UNIT - III

Computation of income under profits and gains of business-profession–capital gains–

income from other sources-Deductions in the computation of total income-income tax
Authorities and their power (problems be included).

PROFIT AND GAINS OF BUSINESS OR PROFESSION (SEC 28 TO 44)

 Business Persons - Profit & Loss account
 Professional Persons – Income & Expenditure account
Meaning of Business Sec 2(13)
Business includes – Trade, Commerce, Manufacture & any adventure or concern in
the nature of trade, commerce or manufacture
Eg: Dealers, Manufacturing Firms, Banking, Finance Companies
Meaning of Profession Sec 2(36)
Profession includes Vocation. Profession requires purely intellectual skill or manual
skill on the basis f some special learning.
Eg: Chartered accountant, Cost Accountant Company Secretary, Doctors, Engineers,
Architects Lawyers etc.

Profit & Loss Account

Particulars Rs Particulars Rs
Expenses/ Payment Income/Receipt
To Purchase *** By Gross receipts ***
To Salary *** By Sales ***
To Fuel ***
To Telephone ***
To Wages ***
To Printing & Stationery ***
To Repairs & Maintenance ***
To Net Profit ****
***** *****

Computation of Income from Business

Particulars Rs
Net Profit as per Profit & Loss A/C ***
Add: Expenses disallowed/In admissible Expenses ***
Less: Incomes credited in P&L A/C different heads of income ***
Less: Expenses (Not debited to P&L A/C) allowed as per provisions ***
Income from Business ****

ALLOWED EXPENSES
1) All expenses must be done specifically for business activity.
2) All expenses must be related to the previous year or financial year.
3) Expenses should not be of personal nature
4) Should not be spent on any illegal activities as bribe, smuggling etc.
5) Expenses should not be in the nature of capital nature.
6) Depreciation is allowed as expenses only on assets used for business.
7) All business expenses related with building furniture, Plant & Machinery, Business
related vehicles are allowed expenses.
DISALLOWED EXPENSES

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 1) Personal Expenses: Marriage Expenses, LIC Premium, Proprietors salary, Household
Expenses – Electricity, Telephone, water bill, Drawings, Saving, Rent.
2) Any payment made in excess of Rs 20000 either in cash or in bearer cheques.
3) Income tax, Wealth Tax
4) Interest on Loan – Business, Personal
5) Provision for Bad debts allowed, doubtful debts
6) Sales Tax, Excise duty
7) Donation & Charity
8) Any purchase of capital assets
9) Cost of sign brand fixed on office premises (advertise)
10) Contribution to staff welfare fund & political party
11) Speculation losses
12) Prelimary expenses
13) Interest on capital
14) Employer contribution to URPF
15) Over & Excess depreciation
16) Personal Gifts
17) Penalties & Fines on excise & custom duty
18) Salary paid to family members who are not professionally qualified
19) Bonus & Commission paid to employees
20) Theft at assessee residence.
Computation of Income from Profession
Particulars Rs
Receipts relating to Profession (Cash basis) ***
Less: Payment relating to Profession ***
Income from Profession ****
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COMPUTATION OF INCOME UNDER PROFITS AND GAINS OF BUSINESS-
PROFESSION
Computation of income under the "Profits and Gains of Business or Profession" in India, as
per the Income Tax Act, 1961, involves determining the income that arises from conducting
a business or profession. The taxable income is calculated after deducting permissible
expenses from the gross receipts. Here’s a step-by-step guide on how to compute income
under this head:
1. Identify the Gross Income (Gross Receipts or Turnover):
The first step is to compute the gross receipts, which include:
 Revenue from sales or services: Total sales of goods or provision of services in case
of business income.
 Other income: This could be from scrap sales, discounts received, recovery of bad
debts, export incentives, or any other incidental income related to the business.
2. Allowable Deductions/Expenses:
Deduct all allowable business expenses incurred during the year to earn the income. These
expenses must be wholly and exclusively incurred for the purpose of the business. Common
expenses include:
 Rent, rates, and taxes: Payments made for office rent, local taxes, and other statutory
fees.
 Salaries, wages, and bonuses: Payments made to employees for their services.
 Depreciation: Deduction for wear and tear of business assets under Section 32. The
rates of depreciation are prescribed based on the nature of the asset.

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  Interest on borrowed capital: Interest paid on loans taken for business purposes,
subject to certain restrictions (Section 36(1)(iii)).
 Repairs and maintenance: Expenditure on repairs of business premises or
machinery.
 Insurance: Insurance premiums paid to protect the business assets.
 Bad debts written off: Debts that are considered irrecoverable and written off in the
books of accounts (Section 36(1)(vii)).
 Advertisement, marketing, and sales promotion: Expenses related to promoting the
business.
 Legal and professional fees: Payments made for obtaining professional services like
legal consultations or auditing.
 Other administrative expenses: Stationery, office supplies, electricity, etc.
3. Disallowable Expenses:
Some expenses are either not allowed or partially allowed. These include:
 Personal expenses: Any personal or family expenses of the business owner.
 Expenses related to income exempt from tax: If any expenditure is incurred to earn
income that is exempt from tax (like dividend income exempt under Section 10), such
expenditure is not allowed.
 Penalties and fines: Penalties paid for violation of laws are not allowed as a
deduction.
 Excessive payments to related parties: Any unreasonable payments to related
parties (Section 40A(2)).
4. Income Computed under Presumptive Taxation (if applicable):
In certain cases, businesses can opt for presumptive taxation, where income is computed on a
presumptive basis:
 Section 44AD: Small businesses with turnover up to Rs2 crore can declare income as
8% of total turnover or gross receipts (6% if receipts are through banking channels).
 Section 44ADA: Professionals (like doctors, lawyers, etc.) with gross receipts up to
Rs50 lakhs can declare income as 50% of gross receipts.
 Section 44AE: For small transporters owning up to 10 goods vehicles, income can be
deemed at Rs7,500 per month per vehicle.
5. Computation of Net Profit:
After accounting for all allowable expenses and any disallowed items, the net profit from
business or profession is computed. This is the Net Income chargeable to tax under the head
"Profits and Gains of Business or Profession."
6. Set-off of Losses (if applicable):
 If the business has suffered a loss during the year, the loss can be set off against other
heads of income in the current year or carried forward to future years to set off against
profits from the same head in subsequent years (up to 8 years).
7. Add Back Deemed Incomes:
Certain items are treated as income under the law, even if they are not recorded in the profit
and loss account. For example:
 Recovery of bad debts written off earlier: If any bad debt that was previously
written off is recovered, it is added back to income (Section 41(1)).
 Amount transferred from reserves or provisions: If any provision for expenses is
written back, it is treated as income.
8. Final Taxable Income:
The final step is to arrive at the taxable income by adding back any disallowed expenses,
deemed incomes, and deducting allowable deductions from the gross receipts.

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Example:
Suppose a business has the following figures for a financial year:
 Gross receipts: Rs1,00,00,000
 Allowable deductions:
o Salaries: Rs20,00,000
o Rent: Rs10,00,000
o Depreciation: Rs5,00,000
o Other expenses: Rs15,00,000
Computation:
Computation:
Gross Receipts=Rs1,00,00,000
Total Allowable Deductions=Rs20,00,000+Rs10,00,000+Rs5,00,000+Rs15,00,000
=Rs50,00,000

Total Allowable Deductions = Rs20,00,000 + Rs10,00,000 + Rs5,00,000 + Rs15,00,000

= Rs50,00,000
Total Allowable Deductions=Rs20,00,000+Rs10,00,000+Rs5,00,000+Rs15,00,000
=Rs50,00,000
Net Profit (Taxable Income)=Rs1,00,00,000−Rs50,00,000=Rs50,00,000
Net Profit (Taxable Income)} = Rs1,00,00,000 - Rs50,00,000 = Rs50,00,000
Net Profit (Taxable Income)=Rs1,00,00,000−Rs50,00,000=Rs50,00,000

Conclusion:
The process of computing business or professional income involves determining gross
income, reducing allowable expenses, adding back disallowed expenses, and arriving at the
taxable profit. It's essential to follow the Income Tax Act guidelines to ensure accurate and
legal computation.
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Problem 1
Following are the Profit and Loss Account of Kesari Mallya for the previous year 2020-2021.
Particular Rs Particular Rs
To Salaries 25650 By Gross Profit 80000
To Rent 1000 By Bank Interest 450
By Bad Debts recovered (Last
To Commission on Sales 100 year allowed) 2000
To Income Tax 2600 By Income from house property 4800
By Interest on commercial
To Entertainment Expenses 600 securities 2000
To Commission paid to collect interest
on securities 25
To Embezzlement by Cashier 1000
To Municipal Tax (House) 600
To Bad debts (Allowed) 450
To Repairs to house 1625
To Office Expenses 9180
To Depreciation 5000
To L.I.C Premium 1320
To Net Profit 40100
89250 89250

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 a) Allowable Depreciation on the Assets is Rs 4500.
b) Compute the taxable business income for the Assessment Year 2021-2022.

Solution
Computation of Business Income of Mr. Kesari Mallya
Particular Rs Rs
Net Profit as per P&L A/C 40100

Add: Inadmissible Expenses:

Income Tax 2600
Commission paid to collect interest on securities 25
Municipal Tax (House) 600
Repairs of House Property 1625
Depreciation 5000
LIC Premium 1320
11170
51270
Less: Incomes not taxable under this head:
Bonus Interest 1450
Income from House Property 4800
Interest on Commercial securities 2000 7250
44020

Less: Allowable Depreciation: 4500

Business Income 39520

Problem 2:
The following is the P & L A/c for the year ended 31 st March 2021 of the Bengal
Sugar Mills of which Shan is the owner.
Profit & Loss A/C
Particulars Rs Particulars Rs
To Manufacturing Exp 585295 By Sales of Sugar and Molasses 1161300
To Excise duty 107500 By Rent from Agricultural land 950
To Salary and Wages 100495 By Revenue from Fisheries 3700
By Sale proceeds from Agricultural
To Establishment Charges 50150 produce 607355
To General Charges 133750 By Sundry Receipts 1230
To Fine paid to Excise duty 1750
To Interest on Bank Loans 24000
To Shan's remuneration 41000
To depreciation 69000
To Cultivation Expenses 457500
To Income Tax 25000
To Net Profit 179095
1774535 1774535
Compute the business income of Mr. Shan after taking the following information into
consideration
1. Manufacturing Expenses include Rs 512000 on account of cane produced in own farm
and consumed in the factory the average market price of such cane being Rs 575000.

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 2. General charges include (a) Rs 1000 as legal expenses incurred in defending a suit
regarding the company’s title to certain agricultural lands, and (b) Rs 90000 paid to
Shri Shan’s son who is an employee in the Sugar Mill for a trip to Hawaii to study
modern methods of manufacture.
3. Depreciation in respect of all assets has been agreed at Rs 75000.

Solution
Calculation of Business Profit of Mr. Shan
Particulars Rs Rs
179095
Balance as per P & L A/c
Add: Disallowed expenses: 1750
Fine paid to Excise deptt 41000
Shan's remuneration 45750
To Cultivation Expenses 0
Income Tax 25000
Legal Expenses- relating to land 1000
Depreciation 69000 595250
774345

Less: Allowed Expenses

Cost of Cane under debited (575000-512000) 63000
Depreciation 75000 138000
636345

Less: Incomes not taxable under this head 950

Rent from agricultural land 3700
Revenue from fishers 60735
Sale proceeds of Cane 5 612005
(all of these are agricultural incomes)
Business Profit 24340

Problem 3:
Ram Prasad is a registered medical practitioner. He has prepared the following
Income and Expenditure Account for the year ending 31 st March, 2021. You are required to
prepare a statement showing his income from profession.
Income and Expenditure Account
Particular Rs Particular Rs
Household expenses 20000 Consultation Fees 10000
Car purchased 30000 Visiting Fees 20000
Travelling Expenses (Personal) 4000 Gains on Race(Gross) 10000
Share in sale proceed of an
Charity & Donations 1000 ancestral house 34000
Income Tax 2000 Profit on sale of securities 6000
Salaries 8000 Dividend on units (Gross) 5000
Gift to daughter 7000 Interest on P.O saving Bank 600
Establishment Exp. 1000 Gifts from Father-in-law 2000
Bad debts recovered (Not
Surgical Equipment 4000 allowed in earlier year) 2000

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 Books 2000 Interest on Fixed deposit 1300
Life Insurance premium 2000
Wealth-Tax 1000
Interest on Capital 1000
Surplus 7900
90900 90900
Rate of Depreciation allowable on car is 15% and surgical equipments is at 15%. In
case of books for profession the rate of depreciation is 60%.

Solution
Computation of Professional Gain
Particular Rs Rs
Profession Receipts
Consultation fees 10000
Visiting fees 20000 30000

Less: Professional Expenses

Depreciation of Car [30000*15%] 4500
Salaries 8000
Establishment Expenses 1000
Surgical Equipment [4000*15%] 600
Books: Depreciation @ 60% of Rs 2000 1200 15300

Professional Gain 14700

Problem 4:
Dr. Satish is Medical Practitioner. He gives you the following summary of cash book
for the year ending 31-3-2021
Particular Rs Particular Rs
To Balance 10000 By Rent of Clinic 18000
To Consultation fee 60000 By Purchase of Medicine 38000
To visiting fee 45000 By Staff Salaries 24000
To Gifts and Presents 8000 By Surgical Equipment 40000
To Sale of Medicine 42000 By Motor car Expenses 8000
To Dividend from U.T.I 6000 By Purchase of motor car 140000
To Life Insurance Maturity 100000 By Household Expenses 7000
To Interest from National Defence Bonds 6000 By Closing Balance 2000
Other Information:
1. 50% if the motor car expense incurred in connection with profession. Car was
purchased in December 2021.
2. Household expenses include Rs 6800 for LIC Premium
3. Gifts and presents include Rs 3000 from relatives.
4. Closing stock of Medicine Rs 12000 and on 1-4-2020 opening stock was Rs 4000
5. Rate of Depreciation allowable on car is 15% and surgical equipments are at 15%.
Compute his Professional gain on the assessment year 2021-2022

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Solution
Particular Rs Rs
Professional Receipts - (A)
Consultation fees 60000
Visiting Fees 45000
Gifts & Presents (8000-3000) 5000
Sale of Medicines 42000 152000
Less: Professional Expenses- (B)
Rent of clinic 18000
Purchase of Medicines 38000
Staff Salaries 24000
Depreciation on Surgical Equipments (40000*15%) 6000
Motor Car Expenses (8000*50%) 4000
Depreciation on Car (140000*15%*50%) 10500 100500
Professional Gain (A)-(B) 51500

Problem 5:
Mr. Kedambi an advocate furnishes the following receipts and payment for the
previous year 2020-2021.
Receipts and Payments A/C
Particulars Rs Particulars Rs
To Balance b/d 6540 By Rent 2400
To Legal Fees 84400 By Telephone 3000
To Salary (as a part-time law
lecturer) 3600 By Salaries 2400
To Interest on debentures (Non-
listed) 2700 By Subscription of Law Journal 240
To Gifts from clients 10000 By Travelling 560
To Rent 6000 By Office expenses 600
By Purchase of stamp paper and court
To Interest on foreign security 8000 fee stamps 1600
To Refund of Company Deposit 2000 By Interest on Loan 870
By Donation to a school 5000
By Income Tax paid 8420
By Municipal Tax 600
By LIC premium 6000
By Wealth Tax 1600
By Balance c/b 89950
12324 12324
0 0

1. The loan was borrowed for constructing his residential house. Its rental value is Rs
300 per month.
2. School is recognized for I.T purposes
3. Gifts from clients include Rs 2000 received from his father. Compute the professional
income.

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Solution
Computation of Professional Gain
Particulars Rs Rs

Professional Receipts 8440

Legal fees 0
Gifts from Client (10000-2000) 8000 92400
Less: Professional Expenses
Rent 2400
Telephone 3000
Salaries 2400
Subscription of Law Journal
Travelling 240
Office expenses 560
Purchase of stamp paper and court fee 600
stamps 1600 10800
Professional Gain 81600

Problem 6:
Mr. Vijayakumar an advocate furnishes the following receipts and payment for the
previous year 2020-2021.
Receipts and Payments A/C
Particulars Rs Particulars Rs
To Balance b/d 5000 By Rent 7500
To Legal Fees 90000 By Telephone 2000
To Gifts from clients 10000 By Salaries 5000
By Subscription of Law Journal 500
By Travelling 800
By Office expenses 1000
By Purchase of stamp paper and court
fee stamps 1800
By Interest on Loan 870
By Donation to a school 5000
By Income Tax paid 8420
By Municipal Tax 600
By LIC premium 6000
By Wealth Tax 1600
By Balance c/b 63910
10500 10500
0 0
1. Gifts from clients include Rs 3000 received from his father. Compute the professional
income.
Solution
Computation of Professional Gain

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 Particulars Rs Rs

Professional Receipts 9000

Legal fees 0
Gifts from Client (10000-3000) 7000 97000
Less: Professional Expenses
Rent 7500
Telephone 2000
Salaries 5000
Subscription of Law Journal
Travelling 500
Office expenses 800
Purchase of stamp paper and court fee 1000
stamps 1800 18600
Professional Gain 78400
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CAPITAL GAIN (Sec. 45 to 55 A)

Meaning: Any profit or gain arising from transfer/sale of a capital asset is a capital
gain. This gain or profit is shall be charged to tax in the year in which transfer of capital
assets takes place. No capital gain is applicable when an asset is inherited because there is no
'sale', only a transfer. However, if this asset is sold by the person who inherits it, capital gains
tax will be applicable. The Income Tax Act has specifically exempted assets received as gifts
by way of an inheritance or will.
Conditions:
 There must be a capital asset
 The transfer must be of capital asset
 The transfer must have been taken place during the previous year.
 The transfer of such capital asset must give rise to profit or gain
Transfer Sec. 2 (47): It includes a sale, exchange or relinquishment of the asset or
extinguishment if any right or the compulsory acquisition under the law or conversion of the
asset in to stock in trade
The following are not consider as transfer (Sec 49(1))
 Transfer of asset in a scheme of amalgamation
 Transfer of agricultural land before 1/4/1970
 Transfer of debenture or bonds into shares
 Transfer of assets in kind at the time of liquidation
 Transfer of asset by a parent company to the own subsidiary company
 Transfer of asset under the gift or will
 Transfer of capital asset at the time of partition of HUF
Capital Assets Sec. 2(14): property any kind held be assessee whether connected or not with
his business or profession. It includes all kinds of property, movable or immovable, tangible
or intangible. For examples land, building, house property, vehicles, patents, trademarks,
leasehold rights, machinery, jewellery, shares, debentures, units, mutual funds, securities held
by FII as per SEBI etc.

The following are not considered capital assets:

 Stock in trade: Any stocks or consumables or raw material held for the purpose of

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 Business or Profession
 Personal effect: Personal goods such as wearing apparel, car, scooter, TV,
refrigerator, musical instruments, generator, furniture etc held for personal use.
 6½% Gold Bonds, 1977 or 7% Gold Bonds, 1980 or National Defence Gold Bonds,
1980 issued by the Central Government
 Special Bearer Bonds 1991
 Gold Deposit Bond issued under the Gold Deposit Scheme, 1999
 Agricultural land in a rural in India area: definition of rural area (from AY14-15)
 Any area which is within the jurisdiction of a municipality
or Cantonment or board
 having a population of less than 10,000 is considered Rural Area,
 If situated outside the limit of municipality etc distance measured..
 Being more than two kilometres from the local limits of
any municipality, having population more than 10000 but
not exceeding 1,00,000 or
 Being than six kilometres from the local limit of any
municipality, having population more than 1,00,000 but
not exceeding 10,00,000
 Being than Eight kilometres from the local limit of any
municipality, having population more than 10,00,000

TYPES OF CAPITAL ASSET:

1. Financial Asset: It is held for less

than 12 months or 1 year like
Types of Capital Asset Short Term: securities, bonds, shares mutual
For determining the nature of funds
capital assets, the period of holding 2. Other Asset: It is held for less
shall be counted from the date of than 36 months or 3 year like
purchase to the date of sale of Jewellery etc. & Less than 24
capital asset by the assessee. months for immovable properties
like land ,building,
house property
1. Financial Asset: It is held for
Long Term: more than 12 months or 1 year
2. Other Asset: It is held for more
than 36 months or 3 year & more
than 24 months for immovable
properties like land
,building, house property

TYPE OF CAPITAL GAIN:

a) Short term Capital Gain: Any gain arising from transfer of short term
capital asset is known as short-term capital gain eg. Equity funds are
considered short-term when held for 12 months or less.
 Tax on short-term capital gain when securities transaction
tax is not applicable: short-term capital gain is added to your
income tax return and the taxpayer is taxed according to his
income tax slab
 Tax on short-term capital gain if securities transaction tax is

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 applicable: Short-term capital gain is taxable at the rate of 15%
+surcharge and cess
b) Long-term capital Gain: Any gain arising from transfer of long term
capital asset is known as long-term capital gain eg. House property
held for more than 3 years is termed as a long-term capital asset,
 Sale of equity share -10% tax of the gain amount exceeds Rs 1(one)
lakhs
 Except for sale of equity – 20% tax rate
Terms used:
1) Full value consideration/Sales: The consideration received or to be
received by the seller in exchange of his assets, which he has
transferred. Capital gains are chargeable to tax in the year of transfer,
even if no consideration has been received.
2) Cost of acquisition: The value for which the capital asset was acquired by the
seller.
3) Cost of improvement: Expenses incurred to make improvements to
the capital asset by the seller. Eg. Alteration, repairs etc. Note that
improvements made before April 1, 2001 is never taken into
consideration.
4) Selling/realization /expenditure in connection with such transfer:
Eg. Brokerage, commission, cost of stamp paper, registration,
travelling, legal expenses etc incurred for transferring the capital
assets.

SUMMARY
Capital Gains – A Detailed Explanation
Capital Gains refer to the profits or gains earned from the sale or transfer of a capital
asset. These gains are taxable under the Income Tax Act, 1961, in India under the head
"Capital Gains."
1. What is a Capital Asset?
A capital asset includes:
 Movable and immovable property: Such as land, buildings, houses, vehicles, etc.
 Securities: Shares, bonds, debentures, and mutual fund units.
 Intangible assets: Patents, trademarks, goodwill, etc.
Exclusions:
 Stock-in-trade, consumable stores, and raw materials held for business purposes.
 Agricultural land in rural areas (subject to conditions).
 Personal movable assets like clothing, furniture, etc.
2. Types of Capital Gains:
Capital gains are classified into two categories based on the period of holding the asset:
a) Short-Term Capital Gains (STCG):
 Gains arising from the sale of a capital asset held for a short term.
 The definition of a short-term holding period varies for different assets:
o Listed equity shares, units of equity-oriented mutual funds, and listed
securities: Less than or equal to 12 months.
o Immovable property (land, building, house): Less than or equal to 24
months.
o Unlisted shares and other assets: Less than or equal to 36 months.
b) Long-Term Capital Gains (LTCG):
 Gains arising from the sale of a capital asset held for a long term.

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  Long-term holding period varies:
o Listed equity shares, units of equity-oriented mutual funds, and listed
securities: More than 12 months.
o Immovable property: More than 24 months.
o Unlisted shares and other assets: More than 36 months.
3. Computation of Capital Gains:
a) Short-Term Capital Gains (STCG) Calculation:
STCG=Full Value of Consideration−(Cost of Acquisition + Cost of Improvement + Transfer
Expenses)
 Full Value of Consideration: The total amount received or receivable from the
transfer of the capital asset.
 Cost of Acquisition: The original purchase cost of the asset.
 Cost of Improvement: Any capital expenditure incurred to improve the asset.
 Transfer Expenses: Costs incurred during the sale/transfer of the asset (like
brokerage, legal fees).
b) Long-Term Capital Gains (LTCG) Calculation:
LTCG=Full Value of Consideration −
(Indexed Cost of Acquisition + Indexed Cost of Improvement + Transfer Expenses)
 Indexed Cost of Acquisition: This is the purchase price adjusted for inflation using
the Cost Inflation Index (CII) provided by the government.

 Indexed Cost of Improvement: The cost of improvement adjusted for inflation,

calculated in a similar way as the indexed cost of acquisition.
4. Capital Gains Tax Rates:
a) Short-Term Capital Gains Tax (STCG):
 STCG on equity shares and equity-oriented mutual funds (subject to STT):
Taxed at 15% (Section 111A).
 STCG on other assets: Added to your total income and taxed at normal slab rates
applicable to individuals.
b) Long-Term Capital Gains Tax (LTCG):
 LTCG on equity shares and equity-oriented mutual funds (subject to STT):
o Exempt up to Rs1 lakh in a financial year.
o Beyond Rs1 lakh, LTCG is taxed at 10% (without the benefit of indexation).
 LTCG on other assets: Taxed at 20% with the benefit of indexation.
5. Exemptions from Capital Gains Tax:
Certain exemptions are available if you reinvest the capital gains in specific assets. Common
exemptions include:
a) Section 54 (Sale of a Residential House Property):
 Available if long-term capital gains from the sale of a residential property are invested
in purchasing or constructing another residential house in India.
 The new house should be purchased within 1 year before or 2 years after the sale or
constructed within 3 years after the sale.
 Exemption is allowed to the extent of the capital gains reinvested.
b) Section 54F (Sale of Any Capital Asset Other Than a House Property):
 Available if you reinvest the proceeds from the sale of a long-term capital asset (other
than a residential house) into purchasing or constructing a residential house.
 Conditions are similar to Section 54.

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c) Section 54EC (Investment in Bonds):
 Exemption is available if the capital gains (from the sale of a long-term asset) are
invested in bonds issued by National Highways Authority of India (NHAI) or Rural
Electrification Corporation (REC).
 The investment must be made within 6 months of the transfer.
 The maximum limit for exemption is Rs50 lakhs.
Example (Section 54):
If you sell a house for Rs80 lakhs and have a capital gain of Rs30 lakhs, you can claim
exemption under Section 54 by investing Rs30 lakhs in another residential property. If you
invest only Rs20 lakhs, then the exemption will be allowed only on Rs20 lakhs, and the
balance Rs10 lakhs will be taxable.
6. Set-Off and Carry Forward of Capital Losses:
 Short-Term Capital Losses (STCL) can be set off against both short-term and long-
term capital gains.
 Long-Term Capital Losses (LTCL) can only be set off against long-term capital
gains.
 Unadjusted losses can be carried forward for up to 8 assessment years.
Conclusion:
Capital Gains taxation involves calculating gains arising from the sale or transfer of capital
assets and applying appropriate tax rates based on the holding period. Proper use of
exemptions (like Sections 54, 54F, 54EC) can help reduce or eliminate capital gains tax.

CALCULATION OF CAPITAL GAINS

Particulars Rs Rs
Value Consideration/Sale Xx
 Less: Selling Expenses/expenditure in connection with such transfer X
Net sales consideration Xx Xx
 Less: Indexed Cost of Acquisition xx
 Less: Index cost of improvement Xx
Long term capital Gain xx
Less: Exemption U/S 54, 54B, 54D, 54EC, 54F, 54G, 54GA xx
Taxable Long term Capital Gain Xx

CALCULATION OF CAPITAL GAINS FOR DEPRECIABLE ASSETS

Particulars Rs Rs
Value Consideration/Sale Xx
 Less: Selling Expenses/expenditure in connection with such transfer X
Net sales consideration Xx Xx
 Less: Written Down Value as on 01/04/20 xx
 Less: cost of new assets purchased during the year Xx
Taxable Capital Gain Xx

CALCULATION OF CAPITAL GAINS FOR SELF GENERATED ASSETS

Particulars Rs Rs
Value Consideration/Sale Xx
 Less: Selling Expenses/expenditure in connection with such transfer X
Net sales consideration Xx
capital Gain xx
Note: in case self generated assets e.g. goodwill cost of acquisition is nil

14
Cost of acquisition of (a) original, (b) rights and(c) Bonus shares

Particulars Cost of acquisition

1. If (a) original, (b) Right and (a) Original Actual cost or Fair market value
(c) bonus shares are (b) Right Whichever is High (WEH)
acquired before 1/4/2001 (c) Bonus Share –Fair market Value
2. If (a) original, (b) Right and (a) Original Actual cost
(c) bonus shares are (b) Right
acquired after 1/4/2001 (c) Bonus Share –Nil

Indexed cost of acquisition/improvement.

a) Indexed cost of acquisition (ICOA)/ Cost inflation index (CII): Means inflating the
cost of an asset acquired to the present value. i.e. the year in which the asset is
transferred. Indexation benefits are available only long term capital assets. However
the Indexation benefit is not available in case of debentures even though it is
long term asset.

b) Indexed cost of improvement: the year in which the improvement took place and cost
inflation index for the year in which the asset is transferred. For short term capital
asset the actual cost of improvement is allowed as deduction, where in case of long
term capital asset it will be indexed and allowed as deduction

c) Why is cost of acquisition and improvement indexed? Indexation, done by applying

CII (cost inflation index), is made to adjust for inflation over the years. This increases
one's cost base and lowers the capital gains.
Capital Gains exempt from Tax
 Capital gain on transfer of units of US64 ( sec. 10(33)

15
  Capital gain on compulsory acquisition of agricultural land of an Individual or
Hindu undivided family which is not situated in rural area and the land was used for
agricultural purpose by the assessee at least two years immediately preceding
compulsory acquisition (sec. 10(37)

Exemptions from capital gains u/s 54,54B, 54D, 54EC, 54F, 54G and 54GA
S.No. Basis Section 54 Section 54B Section 54D
1.) Allow ability Exemption is Exemption is Exemption is
Allowed provided Allowed provided Allowed provided
the Assessee the Assessee has the Assessee has
has Long Capital Gains on Capital Gains on
Term Capital transfer of Compulsory
Gains on transfer Agricultural Land Acquisition of
of Residential Industrial
House Undertaking.
2.) Allowed To Individual/HUF Individual/HUF All Assessees
3.) Conditions to a.) The Assessee a.) The Assessee a.) The Assessee
be Satisfied Should have Should have Should have
purchased one purchased one or Invested the
Residential in more Agricultural Amount in Land
India house either Land within a and Building for the
one year before or period of two years purpose of
two years after the after the date of Industrial
date of transfer Undertaking within
transfer OR The a period of Three
Assessee should years after the date
Construct one of Payment by
residential house Government.
in India within
three years after
the date of transfer
b.) The Assesee b.) The Assesee or b.) The Assesee
Should either his parentsor HUF should have been
Purchase or should have been using such Land
Construct only using Agricultural and Building for
one House within Land so transferred the purpose
the specified time for a period of ofIndustrial
period. atleast 2 years at the Undetaking for a
time of Sale period of atleast 2
years at the time of
Acquisition.
c.) The House so c.) The Land so c.) The Land and
purchased or purchased should Building so
constructed should not be transferred purchased should
not be transferred for a period of at not be transferred
for a period of at least Three Years for a period of
least Three Years atleast Three Years
4.) Amount of Amount of Amount of Amount of

16
 Exemption Exemption shall Exemption shall be Exemption shall be
be equal to equal to Amount equal to Amount
Amount Invested(Subject to Invested(Subject to
Invested(Subject Capital Gains) Capital Gains)
to Capital Gains)
5.) Capital Gain Applicable Applicable Applicable
Accounts
Scheme,1988
Aplicability*
6.) Consequences If Assessee If Assessee Violates If Assessee Violates
Violates Condition Condition c.) stated Condition c.) stated
c.) stated above above Exemption above Exemption
Exemption earlier earlier allowed shall earlier allowed shall
allowed shall be be withdrawn in be withdrawn in
withdrawn in special manner i.e. special manner i.e.
special manner i.e. While Computing While Computing
While Computing Capital Gains, Cost Capital Gains, Cost
Capital Gains, of Acquistion shall of Acquistion shall
Cost of Acquistion be reduced by the be reduced by the
shall be reduced amount of amount of
by the amount of exemption earlier exemption earlier
exemption earlier taken. taken.
taken.

S. Basis Section 54EC Section 54F Section 54GB Section 54G /

No Section 54GA
.
1.) Allowabili Exemption is Exemption is Exemption is Exemption is
ty Allowed Allowed provided Allowed provided Allowed
provided the the Assessee the Assessee provided the
Assessee has Long has Long Assessee has
has long Term Capital Gains Term Capital Gains Capital Gains
term Capital on transfer of any on transfer of any in connection
Gains on Capital Asset Residential House with shifting
transfer of except Residential or Plot. of Industrial
any long term House Undertaking
Capital from Urban
Asset (being area to any
land or other area.
building or
both wef A.y
2019-20)
2.) Allowed All Assessees Individual/ HUF Individual/ HUF All Assessees
To
3.) Condition a.) The a.) The Assessee a.) The Assessee a.) The
s to be Assessee Should have Should have Assessee
Satisfied Should have purchased one Incorporated a new Should have
Invested the residential house company before Invested the

17
Amount property in India due date of filling Amount in
in Long Term either one year of Return of Land and
Specified before or two years Income & Should Building or
Asset within a after the date of have subscribed to P&M ( Not
period of Six transfer OR The more than 50% of Furniture &
Months from Assessee the Shares of the Fixture for
the date of should Construct Company. the purpose of
transfer. one residential Industrial
However house property in b) This provision is Undertaking
from the India within three not applicable to either one
Assessment years after the date any transfer of year before or
Year 2018-19 of transfer residential property three years
investment in made after the 31st after the date
any bonds day of March, 2017 of transfer
redeemable . however for in
after three vestment in eligible
years shall be start-up the
eligible for transfer can take
exemption. place upto
Wef A.y 31.03.2018
2019-20
investment in
any bonds
redeemable
after
five years
shall be
eligible for
exemption
b.) The
b.) The Assesee c.) The Assesee Exemption
Assesee is
Should either Should Invest the shall also be
not allowed toPurchase or Amount in Plant & allowed for
Convert the Construct only one Machinery within shifting
Security into House within the one Year from the expenses
Cash i.e. The specified time date of Purchase of
Assessee is period. Also, the Shares.
not allowed toAssessee should
take Loan on not have more than
the basis of one house in his
security name at the time of
transfer of original
asset income from
which is charged
under the head
Income from house
property
c.) The Asset c.) The House so d.) The shares and c.) The Asset
so purchased purchased or Plant & Machinery so purchased
should not be constructed should so purchased should not be
transferred not be transferred should not be transferred for

18
 before 3 years for a period of transferred for a a period of
(5 years if the atleast Three Years period of at least atleast three
investment in d) if the assessee Five Years. years.
specified purchases, within
asset is made the period of two
on or after years after the date
01.04.2018 ) of the transfer of
the original asset,
or constructs,
within the period of
three years after
such date, any
residential house,
the income from
which is chargeable
under the head
“Income from
house property”,
other than the new
asset,
4.) Amount Amount of Amount of Amount of Amount of
of Exemption Exemption shall be Exemption shall be Exemption
Exemptio shall be equal equal to Capital equal to Capital shall be equal
n to Amount Gains ÷ Net Gains ÷ Net to Amount
Invested Consideration × A Consideration × A Invested in
(Subject to mount of mount of Land &
Capital Investment Investment Building and
Gains) (Subject to Capital Plant &
Gains) Machinery (N
ot Furniture
&
Fixture) (Sub
ject to Capital
Gains)
5.) Capital Not Applicable Not Applicable. Applicable
Gain Applicable However If
Accounts Assessee fails to
Scheme,1 make investment in
988 P&M within one
Aplicabilit year then amount
y* shall be deposited
into Specified Bank
Account
6.) Conseque If Assessee If Assessee If Assessee If Assessee
nces Violates Violates Condition Violates Condition Violates
Condition c.) c & d stated above d.) stated above Condition c.)
stated above Exemption earlier Exemption earlier stated above
Exemption allowed shall be allowed shall be Exemption
earlier considered to be withdrawn and earlier
allowed shall Long Term Capital shall be deemed to allowed shall

19
 be considered Gain of the Year in be the income of be withdrawn
to be Long which the Asset the assesseein special
Term Capital has been chargeable under manner i.e.
Gain of the transferred. the head “Capital While
Year in which gains” of theComputing
the Asset has previous year in Capital Gains,
been which such equity Cost of
transferred. shares or such new Acquistion
asset are sold or shall be
otherwise reduced by
transferred, the amount of
exemption
earlier taken.
***************************************************************************
INCOME FROM OTHER SOURCES
"Income from Other Sources" is a residual category under the Income Tax Act, 1961 in
India. It includes any income that doesn't fall under the heads of Salary, House Property,
Business or Profession, and Capital Gains. This head covers diverse types of incomes,
ensuring that all forms of income are taxable unless specifically exempted.
Common Types of Income under "Income from Other Sources":
1. Interest Income:
o Interest earned on savings bank accounts, fixed deposits (FDs), recurring
deposits, and other bank deposits.
o Interest earned on debentures, bonds, government securities, etc.
2. Dividend Income:
o Dividends received from domestic companies (up to Rs10 lakhs are exempt
under Section 10(34); excess is taxable under "Income from Other Sources").
o Dividends from foreign companies are fully taxable.
3. Income from Lottery, Gambling, and Betting:
o Winnings from lotteries, crossword puzzles, card games, horse races, betting,
etc.
o Taxed at a flat rate of 30% under Section 115BB (without any deductions).
4. Gifts:
o Gifts received in cash, kind, or property exceeding Rs50,000 in value during a
financial year are taxable, unless received from specified relatives or on
certain occasions like marriage.
o Gifts from non-relatives (other than during specific exemptions) are fully
taxable.
5. Rental Income from Machinery, Plant, or Furniture:
o Rental income from letting out machinery, plant, or furniture where the
property is not used for business or profession.
6. Family Pension:
o Pension received by family members after the death of an employee is taxable
under this head. A deduction of 1/3rd of the pension or Rs15,000 (whichever
is less) is allowed.
7. Income from Sub-letting of Property:
o If a person sub-lets a rented property, the income from such sub-letting is
taxed under this head.
8. Commission, Fees, or Rewards:

20
 o Income received in the form of commissions, rewards, or fees (such as an
insurance commission) is taxable.
9. Interest on Securities:
o Interest received on various types of securities, bonds, and debentures.

Deductions Allowed Under "Income from Other Sources":

Some expenses incurred to earn income under this head are allowed as deductions:
1. Interest on Borrowed Capital:
o If any loan has been taken to acquire an income-producing asset (e.g., interest
on loans taken to purchase fixed deposits), the interest paid can be deducted
from the income.
o This is allowed under Section 57 of the Income Tax Act.
2. Collection Charges:
o Any commission or charges paid for collecting dividends or interest can be
deducted.
o Example: Brokerage paid to collect interest on securities.
3. Depreciation on Assets:
o In case of income from renting out machinery, plant, or furniture, depreciation
can be claimed as a deduction.
4. Family Pension Deduction:
o In the case of family pension, as mentioned earlier, a deduction of 1/3rd of the
pension amount or Rs15,000 (whichever is less) is allowed.
Expenses Not Deductible:
Certain expenses are specifically disallowed under Section 58:
 Personal expenses: Expenses of personal nature are not allowed.
 Interest on Unpaid Taxes: Any interest paid for non-payment or delayed payment of
taxes cannot be deducted.
 Expenses related to lotteries or gambling: No deduction is allowed for expenses
incurred to earn income from lotteries, gambling, or betting.
Taxation of Gifts under Section 56(2)(x):
The taxation of gifts can be complex depending on the circumstances:
1. Monetary Gifts:
o If an individual receives cash gifts exceeding Rs50,000 in aggregate in a
financial year from non-relatives, the entire amount is taxable as "Income
from Other Sources."
2. Gifts of Property (Movable/Immovable):
o If an individual receives immovable property (land or building) without
consideration (gifted) and the stamp duty value exceeds Rs50,000, the stamp
duty value is taxable.
o If the property is received at a price lower than the stamp duty value by more
than Rs50,000, the difference between the price paid and the stamp duty value
is taxable.
o For movable property (like jewelry, shares, etc.), if the fair market value
exceeds Rs50,000, the entire fair market value is taxable.
Exemptions for Gifts:
Gifts received from the following persons/situations are exempt from tax:
 Relatives (includes spouse, siblings, parents, etc.).
 On the occasion of marriage.
 Under a will or inheritance.
 In contemplation of death of the payer.

21
Examples of Income from Other Sources:
1. Interest on Fixed Deposits:
o Interest earned on fixed deposits with a bank of Rs30,000 is considered
"Income from Other Sources."
2. Lottery Winnings:
o Rs1 lakh won in a lottery will be taxed at 30% under "Income from Other
Sources."
3. Gift from a Friend:
o Rs60,000 received as a cash gift from a friend during the year is taxable
because it exceeds Rs50,000.
4. Rent from Plant and Machinery:
o If machinery is let out for Rs1 lakh per year, this income is taxable under
"Income from Other Sources."
Tax Treatment:
The income from other sources is included in your gross total income and is taxable
according to the applicable slab rates for individuals. Certain items like lottery income, horse
race winnings, etc., are taxed at a flat rate of 30% irrespective of your income slab.
Conclusion:
Income from Other Sources is a broad category designed to capture all kinds of
income that don't fit into other specific heads. Proper documentation and understanding of
allowable deductions can help reduce the taxable income under this head. Always ensure to
comply with the provisions to avoid penalties, especially in the case of gifts and winnings.
***************************************************************************
DEDUCTIONS IN THE COMPUTATION OF TOTAL INCOME
Deductions in the computation of total income in India refer to the amounts that can
be subtracted from an individual’s gross total income to arrive at the net taxable income.
These deductions are provided under Chapter VI-A of the Income Tax Act, 1961 and help
reduce the taxable income, thereby lowering the overall tax liability.
Here’s a comprehensive list of the main deductions available under Chapter VI-A:

1. Section 80C – Deductions for Investments

 Limit: Up to Rs1,50,000
 Common eligible investments/expenditures:
o Life Insurance Premiums: Premium paid for life insurance policies (for self,
spouse, children).
o Public Provident Fund (PPF): Contributions made to PPF accounts.
o Employees’ Provident Fund (EPF): Employee’s contribution to the
provident fund.
o National Savings Certificate (NSC).
o 5-year Fixed Deposits (FDs) with banks or post offices.
o Principal repayment of housing loan.
o Sukanya Samriddhi Yojana: Contributions made for a girl child’s account.
o Tuition fees: Paid for children’s education (maximum 2 children).
o Equity-Linked Savings Scheme (ELSS): Investments in specified mutual
funds.
Section 80C is the most commonly used deduction to reduce taxable income, and the total
deduction allowed under this section is Rs1.5 lakh.

2. Section 80CCC – Contributions to Pension Plans

 Limit: Up to Rs1,50,000

22
  Contributions made to certain pension plans (like LIC's pension schemes).
 Note: The total deduction under Sections 80C, 80CCC, and 80CCD(1) combined
cannot exceed Rs1,50,000.

3. Section 80CCD – Contribution to National Pension Scheme (NPS)

 Section 80CCD(1): Deduction for employee’s or self-employed’s contribution to
NPS.
o Limit: Up to 10% of salary (for salaried individuals) or 20% of gross total
income (for self-employed), subject to the overall limit of Rs1,50,000.
 Section 80CCD(1B): Additional deduction for self-contributions to NPS up to
Rs50,000. This is over and above the Rs1.5 lakh limit under Section 80C.
 Section 80CCD(2): Employer’s contribution to NPS is also deductible, subject to a
limit of 10% of salary (basic + DA) with no upper cap.

4. Section 80D – Deduction for Medical Insurance Premium

 Limit:
o Self, spouse, and dependent children: Up to Rs25,000.
o For senior citizens (aged 60 and above): Up to Rs50,000.
o Parents (if senior citizens): An additional deduction of up to Rs50,000.
o If both taxpayer and parents are senior citizens, the total deduction can go
up to Rs1,00,000.
 Preventive health check-up: A sub-limit of Rs5,000 (within the overall limit) for
preventive health check-ups for self, spouse, children, and parents.
Premiums must be paid via non-cash modes like credit card, cheque, etc. (except for
preventive health check-ups).

5. Section 80E – Deduction for Interest on Education Loan

 Deduction on the interest paid on loans taken for higher education (for self, spouse,
or children).
 No upper limit on the amount of deduction, but the deduction is available for 8
consecutive years from the year of starting repayment.

6. Section 80G – Deductions for Donations to Charitable Institutions

 Deductions on donations to specified funds, charitable institutions, NGOs, and relief
funds.
 Categories of deductions:
o 100% deduction without any qualifying limit: Donations to PM National
Relief Fund, PM CARES Fund, etc.
o 50% deduction without any qualifying limit.
o 100% deduction subject to 10% of adjusted gross income.
o 50% deduction subject to 10% of adjusted gross income.
 Donations exceeding Rs2,000 must be made through non-cash modes to qualify for
deduction.

7. Section 80GG – Deduction for Rent Paid

 Available to individuals who do not receive House Rent Allowance (HRA) from
their employer.
 Limit: Least of the following three:
o Rs5,000 per month.
o 25% of total income (excluding capital gains, etc.).

23
 o Rent paid minus 10% of total income.
 The taxpayer should not own residential accommodation in the place of employment.

8. Section 80GGC – Donations to Political Parties

 100% deduction for donations made to political parties or electoral trusts.
 The donation must be made through non-cash modes.

9. Section 80TTA – Interest on Savings Accounts

 Deduction for interest earned on savings bank accounts.
 Limit: Up to Rs10,000.
 Applicable for interest earned from banks, post offices, or co-operative societies.

10. Section 80TTB – Interest Income for Senior Citizens

 For senior citizens (aged 60 or above), interest income on savings accounts, fixed
deposits, and post office schemes.
 Limit: Up to Rs50,000.

11. Section 80U – Deduction for Disabled Individuals

 Deduction for individuals with disabilities.
 Limit:
o Rs75,000 for individuals with disability (40% or more).
o Rs1,25,000 for individuals with severe disability (80% or more).

12. Section 80DDB – Deduction for Medical Treatment of Specified Diseases

 Deduction for medical treatment of specified diseases (like cancer, AIDS,
neurological diseases, etc.) for self or dependent family members.
 Limit:
o Up to Rs40,000 for individuals below 60 years of age.
o Up to Rs1,00,000 for senior citizens (aged 60 and above).

13. Section 80EE – Interest on Home Loan (First-time Buyers)

 Additional deduction for interest on a home loan taken by first-time buyers.
 Limit: Up to Rs50,000.
 Conditions:
o The loan amount should not exceed Rs35 lakh.
o The property value should not exceed Rs50 lakh.
o The loan must be sanctioned by a financial institution during FY 2016-17.

14. Section 80EEA – Interest on Home Loan (Affordable Housing)

 Additional deduction for interest on home loans for affordable housing.
 Limit: Up to Rs1,50,000.
 Conditions:
o The loan should be sanctioned between 1st April 2019 and 31st March 2022.
o The stamp duty value of the property should not exceed Rs45 lakh.

15. Section 80GGA – Donations for Scientific Research or Rural Development

 Deduction for donations made towards scientific research or rural development.
 100% deduction is allowed for such donations.

24
Conclusion:
Deductions under Chapter VI-A play a crucial role in reducing the taxable income and
help in effective tax planning. While Section 80C remains the most popular deduction due to
the variety of eligible investments, other sections like 80D, 80CCD, 80E, and 80G provide
substantial opportunities to reduce tax liability based on medical expenses, education loans,
donations, and more.
***************************************************************************
INCOME TAX AUTHORITIES AND THEIR POWERS
The Government of India has constituted a number of authorities to execute the
Income Tax Act and to control the Income Tax Department efficiently.
The Central Board of Direct Taxes is the supreme body in the direct tax set-up. It has
to perform several statutory functions under the various acts and it is responsible for the
formulation and implementation of different policies relating to direct taxes administration.
The Board consists of a Chairman and six members.
Appointment of Income Tax Authorities in India
The Central Government can appoint those persons which it thinks are fit to become
Income Tax Authorities. The Central Government can authorize the Board or a Director-
General, a Chief Commissioner or a Commissioner or a Director to appoint income tax
authorities below the ranks of a Deputy Commissioner or Assistant Commissioner,
According to the rules and regulations of the Central Government controlling the conditions
of such posts.
Powers of Income Tax Authorities
1) Power relating to Discovery, Production of evidence, etc
2) Power of Search and Seizure
3) Requisition of Books of account, etc
4) Power to Call for Information
5) Power of Survey
6) Collection of Information
1) Power relating to Discovery, Production of evidence, etc: The Assessing Officer, The
Joint Commissioner, the Chief Commissioner or the Commissioner has the powers as are
provided in a court under the code of Civil Procedure, 1908, when trying to suit for the
following matters:
a) Discovery and inspection;
b) To enforce any person for attendance, and examining him on oath
c) Issuing commissions; and
d) Compelling the production of books of account and other document.
2) Power of Search and Seizure: Today it is not hidden from income tax authorities that
people evade tax and keep unaccounted assets. When the prosecution fails to prevent tax
evasion, the department has to take actions like search and seizure.
3) Requisition of Books of account, etc: Where the Director or the Director-General or
Commissioner or the Chief Commissioner in consequence of information in his possession,
has reason to believe that (a), (b), or (c) as mentioned under section 132(1) and the book of
accounts or other documents or the assets have been taken under custody by any authority or
officer under any other law, then the Chief Commissioner or the Director General or Director
or Commissioner can authorize any Joint Director, Deputy Director, Joint Commissioner,
Assistant Commissioner, Assistant Director, or Income tax Officer to require the authority to
provide sue books of account, assets or any documents to the requisitioning officer, when
such officer is of the opinion that it is no longer necessary to retain the same in his custody.
4) Power to Call for Information: The Commissioner the Assessing Officer or the Joint
Commissioner may for the purpose of this Act:

25
 a) Can call any firm to provide him with a return of the addresses and names of partners
of the firm and their shares;
b) Can ask any Hindu Undivided Family to provide him with return of the addresses and
names of members of the family and the manager;
c) Can ask any person who is a trustee, guardian or an agent to deliver him with return of
the names of persons for or of whom he is an agent, trustee or guardian and their
addresses;
d) Can ask any person, dealer, agent or broker concerned in the management of stock or
any commodity exchange to provide a statement of the addresses and names of all the
persons to whom the Exchange or he has paid any sum related with the transfer of
assets or the exchange has received any such sum with the particulars of all such
payments and receipts;
5) Power of Survey: The term 'survey' is not defined by the Income Tax Act. According to
the meaning of dictionary 'survey' means casting of eyes or mind over something, inspection
of something, etc. An Income Tax authority can have a survey for the purpose of this Act.
The objectives of conducting Income Tax surveys are:
 To discover new assessee;
 To collect useful information for the purpose of assessment;
 To verify that the assessee who claims not to maintain any books of accounts is in-
fact maintaining the books;
 To check whether the books are maintained, reflect the correct state of affairs.
6) Collection of Information: For the purpose of collection of information which may be
useful for any purpose, the Income tax authority can enter any building or place within the
limits of the area assigned to such authority, or any place or building occupied by any person
in respect of whom he exercises jurisdiction.
************************************END***********************************

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