Intermediate Course

Study Material
(Modules 1 to 3)
PAPER 4
Taxation
Section – A: Income-tax Law
[As amended by the Finance Act, 2021]
Assessment Year 2022-23
(Relevant for May, 2022 and
November, 2022 examinations)

MODULE – 1

BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

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This study material has been prepared by the faculty of the Board of Studies. The
objective of the study material is to provide teaching material to the students to
enable them to obtain knowledge in the subject. In case students need any
clarifications or have any suggestions for further improvement of the material
contained herein, they may write to the Director of Studies.
All care has been taken to provide interpretations and discussions in a manner
useful for the students. However, the study material has not been specifically
discussed by the Council of the Institute or any of its Committees and the views
expressed herein may not be taken to necessarily represent the views of the
Council or any of its Committees.
Permission of the Institute is essential for reproduction of any portion of this
material.
© The Institute of Chartered Accountants of India
All rights reserved. No part of this book may be reproduced, stored in a retrieval
system, or transmitted, in any form, or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without prior permission, in writing, from
the publisher.

Edition : June, 2021

Website : www.icai.org

E-mail : bosnoida@icai.in

Committee/ : Board of Studies

Department

ISBN No. :

Price (All Modules) : `

Published by : The Publication Department on behalf of The Institute of

Chartered Accountants of India, ICAI Bhawan, Post Box
No. 7100, Indraprastha Marg, New Delhi 110 002, India.

Printed by :

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BEFORE WE BEGIN…..

Evolving role of a CA - Shift towards strategic decision making

The traditional role of a chartered accountant restricted to accounting and

auditing, has now changed substantially and there has been a marked shift
towards strategic decision making and entrepreneurial roles that add value
beyond traditional financial reporting. The primary factors responsible for the
change are the increasing business complexities on account of plethora of laws,
borderless economies consequent to giant leap in e-commerce, emergence of
new financial instruments, emphasis on corporate social responsibility, significant
developments in information technology, to name a few. These factors
necessitate an increase in the competence of chartered accountants to take up
the role of not merely an accountant or auditor, but a global solution provider.
Towards this end, the scheme of education and training is being continuously
reviewed so that it is in sync with the requisites of the dynamic global business
environment; the competence requirements are being continuously reviewed to
enable aspiring chartered accountants to acquire the requisite professional
competence to take on new roles.

Skill requirements at Intermediate Level

Under the Revised Scheme of Education and Training, at the Intermediate Level,
you are expected to not only acquire professional knowledge but also the ability
to apply such knowledge in problem solving. The process of learning should
also help you inculcate the requisite professional skills, i.e., the intellectual skills
and communication skills, necessary for achieving the desired professional
competence.

Income-tax law : Dynamic & Interesting

Taxation is one of the core competence areas of chartered accountants. The

subject of “Taxation” at the Intermediate level is divided into two sections,
namely, Section A : Income-tax law and Section B: Indirect Taxes. Income-tax is a
direct tax i.e., it is a tax levied directly on the income of a person. Income-tax law,
at the Intermediate level, largely involves application of provisions of the
Income-tax Act, 1961 in problem solving. The tax laws of the country undergo
significant changes every year on the passing of the annual Finance Act. Apart
from these significant amendments ushered in every year through the Finance

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Act, notifications and circulars are also issued from time to time by the Central
Board of Direct Taxes (CBDT), the statutory authority in charge with the
administration of direct taxes, to implement the provisions of the Act and clarify
issues regarding the meaning and scope of certain provisions. Owing to the
dynamic nature of income-tax law, learning, understanding and applying the
provisions of this law in problem solving is very interesting and challenging.

Know your Syllabus – Read the same along with Study Guidelines
The syllabus of income-tax law is divided into ten topics. The Study Material has
also been divided into ten chapters in line with the syllabus. For understanding
the coverage of syllabus, it is important to read the Study Material along with
the Study Guidelines. The concept of Study Guidelines has been introduced in
the Revised Scheme of Education and Training in this subject, in line with
international best practices, to specify the topic-wise exclusions from the
syllabus. Therefore, the Study Guidelines contain the detailed topic wise
exclusions from the syllabus. The provisions of these excluded sections are,
accordingly, not discussed in the Study Material. However, while discussing the
relevant applicable provisions, a reference may have been made to these
sections at certain places either by way of a footnote or otherwise.

The relevant Finance Act and Assessment Year

This Study Material on Income-tax law is based on the provisions of income-tax

law as amended by the Finance Act, 2021, and the significant notifications and
circulars issued and legislative amendments made upto 15th June, 2021. The
computational problems have been solved on the basis of the provisions of
income-tax law applicable for A.Y.2022-23. The Study Material is, therefore,
relevant for May 2022 and November, 2022 examinations. The amendments
made by the Finance Act, 2021, latest notifications/circulars are indicated in
italics/bold italics in the Study Material.
The significant notifications/circulars issued and other legislative amendments
made between 16.6.2021 and 31.10.2021, relevant for May, 2022 examinations,
will be webhosted as Statutory Update for May, 2022 examination at the BoS
Knowledge Portal. Likewise, the significant notifications/circulars issued and
other legislative amendments made between 16.6.2021 and 30.4.2022, relevant
for November, 2022 examinations, will be webhosted as Statutory Update for
November, 2022 examination at the BoS Knowledge Portal. The Statutory
Updates will also form part of Revision Test Paper (RTP) for May, 2022 and
November, 2022 examination.

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Framework of Chapters – Uniform Structure comprising of specific

components

Efforts have been made to present the complex law of income-tax in a lucid
manner. Care has been taken to present the chapters in a logical sequence to
facilitate easy understanding by the students. The Study Material is divided into
three modules for ease of understanding by the students.
The various chapters/units of each subject at the Intermediate level have been
structured uniformly and comprises of the following components:

Components of About the component

each Chapter

1. Learning Learning outcomes which you need to demonstrate after

Outcomes learning each topic have been detailed in the first page of
each chapter/unit. Demonstration of these learning
outcomes would help you to achieve the desired level of
technical competence

2. Chapter As the name suggests, the flow chart/table/diagram given

Overview at the beginning of each chapter would give a broad
outline of the contents covered in the chapter

3. Content The concepts and provisions of income-tax law are

explained in a student-friendly manner with the aid of
examples/illustrations/diagrams/flow charts. Diagrams
and Flow charts would help you understand and retain
the concept/provision learnt in a better manner. Examples
and illustrations would help you understand the
application of concepts/provisions. These value additions
would, thus, help you develop conceptual clarity and get
a good grasp of the topic.

4. Let us A summary of the chapter is given at the end to help you

Recapitulate revise what you have learnt. It would especially facilitate
quick revision of the chapter the day before the
examination.

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5. Test Your The questions and answers at the end of each chapter
Knowledge would help you to apply what you have learnt in problem
solving, and, thus, sharpen your application skills. In
effect, it would test your understanding of
concepts/provisions as well as your ability to apply the
concepts/provisions learnt in solving problems and
addressing issues.

We hope that these student-friendly features in the Study Material makes your
learning process more enjoyable, enriches your knowledge and sharpens your
application skills.
Happy Reading and Best Wishes!

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SYLLABUS

PAPER – 4 : TAXATION
(One paper ─ Three hours – 100 Marks)

Objective:

To develop an understanding of the provisions of income-tax law and goods and

services tax law and to acquire the ability to apply such knowledge to make
computations and address application oriented issues.

SECTION A: INCOME TAX LAW (60 MARKS)

Contents:
1. Basic Concepts
(i) Income-tax law: An introduction
(ii) Important definitions in the Income-tax Act, 1961
(iii) Concept of previous year and assessment year
(iv) Basis of Charge and Rates of Tax
2. Residential status and scope of total income
(i) Residential status
(ii) Scope of total income
3. Incomes which do not form part of total income (other than charitable
trusts and institutions, political parties and electoral trusts)
(i) Incomes not included in total income
(ii) Tax holiday for newly established units in Special Economic Zones
4. Heads of income and the provisions governing computation of income
under different heads
(i) Salaries
(ii) Income from house property
(iii) Profits and gains of business or profession

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(iv) Capital gains

(v) Income from other sources
5. Income of other persons included in assessee's total income
(i) Clubbing of income: An introduction
(ii) Transfer of income without transfer of assets
(iii) Income arising from revocable transfer of assets
(iv) Clubbing of income of income arising to spouse, minor child and
son’s wife in certain cases
(v) Conversion of self-acquired property into property of HUF
6. Aggregation of income; Set-off, or carry forward and set-off of losses
(i) Aggregation of income
(ii) Concept of set-off and carry forward and set-off of losses
(iii) Provisions governing set-off and carry forward and set-off of losses
under different heads of income
(iv) Order of set-off of losses
7. Deductions from gross total income
(i) General provisions
(ii) Deductions in respect of certain payments
(iii) Specific deductions in respect of certain income
(iv) Deductions in respect of other income
(v) Other deductions
8. Computation of total income and tax liability of individuals
(i) Income to be considered while computing total income of individuals
(ii) Procedure for computation of total income and tax liability of
individuals
9. Advance tax, tax deduction at source and introduction to tax
collection at source
(i) Introduction
(ii) Direct Payment

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(iii) Provisions concerning deduction of tax at source

(iv) Advance payment of tax
(v) Interest for defaults in payment of advance tax and deferment of
advance tax
(vi) Tax collection at source – Basic concept
(vii) Tax deduction and collection account number
10. Provisions for filing return of income and self-assessment
(i) Return of Income
(ii) Compulsory filing of return of income
(iii) Fee and Interest for default in furnishing return of income
(iv) Return of loss
(v) Provisions relating to belated return, revised return etc.
(vi) Permanent account number
(vii) Persons authorized to verify return of income
(viii) Self-assessment

SECTION B – INDIRECT TAXES (40 MARKS)

Contents:
1. Concept of indirect taxes
(i) Concept and features of indirect taxes
(ii) Principal indirect taxes
2. Goods and Services Tax (GST) Laws
(i) GST Laws: An introduction including Constitutional aspects
(ii) Levy and collection of CGST and IGST
a) Application of CGST/IGST law
b) Concept of supply including composite and mixed supplies
c) Charge of tax including reverse charge
d) Exemption from tax
e) Composition levy

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(iii) Basic concepts of time and value of supply

(iv) Input tax credit
(v) Computation of GST liability
(vi) Registration
(vii) Tax invoice; Credit and Debit Notes; Electronic way bill
(viii) Returns
(ix) Payment of tax
Note – If any new legislation(s) is enacted in place of an existing legislation(s),
the syllabus will accordingly include the corresponding provisions of such new
legislation(s) in place of the existing legislation(s) with effect from the date to be
notified by the Institute. Similarly, if any existing legislation ceases to have effect,
the syllabus will accordingly exclude such legislation with effect from the date to
be notified by the Institute. Students shall not be examined with reference to any
particular State GST Law.
Consequential/ corresponding amendments made in the provisions of the
Income-tax law and Goods and Services Tax laws covered in the syllabus of this
paper which arise out of the amendments made in the provisions not covered in
the syllabus will not form part of the syllabus. Further, the specific inclusions/
exclusions in the various topics covered in the syllabus will be effected every year
by way of Study Guidelines. The specific inclusions/ exclusions may also arise due
to additions/ deletions every year by the annual Finance Act.

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STUDY GUIDELINES
New Intermediate Paper 4: Taxation Section A: Income-tax Law
List of topic-wise exclusions from the syllabus
Topics of the Exclusions
Syllabus (Provisions which are excluded from the
corresponding topic of the Syllabus)
1. Basic Concepts -
2. Residential Section 9A - Certain activities not to constitute business
status and scope connection in India
of total income
3. Incomes which
do not form Clause of Particulars
part of total section 10
income (other 4C Interest income of a non-corporate non-
than charitable resident or foreign company on specified
trusts and off-shore Rupee Denominated Bonds
institutions, issued by an Indian company or business
political parties trust
and electoral
4D Income accrued or arisen to or received by
trusts)
specified fund on transfer of a capital asset,
being a bond of an Indian Company or
GDR or rupee denominated bond or
derivative, on a recognized stock exchange
located in any IFSC and where the
consideration is paid/ payable in
convertible foreign exchange etc.
4E Any income accrued or arisen to, or
received by a non-resident as a result of
transfer of non-deliverable forward
contracts entered into with an offshore
banking unit of an IFSC referred to in
section 80LA(1A).

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4F Any income of a non-resident by way of

royalty, on account of lease of an aircraft in
a P.Y., paid by a unit of an IFSC referred to
in section 80LA(1A)
6A Tax on royalty or fees for technical services
derived by foreign companies
6B Tax paid on behalf of non-resident deriving
income from Government or an Indian
concern in pursuance of an agreement
entered into with the Government of a
foreign State or an international
organization
6BB Tax paid on behalf of foreign state or
foreign enterprise on amount paid as
consideration of acquiring aircraft, etc. on
lease
6C Income from projects connected with the
security of India arising to a notified foreign
company
6D Income arising to non-corporate non-resident
and foreign companies, by way of royalty from
or fees from technical services rendered in or
outside India to, the National Technical
Research Organisation (NTRO)
8&9 Remuneration and certain income of
individuals who are assigned duties in India
in connection with any co-operative technical
assistance programmes and income of any
member of the family of such individual
accompanying them to India.
8A & 8B Any remuneration or fee received by a
consultant, directly or indirectly, out of the
funds made available to an international
organisation (agency) under a technical
assistance grant agreement with the agency
and Government of a foreign State

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Any remuneration received by an individual

who is assigned to duties in India in
connection with any technical assistance
program from such consultant
10(10BB) Payment to Bhopal Gas Victims
15A Any payment made by an Indian company
engaged in the business of operation of
aircraft to acquire an aircraft on lease from
the government of a foreign State or a
foreign enterprise
19A Annual value of palaces of former rulers
20 to 25A • Income of local authorities [Section
10(20)]
• Income of research associations
approved under section 35(1)(ii)/(iii)
[Section 10(21)]
• Income of news agency [Section
10(22B)]
• Income of professional associations
[Section 10(23A)]
• Income received on behalf of any
Regimental Fund or Non-Public Fund
established by armed forces [Section
10(23AA)]
• Income of Funds established for welfare
of employees of which such employees
are members [Section 10(23AAA)]
• Income of Fund set up by Life Insurance
Corporation or any other insurer under
pension scheme [Section 10(23AAB)]
• Income of institution established for
development of Khadi and Village
Industries [Section 10(23B)]

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• Income of authorities set up under State

or Provincial Act for promotion of Khadi
and Village Industries [Section 10(23BB)]
• Income of any body or authority set up
to administer religious or charitable
trusts [Section 10(23BBA)
• Income of European Economic
Community (EEC) [Section 10(23BBB)]
• Income derived by the SAARC Fund for
Regional Projects [Section 10(23BBC)]
• Income of the IRDA [Section 10(23BBE)]
• Income of Central Electricity Regulatory
Commission [Section 10(23BBG)]
• Income of Prasar Bharati (Broadcasting
Corporation of India) [Section
10(23BBH)]
• Income of certain funds or institutions
[Section 10(23C)]
• Income of Mutual Fund [Section
10(23D)]
• Income of a securitization trust from the
activity of securitization [Section
10(23DA)]
• Income of Investor Protection Funds
[Section 10(23EA)]
• Specified income of Investor Protection
Fund set up by commodity exchanges
[Section 10(23EC)]
• Income of Investor Protection Fund set
up by depositories [Section 10(23ED)]
• Specified income of Core Settlement
Guarantee Fund (SGF) set up by a
recognized Clearing Corporation
[Section 10(23EE)]

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• Income of Investment Fund [Section

10(23FBA)]
• Income of unit holder of an Investment
Fund [Section 10(23FBB)]
• Certain incomes of Business trust
[Section 10(23FC)/(23FCA)]
• Distributed income of unit holder of a
business trust [Section 10(23FD)]
• Certain incomes of wholly owned
subsidiary of Abu Dhabi Investment
Authority and Sovereign Wealth Fund
[Section 10(23FE)]
• Any income of the nature of capital
gains, arising or received by a non-
resident or a specified fund, on account
of transfer of share of a company
resident in India, by the resultant fund
or specified fund and such shares were
transferred from the original fund to the
resultant fund in relocation, and where
capital gains on such shares were not
chargeable to tax if that relocation had
not taken place [Section 10(23FF)]
• Income of trade unions [Section 10(24)]
• Income of provident funds,
superannuation funds, gratuity funds
etc. [Section 10(25)]
• Income of Employees State Insurance (ESI)
Fund [Section 10(25A)]
• Income of member of a Scheduled Tribe
[Section 10(26)]
26AAB to • Income of an Agricultural Produce
31 Market Committee or Board [Section
10(26AAB)]
• Income of a corporation etc. for the
promotion of interests of members of

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Scheduled Castes or Scheduled Tribes or

both [Section 10(26B)]
• Income of corporations established to
protect interests of minority community
[Section 10(26BB)]
• Income of corporation established by a
Central, State or Provincial Act for
welfare of ex-servicemen [Section
10(26BBB)]
• Income of a co-operative society
formed for promoting the interests of
Scheduled Castes or Schedules Tribes or
both [Section 10(27)]
• Incomes of certain bodies like Coffee
Board, Rubber Board etc. [Section
10(29A)]
• The amount of any subsidy received by
any assessee engaged in the business of
growing and manufacturing tea in India
through or from the Tea Board [Section
10(30)]
• The amount of any subsidy received by
an assessee engaged in the business of
growing and manufacturing rubber,
coffee, cardamom or other specified
commodity in India from or through the
Rubber Board, Coffee Board, Spices
Board [Section 10(31)]
33 Any income arising from the transfer of a
capital asset being a unit of Unit Scheme
1964 of UTI
36 Long term capital gains on transfer of listed
equity shares purchased on or after
1.3.2003 but before 1.3.2004, and held for a
period of 12 months or more

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37A Any income chargeable under the head

capital gains in respect of transfer of
specified capital asset to an asseesee,
being an individual or HUF under Land
Pooling Scheme
39 to 42 • Specified income arising from any
international sporting event in India
[Section 10(39)]
• Certain grants etc. received by a
subsidiary from its Indian holding
company engaged in the business of
generation or transmission or
distribution of power [Section 10(40)]
• Specified income of certain notified bodies
or authorities which have been established
under a treaty or an agreement [Section
10(42)]
44 to 50 • Income received by any person on
behalf of NPS Trust [Section 10(44)]
• Specified income of notified entities not
engaged in commercial activity [Section
10(46)]
• Income of notified infrastructure debt
funds [Section 10(47)]
• Income received by certain foreign
companies in India in Indian currency
from sale of crude oil to any person in
India [Section 10(48)]
• Income arising to a foreign company on
account of storage of crude oil [Section
10(48A)]
• Income arising to a foreign company on
account of sale of leftover stock of crude
oil [Section 10(48B)]
• Income arising to Indian Strategic
Petroleum Reserves Ltd. as a result of

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arrangement for replenishment of crude

oil stored in its storage facility [Section
10(48C)]
• Income accruing or arising to an
institution established for financing
infrastructure and development, set up
under an Act of Parliament, for ten
consecutive assessment years [Section
10(48D)]
• Income accruing or arising to a
developmental financing institution,
licensed by RBI under an Act of the
Parliament and notified by the Central
Govt., for 5 consecutive assessment
years [Section 10(48E)]
• Income arising from any specified
service chargeable to equalization levy
[Section 10(50)].
4. Heads of
income and the
provisions
governing
computation of
income under
different heads
Salaries -
Income from -
house property

Profits and 1. Income computation and disclosure standards (ICDSs)

gains of notified under section 145 and the related provisions
business or in the Income-tax Act, 1961;
profession 2. The provisions contained in the following sections given
hereunder:

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Section Particulars
33AB Tea Development Account/ Coffee
Development Account/ Rubber
Development Account
33ABA Site Restoration Fund
35ABA Expenditure for obtaining right to use
spectrum for telecommunication services
35ABB Expenditure for obtaining licence to
operate telecommunication services
35CCA Expenditure by way of payment to
associations and institutions for carrying
out rural development programmes
35CCC Expenditure on agricultural extension
project
35CCD Expenditure on skill development project
35DD Amortisation of expenditure in case of
amalgamation or demerger
35E Deduction of expenditure on prospecting
and development of certain minerals
36(1)(ia)/ • Insurance premium paid by a Federal
(vi)/(viia)/ Milk Co-operative Society [Section
(viii)/(xii)/ 36(1)(ia)]
(xiv)/ (xvii) • Allowance for animals used for the
purposes of business or profession,
otherwise than as stock in trade [Section
36(1)(vi)]
• Special provision for bad and doubtful
debts made by Banks, Public Financial
Institution, State Financial Corporation,
State Industrial Investment Corporation
[Section 36(1)(viia)]
• Deduction for Special Reserve created
and maintained by Specified Entities
engaged in eligible business [Section
36(1)(viii)]

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• Deduction for expenditure incurred by

entities established under any Central,
State or Provincial Act [Section
36(1)(xii)]
• Deduction of contribution by a public
financial institution to Credit guarantee
fund trust for small industries [Section
36(1)(xiv)]
• Deduction of expenditure incurred by a
co-operative society for purchase of
sugarcane at price fixed by the
Government [Section 36(1)(xvii)]
40(a)(ib) Consideration paid or payable to a non-
resident for specified service on which
equalization levy is deductible under
Chapter VIII of the Finance Act, 2016 and
such levy has not deducted or after
deduction has not been paid on or before
the due date of filing return of Income.
42 Special provisions for deduction in case of
business for prospecting etc. for mineral oil
43C Special Provision for Computation of Cost
of Acquisition of Certain Assets
43D Special Provision in case of income of
Public Financial Institutions, public
companies etc.
44 Insurance Business
44A Special provision for deduction in the case
of trade, professional or similar association
44B to • Special provision for computing the
44DB profits and gains of shipping business in
case of non-residents [Section 44B]
• Special provision for computing profits
and gains in connection with the
business of exploration etc., of mineral
oils [Section 44BB]

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• Special provision for computing profits

and gains of the business of operation
of aircraft in the case of non-residents
[Section 44BBA]
• Special provision for computing profits
and gains of foreign companies
engaged in the business of civil
construction etc. in certain turnkey
power projects [Section 44BBB]
• Deduction of head office expenditure in
the case of non-residents [Section 44C]
• Special provisions for computing
income by way of royalties etc. in case
of non-residents [Section 44DA]
• Special provision for computing
deductions in the case of business
reorganisation of co-operative banks
[Section 44DB]
Capital gains Distribution of capital assets or stock in trade on dissolution
or reconstitution of firm/AOP or BOI [Section 9B]
Profits or gains arising from transfer made by the depository
or participant of beneficiary interest in any securities [Section
45(2A)]
Introduction of capital asset as capital contribution in a
firm/AOP or BOI [Section 45(3)]
Distribution of money or capital assets on reconstitution of
firm/AOP or BOI [Section 45(4)]
Section Particulars
2(42A) Sub-clauses consequent to excluded
clauses of section 47, sub-clause (he) of
clause (i) of Explanation 1 relating to
period of holding of share(s) of a
company acquired by non-resident on
redemption of GDRs referred to in
section 115AC(1)(b) and sub-clause (hg)
relating to period of holding of unit or

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units in the segregated portfolio and

sub-clause (hh) relating to period of
holding of original units or units in the
main portfolio
47(via)/(viaa) • Any transfer of a capital asset being a
/(viab)/(vic)/ share or shares held in an Indian
(vica)/(vicb)/ company, in a scheme of
(vicc)/(viia)/ amalgamation, by amalgamating
(viiab)/ foreign company to the amalgamated
(viiac)/ foreign company [Section 47(via)]
(viiad)/ • Any transfer of a capital asset, in a
(viiae)/ scheme of amalgamation of a
(viiaf)/(xa)/ banking company with a banking
(xii)/(xiii)/ institution [Section 47(viaa)]
(xiiia)/(xiiib)/
• Any transfer, in a scheme of
(xiv)/(xv)/
amalgamation, of a capital asset,
(xvii)/
being a share of a foreign company
(xviii)/(xix)
[Section 47(viab)]
• Any transfer in a demerger, of a
capital asset, being a share or shares
held in an Indian company, by the
demerger foreign company to the
resulting foreign company [Section
47(vic)]
• Any transfer in a business
reorganisation, of a capital asset by
the predecessor co-operative bank to
the successor co-operative bank or
to the converted banking company
[Section 47(vica)]
• Any transfer by a shareholder, in a
business reorganisation, of a capital
asset being a share or shares held by
him in the predecessor co-operative
bank if the transfer is made in
consideration of the allotment to him
of any share or shares in the

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successor co-operative bank or to the

converted banking company [Section
47(vicb)]
• Any transfer in case of a demerger of
a capital asset, being a share of a
foreign company [Section 47(vicc)]
• Any transfer of bonds of an Indian
company or Global Depository
Receipts purchased in foreign
currency referred to in section
115AC(1) [Section 47(viia)]
• Any transfer of a capital asset, being
GDR, rupee denominated bonds or
derivative by a non-resident in
foreign currency on a recognized
stock exchange located in any IFSC
[Section 47(viiab)]
• Any transfer, in a relocation, of a
capital asset by the original fund
to the resulting fund [Section 47(viiac)]
• Any transfer by a shareholder or unit
holder or interest holder, in a
relocation, of a capital asset being a
share or unit or interest held by him in
the original fund in consideration
for the share or unit or interest in
the resultant fund [Section 47(viiad)]
• Any transfer of capital asset by IIFCL
to an institution established
for financing the Infrastructure
and Development, set up under an
act of Parliament and notified by the
Central Government [Section 47(viiae)]
• Any transfer of capital asset by a
public sector company to another
public sector company notified by the
Central Government or to the Central

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Government or to a State
Government under a plan approved
by the Central Government [Section
47(viiaf)]
• Any transfer of by way of conversion
of Foreign Currency Exchangeable
Bonds into shares or debentures of a
company [Section 47(xa)]
• Any transfer of land under a scheme
prepared and sanctioned under
section 18 of the Sick Industrial
Companies (Special Provisions) Act,
1985, by a sick industrial company
which is managed by its workers’ co-
operative [Section 47(xii)]
• Any transfer of a capital asset or
intangible asset by a firm to a
company, where a firm is succeeded
by a company, or any transfer of a
capital asset where an AOP or BOI is
succeeded by a company consequent
to demutualisation or corporatisation
of a recognised stock exchange in
India [Section 47(xiii)]
• Any transfer of a membership right by
a member of recognised stock
exchange in India for acquisition of
shares and trading or clearing rights
in accordance with a scheme for
demutualization or corporatisation
approved by SEBI [Section 47(xiiia)]
• Any transfer of a capital asset or
intangible asset by a private company
or unlisted public company to a LLP
[Section 47(xiiib)]
• Any transfer of a capital asset or
intangible asset where a sole

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proprietary concern is succeeded by a

company [Section 47(xiv)]
• Any transfer in a scheme for lending
of any securities under an agreement
or arrangement which is subject to
SEBI guidelines [Section 47(xv)]
• Any transfer of a capital asset being
share of a SPV to a business trust in
exchange of units allotted by the trust
to the transferor [Section 47(xvii)]
• Any transfer of unit or units by a unit
holder under consolidated scheme of
mutual fund [Section 47(xviii)]
• Any transfer of unit or units by a unit
holder under consolidated plan of
mutual fund scheme [Section 47(xix)]
47A Withdrawal of exemption in certain cases
49 • Sub-sections consequent to excluded
clauses of section 47
• Cost of acquisition of share(s) of a
company acquired by a non-resident
on redemption of GDRs referred
under section 115AC(1)(b) [Section
49(2ABB)]
• Cost of acquisition of unit or units in
a consolidated scheme of a mutual
fund [Section 49(2AD)]
• Cost of acquisition of unit or units in
a consolidated plan of a mutual fund
scheme [Section 49(2AF)]
• Cost of acquisition of shares in case
of business reorganization of a co-
operative bank [Section 49(2E)]
• Cost of acquisition of a unit or units
in the segregated portfolio [Section
49(2AG)]

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• Cost of acquisition of the original

units held by the unitholder in the
main portfolio [Section 49(2AH)]
• Cost of acquisition of capital asset
transferred by holding to its 100%
subsidiary Indian company or vice
versa in case of attraction of section
47A [Section 49(3)]
• Cost of acquisition of an asset declared
under the Income Declaration Scheme,
2016 [Section 49(5)]
• Cost of acquisition of specified
capital asset to an assessee, being an
individual or HUF under Land Pooling
Scheme in case of transfer of
reconstituted plot or land after the
expiry of two years from the end of
the financial year in which the
possession was handed over to the
assessee [Section 49(6)]
• Cost of acquisition of capital asset of
entities in case of levy of tax on
accreted income under section
115TD [Section 49(8)]
54G Exemption of Capital gains on transfer of
assets in cases of shifting of industrial
undertaking from urban area
54GA Exemption of capital gains on transfer of
certain capital assets in case of shifting
of an industrial undertaking from an
urban area to any SEZ
54GB Exemption of capital gains on transfer of
residential property if the sale
consideration is used for subscription in
equity of an eligible start-up to be used
for purchase of new plant and machinery

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55(2)(ab) Cost of acquisition in respect of capital

asset, being equity share or shares
allotted to a shareholder of a recognised
stock exchange of India under a scheme
for demutualization or corporatization
Income from -
Other Sources
5. Income of other Section 65: Liability of person in respect of income included in
persons included the income of another person
in assessee's total
income
6. Aggregation of
income; Set-off, Section Particulars
or carry forward 67A Method of computing a member’s share in
and set-off of income of association of persons or body of
losses individuals
72A Carry forward and set-off of accumulated
business losses and unabsorbed
depreciation in certain cases of Amalgama-
tion/ Demerger, etc.
72AA Provisions relating to carry forward and set-
off of accumulated losses and unabsorbed
depreciation of a –
- banking company against the profit of a
banking institution under a scheme of
amalgamation; or
- one or more corresponding new bank with
any other corresponding new bank; or
- government company with any other
government company under a scheme of
amalgamation
72AB Provisions relating to carry forward and set
off of accumulated loss and unabsorbed
depreciation in business reorganisation of
co-operative banks

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78 Carry forward and set-off of losses in case of

change in constitution of firm or succession
79 Carry forward and set-off of losses in case of
certain companies
7. Deductions Deductions in respect of certain income:
from gross total Section Particulars
income
80-IA to Profit-linked deductions under Chapter VI-A
80-IE
80M Deduction in respect of certain inter-
corporate dividends
80JJA Deduction in respect of profits and gains from
business of collecting and processing of bio-
degradable waste.
80LA Deduction in respect of certain incomes of
Offshore Banking units and International
Financial Services Centers
80P Deduction in respect of income of co-
operative societies
80PA Deduction in respect of certain income of
Producer Companies
8. Computation of Section 5A – Apportionment of income between spouses
total income governed by Portuguese Civil Code
and tax liability Section 89A - Manner and year of taxation of income of a
of Individuals specified person accrued in a specified account
9. Advance tax, tax Section Particulars
deduction at 194LB to • Interest income from Infrastructure Debt
source and 194LD Fund [Section 194LB]
introduction to • Income from units of business trust
tax collection at [Section 194LBA]
source
• Income in respect of units of investment
fund [Section 194LBB]
• Income in respect of investment in
securitization trust [Section 194LBC]

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• Income by way of interest payable to

non-residents by Indian company
[Section 194LC]
• Income by way of interest on certain bonds
and Government securities payable to a
Foreign Institutional Investor or a Qualified
Foreign Investor [Section 194LD]
195 Other sums (payable to non-residents)
196A to • Income in respect of units of non-
196D residents [Section 196A]
• Income from units referred to in section
115AB [Section 196B]
• Income from foreign currency bonds or
shares of Indian company [Section 196C]
• Income of Foreign Institutional Investors
from securities [Section 196D]
10. Provisions for Sections 139(4A) to 139(4F) dealing with provisions for
filing return of filing of return of charitable or religious trusts, research
income and institutions, political party, university, college or other
self-assessment institution, business trust, investment fund.

Note- As far as the Income-tax Rules, 1962 are concerned, only the significant
Rules included in the respective chapters of the Study Material as well as in the
Statutory Update given in the Revision Test Paper (RTP) for May, 2022 and
November, 2022 Examinations would be relevant at the Intermediate level. Even in
respect of those sections which are not excluded from the syllabus, the coverage is
restricted to the extent of the content discussed in the Study Material and Statutory
Update.

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CONTENTS

MODULE - 1
Chapter 1 : Basic Concepts
Chapter 2 : Residence and Scope of Total Income
Chapter 3 : Incomes which do not form part of Total Income

MODULE - 2
Chapter 4 : Heads of Income

MODULE – 3
Chapter 5 : Income of Other Persons included in Assessee’s Total Income
Chapter 6 : Aggregation of Income, Set-off and Carry Forward of Losses
Chapter 7 : Deductions from Gross Total Income
Chapter 8 : Computation of Total Income and Tax Payable
Chapter 9 : Advance Tax, Tax Deduction at Source and Introduction to Tax
Collection at Source
Chapter 10 : Provisions for filing Return of Income and Self-assessment

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DETAILED CONTENTS: MODULE – 1

CHAPTER – 1: BASIC CONCEPTS

Learning Outcomes ......................................................................................................................... 1.1

Chapter Overview ............................................................................................................................. 1.2
Contents:
1. Introduction............................................................................................................................ 1.3

1.1 What is the meaning of tax? ............................................................................. 1.3

1.2 Why are Taxes levied? ......................................................................................... 1.3

1.3 Power to levy taxes ............................................................................................... 1.4

1.4 Overview of Income-tax law in India ............................................................. 1.4

1.5. Levy of Income-tax ............................................................................................... 1.8

2. Important Definitions [Section 2] ................................................................................. 1.16

2.1 Assessee [Section 2(7)] ...................................................................................... 1.16

2.2 Assessment [Section 2(8)] ................................................................................ 1.17

2.3 Person [Section 2(31)] ....................................................................................... 1.17

2.4 Income [Section 2(24)] ...................................................................................... 1.23

2.5 India [Section 2(25A)] ........................................................................................ 1.29

3. Previous Year and Assessment Year............................................................................ 1.30

3.1 Assessment year [Section 2(9)] ...................................................................... 1.30

3.2 Previous year [Section 3] .................................................................................. 1.30

3.3 Undisclosed sources of income ..................................................................... 1.31

3.4 Certain cases when income of a previous year

will be assessed in the previous year itself ................................................ 1.33

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4. Charge of Income-tax ....................................................................................................... 1.35

4.1 Rates of Tax ........................................................................................................... 1.35

4.2 Surcharge ............................................................................................................... 1.43

4.3 Rebate of up to ` 12,500 for resident individuals having total

income of up to ` 5 lakh [Section 87A] ...................................................... 1.57

Let us Recapitulate ......................................................................................................................... 1.59

Test Your Knowledge .................................................................................................................... 1.64

CHAPTER – 2: RESIDENCE AND SCOPE OF TOTAL INCOME

Learning Outcomes ......................................................................................................................... 2.1

Chapter Overview ............................................................................................................................. 2.2

Contents:

1. Residential Status [Section 6] .......................................................................................... 2.3

1.1 Residential status of Individuals ...................................................................... 2.4

1.2 Residential status of HUF ................................................................................. 2.11

1.3 Residential status of firms, AoPs and BoIs ................................................. 2.13

1.4 Residential status of companies .................................................................... 2.13

1.5 Residential status of local authorities and

artificial juridical persons ........................................................................ 2.14

2. Scope of Total Income ..................................................................................................... 2.14

2.1 Meaning of “Income received or deemed to be received” ................. 2.18

2.2 Meaning of income ‘accruing’ and ‘arising’ .............................................. 2.18

2.3 Income deemed to accrue or arise in India [Section 9] ........................ 2.19

Let us Recapitulate ......................................................................................................................... 2.36

Test Your Knowledge .................................................................................................................... 2.39

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CHAPTER – 3: INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME

Learning Outcomes ......................................................................................................................... 3.1

Chapter Overview ............................................................................................................................. 3.2

Contents:

1. Introduction............................................................................................................................ 3.3

1.1 Exemption under section 10 vis-a-vis Deduction

under Chapter VI-A .............................................................................................. 3.3

1.2 Exemptions which are discussed under the relevant chapters ............ 3.3

2. Incomes not included in Total Income [Section 10] ............................................... 3.5

2.1 Agricultural income [Section 10(1)] ................................................................ 3.5

2.2 Amounts received by a member from the income of

the HUF [Section 10(2)].................................................................................... 3.17

2.3 Share income of a partner [Section 10(2A)] .............................................. 3.18

2.4 Interest on moneys standing to the credit of individual

in his NRE A/c [Section 10(4)(ii)] .................................................................... 3.19

2.5 Remuneration received by individuals, who are

not citizens of India [Section 10(6)] .............................................................. 3.19

2.6 Compensation received on account of

disaster [Section 10(10BC)] .............................................................................. 3.21

2.7 Payment from Sukanya Samriddhi Account [Section 10(11A)].......... 3.22

2.8 Educational scholarships [Section 10(16)] ................................................ .3.22

2.9 Payments to MPs & MLAs [Section 10(17)]............................................... 3.22

2.10 Awards for literary, scientific and artistic works and other
awards by the Government [Section 10(17A)] ......................................... 3.23

2.11 Pension received by recipient of

gallantry awards [Section 10(18)] .................................................................. 3.23

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2.12 Specified income of a Sikkimese Individual [Section 10(26AAA)] .... 3.24

3. Tax Holiday for Units established in Special

Economic Zones [Section 10AA]................................................................................... 3.24

4. Restrictions on allowability of expenditure [Section 14A] .................................. 3.31

Let us Recapitulate ......................................................................................................................... 3.34

Test Your Knowledge .................................................................................................................... 3.36

© The Institute of Chartered Accountants of India