1.2 Generally speaking, the word 'income' covers receipt in the shape of money or money's worth which arises with certain regularity or excepted regularity from a definite source. It is not all receipt that forms the basis of taxation under the act. Broadly, an analogy is drawn of a tree and the fruits of that tree. The tree symbolizes the source from which one gets fruits which symbolize 'income'. The receipt arising from the sale of tree itself is, therefore, considered a capital receipt which is not income, but the receipts flowing from this source viz., fruits are income. On application of this analogy, it can be said that while the receipt arising from the sale of a machine is not income, the receipt arising from the realization of rent is income,. In the same way, receipt from the sale of a machine is not income. In these cases, produce brought out from the machine is income. In these cases, however, if a person deals in purchase and sale of house properties or machines, these assets do not remain a source and the profit derived from activities of purchase and sale become income. The source need not necessarily be tangible as the return for human exertion is also income.

a) Income of spouse from,

1. Remuneration derived from the concern in which the individual is substantially interested unless the remuneration is by virtue of the application of technical or profession skill possessed by him or her;
2. Assets transferred by the individual to the spouse or to any other person for the benefit of the spouse unless the transfer is for adequate consideration or in consideration of an agreement to live apart.

b) Income of son's wife from assets transferred by the individual to her or to any other person for her benefit unless the transfer is for adequate consideration.

c) income of his minor child - other than the minor child suffering from disability specified in section 80-U, referred to in para 5.3.9 except when income arises to the child on account of any manual work done by him or account of any activity which involves application of any skill, talent or specialized knowledge and experience.

2.3.1 We may take a few instances to make the position clear:-

2.3.2 'Firm' or 'an association of persons' is generally 'resident'. The only exception is a firm whose control and management during the year is wholly from out side India.

2.3.3 A company is 'resident' if it is an Indian company. All the companies formed and registered in India under the Indian companies act and the government corporations are 'Indian companies'. Even the company registered outside India can be resident if the control and management of its affair during that year is wholly from India.

2.6.1 since a 'resident' is liable to pay in India on his 'total world income'. It is possible that he may have to pay tax on his foreign income in that country also, where it is earned. Such situation leads to double taxation of the same income - in India and again in the country where it is earned. To avoid such a situation, the government of India has entered into agreements for avoidance of double taxation with different countries, a discussion about which is made in chapter XII.

4.2.1 In order to be taxable under the head 'salaries'. It is necessary that there is a relationship of employer and employee between the payer and the receiver. It is for this reason remuneration received as a partner is not taxable as 'salary'.
4.2.2 On computing the salary income for the assessment year 1999-20000, a standard deduction is allowed as under:-

1. Where salary income is upon Rs. One lakh - 33-1/3% or Rs. 25,000/- whichever is less.
2. Where salary income exceeds Rs. One lakh but does not exceed rupee five lakh - Rs. 20,000/-.
3. Where salary income exceeds rupees five lakh - NIL
   Deduction for profession or employment tax levied by State Government is also allowed.

4.3.1 from the annual value of a house property in the occupation of a talent, taxes levied by any local authority in respect of the property to the extent such taxes are borne by the owner are deductible on actual payment basis to arrive at the 'net annual value'.
4.3.2 Where the property consists of a house or a part of a house which is in the occupation of the owner for his own residence, its annual value is taken as NIL. But if such a property is let out during any part of the previous year, its annual value is taken proportionately. Further, where the owner has only one residential house and the house can not be actually occupied by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, its annual value is taken to be nil provided the house is not actually let out and no other benefits is derived by the owner from it.
4.3.3 from the net annual value, determined as above deductions on account of annual repairs and collections expenses (1/4th of the net annual value irrespective of actual expenditure), insurance charges in respect of property, any annual charge, interest paid on any money borrowed for the building, ground rent, land revenue, unrealized rent are allowed. All these deductions ate not allowed in respect of the house property in the occupation of the owner for his own residence, the annual value of which is taken nil. In such a case deduction is allowed only for interest and that too up to Rs.1, 00,000 only provided the house was constructed or acquired after 1.4.1999 but before 1.4.2003.
4.3.4 Under the circumstances mentioned in sec.27 of the I.T. act, a person can be deemed to be the owner of the house property and in such a case the income from that property is taxable in the hands of that person.
4.3.5 where the net result of computation of income from house property is loss and the assessee has income assessable under any other head of income, he is entitled to have such loss set off against income under other heads. Any loss remaining unadjusted can be carried forwards to the following assessment year for set-off against income from house property in that year and in succeeding seven years.

4.4.1 Primarily the business or professional income is computed as per the accepted business and accounting norms and in accordance with the method of accounting regularly employed by the tax payer. Thus, whatever constitutes a legitimate outgoing of revenue nature of a business is allowed as a deduction in computing the business income. However, certain deductions are allowed in the act as per the specific provisions made with regard to those deductions and certain deductions, though business related, are not allowed because of specific bar on their allowance under Act.
4.4.2 some of the specific provisions made in law for permissible deductions in computation of business or professional income relate to the following items of expenditure and outgoings:-

1. Rent, rates, taxes, repairs and insurance of premises used for the purpose of business or profession;
2. Repair and insurance of machinery, plant and furniture used for the purpose of business of profession;
3. Depreciation of tangible assets viz., building, machinery, plant and furniture and intangible assets viz., know how, patents copy rights, trade marks, licenses, franchises or any other business or commercial right of similar nature owned by the tax payer and used for the purpose of business or profession;
4. Expenditure in respect of scientific research:-
   1. On in house research related to the business of the assessee.
   2. Capital expenditure (except expenditure on land) in relation to the research related to the business.
   3. Contribution to an approved university, college, association or institution for scientific research including research in social science or statistical research.
   4. For payment to a national laboratory or a university or an Indian institute of technology for scientific research under an approved programme, a weighted deduction equal to one and one fourth time the sum paid is allowable.
5. Expenditure of deferred revenue nature which are amortized over a number of years. These are:-

   a) On acquisition of patent rights and copy rights (sec. 35A)	14 years (up to A.Y. 1998-99)
   b) On acquisition of know how (sec. 35AB)	6 years (up to A.Y. 1998-99)
   c) Preliminary expenses on setting up of business (Sec. 35D)	5 years
   d) On prospecting for or extraction or production of mineral deposits (sec.35E)	10 years
   e) Expenditure in the nature of capital expenditure on obtaining license to operate telecommunication services (sec.35ABB)	Years during which the license remains in force.

6. Premium in respect of insurance against risk of damage or destruction of stock and stores used for business or profession;
7. Premium in respect of health insurance of the employees;
8. Bonus and commission to employees;
9. Interest on capital borrowed for the business or profession;
10. Contribution to a recognized provident fund, an approved superannuation fund or an approved gratuity funds;
11. Bad debts; and
12. Payments to notified rural development fund or to national urban poverty eradication fund or to approved organization/institutions engaged in activities of conservation of natural resources or afforestation or for carrying out eligible projects or schemes approved by the national committee.

4.4.3 In addition, there is a residuary provision under which the tax payers can claim deduction in respect of any expenditure incurred wholly and exclusively for the purpose of the business or profession.
This omnibus clause is not available for claiming any expenditure for which a specific provision is made or for expenses of capital or personal nature or expenditure for any purpose which is an offence or which is prohibited by law.
4.4.4 Expenses, even though business-related, which are not allowed as deduction are:-

1. expenditure on advertisement in any souvenir etc. of a political party;
2. any interest, salary, royalty, fees, for technical services or other sum payable outside India from which due tax has not been deducted at source;
3. any tax calculated on the basis of profits or gains of the business or profession e.g., income tax;
4. Wealth tax.

4.4.5 Apart from these; the tax authorities may disallow, or restrict the deduction to a reasonable level, where the payments are made to any close relative or a business associate. Claims are also to be disallowed to the extent of 20% where payments in excess of Rs. 10,000/- are not made by a crossed cherub or a crossed bank draft.
4.4.6 The above states principles of computation of business income apply uniformly to all forms of business activities. However, there exist certain special provisions under the act which deal exclusively with taxation of business income from certain specific activities. These provisions make departure from the normal manner of computing income as explained above and prescribe for working out the taxable income on presumptive basis as per the norms laid down. These are:-

i. Business of civil construction or supply of labor for civil construction where the total receipts do not exceed 40 lakh rupees (Sec.44AD)	Profit as declared in the return or the sum equal to 8% of the gross receipts of the previous year, whichever is higher.
ii. Business of plying, hiring or leasing goods carriage, where the assessee does not own more than ten goods carriages (Sec.44AE)	Profits as declared in the return of income or the sum calculated at Rs. 2,000/- per month or part of a month for heavy goods vehicle and Rs. 1,800/- per month or part of a month for other vehicles, whichever is higher.
iii. Retail trade in goods or merchandise where the total turnover of the previous year does not exceed forty lakh rupees.	Profits as declared in the return of income or the sum equal to 5% of total turnover of the previous year, whichever is higher.

Further there are special provisions for computing presumptive income in the case of non-residents engaged in the business of shipping, exploration, etc. of mineral oils, operation of aircraft and civil construction etc. in certain turnkey power projects. Such provisions also exits for taxation of income from certain dividends, interest and units derived by a non-resident or a foreign company and from royalty or fees for technical services derived by a foreign company. A detailed discussion about such provisions is made in chapter vii and x.
4.4.7 It is obligatory on persons engaged in certain specific professions such as legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, authorized representatives, film artists etc., to maintain books of accounts in a manner which may enable the assessing officer to compute their taxable income. The obligation to maintain such books of accounts are also on all other professions and business if the income in any of the preceding three years exceeded rupees 1, 20,000 or the turnover/receipts in any of the preceding three years exceeded rupees ten lakhs. For the business or profession which is newly set up the obligation arises if the income or turnover/receipts is likely to exceed these amounts in the previous year. Persons engaged in activities mentioned in para4.4.6 are exempted from such obligation.
4.4.8 Further, every person carrying on business or profession in India must have his accounts audited by a chartered accountant if his turnover exceeds Rs. 40 lakhs (Rs. 10 lakhs for professional receipt). A copy of the audited accounts and auditor's report are required to be furnished by the due date of filling the return of income. Certain other particulars are required to be filed along with the return of income. The requirement to get the accounts audited does not apply to persons engages in activities mentioned in para4.4.6.
4.4.9 In case of a partnership firm deduction for certain payments made to its partners like interest and remuneration is subject to ceiling laid down in sec. 40(b) introduced by Finance Act 1992.

4.5.1 Capital gain is computes by deducting from the full value of transfer consideration the following:-

1. The cost of acquisition (or the written down value) of and cost of improvement in the asset;
2. The amount of expenditure incurred in connection with such transfer.

The resultant amount in case of short term capital gains is taxable in full at the normal rate of taxation applicable to the tax payer.
4.5.2 In case of the following self-generated assets where there is no cost incurred by the assessee, the law provides for the cost of acquisition to be taken as 'NIL':-

1. Goodwill or a right to manufacture produce or process any article or thing.
2. Tenancy rights
3. Stage carriage permit
4. Loom hours

4.5.3 In case of slump sale of an undertaking or a division thereof, its net worth is to be taken as cost of acquisition. This cost of acquisition is not to be indexed as stated in para4.5.4.
4.5.4 There are special provisions for computation of long term capital gains. In such cases, the actual cost of acquisition and the cost of improvement of the asset is adjusted to take account of inflation in terms of the cost inflation index which is notified by acquired prior to 1st April, 1981, the actual cost can be taken to be its fair market value as on 1st April, 1981 which is than adjusted for inflation in the same manner. The notified cost inflation index is as under:-

S. No.	Financial year	Cost index
1	1981-82	100
2	1982-83	109
3	1983-84	116
4	1984-85	125
5	1985-86	133
6	1986-87	140
7	1987-88	150
8	1988-89	161
9	1989-90	172
10	1990-91	182
11	1991-92	199
12	1992-93	223
13	1993-94	244
14	1994-95	259
15	1995-96	281
16	1996-97	305
17	1997-98	331
18	1998-99	351
19	1999-2000	389

4.5.5 Long term capital gains compute s after taking into consideration the indexed cost of acquisition and/or cost of improvement is taxable for and from the assessment t year 1998-89 at the flat rate of 20% irrespective of the residential status of the assessee. Exceptions are made in the case of certain categories of non-residents and NRIs (refer para7.3.4 and 11.3). In respect of gains arising from transfer of listed securities or unit tax so computed @ 20% will be limited to 10% of capital gain worked out without indexation benefit.
No indexation benefit is available on bonds and debentures as also in respect of global depository receipts purchased by a resident employee under ESOP in foreign currency.
4.5.6 In case of non-residents, protection against loss arising from fluctuation in rupee value is provided in computation of capital gains if the share or debentures of an Indian company was acquired by utilizing foreign currency. This is done to ensure that the amount of capital gains chargeable to tax is not influenced by the exchange rate fluctuation and represents only the accretion in value. The manner of granting such protection is mentioned in para7.3.1 of chapter VII.
4.5.7 Transfer of a capital asset in a scheme of amalgamation or demerger is not regarded as a transfer for the purpose of capital gains when the amalgamated or the resulting company is an Indian company. Further, transfer of a capital assets being shares in Indian companies from one foreign company to another, in a scheme of amalgamation or demerger would not be regarded as a transfer if certain condition conditions are satisfied (para7.3.2). Exemption from tax is also provided, subject to fulfillment of certain condition, when assets are transferred as a result of succession of a sole proprietary concern or a firm by a company.
4.5.8 in case the capital gain arising from transfer of an asset is used for acquiring similar assets within a specified period, the whole or the proportionate amount of capital gain is not included in the income depending upon whether the whole of the capital gains is so used or only part of it is used for acquiring a new asset. Such cases are gains from residential house, agricultural land and from transfer of industrial undertaking (for details section 54, 54B and 54G may be referred to). Gains from any long term asset if used for purchase or construction of residential house where the person has only one residential house is also exempt (sec.54F). similarly gain arising from transfer of any long term capital asset is exempt-wholly or proportionately as the case may be if the net consideration in respect of such transfer is wholly or party invested, within a period of six months, in any of the bonds, debentures, shares of a public company or units of a mutual fund specified by the board for the purpose of section 54EA and notified in the official gazette. The assessee has the option to invest only the amount of capital gain in assets specified by the board for the purpose of section 54EB in which case the gain will be wholly or proportionately exempt depending upon whether whole or part of the gain is so invested. The new assets cannot be transferred or converted into money within three years (if the capital gain only was invested). In the event of such transfer or conversion, the gains exempted on investment are brought to tax in the year of transfer or conversation of new assets and rural development or by the national highways authority of Indian which are redeemable after five years. However gains arising from transfers after 31.3.2000 will be required to be invested only in bonds issues by national bank for agriculture.
4.5.9 Special provisions exist for taxation of capital gains arising to offshore funds from transfer of units purchased in foreign currency, to non-residents from transfer of bonds or shares purchased in foreign currency and to foreign institutional investors from transfer of listed securities purchased in foreign currency. These provisions are explained at 7.3.4 in chapter VII.

4.6.1 In computing the taxable income under this head, deduction is allowable for (other than capital expenditure) which is incurred by the tax payer wholly and exclusively for the purpose of earning such income. Besides, in assessing dividend income, any remuneration or commission paid for realizing such income is allowed as deduction. In assessing income from letting the machinery, plant or furniture on hire, the depreciation on the value of such assets calculated in the same manner as in respect of assets used in a business or profession is allowable as a deduction. No deduction is, however, allowed in respect of-

1. Any personal expenditure of the tax payer;
2. Any salaries or interest payable outside India from which tax is deductible at source under the Act but has not been deducted.

4.6.2 Further, no deduction in respect of any expenditure or allowance is made in computing income from winnings referred in (iii) (b) of para4.6 above. Such income is taxable at a flat rate of 40 per cent under the provisions of section 115BB.
4.6.3 A standard deduction equal to 33-1/3% of the pension amount or Rs.15,000/- whichever is less is allowed in computing income from family pension.

The accumulated losses or unabsorbed depreciation of the amalgamating company, demerged company or the predecessor concern will, subject to fulfillment of certain conditions (sec.72A), be treated as losses or depreciation of amalgamated company, resulting company or the successor concern and will be allowed to be set off and carried forward as their own loss or depreciation gains' which would not be set off against income of respective nature in any year can be carried forward for eight succeeding years for set off against income of similar nature, if any, in those years. Losses in the activity of owning and marinating race horses can be carried forward for set off against profits of similar activities in succeeding four years only.
4.8.2 Losses under the head income from house property which could not be set off against income under ant other head can be carry forward for eight succeeding years for set off against income under this head in those years.
4.8.3 If 51% or more of the voting power changes hands in an unlisted company, the company will not be able to carry forwards losses incurred before such change.

5.2.1 Medical insurance premia (Sec. 80D)
Premium paid up to the maximum amount of Rs.10, 000/- in a year, in respect of medical insurance on the health of the individual or the wife/husband or dependent parents or dependent children of such individual is allowed as a deduction provided the insurance is in accordance with the approved scheme of the general insurance corporation and the premium is paid by cherub. If, however, any of the insured people is a senior citizen, deduction can be of an amount up to Rs.15000.
5.2.2 Payments for medical treatment of handicapped dependents (Sec. 80DD and 80DDA)
Where an assessee being an individual or a Hindu undivided family resident in India incurs any expenditure for the medical treatment, nursing, training and rehabilitation of a handicapped dependents, deduction of Rs.40, 000/- is allowed from gross total income. The deduction includes payment or deposit under an approved scheme of the L.I.C or the U.T.I. providing for repayment of annuity or lump sum amount for the benefit of the handicapped dependent in the event of assessee's death.
5.2.3 where an Indian resident incurs any expenditure for the medical treatment of specified disease or ailment for himself or a dependent relative, he is allowed a deduction of an amount actually incurred subject to maximum of Rs.40,000/-. If he or any dependent relative is senior citizen, the deduction can go up to rs.60, 000. The amount of deduction is to be determined after reducing the amount received under medical insurance (sec.80DDB).
5.2.4 Repayment of loan taken as a student for pursuing higher studies (Sec.80E)
Any repayment of the principal amount of loan taken from a financial institution or a recognized charitable organization for higher studies and interest thereon is allowed as a deduction up to a maximum amount of rs.40.000/- in a year. The relief is available to persons who have undertaken graduate or post graduate courses in any branch of engineering, medicine or management or post-graduate courses in any university in pure science, applied science, mathematics or statistics, this deduction is allowed for a maximum period of 8 years beginning with the year in which repayment starts.
5.2.5 Donations to certain funds, charitable institutions etc. (sec.80G)
Donations/contributions made to recognized charitable trusts/institutions and certain specified funds are allowed as deductions. Full deduction is allowed in respect of certain donations like contributions towards the Prime Minister's National Relief Funds, Prime Minister's Armenia Earthquake Relief Fund, Chief Minister's Relief Fund, Africa Fund, and National Foundation for Communial Harmony, Zila Saksharta, Samitis for Primary and Adult Education, National Sports Fund, National Cultural Fund.
Fund for technology development and application, Indian Olympic Association (by companies only) and to the government, local authority or approved Institution/organization for promotion of family planning. Full deduction is also admissible in respect of any sum paid to a university or any approved educational institution of national eminence. Donations/contributions to other recognized charitable trusts and specified funds quality for deduction of 50% of the amount donated or contributed. Deductions in respect of certain donations, such as donations to national minorities' development and finance corporation are subject to overall qualifying limit of 10% of the 'gross total income'.
5.2.6 Rent payment (sec.80GG)
Expenditure in excess of 10% of total income incurred by an assessee (not in receipt of house rent allowance) on payment of rent in respected of residential accommodation occupied by him for his own residence is allowed deduction up to rs.2,000/- per month or 25% of total income, whichever is less.
5.2.7 Contributions for scientific research etc. (sec. 80GGA)
Complete deduction is allowed in respect of contribution to:-

1. Approved scientific research association, university, college or other institution for scientific research;
2. Approved university, college or institution for research in social science or statistical research;
3. Approved association/institution having as its object the undertaking of any program of conservation of natural resources or of afforestation;
4. Rural development fund set up, and notified by the central government;
5. Fund for afforestation notified by the central government;
6. Public Sector Company, local authority or association or institution approved by the national committee for carrying out any eligible project for social and economic welfare.
7. National urban poverty eradication fund.

These deductions are not allowed to those whose gross total income includes income chargeable under the head 'profits and gains of business or profession'. It is because they are entitled to claim such payments as allowable deductions in computation of income from business or profession.
5.2.8 Expenditure on employment of new workmen (Sec. 80JJAA)
Deduction of amount equal to 30% of additional wages paid to the new regular workmen by an Indian company deriving profit from any industrial undertaking is allowed. Additional wages for this purpose means wages paid to new regular workman in excess of one hundred workman employed during the year and in case of an existing undertaking in excess of 10% of existing workmen.

5.3.1 Profit or gain derived from export or work done abroad.
Profit or gain derived from certain business activities quality for deduction-fully or partly-subject to fulfillment of following conditions:-

1. The enterprise in run by resident of India;
2. Consideration for sale or work done is received in foreign currency;
3. Consideration is brought to India-fully or in the case mentioned at 1 below of amount equal to admissible deduction-in convertible foreign exchange;
4. Such amount is brought within six months or such extended time as may be permitted by R.B.I. or any other competent authority regulating payment and dealing in foreign exchange;
5. In cases mentioned at 1, 2 and 3, a specified percentage of profit is carried to reserve account to be utilized for business purpose (not distribution of dividend or profit) for five years.

The business activities and admissible deduction are

1	Execution of projects outside India (sec.80HHB)	Up to 2000-1 -50% For 2001-2-40% For 2002-3-30% For 2003-4-20% For 2004-5-10% From 2005-6-Nil
2	Execution of world-bank aided housing projects(sec. 80HHBA)	Do
3	Services provided to foreign tourists by hotels or tour operators (sec.80HHD)	Do
4	export of goods or merchandise (sec.80HHC)	Up to 2000-1 -100% For 2001-2-80% For 2002-3-60% For 2003-4-40% For 2004-5-20% From 2005-6-Nil
5	Export or transmission of computer software or rendering of technical services outside India for development or production thereof (sec.80HHE)	Do
6	Export or transfer out of India of software for film, television news including telecast rights (available to Indian companies only) (sec.80HHF))	Do

5.3.2 Profit and gains from industrial undertaking (sec.80-1A and sec.801B)
Deduction is allowed from profits and gains from-

i.	Enterprise carrying on business of (i) developing (ii) maintaining and operating or (iii) developing maintaining and operating infrastructure facility (such as road, highway, systems etc. on BOT, BOOT or similar basis) which is owned by a company under agreement with the government or any statutory bridges, airports, rail systems, water treatment, solid waste management authority and which makes such facility operational after 1.4.95. The deduction also applies to housing or other activities which are integral part of the highway project.	100% or profit for initial five years and 30% thereafter so that the deduction will be available for ten consecutive assessment years falling within a period of fifteen assessment years.(the period will be twenty years in respect of water supply, irrigation, sanitation and sewerage project).
ii.	Undertaking which starts providing telecommunication services between 1.4.1995 and 31.3.2000.	100% of profit for initial five years and thereafter 30% of profit in the case of companies and 25% in the case of others for five years so that the deduction will be available for ten consecutive years falling within fifteen initials assessment years.
iii.	Undertaking which begins to operate a notified industrial park for the period beginning 1.4.1997 and ending 31.3.2002.	Do
iv.	Industrial undertaking for generation or generation and distribution of power set up in any part of India which begins to generate power between 1.4.1993 and 31.3.2003 or engaged in laying a net work of new transmission or distribution lines between 1.4.1999 and 31.3.2003	Do
v.	Undertakings not being small scale undertaking beginning production (other than of low priority items of eleventh schedule) between 1.4.91 and 31.3.95)	30% of profit for companies and 25% for others. The deduction is for 12 years in the case of cooperative societies and 10 years for others.
vi.	Small scale industrial undertaking set up anywhere which being production of articles or operation of cold storage between 1.4.95 and 31.3.2002	30% of profit for companies and 25% for others for 12 years in the case of cooperative societies and 10 years in the case of others.
vii.	Industrial undertaking for producing articles or operating cold storage located in industrially backward state specified in the eighth scheduled which begins production or operation between 1.4.1993 and 31.3.2002	100% of profit for initial five years and thereafter 30% for companies and 25% for other assesses, so that total number of years for which deduction is admissible will be 12 for Co-operative societies and ten for others. In case of notified industries in North-Eastern Region 100% deduction is admissible for ten assessment years.
viii.	Industrial undertaking for producing articles or operating cold storage in notified backward districts of category A which begins production or operation between 1.10.94 and 31.3.2002	Do
ix.	Industrial undertaking for producing articles or operating cold storage in notified backward districts of category B which behind production or operation between 1.10.94 and 31.3.2002.	100% deduction for initial three years and thereafter 30% for companies and 25% for others for further five years so that the total period for which deduction is allowable will be 8 years. (12 years for cooperative societies).
x.	Ships brought into use between 1.4.1990 and 31.3.95	30% of profit for ten years
xi.	The business of hotel (other than those located in Calcutta, Chennai, Delhi and Mumbai) located in a hilly area or a rural area or a place of pilgrimage or any other place specified by the Central Government between 1.4.97 and 31.3.2001	50% of profit for ten years.
xii.	The business of approved hotel (except those located in Calcutta, Chennai, Delhi and Mumbai) which are located in places other those mentioned at (xi) above and which starts functioning between 1.1.97 and 31.3.2001.	30% of profit for ten years.
xiii.	Company registered in India carrying on scientific and industrial research and development which is approved by the prescribed authority at any time before 1.4.1999.	100% of profit for five years.
xiv.	Undertaking which begins commercial production or refining of mineral oil in north eastern region before 1.4.1997 and any part of India on or after 1.4.1997 (in case of refining on or after 1.10.1998)	100% of profit for initials seven years.
xv.	Undertaking engaged in developing and building housing projects approved before 31.3.2001 by a local authority, subject to certain conditions, commencing activities on or after 1.10.1998 and completing the same by 31.3.2003	100% of profit derived from such business
xvi.	Undertakings engaged in setting up and operating a cold chain facility for agricultural produce commencing operation between 1.4.1999 and 31.3.2003	100% for initials five years and thereafter 30% for companies and 25% for others so that the total period does not exceed 10 years (12 years for cooperative societies)

5.3.3 Profit from business of collecting and processing of biodegradable waste (sec.80JJA)
Whole of such income is allowed as deduction for five consecutive assessment years where such collection, processing or training is for generating power, producing bio-gas, bio-fertilizers, and bio-pesticide and for making pellets of briquettes or fuel or organic manure.
5.3.4 Interest on certain deposits, saving instrument, dividend, income from long term saving instruments/schemes etc. are:-

1. Securities of Central or State Government
2. National Saving Certificates (VI,VII or VIII issue)\
3. Notified debentures
4. National deposits scheme
5. Post Office (time deposit) Scheme, Post Office (recurring deposit) National Saving Scheme 1992.
6. Deposits with banking company or industrial development bank of India or a cooperative society
7. Deposits with certain financial corporation providing long term finance for industrial development
8. Deposits with housing authorities
9. Interest on Deposits from co-operative society
10. Deposits with housing finance companies

Where, however, full deduction in respect of items at (i) cannot be given because of the limit of Rs.12, 000/-, an additional deduction up to Rs.3,000/- can be allowed to cover these items.
5.3.5 Certain income of co-operative societies (sec. 80P)
Complete deduction is allowed in respect of income of cooperative societies engaged in the business of banking, cottage industry, marketing of agricultural produce, purchase of agriculture implements etc. intended for agriculture, processing of agriculture products without the aid of power, collective disposal of the labor of its members of fishing or allied activities. Complete deduction is also allowed to the primary societies engaged in supplying milk, oil seeds, fruits or vegetables raised or grown by its members to the federal co-operative society, government, local authority or a government company. For societies engaged in activities other than those mentioned earlier, a separate deduction up to Rs.1,00,000/- is available with respect to profit from such other activities to a consumers' cooperative society and up to Rs50,000/- to any other cooperation society. Apart from this general deduction, the whole of certain types of income is allowed as deductions, income by way of dividend or interest from investments with other cooperative society and income from investments with other cooperative society and income from letting god owns for specific purposes are allowed as deduction is full. Cooperative societies, not engaged in transport and manufacturing business and having gross total income of up to Rs.20, 000/- are entitled to deduction of whole of interest on securities and income from house property.
5.3.6 Income of totally blind or physically handicapped resident persons or their parent (Sec.80U)
A deduction of Rs.40,000/- is allowed out of the income of an individual who at the end of the end of the year was totally or partially blind or who suffered from a permanent physical disability or mental retardation of the order which had the effect of reducing substantially his capacity to engage in a gainful employment.
This deduction is available only to a resident individual.

5.4.1 Income from services for use outside India-
Income from certain services rendered abroad or for use outside India qualifies for deduction subject to the following conditions:-

1. Services are rendered by persons resident in India or in case of income referred to at 2& 4 (sec.80R and 80RRA) by a person who is citizen of India.
2. Consideration is received in foreign currency.
3. The same is brought in India in convertible foreign exchange within six months from the end of the previous year or within such extended time as may be permitted by the reserve bank or any competent authority regulating payment of or dealing in foreign exchange.
4. The deduction is equal to the specified percentage of the income so brought in India.

Income qualifying for deduction and admissible deductions are:-

1	Royalties, commission, fees or any similar payment received from foreign government or a foreign enterprises for use outside India of any patent invention, design or registered trade mark-(sec.80-O)	Up to 2000-1 -50% For 2001-2-40% For 2002-3-30% For 2003-4-20% For 2004-5-10% From 2005-6-Nil
2	remuneration of a professor, teacher or research worker for service rendered in these capacities during stay outside India (sec.80-R)	Up to 2000-1 -75% For 2001-2-60% For 2002-3-45% For 2003-4-30% For 2004-5-15% From 2005-6-Nil
3	income of author, playwright, artist, musician, actor or sportsman (including an athlete) received from a foreign government or a person not resident in India - (sec-80-RR)	Do
4	Remuneration from an employer for services rendered outside India received by (i) a serving of former government employee if such services are sponsored by the central government or (ii) any other individual as a technician if the terms and conditions of service outside India is approved by the prescribed authority. (sec. 80-RRA)	Do

5.5.1 a tax rebate @ 25% for authors, artists and sportsman and @ 20% for others of the amount saved and invested in specified areas is allowable subject to the maximum of Rs.17,5000/- for author, artists and sportsman and Rs.12,000/- for others certain payments which quality for such tax rebate are:-

1. Life Insurance Premium or payments for a contract of deferred annuity.
2. Contribution to a statutory or recognized provident fund, approved superannuation fund or public provident fund.
3. Payment in a ten year or fifteen year account under the post office (Cumulative Time Deposit) scheme.
4. Subscription to the National Saving Certificate (VIII issue).
5. Contribution to the Unit Linked Insurance Plan of the Unit Trust of India or Dhanaraksha-1998 plan of the LIC Mutual Fund.
6. Contribution to "Jeevan Dhara" and "Jeevan Akshay" annuity plans of the life insurance corporation of India.
7. Subscription to the notified schemes of the Unit Trust of India or other notified mutual funds (rebate allowable on amount up to Rs.10,000/-
8. Subscription to the notified Pension Funds of the notified Mutual Funds or the Unit Trust of India.
9. Subscription to home loan account scheme of National Housing Bank.
10. Subscription to the National Savings Scheme of the Government.
11. Money spent on acquisition or construction of residential house or payment of loan taken for the purpose from specified sources. Rebate is admissible in respect of such expenditure up to Rs.20,000/-
12. Subscription to equity shares or debentures or to units of any mutual funds approved by the board or to any eligible issue of capital by any public financial institution provided no benefit has been taken under section 54EA and 54EB (para 4.5.7).

5.5.2 A tax rebate equal to 100% of tax or rs.15000/- whichever is less is allowed to a resident senior citizen who is aged 65 years or more at any time during the previous years.
5.5.3 A woman resident of India who is below the age of 65 years at any time during the previous year is entitled to a tax rebate of an amount up to Rs.5000/-.

6.1.1 The following are some of the instances when the law construes and income to have accrued in India:-

1. Income from business arising through any business connection in India (refer chapter X);
2. Income from house property if such property is situated in India;
3. Income from any asset or source if such asset or source is in India ;
4. Income from salaries if the services are rendered in India. In such cases salary for rest period or leave period will be regarded as earned in India if it forms part of service contract.
5. Income from salaries payable by the government to a citizen of India even through the services are rendered outside India;
6. Income from dividend paid by an Indian company even if the same is paid outside India;
7. Income by way of interest payable by government or by any other person in certain circumstances ( refer chapter VII);
8. Income by way of royalty if payable by the government or by any other person in certain circumstances (refer Chapter VII);
9. Income by way of fees for technical services if such fees is payable by the government or by any other person in certain circumstances (refer chapter VII).

6.1.2 The following income even though appearing to be arising in India is constructed as not arising in India:-

1. If a non-resident running a news agency or publishing newspapers, magazines etc. earns income from activities confined to the collection of news and views in India for transmission outside India, such income is not considered to have arisen in India.
2. In the case of a non-resident, no income shall be considered to have arisen in India if it arises from operations which are confined to the shooting of any cinematography film. This applies to the following types of non-residents:-
   1. Individual who is not a citizen of India; or
   2. Firm which does not have any partner who is a citizen of India or who is resident in India; or
   3. Company which does not have any shareholder who is resident in India.