Computation of Total Income, Tax Liability and Filing of Return of Companies: formula sheet

Key formulas

Computation sequence

Income under each head → set-off and carry forward of losses → add clubbed income → Gross Total Income → less deductions → Total Income

Use this as the skeleton of every answer. Show each head separately.

Speculation loss set-off

Speculation loss can be set off only against profits of another speculation business

It cannot be set off against any other income (section 113(1)).

Speculation loss carry forward

Carry forward to the following tax year; maximum four tax years immediately succeeding the year the loss was first computed

Set off only against speculation profit of those years (section 113(2) and (3)).

Deemed speculation for share dealing

Company dealing in shares of other companies is deemed to carry on speculation business to the extent of such purchase and sale

Exceptions: income mainly from house property, capital gains or other sources; or principal business is share trading, banking or granting loans and advances (section 113(5) and (6)).

Amalgamation of banks under section 117 (certain cases)

Accumulated loss and unabsorbed depreciation of the amalgamating entity are deemed to be those of the amalgamated entity for the year the scheme came into force

If the scheme is in force on or after 1 April 2025, the loss can be carried forward for not more than eight tax years after the year it was first computed for the original predecessor. Accumulated loss excludes speculation loss.

Co-operative bank reorganisation under section 118

Demerger: loss directly relatable to the undertaking goes to the resulting bank; otherwise apportioned in the ratio of assets of the undertaking distributed

Conditions include three years of banking by the predecessor and holding at least three-fourths of book value of fixed assets for the stated periods (section 118(3)).

MAT test

If normal tax < MAT, tax payable = MAT; book profit is deemed total income

Section 206(1)(a). If normal tax is equal to or higher, you pay normal tax.

MAT amount

MAT = 14% × book profit (other companies); 9% × book profit (IFSC unit earning solely in convertible foreign exchange)

The 14% rate applies from 1 April 2026 (earlier 15%). Surcharge and cess are added as applicable.

Book profit

Book profit = P&L profit + listed additions − listed deductions ± special adjustments

Start from the P&L prepared under Schedule III or the governing Act, using the same policies as the accounts laid before the AGM.

Loss or depreciation deduction

Deduct the lesser of (brought forward loss excluding depreciation) and (unabsorbed depreciation), as per books

If either amount is nil, nothing is deducted under this item. Different rules apply to companies under CIRP or Tribunal-nominated directors.

Credit for domestic company that has exercised the option (section 200(5) or 201(2))

Set off in a year ≤ 25% × tax payable on total income under other provisions

Applies to credit under section 115JAA, 1961 as on 31 March 2026. Unused credit is carried forward, not beyond the fifteenth tax year after the year it first became allowable.

Credit for foreign company

Set off in a year ≤ (tax on total income − MAT) of that year

Set off only when normal tax exceeds MAT. The fifteen-year limit applies.

Basic tax, domestic company (normal regime)

Tax = 30% × total income (25% if turnover or gross receipts are within the specified limit)

Flat rate. Carve out special-rate income such as capital gains first.

Concessional regime for domestic company

Tax = 22% × total income; surcharge = 10% of tax; cess = 4%

Only if the company opts in. No MAT and restricted deductions. Check the conditions given in the question.

Foreign company

Tax = 35% × total income (ordinary income)

Special rates apply to specific incomes. Surcharge is 2% above ₹1 crore up to ₹10 crore and 5% above ₹10 crore.

Surcharge, domestic company (normal regime)

7% if income > ₹1 crore up to ₹10 crore; 12% if income > ₹10 crore

Applied on income-tax, not on income. Not applicable up to ₹1 crore.

Cess

Cess = 4% × (tax + surcharge)

Charged after surcharge and marginal relief.

Final tax liability

Liability = tax + surcharge − marginal relief + cess, then less credits (advance tax, TDS, MAT credit where allowed)

Marginal relief applies only when income is just above a surcharge threshold.

Promoter buyback additional tax (section 69(2))

Short-term: 2% (domestic company promoter), 10% (other promoter); Long-term: 9.5% (domestic company promoter), 17.5% (other promoter)

Only where the buyback is under section 68 of the Companies Act, 2013 and the shareholder is a promoter. It is on top of normal tax on those gains.

Accreted income

A = B – C

B = aggregate fair market value of total assets on the specified date; C = total liability on that date; both by the prescribed valuation method.

Reduction for specified assets

Taxable accreted income = A – accreted income attributable to specified assets and related liabilities

Sub-section (3) allows this reduction after computing A.

Additional tax

Tax = Accreted income (after reduction) × maximum marginal rate

Charged in addition to tax on total income.

Payment time

Due within 14 days from the due date in column D of the Table

The specified person and its principal officer or trustee are liable to pay.

Interest on delay

I = 1% of (T × P)

T = tax on accreted income; P = months from the day after the last payment date to the date of payment. Part of a month counts as a month as the text says including part thereof. Simple interest.

Dissolution transfer period

Transfer all assets to another registered non-profit organisation within 12 months from the end of the month of dissolution

Failure is Sl. No. 9; the date of dissolution is the specified date and the end of the 12 months is the due date.

Self-assessment tax payable

Tax on declared total income − (advance tax and other tax already paid + TDS/TCS + tax relief claimed + tax credit claimed) + tax or interest payable under section 391(2) + interest + fee

Section 266(1) and (2). Pay it before furnishing the return and attach proof of payment. The amounts taken into account include tax already paid, TDS/TCS, relief under sections 157, 159 and 160, and the tax credits under section 206(2)(e) to (h) and 206(3) and (4) named in section 266(2)(f). Section 266(2)(g) also takes into account any tax or interest payable under section 391(2).

Assessed tax (for interest on advance tax default)

Tax on total income − TDS/TCS − relief under sections 157, 159, 160 − tax credit under section 206

Section 424(2). Advance tax paid is not deducted in this computation. Additional income-tax under section 267 is excluded (section 424(3)).

90% test

Interest arises if no advance tax is paid, or if advance tax paid < 90% of assessed tax

Section 424(1)(a) and (b). This applies to an assessee liable to pay advance tax.

Interest for advance tax default

Interest = 1% × number of months (part of a month counts as a full month) × base amount

Section 424(1). Simple interest. The period runs from 1 April following the tax year. The base is the full assessed tax if no advance tax was paid, or the shortfall (assessed tax − advance tax paid) if the 90% test fails.

Interest period end date

From 1 April following the tax year to the date of determination of total income under section 270(1), or to completion of regular assessment

Section 424(1)(i) and (ii). If tax is paid earlier, interest on that part runs only up to the date of payment (section 424(4)).

Order of adjustment of a short payment

Fee first, then interest, then tax

Section 266(3). Any unpaid balance makes the assessee an assessee in default (section 266(8)).

Advance tax by order of Assessing Officer

Specified sum = higher of (total income of latest regularly assessed year) and (total income returned for any later tax year)

Section 407(1) and (3). The order can be passed up to the last day of February of the financial year (section 407(2)).

Duty to file

Company required to furnish return under section 263 must do so by the due date in section 263(1)

Applies to a company as a person required to file. State the section in your answer.

Fee for late return (section 428(a))

Total income ≤ ₹5,00,000: ₹1,000; any other case: ₹5,000

Applies where the return is not furnished by the due date. Test the income against ₹5,00,000.

Fee for return beyond nine months (section 428(b))

Return under section 263(5) furnished beyond nine months from end of tax year: ₹1,000 if total income ≤ ₹5,00,000; otherwise ₹5,000

Read together with the clause on the due date. Do not state a cumulative amount unless the facts support it.

Fee for missing tax audit (section 428(c))

Up to one month of continuing failure: ₹75,000; thereafter: ₹1,50,000

Failure to get accounts audited and furnish the report under section 63.

Fee for missing accountant's report (section 428(d))

Up to one month: ₹50,000; thereafter: ₹1,00,000

Report required under section 172.

Verification of company return (section 265, serial 3)

Managing director; if none or unable for unavoidable reason: any director or other prescribed person

General company case, excluding serials 4 to 7.

Special verifiers for companies

Non-resident: power of attorney holder; being wound up or receiver appointed: liquidator; management taken over by government: principal officer; CIRP admitted: insolvency professional

Serials 4, 5, 6 and 7 of the section 265 table.

Quick revision

• Section 206(1)(a): if tax on total income is less than MAT, book profit is deemed total income and tax equals MAT.
• MAT rate on book profit is 14% for companies in general and 9% for an IFSC unit earning solely in convertible foreign exchange.
• Book profit starts from the profit in the statement of profit and loss prepared under Schedule III to the Companies Act, 2013, or the governing enactment for banks, insurers and electricity companies.
• Add back income-tax, reserves, unascertained provisions, dividends, depreciation and deferred tax debited to the statement of profit and loss.
• Reduce by withdrawals from reserves already added back, depreciation excluding revaluation depreciation, and deferred tax credited.
• Under clause (c)(xvi), for a company other than one covered by clause (d)(vi) or (vii), the reduction is the lower of brought forward loss (excluding depreciation) and unabsorbed depreciation, as per books. Where either amount is nil, the lower figure is nil, so nothing is reduced under clause (c)(xvi).
• Clause (d)(vi) applies where the Tribunal, on an application by the Central Government under section 241 of the Companies Act, 2013, has suspended the Board and nominated new directors under section 242. Clause (d)(vii) applies to a company against which CIRP has been admitted under section 7, 9 or 10 of the Insolvency and Bankruptcy Code, 2016. In both cases, the aggregate of unabsorbed depreciation and brought forward loss (excluding depreciation) is reduced from book profit.
• A company must furnish an accountant's report certifying book profit computed under section 206.
• MAT does not apply to a company having income from life insurance business under section 194(1), or one that has exercised the option under section 200(5) or section 201(2). Clause (l) also excludes certain foreign companies, for example a resident of a treaty country that has no permanent establishment in India.
• Alternate minimum tax of 18.5% applies to non-company persons claiming certain deductions; do not mix it up with MAT for companies.
• Clauses (m) to (p) of section 206(1) were omitted with effect from 1 April 2026, so tax paid under section 206(1) creates no fresh MAT credit. Only credit under section 115JAA of the 1961 Act brought forward as on 31 March 2026 can be used, under sub-sections (3) and (4). For a domestic company that has exercised the option under section 200(5) or 201(2) for a tax year beginning on or after 1 April 2026, this credit can be set off up to 25% of the tax payable on total income in a year. No carry forward or set-off is allowed beyond the fifteenth tax year after the year in which the credit first became allowable under section 115JAA.
• Foreign companies use the brought forward credit only to the extent that tax on total income exceeds MAT, up to the difference between the two, within the same 15-year limit.
• Always end a computation with a clear conclusion on the tax payable.

Common mistakes

• Setting off a speculation loss against business income or capital gains. Fix: Remember section 113(1): speculation loss goes only against speculation profit.
• Carrying forward speculation loss for more than four tax years. Fix: Count four tax years immediately after the year the loss was first computed (section 113(3)).
• Adding depreciation and not deducting it, or the reverse Fix: Depreciation is added back and the depreciation debited is deducted, excluding depreciation on revaluation. So with no revaluation the net effect is nil.
• Deducting both brought forward loss and unabsorbed depreciation Fix: Deduct only the lesser of the two as per books. If either is nil, the deduction is nil.
• Applying 30% to every domestic company without checking the concessional regime or the 25% limit. Fix: Always read turnover details and the regime option in the question before choosing the rate.
• Charging surcharge on income instead of on tax. Fix: Surcharge is a percentage of the income-tax. Compute tax first, then multiply by the surcharge rate.
• Treating accreted income as profit or surplus of the year Fix: It is assets at fair market value minus liabilities on the specified date, not a yearly profit.
• Forgetting the reduction for specified assets and related liabilities Fix: Always apply sub-section (3) before applying the rate.
• Deducting advance tax while computing assessed tax for the 90% test Fix: Section 424(2) deducts only TDS/TCS and the reliefs and credits listed there. Advance tax is compared with the assessed tax, not deducted from it.
• Counting the interest months from the end of the advance tax instalment date or from the due date of the return Fix: For section 424 the period starts on 1 April following the tax year. It ends on the date of determination of total income under section 270(1) or completion of regular assessment, or the date tax is paid under section 266.

Exam tips

• Always state the provision and apply its conditions to the facts before concluding.
• Keep speculation items in a separate column from the start.
• Write the last year until which each loss can be carried forward.
• For reorganisation cases, tabulate each condition and mark met or not met, then state the consequence.
• Use the official section numbers of the Income-tax Act, 2025 only where you are sure, otherwise describe the rule in words.
• Open with the section 206(1) test in one sentence, then compute. Markers look for provision, analysis and conclusion.
• Show the add and deduct items in a list so partial marks are easy to give even if one figure is wrong.
• Always check the exclusions first: the option under section 200(5) or 201(2), life insurance business, and the foreign company conditions.