DT CHART BOOK – CA PRANAV CHANDAK

BASIS OF CHARGE [SECTION 28] GENERAL DEDUCTIONS [SECTION 37]

1 Profits & Gains of any business or profession carried on at any time during the PY. 1 Not covered in Sec 30 to 36.
◾ Capital Receipt → Not Taxable; ◾ Capital Loss → Not Deductible. 2 Not a capital expenditure [Only revenue expenditure is deductible u/s 37]
2 Compensation for Loss of Office 3 Incurred during PY.
▪ Termination or Modification of contract relating to Agency in India. 4 It must have been incurred after the business was set up.
▪ Termination/Modification of T&C of any business/professional contract.
5 Only Business Expenditure [Personal Expenditure → NOT deductible]
3 Export Incentives [Sale of Import entitlements/Duty Drawback/DEPS/DFRC] 6 Legal Purpose only (in & outside India) [Any Penalty → Not Deductible]
4 Non-Compete Fees [Taxable u/h PGBP even if they are capital receipts] ▶ Note: AO cannot question necessity of expenditure in allowing deduction.
▪ For not carrying out any activity in relation to any business or profession Important Circulars related to Section 37
▪ Not to share any know-how, patent, copyright, TM
 Premium paid on KIP by Employer → Business Expenditure & Deductible.
5 FMV of Inventory (SIT) on its conversion into Capital Asset  Expenditure on CSR → Not Business Expenditure & Not Deductible
▪ Income = FMV of Inventory on date of conversion – Purchase Price.  Expenses on providing freebees to medical practitioner → Not Deductible.
6 Benefit arising from Business/Profession (Gift) [Nexus Hona b/w Gift & Business] FREQUENTLY ASKED ADJUSTMENTS IN EXAMS
Remuneration received by Partners is taxable in his hands. ☛ Income Tax & Related Payment, Surcharge → Not Deductible.
▪ only to the extent it is deductible to the firm [Refer Section 40(b)] ☛ Indirect Tax & Related Payment → Deductible.
☛ Demurrage paid to authorities for releasing confiscated goods → Deductible
8 Income of Trade/Professional Association from Specific Activities for its Members.
☛ Penalty paid by assessee for non-completion of contract within time →
9 Maturity Amount of KIP (+ Bonus) → Taxable to Employer if Received by him. Deductible as it is not a fine paid for infraction of law. [Infraction of contract].
10 Sum received/receivable on demolition, destruction or transfer of any Capital Asset ☛ Expenditure on Advertisement in souvenir/brochure/pamphlet published by
whole cost of which was allowed as deduction u/s 35AD. Political Party → Not deductible u/h PGBP but deductible u/s 80GGB & 80GGC

SPECULATION BUSINESS SPECIFIC DEDUCTIONS [SECTION 30 - 36]

❖ Meaning: Contract for purchase/sale of any commodity (including stocks & shares) is 1 Rent, Rates, Taxes, Repairs & Insurance for BUILDING (Section 30)
settled otherwise than by Actual delivery or transfer of the commodity/Scrips Rent Taxes Revenue Repairs Insurance
[Section 43(5)]
Tenant Check 43B Done by owner or Tenant Owner
❖ Transactions NOT deemed to be speculative transactions:  No Deduction for Notional Rent is allowed.
▪ Hedging Contract i.r.o Raw Materials or Merchandise or Stocks & Shares
 Subletting of Rented premises → Deduction = Rent paid – Rent recovered.
▪ Forward Contract
 Capital Repairs → Added to COA of building & eligible for depreciation.
▪ Trading in Derivatives or Commodity Derivatives
2 Revenue Repairs & Insurance of Plant, Machinery & Furniture [Sec 31]
❖ Speculation Profits/Losses → Treated Separately from other business or profession since
Speculation Business Loss can be set off against Speculative Business Profit only. PC Note: Deduction of Rent of P&M → Allowed u/s 37 & not u/s 31.
 Capital Repairs → Added to COA of P&M & eligible for depreciation.

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DT CHART BOOK – CA PRANAV CHANDAK

1. Building includes Roads, bridges & tubewells attached to it or forming part of it.
1. OWNERSHIP → Part/Full; Registered/Beneficial owner. 2. Machinery → Asset which is directly connected with Production or Manufacture.
PC Note: If Tenant incurs Capital Expenditure on leased/rented building, he will 3. Furniture → Asset used for Convenience & Decoration.
get depreciation on such capital expenditure.
4. Plant → Any other Asset Essential to carry out the business.
2. USED BY THE ASSESSEE FOR HIS BUSINESS/PROFESSION DURING PY
▪ Active or Passive use. [Ex: Trial run/Generators].
▪ 2nd PY onwards: Asset used for 1 day in PY → 100% Depreciation (as per ROD) PC Note
▪ 1st PY: If used for < 180 days → Only 50 % of the Allowable Depreciation. ▪ No Depreciation on Land & Personal assets & thus not included in any block.
PC Note: Asset acquired in PY but not put to use, 180 days condition is NA for 2 nd ▪ While calculating Depreciation on Building, Cost of Land is to be Excluded.
PY; Thus 100% depreciation will be allowed in Next PY when it is put to use. ▪ No Depreciation is allowed on Goodwill from PY 2020-21.
“BLOCK OF ASSETS” [Same Class & having Same ROD] →
1. Classify assets into (i) Intangible Assets & (ii) Tangible Assets Except Goodwill. Assessee (a) Engaged in Manufacturing or Production or
2. Group the classified assets in each category separately on the basis of ROD. (b) Generation, transmission or Distribution of Power
3. Assets having same rate of depreciation should be grouped together. Ineligible 1. Ships & Aircrafts
Investment 2. Second-hand P&M (in/out of India)
B. STEPS TO CALCULATE DEPRECIATION [V. IMP]
3. P&M installed in office premises, residential/guest house.
1. Find Closing WDV of each block for PY.
4. Office appliances or Road Transport Vehicles.
Opening WDV as on 1st April of current PY
5. P&M whose whole of Actual cost has been allowed as deduction.
Add: Cost of Assets purchased during PY (Not GW of business/profession)
Rate 20% of Actual cost
Less: Sale Value of assets sold, discarded, demolished or destroyed during PY
Less: Actual cost of the goodwill - amount of depreciation that would have been Use < 180 days in first PY: 1st PY = Restricted to 50% & Next PY = Remaining 50%.
allowable to the assessee for such goodwill (upto PY 2019-20) as if goodwill was  Addition depreciation will be over & above normal depreciation allowed.
the only asset in the block. However, such amount of reduction cannot
 It should be reduced from WDV of the asset.
exceed the WDV.
 Printing &/ Publishing = Manufacture & eligible for Additional Depreciation.
2. Bifurcate Closing WDV of each block into two categories:
 No Additional Depreciation on L&B or Old P&M.
(i) WDV of the assets used for less than 180 days during PY
(ii) Balance WDV. [It is not always equal to WDV of Assets used for > 180 days]
Allowed only in old Tax Regime. Not Allowed in Default (New) Tax Regime.

3. Apply Rate of depreciation on (i) Assets used for < 180 days. [50% of ROD] Space for PC Analysis:
(ii) Balance WDV. [100% of ROD].

PC Note: Letting out of assets is:

(a) Business of Assessee → Depreciation is allowed u/s 32.
(b) Not a business → Depreciation is allowed u/s 57(ii).

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DT CHART BOOK – CA PRANAV CHANDAK

Assessee Engaged in Generation, transmission, Distribution of Power. Cost of Acquisition/Construction of Asset XXX
Before DD of Filing ROI u/s 139(1) of PY in which they begin to Less:
Time to Exercise
generate power. The option once exercised shall be Final. (i) GST on which ITC is Allowed (xx)
New Assets used for Depreciation is allowable at 50% of ROD; (ii) Subsidy/Grant received (Directly/Indirectly) (xx) (xx)
< 180 days Remaining 50% will be allowed in next Year. Add:
Sale in 1st Year Profit/Loss arising shall be treated as STCG/STCL. (i) Interest upto the date on which asset is put to use xxx
(ii) Expenses incurred for acquiring Asset xxx
Option of SLM → For Tangible Assets only; Intangible Assets → only WDV is applicable.
(iii) Expenses incurred for Installation of Asset. xxx
Depreciation can be charged on tangible assets individually; i.e SLM/WDV (more beneficial)
(iv) FOREX Fluctuations (if asset is imported) [Sec 43A] xxx Xxx
ACTUAL COST for computing Depreciation XXX
Conditions Treatment
PC Note: Any Expenditure for Acquisition of Asset for which aggregate payments
1. NSC < WDV Terminal Depreciation (Loss) = WDV - NSC. Deductible u/s 32. made to A Person in A Day, otherwise than by A/c Payee Cheque/Draft or ECS
2. COA > NSC > WDV Balancing Charge (Profit) = NSC - WDV. Taxable u/s 41(2). > Rs. 10,000, such expenditure shall not be included in COA of such asset.
3. NSC > COA ▪ Balancing Charge (Profit) = Original COA - WDV. Taxable u/s 41(2). Space for PC Note:
▪ Capital Gain = NSC ─ Original COA.

Class Note:

Prescribed Electronic modes:

▪ Credit card, Debit card, Net banking
▪ RTGS/IMPS/NEFT
▪ UPI (Unified Payment Interface) & BHIM (Bharat Interface for Money).

▪ Can be Carried Forward for Infinite PYs even if business is discontinued.

▪ Priority for Set-off in subsequent PYs: (i) PY Depreciation (ii) B/f Business Loss (iii) Unabsorbed Depreciation.

If assessee is paying tax under default tax regime u/s 115BAC & there is a depreciation i.r.o. a block of asset from an earlier AY attributable to additional depreciation u/s 32(1)(iia),
which has not been given full effect to prior to AY 2024-25 & which is not allowed to be set-off in AY 2024-25, corresponding adjustment shall be made to the WDV of such block
of assets as on 1.4.2023 in the prescribed manner (i.e. WDV as on 1.4.2023 will be increased by unabsorbed additional depreciation not allowed to be set-off).
Space for PC Analysis:

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DT CHART BOOK – CA PRANAV CHANDAK

Cases Actual Cost 1. SCIENTIFIC RESEARCH CARRIED ON BY ASSESSEE [Related to business]

Scientific Asset/ 35AD Asset Nil Revenue Expenditure [Sec 35(1)(i)] [100 % Deduction]
brought into business.
1 Pre-commencement (i) Payment of Salary (excluding perquisites)
Conversion of CA into SIT FMV of CA on date of conversion into SIT [Last 3 years only] (ii) Purchase of Materials used in research.
Conversion of SIT into CA & used FMV of SIT on date of conversion into CA 2 Post-commencement Any Revenue Expenditure
into Business
Capital Expenditure [Sec 35(1)(iv) & 35(2)] [100 % Deduction]
Acquired by Gift/Will/ Inheritance WDV to Previous owner.
1 Pre-commencement Any Capital Expenditure (Except Cost of Land).
Second hand asset If AO is satisfied that main purpose was to
reduce Tax Liability by claiming depreciation [Last 3 years]
on enhanced cost, he may, with previous 2 Post-commencement Any Capital Expenditure (Except Cost of Land).
approval of JCIT, determine Actual Cost.
Re-acquisition of Asset used for (a) WDV at the time of original transfer or 2. CONTRIBUTION TO OUSIDER [Related to Business/Not]
Business/profession earlier. (b) Cost of re-acquisition whichever is Lower Research Sec Contribution to whom Deduction
Sale & Leaseback Cost of asset in the hands of Transferee = Scientific 35 National laboratory, National university, IITs,
100%
WDV of asset in the hands of Leasee. (2AA) IIMs
Building which was used for non- Actual cost of building – Deemed Depreciation 35 Approved Research Association or
100%
business purpose earlier. as if building was used for Business. (1)(ii) Approved University/College etc.
Note: Applicable for Building only ► Other assets → Recorded @ original COA. 35 Indian Company having scientific research as its
100%
Foreign Asset brought to India by Actual cost – Deemed Depreciation as if (1)(iia) main business objective.
NR & used for his business or asset has been used in India since acquisition. Social or 35 Approved Research Association or Approved
profession. Statistical 100%
(1)(iii) University/College etc.

➡ Deduction cannot be denied just because approval granted was withdrawn.

 WDV is Zero but Block is not Empty → No Depreciation & STCG u/s 50(1).
 Block is empty but WDV is not Zero → No Depreciation & STCL u/s 50(2). PC Note:
▪ Deduction specified in (1) above is available in both new & old scheme.
Space for PC Class Note:
▪ However, deductions specified in (2) is available only in old scheme.

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DT CHART BOOK – CA PRANAV CHANDAK
→

Specified Business ↓ Assessee (a) Indian Company or (b) Other Residents in India.
Cold Chain Facility Warehouse for Agro. Produce Warehouse for Sugar Eligible (a) In case of New companies → Expenses for setting up any business.
Expenditure (b) In case of Existing companies → Expenses for Expansion of Business.
Hotel (2 Star +) Hospitals (100 Beds) Production of Fertilizer
▪ Expenditure on Preparation of feasibility report, Project report,
Slurry Pipeline Cross country pipeline Setting up ICD/CFS conducting market survey or engineering services.
Affordable Housing Project & Slum Redevelopment Project ▪ Legal charges for drafting any agreement related to business.
Bee-keeping & Production of Honey & Bee wax ▪ Legal charges for drafting MOA & AOA of the company.
▪ Printing charges of MOA & AOA of the company.
Setting semiconductor Wafer Fabrication Manufacture unit
▪ Registration fees of the company.
Developing/Maintaining/Operating new infrastructure facility. ▪ Expenditure on public issue of shares/debenture, underwriting
commission, brokerage & drafting & advertising prospectus.
Deduction = 100% of Capital Expenditure [Except Land, GW & Fin. Instrument] Maximum 1. Indian Company: Higher of 5% of [Project Cost or Capital].
Note: Prior Period Expenses → Deductible if CAPITALIZED in books of A/c.
Limit 2. Other Assessee: 5% of Cost of Project.
Conditions to claim Deduction u/s 35AD: Qualifying Lower of (i) Eligible Expenditure or (ii) Maximum Limit
 Business Not Formed by Splitting/Reconstruction of Existing Business. Expenditure
 Not Formed by Transfer of Used P&M. [Used P&M → Allowed upto 20%] Deduction 1/5th of the Qualifying expenditure in 5 successive PYs.
Note: Imported P&M → Treated as New for Sec 35AD.
Audit COMPULSORY AUDIT for PYs in which expenditure is incurred.
 Use Asset ‘Only for Specified Business” for 8 Years:
Otherwise PGBP Income = Total Deduction Claimed – Deemed Depreciation. ▪ Cost of Project → Actual cost of Fixed assets [L & B, P & M, F & F etc];
▪ Capital Employed → Issued share capital + Debentures + Long-term borrowings;
PC Note: Any Expenditure for Acquisition of any Asset for which aggregate payment
made to A Person in A Day, otherwise than by A/c Payee Cheque/Draft or
Electronic Medium > Rs. 10,000 → Not Eligible for Deduction u/s 35AD.
Assessee Any Assessee
➡ Loss from one specified business u/s 35AD can be set-off against the profit of Deduction ➢ 1/5th of Expenditure shall be deductible for 5 succeeding PYs.
another specified business only u/s 73A even if the second specified business If Paid in Instalments:
is not eligible for deduction u/s 35AD.
➢ Each Part Payment of VRS is deductible in 5 Instalments.
Deductions u/s 35AD is available only in old scheme. ➢ 1st Instalment is deductible in the PY in which VRS is Paid.

PC Note: In case of any Business Re-organization → Deduction shall be allowed to resulting

company (organisation) for Remaining years.

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DT CHART BOOK – CA PRANAV CHANDAK

INSURANCE PREMIUM PAID ON:

(i) Stocks or stores (vii) BAD DEBTS (EXCLUDING PROVISIONS FOR BAD DEBT)

(ia) Lives of Cattles owned by members of primary milk co-operative society. Conditions:
(ib) Health of Employees → Paid by Employer [Any mode other than Cash]. ▪ Debt must be charged as income in computing the income of assessee of any PY
▪ Must be written off in books of A/c.
(ii) BONUS OR COMMISSION [Sec 43B will Apply]
▪ Debt may be money lent in ordinary course of banking or money lending
▪ Bonus/commission PAID to the Employees [if not payable as dividend] business
(iii) Interest on Capital Borrowed for Business
Second Proviso inserted by FA, 2015:
▪ Interest for the period after asset is put to use → Deductible u/s 36(1)(iii).
If whole or part of Debt has been included in the income of PY in which it becomes
▪ Interest for the period before asset is put to use → Added to COA of Asset. irrevocable or earlier PYs without recording the same in the books of accounts; such
Debt amount shall be allowed in PY in which, it becomes irrevocable and it shall be
PC Note: deemed that such amount has been written off in the accounts.
☛ Interest on money borrowed for payment of dividends → Deductible.
☛ Interest on money borrowed for payment of Tax → Not Deductible. Other points:
☛ Interest paid by a firm to partners → Deductible. 1. In case of succession → Successor can claim deduction of Bad debt when a debt
☛ Interest paid by AOP to its members → Not Deductible. originally due to predecessor is written off as bad debt by successor in his books.
(iii)(a) Amortization of Discount on ZCBs by Issuing Company 2. Recovery of Bad debts is taxable u/h PGBP in PY of recovery. [Sec 41(4)]

▪ Discount on ZCB – Deductible over the life of such bond. (ix) Expenditure on Family Planning → Only for Company.
▪ Revenue Expenditure: Fully allowed in the PY in which it is incurred.
EMPLOYER’S CONTRIBUTION towards
▪ Capital Expenditure: 1/5th of the expenditure allowed in 5 PY’s.
(iv) RPF or Approved SF, if paid as per section 43B [subject to the Limits]
Note: Treatment of Unabsorbed Expenditure is same as unabsorbed
(v) Approved Gratuity Fund if paid as per section 43B.
depreciation.
(iva) Pension scheme to the extent of 10% of salary of the employee in PY.
(xv) Securities Transaction Tax [STT] paid
EMPLOYEE’s CONTRIBUTION (xvi) Commodity Transaction Tax [CTT] paid
(va) Employee’s contribution towards RPF/SF, if deposited by employer before DD
under the respective Act & not DD u/s 139(1).
PC Note: Employee’s contribution is first included in total income of the employer.
Deduction is given under this section if sum received is deposited before due date.

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DT CHART BOOK – CA PRANAV CHANDAK

INCOME TAX → NOT DEDUCTIBLE – Sec 40(a)(ii)

Conditions for (i) Tax is not deducted before the end of PY OR SALARY PAID TO NR [SECTION 40(a)(iii)]
Disallowance (ii) Tax is deducted but not paid before DD of filing ROI u/s 139(1). ▪ on which tax has been neither deducted before the end of PY nor paid before DD
of filing ROI u/s 139(1) → Not allowed as deduction.
Consequences 100 % of such amount paid/payable is disallowed in that PY.
TAX PAID BY EMPLOYER ON NON-MONETARY PERQUISITES [Sec 40(a)(v)]
Deduction or (i) Where tax has been deducted in any subsequent PY OR
Payment in ▪ Not Deductible to Employer.
(ii) has been deducted during PY but paid after DD; then
Subsequent PY ▪ Exempt in the hands of employee – [Sec 10(10CC)]
100% of such sum shall be allowed as deduction in PY in which
such tax has been paid.
Payment of Tax ▪ If Tax on such income has been paid by the payee of such income A. REMUNERATION TO PARTNERS [By whatever name]
by Payee of such by showing such sum as his income in his ROI, then it shall be
Following payments to partners are disallowed to Partnership firm:
sum deemed that Assessee has deducted & paid tax & No disallowance
[Section 201] shall be attracted under this section. 1. Remuneration to Non- Working Partner.
▪ Deemed Date of TDS & Payment of tax by the payer → Date of 2. Remuneration to Working Partner if:
filing ROI by the payee. (a) Not Authorized by Partnership deed.
PC Note: Since date of filing ROI by the payee is deemed to be date on which payer (b) Not in Accordance with T&C of partnership deed.
has deducted & paid tax → 30% shall be disallowed u/s 40(a)(i) in the year in (c) For the period prior to the date of agreement.
which said expenditure is incurred. However, such 30% will be allowed as
deduction in subsequent year in which ROI is filed by the payee. (d) Exceeding the limit given below ↓
Book Profit Amount of Remuneration
PC Note: (1) Deduct Tax in PY & (2) Pay before DD; Otherwise disallowed.
Upto Rs. 3 Lacs of Book Profit or (i) Rs 1.5 Lacs or
Book Loss (ii) 90% of Book Profit [Higher]

Conditions for (i) Tax is not deducted before the end of PY. OR Balance of Book Profit [Above 3L] 60% of Book Profit
Disallowance (ii) Tax is deducted but not paid before DD of filing ROI u/s 139(1).
B. INTEREST PAID TO PARTNERS
Consequences 30% of such amount paid/payable is disallowed in that PY. Interest paid to partners is disallowed in following cases:
(i) Where tax has been deducted in any subsequent PY OR (a) Not Authorized by Partnership deed;
Deduction or
(ii) has been deducted during PY but paid after DD; (b) Rate Exceeding 12% p.a.
Payment in
Subsequent PY then 30% of such sum shall be allowed as deduction in the PY in (c) For the period prior to the date of Partnership Deed.
which such tax has been paid.
Payment of Tax by the Payee of such sum [Sec 201] – Same as Sec 40(a)(i) Note: Remuneration Paid by AOP/BOI to its Members [Sec 40(ba)] → Not Deductible

Section 40A(2): EXCESSIVE PAYMENT TO RELATIVES → Excess Payment is not Allowed as deduction.

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DT CHART BOOK – CA PRANAV CHANDAK

EXPENDITURES DEDUCTIBLE ON PAYMENT BASIS ONLY [SEC 43B]

1. A Payment or Aggregate of Payments made to A Person in A Day for An Following Expenses (which are deductible in normal circumstances) are deductible in
Expenditure exceeds Rs. 10,000 [35,000 for Transport/Goods Carriage Business] relevant PY only if they are paid before due date of filing ROI of such PY u/s 139(1).

2. Payment is made otherwise than by A/c payee cheque/draft/Electronic Medium. 1. Tax, Duty, Cess or Fee (by whatever name called) levied under any law.
NO DEDUCTION shall be allowed for such whole expenditure. 2. Employer’s Contribution to any PF/SF/Gratuity Fund or any recognized fund.
3. Bonus/Commission to employees.
Exceptions: [In following cases, NO Disallowance even if amount paid > Rs. 10,000]
4. Interest on any Loan or borrowing from any PFI/SFC/SIIC/Bank.
Payment made to Banks, LIC etc. Payment made to Government
5. Interest on any Loan or borrowing from notified class of NBFCs.
Payment through Banking System. Payment by Book Adjustments.
6. Leave Salary
Payments made to Cultivator, Grower or Payments made to producer of goods of
producer of agricultural & related cottage industry without the aid of power. 7. Any Sum Payable to Indian Railways for use of Railways Assets.
product 8. Sum payable to a MICRO or SMALL Enterprise beyond time-limit specified in
section 15 of MSME Development Act, 2006.
Payment @ place not served by bank. Any Terminal benefits ≤ Rs. 50,000.
Sec 15 of MSME Development Act, 2006: Due Date of Payment
Payment on a day when banks are closed Payment to Employees on temporary ▪ If there is a written agreement: Date agreed upon (Max. 45 Days)
Payments made by any person to his posting for more than continuous
▪ If no written agreement: Within 15 days of acceptance of goods.
commission agent period of 15 days if such payment is made
after TDS & employee does not have bank PC Analysis:
Payment made by Authorized Dealer or A/c at such place. ▪ If paid as per section 15 → Deduction on accrual basis.
Money changer ▪ If not paid as per section 15 → Deduction in PY of payment.
PC Note:
PC Note: Conversion of unpaid interest into Fresh Loan by Bank /FI → Not deemed
➢ If Expenditure has been allowed as deduction in any earlier PY on accrual basis (if
to be paid & thus no deduction shall be allowed.
assessee is following accrual basis) & payment for such expenditure has been made
in any subsequent PY exceeding Rs. 10,000/35,000 in cash to a person in a day, then ❖ Issue of debentures for unpaid interest → Not deemed as paid & thus no deduction.
such payment shall be deemed to be the income of PY in which payment is made.
ADJUSTMENT IN COA OF ASSET DUE TO CHANGE IN FOREX RATE [SEC 43A]
➢ Section 40A(3) does not apply for Repayment of Loans. But it applies to interest
payments since interest is a deductible expenditure. ▪ If any business asset is acquired or loan is taken in Foreign Currency;
➢ Payment made by commission agents for goods received by them for sale on ▪ Atthe time of payment, there is a change in foreign exchange rates;
commission basis (such payment is not a deductible expenditure in computing ▪ Such Difference [Increase/decrease in liability] shall be adjusted in COA of Asset
taxable income of commission agent). PC Note: Consider Profit/loss only on amount actually paid during PY & Ignore
loss/profit on outstanding amount.
Provision for payment of unapproved gratuity ‘Not yet due’→ Not Deductible
[Section 40A(7)] FVC IN CASE OF TRANSFER OF L&B HELD AS SIT [Section 43CA] → To be
Studied with Section 50C u/h ‘Capital Gains’.
Contribution by Employer to URPF → Not Deductible [Sec 40A(9)]

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DT CHART BOOK – CA PRANAV CHANDAK

A. SPECIFIED PROFESSIONs 1. Refund/Recovery against any Deduction or Remission/Cessation of Trading Liability.

GR > 1,50,000 in All of the Last 3 PY Books prescribed u/r 6F 2. Balancing Charge – Refer Depreciation in Case of “Power-Generating Undertakings”.
Books of A/c which will enable AO to 3. Sale of Scientific Research Asset
GR ≤ 1,50,000 in Any of the last 3 PY ▪ Taxable Amount = Lower of
compute taxable income.
Specified Professionals: Legal, Medical, Engineering, Architectural, Accountancy, (a) Sale Price + Deduction u/s 35 – Capital Expenditure (b) Deduction Allowed
Technical consultancy or Interior Decoration etc. ▪ Year of Taxability: PY of Transfer/Sale.

B. FOLLOWING PERSON WILL BE REQUIRED TO MAINTAIN SUCH BOOKS 4. Recovery of Bad Debt Allowed as deduction → Taxable in PY of Recovery.
OF A/C WHICH WILL ENABLE AO TO COMPUTE THEIR TAXABLE INCOME 5. Adjustment of Loss of Discontinued Business incurred in PY of Discontinuance
1. INDIVIDUAL/HUF carrying Non-Specified Business or Profession: ▪ Generally, loss from business cannot be c/f after 8 years.
▪ Income > 2.5 Lac OR Sale, T/O or GR > 25 Lac in ANY ONE of last 3 PY. ▪ If loss of discontinued business cannot be set off against any other income in the
2. Other than Ind/HUF carrying Non-Specified Business or Profession: year of discontinuation; AND
▪ Income > 1.2 Lac OR Sales, T/O or GR > 10 Lac in ANY ONE of last 3 PY. ▪ After discontinuation of business, there is a receipt which is deemed as business
income u/s 41(1)/(3)/(4);
3. Person showing lower Income than computed on Presumptive basis u/s 44AE.
▪ Unabsorbed loss of PY of Discontinuance only (not earlier years) can be set
➡ Minimum period of Maintenance of books of A/Cs = 6 years from the end of AY. off against any deemed income u/s 41(1), (3), (4), (4A);
➡ Penalty for failure to maintain books of A/c [Section 271A] = Rs. 25,000. ▪ Even if no ROL is filed within time u/s 139(1).

[Penalty = Lower of (a) 0.5% of Turnover in PY or (b) Rs. 1,50,000]

Taxpayer Circumstances when audit is compulsory before specified date [i.e 1 month prior to the due date for filing ROI u/s 139(1)]
(a) Business ▪ If TO, GR for PY > Rs. 1 Crore. [** Section 44AB does not apply to a person who declared profit u/s 44AD on presumptive basis]
Person
▪ Limit of Audit increased from Rs. 1 Cr to 10 Cr subject to following conditions:
- Total Cash receipts in PY < 5% of total receipts (including receipt for sales, turnover, gross receipts); &
- Total Cash payments in PY < 5% of total payments (including amount incurred for expenditure).

▪ If Turnover for the PY < Rs. 1 crore but such resident assessee claims that his income is LOWER than income computed on Presumptive basis u/s
44AD & his Income > BEL in PY → Audit is compulsory.

▪ If Total turnover ≤ Rs. 2 crores & assessee has opted for section 44AD in any earlier PY (say, PY 2022-23) or Assessee whose Total Cash Receipts in
relevant PY ≤ 5% of Total turnover & Turnover ≤ Rs. 3 Crores & who has opted for section 44AD in any earlier PY (say, PY 2022-23) →
If he declares profit for any of 5 successive PYs not in accordance with section 44AD (i.e., he declares profits lower than 8% or 6%), then, he cannot opt
for section 44AD for 5 successive PYs after the year of such default (i.e., from PY 2024-25 to PY 2028-29).
For the year of default (i.e., PY 2023-24) & next 5 PYs (i.e., PY 2024-25 to PY 2028-29), he has to maintain books of account u/s 44AA and get
them audited u/s 44AB, if his income > BEL.

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DT CHART BOOK – CA PRANAV CHANDAK
(b) Professionals If Gross Receipt for PY > Rs. 50 Lacs.
PC Note: If Gross Receipts for the PY < Rs. 50 Lacs OR Assessee whose Total Cash receipts in relevant PY < 5% of Total receipts & whole Gross
Receipts < Rs. 75 Lacs but such resident assessee claims that his income is LOWER than income computed on Presumptive basis u/s 44ADA & his
Income > BEL in PY → Audit is compulsory.

(c) 44AE Assessee If such person claims that his income is LOWER than income computed on Presumptive basis u/s 44AE.

PRESUMPTIVE SCHEME OF TAXATION

Particulars Sec 44 AD → Business Sec 44ADA → Profession Sec 44AE → Transport Business
Eligible Assessee ▪ Resident Individual/HUF/Partnership Firm (No LLP) & ▪ Resident Individual/HUF/ Firm (No LLP) ▪ Persons carrying on business of plying,
▪ Engaged in Any Business (other than Negative Listed). ▪ Specified Professional u/s 44AA. hiring, & leasing goods carriages &
▪ Turnover ≤ Rs. 2 Crores in the PY. ▪ Gross Receipt ≤ Rs. 50 Lacs. ▪ not owning more than 10 Goods
Carriages at any time during the PY.
▪ Limit = 3 Crores if Total Cash Receipts in the PY ▪ Limit = 75 Lacs if Total Cash Receipts
≤ 5% of total turnover. in the PY ≤ 5% of total turnover.

Income Income = 8% of Turnover. Income = 50% of Gross Receipt 1. Heavy Vehicle (> 12,000 Kgs) → Rs.
1,000 per ton per month or part of it.
However, Income = 6% of Turnover or Gross Receipt for
amount received by A/c Payee cheque/draft/Electronic 2. Other than Heavy Vehicle → Rs. 7,500
Medium during PY or before DD of Filing ROI u/s 139(1). per month or part of it.
only for the period during which vehicle
is owned by Assessee in PY.

Deduction No Deduction u/s 30 - 38 shall be available. However, Salary & Interest paid by Firm to Partner → Deductible u/s 44AE only.

Audit & Books of A/c Not required.

VI-A Deductions Deduction u/s 80C to 80U shall be available to the Assessee.

Advance Tax Pay 100% Advance Tax in 1 instalment on/before 15th March. (Except 44AE) [Section 44AE walo ko 4 instalments me hi bharna padega]

Depreciation For subsequent PY (after becoming ineligible for presumptive scheme) → WDV shall be computed, as if Depreciation had been allowed in earlier year.

Option to Pay Higher Yes. Available in all cases.

Option to Pay Less Yes. But (i) He will have to maintain books of accounts & (ii) If declared income > BEL, he will have to get his books of accounts Audited.

Section 44AD(4): If assessee declares profit for any PY as per 44AD & he does not declare profit as per section 44AD(1) for any of the next 5 consecutive PY, he becomes
ineligible to claim the benefit of presumptive income as per AD(1) for next 5 AYs subsequent to PY in which profit has not been declared as per 44 AD.

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