UNIT 3

  1.  setoff and carry forward losses
  2. Deductions from gross total income
  3. advance payment of tax




1Q) SETOFF AND CARRY FORWARD OF LOSSES

SETOFF OF LOSSES

 

LOSS

SET-OFF

1. Loss from house property

a) income from any other house property

b) any other head of income. however, w.e.f. the assessment year 2018-19, set off of a loss against any other head shall be restricted to 2 lakhs for any assessment year

2. loss from business or profession

a) income from any other business or profession

b) any other head of income except under the head salaries

3. loss from speculation

Income from speculation

3A  loss of specified business

Income from any specified business

4. short term capital loss

a) short-term capital gain

b) long-term capital gain

5. long term capital loss

Long-term capital gain

6. loss from the activity of owning and maintaining racehorse

Income from the activity of owning and maintaining racehorses

Note: no loss can be set off against winnings from races, lotteries, etc

 

 

 

CARRY FORWARD AND SETOFF OF LOSSES

LOSS

SET OFF

1. Loss from house property

In the following 8 years, income from house property

2. loss from business or profession

In the following 8 years, income from business or profession

3. loss from speculation

In the following 4 years, income from speculation

3A  loss of specified business

Income from any other specified business

4. short term capital loss

In the following 8 years:

a)short term capital gain

b) long-term capital gain

5. long term capital loss

In the following 8 years, long-term capital gain

6. loss from the activity of owning and maintaining racehorse

In the following 4 years, income from owning and maintaining racehorses

 

 

Losses of closely held companies: (Section 79)

a) such a company shall be allowed to carry forward and set off its losses of earlier years against the income of the previous year provided that shares carrying  at least 51% of the voting power are held  by the same persons at the end of the previous year as they were held at the end of the year  when the loss was incurred

b) losses of an eligible start-up company: For a closely held company, being a start-up, the loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year, if all the shareholders of such company who held shares carrying voting power on the last day of the year or years in which the loss was incurred:

i)  continue to hold shares on the last day of such previous year, and

ii) such loss has been incurred during the period of 7 years beginning from the year the such company is incorporated

 

   EXCEPTIONS:

  a) where a change in the said voting power takes place in a previous year due to the death of a shareholder or on account of transfer by way of gift to any relative of the shareholder making such gift

b) where a change in the shareholder, of an Indian company that is a subsidiary of a foreign company, takes place as a result of an amalgamation or demerger of a foreign company subject to the condition that 51% of the shareholders of the amalgamating or demerged foreign company continue to remain the shareholders of the amalgamated or resulting foreign company.

            if there is a change in shareholders, the company is not entitled to carry forward and set off the losses, but unabsorbed depreciation and unabsorbed capital expenditure on scientific research and family planning are deductible.

 

Carry forward unabsorbed capital expenditure on scientific research and family planning:

Capital expenditure on scientific research and family planning which cannot be absorbed in the assessment year because of insufficiency of profits can be carried forward like unabsorbed depreciation

 

ORDER OF SETOFF:

If an assessee is entitled to claim depreciation, capital expenditure, etc, as well as carried forward business losses, the sequence of allowing deduction will be as under:

·         current depreciation

·      -   capital expenditure on scientific research and family planning

·        - carried forward business losses

·      -   unabsorbed depreciation

·        - unabsorbed capital expenses on scientific research and family planning



222Q) DEDUCTIONS FROM GROSS TOTAL INCOME: (note:  In the exam, u can write any 10 deductions)



























3Q)  ADVANCE PAYMENT OF TAX    :
                                                                                                                                    

Liability for payment of advance tax

(1) Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219, in respect of an assessee’s current income i.e. the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year [Section 207]. 

(2) Under section 208, the obligation to pay advance tax arises in every case where the advance tax payable is Rs.  10,000 or more.

Note - An assessee who is liable to pay advance tax of less than Rs.  10,000 will not be saddled with interest under sections 234B and 234C for defaults in payment of advance tax. However, the consequences under section 234A regarding interest for belated filing of return would be attracted.

(3) In the case of senior citizens who have passive sources of income like interest, rent, etc., the requirement of payment of advance tax causes genuine compliance hardship. Therefore, in order to reduce the compliance burden on such senior citizens, exemption from payment of advance tax has been provided to a resident individual- 

(i) not having any income chargeable under the head “Profits and gains of business or profession”; and

(ii) of the age of 60 years or more. 

           Such senior citizens need not pay advance tax and are allowed to discharge their tax liability (other than TDS) by payment of self-assessment tax.

 Computation of advance tax

(1) An assessee has to estimate his current income and pay advance tax thereon. He need not submit any estimate or statement of income to the Assessing Officer, except where he has been served with notice by the Assessing Officer.

(2) Where an obligation to pay advance tax has arisen, the assessee shall himself compute the advance tax payable on his current income at the rates in force in the financial year and deposit the same, whether or not he has been earlier assessed to tax. 

(3) In the case of a person who has been already assessed by way of a regular assessment in respect of the total income of any previous year, the Assessing Officer, if he is of the opinion that such person is liable to pay advance tax, may serve an order under section 210(3) requiring the assessee to pay advance tax. 

(4) For this purpose, the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment or the total income returned by the assessee in any return of income for any subsequent previous year, whichever is higher, shall be taken as the basis for computation of advance tax payable.

(5) The above order can be served by the Assessing Officer at any time during the financial year but not later than the last date of February.

(6) If, after sending the above notice, but before 1st March of the financial year, the assessee furnishes a return relating to any later previous year or an assessment is completed in respect of a later return of income, the Assessing Officer may amend the order for payment of advance tax on the basis of the computation of the income so returned or assessed.

(7) If the assessee feels that his own estimate of advance tax payable would be less than the one sent by the Assessing Officer, he can file an estimate of his current income and advance tax payable thereon.

(8) Where the advance tax payable on the assessee’s estimation is higher than the tax computed by the Assessing Officer, then, the advance tax shall be paid based upon such higher amount.

(9) In all cases, the tax calculated shall be reduced by the amount of tax deductible at source.

(10) The amount of advance tax payable by an assessee in the financial year calculated by - 

(i) the assessee himself based on his estimation of current income; or

(ii) the Assessing Officer as a result of an order under section 210(3) or amended order under section 210(4) is subject to the provisions of section 209(2), as per which the net agricultural income has to be considered for the purpose of computing advance tax.

 Installments of advance tax and due dates

(1) Common advance tax payment schedule for both corporates and non-corporates [other than assessees computing profits on a presumptive basis under section 44AD(1) or section 44ADA(1)]: 


Advance tax payment by assessees computing profits on presumptive the basis under section 44AD(1) or section 44ADA(1):  An eligible assessee, opting for computation of profits or gains of business or profession on presumptive basis in respect of eligible business referred to in section 44AD(1) or in respect of eligible profession referred to in section 44ADA(1), shall be required to pay advance tax of the whole amount on or before 15th March of the F.Y. 

          However, any amount paid by way of advance tax on or before 31st March 
shall also be treated as advance tax paid during the F.Y. ending on that day.

Interest payable for deferment of advance tax [Section 234C]

(a) Manner of computation of interest under section 234C for deferment of advance tax by corporate and non-corporate assessees: 
In case an assessee, other than an assessee who declares profits and gains in accordance with the provisions of section 44AD(1) or section 44ADA(1), who is liable to pay advance tax under section 208 has failed to 
pay such tax or the advance tax paid by the such assessee on its current income on or before the dates specified in column (1) is less than the specified percentage [given in column (2)] of tax due on returned income, then 
simple interest @1 % per month for the period specified in column (4) on the amount of shortfall, as per column (3) is leviable under section 234C.

Note – however, if the advance tax paid by the assessee on the current income, on or before 15th June or 15th September, is not less than 12% or 36% of the tax due on the returned income, respectively, then, the assessee shall not be liable to pay any interest on the amount of the shortfall on those dates.

























 

 

Comments

Post a Comment

Popular posts from this blog

GST RETURN FILING

  What is a GST Return? A GST return is a document containing details of all income/sales and/or expenses/purchases that a GST-registered taxpayer (every GSTIN) must file with the tax administrative authorities. The tax authorities use this information to calculate net tax liability. Under  GST , a registered dealer has to file GST returns that broadly include: Purchases Sales Output GST (On sales) Input tax credit (GST paid on purchases) To file GST returns or for GST filings, check out the  Clear GST  software that allows the import of data from various ERP systems, such as Tally, Busy, custom Excel, to name a few. There is also the option to use the desktop app for Tally users to directly upload data and file. Who should file GST Returns? Under the GST regime, regular businesses having more than Rs 5 crore as annual aggregate turnover (and taxpayers who have not opted for the  QRMP scheme ) have to file two monthly returns and one annual return. This amounts ...
Read more

UNIT 4

Image
1. submission of return of income  **2. Procedure for assessment  3. penalties and prosecution 4. interest 5. Assessment of companies ( Notes shared in Whatsapp group, plz check) 1Q) SUBMISSION OF RETURN OF INCOME: The Income-tax Act, of 1961 contains provisions for filing of return of income. Return of income is the format in which the assessee furnishes information as to his total income and tax payable. The format for filing returns by different assessees is notified by the CBDT. The particulars of income earned under different heads, gross total income, deductions from gross total income, total income, and tax payable by the assessee are generally required to be furnished in a return of income. In short, a return of income is the declaration of income and the resultant tax by the assessee in the prescribed format. COMPULSORY FILING OF RETURN OF INCOME  [SECTION 139(1)]: (i) Companies and firms (whether having profit or loss or nil income); (ii) a person, bei...
Read more

UNIT 5

Image
 Tax planning with reference to  setting up of new business financial decisions specific managerial decisions( own/ leases, make or buy, shut down or continue) amalgamation, merger or business restructuring 1Q) Tax planning with reference to setting up of new business          Tax planning for new businesses refers to a systematic financial procedure surrounding the tax provisions of the country. The primary goal of the business should be to implement it in such a way that maximum tax liability can be reduced or entirely eliminated.  According to this procedure, an entrepreneur will have to look at the multiple taxation options to properly determine when and in which way the business should be conducted in order to refrain from penalties, etc.        When a person decides to set up a new business he has to consider a number of factors, namely the nature & size of the business,  the location of the business, the amount ...
Read more