PROVISION ILLUSTRATED UNDER INCOME TAX – Sailesh Bhandari & Associates

There are many provisions illustrated under income tax, but some of the most common ones include:

Deductions under income tax act: There are a number of deductions that taxpayers can claim against their income, such as medical expenses, home loan interest, and donations to charity.
Exemptionsunder income tax act: Certain types of income are exempt from tax, such as income from life insurance policies and pensions.
Set-offsunder income tax act: Taxpayers can use losses from one year to offset income in another year.
Advance taxunder income tax act: Taxpayers with a high income are required to pay advance tax during the year. This helps to ensure that they do not have a large tax bill to pay at the end of the year.
Tax slabsunder income tax act: Income is taxed at different rates depending on the taxpayer’s income level. For example, the highest income earners pay a tax rate of 30%.

These are just a few of the many provisions illustrated under income tax. The specific provisions that apply to a taxpayer will depend on their individual circumstances.

EXAMPLES

A taxpayer who incurs medical expenses of Rs.50, 000 in a year can claim a deduction of Rs.50, 000 against their incomeunder income tax act.
A taxpayer who receives a pension from the government is exempt from tax on that incomeunder income tax act.
A taxpayer who has a loss from their business in one year can carry forward that loss to offset their income in future years.under income tax act
A taxpayer who is required to pay advance tax of Rs.10,000 in a year can pay that amount in four equal installments of Rs.2,500 eachunder income tax act.
A taxpayer who earns an income of Rs.10 lakhs in a year will pay a tax of Rs.3 lakhs under income tax act
PROVISION ILLUSTRATED UNDER INCOME TAX
under income tax act: Section 80-IC: This provision allows a deduction of up to 100% of the profits and gains of an undertaking located in a special category state, such as Himachal Pradesh, Uttarakhand, Sikkim, Jammu and Kashmir, and North Eastern states.
Section 80-IEunder income tax act: This provision allows a deduction of up to 100% of the profits and gains of an undertaking located in a notified area in a North Eastern state, such as Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura.
Section 80JJAunder income tax act: This provision allows a deduction of up to Rs.100, 000 for the profits and gains of a business of collecting and processing bio-degradable waste.
Section 80JJAAunder income tax act: This provision allows a deduction of up to Rs.1.5 lakh for the profits and gains of a business employing new workmen.
Section 80LA under income tax act: This provision allows a deduction of up to Rs.10 lakhs for the profits and gains of an offshore banking unit.

FAQ QUESTIONS

Taxation of agricultural income in Keralaunder income tax act: This FAQ explains the tax provisions for agricultural income in Kerala.
Taxation of non-resident Indians in TamilNadu under income tax act: This FAQ explains the tax provisions for non-resident Indians in TamilNadu.
Taxation of clubs and associations in Tamil Nadu: This FAQ explains the tax provisions for clubs and associations in Tamil Nadu.

CASE LAWS
Section 281of the Income Tax Act, this section deals with the taxation of certain transfers that are considered to be void. Case law has clarified that this section applies to transfers that are made with the intention of avoiding tax liability.

Section 143(2) of the Income Tax Act,: This section allows the Assessing Officer to call for information and documents from the assesses in order to ensure that the assesses has not understated their income. Case law has held that this section is a powerful tool that can be used by the Assessing Officer to investigate potential tax evasion.
Section 68of the Income Tax Act, This section deals with the taxation of income that is derived from undisclosed sources. Case law has held that this section can be used to tax income that is derived from illegal activities, such as drug trafficking and money laundering.
Section 80Cunder income tax act: This section allows taxpayers to claim deductions for certain investments, such as life insurance premiums and investments in Provident Funds. Case law has clarified that the deductions under this section are not available for investments that are made with the intention of avoiding tax liability.

The specific provisions that are illustrated under income tax case laws for a specific state will depend on the laws of that state. For example, the state of Tamil Nadu has a provision that allows taxpayers to claim a deduction for the cost of education of their children. This provision has been illustrated by case law to clarify

UNABSORBED DEPRECIATION

Unabsorbed depreciation is the portion of depreciation that an assesses is unable to claim as an expense in his/her income tax return due to insufficient profits during that year. It can be set off against any other head of income and the remaining balance can be carried forward to subsequent years.

For example, let’s say an assesses has a profit of Rs.100, 000 in a financial year and depreciation of Rs.150, 000. In this case, the assesses can only claim depreciation of Rs.100, 000 as an expense and the remaining Rs.50,000 will be unabsorbed depreciation.

The unabsorbed depreciation can be set off against any other head of income, such as salary, interest income, or capital gainsunder income tax act. If the assesses does not have any other income to set off the unabsorbed depreciation, it can be carried forward to subsequent years.

The unabsorbed depreciation can be carried forward for a maximum of 8 assessment yearsunder income tax act. However, if the assesses sells the asset on which the depreciation was claimed, the unabsorbed depreciation will be deemed to have been utilized in the year of sale.

Here are some of the important points to remember about unabsorbed depreciationunder income tax act:

It is the portion of depreciation that the assesses is unable to claim as an expense in his/her income tax return due to insufficient profits during that year.
It can be set off against any other head of income and the remaining balance can be carried forward to subsequent years.
The unabsorbed depreciation can be carried forward for a maximum of 8 assessment years.

Examples of Unabsorbed Depreciation:

A company in Tamil Nadu incurs depreciation of Rs.10 lakhs in the financial year 2022-23. However, the company’s taxable income is only Rs.5 lakhs. Therefore, the unabsorbed depreciation for the year is Rs.5 lakhs.
A company in West Bengal incurs depreciation of Rs.20 lakhs in the financial year 2023-24. However, the company makes a loss of Rs.10 lakhs for the year. Therefore, the entire amount of depreciation is unabsorbed and can be carried forward to the next financial year.
A company in Karnataka incurs depreciation of Rs.15 lakhs in the financial year 2024-25. The company’s taxable income for the year is Rs.10 lakhs. Therefore, Rs.5 lakhs of depreciation can be set off against the taxable income, and the remaining Rs.10 lakhs will be carried forward to the next financial year.

FAQ QUESTIONS FOR UNABSORBED DEPRECIATION

FAQ QUESTIONS FOR UNABSORBED Can unabsorbed depreciation be set off against any head of incomeunder income tax act?

Yesunder income tax act, unabsorbed depreciation can be set off against any head of income, including salary, interest, capital gains, and long-term capital gains.

Can unabsorbed depreciation be carried forward and set off in future yearsunder income tax act?

Yesunder income tax act, unabsorbed depreciation can be carried forward indefinitely and set off against the profits of future years .There is no limit on the number of years for which unabsorbed depreciation can be carried forward.

What are the specific rules for unabsorbed depreciation in different states of India under income tax act?

The rules for unabsorbed depreciation are the same for all states in India. However, there may be some minor differences in the way that the rules are interpreted and applied by different state tax authorities.

Here are some specific rules for unabsorbed depreciation in some states of India under income tax act:

In Tamil Nadu, unabsorbed depreciation can be carried forward for a period of 8 years.
In Tamil Nadu, unabsorbed depreciation can be carried forward for a period of 6 years.
In Tamil Nadu, unabsorbed depreciation can be carried forward for a period of 5 years.
In Karnataka, unabsorbed depreciation can be carried forward for a period of 4 years.

It is important to consult with a tax advisor to understand the specific rules for unabsorbed depreciation in the state where your business is located.

Here are some additional FAQs about unabsorbed depreciation:

What are the conditions for carrying forward unabsorbed depreciation?

The following conditions must be met in order to carry forward unabsorbed depreciation:

The depreciation must have been allowed under the Income Tax Act of 1961.

The depreciation must have been incurred in the previous yearunder income tax act.

The depreciation must not have been set off against any other income in the previous yearunder income tax act.

The business or profession must have been in existence in the previous yearunder income tax act.

What are the steps involved in carrying forward unabsorbed depreciationunder income tax act?

The following steps are involved in carrying forward unabsorbed depreciationunder income tax act:

1. Calculate the amount of unabsorbed depreciation.

2. Claim the unabsorbed depreciation in the current year’s income tax return.

3. Carry forward the unabsorbed depreciation to the next year’s income tax return.

What are the tax implications of unabsorbed depreciationunder income tax act?

The tax implications of unabsorbed depreciation depend on the following factorsunder income tax act:

* The amount of unabsorbed depreciation.

* The income of the taxpayer in the current year.

* The tax rate applicable to the taxpayer.

Can unabsorbed depreciation be set off against any head of incomeunder income tax act?

Yes, unabsorbed depreciation can be set off against any head of income, including salary, interest, capital gains, and long-term capital gains.

Can unabsorbed depreciation be carried forward and set off in future yearsunder income tax act?

Yes, unabsorbed depreciation can be carried forward indefinitely and set off against the profits of future years .There is no limit on the number of years for which unabsorbed depreciation can be carried forward.

What are the specific rules for unabsorbed depreciation in different states of Indiaunder income tax act?

Here are some specific rules for unabsorbed depreciation in some states of Indiaunder income tax act:

In Tamil Naduunder income tax act, unabsorbed depreciation can be carried forward for a period of 8 years.
In Tamil Naduunder income tax act, unabsorbed depreciation can be carried forward for a period of 6 years.
In Tamil Naduunder income tax act, unabsorbed depreciation can be carried forward for a period of 5 years.
In Karnatakaunder income tax act, unabsorbed depreciation can be carried forward for a period of 4 years.

It is important to consult with a tax advisor to understand the specific rules for unabsorbed depreciation in the state where your business is located.

What are the conditions for carrying forward unabsorbed depreciationunder income tax act?

The following conditions must be met in order to carry forward unabsorbed depreciationunder income tax act:

* The depreciation must have been allowed under the Income Tax Act of 1961.

* The depreciation must have been incurred in the previous year.

* The depreciation must not have been set off against any other income in the previous year.

* The business or profession must have been in existence in the previous year.

What are the steps involved in carrying forward unabsorbed depreciationunder income tax act?