Computation of Total Income, Tax Liability and Filing of Returns of various Entities excluding Companies: formula sheet

Key formulas

Total income (structure)

Total income = Gross total income − deductions allowed

Gross total income is the sum of income under all heads after clubbing and after set-off of current-year losses. Deductions are restricted under the new regime by section 202(2).

New regime slabs (section 202(1))

Up to ₹4,00,000: Nil | ₹4,00,001 to ₹8,00,000: 5% | ₹8,00,001 to ₹12,00,000: 10% | ₹12,00,001 to ₹16,00,000: 15% | ₹16,00,001 to ₹20,00,000: 20% | ₹20,00,001 to ₹24,00,000: 25% | Above ₹24,00,000: 30%

Applies to an individual, HUF, AOP (not a co-operative society), BOI and certain artificial juridical persons, unless the option under section 202(4) is exercised. Surcharge, cess and any rebate are separate and not in the text supplied.

Option out of the new regime (section 202(4))

Business or profession income: opt on or before the return due date under section 263(1); once exercised it continues; withdrawal allowed only once; after withdrawal, never again unless business income ceases. No business income: opt along with the return.

The option is made in the prescribed manner for the tax year.

Speculation loss (section 113)

Set off only against speculation business profits; carry forward for not more than four succeeding tax years

The four-year limit counts from the tax year after the loss was first computed.

Specified business loss (section 114)

Set off only against profits of another specified business; carried forward to following years

The text supplied for section 114 contains no time limit.

Race horse activity loss (section 115)

Set off only against income from owning and maintaining race horses; carry forward not more than four succeeding tax years

Loss means stake money falling short of revenue expenditure on maintaining the horses.

Core rule

Sum in section 37(2) → deduction in the tax year of actual payment

Applies irrespective of the accounting method, any contrary provision in the Act, or the year the liability arose.

Grace rule

Paid after year-end but on or before due date under section 263(1) → deduction in the year of liability

Applies to all listed sums except the MSME clause (g).

MSME rule

Amount payable to a micro or small enterprise beyond the section 15 MSMED Act time limit → deduction only when paid

No grace period up to the return due date for this item.

Interest conversion

Interest converted into loan, advance, debenture or other deferring instrument ≠ actually paid

Applies to interest on borrowings from specified financial entities.

No double deduction

Deduction already allowed in year of liability → not allowed again on payment

Section 37(5).

Specified financial entities

Public financial institution, State Financial Corporation, State Industrial Investment Corporation, notified class of NBFCs, scheduled bank, co-operative bank (other than a primary agricultural credit society or primary co-operative agricultural and rural development bank)

Interest to other lenders is outside clause (e).

Employee contribution

Section 37 does not apply to employee contributions covered by section 2(49)(o)

Section 29(1)(e) allows deduction if credited to the employee's fund account on or before the return due date under section 263(1).

Book profit

Book profit = Net profit as per P&L (computed as per Chapter IV-D) + aggregate remuneration to all partners, if deducted in arriving at net profit

Only remuneration is added back. Interest to partners is not added back in this definition.

Allowed working partner remuneration

Lower of (actual authorised remuneration) and [on first ₹6,00,000 of book profit: higher of ₹3,00,000 or 90% of book profit; on the balance: 60%]

In case of a book loss, the ₹3,00,000 limit applies. Apply to the aggregate remuneration of all working partners.

Interest to partners

Allowed interest = lower of (interest authorised by deed) and simple interest at 12% per annum

Excess over 12% is disallowed. The deed must authorise it for that period.

Non-working partner

Remuneration to non-working partner = fully disallowed

A working partner must be an individual actively engaged in conducting the affairs of the business or profession.

Partner's taxable receipt

Taxable in partner's hands = amount allowed to the firm under section 35(e)

Section 26(2)(g). Share of profit after firm's tax is dealt with by separate exemption rules, not covered in the text supplied.

AOP/BOI member share (determinate shares)

Share = (Total income − payments to members) × profit ratio + payments to that member

If the apportioned amount is a loss, the payment is adjusted against it. Section 309(2).

Member's borrowing cost

Interest on capital borrowed to invest in the AOP/BOI is deducted from the member's share

Section 309(4). It reduces the share chargeable under business income.

Taxable regular income, full application

If amount applied (s.341) + amount accumulated (s.342) ≥ 85% of regular income, taxable regular income = nil

Section 336(a). Application and accumulation must be for charitable or religious purposes, in that tax year.

Taxable regular income, shortfall

Taxable regular income = 85% of regular income − (amount applied + amount accumulated)

Section 336(b). Used when application plus accumulation is less than 85%. Do not use 100% of income as the base.

Eligibility for registration

Constituted in India for charitable or public religious purposes + properties held for the general public under an irrevocable trust

Section 332(2). Partly charitable trusts qualify only if formed before the Income-tax Act, 1961 commenced.

Registration time limits and validity

Activities not commenced: apply during the tax year from which registration is sought, order in one month from end of month, provisional registration for three tax years. Activities commenced: order in six months from end of quarter, five tax years.

Section 332(3). Renewal applications must be made at least six months before expiry. Modification of objects: apply within thirty days.

Longer validity for smaller organisations

Five years becomes ten years if total income, before this Part, does not exceed ₹5 crore in each of the two preceding tax years

Section 332(5). It applies to cases at Sl. Nos. 3 to 7 of the Table only.

Political party conditions

Books kept + record of contributions above ₹20,000 + audit + no donation above ₹2,000 except by non-cash modes + treasurer report + return filed on time

Schedule VIII, Sl. No. 1. Cash donations above ₹2,000 break the condition. If any condition fails, income is taxed under section 12(2).

Electoral trust condition

Distribute 95% of aggregate donations received in the year, along with any surplus brought forward, to registered political parties

Schedule VIII, Sl. No. 2. The trust must also function as per rules made by the Central Government.

Persons covered by section 202

Individual, HUF, AOP (not a co-operative society), BOI, artificial juridical person under section 2(77)(g)

A co-operative society is excluded from the AOP limb. It does not use these slabs.

Default slabs under section 202(1)

Up to ₹4,00,000: Nil | ₹4,00,001–₹8,00,000: 5% | ₹8,00,001–₹12,00,000: 10% | ₹12,00,001–₹16,00,000: 15% | ₹16,00,001–₹20,00,000: 20% | ₹20,00,001–₹24,00,000: 25% | above ₹24,00,000: 30%

Applies unless the person exercises the option under section 202(4). Each rate applies only to the income in its band.

Section 202(2) restrictions

No exemption or deduction listed in clause (a); no set-off of loss or depreciation attributable to those deductions; no house property loss set off against other heads

Chapter VIII deductions are barred except those in sections 124(1), 124(2), 125(2) and 146.

Option under section 202(4), business income

Exercise by return due date; continues for later years; one withdrawal only; no re-entry after withdrawal

A person without business income opts along with the return, year by year.

Cooperative society slabs (regular rates)

Up to ₹10,000: 10% | ₹10,001–₹20,000: 20% | above ₹20,000: 30%

Add surcharge where applicable and 4% health and education cess. Check the rate schedule of the Finance Act, 2026 for your session.

Optional concessional rates for cooperative societies

22% flat for a society that forgoes specified deductions; 15% for a new manufacturing society meeting the conditions

These are options, not defaults. Surcharge and cess apply on top. Check the exact conditions in your study text.

Special reserve deduction (section 32(e))

Deduction = amount carried to reserve, limited to 20% of profits from eligible business and to the headroom under 2 × (paid-up capital + general reserves)

Applies to specified entities, including banking companies and cooperative banks of the listed type.

Sugar cooperative deduction (section 32(g))

Sugarcane purchase expenditure allowed only up to the Government-fixed or approved price

Any price paid above the fixed or approved price is not allowed under this clause.

Political contributions (section 137)

Deduction for contributions other than in cash to a registered political party or electoral trust

Not available to a local authority or an artificial juridical person wholly or partly funded by the Government.

When AMT applies

Regular income-tax < AMT → tax payable = AMT

Only for a person other than a company who has claimed Chapter VIII-C (other than section 149) or section 46 deductions.

Adjusted total income

ATI = Total income before AMT + Chapter VIII-C deductions (other than section 149) + [section 46 deduction − depreciation allowable under section 33 as if no deduction were allowed on those assets]

Section 149 deduction is not added back.

AMT rates

AMT = ATI × 18.5% (general); 15% (co-operative society); 9% (IFSC unit earning solely in convertible foreign exchange)

Compute on adjusted total income, not on total income.

AMT credit

Credit = AMT − regular income-tax of that year

No interest is paid on the credit.

Set-off of credit

Set-off in a year ≤ regular income-tax − AMT of that year

Carry forward not allowed beyond the fifteenth tax year immediately succeeding the year the credit becomes allowable.

Exemption for small ATI

Individual, HUF, AOP, BOI or artificial juridical person (section 2(77)(g)) with ATI ≤ ₹20,00,000 → AMT does not apply

The limit is on adjusted total income. It does not cover firms, LLPs or co-operative societies.

Advance tax instalments (section 425(1))

15 June: 15% | 15 September: 45% | 15 December: 75% | 15 March: 100% of tax due on returned income (cumulative)

Each target is cumulative. Shortfall = target minus advance tax already paid by that date.

Interest rate on shortfall (section 425(1))

Interest = shortfall × 3% for June, September and December; shortfall × 1% for March

The Table gives these as flat rates on the shortfall for each instalment. Compute each instalment separately and add.

Safe harbour (section 425(2))

No interest if paid ≥ 12% by 15 June and ≥ 36% by 15 September

Each safe harbour protects only its own instalment. Check each date separately.

Presumptive case (section 425(3))

Interest = 1% × (tax due on returned income − advance tax paid by 15 March)

Applies to an assessee who declares profits and gains under section 58(2) (Table Sl. No. 1 or 3). It is simple interest.

Tax due on returned income (section 425(5))

Tax on returned total income − TDS/TCS − reliefs under sections 157, 159, 160 − credit under section 206(2)(e) to (h), (3), (4)

This is the base for all instalment percentages.

Order of adjustment (section 266(3))

Payment goes first to fee, then interest, then tax

If you pay less than the total, the tax balance stays unpaid.

Unforeseen income relief (section 425(4))

No interest on shortfall caused by under-estimating capital gains, income under section 2(49)(n), first-time business income or dividend income, if the tax on it is paid in full in later instalments or by 31 March

The dividend meaning excludes sub-clause (e) of section 2(40), as stated in section 425(6).

Due date: 30 November

Where section 172 applies: assessee, including partners of the firm or the spouse of such partner (if section 10 applies to the spouse) → 30 November

Applies to the person to whom section 172 applies. The table is checked first.

Due date: 31 October

Where section 172 does not apply: company; assessee (other than a company) whose accounts must be audited under this Act or any other law; partner of such an audited firm or the spouse of such partner → 31 October

Audit can arise under any law, not only under the tax Act.

Due date: 31 August

Where section 172 does not apply: assessee with business or profession income whose accounts are not required to be audited; partner of a non-audited firm or the spouse of such partner → 31 August

Non-audited salaried-only individuals are not here. They fall under 'any other assessee'.

Due date: 31 July

Any other assessee → 31 July

Example: an individual with salary and interest income only.

Belated return

Within 9 months from the end of the tax year, or before completion of assessment, whichever is earlier

Section 263(4). Available to a person who did not file within the time under section 263(1).

Revised return

Within 12 months from the end of the tax year, or before completion of assessment, whichever is earlier

Section 263(5). Only if you filed under sub-section (1) or (4) and found an omission or wrong statement. It is subject to section 428(b). The period was 9 months before Act No. 4 of 2026.

Updated return

Within 48 months from the end of the financial year succeeding the relevant tax year

Section 263(6)(a). Open whether or not you filed earlier, but the bars in clauses (c) and (d) apply.

Defective return

Rectify within 15 days of intimation (extendable on application); late rectification before assessment may be condoned

If not rectified, the return is invalid and treated as not filed. Section 263(7).

Quick revision

• Follow one method every time: status, heads, set-off, deductions, tax, credits, interest, filing.
• Check the entity's status before applying any rule, since it controls rates and exemptions.
• Check payment-linked deductions against the actual payment, not the accrual.
• For firms and LLPs, treat partner remuneration and interest strictly by the Act's conditions.
• For trusts, test registration, application of income and the exemption conditions before computing tax.
• Under section 206(2), a non-company pays AMT when its regular income-tax is less than the AMT.
• Adjusted total income is total income increased by deductions claimed under Chapter VIII-C (other than section 149) and section 46, with the section 46 adjustment for depreciation.
• AMT rates for non-companies: 18.5% in general, 15% for a cooperative society, 9% for an IFSC unit earning solely in convertible foreign exchange.
• AMT does not apply to an individual, HUF, AOP, BOI or artificial juridical person whose adjusted total income does not exceed ₹20 lakh.
• AMT credit is the excess of AMT over regular tax, carries forward up to the fifteenth succeeding tax year and is set off only against regular tax in excess of AMT, with no interest.
• A person to whom AMT applies must furnish an accountant's report in the prescribed form before the specified date.
• Always end a computation with advance tax, TDS credit and interest to show the net payable or refundable.

Common mistakes

• Setting off a speculation loss against salary or other business income. Fix: Under section 113(1), a speculation loss goes only against profits of another speculation business. Carry the rest forward.
• Claiming old-regime deductions while computing under the default regime. Fix: Check section 202 at the start. If no option is exercised under section 202(4), apply the section 202(2) restrictions.
• Deducting a listed expense on accrual because the books follow the mercantile system. Fix: Section 37(1)(b) overrides the method of accounting. Listed sums need actual payment.
• Applying the due-date grace to MSME dues. Fix: Section 37(3) excludes clause (g). MSME dues paid late are deducted only in the year of payment.
• Allowing remuneration to a partner who is not a working partner. Fix: Check that the partner is an individual actively engaged in the business. Otherwise disallow the full amount under section 35(e)(i).
• Computing book profit without adding back remuneration. Fix: Add back the aggregate remuneration to all partners if it was deducted. Do not add back interest.
• Taxing the whole shortfall against 100% of income Fix: Under section 336 the base is 85% of regular income. Deduct application and accumulation from that figure only.
• Assuming registration is automatic for any trust Fix: Registration under section 332 is needed to claim the benefits. Check eligibility, application time and validity before computing.
• Treating a cooperative society as an AOP and applying the section 202 slabs. Fix: Section 202(1)(c) says AOP 'other than a co-operative society'. Use the cooperative society's own rate rule.
• Applying the full slab rate to the whole income instead of band by band. Fix: Split total income into bands and apply each rate only to its band.

Exam tips

• Start every answer with the regime and residential status. Examiners look for this first.
• Quote the section number for each restriction you apply, but only when you are sure of it.
• Write provision, analysis and conclusion for each issue, as the paper is case-based.
• Show slab-wise tax in a small list so marks are earned even if the final figure slips.
• State clearly which losses are carried forward and any time limit.
• Write the section 37(1) rule first, then apply it to each item in a table-like list using bullets, since the question usually mixes listed and unlisted expenses.
• Always state whether payment fell in the year, before the return due date, or after. This decides the answer.
• Remember the three traps: MSME has no grace, converted interest is not paid, and the lender must be a specified financial entity.