Rates of Tax (Part - 1) - Taxation | Income Tax for assessment (Inter Level) PDF Download
Rates of Tax - Taxation
Special incomes are those incomes which are subjected to concessional rates of tax. Special incomes are of 2 types which are:
(a) | STCG STT paid | In case of Short term capital gain (STCG) which is subject to securities transaction tax (STT). The rate of tax is 15% flat. But where securities transaction tax is not applicable then such short term capital gain is subjected to normal rates of tax. |
(b) | LTCG | It is subjected to flat 20%. |
(c) | LTCG STT paid | However Long term capital gain subjected to securities transaction tax is fully exempt from tax u/s 10(38). |
(d) | STCG | It is normal income since STT is not applicable. |
Note 1: Special incomes are subjected to same rates of tax for all kinds of assessee whether corporate assessee or non-corporate assessee.
2. Tax on casual income
Casual Income are windfall gains, like income from gambling, races, lotteries, TV game show etc. It is subjected to 30% flat rate on all kinds of assessee whether corporate assessee or non-corporate assessee, whether resident or non-resident.
3. Tax on normal income
Any income other than special income and casual income is normal income. Normal income is subjected to normal rates of tax which differ from assessee to assessee. Individual, HUF etc., earning normal income are subjected to slab rate whereas normal income of firm and company are subjected to flat rate.
Note 1: Normal Income = Total Income– Special income– Casual Income
Firm / LLP / Domestic Company | 30% flat |
Foreign Company | 40% flat |
Individual / HUF / AOP / BOI / AJP | Slab rate |
4. Surcharge
| Domestic Company | Foreign Company | Firm / llp | Ind / HUF/ AOP / BOI / ajp | Local Authority | Co operative society |
• Total Income exceeds Rs 1 Cr | 7% | 2% | 12% | 15% | 12% | 12% |
• Total Income exceeds Rs 10 Cr. | 12% | 5% | 12% | 15% | 12% | 12% |
5. Education cess (2%) + Secondary and Higher Education Cess (1%) : 3% on all persons at all levels of income.
TAX RATES IN BRIEF
| Domestic Company | Foreign Company | Firm / LLP | Individual / HUF / AOP / BOI / AJP |
Tax on Long Term Capital Gain | 20% flat | 20% flat | 20% flat | 20% flat |
Tax on Short Term Capital Gain (STT paid) | 15% flat | 15% flat | 15% flat | 15% flat |
Tax on Lottery Income. (Casual Income) | 30% flat | 30% flat | 30% flat | 30% flat |
Tax on Normal Income | 30% flat | 40% flat | 30% flat | slab rate with rebate u/s 87A. |
Surcharge (Tax on Tax) |
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• TI exceeds Rs 1 Cr. | 7% | 2% | 12% | 15% |
• TI exceeds Rs 10 Cr. | 12% | 5% | 12% | 15% |
Whether marginal relief available | Yes | Yes | Yes | Yes |
Education cess & SHEC | 3% at all levels of income | 3% at all levels of income | 3% at all levels of income | 3% at all levels of income |
SECTION 87A, TAX REBATE
Conditions
1. Assessee is resident individual.
2. His total income is upto Rs 5,00,000.
Amount of rebate
100% of tax or Rs 5,000 Rs 2,000 whichever is lower. This rebate is not applicable to super senior citizens.
Note 1 : Rebate u/s 87A is not available to non resident individual or to HUF / AOP / BOI / AJP.
Note 2 : Rebate u/s 87A is available also from tax on special income and lottery income.
Normal Income | R Ind | R SC | R SSC | (NR - Ind) / (R / NR HUF / AOP / BOI) |
2,60,000 | 1,000 - 1,000 = nil | Nil | Nil | 1,000 |
2,80,000 | 3,000 - 2,000 = 1,000 | Nil | Nil | 3,000 |
3,00,000 | 5,000 - 5,000 = Nil | Nil | Nil | 5,000 |
4,00,000 | 15,000 - 5,000 = 10,000 | 10,000- 5,000 = 5,000 | Nil | 15,000 |
5,00,000 | 25,000 - 5,000 = 20,000 | 20,000 - 5,000 = 15,000 | Nil | 25,000 |
6,00,000 | 45,000 - 0 = 45,000 | 40,000 - 0 = 40,000 | 20,000 - 0 = 20,000 | 45,000 |
COMPUTATION OF TAX LIABILITY
Tax on Special Income | 1,00,000 |
Tax on Casual Income | 2,00,000 |
Tax on Normal Income | 5.00.000 |
Total Tax | 8,00,000 |
Less : Rebate u/s 87A (available only to resident individual. Max Rs 2,000, if TI is upto Rs 5 Lakhs) | Nil |
Tax | 8,00,000 |
(+) Surcharge @ 2% / 5% / 12% (Assume 2%) | 16.000 |
Tax and Surcharge | 8,16,000 |
(+) Education cess @ 3% | 24,480 |
Tax | 8,40,480 |
P1 : Compute total income and tax payable of Mr. X from the following information. |
Income from House Property 4,00,000
Long Term Capital Gain 2,00,000
Short Term Capital Gain (STT paid) 1,00,000
Short Term Capital Gain 50,000
Long Term Capital Gain (STT paid) 10,000
Lottery Income 80,000
Other Income 10,000
Dividend from domestic company 40,000
Deduction u/s 80G 2,00,000
Ans: 82,400.
P2 : Compute total income and tax payable from the following information.
Profit from Business 8,00,000
Long Term Capital Gain 2,00,000
Short Term Capital Gain (STT paid) 1,00,000
Short Term Capital Gain 50,000
Lottery Income 60,000
Other Income 40,000
Dividend from domestic company 10,000
Deduction u/s 80G 50,000
Solution:
Computation of Total Income
Profit from Business | 8,00,000 | |
Capital Gain |
| |
| Long Term Capital Gain | 2,00,000 |
| Short Term Capital Gain (STT paid) | 1,00,000 |
| Short Term Capital Gain | 50,000 |
Income from Other Sources |
| |
| Lottery Income | 60,000 |
| Dividend from Indian Company. [Fully exempt from tax u/s 10(34)] | NIL |
| Other Income | 40,000 |
Gross Total Income | 12,50,000 | |
Less: Deduction u/s 80G | (50,000) | |
Total Income | 12,00,000 | |
Computation of Tax
| Firm / D.Co | Foreign Co. | Ind / HUF |
Tax on Long Term Capital Gain @ 20% on Rs 2,00,000 | 40,000 | 40,000 | 40,000 |
Tax on Short Term Capital Gain (STT paid) @ 15% on Rs 1,00,000 | 15,000 | 15,000 | 15,000 |
Tax on Casual Income @ 30% on Rs 60,000 | 18,000 | 18,000 | 18,000 |
Tax on Normal Income on Rs 8,40,000 | 2.52.000 | 3,36,000 | 93,000 |
Total Tax | 3,25,000 | 4,09,000 | 1,66,000 |
+ Surcharge | Nil | Nill | Nil |
Tax | 3,25,000 | 4,09,000 | 1,66,000 |
+ Education cess @ 3% | 9,750 | 12,270 | 4,980 |
Tax | 3,34,750 | 4,21,270 | 1,70,980 |
Average Rate of Tax
Total Tax
----------------- x 100
Total income
SECTION 2(29C). MAXIMUM MARGINAL RATE OF TAX (MMR)
As per section 2(29C) maximum marginal rate of tax (MMR) is the highest tax incidence levied on different persons including surcharge and education cess + SHEC.
• | Firm / LLP (30% + 12% surcharge + 3% education cess) | 34.608% |
• | Domestic Company (30% + 12% surcharge + 3% education cess) | 34.608% |
• | Foreign Company (40% + 5% surcharge + 3% education cess) | 43.26% |
• | Individual/HUF/AOP/BOI/AJP (30% + 15% surcharge + 3% education cess) | 35.535% 34.608% |
BASIC EXEMPTION ALLOWED FROM SPECIAL INCOME ALSO
Condition
(a) The assessee is resident individual or resident HUF.
(b) The rule is basic exemption is allowed from special income only when normal income is less than basic exemption (NI < BE). Do remember basic exemption is not available from casual income (Lottery).
Computation
First allow basic exemption from normal income and then whatever left from special income. Again do remember basic exemption is not available from casual income (Lottery). However rebate u/s 87A is available maximum Rs 2,000 if Total Income is upto Rs 5,00,000.
P1: Compute tax payable of Mr. X from the following information.
Profit from Business 1,50,000
Long Term Capital Gain 2,00,000
Gross Total Income 3,50,000
Less: Deduction u/s 80G (40,000)
Total Income 3,10,000
Tax on LTCG @ 20% on Rs 60,000 | 12,000 | Working Note | |
Less : Rebate u/s 87A | 5,000 | LTCG | 2,00,000 - 1,40,000 = 60,000 |
Tax | 7,000 | Normal Income | 1,10,000 - 1,10,000 = Nil |
+ Education cess @ 3% | 210 | First allow basic exemption of Rs 2,50,000 from normal |
Tax | 7,210 | income and then balance from special income |
P2 : Compute tax payable of Mr. X from the following information.
Profit from Business | 2,70,000 |
STCG STT paid | 1,00,000 |
Long Term Capital Gain | 30.000 |
Gross Total Income | 4,00,000 |
Less: Deduction u/s 80G | (1,00,000) |
Total Income | 3,00,000 |
Solution:
Working Note
LTCG | 30,000 - 30,000 = nil | First allow basic exemption of Rs 2,50,000 from normal income and then balance from LTCG and then from STCG STT paid. |
STCG STT paid | 1,00,000 - 50,000 = 50,000 |
|
Normal Income | 1,70,000 - 1,70,000 = nil |
|
Computation of Tax
Tax on STCG STT paid @ 15% on Rs 50,000 | 7,500 |
Less : Rebate u/s 87A | 5,000 |
Tax | 2,500 |
+ Education cess @ 3% | 75 |
Tax | 2,575 |
P3 : Compute tax payable on STCG STT paid ₹ 2,90,000 of Mr. X if he is (a) resident (b) Non- Resident.
Ans: (a) 1,030 (b) 44,805.
P4 : Mr. Rajput, aged 82 years gives you the following information.
(i) | Interest on fixed deposits with banks | 4,80,000 |
(ii) | Long- term capital gain on sale of land | 50,000 |
(iii) | Short-term capital gain on sale of shares (securities transactions tax paid) | 20,000 |
Compute tax payable by Mr. Rajput for the AY in cases (i) he is resident; (ii) he is non - resident
Ans: (a) 9,270 (b) 37,080.
Assignment
P1: Mr. Taxcrazy, Resident in India and a Foreign Citizen, a physically disabled, works in NPLH Ltd. (manufacturer of disabled equipment), Goa draws following salary: Basic Salary Rs 45,000. Transport allowance (100% is used for commutation between residence and office) Rs 43,200. He is provided with accommodation five k.m. away from his office @ Rs 2,500. Population as per latest census is 35 lakhs. He purchases a brand new wheelchair of Rs 3,500 from the company for Rs 2,000. The gas bill amounting to Rs 500 is paid by Company. The bill is in the name of Company. He is also provided with car facility for his family members. Expenditure incurred by the company is Rs 10,000. On sale of unlisted shares of NPLH Ltd. he earned a Long term capital gain of Rs 25,000. Interest from Govt. Securities Rs 25,000.
Compute his total income & tax if he is (A) Resident in India. (B) Non-Resident in India.
Ans: (A) 3,578; Nil; (B) 79,770; 5,150. [45,000+4,800+4,970+0+0+0=54,770+25,000+ 25,000=1,04,770– 25,000–1,193–75,000=3,578] [45,000+4,800+4,970+0+0+0=54,770+ 25,000+ 25,000=1,04,770–25,000=79,770]
P2: Find the tax liability of Mrs. Gupta, a resident individual, from the following particulars of her incomes.
Income from House property (computed) 2,02,000
Dividend from an Indian Company 15,000
Family pension (gross) 60,000
Interest on Central Govt. Securities 16,000
Income of minor child (against the amount deposited in the name of Minor child) 18,000
Winnings from lotteries 5,000
Long-term capital gain 50,000
Payment for purchase of National Savings Certificates (VIII issue) 51,000
Ans: 2,266. (2,02,000 + 0 + 45,000 + 16,000 + 16,500 + 5,000 + 50,000 = 3,34,500 – 51,000 = 2,83,500)
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