Basic Concepts: formula sheet

Key formulas

Tax year (normal rule)

Tax year = 12 months from 1 April to 31 March

Tax year 2026-27 = 1 April 2026 to 31 March 2027. Income earned in it is taxed for that same tax year. This is the normal rule.

Tax year for new business or profession

Tax year = date of setting up of business or profession → next 31 March

Counted from the date of setting up, not the date of incorporation or first sale. The tax year for that business is shorter than twelve months.

Tax year for new source of income

Tax year = date source comes into existence → next 31 March

Applies where a source of income newly comes into existence during the year. Acquiring a house property or a capital asset does not by itself start a separate tax year. Its income is computed within the tax year.

Old terms mapped to the new term

Previous year + Assessment year (old Act) → Tax year (2025 Act)

Use only 'tax year' in answers on the 2025 Act. Never write 'assessment year' for tax year 2026-27 or later.

Rates applicable

Income of tax year X is taxed at the rates of the Finance Act for tax year X

No lag. Rates do not come from the next year.

Charge of tax

Tax is charged on the total income of a person for the tax year

The taxpayer must be a person. Scope depends on residential status.

Categories of person

Person includes: Individual | HUF | Company | Firm | AOP/BOI | Local authority | + every other artificial juridical person not falling in these categories

The definition is inclusive, so the residual artificial juridical person category is open-ended. AOP or BOI counts whether or not it is incorporated. Firm includes an LLP.

Income as an inclusive term

Income = items listed in the definition + any other receipt that is income in nature

The list is not exhaustive. Name the item, then say it is covered by the inclusive definition.

Capital vs revenue rule

Revenue receipt: taxable unless exempt. Capital receipt: not taxable unless specifically charged, e.g. as capital gains

Not every capital receipt is tax-free. Check for a specific charging provision.

Total income scheme

Gross total income = Sum of the five heads after clubbing and set-off. Total income = Gross total income − Chapter deductions

Exempt income is left out before the heads are added.

Individual: basic conditions for residence

Resident if (a) stay in India ≥ 182 days in the tax year, OR (b) stay ≥ 60 days in the tax year AND ≥ 365 days in the 4 preceding tax years

Meeting either one is enough. Otherwise the individual is non-resident. Stay need not be continuous. Count both the day of arrival and the day of departure.

Exception to the 60-day test: citizen leaving for work or visiting

Condition (b) does not apply to (i) an Indian citizen who leaves India in the tax year for employment outside India or as a crew member of an Indian ship, and (ii) an Indian citizen or person of Indian origin who comes on a visit to India. Such a person is resident only if stay in the tax year ≥ 182 days

Only condition (a) is available for these persons. A stay of 182 days or more makes them resident. A shorter stay makes them non-resident, however many days they stayed in the 4 preceding years. Exception to the exception: a visiting citizen or PIO whose Indian income exceeds ₹15 lakh uses 120 days instead (see the next formula).

Visiting citizen or PIO with high Indian income

If total income other than income from foreign sources > ₹15,00,000, then 60 days is replaced by 120 days (the 365-day test over 4 years still applies). Such a person who is resident only because of this rule is RNOR

Applies to a citizen or person of Indian origin visiting India. Income from foreign sources means income accruing or arising outside India, except income from a business controlled in or a profession set up in India.

Deemed resident citizen

An Indian citizen who is not otherwise resident in India, whose total income other than income from foreign sources > ₹15,00,000, and who is not liable to tax in any other country by reason of domicile or residence, is deemed resident in India, and is RNOR

This covers a citizen who is not resident under the basic conditions and is not taxed anywhere else, such as someone living in a country with no income tax. Income from foreign sources has the same meaning as above: income accruing or arising outside India, except income from a business controlled in or a profession set up in India. If the person is already resident under the basic conditions, the usual ROR or RNOR test applies.

Individual: RNOR test

A resident individual is RNOR if (a) NR in 9 out of the 10 preceding tax years, OR (b) stay in India ≤ 729 days in the 7 preceding tax years, OR (c) the individual is resident only because of the 120-day rule or is a deemed resident citizen. Otherwise ROR

Meeting any one makes the person RNOR. To be ROR, the individual must fail all of them: resident in at least 2 of the 10 preceding years AND stay ≥ 730 days in the 7 preceding years AND not resident only through the 120-day rule or the deemed-resident rule.

HUF, firm, AOP, BOI, other persons

Resident unless control and management of affairs is wholly outside India during the tax year

Even partial control in India makes the person resident. An HUF is then ROR only if its manager (karta) satisfies both ROR conditions above; otherwise RNOR. The manager's status is tested for the tax year in question.

Company

Resident if it is an Indian company, OR its place of effective management (POEM) is in India in the tax year. Otherwise non-resident

POEM means the place where key management and commercial decisions necessary for conducting the business as a whole are in substance made. A foreign company with POEM in India is resident and taxed on global income.

Incidence of tax: ROR

Taxable: income received or deemed received in India + income accruing or deemed to accrue in India + income accruing outside India

Global income. This includes income earned and received abroad.

Incidence of tax: RNOR

Taxable: income received or deemed received in India + income accruing or deemed to accrue in India + foreign income only if derived from a business controlled in India or a profession set up in India

Other foreign income, such as foreign rent, dividend or interest received abroad, is not taxable.

Incidence of tax: Non-resident

Taxable: income received or deemed received in India + income accruing or deemed to accrue in India

Foreign income received abroad is not taxable. Income received in India is taxable even if it accrued abroad.

Salary TDS certificate timeline

Due date = 15 June following the end of the financial year (position under the 1961 Rules, Form 16)

Issued once a year, covering the whole tax year. 15 June is the due date under the 1961 Rules. The timeline under the Income-tax Rules, 2026 must be verified in your ICAI material. If the same date is carried over, tax year 2026-27 gives 15 June 2027. This is the same date as the Q4 non-salary TDS certificate, so do not mix the two up.

Non-salary TDS certificate timeline

Due date = 15 days from the due date of furnishing the quarterly TDS statement

Counted from the statement's due date, not the actual filing date. The statement due dates 31 July (Q1), 31 October (Q2), 31 January (Q3) and 31 May (Q4) are the dates under the 1961 Act Rules. Confirm them under the Income-tax Rules, 2026 as per ICAI material.

TCS certificate timeline

Due date = a prescribed number of days from the due date of the quarterly TCS statement

Same logic as non-salary TDS: count from the statement's due date. Do not assume the TCS statement and certificate dates are identical to TDS. Under the old law the Q4 TCS statement was due 15 May and the certificate by 30 May. Verify the TCS statement and certificate dates in your ICAI material before using them.

Quarterly TDS certificate due dates (quick table)

Q1 (Apr-Jun): 15 Aug | Q2 (Jul-Sep): 15 Nov | Q3 (Oct-Dec): 15 Feb | Q4 (Jan-Mar): 15 Jun

For non-salary TDS only. Derived from the old-law statement due dates plus 15 days. Under the 1961 Act Rules the Q4 TDS statement is due 31 May, so the Q4 certificate is due 15 June. The salary certificate is also due on 15 June, so the two dates coincide for Q4 only. Confirm all these dates under the 2026 Rules per ICAI material. Do not apply this table to TCS without checking.

Particulars to be shown

Deductor/collector name, address, PAN and TAN; payee name and PAN; nature and amount of payment; tax deducted or collected; date and details of deposit (challan); statement receipt reference

A certificate missing the challan or deposit details is incomplete.

Penalty for delay

₹100 per day of failure, limited to the amount of tax deductible or collectible in respect of the failure (old-law position)

Under the 1961 Act this penalty was in section 272A(2)(g), and the penalty could not exceed the tax deductible or collectible in respect of the failure. The corresponding provision and the exact cap wording in the Income-tax Act, 2025 must be taken from your ICAI material. Do not treat the 2025 position as confirmed until you have checked it. Whether the penalty is counted separately for each certificate must also be taken from your ICAI material.

Partial integration conditions

Applies if: non-agricultural income > basic exemption limit AND agricultural income > ₹5,000 AND assessee is an individual, HUF, AOP, BOI or artificial juridical person

If either amount test fails, tax only the non-agricultural income at normal slabs. Agricultural income is then simply ignored.

Step 1 tax

Tax on (non-agricultural income + agricultural income) at slab rates

Use the slabs of the regime the assessee follows, and the age-based limit if the old regime applies.

Step 2 tax

Tax on (agricultural income + basic exemption limit) at slab rates

Use the same slabs and the same limit as Step 1.

Net income-tax before rebate

Step 1 tax − Step 2 tax

Add surcharge if applicable and then health and education cess at 4%.

Agricultural income test (land)

Rent or revenue from land in India + income from agricultural operations + income from qualifying farm building

Land outside India is excluded. Poultry and dairy are not agriculture.

Composite income

Tea grown and manufactured: 60% agricultural, 40% business income

Use the split the rules prescribe for the crop. Compute total profit first, then split.

Quick revision

• The 2025 Act uses one concept, the tax year; do not write assessment year in answers.
• Total income is computed after heads of income, set-off, carry forward and deductions.
• Residential status is decided separately for each tax year.
• An individual is resident if in India for 182 days or more in the tax year, or 60 days or more in the tax year plus 365 days or more in the four preceding tax years.
• The 60-day limit is replaced by 182 days for an Indian citizen who leaves India for employment or as crew. It is replaced by 120 days for a citizen or person of Indian origin who visits India and whose income other than foreign-source income exceeds ₹15 lakh. The 365-day condition for the four preceding tax years still applies in both cases.
• Separately, an Indian citizen whose income other than foreign-source income exceeds ₹15 lakh, and who is not liable to tax in any other country, is deemed resident in India. Such a deemed-resident citizen is resident but not ordinarily resident. This rule applies only to citizens, not to persons of Indian origin.
• Resident and ordinarily resident: global income is taxable in India.
• Non-resident: only income received, or accruing or arising, in India (including deemed) is taxable.
• A resident is not ordinarily resident if he was non-resident in 9 of the 10 preceding tax years, or stayed in India for 729 days or less in the 7 preceding tax years. A deemed-resident citizen and a visitor who is resident only because of the relaxed 120-day limit are also resident but not ordinarily resident.
• Resident but not ordinarily resident: income received or accruing in India, plus income accruing outside India from a business controlled from India or a profession set up in India.
• Income received in India is taxable for every assessee, whatever the residential status.
• Agricultural income is exempt, but may be added back for rate purposes in specified cases.
• TDS and TCS certificates support your claim for credit of tax already paid.
• Always state the provision, apply the facts, then give a clear conclusion.

Common mistakes

• Writing 'assessment year 2027-28' for income of 2026-27 under the 2025 Act. Fix: Use only 'tax year 2026-27'. Mention previous and assessment year only when a question asks you to compare the two laws or deals with income up to 2025-26.
• Starting a new business's period of income from incorporation of the company. Fix: The period starts from the date of setting up of the business. Incorporation may be earlier. Read the facts for when the business was ready to commence.
• Treating every capital receipt as non-taxable. Fix: Always ask whether a provision charges it specifically. Sale of a capital asset gives a taxable capital gain, not tax-free proceeds.
• Taxing the whole sale price of a capital asset instead of the gain. Fix: Compute capital gains under that head. Only the gain enters total income.
• Treating the 182-day test as the only test for every individual. Fix: Always run both conditions. If 182 days fails, test 60 days with 365 days over 4 preceding years, then adjust the threshold for exceptions.
• Applying the 60-day condition to a citizen who left for employment abroad or who is visiting India. Fix: Scan facts for words like employment outside India, crew member, visit, citizen, person of Indian origin. These change the threshold to 182 days, or 120 days for a visiting citizen or PIO with Indian income above ₹15 lakh.
• Counting 15 days from the date the statement was actually filed Fix: Always count from the statutory due date of the statement. The filing date is a distractor.
• Applying the quarterly 15-day rule to the salary certificate Fix: Salary is annual, due 15 June after the tax year (the old-rule position; verify under the 2026 Rules). The quarter-plus-15-days rule is only for non-salary TDS and, with its own dates, TCS. The Q4 non-salary certificate also falls on 15 June, but only by coincidence.
• Including agricultural income in total income Fix: Use it only as a rate-fixing figure inside the working. Show total income without it, and say so in the answer.
• Applying partial integration to companies, firms or LLPs Fix: Check assessee type first. Only individuals, HUF, AOP, BOI and artificial juridical persons are covered. Others pay flat-rate tax.

Exam tips

• In case MCQs, spot the start date first. Distractors usually use incorporation date, first sale date or the accounting year.
• Always write 'tax year', not 'assessment year', in answers on the 2025 Act. Mention the old terms only to compare.
• For comparison questions, use a short pairing: old law had two years and a lag; new law has one tax year and no lag.
• Show the dates and the number of months in your working. Even a one-line working earns method marks.
• If facts mention books closed on 31 December or 30 June, say the books are irrelevant for choosing the tax year and split the income to the 31 March year.
• In a case-scenario MCQ, first check the assessee category and exempt items. Many distractors work by including exempt or capital items.
• In written answers, name the provision in plain words, apply the facts, and then give the conclusion. Do not write a section number unless you are certain of it.
• When a question says "discuss whether taxable", cover both capital versus revenue and any exemption before concluding.