Income Tax Act – India

Important Sections of the Income Tax Act, 1961

The Income Tax Act, 1961 (India) contains several important sections that taxpayers, businesses, and professionals must be aware of. Below are some of the key sections categorised by their relevance:

1. Basic Provisions

• Sec 2 – Definitions (Assessee, Person, Income, etc.)
• Sec 4 – Charge of Income Tax
• Sec 5 – Scope of Total Income (Residential Status)
• Sec 6 – Determination of Residential Status (ROR/NRI/RNOR)

2. Heads of Income

(A) Income from Salaries (Section 15-17)

• Sec 15 – Chargeability of Salary Income
• Sec 16 – Deductions from Salary (Standard Deduction, Entertainment Allowance, Professional Tax)
• Sec 17(1) – Definition of Salary (Includes Wages, Annuity, Pension, Gratuity, etc.)
• Sec 17(2) – Perquisites (Company Car, Rent-Free Accommodation, Stock Options, etc.)
• Sec 17(3) – Profits in Lieu of Salary (Bonus, Commission, Retrenchment Compensation)

Related Exemptions:

• Sec 10(10) – Gratuity (Tax-Free up to ₹20 Lakh)
• Sec 10(10A) – Pension Commutation
• Sec 10(10AA) – Leave Encashment
• Sec 10(13A) – HRA Exemption
• Sec 10(14) – Special Allowances (Transport, Children’s Education, etc.)

(B) Income from House Property (Section 22-27)

• Sec 22 – Chargeability of Income from House Property
• Sec 23 – Annual Value Calculation (Rental Income/Municipal Value)
• Sec 24 – Deductions:
  • 24(a) – Standard Deduction (30% of Annual Value)
  • 24(b) – Interest on Home Loan (₹2 Lakh max for self-occupied property)
• Sec 25 – Exception for Property Owned by Co-Owners
• Sec 26 – Property Owned by Multiple Persons
• Sec 27 – Deemed Ownership (e.g., Transfer to Spouse/Minor Child)

Related Exemptions:

• Sec 10(32) – Clubbing Income of Minor Child (₹1,500 per child exempt)

(C) Profits from Business/Profession (Section 28-44D)

• Sec 28 – Chargeability of Business Income (Includes Profits, Export Incentives, etc.)
• Sec 30-37 – Deductions Allowed:
  • Sec 30 – Rent, Repairs of Business Premises
  • Sec 31 – Repairs of Machinery
  • Sec 32 – Depreciation on Assets
  • Sec 35 – Scientific Research Expenditure
  • Sec 35AD – Deduction for Specified Businesses (e.g., Cold Chain, Hospitals)
  • Sec 36 – Other Deductions (Insurance, Bad Debts, Employee Welfare)
  • Sec 37(1) – General Deduction for Business Expenses
• Sec 40 – Disallowances (e.g., Personal Expenses, Cash Payments >₹10K)
• Sec 40A(3) – Cash Payment Restrictions
• Sec 43B – Deduction Only on Actual Payment (e.g., Bonus, PF, ESI)
• Sec 44AA – Maintenance of Books of Accounts
• Sec 44AD – Presumptive Taxation (6-8% of Turnover for Small Businesses)
• Sec 44ADA – Presumptive Taxation for Professionals (50% of Gross Receipts)

(D) Capital Gains (Section 45-55)

• Sec 45 – Chargeability of Capital Gains
• Sec 46 – Capital Gains on Distribution of Assets by Companies
• Sec 47 – Transactions Not Treated as Transfer (e.g., Gifts to Relatives)
• Sec 48 – Computation of Capital Gains (Indexation Benefit for LTCG)
• Sec 49 – Cost of Acquisition for Inherited Assets
• Sec 50 – Special Cases (Depreciable Assets, Slump Sale)
• Sec 50C – Stamp Duty Value as Sale Consideration (Immovable Property)
• Sec 54 – Exemption on Reinvestment in Residential House (LTCG)
• Sec 54EC – Exemption on Bonds (NHAI/REC)
• Sec 54F – Exemption if Sale Proceeds Invested in Residential House
• Sec 55 – Cost of Acquisition for Certain Assets

Tax Rates:

• Sec 112 – LTCG Tax (10% >₹1 Lakh for Equity, 20% for Other Assets)
• Sec 111A – STCG on Equity (15%)

(E) Income from Other Sources (Sec 56-59)

• Sec 56(2)(i) – Income from Dividends (Taxable)
• Sec 56(2)(x) – Tax on Gifts (₹50K+ from Non-Relatives)
• Sec 57 – Deductions Allowed (e.g., Collection Charges, Interest Expense)
• Sec 58 – Disallowances (e.g., Personal Expenses)
• Sec 59 – Deemed Income (e.g., Unexplained Cash Credits)

Related Provisions:

• Sec 10(34) – Dividend Income (Exempt up to ₹10 Lakh, then taxable)
• Sec 194K – TDS on Mutual Fund Dividends

3. Deductions (Chapter VI-A)

• Sec 80C – ₹1.5 Lakh (PPF, ELSS, LIC, etc.)
• Sec 80D – Health Insurance (₹25K-₹75K)
• Sec 80G – Donations (50%/100% Deduction)
• Sec 80TTA/80TTB – Interest Income (Savings A/c & Senior Citizens)
• Sec 80CCD(1B) – Additional NPS Deduction (₹50K)

4. TDS/TCS Provisions

• Sec 192 – TDS on Salary
• Sec 194A – TDS on Interest (Banks, FD)
• Sec 194C – TDS on Contractor Payments
• Sec 194H – TDS on Commission/Brokerage
• Sec 194I – TDS on Rent
• Sec 194N – TDS on Cash Withdrawal (≥₹20 Lakh)
• Sec 206C(1H) – TCS on Sale of Goods (≥₹50 Lakh)

5. Tax Rates & Rebates

• Sec 115BAC – New Tax Regime (2023-24 Slabs)
• Sec 87A – Rebate (Up to ₹7 Lakh Taxable Income)
• Sec 112 – LTCG Tax (10% > ₹1 Lakh)

6. Return Filing & Assessment

• Sec 139 – Return of Income
• Sec 140 – Verification of return
• Sec 143(1)– Intimation
• Sec 143(3) – Scrutiny assessment
• Sec 147-153 – Reassessment and time limits

7. Penalties & Compliance

• Sec 234A – Late Filing Interest
• Sec 234B/C – Advance Tax Default Interest
• Sec 271(1)(c) – Concealment Penalty (100-300% of Tax)
• Sec 270A – Underreporting Penalty (50%/200%)
• Sec 271AAD – Penalty for false entries
• Sec 276C – Prosecution for tax evasion

8. Special Cases

• Sec 44ADA – Presumptive Tax for Professionals (50% of Income)
• Sec 80-IAC – Startup Tax Holiday (3 Years)
• Sec 115BBE – 60% Tax on Unexplained Income

9. Assessments & Appeals

• Sec 143(1) – Intimation (Preliminary Assessment)
• Sec 143(3) – Scrutiny Assessment
• Sec 147 – Reopening of Assessment
• Sec 263 – Revision by CIT

Recent Updates (2023-24)

• Sec 194BA – TDS on Online Gaming Winnings
• Sec 269SU – Mandatory Digital Payment Acceptance