Income Tax Implication on Specified Transactions: formula sheet

Key formulas

Rule-making power

Board + Central Government control + notification = rules under section 533(1)

The power is to make rules for carrying out the purposes of the Act. Section 533(2) lists matters without limiting the general power.

Estimation of income

Income not definitely ascertainable, or only with unreasonable trouble and expense → rules may prescribe estimation methods (section 533(3))

This applies to cases under section 533(2)(b). An assessment on the estimate or proportion is deemed duly made.

Agriculture and business income

Rules may specify the proportion of income deemed to be income liable to tax

Applies only to income derived in part from agriculture and in part from business.

Retrospective rules

Retrospective effect allowed only from a date not earlier than commencement of the Act, and not to prejudice assessees unless the contrary is permitted

Do not say rules can never be retrospective. They can, within these limits.

Section 400 relaxation

Central Government notification → no deduction or collection, or a lower rate, for a person or class of persons

Guidelines under section 400(2) need Central Government approval, bind the authorities and the deductor or collector, and are laid before Parliament.

General rule-making power

Board + subject to control of Central Government + by notification → rules for carrying out the purposes of the Act (s. 533(1))

Section 533(2) listing is without prejudice to this general power.

Estimation of income

Where income cannot be definitely ascertained, or only with unreasonable trouble and expense → rules may prescribe estimation methods or a deemed proportion (s. 533(3))

Applies to the cases in s. 533(2)(b). Proportion rule is for income partly from agriculture and partly from business. Assessment on such basis is deemed duly made.

Retrospective rules

Retrospective effect allowed from a date not earlier than commencement of the Act; no prejudicial retrospective effect on assessees unless permitted expressly or by necessary implication (s. 533(4))

Do not say rules can go back to any date.

Laying before Parliament

Rules laid before each House while in session for a total of thirty days, in one session or two or more successive sessions (s. 534)

If both Houses agree to modify or that the rule should not be made, it has effect only in modified form or no effect, without prejudice to things previously done.

Other delegated powers in the text

Notification to relax or lower TDS or TCS (s. 400(1)); Board guidelines to remove difficulty with Central Government approval, binding on authorities and deductors, laid before Parliament (s. 400(2)); faceless schemes (ss. 245, 260)

Section 400(2) was substituted w.e.f. 1-4-2026 to make the guidelines binding. Notifications under ss. 245 and 260 must be laid before Parliament as soon as may be.

Basic capital gain

Capital gain = Full value of consideration − Transfer expenses − Cost of acquisition − Cost of improvement

Classify as short term or long term by holding period before applying the rate. Use the holding period for the specific asset.

Block of assets, asset remains (section 74(2))

Deemed STCG = Full value of consideration − [Transfer expenses + Opening WDV of block + Actual cost of assets acquired in the year]

Applies only if the result is a positive excess. If no excess, there is no capital gain under this rule.

Block ceases to exist (section 74(3))

Cost of acquisition = Opening WDV + Actual cost of assets acquired in the year; gain is deemed short term

The block ceases to exist when all assets in it are transferred in the tax year.

Net consideration (section 215(2)(b))

Net consideration = Full value of consideration − Expenditure wholly and exclusively for the transfer

This is the base for testing how much of the NRI reinvestment qualifies.

NRI reinvestment, full exemption (section 215(1)(i))

If cost of new asset ≥ net consideration, whole long-term capital gain is not charged

The new asset must be a specified asset acquired within six months after the transfer.

NRI reinvestment, proportionate exemption (section 215(1)(ii))

A = B × C ÷ D

A = gain not charged; B = whole capital gain; C = cost of the new asset; D = net consideration of the original asset. Used when C < D.

Withdrawal of relief (section 215(3))

If new asset is transferred or converted into money within 3 years of acquisition, the gain not charged is deemed long-term capital gain of that tax year

The three years run from the date of acquisition of the new asset.

Amalgamation loss transfer

Accumulated loss + unabsorbed depreciation of amalgamating company → deemed loss/depreciation of amalgamated company for the year of amalgamation

Section 116(1). Only for the listed categories of amalgamation, and subject to section 116(4) conditions.

Amalgamating company conditions

Business ≥ 3 years; holds ≥ ¾ of book value of fixed assets held 2 years before amalgamation

Section 116(4)(a). Assets must be held continuously up to the date of amalgamation.

Amalgamated company conditions

Holds ≥ ¾ of book value of acquired fixed assets for 5 years; continues business for 5 years; meets prescribed conditions

Section 116(4)(b). Failure makes the set-off amount income in the year of breach (section 116(5)).

Carry forward limit

Transferred loss carried forward for not more than 8 tax years after the year the loss was first computed for the original predecessor entity

Section 116(12). Applies to amalgamations and reorganisations effected on or after 1 April 2025.

Demerger loss allocation

Directly relatable to transferred undertaking → resulting company; otherwise apportioned in the ratio of assets retained : assets transferred

Section 116(6). Government may notify conditions for genuine business purpose under section 116(7).

Slump sale

Transfer of an undertaking for a lump-sum consideration without values assigned to individual assets and liabilities

Definition stated in general terms. Check the capital gains provisions for computation.

Capital gain on transfer of shares

Capital gain = Full value of consideration − (Cost of acquisition + Cost of improvement, if any + Expenses on transfer)

Classify as short-term or long-term by the holding period. Listed equity shares are long-term if held for more than 12 months.

Concessional rates on listed equity shares (STT paid)

LTCG: 12.5% on gain above ₹1,25,000 in the year | STCG: 20%

These rates apply to transfers in tax years governed by the Income-tax Act, 2025 (from 1 April 2026), where the conditions of the Act are satisfied, including securities transaction tax. Grandfathering of cost applies only to listed equity shares acquired on or before 31 January 2018, and only as the Act provides. Check the acquisition date before using it. Other shares are taxed under the general rules.

Dividend in shareholder's hands

Dividend is taxable income of the shareholder at the rate applicable to them

The company pays no separate tax on the dividend it declares. Check the TDS threshold and rate in the current text.

Section 193: resident employee, GDR of knowledge based company

Dividend on such GDRs: 10% | LTCG on such GDRs: 12.5% | Balance of total income: rates in force

Employee must be a resident individual working for an Indian company in a specified knowledge based industry or service, or for its subsidiary. GDRs must be issued under a notified ESOP scheme and bought in foreign currency.

Section 209: non-resident, bonds and GDRs bought in foreign currency

Interest on eligible bonds: 10% | Dividend on eligible GDRs: 10% | LTCG on those bonds or GDRs: 12.5% | Balance: rates in force

Section 72(6) does not apply to the LTCG computation. If the gross total income consists only of such interest or dividend, no deduction is allowed under sections 28 to 58, 60 and 61, section 93(1)(a) or (e), or Chapter VIII (section 209(2)(a)).

Return filing relief for non-resident (section 209(4))

No return needed if total income for the tax year consists only of interest on eligible bonds (Sl. No. 1) and dividend on eligible GDRs (Sl. No. 2) AND tax deductible at source under Chapter XIX-B has been deducted

Both conditions must be met. Long-term capital gains (Sl. No. 3) are not covered. A non-resident with such LTCG, or any other income, does not get this relief.

Seller side: capital asset, land or building (section 78(1))

If consideration < stamp duty value, full value of consideration = stamp duty value

Applies to capital gains computation for land or building or both.

110% tolerance (section 78(1)(b) and section 53(2))

If stamp duty value ≤ 110% × consideration, full value of consideration = actual consideration

If the stamp duty value is even slightly above 110%, the whole stamp duty value is used, not just the excess.

Stamp duty value on date of agreement

Use stamp duty value on date of agreement if agreement date ≠ registration date AND part or full consideration was received on or before the agreement date in specified banking or online mode

Both conditions must be met. Cash advance does not qualify. Section 53(3) and (4) give the same rule for non-capital assets.

Money received without consideration (section 92(2)(m)(i))

If total received in the tax year from any person or persons > ₹50,000, whole sum is income

Not just the excess over ₹50,000. At exactly ₹50,000 nothing is taxed.

Immovable property without consideration (section 92(2)(m)(ii)(A))

If stamp duty value > ₹50,000, income = stamp duty value

Whole stamp duty value is taxed.

Immovable property for consideration (section 92(2)(m)(ii)(B))

Income = stamp duty value − consideration, if this excess > higher of ₹50,000 or 10% of consideration

If the excess is within the threshold, no income arises.

Other property without consideration (section 92(2)(m)(iii)(A))

If aggregate fair market value > ₹50,000, income = whole aggregate fair market value

Property means shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures, any work of art, bullion and virtual digital assets.

Other property for consideration (section 92(2)(m)(iii)(B))

If aggregate FMV − consideration > ₹50,000, income = FMV − consideration

Only the excess is taxed here.

Exempt receipts (section 92(3))

No charge under section 92(2)(m) on receipts from a relative, on marriage of the individual, under a will or inheritance, in contemplation of death, etc.

Learn the relative list in section 92(5)(g).

Quick revision

• Section 533 lets the Board, subject to Central Government control, make rules by notification to carry out the Act.
• Rules under Section 533 can prescribe forms, procedures, valuation methods and the manner of filing.
• Rules cannot prejudice assessees retroactively unless the contrary is permitted, and cannot predate the Act's commencement.
• Slump sale profits are chargeable as long-term capital gains under Section 77(1).
• If the undertaking was held for thirty-six months or less, the slump sale gain is short-term.
• In a slump sale, net worth is deemed to be both the cost of acquisition and the cost of improvement.
• Fair market value of the capital assets on transfer, as prescribed, is deemed to be the full value of consideration.
• Net worth equals aggregate value of total assets less liabilities as in the books; revaluation changes are ignored.
• For net worth, depreciable assets are taken at the written down value of the block; self-generated goodwill is nil.
• An accountant's report computing and certifying net worth must be furnished in the prescribed form.
• Answer every case in order: provision, analysis of facts, conclusion.

Common mistakes

• Saying the Board can make rules on its own without any control. Fix: Always write: the Board, subject to the control of the Central Government, by notification.
• Treating the list in section 533(2) as exhaustive. Fix: State that the matters are in particular and without prejudice to the general power in section 533(1).
• Saying Parliament makes the income-tax rules. Fix: Write that the Board makes rules subject to Central Government control; Parliament only has a laying and modification check.
• Treating the list in section 533(2) as exhaustive. Fix: Quote the words 'without prejudice to the generality of the foregoing power' and clause (zb).
• Computing gain asset by asset for depreciable assets in a block. Fix: Use section 74. Work at block level with opening WDV and additions, and treat any excess as short-term gain.
• Forgetting to add assets acquired during the year when testing the block excess. Fix: Deduct transfer expenses, opening WDV and the actual cost of assets acquired in the year before finding the excess.
• Allowing loss carry forward for every amalgamation. Fix: Check that the case is within section 116(1) categories before moving any loss.
• Mixing up the three-year and five-year tests. Fix: Three years of business and the two-years-before asset test apply to the amalgamating company. Five years of holding and continuing the business apply to the amalgamated company.
• Treating dividend and buyback proceeds the same way Fix: Decide by the current text. Dividend is income from the company's distribution. Buyback follows its own rule in the Act as amended by the Finance Act, 2026.
• Applying the ₹1,25,000 exemption to short-term gains Fix: The exemption is for long-term gains on listed equity shares under the concessional rate. Short-term gains are taxed at the short-term rate from the first rupee.

Exam tips

• Open every answer on this topic with section 533(1): Board, Central Government control, notification.
• Match each procedural detail in the facts to the right clause of section 533(2) in words, not just a number.
• If section numbers are not given, describe the power in plain words. A correct description earns marks; a wrong number does not.
• Distinguish section 533 rules, section 400 notifications and guidelines, and section 527 notifications in one line each.
• Close with a firm conclusion on the tax treatment or compliance step, as the paper is case-based.
• Quote section numbers: 533(1) for the power, 533(2) for matters, 533(3) for estimation, 533(4) for retrospectivity, 534 for laying.
• In case studies, match the facts to a specific clause of section 533(2) before concluding.
• Show the Act-versus-rules distinction in one line; it is a favourite short-note point.