269ua

A PERSON WHO HAS ACQUIRED A RIGHT IN A BUILDING UNDER SECTION 269 UA(f) - If a person acquires a right in a building by virtue of a transaction which is referred to in section 269 UA (f), then he is deemed as owner of the property.

Broadly speaking, section 269 UA (f) covers giving a property on lease for a term of not less than 12 years (whether fixed originally or there is a provision for extension of term and the aggregate period is not less than 12 years). The above-noted provision of deemed ownership does not cover any right by way of a lease from month to month or for a period not exceeding one year.

From the provisions of section 27(iiib) read with section 269UA(f) it is clear that where the period of lease is more than 12 years, lessee is deemed to be the owner of the property for purpose of assessment— Yagyawati Jayaswal Family Trust v. ITO [2004] 89 ITD 199 (Kol.)(SMC).

The following illustrations are given to have better understanding—

1. X owns a property. It is given on lease for a period of 12 years to Y, lease rent being Rs. 40,000 per month. As the period of lease is not less than 12 years, Y becomes deemed “owner” of the property.

2. A owns a property. It is given on lease for a period of 6 years to B, lease rent being Rs. 20,000 per month. B has a right to get renewal of lease for further period of 6 years after the expiry of lease. In this case, the aggregate period of lease is not less than 12 years. Therefore, B is deemed as “owner” of the property.

3. C owns a property, which is given on lease to D for a period of one month, rent being Rs. 10,000. D has a right to get renewal of the lease subject to the condition that every time it will be renewed only for a period of one month and such renewal is possible with mutual consent till 2050. In this case, the aggregate period of lease is more than 12 years, but D will not become deemed “owner” of the property (the property is given on lease from month to month).

ratio formula

           A) LIQUIDITY RATIOS - SHORTTERM SOLVENCY RATIO FORMULA NUMERATOR DENOMINATOR 1.Current Ratio Current Assets /  Inventories Sundry Crs (for Goods) Current Liabilities + Debtors + OS Expn ( for Service)     + Cash & Bank + Bank OD / CC     + Receivables + Provision for Tax     + Short Term Loans + Proposed / Unclaimed Dividend     + Marketable Investments           2. Quick Ratio or Acid test Ratio Quick Assets /  Current Assets Current Liabilities Quick Liabilities Less : Inventories Less : Bank OD / CC     Less : Prepaid Expenses           3. Absolute Cash Raio (Cash + Marketable Securities) / CL Cash in Hand As above Cash at Bank       Maketable Securities       Short Term Investments           4. Interval Measure Quick Assets / Cash Expenses Per Day As above Annual Cash Expenses / 365   Cash Expenses = Total Expn - Depn - W/off               B) CAPITAL STRUCTURE RATIOS / INDICATOR OF FINANCING TECHNIQUES & LONG TERM SOLVENCY 1. Equity to Total Funds Ratio Shareholder's Funds / Total Funds Equity Share Capital Total Long Term funds employed + Preference Share Capital Debt + Equity     + Reserves & Surplus       Less : Accumulated Losses           2. Debt Equity Ratio Debt / Equity Long Term Borrowed Funds Equity Share Capital   Debentures + Preference Share Capital     Long Term Loans + Reserves & Surplus       Less : Accumulated Losses         3. Capital Gearing Ratio Fixed Charge Bearing Capital / Equity Shareholder's Funds Preference Share Capital Equity Share Capital + Debentures + Reserves & Surplus   + Long Term Loans Less : Accumulated Losses         4. Fixed Asset to Long Term Fund Ratio Fixed Assets / Long Term Funds Net Fixed Assets Shareholder's Fund (Equity) Gross Block Debt   Less : Cum Depreciation           5. Proprietary Ratio Proprietary Funds / Total Assets Equity Share Capital Net Fixed Assets + Preference Share Capital + Total Current Assets   + Reserves & Surplus (only Tangible assets will be included)     Less : Accumulated Losses           Note : Liability Route (ESC + PSC + Reserves & Surplus Less Accumulated Losses) Assets Route ( Net Fixed Assets + Net Working Capital  Less Longterm Liability) C) COVERAGE RATIOS - ABILITY TO SERVE FIXED LIABILITIES 1. Debt Service Coverage Ratio Earnings for Debt Service / (Interest + Instalment) NP After Tax Interest Add : Tax Add : Instatment of Debt    Add : Interest (Principal repaid)     Add : Non Cash Expn (Depn)       Add : Non Operating Adj       (loss on sale of FA)           2. Interest Coverage Ratio EBIT / Interest Sales Less Varial & Fixed Cost Interest (Excluding Interest)       EAT + Tax + Interest           3. Preference Dividend Coverage Ratio EAT / Preference Dividend Earnings After Tax Dividend on Preference Share Capital                   D) TURNOVER / ACTIVITY / PERFORMANCE RATIOS 1. Capital Turnover Ratio Sales / Capital  Employed Sales net of returns Net FA + Net WC (Asset Route)   ESC + PSC + Reserves & Surplus + Debenture & LT Loans Less Accumulated Losses Less Non Trade Investments (Liability Route)                           2. Fixed Asset Turnover Ratio Turnover / Fixed  Assets Sales net of returns Net Fixed Assets             3. Working Capital Turnover Ratio Turnover  /  Net Working Capital Sales net of returns CA Less CL             4. Finished Goods or Stock Turnover Ratio COGS  /  Average    Stock Opening Stock + Purchases - Closing Stock (Opening + Closing) / 2  or (Max + Min Stock) / 2               5. WIP Turnover Ratio Factory Cost / Average Stock of WIP Material + Wages (Open WIP + Close WIP) / 2 + Production OHS           6. Raw Material Turnover Ratio COMC  /  Average   Stock  of RM Opening Stock of  RM + Purchases - Closing Stock (Opening + Closing) / 2            7. Debtors Turnover Ratio Credit Sales / Average Accounts Receivable Credit Sales net of returns Debtors + B/R   (Opening + Closing) / 2          8. Creditors Turnover Ratio Credit Purchases / Avg Accounts Payable Credit Purchase net of returns Creditors + B/P   (Opening + Closing) / 2          E) PROFITABILITY RATIOS BASED ON SALES 1. Gross Profit Ratio Gross Profit / Sales Gross Profit Sales net of returns       2. Operating Profit Ratio Operating Profit / Sales Sales Less Cost of Sales  (or) Sales net of returns   Net Profit       Add : Non Operating Expn       Less : Non Operating Income           3. Net Profit Ratio Net Profit  / Sales Net Profit Sales net of returns       4. Contribution Sales Ratio Contribution / Sales Sales Less Variable Cost Sales net of returns       F) PROFITABILITY RATIOS OWNER'S VIEW POINT 1.ROI or ROCE Total Earnings / Total  Capital Employed Profit After Tax Net FA + Net WC (Asset Route) Add : Tax ESC + PSC + Reserves & Surplus + Debenture & LT Loans Less Accumulated Losses Less Non Trade Investments (Liability Route)     Add : Interest     Add : Non Trading Expn     Less : Non Operating incomes     (Rent, Interest & Dividend)           2. ROE EAT / Net Worth Profit After Tax Net Fixed Assets + Net WC       Less : External Liabilities (Long Term)         3. EPS (PAT - Preference Dividend) / No of Equity Shares Profit After Tax Equity Share Capital / Face Value per Share   Less : Preference Dividend               4. DPS Dividends / No of Equity Shares Profits distributed to Equity shareholders Equity Share Capital / Face Value per Share           5. ROA NP after Tax / Average Total Assets Net Profit After Tax Avg Total Assets or Tangible or Fixed     (Opening + Closing / 2)                                      

Depreciation

In earlier chapters you learned the basics of depreciation. This chapter explains a little more about how depreciation expense is calculated. It also shows the other significant events in the life of plant assets: the purchase and retirement of those assets.

Depreciation expense spreads the cost of major equipment and assets over a period of time that spans a number of years. Amortization is used to allocate the cost of intangible assets, such as patents, copyrights, trademarks, and franchises. Depletion is used to record the cost of natural resources extracted from the earth.
There are three main events in the life of any asset:

1.     acquisition

2.     useful life

3.     disposal or retirement

We will make journal entries for each of these events. Over the useful life we will enter depreciation expense. At the end of the life we will record any gain or loss at the time of disposal or retirement of the asset. Sometimes assets are traded for other assets, and that must be accounted for in the same manner as a disposal or retirement.

Fixed asset acquisition
Fixed asset accounts are debited for the actual cost of fixed assets. The correct account should be debited. Some companies use a Fixed Asset Subsidiary Ledger and show a control account on the Balance Sheet, called Property, Plant and Equipment (PPE) or something similar. In these cases all fixed assets acquisitions debit PPE and the subsidiary ledger carries the details pertaining to the asset.
Depreciable cost
Buildings, equipment, vehicles, computers, furniture and fixtures are all examples of depreciable assets. We will depreciate the depreciable cost of assets. This includes the purchase price paid, sales tax, shipping and installation costs, and possibly incidental costs if they are material. Cost of fixing damage caused during shipping and installation is treated as  a Repair Expense.
Some costs are incidental to buying new equipment. A specialist might be hired to install a large printing press, or other specialized, complex piece of manufacturing equipment. This type of cost is included in the depreciable cost of the asset. 
Sometimes employees have to be trained. The cost of training may be considered part of the depreciable cost, it the amount is material to the purchase of the asset. A brief training session for one or two machine operators will probably be an immaterial amount. 
The cost of  training the entire company's personnel when a new computer system is installed would probably be a material amount, especially in a large company. Every employee might require a day's training or more in the new system. The loss of productivity would be a material amount, and should be classified as part of the depreciable cost of the asset.
Recording Asset Acquisitions
If a company buys land, building, equipment etc. all at the same time, the total purchase price has to be divided correctly among the various assets.
Land is a non-depreciable asset. It falls into its own category in the books and on the Balance Sheet. Don't include land costs with other fixed asset costs, such as buildings. They must always be entered separately. Buildings will be depreciated; land will not be depreciated. 

General Journal

Date	Account	Debit	Credit
Apr-15	Land	$5,000
	Building	$45,000
	Cash		$10,000
	Mortgage Note Payable		$40,000
	To record purchase of land and building
Apr-30	Manufacturing Equipment	$7,000
	Computers and peripherals	$10,000
	Computer software	$3,000
	Accounts Payable		$20,000
	To record purchase of equipment, computers and software

The Useful Life of an asset is the period of time the company expects to use the asset in the business. It is also important that the asset be used as it is intended, and for the production of income. For instance, a computer that is being used as a doorstop is not contributing to the production of income, and it is also not being used as it was intended. 
[Of course, at this point some very clever student will say something like, "What if the computer is used as part of an art project displayed in the foyer of an office building? It's not being used as intended nor in the production of income." Well, young Einstein, objects d'art are Investments, not depreciable plant assets. Nice try, but no banana for the monkey.]
Why do assets depreciate?
For Federal Income Tax purposes, depreciation is referred to as cost recovery. The government allows you to use the cost of plant assets to offset income. You recover your cost a little bit at a time, over a number of years. Each year you reduce your income tax expense, by an amount relative to the cost recovery amount for that year. It's a slightly strange concept if you're not involved in preparing income taxes. But it does make sense if you think about it a bit.
For financial statement purposes, depreciation reflects a number of different influences that each affects an asset over its useful life.

• recognize physical deterioration
• recognize obsolescence
• recognize a reduction in market value
• recognize benefits derived from using the asset
• apply a logical, systematic cost allocation over a relevant period of time
• apply the matching principle

Each of these is important to a company. When assets are purchased, the cost is reflected in the Balance Sheet. Depreciation expense transfers that cost to the Income Statement in order to reflect the effect of the items listed above, in the financial statements. 

Usually, at this point, students are a showing a slight glaze over their eyes. I then reiterate that depreciation expense reduces income, which in turn cuts income taxes. Cutting our taxes, that's something most of us can relate to. So depreciation is a good thing, an important thing, a joyous and wonderful thing. 
[You may now take a few moments to celebrate the joys of depreciation ...ahhhhh.]
Depreciation Methods
We will study a couple of depreciation methods. There are other methods. If you study international accounting, you will find that other countries deal with these issues in a very different way than we do in the US. But we're #1, so we must be right (hee, hee).
 

Depreciation Method	my silly comments
Straight-Line Method	causes problems with my spell checker because of the hyphenated word
Declining-Balance Method	oh, no. another hyphenated word. my spell checker is not happy today
MACRS (income tax method)	US congress made up this word. its not in my spell checker dictionary either. whatever they were drinking that night, I want a bottle of it.

OK, let's try this again.

Depreciation Method	my serious comments
Straight-Line Method	an easy method that allocates an equal amount of depreciation to each time period; salvage value is used
Declining-Balance Method (200% & 150% DB)	allocates more depreciation expense to the early years of an asset's life, when it is new; since there should be less down-time and fewer repairs in the early years, the company should get more use out of the asset in the beginning of it's life; no salvage value is used.
MACRS (income tax method)	uses the double-declining balance method, but you only take one-half year's depreciation in the first year, and then you switch to the straight-line method in the middle of the asset's life, so a 5 year asset takes 6 years to depreciate. salvage value? salvage value? we don't need no stinking salvage value!! I still want a bottle of whatever they were drinking when they dreamed this one up.

[It is a little known fact that the US congress is responsible for the rapid growth of the computer industry during the 1980s and 1990s. The MACRS depreciation rules were so complex everyone had to buy computers just to do the calculations each year. Millions of computers were sold, just to calculate MACRS depreciation  ........ OK, I'm just kidding. You didn't really think I was serious, did you?. Hey, this is week 8, we're almost done.]
Selling or disposing of Fixed Assets
After selling or disposing of fixed assets, the company no longer has the asset. This requires a journal entry to remove everything in the accounting records relating to the asset. 
The depreciable cost and accumulated depreciation relating to the asset must both be removed, or reversed. There might be a gain or loss when disposing of assets. There might also be incidental costs relating to disposing of the asset. All these things should be included in the journal entry recording the disposal.
Let's assume on September 1, the ledger shows these balances for a piece of equipment.

General Ledger
Equipment

Date	Description	Debit	Credit	Balance
Sep-1	Balance forward	$7000		$7000

Accumulated Depreciation - Equipment

Date	Description	Debit	Credit	Balance
Sep-1	Balance forward		$5600	($5600)

Removing these amounts from the books with a journal entry
When assets disposed of there might be a gain, loss or a wash (no gain or loss). In either case all such journal entries will start from the same place, removing the related asset cost and accumulated depreciation. This journal entry does not balance; is the beginnings of a journal entry, and must be completed when all the information is available.

General Journal

Date	Account	Debit	Credit
Sep-15	Accumulated Depreciation	$5,600
	Equipment		$7,000
	To record disposal of equipment

Notice the exact opposite of the account balances is entered for each account. This causes the account balances to go to zero after this journal entry is posted.

General Ledger
Equipment

Date	Description	Debit	Credit	Balance
Sep-1	Balance forward	$7000		$7000
Sep-15	Disposal of asset		$7000	$0

Accumulated Depreciation - Equipment

Date	Description	Debit	Credit	Balance
Sep-1	Balance forward		$5600	($5600)
Sep-15	Disposal of asset	$5600		$0

The asset and related accumulated depreciation have both been removed from the books.
 
Calculating Book Value
Book Value is the difference between the asset cost and accumulated depreciation:
 

Equipment cost	$  7,000
Less: accumulated depreciation	-5,600
Book Value before sale	$  1,400

Gains and losses are calculated using the Book Value.
 
Equipment sold for a Gain
If the equipment is sold for more than its book value there will be a gain. Gains are similar to revenues, and will be recorded with a credit entry. Let's say the equipment is sold on September 15 for $2,000. The gain will be:
 

Selling Price	$  2,000
Less: Book Value	- 1,400
Gain	$    600

We'll begin with the journal entry we started above, and add the additional information, the selling price and gain or loss, in the right places.

General Journal

Date	Account	Debit	Credit
Sep-15	Accumulated Depreciation	$5,600
	Cash	$2,000
	Gain on disposal of equipment		$ 600
	Equipment		$7,000
	To record disposal of equipment

The journal entry is now in balance. Did you notice what I did? I started the journal entry with what I already knew - the cost and accumulated depreciation. I left 2 lines blank in the middle of the journal entry, so the sales price and gain or loss could be recorded. 
 
Equipment sold for a Loss
If the equipment is sold for less than its book value there will be a loss. Losses are similar to expenses, and will be recorded with a debit entry. Let's say the equipment is sold on September 15 for $1,000. The loss will be:
 

Selling Price	$  1,000
Less: Book Value	- 1,400
Loss	($   400)

We'll begin with the journal entry we started above, and add the additional information, the selling price and gain or loss, in the right places.

General Journal

Date	Account	Debit	Credit
Sep-15	Accumulated Depreciation	$5,600
	Cash	$1,000
	Loss on disposal of equipment	$  400
	Equipment		$7,000
	To record disposal of equipment

 

Equipment sold for a Wash
If the equipment is sold equal to its book value there will be a wash. Let's say the equipment is sold on September 15 for $1,400. 
 

Selling Price	$  1,400
Less: Book Value	- 1,400
Wash	$        0

We'll begin with the journal entry we started above, and add the additional information, the selling price and gain or loss, in the right places. In this case there is a wash, so no gain or loss is recorded. The equipment is simply removed from the books.

General Journal

Date	Account	Debit	Credit
Sep-15	Accumulated Depreciation	$5,600
	Cash	$1,400
	Equipment		$7,000
	To record disposal of equipment

Equipment Junked
If the equipment is junked there will be a loss equal to its book value. We call this abandonment. The item is usually just thrown in the trash, or hauled to the dump. Sometimes a company will have to pay to have the item hauled away. Incidental costs are revenue expenditures, and are not included in calculating the capital gain or loss.
 

Selling Price	$        0
Less: Book Value	- 1,400
Loss	($ 1,400)

We'll begin with the journal entry we started above, and add the additional information, the selling price and gain or loss, in the right places. 

General Journal

Date	Account	Debit	Credit
Sep-15	Accumulated Depreciation	$5,600
	Loss on abandonment of equipment	$1,400
	Equipment		$7,000
	To record abandonment of equipment

Intangible Assets
Intangibles are assets that have no physical existence. They are legal assets or accounting assets, such as copyrights, patents, trademarks or goodwill. We use a simple form of amortization, usually straight-line, to allocate the cost of these items to expenses. 

17 important items fully exempt

The following are 17 important items of income, which are fully exempt from income tax and which a resident individual Indian assessee can use with profit for the purpose of tax planning.

1. Agricultural income

Under the provisions of Section 10(1) of the Income Tax Act, agricultural income is fully exempt from income tax.

However, for individuals or HUFs when agricultural income is in excess of Rs 5,000, it is aggregated with the total income for the purposes of computing tax on the total income in a manner which results into "no" tax on agricultural income but an increased income tax on the other income.

Agricultural income which fulfils the above conditions is completely exempt from tax. The manner of calculating tax on total income and agricultural income, is explained in the following illustration:

Illustration For FY 2008-09 (assessment year 2009-10), a male individual has a total income from trading in textiles amounting to Rs 1,52,000; besides, he has earned Rs 40,000 as income from agriculture. The income tax payable by him will be computed as under: On the first Rs 150,000 of the taxable non-agricultural income: Nil On the next Rs 40,000 of agricultural income (falling under 10% slab): Nil On the next Rs 2,000 of taxable non-agricultural income @ 10 per cent: Rs 200 Income tax on aggregated income of Rs 152,000 + Rs 40,000 = Rs 192,000: Rs 200

2. Receipts from Hindu Undivided Family (HUF)

Any sum received by an individual as a member of a Hindu Undivided Family, where the said sum has been paid out of the income of the family, or, in the case of an impartible estate, where such sum has been paid out of the income of the estate belonging to the family, is completely exempt from income tax in the hands of an individual member of the family under Section 10(2).

3. Share from a partnership firm

Under the provisions of Section 10(2A), in the case of a person being a partner of a firm which is separately assessed as such, his share in the total income of the firm is completely exempt from income tax since AY 1993-94.

For this purpose, the share of a partner in the total income of a firm separately assessed as such would be an amount which bears to the total income of the firm the same share as the amount of the share in the profits of the firm in accordance with the partnership deed bears to such profits.

4. Allowance for foreign service

Any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India, rendering service outside India, are completely exempt from tax under Section 10(7). This provision can be taken advantage of by the citizens of India who are in government service so that they can accumulate tax-free perquisites and allowances received outside India.

5. Gratuities

Under the provisions of Section 10(10) of the IT Act, any death-cum-retirement gratuity of a government servant is completely exempt from income tax. However, in respect of private sector employees gratuity received on retirement or on becoming incapacitated or on termination or any gratuity received by his widow, children or dependants on his death is exempt subject to certain conditions.

The maximum amount of exemption is Rs. 3,50,000;. Of course, this is further subject to certain other limits like the one half-month's salary for each year of completed service, calculated on the basis of average salary for the 10 months immediately preceding the year in which the gratuity is paid or 20 months' salary as calculated. Thus, the least of these items is exempt from income tax under Section 10(10).

6. Commutation of pension

The entire amount of any payment in commutation of pension by a government servant or any payment in commutation of pension from LIC [Get Quote] pension fund is exempt from income tax under Section 10(10A) of IT Act.

However, in respect of private sector employees, only the following amount of commuted pension is exempt, namely: (a) Where the employee received any gratuity, the commuted value of one-third of the pension which he is normally entitled to receive; and (b) In any other case, the commuted value of half of such pension.

It may be noted here that the monthly pension receivable by a pensioner is liable to full income tax like any other item of salary or income and no standard deduction is now available in respect of pension received by a tax payer.

7. Leave salary of central government employees

Under Section 10(10AA) the maximum amount receivable by the employees of central government as cash equivalent to the leave salary in respect of earned leave at their credit upto 10 months' leave at the time of their retirement, whether on superannuation or otherwise, would be Rs. 3,00,000.

8. Voluntary retirement or separation payment

Under the provisions of Section 10(10C), any amount received by an employee of a public sector company or of any other company or of a local authority or a statutory authority or a cooperative society or university or IIT or IIM at the time of his voluntary retirement (VR) or voluntary separation in accordance with any scheme or schemes of VR as per Rule 2BA, is completely exempt from tax. The maximum amount of money received at such VR which is so exempt is Rs. 500,000.

9. Life insurance receipts

Under Section 10(10D), any sum received under a Life Insurance Policy (LIP), including the sum allocated by way of bonus on such policy, other than u/s 80DDA or under a Keyman Insurance Policy, or under an insurance policy issued on or after 1.4.2003 in respect of which the premium payable for any of the years during the term of the policy exceeds 20 per cent of the actual capital sum assured, is fully exempt from tax.

However, all moneys received on death of the insured are fully exempt from tax Thus, generally moneys received from life insurance policies whether from the Life Insurance Corporation or any other private insurance company would be exempt from income tax.

10. Payment received from provident funds

Under the provisions of Sections 10(11), (12) and (13) any payment from a government or recognised provident fund (PF) or approved superannuation fund, or PPF is exempt from income tax.

11. Certain types of interest payment

There are certain types of interest payments which are fully exempt from income tax u/s 10 (15). These are described below:

(i)  Income by way of interest, premium on redemption or other payment on such securities, bonds, annuity certificates, savings certificates, other certificates issued by the Central Government and deposits as the Central Government may, by notification in the Official Gazette, specify in this behalf.
(iia) In the case of an individual or a Hindu Undivided Family, interest on such capital investment bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf (i.e. 7 Capital Investment Bonds);
(iib) In the case of an individual or a Hindu Undivided Family, interest on such Relief Bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf (i.e., 9 per cent or 8.5 per cent or 8 per cent or 7 per cent Relief Bonds); (iid) Interest on NRI bonds;
(iiia) Interest on securities held by the issue department of the Central Bank of Ceylon constituted under the Ceylon Monetary Law Act, 1949;
(iiib) Interest payable to any bank incorporated in a country outside India and authorised to perform central banking functions in that country on any deposits made by it, with the approval of the Reserve Bank of India [Get Quote] or with any scheduled bank;
(iv) Certain interest payable by Government or a local authority on moneys borrowed by it, including hedging charges on currency fluctuation (from the AY 2000-2001), etc.;
(v)  Interest on Gold Deposit Bonds;
(vi) Interest on certain deposits are: Bhopal Gas victims;
(vii) Interest on bonds of local authorities as notified,
(viii) Interest on 6.5 per cent Savings Bonds [Exempt] issued by the RBI, and
(ix) Stipulated new tax free bonds to be notified from time to time.

12. Scholarship and awards, etc

Any kind of scholarship granted to meet the cost of education is exempt from tax under Section 10(16). Similarly, certain awards and rewards, etc. are completely exempt from tax under Section 10(17A), for example, Lakhotia Puraskar of Rs 100,000 awarded to the best Rajasthani author, every year under Notification No. 199/28/95-IT (A-I) dated 22-4-1996.

Any daily allowance received by a Member of Parliament or by an MLA or any member of any Committee of Parliament or State legislature is also exempt from tax under Section 10(17).

13. Gallantry awards, etc. -- Section 10(18)

The Finance Act, 1999 has, with effect from AY 2000-2001, provided for complete exemption for the pension and family pension of Gallantry Award Winners like Paramvir Chakra, Mahavir Chakra, and Vir Chakra and also other Gallantry Award winners notified by the Central Government.

14. Dividends on shares and units -- Section 10(34) & (35)

With effect from the Assessment Year 2004-05, the dividend income and income of units of mutual funds received by the assessee completely exempt from income tax.

15. Long-term capital gains of transfer of securities -- Section 10(38)

With effect from FY 2004-05, any income arising to a taxpayer on account of sale of long-term capital asset being securities is completely outside the purview of tax liability especially when the transaction has been subjected to Securities Transaction Tax (STT).

Thus, if the shares of any company listed in the stock exchange are sold after holding it for a minimum period of one year then there will be no liability to payment of capital gains. This provision would even apply for the old shares which are held by an assessee and are sold after the Finance (No.2) Act, 2004 came into force.

16. Amount received by way of gift, etc -- Section 10(39)

As per the Finance (No. 2) Act, 2004, gift, etc. received after 1-9-2004 by an individual or an HUF whether in cash or by way of credit, etc. is being subjected to tax if the same is not received from a stipulated relative. Section 10(39) provides that the amount received to the extent of Rs 50,000 will, however, be exempt from the purview of tax payment.

Similarly, amount received on the occasion of marriage from non-relatives, etc. would also be exempted. It may be noted that the gift from relatives, as specified in the section can be received without any upper limit.

17. Tax exemption regarding reverse mortgage scheme -- sections 2(47) and 47(x)

Any transfer of a capital asset in a transaction of reverse mortgage for senior citizens under a scheme made and notified by the Central Government would not be regarded as a transfer and therefore would not attract capital gains tax. The loan amount would also be exempt from tax. These amendments by the Finance Bill, 2008 apply from FY 2007-08 onwards.