Post on 04-Jan-2016
1
Chapter XII
Ascertainment of Taxable Income
• Taxable Income: Assessable Income – Entitled Aggregated Allowances
• Entitled Aggregate Allowances
1. Resident Individual/Charitable Institution
• Statutory Allowance (Rs. 300,000/-)
• Allowance for Qualifying Payments
2. For Others:
• Allowance for Qualifying Payments
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Chapter XII
Ascertainment of Taxable Income
• Order of Priority for Deductions
• Statutory Allowance
• QPs not eligible to be CFd
• QPs eligible to be CFd
• Qualifying Payment Allowance
• Payment enumerated in Section 31(2) of the Act. Reduces the tax payable
• Are two groups of QPs
(Applicable to Individuals & to Companies)
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Chapter XII
Ascertainment of Taxable Income
• Qualifying Payments
12.08 Approved Charity & Specified Institutions
12.09 Donation to Government or Specified Funds
12.10 Expenditure on Projects in a Development Plan of the Government
12.11 Provident Fund Contributions
12.12 Insurance Premium
12.13 Cost of Film Production
12.15 Construction/ Purchase of a House
12.16 Shares in Venture Capital Companies
12.17 Expenditure on Housing (Repayment of Loan – Capital Portion)
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Chapter XII
Ascertainment of Taxable Income
• Limitations of QP – Individuals
Description Ability to CF
1
1/3 of AI or Rs. 25,000/- which ever is lower
No
- Cash donations to specified institutions
2Up to Rs. 25,000/- Yes
- Expenses on Govt approved project
3
1/3 of AI or Rs. 25,000/- which ever is lower
No
Insurance Premium (Life/ Medical)
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Chapter XII
Ascertainment of Taxable Income
• Limitations of QP – Individuals (Contd…)
4
1/3 of AI or Rs. 25,000/- which ever is lower
No
EPF Contribution
5
1/3 of AI or Rs. 25,000/- which ever is lower
No
Money donation to approved charity
3, 4 & 5 in aggregate cannot exceed Rs. 75,000/- or 1/3 of AI
6
• Limitations of QP – Individuals (Contd…)
6
1/3 of AI or Rs. 100,000/- which ever is lower
No
Repayment of (capital portion) of an approved housing loan
71/3 of AI No
Investment in Venture Capital Companies
8Up to Rs. 10 Million Yes (2 Years)
Cost of Film Production
9
100% Yes
Donation to the Government (If non monitory it is limited to Rs. 2 million – excess not allowed)
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Chapter XII
Ascertainment of Taxable Income
• Limitations of QP – Companies
Description Ability to CF
1/5 of AI
1- Cash donation to approved charity
No
2- Cash donation to Specified Institution
No
3- Exp on government development project
Yes
4- Investment in Venture Capital Companies
No
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Chapter XII
Ascertainment of Taxable Income
• Limitations of QP – Companies
5Up to Rs. 10 Million Yes (for 2
Years)- Cost of film production
6
100% Yes
Donation to Govt.
(If non monitory it is limited to Rs. 2 million – excess not allowed)
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Chapter
Computation of Income Tax
• Tax Rates for Individuals (Pg. 370)
• First 240,000/- - 10%
• Next 240,000/- - 20%
• Balance - 30%
• Tax Rates for Companies (Pg. 372)
• Tax Payable/ Balance Tax Payable
• Taxable Income * Rate = Gross Tax
• Less - Tax Credits
Balance Tax Payable
(Tax Credits: PAYE & WHT)