Computation of taxable income of individual, HUF and firms
COMPUTATION OF TAXABLE INCOME OF AN INDIVIDUAL
What is included in income of an individual?
While computing taxable income of an individual, the following points should be considered— Nature of income| Tax treatment|
Income earned by the taxpayerShare of profit from a HUFShare of profit from a firm assessed as firmSalary & interest from the aforesaid firmShare of profit from an association of persons/body of individualsIncome earned by others and included in the income of the taxpayer by virtue of sections 60 to 64| Except the following, all other incomes shall be included— a. Income exempt under sections 10 to 13A; b. Incomes to be included in income of others by virtue of sections 60 to 64.It is exempt under section 10(2)It is exempt under section 10(2A)These are taxable as business incomeIf the association/body us taxable at the maximum marginal rate, then share of profit is not taxable in the hand of recipientSuch income shall be included in the income of the taxpayer|
Taxable income – how computed
Taxable income shall be computed as follows:
Step 1 – income under the different heads of income- First find out income under the five heads of income. Step 2 – adjustment of losses of the current year and earlier years- Losses should be set off according to the provisions of sections 70 to 80. The income after adjustment of losses is gross total income. Step 3 – deduction from gross total income- from the gross total income, the following deductions are available— Section| Nature of deduction|
80C80CCC80CCD80D80DD80DDB80E80G80GG80GGA80GGC80-IA80-IAB80-IB80-IC80-JJA80QQB80RRB80U| Payment of insurance premium, contribution to provident fund etc.Contribution to certain pension fundContribution to pension scheme of central governmentPayment of medical insurance premiumMaintenance including medical treatment of a dependent being a person with disabilityMedical treatment expenditureRepayment of loan taken for higher studiesDonations to charitable institutions and fundsRent paidDonations for scientific research or rural developmentContributions given to political partiesProfits and gains from industrial undertakings or enterprise engaged in infrastructure development, etc.Profits and gains by an undertaking or enterprise engaged in development of special economic zoneProfits and gains from certain industrial undertakings other than infrastructure development undertakingsProfits and gains of certain undertakings in certain special category of statesProfits from the business of collecting and processing of bio-degradable wasteRoyalty income of authorsRoyalty on patentsIncome of a person with disability|
Step 4 – Rounding off- The balance should be rounded off to the nearest Rs. 10. It is known as net income or total income or taxable income. Tax liability – how calculated
Final tax liability shall be determined as under –
Particulars | amount|
Tax on net incomeLess: Tax rebates under section 88EBalanceAdd: SurchargeTax and surchargeAdd: Education cess (2% of tax & surcharge)Total taxLess: Tax rebate or relief under sections 86,89,90,90A & 91Add: Interest payable under sections 234A,234B & 234CLess: Prepaid taxTax deducted at source on his own income & on income of others included in his taxable incomeTax collected at sourceAdvance taxTax payable at the time of submission of return of income| ........................______....................................______............................................................______............______|
Special provisions relating to non-residents [sec.115C to 115-I] – These provisions are given below: WHO CAN CLAIM THE BENEFIT OF SPECIAL PROVISIONS – The benefit of special provisions can be claimed by non-resident Indians. The following are “non –resident Indians” for this purpose: a. Citizen of India who is a non-resident; or
b. A person of...