Direct Tax Laws & International Taxation: formula sheet

Key formulas

Individual: basic conditions

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

Satisfy any one condition and the person is resident. If neither is met, the person is non-resident.

Individual: relaxation for outbound citizens

Indian citizen leaving India for employment abroad, or as crew of an Indian ship: the 60-day period in condition (b) becomes 182 days; condition (a) stays the same

Condition (a) is unchanged at 182 days. Condition (b) now needs 182 days plus 365 days in the 4 preceding years. In practice, a person with fewer than 182 days in the year is non-resident. This outbound relaxation is for Indian citizens only. A person of Indian origin (PIO) gets a relaxation only when visiting India.

Individual: visiting citizens or PIOs

Indian citizen or PIO who visits India: the 60-day condition becomes 182 days if Indian income (total income excluding foreign-source income) is ₹15,00,000 or less, and 120 days if Indian income is above ₹15,00,000 (with 365 days in the 4 preceding years)

This is a relaxation for visitors only; the normal 60-day rule still applies to other persons. A visitor who is resident only through the 120-day case (Indian income above ₹15,00,000) is RNOR.

Deemed resident

Indian citizen with Indian income above ₹15,00,000, who is not liable to tax in any other country by reason of domicile or residence, and who is not already resident under the basic conditions, is deemed resident in India

Deemed residence applies only when the basic conditions are not met. Such a person is only RNOR.

Ordinarily resident test

ROR if resident in India in at least 2 of the 10 previous years before the relevant year AND stay ≥ 730 days in the 7 years before it

Fail either condition and the resident is RNOR. A deemed resident, and a visiting citizen or PIO resident only through the 120-day rule, is RNOR regardless.

HUF, firm, AOP, BOI

Resident if control and management of affairs is wholly or partly in India; otherwise non-resident

Firms, AOPs and BOIs are only resident or non-resident. For an HUF, it is ROR only if the manager (karta) meets both ordinarily-resident conditions; otherwise RNOR.

Company

Indian company: always resident. Foreign company: resident only if POEM is in India in that year

POEM means the place where key management and commercial decisions needed to run the business as a whole are, in substance, made.

Scope of total income

ROR: Indian income + foreign income. RNOR: Indian income + foreign income from a business controlled in India or a profession set up in India. NR: Indian income only

Indian income means income received or deemed received in India, or accruing or arising or deemed to accrue in India.

Salary income

Gross salary (taxable items) − deductions allowed on salary (such as standard deduction) = Income from salary

Add taxable allowances, perquisites and retirement benefits first. Remove fully exempt items. The standard deduction amount depends on the regime and year.

Net annual value (let-out property)

NAV = Annual value − municipal taxes paid by the owner during the previous year

Municipal taxes are deductible only if the owner actually paid them during the previous year. Expected rent is the higher of municipal value and fair rent, but not more than standard rent under the Rent Control Act, where that Act applies. Annual value is the higher of expected rent and actual rent received. If actual rent is lower than expected rent only because of vacancy, the actual rent received is taken as annual value. Special rules also apply for unrealised rent.

Income from house property

NAV − 30% of NAV − interest on borrowed capital allowed

For a self-occupied house, annual value is nil and only interest is deducted, capped at ₹2,00,000 under the old regime, which gives a loss. This deduction is not allowed under the new regime (section 115BAC). Pre-construction interest is deducted in five equal instalments.

Capital gain (general)

Full value of consideration − expenses on transfer − cost of acquisition − cost of improvement

Long-term gains on most assets no longer get indexation under current rules. Check the Finance Act applicable to your attempt.

Holding period test

Listed securities: long-term if held more than 12 months. Unlisted shares, land, building and most other assets: long-term if held more than 24 months

Count from the date of acquisition to the date of transfer. Special asset-specific rules, such as certain mutual fund units, override the general test.

Slump sale gain

Slump sale consideration − net worth of the undertaking

Net worth = value of total assets − value of liabilities. Depreciable assets are taken at written down value under the Act. Other assets are taken at book value, ignoring revaluation. Self-generated goodwill gets no value. The gain is long-term if the undertaking was held more than 24 months.

Land or building transferred below stamp duty value (section 50C)

Full value of consideration = Stamp duty value, if the stamp duty value exceeds the actual consideration by more than 10% of the actual consideration

It applies to the seller of land or buildings. If the stamp duty value is within 110% of the actual consideration, the actual consideration is used. Check the tolerance in the law applicable to your attempt.

Unquoted share transfer below fair value (section 50CA)

Full value of consideration = Fair market value, if actual consideration is lower than the fair market value computed under the prescribed rules

It applies to the seller on transfer of unquoted shares. The fair market value is computed as per the prescribed method.

Receipts below value (56(2)(x) rule)

Shares and movable property: taxable amount = aggregate fair market value − consideration paid, if the aggregate fair market value exceeds the consideration by more than ₹50,000. Immovable property: taxable amount = stamp duty value − consideration paid, if the stamp duty value exceeds the consideration by more than the higher of ₹50,000 and 10% of consideration

Where shares or movable property are received for no consideration, the aggregate fair market value is taxable if it exceeds ₹50,000. Once the test is met, the whole excess is taxable, not just the part above the limit. For unquoted shares, the fair market value is determined under Rule 11UA. Exceptions exist, such as gifts from relatives.

Tax on listed equity gains (STT paid)

Short-term: 20%. Long-term: 12.5% on gains above ₹1,25,000 in the year

Applies to listed equity shares and equity-oriented fund units on which STT is paid under the conditions. The exemption limit is a combined limit for such long-term gains. Add surcharge and cess where relevant.

Tax on other long-term gains

Long-term capital gain on other assets: 12.5%, without indexation

The ₹1,25,000 threshold does not apply to this category. Resident individuals and HUFs can set the basic exemption shortfall against these gains.

Business income computation

Net profit as per P&L + disallowed expenses + book depreciation − income taxable under other heads or exempt, credited in P&L − tax depreciation − other allowable deductions

Always show a clear list of additions and deductions with reasons. Marks are given for each item.

Cash payment disallowance

Expense paid in cash to one person in one day above ₹10,000 → 100% disallowed

Limit is ₹35,000 for payments to transport operators for plying, hiring or leasing goods carriages. The test is per person per day, not per bill.

Payment-basis items (43B group)

Tax, duty, cess, fee, bonus or commission to employees, employer contributions to welfare funds, and interest on loans from banks and notified institutions: deductible in the year of accrual if paid on or before the due date of filing the return for that year; otherwise deductible in the year of actual payment. Leave encashment: deductible only in the year of actual payment.

The due-date-of-return relief applies to tax, duty, cess, fee, bonus or commission to employees (where not otherwise payable as profits or dividends), employer contributions, and interest on loans from banks and notified institutions. It does not apply to leave encashment, which is allowed only when actually paid. Interest converted into a loan is not treated as paid.

Employee contribution to PF or ESI

Allowed only if deposited on or before the due date under the relevant Act

This is governed by section 36(1)(va), not 43B. The longer 'due date of return' relief applies to the employer's own contribution, not the employee's share.

Depreciation on a block

Depreciation = Rate × (Opening WDV + additions used ≥ 180 days − sale proceeds of the block) + ½ × Rate × additions used < 180 days

Closing WDV = Opening WDV + all additions − sale proceeds − depreciation. Sale proceeds are deducted from the block as a whole. If the proceeds are more than Opening WDV plus additions used ≥ 180 days, the excess reduces the additions used < 180 days, and the half-rate applies only to what is left. If the proceeds exceed the opening WDV plus all additions of the block, or all assets of the block are sold, the result is a short-term capital gain (or loss, where the block ceases with a shortfall) and no depreciation is allowed on that block. While the block still exists and proceeds are lower than opening WDV plus additions, there is no capital gain or loss.

Common depreciation rates (WDV)

Plant and machinery (general) 15%; furniture 10%; buildings (residential) 5%; other buildings 10%; computers and software 40%; intangibles 25%

Rates change by block and notification. Check the rate table given in the question or your supplied text.

Presumptive income for eligible business

Deemed profit = 8% of turnover (6% on amounts received by account payee cheque or draft or through electronic modes, not in cash)

Available only if turnover is within the limit and the assessee is eligible. Resident individuals, HUFs and partnership firms (not LLPs) are the usual eligible group. Income is computed at the stated percentage. Normal business deductions, including depreciation, are deemed allowed, and the WDV of assets is reduced as if depreciation had been claimed. No deduction for unabsorbed depreciation or business loss can be claimed during the presumptive years, but unabsorbed depreciation and losses of earlier years remain eligible for carry forward. Check the current turnover limits.

Presumptive income for specified professionals

Deemed profit = 50% of gross receipts

Applies to specified professions within the prescribed receipts limit. The assessee may claim lower profit only by meeting books and audit conditions.

Section 115BAA company

Tax at 22% plus surcharge of 10% and cess of 4% (effective rate 25.168%); no MAT; certain deductions and additional depreciation not allowed

The option is irrevocable once exercised. Unabsorbed additional depreciation and losses attributable to the deductions that are disallowed under this regime cannot be carried forward or set off.

Order of computation

Clubbing → income under each head → intra-head set-off → inter-head set-off → brought-forward losses → Gross Total Income → Chapter VI-A → Total Income

Follow this order in every answer. It is also the marking scheme.

Gross Total Income

GTI = Sum of net income of all heads after set-off and brought-forward loss adjustment (including clubbed income)

Chapter VI-A deductions cannot exceed GTI. Remove income taxed at special rates before testing the limit.

Clubbing rules to remember

Spouse (asset gifted, no adequate consideration) → transferor. Son's wife (same) → transferor. Minor child → parent with higher income. Own HUF conversion → the member.

Exceptions: minor's income from own skill, talent or manual work; minor with specified disability; transfers under an agreement to live apart.

Loss restrictions

Speculative loss → speculative profit only. Long-term capital loss → long-term capital gain only. Short-term capital loss → any capital gain. Non-speculative business loss → any head except salary.

Capital loss is never set off against income of other heads.

Carry-forward periods

House property loss: 8 AYs. Non-speculative business loss: 8 AYs. Capital loss: 8 AYs. Speculative loss: 4 AYs. Unabsorbed depreciation: no limit.

Carry-forward business loss needs a return filed by the due date. House property loss does not.

House property loss cap

Inter-head set-off of house property loss in a year ≤ ₹2,00,000

The balance is carried forward for 8 AYs against house property income only.

Order for business loss and depreciation

Current depreciation first → brought-forward business loss → unabsorbed depreciation

Unabsorbed depreciation is treated as current-year depreciation, so it can be set off against income under any head, including salary, subject to the regime.

MAT

Payable tax = higher of (normal tax, 15% of book profit) plus surcharge and cess

Applies to companies under the regular provisions. It does not apply to companies under section 115BAA or 115BAB.

MAT credit

Credit created = MAT paid − normal tax. Credit used in a year ≤ normal tax − MAT for that year

Carry forward 15 years. Usable only against tax under the regular regime. Credit cannot take tax below MAT.

AMT

AMT = 18.5% of Adjusted Total Income, payable if it exceeds normal tax

For non-company persons claiming profit-linked deductions. Credit carried forward 15 years.

Advance tax instalments (non-presumptive taxpayers)

By 15 June: 15% | by 15 Sept: 45% | by 15 Dec: 75% | by 15 March: 100% (all cumulative)

Advance tax applies where the tax payable after TDS/TCS is ₹10,000 or more. Eligible presumptive taxpayers pay the full amount by 15 March.

Interest for late filing (234A)

1% × tax payable on total income (after TDS, TCS, advance tax) × months or part months of delay

Runs from the day after the due date to the date of filing. Part of a month counts as a full month. It is simple interest.

Interest for default in advance tax (234B)

1% × (assessed tax − TDS/TCS − advance tax paid) × months or part months

Applies only if advance tax paid is less than 90% of the assessed tax. Runs from 1 April after the end of the tax year to the date of payment or determination. Self-assessment tax paid reduces the shortfall from the date of payment, so interest stops on that amount.

Interest for deferment of instalments (234C)

1% × shortfall × 3 months (June, Sept, Dec instalments); 1% × shortfall × 1 month (March instalment)

Shortfall is measured against 15%, 45%, 75% and 100% of tax on returned income, after TDS/TCS. No interest on the June or Sept instalment if cumulative payment is at least 12% or 36% respectively.

Interest on TDS default

Late deduction: 1% per month or part month. Late deposit after deduction: 1.5% per month or part month

Late deduction is counted from the date it was deductible to the date of deduction. Late deposit is counted from the date of deduction to the date of deposit.

TDS deposit due date

Government deductor: same day if without challan. Others: 7th of the next month. March deductions: 30 April

Check the exact timing rules for your question. Special cases (such as certain property and contract payments) have separate due dates.

Appeal time limits

To CIT(A): 30 days from service of the notice of demand or the order appealed against | To ITAT: 60 days from receipt of the CIT(A) order | To High Court: 120 days from receipt of the ITAT order

Condonation of delay is possible for sufficient cause. The High Court hears only a substantial question of law.

Reassessment time limit

Notice can be issued up to 3 years from the end of the relevant tax year; up to 5 years where the income escaping assessment is ₹50 lakh or more

For the 5-year limit, the escaped income of ₹50 lakh or more must be in the form of an asset, expenditure or entry. Check the procedural conditions and approvals in the law applicable to your attempt.

Penalty for under-reporting

50% of tax on under-reported income; 200% of tax where income is misreported

Penalty is not automatic. Check the facts to see if it is under-reporting or misreporting.

Amalgamation: shareholder test

Shareholders holding ≥ 75% in value of shares of amalgamating company become shareholders of amalgamated company

Shares held by the amalgamated company, its subsidiary or its nominee are left out of the test. Successor must be an Indian company for tax neutrality.

Amalgamation: cost and holding period of new shares

Cost of new shares = cost of old shares; holding period includes the period for old shares

Exchange of shares in the amalgamation is not a transfer for the shareholder.

Demerger: cost of shares in resulting company

Cost = Cost of shares in demerged company × (Net book value of assets transferred ÷ Net worth of demerged company immediately before demerger)

Net worth = paid-up share capital + general reserves per the books immediately before demerger. This split applies only if the demerger conditions are met: all property and liabilities of the undertaking transfer, assets move at book value (net of depreciation), shares are issued to shareholders of the demerged company in proportion, and shareholders holding at least 75% in value of the demerged company continue as shareholders of the resulting company.

Demerger: cost of original shares

Revised cost of original shares = Original cost − Cost allocated to resulting company shares

The holding period of the new shares includes that of the original shares.

Slump sale: capital gain

Capital gain = Lump sum consideration − Net worth of undertaking

Long-term if undertaking held for more than 36 months, otherwise short-term. Use the rate in the Finance Act applicable to your attempt.

Slump sale: net worth

Net worth = Total assets − Liabilities; depreciable assets at block WDV, other assets at book value, revaluation ignored

Self-generated goodwill and similar intangibles with no cost are not valued. A CA report in the prescribed form is needed.

Conversion of proprietorship or firm into company

Not a transfer if all assets and liabilities pass, no consideration except shares, and ≥ 50% of total voting power is held by the proprietor or partners for 5 years

This is a 50% voting power test, not the 75% test of amalgamation. For a firm, partners must become shareholders in the same proportion as their capital in the firm, and no partner may receive any consideration or benefit other than shares.

Conversion of company into LLP

Not a transfer if the company is a private company or unlisted public company, turnover or gross receipts do not exceed ₹60 lakh in any of the 3 preceding previous years, total asset value in books does not exceed ₹5 crore in any of those years, and the erstwhile shareholders' aggregate profit share in the LLP is ≥ 50% at all times during 5 years from conversion, along with the other continuity conditions

Shareholders become partners in the same proportion as their shareholding. No consideration except LLP interest and no benefit except profit share. No revaluation of assets. Any profit share of other persons must stay within what the 50% limit allows. Conditions run for 5 years.

LLP and firm: partner remuneration limit

On first ₹6,00,000 of book profit (or loss): higher of ₹3,00,000 or 90%; on balance: 60%

Only to working partners, authorised by the deed, for the period after the deed. Interest to partners is allowed up to 12% simple.

MAT (regular regime company)

MAT applies if tax on total income < 15% of book profit; credit = MAT paid − regular tax

The 15% rate and the 15-year carry-forward are as per the Finance Act applicable to your attempt. Credit is available only under the regular regime and is set off only against the excess of regular tax over MAT. Not applicable to the concessional 22% regime. Check the MAT and credit position applicable to your attempt.

Quick revision

• Residential status is decided year by year and decides the scope of taxable income.
• Residents are taxed on global income; non-residents on income received or accruing in India, or deemed to do so.
• Classify every receipt under the correct head before computing anything.
• Business income: check disallowances and conditions before allowing any expense.
• Set-off happens within a head first, then between heads, subject to the Act's restrictions.
• Losses are carried forward only if the return is filed on time, with specified exceptions.
• Check TDS applicability, rate and deposit timing for every payment in a case.
• In reorganisations, test the conditions for tax neutrality before claiming it.
• Transfer pricing applies to international transactions and specified domestic transactions between associated enterprises.
• A DTAA can give relief where it is more beneficial to the taxpayer than the domestic law.
• GAAR targets impermissible avoidance arrangements; BEPS is the global framework against profit shifting.
• Write each answer as provision, facts, conclusion, with a clear figure.

Common mistakes

• Applying the 60-day rule to an Indian citizen who left India for employment abroad. Fix: Check purpose of travel first. For an Indian citizen leaving for employment abroad or as crew of an Indian ship, the 60-day period in condition (b) becomes 182 days, while condition (a) stays at 182 days. So a stay of fewer than 182 days means non-resident. A PIO does not get this outbound relaxation; PIOs are covered only when visiting India.
• Treating a deemed resident as ROR. Fix: A deemed resident is always RNOR. Tax only Indian income and foreign income of an Indian-controlled business or Indian-set-up profession.
• Using actual sale price when a deemed value rule applies Fix: Match the asset to the rule. For land or buildings, compare the price with the stamp duty value under section 50C. For unquoted shares, compare it with the fair market value under section 50CA. Then apply the deemed value if it is higher.
• Taxing only the seller and ignoring the buyer Fix: In any undervalued deal, add one line on the receiving party's tax treatment under section 56(2)(x), with its threshold, for property received below fair value.
• Applying the cash payment limit to the total payments in a year or to each bill instead of per person per day. Fix: Group payments by payee and date. Disallow the whole day's amount for that payee if it is above the limit, and check the transport operator exception.
• Disallowing a 43B item that was paid after year-end but before the due date of the return. Fix: Tax, duty, cess, fee, bonus or commission to employees, employer contributions, and interest on loans from banks and notified institutions are allowed in the accrual year if paid by the due date of filing the return. Leave encashment is different: it is allowed only in the year of actual payment. The employee's PF or ESI contribution is governed by section 36(1)(va) and must be deposited by the due date under the relevant Act.
• Clubbing the income earned on clubbed income. Fix: Club only the first-generation income from the transferred asset. Income from reinvesting that income is taxed in the hands of the spouse.
• Setting off long-term capital loss against short-term capital gain, or against income of another head. Fix: Long-term capital loss goes only against long-term capital gain. Short-term capital loss can go against both. Capital loss never goes against other heads.
• Computing 234B and 234C on the gross tax instead of tax after TDS and TCS Fix: Always subtract TDS and TCS first. Then test the advance tax rules on the net figure.
• Counting exact days instead of months for interest Fix: Interest under 234A, 234B, 234C and TDS is by month or part of a month. A single day over counts as a full extra month.

Exam tips

• In case studies, extract the numbers first: days of stay, years of earlier residence, citizenship, and Indian income against ₹15,00,000. The question usually turns on one of these.
• Write the reason for the status in one sentence before computing anything. Examiners give marks for the test applied, not only the conclusion.
• For POEM questions, quote the facts about where key decisions are made and by whom. Routine day-to-day operations in India alone do not make the POEM.
• End with a list of taxable and non-taxable items under the status you found. This shows you know the scope rule and earns the final marks.
• Keep the terminology consistent with the paper. The Income-tax Act, 2025 uses 'tax year', but the tests and logic of residence are what the question is checking.
• Read each case for dates first. Holding period decides short-term versus long-term, and many MCQs depend on that one fact.
• For deemed value questions, show both sides: the seller's full value rule and the recipient's income from other sources. Examiners reward the extra line.
• In slump sale answers, list the net worth working item by item. A correct method with one wrong figure still earns most of the marks.