UGC NET Commerce Income-tax and Corporate Tax Planning Syllabus

What is the maximum deduction under Section 80C and name three eligible investments?

Maximum deduction is Rs 1,50,000. Eligible items include LIC premium, PPF, EPF, ELSS, NSC, principal repayment of housing loan, 5-year tax-saving FD, and tuition fees for children.

What deduction is available under Section 80D for medical insurance premium?

Up to Rs 25,000 for premium on self/spouse/children (Rs 50,000 if senior citizen), plus an additional Rs 25,000 (Rs 50,000 for senior citizen) for parents. A preventive health check-up of up to Rs 5,000 is included within these limits.

What deduction does Section 80CCD(1B) provide?

An additional deduction of up to Rs 50,000 for contributions to the National Pension System (NPS), over and above the Rs 1,50,000 limit of Section 80C/80CCD(1).

What deduction is allowed under Section 80E?

Deduction of the entire interest paid on a loan taken for higher education (for self, spouse, children, or a student for whom one is a legal guardian) for up to 8 years, with no upper monetary limit. Principal is not deductible.

What is the deduction under Section 80G?

Deduction for donations to specified funds and charitable institutions, allowed at either 100% or 50% of the donation, sometimes subject to a qualifying limit of 10% of adjusted gross total income.

What is the deduction under Section 80TTA and Section 80TTB?

Section 80TTA allows up to Rs 10,000 deduction on interest from savings bank accounts for non-senior individuals/HUF. Section 80TTB allows senior citizens up to Rs 50,000 on interest from deposits (savings and fixed).

What is the rebate under Section 87A?

A resident individual whose total income does not exceed Rs 5,00,000 (old regime) gets a rebate of up to Rs 12,500; under the new regime the rebate is up to Rs 25,000 for total income up to Rs 7,00,000, making tax liability nil.

Outline the steps in computing the total income and tax liability of an individual.

1) Compute income under each of the 5 heads; 2) Apply clubbing and set-off/carry-forward of losses to get GTI; 3) Deduct Chapter VI-A (80C-80U) to get total income; 4) Apply tax slab rates; 5) Add surcharge and 4% health & education cess; 6) Deduct rebate (87A), TDS/advance tax to get net payable/refund.

What is 'clubbing of income' under the Income-tax Act?

Clubbing means including the income of another person in the assessee's total income in specified situations (to prevent tax avoidance by transferring income/assets), and taxing it in the hands of the assessee.

How is income from assets transferred to a spouse treated for clubbing under Section 64(1)(iv)?

Income arising from an asset transferred to one's spouse without adequate consideration (other than in connection with an agreement to live apart) is clubbed in the income of the transferor.

How is a minor child's income clubbed under Section 64(1A)?

A minor's income is clubbed with the parent having the higher income, with an exemption of Rs 1,500 per minor child. Exceptions: income from the minor's manual work or from a skill/talent, and income of a disabled minor, are not clubbed.

What is the clubbing provision regarding income from assets transferred to a son's wife (Section 64(1)(vi))?

Income arising from an asset transferred without adequate consideration to one's son's wife (daughter-in-law) is clubbed in the income of the transferor.

What is double taxation, and what are the two methods of relief?

Double taxation is the taxing of the same income in two countries. Relief is given through (1) the Exemption method (income taxed in only one country) and (2) the Credit method (income taxed in both, but credit given for foreign tax paid).

Distinguish between bilateral and unilateral relief from double taxation.

Bilateral relief is provided through a Double Taxation Avoidance Agreement (DTAA) between two countries under Section 90/90A. Unilateral relief under Section 91 is granted by the home country (India) where no DTAA exists with the other country.

What is the purpose of a Double Taxation Avoidance Agreement (DTAA)?

A DTAA is a treaty between two countries to avoid taxing the same income twice, allocate taxing rights, prevent fiscal evasion, provide certainty, and promote cross-border trade and investment.

What is 'transfer pricing' and which transactions does it govern?

Transfer pricing refers to the pricing of goods, services, intangibles, or funds transferred between associated enterprises (related parties), typically across borders. It ensures international transactions between such enterprises are priced as if between unrelated parties.

What is the 'arm's length price' (ALP) in transfer pricing?

The arm's length price is the price that would be charged in a comparable transaction between independent (unrelated) enterprises under uncontrolled conditions, ensuring profits are not artificially shifted to lower-tax jurisdictions.

Name three methods prescribed for computing the arm's length price under Indian transfer pricing rules.

(1) Comparable Uncontrolled Price (CUP) method, (2) Resale Price Method (RPM), (3) Cost Plus Method (CPM), (4) Profit Split Method (PSM), and (5) Transactional Net Margin Method (TNMM).

Define 'corporate tax planning'.

Corporate tax planning is the legitimate arrangement of a company's financial and business affairs, using available deductions, exemptions, and incentives within the law, to minimize its tax liability while complying fully with the provisions of the Income-tax Act.

State the significance/objectives of corporate tax planning.

Objectives include reduction of tax liability, minimization of litigation, productive investment of savings, economic stability and growth, healthy cash flow, and ensuring compliance to avoid penalties.

Distinguish between tax avoidance and tax evasion.

Tax avoidance is reducing tax through legal means by exploiting the provisions of the law (within its letter, though sometimes against its spirit). Tax evasion is the illegal reduction of tax through fraud, concealment of income, or false claims, and is punishable.

How does tax planning differ from tax avoidance?

Tax planning uses the deductions, exemptions, and incentives intended by the legislature and is fully legal and encouraged. Tax avoidance exploits loopholes and gaps in the law; it is technically legal but goes against the legislative intent.

What is the difference between tax planning and tax management?

Tax planning is forward-looking, aimed at minimizing tax liability through legitimate means. Tax management is the compliance aspect: maintaining records, deducting TDS, paying advance tax, and filing returns on time to avoid interest and penalties.

Name the main techniques of corporate tax planning.

Techniques include: short-term and long-term planning, permissive planning (using provided incentives), purposive planning (arranging affairs to attain benefits), and planning based on form/nature of business, capital structure, and location of undertaking.

What tax considerations arise when deciding the capital structure of a company (debt vs equity)?

Interest on debt (borrowed capital) is a deductible expense reducing taxable profit, whereas dividend on equity is paid out of post-tax profits and is not deductible. Hence, a higher proportion of debt offers a tax shield, subject to thin-capitalization limits.

What are key tax considerations in the 'make or buy' decision?

The decision compares the after-tax cost of manufacturing in-house (considering depreciation, deductions on plant, and incentives) versus buying from outside. Tax savings from depreciation and investment allowances on owned assets may favour 'make'.

What is 'advance payment of tax' and who is liable to pay it?

Advance tax (pay-as-you-earn) is the payment of income tax in installments during the previous year itself, instead of a lump sum at year-end. Every assessee whose estimated tax liability for the year is Rs 10,000 or more must pay it.

State the due dates and installment percentages for advance tax for individuals (other than presumptive).

By 15 June: 15%; by 15 September: 45% (cumulative); by 15 December: 75% (cumulative); by 15 March: 100% of advance tax liability.

Which assessees are exempt from paying advance tax?

A resident senior citizen (aged 60 or above) who does not have any income chargeable under 'Profits and gains of business or profession' is not liable to pay advance tax.

What is e-filing of income-tax returns, and which form is generally used by a salaried individual with one house property?

E-filing is the electronic submission of the income-tax return through the Income Tax Department's e-filing portal. A salaried individual with income from salary, one house property, and other sources (total up to Rs 50 lakh) generally uses Form ITR-1 (Sahaj).