CA Final PAPER 4: DIRECT TAX LAWS & INTERNATIONAL TAXATION Syllabus

PAPER 4: DIRECT TAX LAWS & INTERNATIONAL TAXATION syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for PAPER 4: DIRECT TAX LAWS & INTERNATIONAL TAXATION in CA Final, not a summary of it.

1. 1

   Comprehensive computation of income-tax liability of companies and other entities under the alternative tax regimes under the Income-tax Act, 1961 to optimise tax liability

   3 topics

   • General provisions under the Act for computation of total income and tax liability of companies and other entities
   • Special tax regimes under the Act for companies and other entities
   • Optimisation of tax liability of companies and other entities through tax planning
2. 2

   Special Provisions relating to charitable and religious trust and institutions, political parties and electoral trusts, business trusts, securitisation trusts, investment funds and other funds/trusts

   2 topics

   • Anti-avoidance provisions under the Act
   • Provisions to address tax challenges on digitalisation
3. 3

   Tax Administration and Appellate Mechanism

   8 topics

   • Deduction, Collection and Recovery of Tax
   • Income-tax Authorities
   • Assessment Procedures
   • Appeals and Revision; and Dispute Resolution
   • Provisions to counteract unethical tax practices
   • Taxation of undisclosed income under the Income-tax Act, 1961
   • Taxation of undisclosed foreign income and assets
   • Penalties and offences and prosecution
4. 4

   Miscellaneous Provisions

   1 topic

   • Tax Audit
5. 5

   International Taxation

   2 topics

   • Taxation of cross border transactions and Non-resident taxation under the Income-tax Act, 1961, including
     • Transfer Pricing
     • Non-resident Taxation
     • Double Taxation Relief
     • Advance Ruling
   • Other Aspects of International Taxation, namely,
     • Significant articles of OECD and UN Model Tax Conventions
     • Fundamentals of BEPS
     • Application and Interpretation of Tax Treaties
     • Latest developments in International Taxation

PAPER 4: DIRECT TAX LAWS & INTERNATIONAL TAXATION flashcards for CA Final

20 of 51 cards from the PAPER 4: DIRECT TAX LAWS & INTERNATIONAL TAXATION deck — real questions with worked answers.

1. What is the basic rate of corporate income-tax for a domestic company under section 115BAA (concessional regime)?

   22% (plus surcharge of 10% and cess of 4%), giving an effective rate of about 25.17%. Such companies cannot claim most specified deductions/incentives and are not subject to MAT.

2. Under section 115BAB, what concessional tax rate applies to a new domestic manufacturing company, and by when must manufacturing commence?

   15% (effective ~17.16% with surcharge and cess). The company must be set up and registered on/after 1.10.2019 and commence manufacturing on or before 31.3.2024 (originally; extended timelines noted in later amendments).

3. What is Minimum Alternate Tax (MAT) and its rate under section 115JB?

   MAT is tax computed at 15% (plus surcharge and cess) on the 'book profit' of a company, applicable when normal tax payable is less than 15% of book profit. It does not apply to companies opting for 115BAA/115BAB.

4. How long can MAT credit be carried forward under section 115JAA?

   MAT credit (excess of MAT over normal tax) can be carried forward and set off for up to 15 assessment years.

5. What is the formula for computing 'book profit' for MAT under section 115JB?

   Net profit as per profit & loss account (prepared per Companies Act / Ind AS), as increased by specified additions (e.g., income-tax, provisions for unascertained liabilities, deferred tax) and reduced by specified deductions (e.g., amount withdrawn from reserves, exempt income, brought-forward loss or unabsorbed depreciation whichever is less).

6. What is Alternate Minimum Tax (AMT) and to whom does it apply (section 115JC)?

   AMT is tax at 18.5% on 'adjusted total income' applicable to non-corporate assessees (e.g., LLPs, firms, individuals/HUF/AOP) who claim certain deductions. It does not apply to individuals/HUF/AOP/BOI whose adjusted total income does not exceed Rs. 20 lakh.

7. What is the GAAR (General Anti-Avoidance Rule) and where is it contained in the Income-tax Act?

   GAAR is contained in Chapter X-A (sections 95 to 102). It empowers tax authorities to declare an arrangement an 'impermissible avoidance arrangement' and deny tax benefits where the main purpose is to obtain a tax benefit and it lacks commercial substance.

8. What are the four 'tainted element' tests under GAAR for an impermissible avoidance arrangement (section 96)?

   An arrangement is impermissible if its main purpose is to obtain a tax benefit AND it: (a) creates rights/obligations not at arm's length, (b) results in misuse/abuse of the Act, (c) lacks commercial substance, or (d) is carried out in a manner not normally employed for bona fide purposes.

9. What is the monetary threshold for GAAR to be invoked?

   GAAR provisions apply only where the tax benefit arising to all parties from the arrangement in the relevant year exceeds Rs. 3 crore.

10. What is the Equalisation Levy and at what rates is it charged?

    Equalisation Levy addresses tax challenges of digitalisation. It is charged at 6% on online advertisement services (consideration > Rs. 1 lakh/year) paid to a non-resident. (The 2% levy on e-commerce supply/services was withdrawn w.e.f. 1.8.2024.)

11. What is 'Significant Economic Presence' (SEP) under section 9(1)(i) Explanation 2A?

    SEP creates a business connection in India for a non-resident through: (a) transactions in goods/services/property with any person in India (including digital downloads) above a prescribed monetary threshold, or (b) systematic and continuous soliciting of business or interaction with users in India above a prescribed number, regardless of physical presence or agreement in India.

12. Under section 192, when is TDS deducted on salary and at what rate?

    TDS on salary is deducted by the employer at the time of payment at the average rate of income-tax computed on estimated total salary income for the financial year at the slab rates in force.

13. What is the TDS rate and threshold under section 194C for payments to contractors?

    TDS at 1% (individual/HUF) or 2% (others) on payment to resident contractors. Threshold: Rs. 30,000 per single contract or Rs. 1,00,000 in aggregate during the financial year.

14. What is the TDS rate and threshold under section 194J for professional/technical fees?

    10% on fees for professional services, royalty, non-compete fees; 2% on fees for technical services and on payments to call centres. Threshold: Rs. 30,000 per category per year.

15. What is TCS under section 206C(1H) on sale of goods?

    TCS at 0.1% is collected by a seller (turnover > Rs. 10 crore in preceding year) on sale consideration exceeding Rs. 50 lakh from a buyer in a financial year. (Withdrawn w.e.f. 1.4.2025 with TDS u/s 194Q taking precedence.)

16. What is the TDS rate under section 194Q on purchase of goods, and when does it apply?

    0.1% TDS by a buyer (turnover > Rs. 10 crore in preceding year) on purchase of goods from a resident seller where value/aggregate exceeds Rs. 50 lakh in the financial year (on the amount exceeding Rs. 50 lakh).

17. What is the consequence under section 40(a)(ia) of failure to deduct/pay TDS on payments to residents?

    30% of the expenditure on which TDS was not deducted (or not paid by the due date of filing return) is disallowed. The disallowance is reversed in the year the TDS is subsequently paid.

18. List the principal income-tax authorities under section 116 in descending order.

    CBDT; Principal Chief Commissioners / Chief Commissioners; Principal Director General / Director General; Principal Commissioners / Commissioners; Additional Commissioners / Additional Directors; Joint Commissioners / Joint Directors; Deputy Commissioners / Deputy Directors; Assistant Commissioners / Assistant Directors; Income-tax Officers; Tax Recovery Officers; and Inspectors of Income-tax.

19. What is the time limit for issuing notice under section 143(2) for scrutiny assessment?

    Notice under section 143(2) must be served within 3 months from the end of the financial year in which the return was furnished.

20. What is the time limit for issuing a notice under section 148 (income escaping assessment) in normal cases?

    Notice under section 148 cannot be issued after 3 years from the end of the relevant assessment year, unless the escaped income represented in the form of an asset, expenditure, or entry is Rs. 50 lakh or more, in which case the limit extends to 5 years (post 2024 amendments).

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