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Basic Conditions for Resident Status (Individual)

Topic: Basic Concepts and Residential StatusChapter: Chapter 1
Condition 1: Stay in India ≥182 days in the relevant Previous YearORCondition 2: Stay in India ≥60 days in the relevant Previous Year ANDStay in India ≥365 days in the 4 preceding Previous Years\text{Condition 1: } \text{Stay in India } \ge 182 \text{ days in the relevant Previous Year} \\ \text{OR} \\ \text{Condition 2: } \text{Stay in India } \ge 60 \text{ days in the relevant Previous Year } \text{AND} \\ \text{Stay in India } \ge 365 \text{ days in the 4 preceding Previous Years}
An individual is a Resident if they satisfy either Condition 1 or Condition 2. Note: The 60-day rule is replaced by 182 days for Indian citizens leaving for employment or members of a crew of an Indian ship.

Additional Conditions for Ordinary Resident (ROR)

Topic: Basic Concepts and Residential StatusChapter: Chapter 1
Condition A: Resident in at least 2 out of 10 preceding Previous YearsANDCondition B: Stay in India ≥730 days in 7 preceding Previous Years\text{Condition A: } \text{Resident in at least 2 out of 10 preceding Previous Years} \\ \text{AND} \\ \text{Condition B: } \text{Stay in India } \ge 730 \text{ days in 7 preceding Previous Years}
To be classified as Resident and Ordinarily Resident (ROR), an individual must satisfy both Condition A and Condition B in addition to the basic conditions.

Scope of Total Income (Residential Status Matrix)

Topic: Basic Concepts and Residential StatusChapter: Chapter 1

\begin{array}{|l|c|c|c|} \hline \text{Nature of Income} & \text{ROR} & \text{RNOR} & \text{NR} \ \hline \text{Income received/deemed received in India} & \text{Taxable} & \text{Taxable} & \text{Taxable} \ \hline \text{Income accruing/deemed to accrue in India} & \text{Taxable} & \text{Taxable} & \text{Taxable} \ \hline \text{Income accruing outside India (Business controlled from India)} & \text{Taxable} & \text{Taxable} & \text{Not Taxable} \ \hline \text{Income accruing outside India (Other cases)} & \text{Taxable} & \text{Not Taxable} & \text{Not Taxable} \ \hline \end{array}

This matrix determines the taxability of various types of income based on the individual's residential status.

Short-Term Capital Gain (STCG)

Topic: Capital GainsChapter: Chapter 1
STCG=Full Value of Consideration−(Transfer Expenses+Cost of Acquisition+Cost of Improvement)\text{STCG} = \text{Full Value of Consideration} - (\text{Transfer Expenses} + \text{Cost of Acquisition} + \text{Cost of Improvement})
Used when a capital asset is held for a period less than the specified statutory period. It represents the net profit after deducting all related costs and expenses from the sale price.

Long-Term Capital Gain (LTCG)

Topic: Capital GainsChapter: Chapter 1
LTCG=Full Value of Consideration−(Transfer Expenses+Indexed Cost of Acquisition+Indexed Cost of Improvement)\text{LTCG} = \text{Full Value of Consideration} - (\text{Transfer Expenses} + \text{Indexed Cost of Acquisition} + \text{Indexed Cost of Improvement})
Used when a capital asset is held for a period exceeding the statutory limit. It incorporates indexation to account for inflation.

Indexed Cost of Acquisition (ICOA)

Topic: Capital GainsChapter: Chapter 1
ICOA=Cost of Acquisition×CII of Year of TransferCII of Year of Acquisition\text{ICOA} = \text{Cost of Acquisition} \times \frac{\text{CII of Year of Transfer}}{\text{CII of Year of Acquisition}}
Used to adjust the original purchase price for inflation using the Cost Inflation Index (CII) provided by the Income Tax Department.

Indexed Cost of Improvement (ICOI)

Topic: Capital GainsChapter: Chapter 1
ICOI=Cost of Improvement×CII of Year of TransferCII of Year of Improvement\text{ICOI} = \text{Cost of Improvement} \times \frac{\text{CII of Year of Transfer}}{\text{CII of Year of Improvement}}
Used to adjust the cost of capital improvements made to an asset to reflect their value in terms of current inflation.

Net Sale Consideration

Topic: Capital GainsChapter: Chapter 1
Net Consideration=Gross Sale Consideration−Expenditure incurred wholly and exclusively in connection with transfer\text{Net Consideration} = \text{Gross Sale Consideration} - \text{Expenditure incurred wholly and exclusively in connection with transfer}
The actual amount available for tax calculation after deducting brokerage, commission, or legal expenses incurred during the sale.

Cost of Acquisition for assets acquired before 01.04.2001

Topic: Capital GainsChapter: Chapter 1
Cost of Acquisition=Higher of (Actual Cost, Fair Market Value as on 01.04.2001)\text{Cost of Acquisition} = \text{Higher of (Actual Cost, Fair Market Value as on 01.04.2001)}
This rule determines the cost of acquisition for capital assets acquired before April 1, 2001, for the purpose of calculating capital gains. For long-term capital assets, this value is then indexed.

Basic Capital Gain (before indexation)

Topic: Capital GainsChapter: Chapter 1
Capital Gain=Full Value of Consideration−Expenses on Transfer−Cost of Acquisition−Cost of Improvement\text{Capital Gain} = \text{Full Value of Consideration} - \text{Expenses on Transfer} - \text{Cost of Acquisition} - \text{Cost of Improvement}
This formula calculates the basic capital gain or loss before considering the impact of indexation. It applies to both short-term and long-term capital assets, though for long-term assets, indexed costs are used.

Short-Term Capital Gain (STCG) from Sale of Depreciable Assets (Excess over WDV)

Topic: Capital GainsChapter: Chapter 1
STCG=Net Sale Consideration−Written Down Value (WDV) of the block of assets\text{STCG} = \text{Net Sale Consideration} - \text{Written Down Value (WDV) of the block of assets}
This formula calculates the Short-Term Capital Gain when the net sale consideration (Full Value of Consideration less Expenses on Transfer) from the sale of a depreciable asset exceeds the Written Down Value (WDV) of the block of assets. This excess is treated as STCG. Other scenarios (e.g., block ceasing to exist) also result in STCG.

Exemption under Section 54F (Proportionate Exemption)

Topic: Capital GainsChapter: Chapter 1
Exemption u/s 54F=Long-Term Capital Gain×Cost of new residential houseNet Sale Consideration\text{Exemption u/s 54F} = \text{Long-Term Capital Gain} \times \frac{\text{Cost of new residential house}}{\text{Net Sale Consideration}}
This formula calculates the proportionate exemption available under Section 54F when the entire net sale consideration from the transfer of a long-term capital asset (other than a residential house) is not invested in a new residential house.

Tax Deducted at Source (TDS) Amount

Topic: TDS and TCSChapter: Chapter 1
\text{TDS Amount} = \text{Gross Amount of Payment} \times \frac{\text{Rate of TDS (%) }}{100}
Used to calculate the specific amount that a deductor must withhold from a payment made to a deductee. The rate is determined by the specific section of the Income Tax Act (e.g., Section 194C, 194J, etc.).

Net Amount Payable to Deductee

Topic: TDS and TCSChapter: Chapter 1
\text{Net Payable} = \text{Gross Amount} - \left( \text{Gross Amount} \times \frac{\text{Rate of TDS (%) }}{100} \right)
Calculates the actual cash outflow to the payee after the statutory tax deduction has been made.

Tax Collected at Source (TCS) Amount

Topic: TDS and TCSChapter: Chapter 1
\text{TCS Amount} = \text{Sale Consideration} \times \frac{\text{Rate of TCS (%) }}{100}
Used by a seller to calculate the additional amount to be collected from a buyer on specific goods/transactions as per Section 206C.

Total Amount Recovered from Collectee

Topic: TDS and TCSChapter: Chapter 1
Total Amount=Sale Price+TCS Amount\text{Total Amount} = \text{Sale Price} + \text{TCS Amount}
The total invoice value that the buyer must pay to the seller, including the tax component collected for the government.

TDS/TCS in case of Non-Availability of PAN

Topic: TDS and TCSChapter: Chapter 1
Tax Amount=Gross Amount×max⁡(Applicable Rate,20%)100\text{Tax Amount} = \text{Gross Amount} \times \frac{\max(\text{Applicable Rate}, 20\%)}{100}
Under Section 206AA/206CC, if the deductee/collectee fails to provide a PAN, tax must be deducted/collected at the higher of the applicable rate or 20%.

Calculation of TDS Amount

Topic: TDS and TCSChapter: Chapter 1
TDS Amount=Taxable Payment Amount×TDS Rate\text{TDS Amount} = \text{Taxable Payment Amount} \times \text{TDS Rate}
Calculates the amount of tax to be deducted at source from a payment. Key variables include the gross payment subject to TDS and the applicable TDS rate as per the Income Tax Act, which varies based on the nature of payment and payee.

Calculation of Net Payment to Payee (after TDS)

Topic: TDS and TCSChapter: Chapter 1
Net Payment to Payee=Gross Payment−TDS Amount\text{Net Payment to Payee} = \text{Gross Payment} - \text{TDS Amount}
Determines the actual amount received by the payee after the tax has been deducted at source by the deductor and remitted to the government.

Calculation of TCS Amount

Topic: TDS and TCSChapter: Chapter 1
TCS Amount=Taxable Value of Goods/Services×TCS Rate\text{TCS Amount} = \text{Taxable Value of Goods/Services} \times \text{TCS Rate}
Calculates the amount of tax to be collected at source by the seller from the buyer on specified transactions. Key variables include the value of goods/services subject to TCS and the applicable TCS rate.

Calculation of Net Amount Payable by Buyer (after TCS)

Topic: TDS and TCSChapter: Chapter 1
Net Amount Payable by Buyer=Gross Value of Goods/Services+TCS Amount\text{Net Amount Payable by Buyer} = \text{Gross Value of Goods/Services} + \text{TCS Amount}
Determines the total amount to be paid by the buyer to the seller, including the tax collected at source.

Interest for Late Deduction/Collection of TDS/TCS

Topic: TDS and TCSChapter: Chapter 1
Interest=Amount of TDS/TCS×Rate of Interest×Number of Months or Part Thereof100\text{Interest} = \frac{\text{Amount of TDS/TCS} \times \text{Rate of Interest} \times \text{Number of Months or Part Thereof}}{100}
Calculates the interest payable for failure to deduct/collect TDS/TCS or for late deduction/collection. The rate of interest is typically 1% per month or part thereof from the date on which such tax was deductible/collectible till the date of deduction/collection.

Interest for Late Payment of TDS/TCS

Topic: TDS and TCSChapter: Chapter 1
Interest=Amount of TDS/TCS×Rate of Interest×Number of Months or Part Thereof100\text{Interest} = \frac{\text{Amount of TDS/TCS} \times \text{Rate of Interest} \times \text{Number of Months or Part Thereof}}{100}
Calculates the interest payable for failure to pay TDS/TCS to the government after it has been deducted/collected. The rate of interest is typically 1.5% per month or part thereof from the date of deduction/collection till the date of payment to the government.

Gross Annual Value (GAV)

Topic: Income from House PropertyChapter: Chapter 1
GAV=max⁡(Expected Rent,Actual Rent Received/Receivable)\text{GAV} = \max(\text{Expected Rent}, \text{Actual Rent Received/Receivable})
Expected Rent is the higher of Municipal Value or Fair Rent, but restricted to Standard Rent. GAV is the higher of Expected Rent or Actual Rent (adjusted for vacancy).

Net Annual Value (NAV)

Topic: Income from House PropertyChapter: Chapter 1
NAV=GAV−Municipal Taxes\text{NAV} = \text{GAV} - \text{Municipal Taxes}
Municipal taxes can only be deducted if they are actually paid by the owner during the previous year.

Income from House Property

Topic: Income from House PropertyChapter: Chapter 1
Income=NAV−Standard Deduction (u/s 24a)−Interest on Borrowed Capital (u/s 24b)\text{Income} = \text{NAV} - \text{Standard Deduction (u/s 24a)} - \text{Interest on Borrowed Capital (u/s 24b)}
The final taxable income is derived by subtracting statutory deductions from the Net Annual Value.

Standard Deduction (Section 24a)

Topic: Income from House PropertyChapter: Chapter 1
Standard Deduction=30%×NAV\text{Standard Deduction} = 30\% \times \text{NAV}
A flat deduction of 30% of the NAV is allowed for repairs and maintenance, regardless of actual expenditure incurred.

Interest on Borrowed Capital (Section 24b)

Topic: Income from House PropertyChapter: Chapter 1
Deduction=Interest Accrued during the year\text{Deduction} = \text{Interest Accrued during the year}
Includes interest on loans taken for purchase, construction, repair, or reconstruction of the property. For let-out property, there is no limit; for self-occupied property, limits apply.

Expected Rent (ER)

Topic: Income from House PropertyChapter: Chapter 1
ER=Min(Max(Municipal Value, Fair Rent),Standard Rent (if applicable))\text{ER} = \text{Min}(\text{Max}(\text{Municipal Value, Fair Rent}), \text{Standard Rent (if applicable)})
Expected Rent is the higher of Municipal Value or Fair Rent, but restricted to Standard Rent if the property is covered by the Rent Control Act. If no Standard Rent is applicable, it's simply the higher of Municipal Value or Fair Rent.

Gross Annual Value (GAV) for Let-Out Property

Topic: Income from House PropertyChapter: Chapter 1
GAV=Max(Expected Rent, Actual Rent Received/Receivable)\text{GAV} = \text{Max}(\text{Expected Rent, Actual Rent Received/Receivable})
Gross Annual Value for a let-out property is generally the higher of Expected Rent or Actual Rent received/receivable. However, if the actual rent received/receivable is lower than the expected rent solely due to vacancy, then the actual rent received/receivable (for the occupied period) is taken as GAV.

Income from House Property (IFHP)

Topic: Income from House PropertyChapter: Chapter 1
IFHP=NAV−(30% of NAV)−Interest on Borrowed Capital\text{IFHP} = \text{NAV} - (\text{30\% of NAV}) - \text{Interest on Borrowed Capital}
Income from House Property is derived by deducting a standard deduction (30% of NAV) and the allowable interest on borrowed capital from the Net Annual Value. For a self-occupied property, NAV is Nil, but interest on borrowed capital can still be deducted, leading to a loss from house property.

Maximum Interest Deduction for Self-Occupied Property (SOP)

Topic: Income from House PropertyChapter: Chapter 1

\text{Max Interest Deduction} = \begin{cases} \text{₹ 2,00,000} & \text{if loan taken for acquisition/construction after 01.04.1999} \ \text{₹ 30,000} & \text{otherwise (e.g., repairs, or loan before 01.04.1999)} \end{cases}

For a self-occupied property, the deduction for interest on borrowed capital is restricted to a maximum of ₹2,00,000 if the loan is for acquisition or construction and was taken on or after April 1, 1999. In other cases (e.g., for repairs, renewal, reconstruction, or if the loan for acquisition/construction was taken before April 1, 1999), the maximum limit is ₹30,000.
Chapter 1 Formulas — CA Intermediate | Kartavvya