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Taxchopal Latest Questions

CA Sanjiv Kumar
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    How to Compute Income Tax on Agricultural Income? Under the Income Tax Act, 1961, agricultural income is exempt from tax as per Section 10(1). However, if a taxpayer earns both agricultural and non-agricultural income, the partial integration method is used to determine the applicable tax rate. WhenRead more

    How to Compute Income Tax on Agricultural Income?

    Under the Income Tax Act, 1961, agricultural income is exempt from tax as per Section 10(1). However, if a taxpayer earns both agricultural and non-agricultural income, the partial integration method is used to determine the applicable tax rate.

    When is Agricultural Income Considered for Tax Computation?

    The partial integration method applies only if:
    ✅ Agricultural income exceeds ₹5,000, AND
    ✅ Non-agricultural income exceeds the basic exemption limit (₹2,50,000 / ₹3,00,000 / ₹5,00,000 depending on age & category).

    Step-by-Step Computation of Tax on Agricultural Income

    Step 1: Compute Total Income

    • Add non-agricultural income (salary, business income, rental income, etc.).
    • Exclude pure agricultural income (income from farming, sale of produce, etc.).

    Step 2: Apply the Partial Integration Method

    Tax is computed in three parts:

    Step Calculation
    A Compute tax on (Non-Agricultural Income + Agricultural Income).
    B Compute tax on (Agricultural Income + Basic Exemption Limit).
    C Final tax payable = A – B

    Step 3: Apply the Applicable Tax Rate & Add Cess

    • Compute tax based on slab rates.
    • Add 4% Health & Education Cess.

    Example Calculation

    Let’s assume a taxpayer has:
    🔹 Non-Agricultural Income = ₹8,00,000
    🔹 Agricultural Income = ₹3,00,000

    Step A: Compute Tax on (₹8,00,000 + ₹3,00,000) = ₹11,00,000

    • As per slab rates, tax = ₹1,32,000

    Step B: Compute Tax on (₹3,00,000 + ₹2,50,000) = ₹5,50,000

    • Tax on ₹5,50,000 = ₹22,500

    Final Tax Calculation:

    ✅ Tax Payable = ₹1,32,000 – ₹22,500 = ₹1,09,500
    ✅ Add 4% Cess = ₹1,13,880

    🔹 Total Tax Payable = ₹1,13,880

    Key Points to Remember

    ✅ Agricultural income alone is tax-free, but it affects the tax rate on other income.
    ✅ Partial integration applies only if agricultural income > ₹5,000.
    ✅ Different exemption limits apply based on the taxpayer’s category (individual, senior citizen, etc.).
    ✅ Agricultural income from tea, rubber, and coffee plantations is partially taxable under Rule 7, 7A, and 7B.

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CA Sanjiv Kumar
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Financial Transactions Covered in Annual Information Return (AIR) The Annual Information Return (AIR), now integrated into the Statement of Financial Transactions (SFT) under the Income Tax Act, requires specified entities (banks, financial institutions, registrars, etc.) to report high-value financRead more

    Financial Transactions Covered in Annual Information Return (AIR)

    The Annual Information Return (AIR), now integrated into the Statement of Financial Transactions (SFT) under the Income Tax Act, requires specified entities (banks, financial institutions, registrars, etc.) to report high-value financial transactions to the Income Tax Department.

    1. Who Needs to File AIR/SFT?

    The following entities must report transactions exceeding the specified limits:
    ✔️ Banks & Post Offices
    ✔️ Mutual Fund Companies
    ✔️ Stock Exchanges & Depositories
    ✔️ Companies Issuing Bonds & Shares
    ✔️ Property Registrars

    2. Key Financial Transactions Reported in AIR/SFT

    Nature of Transaction Threshold for Reporting Reported by
    Cash deposits in savings account ₹10 lakh or more in a financial year Banks/Post Offices
    Cash deposits/withdrawals in current account ₹50 lakh or more in a financial year Banks
    Fixed deposit transactions ₹10 lakh or more in a financial year (excluding renewal) Banks/Post Offices
    Credit card bill payments ₹1 lakh (cash) or ₹10 lakh (other modes) in a financial year Banks
    Purchase of shares, debentures, bonds, or mutual funds ₹10 lakh or more in a financial year Companies & Mutual Fund Houses
    Purchase/sale of immovable property ₹30 lakh or more Sub-registrars
    Buyback of shares by a listed company ₹10 lakh or more Listed Companies
    Foreign currency purchases (Forex transactions) ₹10 lakh or more Authorized Forex Dealers
    Payment for travel, hotel, or jewelry purchases ₹2 lakh or more in cash Businesses
    Sale of motor vehicle (excluding two-wheelers) Any amount Motor Vehicle Dealers

    3. How is AIR/SFT Data Used by the Income Tax Department?

    ✔️ Cross-verification of tax returns to detect undisclosed income.
    ✔️ Matching financial transactions with the taxpayer’s PAN.
    ✔️ Identifying high-value transactions that may require scrutiny.
    ✔️ Ensuring compliance with tax laws and preventing tax evasion.

    4. How to Avoid Tax Scrutiny Due to AIR/SFT Reporting?

    ✅ Ensure that your PAN is linked to all financial transactions.
    ✅ Report all high-value transactions accurately in your ITR.
    ✅ Keep supporting documents (bank statements, property agreements, etc.) for verification.
    ✅ Avoid cash transactions exceeding prescribed limits to prevent scrutiny.

    Final Thought

    AIR/SFT helps the Income Tax Department track large transactions to detect tax evasion. If you have undertaken such transactions, declare them properly in your tax return to avoid any penalties.

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CA Manish Kumar Gupta
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Mandatory Conditions for a Partnership Firm in India A Partnership Firm in India is governed by the Indian Partnership Act, 1932. While registration is not mandatory, certain legal and operational conditions must be met for a valid partnership. 1. Minimum Two Partners (Section 4) A partnership mustRead more

    Mandatory Conditions for a Partnership Firm in India

    A Partnership Firm in India is governed by the Indian Partnership Act, 1932. While registration is not mandatory, certain legal and operational conditions must be met for a valid partnership.

    1. Minimum Two Partners (Section 4)

    • A partnership must have at least two persons to form a firm.
    • The maximum number of partners is:
      • 50 (as per Companies Act, 2013).
      • No limit for professional firms (e.g., chartered accountants, lawyers).

    2. Valid Partnership Agreement (Partnership Deed)

    • A written or oral agreement between partners is necessary.
    • A written Partnership Deed is recommended for clarity and legal proof.
    • Essential contents of a Partnership Deed:
      • Name of the firm and partners
      • Capital contribution
      • Profit-sharing ratio
      • Rights and duties of partners
      • Dispute resolution mechanism

    3. Profit Motive

    • The partnership must be formed for lawful business with the intent to earn profit.
    • Non-profit organizations cannot be partnerships.

    4. Shared Responsibility & Liability (Section 25)

    • Partners have unlimited liability, meaning personal assets can be used to pay business debts.
    • Each partner is jointly and severally liable for the firm’s liabilities.

    5. Mutual Agency (Section 18 & 19)

    • Each partner can act as an agent of the firm and bind other partners.
    • Any act done by a partner in the ordinary course of business is binding on the firm.

    6. Registration (Optional but Recommended) – Section 58

    • While registration of a partnership firm is not mandatory, an unregistered firm:
      ❌ Cannot file legal suits against third parties
      ❌ Cannot claim set-off in court
    • Registration requires filing with the Registrar of Firms in the respective state.

    7. PAN & Bank Account

    • A partnership firm must obtain a PAN (Permanent Account Number) from the Income Tax Department.
    • A separate bank account in the firm’s name is required for transactions.

    8. Taxation & Compliance

    • A partnership firm must file Income Tax Returns (ITR-5) annually.
    • GST registration is required if turnover exceeds ₹40 lakh (₹20 lakh for services).
    • TAN (Tax Deduction & Collection Account Number) is needed if TDS is applicable.

    Final Answer

    For a valid Partnership Firm in India, these conditions must be met:
    ✅ Minimum two partners
    ✅ Partnership Deed defining terms
    ✅ Profit-sharing agreement
    ✅ Unlimited liability & mutual agency
    ✅ Optional but recommended registration
    ✅ Compliance with tax laws (PAN, ITR, GST, TAN, etc.)

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CA Sanjiv Kumar
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Basic Documents ✅ PAN Card of the Partnership Firm – The firm must have a separate PAN card issued by the Income Tax Department. ✅ Partnership Deed – A notarized or registered partnership deed is required, mentioning the firm’s name, partners, and profit-sharing ratio. ✅ PAN Cards of All Partners –Read more

    1. Basic Documents

    ✅ PAN Card of the Partnership Firm – The firm must have a separate PAN card issued by the Income Tax Department.
    ✅ Partnership Deed – A notarized or registered partnership deed is required, mentioning the firm’s name, partners, and profit-sharing ratio.
    ✅ PAN Cards of All Partners – Each partner must submit a copy of their PAN card.

    1. Identity & Address Proof of Partners

    Each partner must provide:
    ✅ Aadhaar Card (Mandatory)
    ✅ Passport / Voter ID / Driving License (Any one as additional proof)
    ✅ Latest Passport-Size Photograph

    1. Business Address Proof (Any one of the following)

    ✅ Electricity Bill / Water Bill / Property Tax Receipt (Not older than 2 months)
    ✅ Rent Agreement (If Rented Property) – An agreement between the firm and the property owner.
    ✅ NOC from Property Owner – A No Objection Certificate (NOC) from the property owner (if rented/leased).

    1. Bank Account Proof

    ✅ Cancelled Cheque or Bank Statement – A firm’s bank account statement or a cancelled cheque displaying the firm’s name, account number, and IFSC code.

    1. Authorized Signatory Documents

    ✅ Authorization Letter – If a specific partner is appointed as the authorized signatory, an authorization letter is required.

    1. Digital Signature Certificate (For LLPs & Large Firms)

    ✅ DSC (Digital Signature Certificate) – If the firm is an LLP (Limited Liability Partnership), a DSC of the authorized partner is required for GST filing.

    Key Points to Remember:

    📌 All documents should be clear and self-attested.
    📌 Ensure the mobile number & email ID are active for OTP verification.
    📌 Keep soft copies of the documents ready for online submission

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CA Vishnu Ram
Enlightened
Asked: In:

  1. Ramesh Sharma Enlightened

    In case of receipt of past salary, salary in advance or receipt of family pension in arrears, tax relief under section 89(1) is allowed. Here’s how you can calculate the tax relief as per below steps – Step 1: First calculate the tax payable on the total income, including additional salary – in theRead more

    In case of receipt of past salary, salary in advance or receipt of family pension in arrears, tax relief under section 89(1) is allowed.

    Here’s how you can calculate the tax relief as per below steps –

    Step 1:
    First calculate the tax payable on the total income, including additional salary – in the year it is received.

    Step 2:
    Now calculate tax payable on the total income, excluding additional salary in the year it is received.  You need to subtract the arrear received from the employer from the total salary received

    Step 3:
    Calculate the difference between Step 1 and Step 2.
    This will give you the additional tax liability arrived due to arrears of income.

    Step 4:
    Now calculate the tax payable on the total income of that year to which the arrears relate, excluding arrears.

    Step 5:
    Calculate tax payable on the total income of that year to which the arrears relate, including arrears

    Step 6:
    Calculate the difference between Step 4 and Step 5.
    This will calculate the actual tax liability in any past year pertaining to which arrears have been received in the current year, had the full arrears received in the same past year.

    Step 7:
    Excess of the amount at Step 3 over Step 6 is the tax relief that shall be allowed. ( Step 3 minus Step 6). If the amount in Step 6 is more than the amount in Step 3, no relief shall be allowed.

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CA Vishnu Ram
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Leasing of trucks falls under the scope of "business", as defined in Section 2(13) and 2(28C):"Business includes trade, commerce or manufacture or any adventure in the nature of trade..." So, income from truck leasing is taxable under the head 'Profits and Gains of Business or Profession' [Section 2Read more

    Leasing of trucks falls under the scope of “business”, as defined in Section 2(13) and 2(28C):”Business includes trade, commerce or manufacture or any adventure in the nature of trade…”

    So, income from truck leasing is taxable under the head ‘Profits and Gains of Business or Profession’ [Section 28].

    Two Methods of Computation:

    1️⃣ Presumptive Taxation – Section 44AE (for small transporters)

    Applicable only if the person owns ≤ 10 goods vehicles (including leased ones).

    📘 Bare Act (Section 44AE):

    “The income shall be deemed to be ₹1,000 per ton of gross vehicle weight (GVW) for heavy goods vehicles and ₹7,500 per month per vehicle for other goods vehicles.”

    💡 Key Points:

    • Applies to persons owning goods carriages, even if leased out

    • Applicable only for goods vehicles, not passenger vehicles

    • Income is presumed, no need to maintain books (Sec 44AA not required)

    • Heavy goods vehicle = GVW > 12,000 kg

    • No further deduction allowed (like depreciation, etc.)

    ✅ Example:

    Mr. A owns 5 trucks (each <12,000 kg) and leases them.

    → Presumptive income = ₹7,500 × 5 trucks × 12 months = ₹4,50,000

    This ₹4.5 lakh will be taxable under “Business Income” without further deductions.

    2️⃣ Normal Taxation (Section 28 & 32) – If not opting 44AE or owning > 10 vehicles

    If the assessee:

    • Owns more than 10 trucks, or

    • Chooses not to opt for Section 44AE,
      Then normal business provisions apply.

    🔹 Income = Gross Receipts – Allowable Expenses

    Allowable expenses include:

    • Truck maintenance & fuel

    • Driver wages, RTO fees, etc.

    • Depreciation under Section 32 (usually 30% for trucks on WDV basis)

    • Interest on loans for trucks

    • Insurance and road tax

    📒 Books of accounts must be maintained as per Section 44AA
    🔍 Accounts may be audited if turnover exceeds limits in Section 44AB

    Which is Better?

    Criteria Section 44AE Normal Provision
    Simplicity Very easy Complex
    Records No books needed Mandatory
    No. of trucks ≤ 10 > 10
    Actual Expenses Not considered Fully allowed
    Depreciation Not allowed separately Allowed u/s 32
    Turnover-based Audit Not applicable Required if turnover crosses limits
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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    nder the Income Tax Act, 1961, a “capital asset” is broadly defined in Section 2(14). It includes property of any kind held by an assessee, whether or not connected with their business or profession. However, this definition comes with several exclusions. Key Exclusion: Stock-in-Trade Stock-in-TradeRead more

    nder the Income Tax Act, 1961, a “capital asset” is broadly defined in Section 2(14). It includes property of any kind held by an assessee, whether or not connected with their business or profession. However, this definition comes with several exclusions.

    Key Exclusion: Stock-in-Trade

    • Stock-in-Trade Is Not a Capital Asset:
      Items held for the purpose of sale in the ordinary course of business—such as inventory, raw materials, or finished goods—are classified as stock-in-trade and do not fall under the definition of capital assets.

    • Why This Matters:
      Capital gains on the sale of capital assets are taxed differently from business income. Since stock-in-trade is part of normal business inventory, any profit from its sale is treated as business income, not as capital gains.

    In Summary

    • Capital Asset:
      Defined under Section 2(14) of the Income Tax Act and includes property held for investment or personal use.
    • Exclusion:
      Stock-in-trade is excluded from the definition of capital assets because it is part of the inventory used in the normal course of business.

    This distinction is crucial for determining the applicable tax treatment on the sale of assets. For capital assets, capital gains tax rules apply, while profits from stock-in-trade are taxed as business income.

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