Exempted suppose she invested in Soul propriety this is how we should calculate able to understand suppose she invested that in a company and she's getting dividend dividend is Club dividend will be subject to clubing able to understand so that's it so that is what 64 subsection one Clause two is all about so in this I've clearly explained everything Clause 4 is also over where transfer asset is invested in the business getting it illustration five we have given you illustration five in our book and even in test your knowledge question also we have given one question so what I will be doing is any how in this Marathon I'm going to upload the main provision and test your Knowledge Questions also which I solved and explained so that also I'll be uploading for your easy reference getting it next next now we understood Clause number four right we understood Clause number four right now what is Clause number six Clause number six is very simple suppose you did not gifted her asset directly you gifted the asset to some friend your friend or your brother your brother gifted to your wife that's an indirect transfer getting the point indirect transfer also it is subject to now in here to my wife who transfer my brother but the law assumes I am the transferer the clubbing will be in the hands of the deemed transferer that is what Clause six says about so you know in clubbing know you have an example called cross transort what is it cross transort suppose I gifted an asset to my wife my brother's wife not to my spouse but to my brother's spouse in return my brother gifted to my wife my wife my wife getting it so indirectly I gifted to my wife indirectly he gifted to his wife getting it that's a cross transer so they both are circut transaction getting the point they both are interconnected transaction so clubbing will apply in the hands of De transer that's it next next so then suppose no I did not transfer to my spouse I transferred it to my daughter-in-law 64 subsection one Clause 7 will apply and Clause 8 will apply if I directly transfer to my daughter-in-law CL 7 if I indirectly transfer to my daughter-in-law Clause now how clubbing will apply exactly instead of SP in Clause number four what we discussed spouse instead of spouse you transport to daughter that's it provision is exactly same son's wife if you transfer any asset to son's wife without adequate consideration whatever income your son's wife daughter-in-law she's receiving that is tax in the hands of the transferer suppose if the daughter-in-law invested in a business how to Club same we have seen as on opening date how much is the capital from the gifted portion divided by total Capital as an opening de in that proportion only clubbing will apply so the provision is exactly same just that clause number changes just that the transfery changes in Clause number four and six the transfery the beneficiary spouse whereas in Clause number seven and eight the benefici is daughter inlaw that's so the clubbing provision is over clubbing Provisions are over hardly half an hour we spent now there is another provision 64 subsection 2 what is 64 subsection 2 what this provision says this provision says suppose an individual is there he's a member of HF he's a member of HF now this individual is having some personal property now this individual is having some personal property by the way before this one important observation now 6414 Clause number six there any asset you transfer excluding house property whereas in daughter-in-law case no even if you transfer house property to daughter-in-law on that income whatever she is getting first compute income in her hands as income from house property that income is subject to tax in the hands of the transferer because for house property transfer to daughter inlaw without consideration 27 deemed owner concept is not there so clubbing provision we will apply whereas for transfer to spouse no house property provision will apply if I transfer house property if I transfer any other asset Ling provision will apply fine fine come back come back to 64 subsection 2 Suppose there is a HF inside that there is one member now this individual know he's having his own personal business also out of that he's earning so much and he constructed some buildings and now one building or one asset one property he transferred to HF at free of cost without consideration without adequate consideration now this individual who is a member of HF transferred his personal property into HF he throws that property into HF property getting the point now whatever now HF is receiving income on that property that is not taxed in the hands of the HF that is taxable in hands of the transferer only suppose no later on after transfer is over everything is over HF got HF got partitioned now whatever total properties of the HF is z know that is distributed equally to all the brothers now how clubbing will apply suppose no I am the individual who originally transferred the HF no so I transferred 100 CR worth of property to my HF one property gifted now on this 100 CR whatever HF is getting income no 10 CR income HF is getting that entire income is taxed in my hands but once after partition me and my wife we are receiving only two CR income on that property then after partition only 2 CR is subject to clubbing in my hands reminding others the share is not subject to clubbing because no it is not H property anymore after partition the properties got distributed between all the brothers and sisters so no more clubbing will apply only my share and my wife's share only that will be taxable in my hands before partition 100 CR worth of property I gifted no on the 10 CR income H is getting right that is entirely subject to clubbing in my hands with this clubbing provision is over 64 subsection to everything we have discussed that's okay so immediately I have attached a you know test Knowledge Questions also which I solved using all these principles you just watch it you will feel a literal revision of income tax complete income tax with provisions and answers you will feel like a revision absolutely in our regular class we will be discussing very indepth the way we explain everything is completely different so that's why it's a revision class revision class is revision class that's it okay take care so on clubbing one more clarification I just want to give you remember if at all the SS is following 115 BC default tax means he has not opted shifting Out means he has not exercised the option of Shifting Out means he's declaring income under default tax regime 10 subsection 30 to, 1500 perom per child you will get exemption right for every minor child when you're clubbing that exemption is not available that exemption is not available if the SS is declaring income under default tax just I just want to remind you this that's it so go solve test your knowledge questions I have already Sol you just observe it okay continue yes so let's start the set off and carry forward revision so the broad provisions of set off and carry forward were completely covered under Section 70 to 7 70 to 80 and set of and carry forward Provisions are discussed under chapter six of income tax act Income Tax Act is broadly divided into 23 chapters inside the chapter six whereas clubbing Provisions is covered under chapter five all heads of incomes are covered under chapter four Exempted incomes all that were covered under chapter three getting it chapter one preliminary rates of tax all that will be covered in that chapter one getting definitions all that so like that you know chapter six whereas 68 talks about reductions that's why we call it as chapter 6A reductions getting it fine so now so in this 70 to 80 we don't have multiple sections at CA in like 78 79 so these sections we don't have at CA inter we only have at CA final so rest all other sections we have at CA inter getting it so now in the set of and carry for word the sections are broadly divided into two categories set of related sections carry forward related sections getting it now set of related sections for set of we have section 70 and 71 these two sections talk about set off whereas 71b 72 73 73a 74 748 these six sections talk about carry forward section 80 is there this is a condition section 80 it speaks about a condition to carry forward these losses in order to carry forward these losses there's a condition except 71b remaining all losses you can carry forward only if you file it return within the due date if you file the it return income tax return within the due date mentioned under 139 subsection one read with 139 subsection 3 if you file the return within this due date then only you can carry forward all the losses except 71b 71b talks about carry forward of house property loss 72 talks about normal business carry forward of losses 73 talks about speculation business loss to be carry forward 73a specified business losses to be carry forward 74 carry forward of long-term capital losses 74a uh carry forward of losses from warning and maintaining resources and 0 which talks about condition what is the condition you have you have to file it return return within the due date for filing 1391 in order to carry forward all these Lawes except house property loss so house property loss you can carry forward even if you file the it return belatedly not only that there is another loss called unabsorbed depreciation loss and you know unabsorbed capital expenditure on scientific research and family planning these losses also can be carry forwarded even if you f even if you file the it return relatedly now what is an absorbed depreciation La what is set off and carry for all that we will be discussing now there is a section called 73 which talks about intra head setof intra head set off in some cases it is also refer had intersource intersource set off within the same head of income within the same head of income we all know that all the incomes under income tax law were broadly classified into five heads of incomes now under a particular head of income we may have multiple sources of income suppose suppose I may have some five to six House properties whereas all the house properties incomes now they are taxable under house property only within the house property head getting the point so now intra head set off means what now suppose I may be having multiple businesses so I have some business one I have some business to I have some business education I have some business for you know some rice training I have some business some wholesale sale something now if I have a loss in one business if I have a profit in another business both are coming under same head of income can I set off and pay lower tax on the lower income because after set off the overall profit will come down so can I set off yes section 70 says loss from one source of income can be set off againest profit from another source of income provided both the sources of incomes are taxable under same head of income now to this rule there is an exception by the way please listen to these Clauses these classes at standard speed only don't don't hurry up now now so so that is regarding the standard Rule now there are exceptions four exceptions we have exception one exception two exception three exception four no like headwise we will come so with respect to salaries inra head set of no restriction because in salary there's no question of loss house property int head set off within the head of income set off with set off of loss from one house with another house there is no restriction pgbp there is a restriction loss from speculation business loss from speculation business can be set off W with speculation business profit so what is the condition one so it says if you are having a speculation business and from that activity if you make a loss that loss you can set up only with speculation business you cannot set up with non-sp speculation activity you cannot set up with other than speculation simple I have multiple businesses I have coaching Institute and I'm I'm incoming this and along with this I'm also trading in shares and securities in the stock market so where I'm getting intraday profits and all intraday losses now this is called speculation activity from this business I end up with a huge amount of loss now can I set up my St business profits with this particular loss no because this is speculation activity loss from speculation activity can be set off only with speculation profits what is a speculation business what is a speculation transaction where you are transacting in shares and securities or Commodities where you end up closing the transaction without delivery you don't take any delivery you are settling it without deliver itself that is called a speculation the following are not a speculation transaction hedging transaction is not a speculation derivatives transaction is not a speculation forward contract is not a speculation further if a company whose main business itself is trading in shares and securities for them it is not a speculation for a bank trading in shares and securities and commodities not a speculation for a loans and advances nbfc company trading in shares and securities is not a speculation activity for all other organizations if at all you're having normal business and also you're doing trading in trading in shs and securities the extent the portion of trading in shs and securities this is treated as speculation activity this entire definition is given under Section 43 of pgbp I hope you're clear now section 7 says what loss from speculation business can be set off only with the speculation you cannot set up this loss with any Source any head off income next another exception loss from specified business under 35 ad if you have if you're doing any specified business getting the point which comes under 35 ad section out of 14 businesses which you have you are doing those activities you have a loss it can be set off only with only with 35 ad businesses so if you having having any loss from specified business it can be set off only with profit against specified business getting the point now whether these specified businesses are you claiming deduction under 35 are they eligible for 35 ad or not doesn't matter you are having loss from specified business when hotel is there you started long ago 20 years ago you have a loss getting it actually that hotel is not eligible for 35 ad but that comes under three star four two two star three star four star five star seven star that category only you have a loss you have another hotel where you have a profit which already claim a deduction of 35 ad which is eligible for 35 ad but at the end of the day both of them are 35 ad businesses whether they are eligible for deduction or not doesn't matter you can set off then another exception long-term capital loss now pgbp related exceptions over now capital gains within the head of income exceptions long-term capital loss can only be set off against long-term capital game in other words long-term capital loss cannot be set off against long-term capital gain sorry short-term capital gain getting it you see the Restriction is only for long-term capital loss not for short-term capital loss suppose if I have a short-term capital loss I can set off against long-term capital gain I can set off against short-term capital gain able to understand now whether this long-term capital loss is 112a loss 112 loss whatever it is you can set off only with the long-term capital gain suppose if I have a loss after set off I don't have any I don't have any other still I have a loss you can carry forward anyhow carry forward verion I'll come to that later next another exception loss from warning and maintaining resoures like you are running a Stud form Stud form means where you are breeding the horses you you are breeding the for feeding you know horses and all for horse race purpose so if you have a loss from that activity raise horses maintenance activity remember if you participate in a horse race and you lost money out of that betting that is not a loss on set of and carry forward that is ignored that is to be ignored 115 BB section 115 BB say income from wiing income from Lottery income from so and so whatever whatever it is flat tax 30% if any loss is there on that ignore I am talking about which loss you you're you're doing some activity called warning and maintaining resources from that activity you're having loss that loss you cannot set off with any other income you can only set off with profit from waning and maintaining raise horses suppose if I have a St form in Chennai I have St form in Bangalore Bangalore is getting profits Chennai St form I'm making losses I can set up these two so these are the restrictions within the head of income now suppose I have a normal business from that I have a loss and I have a speculation profit can I set off yes so you just said it is not possible no I said speculation loss cannot be set off with others I did not tell other businesses loss can be set cannot be set no I did not tell so the Restriction the Restriction is only for speculation loss specified business loss long-term capital loss loss from owning and maintaining resources these four item these four losses can only be set off against these four profits remaining losses I can set off with other profit other losses I can remaining losses I can start off with other profits also if I have a pro if I have a profit in speculation and loss in nonp speculation nonspecific activity can I set off yes because there is no restriction for this loss I have a short-term capital loss can I set off with long-term capital G is there any restriction for short-term capit loss no so I can set off I have a loss in other sources can I set off with wning and maintaining resources is there any restriction for this loss no restriction so can set off so that is in head set off now first know when we are Computing problems first we should apply intra head set off still you have a loss then you can set up that loss with other heads of income you can set up the loss with what other heads of income which losses other than the four which we discussed because those four items are Untouchable you can't touch them at all getting the point long-term capital loss loss from speculation loss from business loss from owning and maintaining resources these losses can only be set up against these respective incomes getting the point so they can't be set up with other heads also if I have some other loss in the head of income what about that loss can I set up with other heads of income yes you can absolutely set off but there are certain additional restrictions house property laws can be set off against other heads of income only up to 2 lakhs only up to how much 2 lakhs suppose if you have a house property loss head of income itself is total loss two and half three lakh loss is there I can set up with other heads but maximum how much up to 2 lakhs only now when you are setting off in interhead no interhead no first know set off against long-term capital game set off against short-term capital game 1A then set off against long-term capital gain 112a so 112 which is taxable at 20% Which is taxable at 15% which is taxable at you know 10% so when you are having a loss you are having these gains first set up against these gains the suppose no you are a company your normal rates of tax normal income pgb income normal rates of tax is 30% in that case set up with normal RI of tax why suppose if you have a loss a company is there it has a loss in one head so it has a profit in bgbp it has a profit in long-term capital Lane long-term capital Lan for the company is taxable at 20% whereas normal profit business is taxable at 30% so if I set up this loss against business or Capital which is beneficial I will start off with business because my tax liity will come a to understand so whichever income is taxed at higher rate higher rate against that set of this so that's the logic getting it fine so a house property loss cannot be set off against other heads of income Beyond two lakhs you can set up to 2 lakhs against any head of income you can set up against salary you can set up against pgbp you can set up against capital gains you can set up against other sources but remember if other sources income consist of winnings and lotteries and card games like that against you can't set off getting it as for BB winnings lotteries card games puzzles whatever it is it is St taxable at gross 30% rate no set off is permitted no deduction from that is permitted no expenditure can be claimed no loss on that Source can be considered that 115 BB section clearly says that are you clear next now now there is another one loss under the head pgbp loss under the head of income which head of income pgbp loss under the head pgbp means what it may be normal business it may be depreciation loss it may be loss related to capital expenditure on scientific research it may be loss related to capital expenditure on family Bing these all come under losses under the head pgbp loss under the head pgbp can be set up with any head of income except salaries so with the salary set of income pgbp loss cannot be set off pgbp set of income related loss it may be depreciation loss it may be what it may be you know normal business loss whatever you cannot set off with salary set off income F the loss under the head capital gains loss under the head itself capital gains cannot be set off with any head of income cannot be set up with any head which means if I have a losses within the head capital gain I have to set up only with capital gains further long-term capital loss can be set up only with long-term capital gain short-term capital loss I can set up with long-term capital gain I can set up with short-term capital G still have a short-term capital loss can I set off with other heads of income no you cannot and further remember whether it is inad or interhead suppose if I have income getting it from an Exempted Source suppose I'm doing agriculture activity from that I made a loss can I set off with other heads of income no agriculture income if you get positive it's Exempted right same way if you have a loss in agriculture that loss has to be ignored so loss from an Exempted Source has to be ignored getting the point fine sir understood section 70 understood section 71 so summary what is the story loss from speculation business cannot can be set up only with speculation income loss from specified business can be set up only with specified business loss from Capital long-term capital loss can be set up only with long-term capital gain loss from activity of owning and maintaining race horses can be set up only with income from owning and maintaining race horses loss under the head house profit can be set off with other heads of income up to maximum of two lakh loss under the head pgbp cannot be set off with salaries loss under thehe capital gains cannot be set up with other heads of incomes that's it and loss from an Exempted Source has to be ignored listen to this day before exam believe me you will definitely everything will go into your mind you will never do a mistake fine next now sir I applied within the headset off then I have still loss I applied set off with other heads also still I have a loss what should I do carry forward what you what you should do carry forward now section 71b house property loss after set off up to 2 lakhs with other head still you have a loss carry forward for eight assessment years after the assessment year for which you got the loss 72 sir I have a normal business sir not a speculation not a spef I have a loss from normal business I set up with other heads except salary still I have a loss what should I do carry forward for eight assessment Years sir I have speculation loss carry forward for four assessment Years sir I have a specified business loss I'm doing a specified business 14 businesses I'm doing that business and I have a loss what should I do carry forward for infinite number of years no time limit sir I have Capital losses sir I have a longterm capital losser I can set up only with gain rate but I don't have gain what should I do carry forward for 8 years sir I have a short-term capital loss sir I setled off with long-term capital gain short-term capital gain all that still I have a loss what should I do carry forward for 8 years 74 so I'm doing I'm I'm having a business called warning and maintaining resources from that activity I got a loss what should I do carry forward for four assessment years carry forward very simple now in order to carry forward these losses except except 71b in order to carry forward these Lawes section 80 says You must file it dat very simple now now you need to understand what is business loss what is unabsorbed depreciation loss correctly now when you're calculating loss under the head pgbp no first know you compute income from business or profession rate you compute how do you compute income from business or profession all incomes minus all deductions disan and all you just apply like you start with net profit add disan less further deductions anything now you will have a profit right for that profit no as per pgb provision first compute profit or loss suppose you computed there is a loss there is a loss this entire loss is not business loss to this add back depreciation claimed under Section 32 okay added back to that add back deduction claimed under Section 35 for capital expenditure on scientific research add back because you claim a deduction already suppose no you did not claim a deduction for depreciation you did not claim deduction for capital expenditure on scientific research or capital expenditure on Family Planning before claiming these three deduction getting it what is pgbp income calculate or if at all you calculated as per standard procedure pgbp result you have a loss to that already you reduced depreciation 32 right depreciation additional depreciation all that already you reduced capital expenditure on scientific research rate already you reduced deduction under section 36 for Family Planning capital expenditure rate add back now after adding back three all so if still there is a loss if still there is a loss this loss is only called as business loss within the meaning of section 72 only this loss is called as business loss now in 72 I told right business loss can be Carri forwarded for 8 years that 8 years point will apply only for this loss suppose now which means which means before claiming deduction before claiming deduction for depreciation before claiming deduction for scientific research and Family Planning Capital expenditures you still have a loss this is business loss carry for eight years and these items remember what is it the depreciation the capital expenditure scientific research and family planning these expenditure the business profits are not sufficient to absorb these expenditure therefore unabsorbed depreciation unabsorbed capital expenditure on scientific research unabsorbed capital expenditure on Family Planning you can carry forward how many infinite no time limit are you clear and once you carry forward no what you should do for all carry forward losses there is a restriction what once you carry forward a loss under one head of income next year what is it a broad forward loss suppose I have a broad forward house property loss generally current we have house property loss what can I do I can set up with other heads still I have I can carry forward like that I brought forwarded one loss now can I set up the brought forward house property loss with other heads not at all once you brought forward a loss under particular head of income that loss can be set off only with the same head of income which means section 17 and 71 talks about only current year loss current year losses current year intad loss current year interhead set off current year losses only you can set up with other heads what about broad forward losses brought forward losses you cannot set up with other heads of income however brought forward losses which losses unabsorbed depreciation unabsorbed capital expenditure on scientific research and family planning these can be set off with other heads of income except salaries unabsorbed depreciation unabsorbed capital expenditure on scientific research unabsorbed capital expend on family planning these losses can be set up with other heads except salaries I hope I have covered all the points that's it set off and carry forward chapter revision is over entire this Theory you can find here so in the book very clearly very very you know structurely we have arranged all the provisions everything neatly we have made it getting it for better understanding that's it so with this set off and carry forward provision is completed revision is completed I hope you're confident so I hope you understood complete set off and carry forward related discussion just one clarification I want to give regarding default tax raising 115 BC we already saw in part one Marathon part one Marathon I hope you already saw uh under default tax regime house property loss set off with other heads is not permitted first of all house property loss if at all the SS is having self-occupied unoccupied no deduction at all for interest 24b talks about what interest so no deduction at all for self occupied unoccupied property for interest so for self occupied unoccupied property the question of loss Will loome for which house property loss possibility is there under default tax res only for let out property or deemed let out property because for let out property deem let out property you can still claim deduction under house property after claiming deduction if you still have a loss after claiming deduction if you still have a loss that loss you cannot set off you cannot set off is you cannot set off with other heads of income that is not permitted so this just one clarification I want to add continue watching uh you know the problem solving test your knowledge question solving that's it okay go ahead alternate minimum tax one important point if the SSC is paying tax under 11 by BAC method if the SS has chosen optional tax regime getting it 115 BAC AMT provision will not apply remember this point if 5 BAC is chosen AMT provision itself will not apply now what is this AMT provision I have made a beautiful simple notes so uh last minute you can take a simple screenshot of it and then keep it don't write anything it will be time L just focus on L now what is this AMT when this AMT is applicable I will explain entire this revision entire provision through this particular revision getting it now is the S did he claim deduction under Section 35 ad 10 chapter 6A heading C if the answer is yes if the answer is yes 115 J AMT provision is applicable if the SS has claimed 35 ad under pgbp investment based deduction 100% of the capital expenditure will be allowed as deduction for specified businesses 14 specified businesses 10A if a if a person has established any manufacturing unit or providing any services from special economic zone where he has commenced operations on or on or before 31st March 2020 or he got approval before 31st March 2020 but started operations on or before 31st March 2021 approval was before 2020 but started before 2021 or started before 2020 directly that fellow P five years whatever exports he's making for of the Articles of goods or services whatever exports related profit 100% deduction this is for past five years 6th year to 10 year 50% of the export profit is deductible first year to fifth year 100% of the export profit sixth year to 10th year 50% of the export profit you can claim deduction under 10A 11th to 15th year also under 10aa 50% of the export property you can claim deduction subject to investment Reserve subject to creating an investment Reserve special economic zone reinvestment Reserve once you create that Reserve you can claim from 11th to 15th year also deduction provided you create Reserve equal amount whatever exemption you are claiming suppose no 11th 11th year your profit is some 10 CR 50% you can claim deduction 5 CR if you want to claim 5 CR deduction for 5 CR transfer to reserve account then you claim reduction that Reserve no you should utilize it within 3 years from the date of creation getting the point so from the just a minute so from the date of creating the reserve within 3 years you must utilize that reserve for purchasing new plant and missionary and all then under 10aa first 5 years 100% of the profit is Exempted no condition reserve and all does not apply next 5 years 50% of the profit is Exempted which profit not total profit export profit only Exempted export profit only you can claim deduction first 5 years 100% of export profit next 5 years 50% of the export profit third set of five years 11th to 15th year 50% of the export profit subject to investment in the reserve F subject to creation of reinvestment Reserve whereas for first 10 years no 5 years 100% another 5 years 50% of the export profit here deduction you can claim without any condition of creation of Reserve then chapter 6 heading C like 80 iies 80 jjaa 80 qqb 80 rrb these deductions if the SS is claiming deduction under 80 chapter 6 heading C income based deductions so if the SS is claiming 35 ad 10aa chapter 6A heading C for him 115 je AMT provision is applicable remember SS means anybody other than company other than company for companies and all this provision is applicable just a minute yeah so this provision is applicable for any person other than for company for company 115 JB provision is there separate provision for company related taxation at CA inter we don't have at C inter we only have individual partnership form taxation getting it so if the any person who claim a deduction under these Provisions whatever I have told here getting it for him AMT provision is applicable now okay if am is applicable what should I very simple you have to compute adjusted total income what you have to compute adjusted total income very simple in the question no did they give any information yes see claim deduction under these sections yes sir they gave very simple 115 J is applicable okay what should I do compute adjusted total income how to compute in exam they may give you total income they may give you total income to that total income add back 10A deduction if there 10 is not there 35 deduction is there then add back both of these are not there 80 I 80 JJ 80 qqb RB chapter 6 heading C based deduction is claimed by the s for computing this total income he claimed already add back that either this or this or this any of these only will come any one only will come generally if s claimed 10 35 ad will not be there if s claimed 35 a 80 JJ qqb I mean 80 I these are all will not be there these are all mutually exclusive if the SS claimed any of these while calculating total income add back to that now if the S who has claimed 35 you added back right now calculate depreciation and reduce calculate depreciation and reduce because know when the SS is claiming 35 ad deduction for computing this total income he has not claimed depreciation directly 35 deduction he claimed for capital expenditure so add back that capital expenditure which means you did not claim any depreciation and deduction also added back so now you claim depreciation if at all 358 you adding back this point will come suppose you're adding back 10 deduction this will not come you adding back 80 a 80 all this this will not come able to understand so very simple add back these items less depreciation under Section 32 you will have adjusted total income very simple remember this format don't don't do so much of interpretation at all very simple whatever total income is there add back this you will have adjusted total income suppose if this adjusted total income is more than 20 lakh rupe more than how much 20 lakh rupe then flat 18.5% tax rate you apply on this adjusted total income 18.5% is flat tax rate apply so you will compute you will compute some tax on that apply charge at what rate if the if if this if this total income is more than 50 lakhs adjusted total income is more than 50 but not exceeding one CR 10% a if the adjusted total income is more than 1 CR but not exceeding 2 15% if the to adjusted total income is more than two but not five 25% otherwise 35 37% is so depending on that logic only very simple so uh so uh 18.5 plus sub charge which may be 10 which may be 15 which may be 25 which may be 37 whatever adds us you will have AMT this is called alternate minimum tax nothing but the minimum amount of tax which you must pay to the income tax department at any cost sir whatever the deduction I'm claiming you're adding it back no what is the purpose of then these deductions you are again adding back and giving me you know department is collecting tax what is the purpose of then then 358 10 all this useless no what department is saying is suppose see generally you compute regular by applying 35 ad 10 GAA whatever is applicable you compute total income getting the point so on that you compute tax and that's called regular tax payable what is it called as tax computed under regular method that is called normal so normal whatever Provisions that were given under income tax law so you you you calculate a turnover from that whatever deductions that you eligible you reduce deductions you you calculate a total income on that whatever tax you computed that is called regular tax payable this regular tax payable also should be basic Tax Plus sub charge plus s everything so regular tax now suppose no now by applying AMT whatever I have told by applying 115 J you computed some other tax also that's called alternate minimum tax if alternate minimum tax is more than regular tax payable then you you must pay income tax department AMT by Chalan so pay by Chalan file it return this much amount you must pay because your regular tax amount is zero or just some 10 lakhs some amount is there but AMT some 50 lakhs amount is there so you must pay AMT now now immediately you felt this sir when I'm paying altered minimum tax when I'm adding back all the deductions 10A everything when I'm adding what is the purpose of get claiming all these deductions what there there is no use because of these deductions because at the end of the day again you are adding back and collecting tax from me in the name of alternate minimum tax wait whatever AMD you pay no minus regularly how much you have to pay tax if I if I if at all 115 J is not at all there what is your regular tax payable 10 lakhs what is the AMT 30 lakhs the excess amount 25 lakh rupee I will call it as AMT credit okay what should I do forward it for 15 years carry forward it for 15 years what should I do by carry forward it in the second year suppose year one year one suppose in year one AMT you calculated 35 LHS but regularly if I calculate only 10 lakhs is a tax so 35 lakh you pay to the department at the end of the day because this is a minimum tax that you have to pay as for 115 je the minimum tax amount comes 35 so you have to pay that by cash you cannot claim any exemption on that that's a minimum tax you have to pay now sir I paid 35 LH sir regularly if I C only 10 LH so I paid excess amount of 25 lakhs whatever the excess amount of tax you paid because of 115 je provision that excess amount is called as AMT credit which you can carry forward for 15 years now while okay I'll carry forward for next 15 years in this year year one I claim year one I paid 35 sorry year year one I paid 35 lakhs 25 LS extra I paid this 25 lakhs I can carry forward from year two to year 16 yes or no so year 2 to year 16 what should I do now in year year 2 to year 60 no year 2 to year 60 no let us assume year two in year two if you see again in year two also you have total income again you claimed some deductions whatever your AMT tax is 20 lakhs whereas in that year two regular tax payable is 40 lakh in the year two know if I compute if you compute your tax if you compute your total income and tax on that the regular mode you have to pay 40 lakhs STS and in the year two also you claimed some 3580 deduction all that so AMD provision applied accordingly AMT amount also calculated 20 LHS only it came what department is saying you know I want you to pay 40 L if AMT is higher than normal tax regular tax AMT if regular tax is higher than am then pay regular tax ah so so you have to pay how much 40 so but out of this 40 no AMD is how much anyhow in that year minimum tax how much you have to pay to the department 20 minimum you have to pay at any cost so 20 you pay to the department by Chan what about balance 20 lakh I can set off I can set off this 20 20 lakhs liability by brought forwarded AMT credit AMT credit opening how much 25 L AMT credit is there I can set up against this 20 so balance 20 only I will pay nothing but if any AMT credit I brought for but that AMT credit can be used to set off regular tax which I have to pay over and above AMT in the suceeding year Su succeeding years so suppose in year two no AMT amount is 20 regular tax regular tax payable 40 minimum whatever AMD is there in every year that you have to pay Department by chal for sure excess amount is what 20 this 20 lakhs you can set off AMD credit you can set off with AMD credit that's it are you getting the point with this 115 je provision is completely over now this 115 je 18% 18.5% am all this this and all do not apply if adjusted to income is less than or equal to 20 lakhs if the adjusted total income is not exceeding if the adjusted total income does not exceed 20 lakh rupe this 115 je AMT provision itself do not apply further AMT provision do not apply if the SSC it will not apply if the individual HF is opting concessional tax under 115 B suppose if at all you're choosing 115 BAC method of payment of tax AMD provision will not apply suppose your you are not choosing 115 BC and you have claimed 35 a deduction you have claimed 10 deduction or you have claimed heading C chapter 6 income based reduction now very for your total income we will add back all that we again give you depreciation benefit balance amount if it is more than 20 lakhs then AMT provision we apply on that total income adjusted total income we apply AMT tax rate plus sub charge plus everything we calculate what is AMT liability if it is more than your regular mode of tax liability then AMT whatever is there we collect that amount entire amount and the excess of whatever the extra am you pay know beyond your regular mode of tax that extra amount I will give you AMD credit carry forward succeeding years you set up with regular tax full regular tax no no no no no regular tax in the succeeding suppose in year two you have regular tax in the year two also AMD is there regular tax minus AMT is there in year two so whatever the extra regular tax you are paying over and above am in the succeeding year that extra regular tax you can set off am credit indirectly indirect ly Department though they gave deduction they're adding back deduction and collecting AMT and by carry forwarding that AMT and permitting you to set up against regular tax extra excess regular tax which you pay over and above a in that succeeding year they're allowing you to set off no indirect 35 deduction 10 benefit everything is given just that in order to save cash flows in order to temporarily save the cash flows of the department they just did this kind of adjustment at the end of the they're giving next 15 years you can carry forward my AMD obviously in the next 15 years definitely there will be one year where I will not have 35 ad I will not have 10 nothing so in that I have toay regular tax only completely am is also not there I can set off this very simple now in this there are some noteworthy points now can I set off am Credit in this year even though my adjusted total is less than 20 you can no no question at all suppose in in year two I don't have am at all I have only regular tax can I you can set off able to understand suppose in the succeeding year I don't have 35 ad deduction itself everything is not there still you can set off once AMT is carry forwarded you can set off against regular tax payable provided in that year if AMT is also there no that much minimum amount you pay to the department by cash extra over and above am whatever regular tax that you have to pay extra against that Only You Can Am credit that's it so with this 115 J is completed now in this no there is one important question in to income chapter so I will I will open and show you you please solve it you can download this book from my website rest of CM there's a website inside it you can download this book so uh in total income there's a problem even in the last attempt I think May 23 they have given similar kind of question 220 page just a minute 249 you go 245 yeah this question number 11 is there know every one of you try to solve this particular question there is a high possibility that a similar question will come in exam the high possibility so this itself if at all ask they'll ask for 14 marks or at least 12 marks they'll ask getting it so very careful now in this question no they have 115 je 115 BAC everything is tested in this question anyhow I will talk 115 BAC now so this is nothing but solved workbook m in website in website you can find uh uh so in group one if you go to if you go to rest of a CM website CA in inside that group one inside that paper four inside that income tax workbook if you click on this download option you will find the solutions it's a complete question Bank kind of next so that's about uh that's about uh you know alternate minimum tax now let's look I have told you right this question number 11 which is a comprehensive problem on regular tax payable alternate minimum tax 115 BAC optional tax res so all these three put together there is a question there is a high possibility that the similar question might come that's it I hope you're clear so if at all you know you see any paper salaries compute income from salary assuming s has opted for 115 BC so when you're Computing income from salary who has opted for one for BC water all you will not claim leave in leave salary 10 subsection 5 10 CLA you will not CL 103 HR you will not clim 16 standard deduction all that 10 subsection 14 11 deductions you cannot CLA that's it rest all you can claim rat exemption you can claim leave encashment you can claim 10 10 pension Community pension benefit you can claim vs benefit you can claim all that is common pgb normal depreciation can be claimed scientific research expenditure spent by the S can claim donation to scientific research Association he cannot claim additional depreciation he cannot claim 35 ad he cannot kill hope you're able to so that's AMT and 115 BAC provision is follow next chapter next topic which I will start is residential status in the residential status many students have confusion on individual related residential status provision which I will focus okay take care so this is a very small video which is purely on AMT and 115 BAC and you please solve this problem I'm telling you you will enjoy like anything okay you will understand the consequences very very clearly take care