Rental income from a property, being building or land appurtenant thereto, of which the taxpayer is the owner is charged to tax under the head “Income from house property”. To tax the rental income under the head “Income from house property”, the rented property should be building or land appurtenant thereto. Shop being a building, rental income will be charged to tax under the head “Income from house property”.

Composite rent includes rent of building and rent towards other assets or facilities. The tax treatment of composite rent is as follows:-

(a) In a case where letting out of building and letting out of other assets are inseparable (i.e., both the lettings are composite and not separable, e.g., letting of equipped theatre), entire rent (i.e. composite rent) will be charged to tax under the head “Profits and gains of business and profession” or “Income from other sources”, as the case may be. Nothing is charged to tax under the head “Income from house property”..

(b) In a case where, letting out of building and letting out of other assets are separable (i.e., both the lettings are separable, e.g., letting out of refrigerator along with residential bungalow), rent of building will be charged to tax under the head “Income from house property” and rent of other assets will be charged to tax under the head “Profits and gains of business and profession” or “Income from other sources”, as the case may be. This rule is applicable, even if the owner receives composite rent for both the lettings. In other words, in such a case, the composite rent is to be allocated for letting out of building and for letting of other assets.

In such a case, composite rent includes rent of building and charges for different services (like lift, watchman, water supply, etc.): In this situation, the composite rent is to be bifurcated and the sum attributable to the use of property will be charged to tax under the head “Income from house property” and charges for various services will be charged to tax under the head “Profits and gains of business and profession” or “Income from other sources” (as the case may be).

While computing income chargeable to tax under the head "Income from house property" in case of a let-out property, the taxpayer can claim deduction under section 24(b) on account of interest on loan taken for the purpose of purchase, construction, repair, renewal or reconstruction of the property. Deduction on account of interest is classified in two forms, viz., interest pertaining to pre-construction period and interest pertaining to post-construction period. Post-construction period interest is the interest pertaining to the relevant year (i.e., the year for which income is being computed). Pre-construction period is the period commencing from the date of borrowing of loan and ends on earlier of the following:

Date of repayment of loan; or

31st March immediately prior to the date of completion of the construction/acquisition of the property.

Interest pertaining to pre-construction period is allowed as deduction in five equal annual instalments, commencing from the year in which the house property is acquired or constructed.
Thus, total deduction available to the taxpayer under section 24(b) on account of interest will be 1/5th of interest pertaining to pre-construction period (if any) + Interest pertaining to post construction period (if any).

A self-occupied property means a property which is occupied throughout the year by the taxpayer for his residence. Income chargeable to tax under the head "Income from house property" in case of a self-occupied property is computed in following manner :

Particulars	Amount
Gross annual value	Nil
Less:- Municipal taxes paid during the year	Nil
Net Annual Value (NAV)	Nil
Less:- Deduction under section 24
➣Deduction under section 24(a) @ 30% of NAV ➣Deduction under section 24(b) on account of interest on borrowed capital	Nil   (XXXX)
Income from house property	XXXX

From the above computation it can be observed that "Income from house property" in the case of a self occupied property will be either Nil (if there is no interest on housing loan) or negative (i.e., loss) to the extent of interest on housing loan. Deduction in respect of interest on housing loan in case of a self-occupied property cannot exceed Rs. 2,00,000 or Rs. 30,000, as the case may be (discussed later).

The provisions relating to deduction under section 24(b) on account of interest on housing loan in case of self-occupied property are same as applicable in case of let-out property. In other words, deduction available to taxpayer under section 24(b) in respect of self-occupied property will be 1/5th of interest pertaining to pre-construction period (if any) + Interest pertaining to post-construction period (if any). However, in the case of self-occupied property, deduction under section 24(b) cannot exceed Rs.2,00,000 or Rs. 30,000 (as the case may be). If all the following conditions are satisfied, then the limit in respect of interest on borrowed capital will be Rs.2,00,000:
➣ Capital is borrowed on or after 1-4-1999.
➣ Capital is borrowed for the purpose of acquisition or construction (i.e., not for repair, renewal, reconstruction).
➣ Acquisition or construction is completed within 5 years from the end of the financial year in which the capital was borrowed.
➣ The person extending the loan certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as re-finance of the principal amount outstanding under an earlier loan taken for acquisition or construction of the property.
If any of the above condition is not satisfied, then the limit of Rs. 2,00,000 will be reduced to Rs. 30,000.

Any subsequent recovery of unrealized rent shall be deemed to be the income of taxpayer under the head “Income from house property” in the year in which such rent is realized (whether or not the assesse is the owner of that property in that year). It will be charged to tax after deducting a sum equal to 30% of unrealized rent.

The amount received on account of arrears of rent (not charged to tax earlier) will be charged to tax after deducting a sum equal to 30% of such arrears. It is charged to tax in the year in which it is received. Such amount is charged to tax whether or not the taxpayer owns the property in the year of receipt.

No, the income earned from subletting a house property is chargeable to tax under the head “income from other sources” rather than house property Income. Since, the assessee is not the owner of the property the said rental income cannot be held as income from house property. Since, the assessee was not engaged in the business of subletting, the same cannot be construed as business income of the assessee. Accordingly, such income shall be taxable as last resort income head i.e. income from other sources.

Deduction u/s 80CCD for deposit under NEW PENSION SCHEME has been introduced for all tax payers whether employed by the Government, any other employers or Self employed individuals in addition to Section 80C with a combined limit to Rs.2 Lakhs.
NPS Tax Benefits under Sec.80CCD (1)
The maximum benefit available is Rs.1.5 lakh (including Sec.80C limit).
An individual’s maximum 10% of annual income or an employee’s (10% of Basic + DA) contribution will be eligible for deduction.
As I said above, this section will form the part of Sec.80C limit.
NPS Tax Benefits under Sec.80CCD (1B)
This is the additional tax benefit of up to Rs.50,000 eligible for income tax deduction and was introduced in the Budget 2015 for voluntary contribution to NPS.
Introduced in Budget 2015. One can avail the benefit of this Sect.80CCD (1B) from FY 2015-16.
Both self-employed and employees are eligible for availing this deduction.
This is over and above Sec.80CCD (1) i.e. If the taxpayer contributes more than Rs.1.5 lakh to the NPS in a year, the amount in excess of Rs 1.5 lakh can be treated as voluntary investment and claimed as a deduction under the new Section 80CCD(1b).
NPS Tax Benefits under Sec.80CCD (2)
There is a misconception among many that there is no upper limit for this section. However, the limit is least of 3 conditions.
1) Amount contributed by an employer,
2) 10% of Basic Salary (Basic + DA) and
3) Gross Total Income.
This is additional deduction which will not form the part of Sec.80C limit.
The deduction under this section will not be eligible for self-employed.

A new saving scheme introduced vide Finance Act 2012 and amended vide Finance Act 2013 for the Resident Individuals (NO HUF) with a Gross total income of Rs.12 Lakhs or Less to claim deduction u/s 80CCG to an extent of Rs.50,000 in addition to 1.5 lakhs u/s 80C for investment in specified equity shares and mutual funds. The scheme was introduced by the government as RGESS (Rajiv Gandhi Equity Saving Scheme) under which an individual investing would be eligible to claim 50% of the invested amount as deduction from his total income to a maximum limit of INR 50,000.
Key features of the above deduction scheme:

• The allowed tax deduction u/s 80CCG will be over and above the Rs. 1.5 Lakhs limit permitted under Section 80C of the Income Tax (IT) Act, making it thus attractive for the middle class investors
  
• Further, the Dividend income is tax free, if the company is liable to dividend distribution tax
  
• The benefits can be availed for three consecutive years
  
• Investor is free to trade / churn the portfolio after the fixed lock-in period i.e 1 year, subject to certain conditions
  
• Gains arising out of higher market valuation of RGESS eligible securities can be realized after a year viz: fixed lock-in period. Provisions exist to protect the investor from general declines in the market to a certain extent. This is in contrast to all other tax saving instruments.
  
• Facility for pledging stocks after the fixed lock-in period
  
• For investments upto Rs.50,000 in your sole RGESS demat account, if you opt for Basic Service Demat Account, annual maintenance charges for the demat account is zero and for investments upto Rs. 2 lakh, it is stipulated at Rs 100
  
• The investments can be made in installments during the financial year in which tax deduction is claimed
  

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No, deduction under sections 80C to 80U is not allowed on short-term capital gains referred to in section 111A. However, such deductions can be claimed from STCG other than covered under section 111A. The above statement is applicable for both the Residents & Non residents.

No, deduction under sections 80C to 80U is not allowed to be adjusted against Long-term capital gains for any tax payer. However LTCG can be adjusted against Basic exemption limit in case of Resident Individuals.

Section 80EE was re-introduced by budget 2016 to provide for additional deduction of Rs.50,000 for payment of interest on home loan over and above that is allowed u/s 24.
This Deduction of Section 80EE would be applicable only in the following cases:-

This deduction would be allowed only if the value of the property purchased is less than Rs. 50 Lakhs and the value of loan taken is less than Rs. 35 Lakhs.

The loan should be sanctioned between 1st April 2016 and 31st March 2017.

The benefit of this deduction would be available till the time the repayment of the loan continues.

This Deduction would be available from Financial Year 2016-17 onwards.

The above tax deductions are per person and not per Property. So in case you’ve purchased a property jointly and have taken a joint home loan, each person repaying the amount would be eligible to claim whole deduction separately.

If you are living in a rented premise and are taking Tax Benefit of HRA Allowance

Section 80D provides for the deduction from the gross total taxable income of any Individual or HUF (resident & non-resident)with respect to the premium amount paid by any mode other than cash towards the medical / health insurance policy taken for Self, spouse, dependent children & parents.
Limit of Deduction
For Self and Family:
Maximum deduction of Rs.25,000 per year on health insurance premium for self, spouse & kids.
Maximum deduction of Rs.30,000 per year if you are a senior citizen.
For Parents:
Maximum deduction of Rs.25,000 per year on health insurance premium paid on behalf of parents.
Maximum deduction of Rs.30,000 per year on premium payments for senior citizen parents.
Additional Deduction (Preventive Health checkups) :
A deduction of Rs.5,000 can be claimed every year on expenses related to health check-ups. This limit includes the check-up expenses of all members in a family, including spouse, kids and parents.

House Rent Allowance is a deduction from gross taxable salary that can be claimed by a Salaried Individual who lives in a rented house. HRA as provided by the employer is calculated and respective deduction is given in Form 16 and accordingly the TDS u/s 192 is calculated for every employee. However, if the employer doesn’t provide HRA to any employee who is paying rent towards any furnished / unfurnished accommodation, such employee can resort to Section 80GG for deduction from Gross Taxable Income. The lowest of these will be considered as the deduction under section 80GG –

• Rs 5,000 per month / Rs.60000 per year
  
• 25% of adjusted total income*
  
• Actual Rent less 10% of adjusted total Income* [Actual Rent – 10% of Adj.Total Income]
  

Adjusted Total Income* means Total Income Less long term capital gain, short term capital gain under section 111A and Income under section 115A or 115D and deductions 80C to 80U (except deduction under section 80GG)

The two terms often used interchangeably is “Medical Reimbursement” and “Medical Allowance” of which Medical Re-imbursement by employer is Not Taxable while Medical Allowance is taxable at the Marginal Income Tax Rate (Income Rate Slab) of the employee.
Both the employer and the employee try to structure salary to maximize in-hand income of the employee. There are certain allowances or expense reimbursements that are not taxable in the hands of the employee. One such payment from employer is reimbursement of the medical expenses of the employee or his family.
On the other hand, Medical allowance is a fixed part of an employees’ salary which is taxable in the hands of the employee under the head “Salary”.
The reimbursement is only on actual basis (employer can’t reimburse more than you have incurred). Contrast this with fixed medical allowance, which is guaranteed regardless of whether the employee (or his family member) undergo medical treatment or not.
Reimbursement of medical expenses by the employer is exempt to the extent of Rs.15000 per financial year. Any additional reimbursement would be taxable as Salary in the hands of the employee.
In addition to above, there are specific scenarios where the entire amount reimbursed/cost incurred by the employer is exempt from tax i.e. there is no cap on tax exemption.

The value of the treatment provided to the employee or his family member at a hospital maintained by the employer.

Amount paid by the employer in respect of the medical treatment availed by employee or his family member in a Government hospital or any hospital approved by Government for such employees.

Cost incurred for treatment of specific illness in any hospital approved by the Chief Commissioner. (You must file a certificate from the hospital specifying the disease/treatment and payment receipts).
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On February 1, 2018, the Finance Minister, Mr. Arun Jaitley, presented the Union Budget for the year 2018. List of all the proposals related to deductions under chapter VI-A is highlighted as under:

1. Hike in deduction limit for health insurance premium and/ or medical expenditure from Rs. 30,000 to Rs. 50,000 under section 80D.
   

The current deduction u/s 80D of INR 30,000 allowed to an Individual or HUF with respect to premium amount paid for health insurance (medical policy) for dependent parent / parents being Senior Citizen (age above 60 Yrs) has been enhanced vide Finance Bill 2018 to INR 50,000. The above increment of deduction is also applicable to an individual for premium amount of his medical policy if he has attained the age of 60 and above.

2. Deduction limit under section 80DDB is enhanced
   

The deduction limit for medical expenditure for certain critical illness has been increased from Rs. 60,000 (in case of senior citizens) and from Rs. 80,000 (in case of very senior citizens) to Rs. 1 lakh for all senior citizens, under section 80DDB. The differentiation between senior and super senior citizen is removed

3. Deductions under Section 80JJAA is extended to footwear and leather industry
   

Section 80JJAA allows deductions to the manufacturers who employ new employees for a minimum period of 240 days during the year. This deduction is calculated at the rate of 30% of the additional employee cost incurred by the assessee during the year. The eligibility of a manufacturer to claim this deduction is determined only if he gives employment for a minimum period of 240 days during the year. However, for apparel industry the minimum period of employment is relaxed to 150 days. The concession of minimum employment period for 150 days has been extended to footwear and leather industry. Manufacturers are often denied the deduction if an employee is employed in year 1 for a period of less than 240 days or 150 days, but continues to remain employed for more than 240 days or 150 days in year 2. To overcome some difficulties, the employment conditions has been proposed to be relaxed. Now in this situation the deduction shall be allowed to the manufacturer if an employee hired in last year continues to remain in employment in current year for more than 240 or 150 days, as the case may be.

4. New deduction introduced for Farm Producer Companies
   

• To promote agricultural activities a new section 80PA is proposed to be inserted. This new provision proposes 100% deductions of profits for a period of 5 years to farm producer companies.
  
• This deduction is allowed to farm producer companies who have total turnover of less than Rs. 100 crores during the financial year. For claiming this deduction, companies' gross total income should include income from:
  

Marketing of agricultural produce grown by its members

Purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members

Processing of agricultural produce of its members

5. Exemption of interest income on deposits with banks and post offices to be increased from Rs. 10,000 to Rs. 50,000 only for senior citizens.
   

The current deduction u/s 80 TTA for Individuals / HUF with respect to interest on savings bank account of Rs.10,000 has been enhanced for Senior Citizens by inserting a new section 80 TTB to Rs.50,000. That is to say, this provision allows deduction of up to Rs. 50,000 to the senior citizen who has earned interest income from deposits (both Fixed & Savings) with banks or post office or co-operative banks. After introducing this new deduction, the existing deduction of up to Rs. 10,000 under Section 80TTA shall not be allowed to the senior citizens.

6. Certain Deductions other than those covered under Heading A (Section 80A to 80C), Heading B (Section 80CC to 80GGC) & Heading D (Section 80U to 80VV) not to be allowed if return is not filed on time
   

As per existing provisions of Section 80AC of the Act, no deduction would be admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, unless the return of income by the assessee is furnished on or before the due date specified under Section 139(1). This burden of filing of return on time is not casted on other assesses who are claiming deductions under other similar provisions. Therefore, to bring uniformity in all income-based deduction, it is now proposed that the scope of section 80AC shall be extended to all similar deductions which are covered in heading "C.—Deductions in respect of certain incomes" in Chapter VIA (sections 80 H to 80RRB). The impact of such amendment shall be that no deduction would be allowed to a taxpayer under Heading C of Deductions Chapter if income-tax return is not filled on or before the due date. This amendment will take effect, from 1^st April, 2018 and will accordingly apply in relation to the assessment year 2018-19 and subsequent assessment years.

7. Amendment in section 80-IAC to promote new start-ups
   

Deductions under Section 80-IAC is available to an eligible start-up for 3 consecutive assessment years out of 7 years at the option of such start-up. These deductions are allowed subject to certain conditions as given below:

It is incorporated between 01/04/2016 and 31/03/2019

The total turnover of its business does not exceed Rs. 25 crores in any of the previous year 2016-17 to 2020-21; and

It is engaged in the eligible business which involves innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.
In order to improve the effectiveness of the scheme for promoting start-ups in India, it is proposed to make following changes in the taxation regime for the start -ups:

The benefit would also be available to start up cos incorporated between 01/04/2019 and 31/03/2021;

The requirement of turnover not exceeding Rs. 25 Crore would apply to 7 previous years commencing from the date of incorporation;

The definition of eligible business has been expanded to provide that the benefit would be available if it is engaged in innovation, development or improvement of products or processes or services, or a scalable business model with a high potential of employment generation or wealth creation.

Section 80C of the Income Tax Act provides provisions for tax deductions on a number of payments, with both individuals and Hindu Undivided Families eligible for these deductions. Eligible taxpayers can claim deductions to the tune of Rs 1.5 lakh per year under Section 80C, with this amount being a combination of deductions available under Sections 80 C, 80 CCC and 80 CCD.

Some of the popular investments which are eligible for this tax deduction are mentioned below.

• Payment made towards life insurance policies (for self, spouse or children)
  
• Payment made towards a superannuation/provident fund
  
• Tuition fees paid to educate a maximum of two children
  
• Payments made towards construction or purchase of a residential property
  
• Payments issued towards a fixed deposit with a minimum tenure of 5 years
  

This section provides for a number of additional deductions like investment in mutual funds, senior citizens saving schemes, purchase of NABARD bonds, etc..

Generally, long-term capital gains are charged to tax @ 20% (plus surcharge and cess as applicable), but in certain special cases, at the option of tax payer the capital gain can be calculated @ 10% (plus surcharge and cess as applicable).
The benefit of charging long-term capital gain @ 10% is available only in respect of long-term capital gains arising on transfer of any of the following asset:

Any security (*) which is listed in a recognized stock exchange in India.

Any unit of UTI or mutual fund (whether listed or not) (it is not available now because this option is available only in respect of units sold on or before 10-7-2014.)

Zero coupon bonds.

(*) The definition of security generally includes shares, scrips, stocks, bonds, debentures, debenture stocks or other marketable securities.
In case of long term capital gain arising on account of above assets, the taxpayer has following two options:

Avail the benefit of indexation; the capital gains so computed will be charged to tax at normal rate of 20%

Do not avail of the benefit of indexation; the capital gain so computed is charged to tax @ 10%.

The selection of the option is to be done by computing the tax liability under both the options, and the option with lower tax liability is to be selected.
Example:
Mr. X (a non resident) purchased equity shares (listed) of Shyamal Ltd. in December 1995 for Rs. 28,100. These shares are sold (outside recognized stock exchange) in April, 2016 for Rs. 5,00,000. He does not have any other taxable income in India. What will be his tax liability?
Mr. X has purchased the listed equity shares so he is eligible to take the benefit of 10% taxation.

Mr. X has following two options:

Particulars	Option 1 (Avail indexation)	Option 2 (Do not avail indexation)
Full value of consideration	5,00,000	5,00,000
Less: Indexed cost of acquisition (Rs. 28,100 × 1125/281)	(1,12,500)	--------
Less: Cost of acquisition	--------	(28,100)
Taxable Gain	3,87,500	4,71,900
Tax @ 20% on Rs. 3,87,500	77, 500	--------
Tax @ 10% on Rs. 4,71,900	--------	47,190

From the above example it is clear that Mr. X should opt for option 2, because since in this situation the tax liability (excluding cess as applicable) comes to Rs. 47,190 which is less than tax liability under option 1 i.e. Rs. 77,500. Tax liability after EC @ 2% and SHEC @ 1% will come to Rs. 48,606.

Basic exemption limit means the level of income up to which a person is not required to pay any tax. This Basic exemption limit is available only for Individual, HUF, AOP, BOI and artificial judicial persons
We all know that if the income is below the basic exemption limit, then there will be no tax liability. But always a question arises that ‘can an individual adjust the basic exemption limit against long-term capital gain?’
The answer will depend on the residential status of the individual that is whether the individual or HUF is resident or Non-resident.
Only a resident individual/HUF can adjust the exemption limit against LTCG. Thus, a non-resident individual and non-resident HUF cannot adjust the basic exemption limit against LTCG.
A resident individual can adjust the LTCG with Basic exemption limit, but only after making adjustment of other income. That means, first income under other heads (other than LTCG) is to be adjusted against the basic exemption limit and then the remaining limit (if any) can be adjusted against LTCG.

Section 54 provides exemption from payment of Tax on Long term capital gain earned by virtue of sale of a Long term immovable property, being a House property to the extent of Lower of the following:

Amount of capital gains arising on transfer of residential house; or

Amount invested in purchase/construction of new residential house property [including the amount deposited in Capital Gains Deposit Account Scheme] 
An individual or HUF only can claim benefit u/s 54 upon fulfillment of following basic conditions:

The asset transferred should be a long-term capital asset, being a residential house property.

Within a period of one year before or two years after the date of transfer of old house, the taxpayer should acquire another residential house or should construct a residential house within a period of three years from the date of transfer of the old house. In case of compulsory acquisition the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional).
However, with effect from assessment year 2015-16 exemption can be claimed only in respect of one residential house property purchased/constructed in India. If more than one house is purchased or constructed, then exemption under section 54 will be available in respect of one house only. No exemption can be claimed in respect of house purchased outside India. Text of Amendments in for the above Sections is given as under: “In section 54 of the Income-tax Act, in sub-section (1), for the words “constructed, a residential house”, the words “constructed, one residential house in India” shall be substituted with effect from the 1st day of April, 2015.” Besides, to keep a check on the misutilization of this exemption, a restriction is imposed upon the assessee availing this exemption. The provisions of Section 54 reads as:

• The restriction will be attracted, if after claiming exemption under section 54, the new house is sold before a period of 3 years from the date of its purchase/completion of construction.
  
• If the new house is sold before a period of 3 years from the date of its purchase/completion of construction, then at the time of computation of capital gain arising on transfer of the new house, the amount of capital gain claimed as exempt under section 54 will be deducted from the cost of acquisition of the new house.
  

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Any profit or gain arising from transfer of a capital asset [as defined u/s 2(14) of IT Act,1961] during the year is charged to tax under the head “Capital Gains”.

Capital asset is defined to include:

a) Any kind of property held by an assesse, whether or not connected with business or profession of the assesse.

b) Any securities held by a FII which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992.
However, the following items are excluded from the definition of "capital asset":

• Any stock-in-trade, consumable stores, or raw materials held by a person for the purpose of his business or profession.
  

E.g., Motor car for a motor car dealer or gold for a jewellery merchant, are their stock-in-trade and, hence, they are not capital assets for them.

• Personal effects of a person, that is to say, movable property including wearing apparels (*) and furniture held for use, by a person or for use by any member of his family dependent on him.
  

(*) However, jewellery, archeological collections, drawings, paintings, sculptures, or any work of art are not treated as personal effects and, hence, are included in the definition of capital assets. The term jewellery has been given a wider meaning and includes ornaments made up of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stones, and whether or not worked or sewn into any wearing apparel. It also includes precious or semi-precious stones, whether or not set in any furniture, utensil, or other article or worked or sewn into any wearing apparel.

• Agricultural Land in India, not being a land situated:
  

Within jurisdiction of municipality, notified area committee, town area committee, cantonment board and which has a population of not less than 10,000;

Within range of following distance measured aerially from the local limits of any municipality or cantonment board:

• not being more than 2 KMs, if population of such area is more than 10,000 but not exceeding 1 lakh;
  

not being more than 6 KMs , if population of such area is more than 1 lakh but not exceeding 10 lakhs; or

not being more than 8 KMs , if population of such area is more than 10 lakhs.
Population is to be considered according to the figures of last preceding census of which relevant figures have been published before the first day of the year.

• 6½% Gold Bonds,1977 or 7% Gold Bonds, 1980 or National Defense Gold Bonds, 1980 issued by the Central Government.
  
• Special Bearer Bonds, 1991, issued by the Central Government
  
• Gold Deposit Bonds issued under Gold Deposit Scheme, 1999.
  
• Deposit certificates issued under the Gold Monetization Scheme, 2015.
  

Following points should be kept in mind : The property being capital asset may or may not be connected with the business or profession of the taxpayer. E.g. Bus used to carry passenger by a person engaged in the business of passenger transport will be his Capital asset. Any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 will always be treated as capital asset, hence, such securities cannot be treated as stock-in-trade.

Any capital asset held by a person for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset.
     Any capital asset held by a person for a period of not more than 36 months immediately preceding the date of its transfer will be a short-term capital asset.
However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India, units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months.
In case of unlisted shares in a company, the period of holding to be considered is 24 months instead of 36 months.
Illustration
Mr. Raj is a salaried employee. On 8th April, 2014, he purchased a piece of land and sold the same on 29th June, 2016. In this case, land is a capital asset for Mr. Raj. He purchased the land on 8th April, 2014 and sold it on 29th June, 2016, i.e., after holding it for a period of less than 36 months. Hence, land will be a short-term capital asset.
Illustration
Mr. Kumar is a salaried employee. On 8th July, 2015, he purchased shares of SBI Ltd. (listed in BSE) and sold the same on 29th June, 2016. In this case, shares are capital assets for Mr. Kumar. He purchased shares on 8th July, 2015 and sold them on 29th June, 2016 i.e., after holding them for a period of less than 12 months. Hence, shares are short-term capital assets.

Gain arising on transfer of long-term capital asset is termed as long-term capital gain and gain arising on transfer of short-term capital asset is termed as short-term capital gain. However, there are a few exceptions to this rule, like gain on depreciable asset is always taxed as short-term capital gain.

The taxability of capital gain depends on the nature of gain, i.e. whether short-term or long-term. Hence to determine the taxability, capital gains are classified into short-term capital gain and long-term capital gain. In other words, the tax rates for long-term capital gain and short-term capital gain are different. Similarly, computation provisions are different for long-term capital gains and short-term capital gains.

No, the benefit of indexation is available only in case of long-term capital assets and is not available in case of short-term capital assets. Indexation is a process by which the cost of acquisition/improvement of a capital asset is adjusted against inflationary rise in the value of asset. Hence it is applicable only in the case of long term capital assets.

Yes, the method of computation of cost of acquisition for capital asset acquired before 1^st April, 1981 differs. Generally, cost of acquisition of a capital asset is the cost incurred in acquiring the capital asset. It includes the purchase consideration plus any expenditure incurred exclusively for acquiring the capital asset.   However, in respect of capital asset acquired before 1st April, 1981, the cost of acquisition will be higher of:

• the actual cost of acquisition of the asset; or
  
• fair market value of the asset as on 1st April, 1981.
  

This option is not available in the case of a depreciable asset.

Generally, transfer means sale, however, for the purpose of Income-tax Law "Transfer”, in relation to a capital asset, includes:
i.Sale, exchange or relinquishment of the asset;
ii.Extinguishment of any rights in relation to a capital asset;
iii. Compulsory acquisition of an asset;

Conversion of capital asset into stock-in-trade;

Maturity or redemption of a zero coupon bond;

Allowing possession of immovable properties to the buyer in part performance of the contract;

iv. Any transaction which has the effect of transferring an (or enabling the enjoyment of) immovable property; or
v. Disposing of or parting with an asset or any interest therein or creating any interest in any asset in any manner whatsoever

Capital gain arises if a person transfers a capital asset. section 47 excludes various transactions from the definition of 'transfer'. Thus, transactions covered under section 47 are not deemed as 'transfer' and, hence, these transactions will not give rise to any capital gain. Transfer of capital asset by way of gift, will, etc., are few major transactions covered in section 47. Thus, if a person gifts his capital asset to any other person, then no capital gain will arise in the hands of the person making the gift (*).

If the person receiving the capital asset by way of gift, will, etc. subsequently transfers such asset, capital gain will arise in his hands. Special provisions are designed to compute capital gains in the hands of the person receiving the asset by way of gift, will, etc. In such a case, the cost of acquisition of the capital asset will be the cost of acquisition to the previous owner and the period of holding of the capital asset will be computed from the date of acquisition of the capital asset by the previous owner.

(*) As regards the taxability of gift in the hands of person receiving the gift, separate provisions are designed under section 56.

House sold by you is a long-term capital asset. Any gain arising on transfer of capital asset is charged to tax under the head “Capital Gains”. Income-tax Law has prescribed the method of computing capital gain arising on account of sale of capital assets. Thus, to check the taxability in your case, you have to compute capital gain by following the rules laid down in this regard, and if the result is gain, then the same will be liable to tax.

Section 10: provides list of incomes which are exempt from tax Amongst these the major exemptions relating to capital gains are listed below:

Section 10(33): Long-term or short-term capital gain arising on transfer of units of Unit Scheme, 1964 (US 64) (transferred on or after 1-4-2002).

Section 10(37): An individual or Hindu Undivided Family (HUF) can claim exemption in respect of capital gain arising on transfer of agricultural land situated in an urban  area by way of compulsory acquisition. This exemption is available if the land was used by the taxpayer (or by his parents in the case of an individual) for agricultural purpose for a period of 2 years immediately preceding the date of its transfer. .

Section 10(38): Long-term capital gain arising on transfer of equity shares or units of equity oriented mutual fund (*) or a unit of a business trust other than a unit allotted by the trust in exchange of shares of a special purpose vehicle as referred to in section 47(xvii), will be exempt from tax, if the following conditions are satisfied:

The asset transferred should be equity shares of a company or units of an equity oriented mutual fund or a unit of a business trust other than a unit allotted by the trust in exchange of shares of a special purpose vehicle as referred to in section 47.
The transaction should be liable to securities transaction tax at the time of transfer.
Such asset should be a long-term capital asset.
Transfer should take place on or after October 1, 2004.
Note: Any long-term capital gain arising from a transaction undertaken in recognized stock exchange located in an International Financial Service Center shall be exempt from tax. Such exemption is available if such transaction is undertaken in foreign current and even if no STT is paid on such transaction. [Inserted by the Finance Act w.e.f. 1-4-2017]
(*) Equity oriented mutual fund means a mutual fund specified under section 10(23D) and 65% of its investible funds, out of total proceeds of such fund are invested in equity shares of domestic companies.

A taxpayer can claim exemption from certain capital gains by re-investing the capital gain into specified asset. The following table highlights the assets in respect of which the benefit of re-investment is available:  

Section under which benefit is available	Gain eligible for claiming exemption	Asset in which the capital gain is to be re-invested to claim exemption
section 54	Long-term capital gain arising on transfer of residential house property.	Gain to be re-invested in purchase or construction of one residential house property in India.
section 54B	Long-term or short-term capital gain arising on transfer of agricultural land.	Gain to be re-invested in purchase of agricultural land.
section 54EC	Long-term capital gain arising on transfer of any capital asset.	Gain to be re-invested in bonds issued by National Highway Authority of India or by the Rural Electrification Corporation Limited.
Section 54EE	Long-term capital gain arising on transfer of any capital asset.	Gain to be re-invested in units of specified fund, as may be notified by Govt. to finance start-ups.
section 54F	Long-term capital gain arising on transfer of any capital asset other than residential house property.	Net sale consideration to be re-invested in purchase or construction of one residential house property in India.
section 54D	Gain arising on transfer of land or building forming part of industrial undertaking which is compulsorily acquired by Government and was used for industrial purpose for a period of 2 years prior to its acquisition.	Gain to be re-invested to acquire land or building for industrial purpose.
section 54G	Gain arising on transfer of land, building, plant or machinery in order to shift an industrial undertaking from urban area to rural area	Gain to be re-invested to acquire land, building, plant or machinery in order to shift the industrial undertaking from an urban area to a rural area
section 54GA	Gain arising on transfer of land, building, plant or machinery in order to shift an industrial undertaking from urban area to any Special Economic Zone	Gain to be re-invested to acquire land, building, plant or machinery in order to shift the industrial undertaking from urban area to any Special Economic Zone.
section 54GB	Long-term capital gain arising on transfer of residential property (a house or a plot of land). The transfer should take place during 1st April, 2012 and 31st March 2017. However, in case of investment in “eligible start-up”, sunset limit of 31st march 2017 is extended to 31st march 2019.	The net sale consideration should be utilised for subscription in equity shares of an "eligible company".  W.e.f. April 1, 2017, eligible start-up is also included in definition of eligible company

Yes, as per section 54EC you can claim tax relief by investing the long-term capital gains in the bonds issued by the National Highway Authority of India or by the Rural Electrification Corporation Limited. The investment should be made within a period of 6 months from the date of transfer of capital asset and bonds should not be redeemed before 3 years. This benefit cannot be availed in respect of short-term capital gain. Maximum amount which qualifies for investment will be Rs. 50,00,000. Thus, deduction under section 54EC cannot be claimed for more than Rs. 50,00,000.

Stamp duty value means the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty.
As per section 50C, while computing capital gain arising on transfer of land or building or both, if the actual sale consideration of such land and/or building is less than the stamp duty value, then the stamp duty value will be taken as full value of consideration,
i.e., as deemed selling price and capital gain will be computed accordingly.
Illustration
Mr. Raja sold his bungalow for Rs. 80,00,000. The value adopted by the Stamp Valuation Authority of the bungalow for the purpose of payment of stamp duty is Rs. 84,00,000. In this situation, while computing taxable capital gain arising on transfer of bungalow, Rs. 84,00,000 will be taken as full value of consideration (i.e., sale value of the bungalow). Thus, actual selling price of Rs. 80,00,000 (being less than stamp duty value) will not be taken into account while computing taxable capital gain.
Illustration
Mr. Karan sold his land for Rs. 25,20,000. The value adopted by the Stamp Valuation Authority of the bungalow for the purpose of payment of stamp duty is Rs. 20,00,000. In this situation, while computing taxable capital gain arising on transfer of land, Rs. 25,20,000 (being actual sale value) will be taken as full value of consideration. Thus, stamp duty value (being less than actual selling price) will not be taken into account while computing taxable capital gain.
What is the tax treatment of Advance money forfeited under a un-materialized contract for transfer of capital Asset?
Any advance received on transfer of capital asset shall be chargeable to tax under the head 'Income from other sources', if such sum is forfeited and the negotiations do not result in transfer of capital Asset.

Yes, in order to claim exemption u/s 54 / 54F against long term capital gain from sale of house property, one can book the flat with the builder.

As per the recent decision by ITAT in the case of ACIT Vs. Sh. Vineet Kumar Kapila (ITAT Delhi), ITAT held that booking of flat with the builder has to be treated as construction of flat by the assessee and hence period of three years would apply for construction of new house from the date of transfer of long term capital asset. Therefore, the Ld. CIT(A) has rightly allowed the exemption u/s. 54 of the Act, because in the present case also the flat booked with the builder by the assesse has to be considered as a case of construction of flat and the deduction claimed by the assessee u/s. 54 of the Act was rightly allowed,

In addition to section 40A(3), a new section 269ST has been inserted in the Income tax Act vide Finance Act 2017 with effect from 01.04.2017, that prohibits receipt of an amount of INR 2 Lakhs or more by a person, in the circumstances specified therein, through modes other than by way of an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account. In other words, No person shall receive an amount of two lakh rupees or more—
(a) in aggregate from a person in a day; or
(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion from a person,
otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.
However, in the case of repayment of loan by NBFCs or HFCs, the receipt of one instalment of loan repayment in respect of a loan shall constitute a ‘single transaction’ as specified in clause (b) of section 269ST of the Act and all the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions section 269ST.
Penal provisions have also been introduced by way of a new section 271DA, which provides that if a person receives any amount in contravention to the provisions of section 269ST, it shall be liable to pay penalty of a sum equal to the amount of such receipt.
The above section is applicable to all the persons- individuals, HUF, Firm, LLP, company, Trust etc, transacting in cash irrespective of the nature of transactions i.e Capital or Revenue.

The amendment brought about under the existing section 40A(3) vide Finance Bill 2017 with effect from 01.04.2018 is basically to promote the concept of Digital India and there by discourage cash transaction. As per the amendment, the existing threshold of cash payment of Rs.20,000 has been reduced to Rs.10,000 per person in a single day, i.e any payment in cash above ten thousand rupees to a person in a day, shall not be allowed as deduction in computation of Income from “Profits and gains of business or profession“.
Extract of relevant clause from Finance Bill, 2017
Amendment of section 40A.
In section 40A of the Income-tax Act,—
(a) in sub-section (2), in clause (a), in the proviso, after the words “Provided that”, the words, figures and letters “for an assessment year commencing on or before the 1st day of April, 2016” shall be inserted; (b) with effect from the 1st day of April, 2018,—
(A) in sub-section (3), for the words “exceeds twenty thousand rupees”, the words “or use of electronic clearing system through a bank account, exceeds ten thousand rupees,” shall be substituted;
in sub-section (3A),—
(i) after the words “account payee bank draft,”, the words “or use of electronic clearing system through a bank account” shall be inserted; (ii) for the words “twenty thousand rupees”, the words “ten thousand rupees” shall be substituted;
(iii) in the first proviso, for the words “exceeds twenty thousand rupees”, the words “or use of electronic clearing system through a bank account, exceeds ten thousand rupees,” shall be substituted; (iv) in the second proviso, for the words “twenty thousand rupees”, the words “ten thousand rupees” shall be substituted;

The term “Gift” denotes anything received by anyone without consideration or inadequate consideration.
According to the provisions of Income Tax Law, in case of Gifts, in all situation the receiver of Gift shall be under the purview of Taxation. Section 56 of the Income Tax Act contains the relevant provisions that guide the Taxation of Gifts.
Not all the gifts received are taxable in the hands of the recipient. As per section 56(2)(vii) following Gifts received by an Individual or HUF are taxable under the head “Income from other Sources”:

Aggregate of all the Cash Gifts received in a Financial year in excess of Rs.50,000 is taxable

Value of Gift of immovable property having a Stamp value in excess of INR 50,000 after taking into consideration any inadequate consideration involved.

Aggregate value of the Gift of movable property having a Fair Market Value in excess of INR 50,000 after taking into consideration the inadequate consideration involved therein (if any).

Exceptions:
In certain situations / conditions, gift received in excess of the above mentioned limit of Rs.50,000 shall not be taxable:

Gifts from Relatives*

Gift received on occasion of marriage (Whether received from friends or relatives)

Under will / Inheritance

In contemplation of death (No will has been prepared but a person is about to die and he gives some amount to any person)

Any trust (registered under section 10A)

Any local authority

Any university / Fund / Foundation / Educational institute / hospital / medical institution etc. (section 10 (23C)

transaction not regarded as transfer under clause (vicb) or clause (vid) or clause (vii) of Section 47 (These include transfer of shares in case of Amalgamation /Demerger of Company/Business Reorganization of a Cooperative Bank) (NEW AMENDMENT)

* Definition of Relative
In case of an Individual:

Spouse

Brother – Sister

Brother – Sister, of spouse

Brother – Sister, of parents.

Lineal Ascendant Or Descendant of individual or Spouse

Spouse, of above

In case of HUF:
All the members of HUF.
Rubik's Cubes make a perfect gift for any occasion. Learn more about this amazing puzzle on this link.

Under certain circumstances as given in section 64(1)(ii) , remuneration ( i.e., salary) received by the spouse of an individual from a concern in which the individual is having substantial interest is clubbed with the income of the individual. Provisions in this regard are as follows:

• The individual is having substantial interest in a concern (*).
• Spouse of the individual is employed in the concern in which the individual is having substantial interest.
• The spouse of the individual is employed without any technical or professional knowledge or experience ( i.e., remuneration is not justifiable).

(*) An individual shall be deemed to have substantial interest in any concern, if such individual alone or along with his relatives beneficially holds at any time during the previous year 20% or more of the equity shares (in case of a company) or is entitled to 20% of profit (in case of concern other than a company).
Relative for this purpose includes husband, wife, brother or sister or lineal ascendantor descendent of that individual [ section 2( 41 ) ].

As per section 64(1A) , income of minor child is clubbed with the income of his/her parent (*). Income of minor child earned on account of manual work or any activity involving application of his/her skill, knowledge, talent, experience, etc. will not be clubbed with the income of his/her parent. However, accretion from such income will be clubbed with the income of parent of such minor.
Income of minor will be clubbed along with the income of that parent whose income (excluding minor's income) is higher.
If the marriage of parents does not sustain, then minor's income will be clubbed with the income of parent who maintains the minor.
In case the income of individual includes income of his/her minor child, such individual can claim an exemption under section 10(32) of Rs. 1,500 or income of minor so clubbed, whichever is less.
(*) Provisions of section 64(1A) will not apply to any income of a minor child suffering from disability specified under section 80U . In other words income of a minor suffering from disability specified under section 80U will not be clubbed with the income of his/her parent.

As per section 64(2) , when an individual, being a member of HUF, transfers his property to the HUF otherwise than for adequate consideration or converts his property into the property belonging to the HUF (it is done by impressing such property with the character of joint family property or throwing such property into the common stock of the family), then clubbing provisions will apply as follows:

Before partition of the HUF, entire income from such property will be clubbed with the income of transferor.

After partition of the HUF, such property is distributed amongst the members of the family. In such a case income derived from such property by the spouse of the transferor will be clubbed with the income of the individual and will be charged to tax in his hands.

“Section 44ADA” as inserted by the Finance Act 2016 with effect from 01.04.2017 (FY 2017-18) is proposed in line with the recommendation of Justice Easwar Committee for simplification of taxation of professionals.
Certain resident professionals referred to in section 44AA(1)* of the Income Tax Act whose total gross receipts from profession does not exceed Rs. 50 lakhs in a financial year may offer a sum equal to higher of the below as income chargeable to Tax under the head “profits & gains from business / profession”:

50% of the gross receipts from profession (OR)

Income from profession offered by the assessee

All deductions from sections 30 to 38 (including depreciation and un-absorbed depreciation / allowances) shall be deemed as allowed and Written down value (WDV) of depreciable assets shall be recomputed deducting depreciation which is deemed as allowed.
Although an assessee opting to pay taxes u/s 44ADA are not required to maintain books of accounts, however to avoid legal consequences, necessary documents and evidences should be kept and preserved as substantial proof to verify the stand of the assessee.
*Professionals with a technical certificate of their profession as specified u/s 44AA(1) who are eligible to opt for taxation u/s 44ADA are listed as under:

Legal

Medical

Engineering

Architecture

Accountancy

Technical consultancy

Interior decoration

Other notified professionals

Authorized representatives

Film Artists

Certain sports related persons

Company Secretaries and

Information technology

The presumptive taxation scheme of section 44ADA can be opted by the eligible persons if the total turnover or gross receipts from the business do not exceed the limit prescribed under section 44AB (i.e., Rs. 2,00,00,000). In other words, if the total turnover or gross receipt of the business exceeds Rs. 2,00,00,000 then the scheme of section 44ADA cannot be adopted.

A person who is earning income in the nature of commission or brokerage cannot adopt the presumptive taxation scheme of section 44AD. Insurance agents earn income by way of commission and, hence, they cannot adopt the presumptive taxation scheme of section 44AD

The scheme of sections 44AE is available to the person who owns not more than ten goods carriages at any time during the previous year and who is engaged in the business of plying, hiring or leasing such goods carriages.

There is no concession as regards payment of advance tax in case of a person who is adopting the presumptive taxation scheme of section 44AE and, hence, he will be liable to pay advance tax even if he adopts the presumptive taxation scheme of section 44AE

The report of the tax audit conducted by the chartered accountant is to be furnished in the prescribed form. The form prescribed for audit report in respect of audit conducted under section 44AB is Form No. 3CB and the prescribed particulars are to be reported in Form No. 3CD.
In case of persons covered under those who are required to get their accounts audited by or under any other law, the form prescribed for audit report is Form No. 3CA/3CB and the prescribed particulars are to be reported in Form No. 3CD.

According to section 271B, if any person who is required to comply with section 44AB fails to get his accounts audited in respect of any year or years as required under section 44AB, the Assessing Officer may impose a penalty. The penalty shall be lower of the following amounts:
(a) 0.5% of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such year or years.
(b) Rs. 1,50,000.
However, according to section 273B, no penalty shall be imposed if reasonable cause for such failure is proved.

A person who is engaged in any profession as prescribed under section 44AA(1) cannot adopt the presumptive taxation scheme of section 44AD.
However, he can opt for presumptive taxation scheme under section 44ADA and declare 50% of gross receipts of profession as his presumptive income. Presumptive Scheme under section 44ADA is applicable only for resident assessee whose total gross receipts of profession do not exceed fifty lakh rupees.

Generally, as per the Income-tax Law, the taxable business income of every person is computed as follows :
Particulars Amount
Turnover or gross receipts from the business XXXXX
Less : Expenses incurred in relation to earning of the income (XXXXX)
Taxable Business Income XXXXX
For the purpose of computing taxable business income in the above manner, the taxpayers have to maintain books of account of the business and income will be computed on the basis of the information revealed in the books of accounts.

Section 44AA deals with provisions relating to maintenance of books of account by a person engaged in business/profession. Thus, a person engaged in business/profession has to maintain books of account of his business/profession according to the provisions of section 44AA.
In case of a person engaged in a business and opting for the presumptive taxation scheme of section 44AD, the provisions of section 44AA relating to maintenance of books of account will not apply. In other words, if a person adopts the provisions of section 44AD and declares income @ 8%/6% of the turnover, then he is not required to maintain the books of account as provided under section 44AA in respect of business covered under the presumptive taxation scheme of section 44AD.

Concept of set-off:
Specific provisions have been made in the Income-tax Act, 1961 for the set-off and carry forward of losses. In simple words, “Set-off” means adjustment of losses against the profits from another source/head of income in the same assessment year. If losses cannot be set-off in the same year due to inadequacy of eligible profits, then such losses are carried forward to the next assessment year for adjustment against the eligible profits of that year. The maximum period for which different losses can be carried forward for set-off has been provided in the Act.
Intra head set off/Inter source adjustment [Section 70]
Under this section, the losses incurred by the Assessee in respect of one source shall be set-off against income from any other source under the same head of income, since the income under each head is to be computed by grouping together the net result of the activities of all the sources covered by that head. In simpler terms, loss from one source of income can be adjusted against income from another source, both the sources being under the same head.
Example 1: Loss from one house property can be set off against the income from another house property.
Example 2: Loss from one business, say textiles, can be set off against income from any other business, say printing, in the same year as both these sources of income fall under one head of income. Therefore, the loss in one business may be set-off against the profits from another business in the same year.
Exemptions for the above:

1. Short-term capital loss is allowed to be set off against both short-term capital gain and long-term capital gain. However, long-term capital loss can be set-off only against long-term capital gain and not short-term capital gain.
2. A loss in speculation business can be set-off only against the profits of any other speculation business and not against any other business or professional income. However, losses from other business can be adjusted against profits from speculation business.
3. The losses incurred by an Assessee from the activity of owning and maintaining race horses cannot be set-off against the income from any other source other than the activity of owning and maintaining race horses.

Inter head adjustment [Section 71]
 Loss under one head of income can be adjusted or set off against income under another head. However, the following points should be considered:

1. Loss under head Capital Gains cannot be set-off with any other head of income.
2. Loss under the head Profits and gains from business or profession cannot be set off with income from salary
3. Speculation loss and loss from the activity of owning and maintaining race horses cannot be set off against income under any other head.

Loss from exempted source of income cannot be adjusted against taxable income: 
If income from a particular source is exempt from tax, then loss from such exempted source cannot be set off against any other income which is chargeable to tax.
E.g., Agricultural income is exempt from tax, if the taxpayer incurs loss from agricultural activity, then such loss cannot be adjusted against any other taxable income.

Let us understand the inter source and inter head setoff process in brief in a tabular format:

Particulars of loss		Income from Salary	Income from House property	Long Term Capital Gain	Short Term capital gain	Non Speculative Business profit	Speculative Business Profit	Income from other Sources	Gains from Activity of owning and maintaining race horses
				Capital Gains		Business/ Professional Income
Loss from House property		ü	ü	ü	ü	ü	ü	ü	ü
Short Term Capital loss	Capital Gains	O	O	ü	ü	O	O	O	O
Long term capital loss		O	O	ü	O	O	O	O	O
Non Speculative Business loss	Business Income	O	ü	ü	ü	ü	ü	ü	ü
Speculative business loss		O	O	O	O	O	ü	O	O
Loss from owning and maintaining race horses		O	O	O	O	O	O	O	ü

Carry forward of Losses:
Many times it may happen that after making intra-head and inter-head adjustments, still the loss remains unadjusted due to inadequacy of eligible profits, such losses are carried forward to the next assessment year for adjustment against the eligible profits of that year. The maximum period for which different losses can be carried forward for set-off has been provided in the Income Tax Act.
Carry forward and set off of business loss:

If loss of any business/profession cannot be fully adjusted in the year in which it is actually incurred, then the unadjusted loss can be carried forward to the next year for making adjustment. In the next years such loss can be adjusted only with the income under the head “Profits and gains of business or profession”

Loss under the head “Profits and gains of business or profession” can be carried forward only if the Income tax return of the year in which loss is incurred is filed on or before the due date of filing the return.

Non speculative Business loss:

Loss from non speculative business can be carried forward for eight years immediately next to the year in which the loss is incurred.

Loss from owning and maintaining race horses:

Loss from the business of owning and maintaining race horses cannot be set off against any income other than income from the business of owning and maintaining race horses. Such loss can be carried forward only for a period of 4 years

Speculative Business loss:

If loss of any speculative business cannot be fully adjusted in the year in which it is incurred, then the unadjusted speculative loss can be carried forward for making adjustment in the next year. In the subsequent years such loss can be adjusted only against income from speculative business (may be same or any other speculative business). Such loss can be carried forward for 4 years immediately succeeding the year in which the loss is incurred.

Specified Business loss:

Loss from business specified under section 35AD cannot be set off against any other income except income from specified business. Such loss can be carried forward for adjustment against income from specified business for any number of years

Section 35AD is applicable in respect of certain specified businesses like setting up a cold chain facility, setting up and operating warehousing facility for storage of agricultural produce, developing and building a housing projects, etc.

If loss under the head “Income from house property” cannot be fully adjusted in the year in which such loss is incurred, then unadjusted loss can be carried forward to next year.

In the subsequent years(s) such loss can be adjusted only against income chargeable to tax under the head “Income from house property”

Such loss can be carried forward for eight years immediately succeeding the year in which the loss is incurred.

Loss under the head “Income from house property” can be carried forward even if the Income Tax Return of the year in which loss is incurred is not filed on or before the due date of filing the return.

In case if loss under the head “Capital gains” incurred during a year cannot be adjusted in the same year, then unadjusted capital loss can be carried forward to next eight immediate years.

Such loss can be carried forward only if the Income Tax Return is filed on or before the due date of filing the return.

Such loss can only be set off under the head capital gain. Long-term capital loss can be adjusted only with long-term capital gains. Short-term capital loss can be adjusted with long-term capital gains as well as short-term capital gains.

Apart from several other deductions, in computation of income chargeable to tax under the head “Profits and gains of business or profession” a person is allowed to claim deduction on account for depreciation, capital expenditure incurred by him on scientific research and capital expenditure incurred by a company for promoting family planning amongst its employees.
If the income of the year in which these expenses are incurred falls short of these expenses, then the unabsorbed expenses can be carried forward to next year in the form of unabsorbed depreciation or unabsorbed capital expenditure on scientific research or unabsorbed capital expenditure on promoting family planning amongst the employees.
The unabsorbed portion shall be added to the amount of depreciation for the following year and shall be deemed to be the part of depreciation for that year (similar treatment would be given to other allowances as mentioned above).
However, while doing set off, following order needs to be followed:

First adjustments are to be made for current scientific research expenditure, family planning expenditure and current depreciation.

Second adjustment is to be made for brought forward business loss.

Third adjustments are to be made for unabsorbed depreciation, unabsorbed capital expenditure on scientific research or on family planning.

As per the amendment in the finance budget 2017 with effect from 01-04-2018:
Till the financial year 2016-17(AY 2017-18) there is no limit on the amount of house property loss set off with other heads of income but from financial year 2017-18 (AY 2018-19) that is from 01^st of April 2017, set off for the house property loss with other heads of income is limited to Rs. 2 Lakhs.
The loss if any in excess to 2 Lakhs can be carried forward and set off with the income from house property in the next 8 Assessment years (Immediate).
One should be clear about the amendment; it is not limiting the housing loan interest u/s 24b for a let out property but is limiting the amount of loss that can be set off with other heads of income
This amendment is not impacting those only having a single self occupied property because for self occupied property the housing loan interest that can be claimed as deduction under sec 24b is limited to Rs. 2 Lakhs and the loss of house property which actually arises due to housing loan interest will also be less than or equal to Rs. 2 lakhs.
When we see the let out/rented out property the housing loan interest that can be claimed as deduction under sec 24b is unlimited and loss arising from the house property may be more than 2 lakhs. In this way the new amendment impacts the let out/ rented out property.

Although an intimation received by an assessee u/s 143(1) within a period of 1 Year from the end of Financial Year in which the Return of Income was filed for the year under assessment can be considered as Assessment by the authorized Assessing Officer, however it is a matter of judgment where 143(1) is taken as a mere Intimation rather than Assessment order.
Case Law: TATA AIG GENERAL INSURANCE PVT LTD Vs DCIT ITAT (Mumbai)- ITA No.968 (MUM)2015.
Assessment under section 143(1)
This is intimation from the CPC and is a computer generated statement. All the data available in the Income Tax Return is validated by CPC with reference to the data available in the records of the income tax department.
Scope of assessment under section 143(1)
Intimation under section 143(1) is like primary verification of the return of income filed. At this stage of verification detailed examination of the return of income is not carried out. At this stage, the total income or loss is computed after making the adjustments (if any). Some of the adjustments made can be for the following matters:-

The arithmetical errors in the return of income filed; or

Any incorrect claims made in the return of income;

Any loss claimed will be disallowed, if return of the previous year for which set-off of loss is claimed was furnished after the due date specified for filing the return of income;

Any expenditure mentioned in the audit report will be disallowed if it is not taken into consideration for the computation of total income in the return filed;

Any deduction claimed u/s 10AA, 80IA to 80-IE will also be disallowed, if the return is furnished after the due date specified for filing the return of income; or

Any additional income appearing in Form 26AS which was not included in computing the total income in the return of income.

However, no adjustment shall be made by CPC unless intimation is given to the assessee of such adjustment either in writing or in electronic mode. So, the assessee will get the intimation about the adjustment. If the assessee gives any response, such response shall be considered before making any adjustment, and if no response is received within 30 days from the issue of the intimation, adjustments shall be made by the department.

After successful filing of Return of Income by an assessee u/s 139, the major notices that can be expected to come within a period of 1 year from the end of Financial Year in which the said return was filed is Intimation Notice U/s 143(1), Notice for Scrutiny Assessment u/s 143(2) ( within a period of 6 months from the end of the Financial Year in which the said return was filed) and Notice for Best Judgement Assessment u/s 142(1).
In addition to above, a notice u/s 133C as inserted by the Finance (No.2) Act 2014 w.e.f 01/10/2014 can also be issued by the prescribed Income Tax authority for Return of Income filed for AY 2015-16 and onwards within a time period of 4 years or 6 years as prescribed u/s 153.
Every taxpayer has to furnish the details of his income to the Income-tax Department. These details are to be furnished by filing up his return of income. Once the return of income is filed up by the taxpayer, the next step is the processing of the return of income by the Income Tax Department. The Income Tax Department examines the return of income for its correctness. The process of examining the return of income by the Income Tax department is called as “Assessment”. Assessment also includes re-assessment and best judgment assessment under section 144.
Under the Income-tax Law, there are four major assessments given below:

Assessment under section 143(1), i.e., Summary assessment without calling the assessee.

Assessment under section 143(3), i.e., Scrutiny assessment.

Assessment under section 144, i.e., Best judgment assessment.

Assessment under section 147, i.e., Income escaping assessment.

All the above mentioned notices are issued which leads to the given assessment proceedings.

Notice u/s 139(9) is basically intimation from the Income Tax Department for the Income tax return filed for a financial year being defective due to following common reasons:
The assessee having filed in the return the details of taxes paid, but failed to provide income details, the Income Tax Department deems the return as defective.
The assessee having claimed the tax deducted at source (TDS) as refund, failed to provide income details in the return. In such cases the return will be deemed to be defective.
The assessee having liability to pay taxes fails to pay the taxes in full before filing the return.
The Assessee who is required to maintain balance sheet and profit and loss statement as per the provisions of Income tax Act, 1961, but fails to provide such statements while preparing the income tax return.
When there is a mismatch of name in the return filed with the name as per PAN card.
In order to clear the defects in the original return filed i.e. in response to the notice sent by the department u/s 139(9), the assessee is required to file response within 15 days of the receipt of intimation or within such other time as extended by the AO on a written request filed for the same. For filing the response one should mention in the return the section under which the return is being filed and the communication reference number which is already there on the intimation given by the department.

Notice for scrutiny assessment u/s 147 is issued u/s 148 if the Assessing Officer(AO) has reason to believe that any income has escaped assessment which should be chargeable to tax . The main objective of
How the scrutiny assessment can be made by the assessing officer (AO)?
For making the scrutiny assessment the AO has to issue a notice to the assessee (i.e., the tax payer) u/s 148 and assessee should be given an opportunity of being heard. The time-limit for issuance this notice u/s 148 is a period of 4 years from the end of the relevant assessment year. If the income escaped by the assessee is Rs. 1,00,000 or more and certain other conditions are satisfied, then notice can be issued upto 6 years from the end of the relevant assessment year.
In case the income which is escaped relates to any asset located outside India, notice can be issued upto 16 years from the end of the relevant assessment year.
Notice under section 148 can be issued by AO only after getting prior approval from the prescribed authority.
The objective of carrying out assessment under section 147 is to bring under the tax net any income which has escaped assessment in original assessment under sections 143(1), 143(3), 144 & 147 (as the case may be).
In the following cases, it will be considered as income having escaped assessment:

Where no return of income has been furnished by the taxpayer, although his total income or the total income of any other person in respect of which he is assessable during the previous year exceeded the maximum amount which is not chargeable to income-tax.

Where a return of income has been furnished by the taxpayer but no assessment has been made and it is noticed by the Assessing Officer that the taxpayer has understated the income or has claimed excessive loss, deduction, allowance or relief in the return.

Where the taxpayer has failed to furnish a report in respect of any international transaction which he was required to do under section 92E.

Where an assessment has been made, but:

income chargeable to tax has been under assessed; or

income has been assessed at low rate; or

income has been made the subject of excessive relief; or

excessive loss or depreciation allowance or any other allowance has been computed;

Where a person is found to have any asset (including financial interest in any entity) located outside India.

Where a return of income has not been furnished by the assessee and on the basis of information or document received from the prescribed income-tax authority under section 133C(2), it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax.

Where a return of income has been furnished by the assessee and on the basis of information or document received from the prescribed income-tax authority under section 133C(2), it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return.