Bird’s Eye View on Income Tax Act, 1961( for more

details on every item refer the bare Act, rules and text
books)
Meaning of Income (Section 2(24))
The term income includes:

 Profits and gains

 Dividend
 Voluntary contributions received by trusts
 Perquisites or profits in lieu of salary
 Capital gains
 Any sum chargeable under sections 28 to 44 (business income)

Income is inclusive, not exhaustive, meaning it covers all receipts unless specifically
exempt.

2. Definition of Person (Section 2(31))

A person includes:

1. Individual
2. Hindu Undivided Family (HUF)
3. Company
4. Firm
5. Association of Persons (AOP)
6. Body of Individuals (BOI)
7. Local Authority
8. Artificial Juridical Person

3. Assessment Year (Section 2(9))

 Assessment Year (AY) is the 12-month period starting from 1st April to 31st
March following the previous year.
 Income earned in the Previous Year is assessed in the Assessment Year.

4. Determination of Residential Status (Section 6)

Residential status is determined every year.

For Individuals:

A person is Resident if:

 Stayed in India ≥182 days in PY, OR

  Stayed ≥60 days in PY and ≥365 days in last 4 years

Otherwise, Non-Resident (NR)

Resident further classified as:

 Resident and Ordinarily Resident (ROR)

 Resident but Not Ordinarily Resident (RNOR)

5. Agricultural Income (Section 2(1A))

Agricultural income includes:

 Rent or revenue from agricultural land

 Income from agriculture operations
 Income from farm buildings

Exempt under Section 10(1)

However, partial integration applies for rate purposes.

6. Marginal Rate of Tax

 Highest rate of tax (including surcharge and cess)
 Applied in cases like AOP, trust income, etc.

7. Exempted Income (Section 10)

Some exempt incomes:

 Agricultural income
 Share of profit from partnership firm
 Gratuity (subject to limits)
 Leave Travel Allowance (LTA)
 Life insurance proceeds (subject to conditions)

8. Perquisites (Section 17)

Perquisites are benefits provided by employer in addition to salary:

 Rent-free accommodation
 Motor car facility
 Free education
 Employer’s contribution to excess PF

Taxable unless specifically exempt.

9. Deductions from Income from House Property (Section
24)
Allowed deductions:

1. Standard deduction – 30% of Net Annual Value

2. Interest on borrowed capital
o ₹2,00,000 (self-occupied)
o Full amount (let-out property)

10. Permissible Deductions from Salary

 Standard Deduction – ₹50,000
 Professional tax
 Entertainment allowance (Govt employees only)

11. TDS Provisions (Tax Deducted at Source)

 Tax deducted at time of payment or credit
 Ensures regular collection of tax
 Examples:
o Salary – Section 192
o Interest – Section 194A
o Rent – Section 194I

12. Advance Payment of Tax (Sections 207–211)

Advance tax payable if tax liability ≥ ₹10,000

Installments:

 15% by 15 June
 45% by 15 Sept
 75% by 15 Dec
 100% by 15 March

Interest charged under Sections 234B & 234C for default.

13. Short-Term & Long-Term Capital Gain

Short-Term Capital Gain (STCG):

 Asset held ≤36 months (≤12 months for shares)

 Taxed at slab rate or 15% for equity (Section 111A)

Long-Term Capital Gain (LTCG):

  Asset held >36 months
 Taxed at 20% with indexation
 Equity LTCG above ₹1 lakh taxed at 10%

14. Provisions for Filing Income Tax Return (Section 139)

 Mandatory if income exceeds basic exemption
 Due dates:
o Individuals: 31st July
o Audit cases: 31st October
 Belated return allowed with penalty

15. Carry Forward of Depreciation and Losses

 Business loss: 8 years
 Capital loss: 8 years
 Unabsorbed depreciation: Can be carried forward indefinitely
 Must file return on time (except depreciation)

16. Transfer of Capital Asset (Section 2(47))

Transfer includes:

 Sale, exchange, or relinquishment

 Compulsory acquisition
 Conversion into stock-in-trade
 Transfer of rights

17. New Tax Regime vs Old Tax Regime

Particulars Old Regime New Regime
Tax rates Higher Lower
Deductions Allowed (80C, HRA) Mostly not allowed
Suitable for Investors, salaried with deductions Simple salary income

Provisions for Payment of Advance Tax

Advance Tax, also known as “pay-as-you-earn” tax, is the tax payable in installments
during the financial year rather than as a lump sum at the end. It is applicable to:

 Salaried individuals (if TDS is insufficient)

 Professionals
 Business income earners
 Self-employed persons
 Others with tax liability > ₹10,000 in a year
Legal Basis:

 Sections 208 to 219 of the Income Tax Act, 1961

 Interest for late payment is charged under Sections 234B and 234C

2. Due Dates and Percentages of Advance Tax Payable

For Individuals (other than companies) and Non-Corporate Taxpayers

Installment Due Date % of Estimated Tax Liability

1st 15th June 15%
2nd 15th September 45% cumulative
3rd 15th December 75% cumulative
4th 15th March 100% cumulative

Cumulative means: the sum of installments paid till that date should equal the % of total
estimated tax.

Example: If total estimated tax = ₹1,00,000:

 15th June: ₹15,000

 15th Sept: ₹45,000 total → need to pay ₹30,000 more
 15th Dec: ₹75,000 total → pay ₹30,000 more
 15th Mar: ₹1,00,000 total → pay ₹25,000 more

For Companies (including firms and LLPs)

 Companies must pay 100% of advance tax in one or more installments according
to their estimated tax.
 Due dates for companies: same as above, but interest rules differ slightly.

3. Consequences of Non-Payment or Short Payment of

Advance Tax
A. Interest under Section 234B (Non-payment of Advance Tax)

 If advance tax is not paid or is insufficient, interest is charged on shortfall at 1%

per month (or part of a month) from the 1st day of April to the date of payment.
 Applicable on tax payable minus TDS/reliefs.

Example:

 Tax payable = ₹1,00,000

 Advance tax paid = ₹40,000
 Shortfall = ₹60,000
 Interest (assuming 12 months) = ₹60,000 × 1% × 12 = ₹7,200
B. Interest under Section 234C (Deferment of Installments)

 If an installment due is not paid in time: interest is charged at 1% per month for 3
months (for individuals) or shorter periods depending on the due date.
 This is calculated separately for each installment.

Example:

 Due 15th June = ₹15,000

 Paid only ₹10,000 → shortfall = ₹5,000
 Interest = ₹5,000 × 1% × 3 months = ₹150

C. Penalty and Legal Consequences

 No separate penalty for advance tax shortfall, but interest is mandatory under
234B/234C.
 Persistent non-payment can invite scrutiny by the Assessing Officer and demand
recovery of tax under Sections 222–223.

4. Key Points / Tips

1. Threshold: Only if tax liability > ₹10,000 after TDS/reliefs.

2. Professionals & Traders: Must carefully estimate profits and tax liability to avoid
interest.
3. Overpayment: No penalty; excess payment is refundable when filing ITR.
4. Revision: If estimated tax changes during the year, revised advance tax can be paid.

✅ Summary Table of Consequences of Non-Payment

Default Section Rate / Effect

Non-payment / short payment 234B 1% per month on shortfall from 1 April
Installment not paid on time 234C 1% per month for 3 months on shortfall
Persistent default / scrutiny 222–223 Recovery notice by AO
Overpayment N/A Refund on filing ITR

If you want, I can also draw a clear timeline chart showing due dates, percentages, and
interest calculations—it makes this much easier to memorize for exams.

Do you want me to make that timeline?

provisions for filing of income tax return - regular return belated return, defective return,
return of loss, return in response to notice issued by comissioner , effects of non filing,
delayed filing of return

Here’s a detailed, high-level overview of the provisions for filing Income Tax Returns
(ITR) under the Income Tax Act, including types of returns, consequences, and deadlines:

1. Regular Return (Original Return)

 Definition: The original return filed within the due date specified under Section
139(1).
 Due Dates:
o Salaried/Individual (not requiring audit): 31st July of the assessment year
o Business/profession requiring audit: 30th September of the assessment year
o Transfer Pricing cases: 30th November of the assessment year
 Purpose: To report income, deductions, TDS, and taxes paid.
 Effect: Filing on time avoids interest/penalty under Sections 234A, 234B, 234C,
234F.

2. Belated Return
 Definition: Return filed after the due date, under Section 139(4).
 Due Date: Up to 31st March of the assessment year (or 3 months before completion
of assessment, whichever is earlier).
 Penalty/Interest:
o Late fee under 234F:
 ₹5,000 if filed after due date but before 31st Dec
 ₹10,000 if filed after 31st Dec (for income ≤ ₹5 lakh, max ₹1,000)
o Interest under 234A on unpaid tax
 Effect: Eligible for refund or loss set-off (if filed within time limits for certain losses).

3. Defective Return
 Definition: Return treated as defective if it has errors/omissions (Section 139(9)).
Examples:
o Incorrect TDS details
o Missing documents
o Computational errors
 Rectification:
o Income Tax Officer issues notice for defect within 15 days of filing
o Taxpayer must rectify within 15 days (or extended by AO)
 Effect: Treated as not filed until defect is corrected

4. Return of Loss
 Definition: Filed to report losses (business loss, capital loss, house property loss)
under Section 139(3).
 Purpose: To carry forward losses for set-off in future years.
  Deadline: Must file within due date of regular return
 Effect:
o Losses can be carried forward only if ITR filed on time
o Late filing → loss cannot be carried forward

5. Return in Response to Notice by Commissioner / AO

 Definition: Return filed under Section 142(1) or Section 148, in response to a notice
issued by the AO.
 Purpose: To provide information, clarify discrepancies, or report income after
income escaped assessment.
 Effect:
o Non-compliance → AO can assess income based on available info
o Penalties under Section 271(1)(c) possible for concealment

6. Effects of Non-Filing / Delayed Filing of Return

Default / Delay Type Section / Effect
Non-filing (taxable income > Penalty under 234F, interest under 234A/B/C, no loss
₹2.5 lakh) carry forward
Same as above; belated return possible up to 31 Mar of
Late filing
assessment year
Losses not filed on time Cannot be carried forward for future set-off
Concealment or inaccurate info Penalty up to 100% of tax evaded under 271(1)(c)
TDS or Advance tax shortfall Interest under 234A/B/C even if return filed later
Refund claim Cannot claim refund if ITR not filed

A. Deductions Allowed for Business or Profession

(Sections 30 to 37, 40–43)

While computing Profits and Gains of Business or Profession, the following expenses are
allowed, provided they are wholly and exclusively for business purposes.

1. Rent, Rates, Taxes & Repairs (Section 30)

 Rent of business premises

 Municipal taxes (not income tax)
 Repairs and maintenance of building used for business

2. Repairs & Insurance of Machinery, Plant & Furniture (Section 31)

 Repairs of machines, furniture, vehicles

 Insurance premium of business assets
3. Depreciation (Section 32)

 Depreciation on tangible and intangible assets

Example: Building, machinery, patents, trademarks, goodwill

📌 Allowed as per Income-tax Rules rates

4. Expenditure on Scientific Research (Section 35)

 Revenue and capital expenditure for scientific research related to business

5. Expenditure on Specified Businesses (Section 35AD)

 100% deduction for capital expenditure on specified businesses

Example: Cold storage, hotels, hospitals

6. Amortisation of Preliminary Expenses (Section 35D)

 Expenses incurred before commencement of business

Example: Legal fees, company formation expenses

7. Bad Debts (Section 36(1)(vii))

 Debts written off as irrecoverable in books

8. Employer’s Contribution to PF, ESI, Gratuity (Section 36)

 Allowed if deposited within due date

9. Interest on Borrowed Capital (Section 36(1)(iii))

 Interest on loans taken for business purposes

10. General Business Expenses (Section 37)

Any expense:

 Not capital in nature

 Not personal
 Not illegal

Examples:

 Salaries and wages

 Office expenses
 Advertisement expenses
 Legal and professional fees
 Audit fees
 Telephone, internet, electricity
  Sales promotion expenses

B. Deductions / Exemptions Allowed Under Capital Gains

(Sections 45 to 55, 54 series)

Capital Gains are computed by deducting specific items only.

1. Cost of Acquisition (Section 48)

 Purchase price of asset

 In case of inheritance, cost to previous owner

2. Cost of Improvement (Section 55)

 Capital expenditure incurred to improve asset

📌 Improvement after 1-4-2001 only

3. Indexed Cost of Acquisition & Improvement

 Allowed for Long-Term Capital Assets

 Adjusted using Cost Inflation Index (CII)

4. Expenses on Transfer

 Brokerage or commission
 Legal fees
 Stamp duty
 Advertisement expenses for sale

5. Exemptions Under Capital Gains

(Subject to conditions)

Section Asset Sold Exemption

54 Residential house Purchase / construction of another house
54B Agricultural land Purchase of new agricultural land
54EC Any long-term asset Investment in bonds (NHAI, REC)
54F Any asset except house Purchase of residential house
54GB Residential property Investment in eligible start-up
Deductions Not Allowed Under Business or Profession
(Section 37 and related provisions)

Even though these expenses may be incurred in business, the Income-tax Act disallows them
while computing Profits and Gains of Business or Profession.

1. Personal Expenses

 Expenses not exclusively for business purposes

Example: Personal travel, household expenses charged to business

📌 Reason: Allowed only if incurred wholly and exclusively for business.

2. Capital Expenditure

 Expenses resulting in acquisition of capital asset

Example: Purchase of machinery, building, furniture

📌 Note: Only depreciation is allowed, not the full amount.

3. Income Tax and Penalties

 Income tax paid

 Penalty for non-compliance of law

📌 Reason: Tax on income is an application of income, not a business expense.

4. Fines and Penalties for Illegal Activities

 Penalty for violation of law

Example: Penalty for GST evasion, traffic fines on business vehicle

📌 Reason: Against public policy.

5. Expenses for Illegal Business

 Expenses incurred for unlawful activities

Example: Bribes, smuggling expenses

📌 Explicitly disallowed under Explanation to Section 37(1)

6. Cash Payments Above Prescribed Limit

 Payment exceeding ₹10,000 made otherwise than by account payee cheque/bank

(₹35,000 for transport operators)

📌 Section 40A(3)

7. Provision for Future Losses

 Anticipated or contingent losses

Example: Provision for future warranty claims (unless specifically allowed)

8. Excessive or Unreasonable Payments

 Excess salary, commission, or remuneration paid to relatives/directors

📌 Section 40A(2)

9. Employer’s Contribution Not Paid

 Employer’s contribution to PF/ESI not deposited within due date

10. Unapproved Donations

 Donations not qualifying under Section 80G

(Claimed as business expense)