Podcast
Questions and Answers
What should be done with short-term capital gains (STCG) that have been credited to the profit and loss statement when computing business income?
What should be done with short-term capital gains (STCG) that have been credited to the profit and loss statement when computing business income?
How is profit from the sale of a plot of land to a 100% subsidiary classified for taxation purposes?
How is profit from the sale of a plot of land to a 100% subsidiary classified for taxation purposes?
What is the maximum amount that can be paid to Mr. Raj on his retirement without disallowance under section 40A(3)?
What is the maximum amount that can be paid to Mr. Raj on his retirement without disallowance under section 40A(3)?
How should dividend income from a domestic company be handled when it's credited to the profit and loss statement?
How should dividend income from a domestic company be handled when it's credited to the profit and loss statement?
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Which expense is considered allowable as revenue expenditure when inaugurating a new branch?
Which expense is considered allowable as revenue expenditure when inaugurating a new branch?
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What type of deduction is allowable for contributions to the National Fund for Rural Development?
What type of deduction is allowable for contributions to the National Fund for Rural Development?
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What type of penalty is paid to the government if it is for non-fulfilment of a contract?
What type of penalty is paid to the government if it is for non-fulfilment of a contract?
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When computing business income, what should be done with the long-term capital gain on the sale of shares?
When computing business income, what should be done with the long-term capital gain on the sale of shares?
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How much of the Voluntary Retirement Scheme expenditure is allowable in one year?
How much of the Voluntary Retirement Scheme expenditure is allowable in one year?
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What is required if the entire amount of Voluntary Retirement Scheme expenditure is debited to profit and loss?
What is required if the entire amount of Voluntary Retirement Scheme expenditure is debited to profit and loss?
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What determines whether expenses related to the inauguration of a new branch require adjustment?
What determines whether expenses related to the inauguration of a new branch require adjustment?
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Which of the following would be incorrectly considered an allowable expense?
Which of the following would be incorrectly considered an allowable expense?
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In what situation is the amount paid for a voluntary retirement scheme added back in entirety?
In what situation is the amount paid for a voluntary retirement scheme added back in entirety?
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Who is permitted to subscribe to the NSC VIII issue?
Who is permitted to subscribe to the NSC VIII issue?
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What is the tax rate applied to long-term capital gains (LTCG)?
What is the tax rate applied to long-term capital gains (LTCG)?
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What is the tax liability after adding health and education cess?
What is the tax liability after adding health and education cess?
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What is the total amount of tax deducted at source (TDS)?
What is the total amount of tax deducted at source (TDS)?
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What is the total amount refundable to Mr. Ashish?
What is the total amount refundable to Mr. Ashish?
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What is the effective tax rate on short-term capital gains (STCG)?
What is the effective tax rate on short-term capital gains (STCG)?
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What is the taxable interest on government securities based on a $100,000 investment?
What is the taxable interest on government securities based on a $100,000 investment?
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What basic exemption limit is mentioned for interest on deposits held with private limited companies?
What basic exemption limit is mentioned for interest on deposits held with private limited companies?
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What is the amount of long-term capital gains arising on the transfer of specified foreign exchange asset?
What is the amount of long-term capital gains arising on the transfer of specified foreign exchange asset?
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How much expenditure was incurred in connection with the transfer of the specified foreign exchange asset?
How much expenditure was incurred in connection with the transfer of the specified foreign exchange asset?
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What was the total interest earned from deposits held with private limited companies?
What was the total interest earned from deposits held with private limited companies?
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What is the amount of income from short-term capital gains under section 111A?
What is the amount of income from short-term capital gains under section 111A?
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What investment was made in notified savings certificates of Central Government?
What investment was made in notified savings certificates of Central Government?
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What is the tax deducted at source for the financial year ended 31-3-2021?
What is the tax deducted at source for the financial year ended 31-3-2021?
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What percent of tax is ABC.com required to deduct on the gross amount of sale of goods as per section 194-O?
What percent of tax is ABC.com required to deduct on the gross amount of sale of goods as per section 194-O?
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When is the e-commerce operator required to deduct tax for sales facilitated by its platform?
When is the e-commerce operator required to deduct tax for sales facilitated by its platform?
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What percentage of tax did the Assessing Officer initially levy on the income of the assessee?
What percentage of tax did the Assessing Officer initially levy on the income of the assessee?
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Which type of capital gains did the assessee mistakenly offer for taxation?
Which type of capital gains did the assessee mistakenly offer for taxation?
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Under which section did the assessee file a revision petition after the rectification order?
Under which section did the assessee file a revision petition after the rectification order?
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What was the outcome of the revision petition filed under section 264?
What was the outcome of the revision petition filed under section 264?
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What was the reason cited by the CIT for rejecting the revision petition?
What was the reason cited by the CIT for rejecting the revision petition?
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What percentage of expenditure did the Assessing Officer disallow due to non-deduction of tax at source?
What percentage of expenditure did the Assessing Officer disallow due to non-deduction of tax at source?
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What condition was noted regarding the tax deduction at source in the transportation business?
What condition was noted regarding the tax deduction at source in the transportation business?
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For what purpose did M/s. Karishma Transport Services engage other transporters?
For what purpose did M/s. Karishma Transport Services engage other transporters?
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Study Notes
Tax Deductions and Allowances
- Disallowance under section 40A(3) does not apply to retirement payments below `50,000 made to Mr. Raj, as per Rule 6DD.
- Expenses for inaugurating a new business branch are allowable as revenue expenditure, no further adjustments needed since already recorded in profit and loss statement.
- Penalty of `20,000 paid for contract non-fulfillment is allowable since it pertains to contractual obligations, already accounted for in profit and loss.
- Expenditure on voluntary retirement schemes is deductible at 1/5th over five years under section 35DDA, requiring adjustment of 4/5th of the total expenditure back to profits.
Business Income Adjustments
- Deduct profit of `6,00,000 from sale of land to a 100% subsidiary while computing business income, as it falls under capital gains.
- Dividend income from domestic companies, amounting to `50,000, is taxed under "Income from other sources" and should be deducted from business income.
- Contribution of `1,20,000 to the National Fund for Rural Development is deductible under section 35CCA, even for assessees opting for section 115BAB.
Capital Gains Overview
- Long-term capital gains of
8,50,000 from transferring foreign exchange assets, subject to allowable expenses of30,000 connected to the transfer. - Interest earnings total
2,93,000 from private companies and1,00,000 from government securities, indicating diversified investment income. - Short-term capital gains (STCG) of `2,00,000 taxed at 15%, highlighting the different tax treatments for capital gains based on duration.
Tax Computation Insights
- Long-term capital gains taxed at 10%, resulting in a tax liability of `82,000.
- Health and education cess of 4% adds
5,280 to the total tax liability of1,37,280. - Tax deducted at source (TDS) of
1,55,000 allows for a refund of17,720, emphasizing the importance of TDS in cash flow management.
Legal and Compliance Considerations
- Section 194-O mandates e-commerce operators to deduct 0.75% tax on sales facilitated to resident individuals, with timing based on payment or credit.
- Mr. Ashish, a non-resident, is not eligible for investing in notified savings certificates, which reflects foreign investment regulations.
- The rejection of a revision petition under section 264 by the Commissioner of Income Tax signifies limits on revisionary jurisdiction, especially concerning returns filed.
Contractual and Compliance Issues
- M/s. Karishma Transport Services, without own vehicles, is disallowed 30% of expenses for non-deduction of tax at source while compensating transport operators, underscoring compliance requirements in contractual agreements.
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Description
This quiz covers essential concepts related to tax deductions and allowances, particularly in the context of business income. It focuses on specific sections relevant to retirement payments, revenue expenditures, and capital gains. Test your knowledge on these crucial aspects of tax regulations and their implications for business accounting.
