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CMA Final Direct Tax Laws and International Taxation Syllabus
The Direct Tax Laws and International Taxation syllabus for CMA Final in full: 3 chapters and 9 topics, every one listed below, plus 49 Direct Tax Laws and International Taxation flashcards with answers.
Direct Tax Laws and International Taxation syllabus: all 3 chapters
Expand any chapter to see its topics and sub-topics.
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Income Tax Act
3 topics- Basic Concepts and Definitions
- Computation of Income
- Tax Planning and Management
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International Taxation
3 topics- Double Taxation Avoidance Agreements
- Transfer Pricing Regulations
- Taxation of E-Commerce
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Tax Administration and Compliance
3 topics- Assessment Procedures
- Penalties and Prosecutions
- Tax Audit
CMA Final Direct Tax Laws and International Taxation flashcards — 49 questions with answers
Under the Income-tax Act, 1961, what is the definition of an 'Assessee' under Section 2(7)?
A person by whom any tax or any other sum (interest/penalty) is payable under the Act, and includes any person against whom proceedings have been taken, a deemed assessee, and a person deemed to be an assessee in default.
What is the 'Previous Year' and 'Assessment Year' as defined in the Income-tax Act?
Previous Year (Sec 3) is the financial year (1 April-31 March) in which income is earned. Assessment Year (Sec 2(9)) is the following financial year in which that income is assessed to tax.
How does Section 6 determine the residential status of an individual (basic conditions)?
An individual is resident if either: (a) in India for 182 days or more in the previous year, OR (b) in India for 60 days or more in the PY and 365 days or more in the 4 preceding years.
What additional conditions make a resident individual 'Ordinarily Resident' versus 'Not Ordinarily Resident'?
A resident is Ordinarily Resident if BOTH: resident in India in at least 2 of the 10 preceding years, AND in India for 730 days or more in the 7 preceding years. Failing either makes him Not Ordinarily Resident.
What is 'Total Income' under Section 2(45) and how does it differ from Gross Total Income?
Gross Total Income is the aggregate of income under the five heads before Chapter VI-A deductions. Total Income (Sec 2(45)) is the GTI as reduced by deductions under Chapter VI-A, on which tax is computed.
What are the five heads of income under Section 14 of the Income-tax Act?
(1) Salaries, (2) Income from House Property, (3) Profits and Gains of Business or Profession, (4) Capital Gains, and (5) Income from Other Sources.
What is the scope of total income for a Resident and Ordinarily Resident under Section 5?
A Resident and Ordinarily Resident is taxed on global income: income received/deemed received in India, income accrued/deemed accrued in India, AND income accruing or arising outside India.
What is the scope of total income for a Non-Resident under Section 5?
A Non-Resident is taxed only on income received or deemed to be received in India, and income that accrues or arises (or is deemed to accrue/arise) in India. Foreign income is not taxable.
How is income from capital gains classified as long-term vs short-term for listed equity shares?
Listed equity shares are long-term capital assets if held for more than 12 months; otherwise short-term. (Immovable property: >24 months; other assets generally >36 months.)
What is the formula for computing income under the head 'House Property'?
Net Annual Value = Gross Annual Value − Municipal Taxes paid. Income from House Property = NAV − Standard Deduction (30% of NAV under Sec 24a) − Interest on borrowed capital (Sec 24b).
How is depreciation computed under Section 32 for business assets?
Depreciation is computed on the Written Down Value (WDV) of the block of assets at prescribed rates. Block WDV = Opening WDV + additions − sale proceeds of assets sold; depreciation = rate × WDV (50% rate if asset used <180 days in year of acquisition).
Under Section 44AB, what turnover/receipt thresholds trigger a compulsory tax audit for business and profession?
Business: turnover exceeds Rs 1 crore (raised to Rs 10 crore if cash receipts and payments are each ≤5%). Profession: gross receipts exceed Rs 50 lakh.
What is the formula to compute capital gains under Section 48?
Capital Gain = Full Value of Consideration − (Cost of Acquisition + Cost of Improvement + Expenditure on transfer). For long-term assets, indexed cost using the Cost Inflation Index is used (where indexation is available).
What is the difference between tax planning, tax avoidance and tax evasion?
Tax planning is arranging affairs within the law to minimize tax using available reliefs (legitimate). Tax avoidance bends the law's letter against its spirit (often challenged via GAAR). Tax evasion is illegal concealment/misrepresentation to escape tax (punishable).
What is GAAR and when can it be invoked?
General Anti-Avoidance Rules (Chapter X-A, Sec 95-102) empower tax authorities to declare an arrangement an 'impermissible avoidance arrangement' if its main purpose is to obtain a tax benefit and it lacks commercial substance, allowing the benefit to be denied/recharacterized.
What is the deduction available under Section 80C and its maximum limit?
Section 80C allows deduction for specified investments/payments (LIC premium, PPF, ELSS, repayment of housing loan principal, tuition fees, etc.) up to a maximum of Rs 1,50,000 per year.
Under Section 115BAA, what is the concessional corporate tax rate for domestic companies?
Domestic companies may opt for a 22% tax rate (effective ~25.17% with 10% surcharge and 4% cess), provided they forgo specified exemptions/deductions and additional depreciation; MAT does not apply.
What is Minimum Alternate Tax (MAT) under Section 115JB and its rate?
MAT ensures companies with book profits but low taxable income pay a minimum tax. It is levied at 15% (plus surcharge and cess) of book profit when normal tax payable is lower; excess MAT can be carried forward as MAT credit for 15 years.
What is a Double Taxation Avoidance Agreement (DTAA)?
A DTAA is a bilateral treaty between two countries to avoid taxing the same income twice, allocate taxing rights, prevent fiscal evasion, and provide relief (via exemption or credit method) to taxpayers earning cross-border income.
What is the difference between the 'Exemption method' and the 'Credit method' of relief under a DTAA?
Exemption method: income taxed in one country is exempt in the other (income excluded). Credit method: income is taxed in both, but the residence country gives credit for tax paid in the source country against its own tax liability.
Show the other 29 Direct Tax Laws and International Taxation flashcards
Under Section 90 vs Section 91, how is double taxation relief granted?
Section 90 grants bilateral relief where a DTAA exists with the foreign country. Section 91 grants unilateral relief where no DTAA exists, allowing credit at the lower of Indian or foreign tax rate on the doubly taxed income.
What is the principle in Section 90(2) regarding DTAA versus the Income-tax Act?
Where a DTAA applies, the provisions of the Act apply only to the extent they are more beneficial to the assessee. The taxpayer can choose between the DTAA and the Act, whichever is more advantageous.
What is a 'Permanent Establishment' (PE) in the context of DTAAs?
A PE is a fixed place of business through which the business of an enterprise is wholly or partly carried on (e.g., branch, office, factory, mine). It is the threshold that allows the source country to tax business profits of a foreign enterprise.
What is a Tax Residency Certificate (TRC) and why is it required (Section 90(4))?
A TRC is a certificate issued by the country of residence certifying the taxpayer's residency. A non-resident must furnish a TRC (and Form 10F with prescribed particulars) to claim relief/benefits under a DTAA.
What is Transfer Pricing and the Arm's Length Principle under Section 92?
Transfer pricing governs pricing of international transactions between associated enterprises. The Arm's Length Principle requires such transactions to be priced as if between independent, unrelated parties in comparable uncontrolled conditions.
What constitutes an 'Associated Enterprise' under Section 92A?
Two enterprises are associated if one participates directly/indirectly in the management, control or capital of the other, or the same persons do so for both. Section 92A(2) lists deeming criteria, e.g., holding 26% or more voting power, or advancing loans ≥51% of book value of assets.
What are the prescribed methods for computing Arm's Length Price under Section 92C?
Comparable Uncontrolled Price (CUP) method, Resale Price Method (RPM), Cost Plus Method (CPM), Profit Split Method (PSM), Transactional Net Margin Method (TNMM), and 'any other method' prescribed by the Board.
What is a 'Specified Domestic Transaction' under Section 92BA for transfer pricing?
It is a transaction (other than an international transaction) between related domestic parties exceeding an aggregate value of Rs 20 crore in the year, such as certain payments to related persons and transactions of tax-holiday units, subject to arm's length scrutiny.
What is an Advance Pricing Agreement (APA) under Sections 92CC and 92CD?
An APA is an agreement between the taxpayer and CBDT determining the arm's length price or methodology for future international transactions, valid for up to 5 years (with rollback for 4 prior years), providing certainty and avoiding TP disputes.
What are the three tiers of Transfer Pricing documentation under Section 92D (BEPS Action 13)?
Master File (group-level information), Local File (entity-level transaction details), and Country-by-Country Report (CbCR) filed by large MNE groups (consolidated revenue threshold Rs 6,400 crore) reporting global allocation of income and taxes.
What is 'Equalisation Levy' and at what rate does it apply to online advertising services?
Equalisation Levy is a levy on certain digital transactions to tax e-commerce. It applies at 6% on payments exceeding Rs 1 lakh/year by a resident/PE to a non-resident for specified online advertisement services.
What is 'Significant Economic Presence' (SEP) under Section 9(1)(i) and its relevance to e-commerce taxation?
SEP deems a business connection in India for a non-resident based on revenue from transactions in goods/services/data with India exceeding prescribed thresholds, or systematic solicitation of users beyond a prescribed number, enabling taxation of digital businesses without a physical PE.
What is the TDS provision under Section 194-O for e-commerce transactions?
An e-commerce operator must deduct TDS at 0.1% (1% pre-revision) on the gross amount of sale of goods/services facilitated through its digital platform for an e-commerce participant, credited/paid at the time of credit or payment.
What was the scope of the Equalisation Levy of 2% on e-commerce supply (and its current status)?
The 2% equalisation levy applied to consideration received by a non-resident e-commerce operator for online supply of goods/services to Indian residents/IP-address users. It was abolished w.e.f. 1 August 2024 (advertising EL of 6% continued before later changes).
What is a 'Self-Assessment' under Section 140A?
Before filing the return, the assessee must compute total income, calculate tax due after TDS/TCS/advance tax/relief, and pay the balance tax along with interest and fee. This payment is self-assessment tax under Section 140A.
What is 'Summary Assessment' / processing of return under Section 143(1)?
A preliminary, computerised processing of the return where total income is adjusted for arithmetical errors, incorrect claims apparent from the return, etc., and an intimation showing tax/refund payable is issued without detailed scrutiny.
What is 'Scrutiny Assessment' under Section 143(3)?
A detailed assessment where, after issuing notice under Sec 143(2), the Assessing Officer examines the return, evidence and accounts to ensure income is not understated or excessive losses/deductions claimed, then determines the total income and tax by order.
What is 'Best Judgment Assessment' under Section 144?
Where an assessee fails to file the return, comply with notices, or maintain accounts, the AO assesses total income to the best of his judgment based on available material (after giving an opportunity of being heard), determining tax accordingly.
What is 'Income Escaping Assessment' (Reassessment) under Sections 147-148?
Where the AO has information suggesting income chargeable to tax has escaped assessment, he may, after issuing notice under Sec 148 (preceded by Sec 148A procedure), assess or reassess such income subject to prescribed time limits.
What is the time limit and procedure under Section 148A before issuing a reassessment notice?
Before issuing a Sec 148 notice, the AO must conduct inquiry (if required), provide the assessee an opportunity to explain via show-cause within 7-30 days, consider the reply, and pass an order under Sec 148A(d) deciding whether it is a fit case for reassessment.
What is 'Faceless Assessment' under Section 144B?
A scheme eliminating the physical interface between taxpayer and tax authority, conducting assessments electronically through a National Faceless Assessment Centre with automated/random allocation, team-based review and dynamic jurisdiction to ensure transparency.
What is the penalty for under-reporting of income under Section 270A?
Penalty for under-reporting is 50% of the tax payable on under-reported income; if the under-reporting results from misreporting (e.g., misrepresentation, false entries), the penalty is 200% of the tax on such income.
What is the penalty under Section 271H for failure to file TDS/TCS statements?
Penalty ranges from Rs 10,000 to Rs 1,00,000 for failure to file TDS/TCS statements or for furnishing incorrect information; no penalty if the statement is filed within one year with fees and interest paid.
What is the penalty for failure to get accounts audited under Section 271B?
Penalty equals 0.5% of total sales/turnover/gross receipts, subject to a maximum of Rs 1,50,000, for failure to get accounts audited or to furnish the audit report under Section 44AB.
Under Section 276C, what is the prosecution provision for wilful attempt to evade tax?
Wilful attempt to evade tax, penalty or interest is punishable: if tax sought to be evaded exceeds Rs 25 lakh, rigorous imprisonment of 6 months to 7 years with fine; otherwise 3 months to 2 years with fine.
What is the penalty under Section 271C for failure to deduct or pay TDS?
A penalty equal to the amount of tax that was not deducted or not paid may be levied for failure to deduct tax at source (or pay it under certain provisions), in addition to interest under Section 201.
What is the fee under Section 234F for late filing of return of income?
A fee of Rs 5,000 is levied for filing the return after the due date; it is reduced to Rs 1,000 if the total income does not exceed Rs 5 lakh.
What is the purpose of a Tax Audit Report in Forms 3CA/3CB and 3CD under Section 44AB?
Form 3CA (where accounts are audited under another law) or 3CB (otherwise) is the auditor's report, and Form 3CD is the detailed statement of prescribed particulars; together they ensure proper maintenance of books and correct reporting of income for tax purposes.
What is the difference between interest under Sections 234A, 234B and 234C?
234A: interest at 1% per month for late filing of return. 234B: 1% per month for default/shortfall in payment of advance tax (less than 90% paid). 234C: 1% for deferment of advance tax instalments below prescribed percentages on due dates.
CMA Final Direct Tax Laws and International Taxation FAQ
What is in the CMA Final Direct Tax Laws and International Taxation syllabus?
CMA Final Direct Tax Laws and International Taxation is split into 3 chapters: Income Tax Act, International Taxation and Tax Administration and Compliance. Together they contain 9 topics.
How many chapters are in CMA Final Direct Tax Laws and International Taxation?
3 chapters, containing 9 topics. The largest chapter is Income Tax Act, with 3 topics.
Are there flashcards for CMA Final Direct Tax Laws and International Taxation?
Yes — a 49-card Direct Tax Laws and International Taxation deck, printed in full in the flashcards section of this page and available in the Examius app with spaced repetition. The free plan covers one exam of your choice, including its flashcards; Examius Pro, a one-time purchase, unlocks every other exam and deck.