Month: May 2020

Assessment in income tax is estimation of total income and tax thereon either by assessee himself or by income tax officer. Assessment is broadly covered in following types:

(1) Self-assessment u/s 140A

Every assessee before filing income tax return under various sections viz. 139, 142(1), 148 or 153A is supposed to find whether he is liable for any tax, interest or penalty.

For this purpose section 140A has been introduced in Income tax act.

Procedure of self-assessment is as follows:

Self-assessment calculation Summary:

	Particulars	Amount
	Compute total income	XX
	Calculate tax payable on total income	XX
Add	Edu. Cess +Surcharge if any	XX
Less	Relief under section 89, 90, 91 & 90A	XX
Less	MAT credit under 115JAA or 115JD	XX
Less	TDS/TCS	XX
Less	Advance tax Paid, if any	XX
Add	Interest u/s 234A, 234B, 234C	XX
Amount Payable as Self-Assessment u/s 140A		XX

If any amount is payable under section 140A then amount so paid shall be adjusted against interest payable first and then balance amount to be adjusted toward tax payable.

Enquiry before assessment: Secton 142

Section 142(1): for making assessment, the assessing officer may take any / all of the following steps:

i) Notice u/s 142 (1) (i): this notice can be issued to assessee (only those who have not filed return) requiring him to furnish return when no any return has been u/s 139(1) has been filed, within the time allowed u/s 139(1) or before the end of the relevant assessment year.

ii) Notice u/s 142 (1) (ii): this notice can be issued to all assessees who filed return or not to produce or cause to be produced such accounts or documents as the assessing officer may require but shall not require the assesse to produce any accounts relating to period of more than three years prior to the previous year along with accounts of previous year under assessment.

Example: suppose assessment for AY 2018-19 is to be made then accounts for last 3 years FY 2014-15, FY 2015-16, FY 2016-17 and previous year 2017-18 may be required by officer.

iii) Notice u/s 142 (1)(iii): this notice can be issued to ay assessee who has filed a return of income of whose time to file return u/s 139(1) has been expired, to furnish, in writing and verified in prescribed manner information in such form as he may require and he may also ask for a statement of all assets and liabilities of the assessee for any number of previous year.

Enquiry from other u/s 142(2):

This section empowers assessing officer to collect information from sources other than assessee in view of the provisions of sections 131, 133(6), 142(2).

Audit of accounts u/s 142(2A) to (2D): 

The assessing officer may, at any time at any stage of the assessment, direct the assesse to get the accounts audited by a Chartered Accountant nominated by Chief Commissioner / Commissioner of Income Tax, such a decision may be taken by assessing officer, if having regard to the nature, volume, multiplicity of transactions, doubts about the correctness of accounts, specialized nature of business activity and in the interest of revenue is of opinion that it is necessary to do so.

Above direction of Audit can be given even if accounts are already audited under the income tax Act or any other law.

Audit report instructed under this notice shall be submitted in Form 6B not later than 180 days from the date of such direction.

Expenses of such Audit determined by Chief Commissioner / Commissioner shall be paid by Central Govt.

Section 142(3): The assessing officer before using such information gathered u/s 142(2) and 142(2A) for any assessment shall give an opportunity of being heard to the assessee. However no such opportunity is necessary when the assessment is made u/s 144.

Consequences of non-compliance of section 142(1) and section 142(2A):

a) Best judgement assessment u/s 144

b) Penalty u/s 271(1)(b) which has been fixed at Rs. 10000/-

c) Prosecution u/s 276D: rigorous imprisonment up to 1 year or fine from Rs. 4 to Rs. 10 per day or both

d) Issue of warrant u/s 132 for search

(2) Summary Assessment u/s 143(1)

Where a return under section 139 or in response to notice under section 142 (1) is filed then u/s 143(1) this return is checked form the point of arithmetical accuracy and will not be scrutinized in detail, in following way:

1) The total income or loss shall be computed after making the following adjustments, namely:

(i) Any arithmetical error in the return; or

(ii) An incorrect claim, if such incorrect claim is apparent from any information in the return;

(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139;

(iv) Disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return;

(v) Disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or

(vi) Addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return. However no adjustment shall be made under this in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018

However no such adjustments shall be made unless intimation is given to the assessee of such adjustments either in writing or in electronic mode:

The response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made.

2 .The tax and interest, if any, shall be computed on the basis of the total income computed under clause (a);

3. the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax and interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest and fee;
4. an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and
5. the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee.

An intimation u/s 143(1) shall also be sent if loss declared is adjusted but no any tax/interest/fee/ is payable by or no refund is due to him.

No intimation u/s 143(1) shall be sent after the expiry of one year from the end of the financial year in which return is filed. In case of revised return (section 139(5)) the one year period shall be counted from end of financial year in which return was revised.

(3) Scrutiny assessment u/s 143(3)

Scrutiny assessment u/s 143(3) is also known as regular assessment.

To initiate assessment u/s 143(3), assessing officer has to issue notice u/s 143(2), which can only be issued in case where return u/s 139 or in response to section 142(1) has been filed by the assessee. Means notice u/s 143(2) and assessment u/s 143(3) cannot be issued / done if no return is filed.

Assessing officer, u/s 143(2), if consider it necessary or expedient to ensure that –

i) The assessee has not understated the income or

ii) Has not computed excessive loss or

iii) Has not under paid the tax in any manner shall require assessee to attend his office to produce documents / evidences in support of return.

Note:

1. No notice u/s 143(2) shall be served on the assessee after the expiry of 6 months from the end of financial year in which return is furnished.

Example: suppose return for FY 2016-17 was filed on 30/07/2017 then notice u/s 143(2) can be issued on or before 30/09/2018

Suppose above return was revised on 24/05/2018 then notice u/s 143(2) can be issued on or before 30/09/2019.

2. Fresh notice u/s 143(2) is requied to be issued if return is revised u/s 139(5).
3. Non-compliance of notice u/s 143(2) may result in ex parte, best judgement assessment u/s 144 and may also attract penalty u/s 271(1)(b) which has been fixed at Rs. 10000/-.

Assessment u/s 143(3)

On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment.

No order of assessment/ reassessment under section 143(3) shall be made after the expiry of 21 months (18 months for A.Y. 2018-19 and 12 months wef A.Y. 2019-20) from the end of relevant Assessment Year.

Example: Last date for assessment order u/s 143(2):

for FY 2015 -16 (AY 2016-17) – 31^st Dec. 2018

for FY 2016 -17 (AY 2017-18) – 31^st Dec. 2019

for FY 2017 -18 (AY 2018-19) – 30^th Sep. 2020

for FY 2018 -19 (AY 2019-20) – 31^st Mar. 2021

3.Where a reference has been made to Transfer Pricing Officer to determine Arm’s Length Price, then no order of assessment/ reassessment under section 143(3) shall be made after the expiry of 33 months(30 months for A.Y. 2018-19 and 24 months wef A.Y. 2019-20) from the end of relevant Assessment Year.

(4) Best judgment assessment u/s 144

Where any person:

(a) Fails to make the return required u/s 139 (1) / 139(4) or 139(5) depending upon circumstances, or

(b) Fails to comply with

(i) All the terms of a notice issued u/s 142(1) or

(ii) Directions issued under sub-section (2A) of that section], or

(c) Fails to comply with all the terms of a notice issued under sub-section (2) of section 143,

the Assessing Officer, after taking into account all relevant material which he has gathered, shall, after giving the assessee an opportunity of being heard (not necessary in case where notice u/s 142(1) is already served), make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment:

Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment.

Note: The assessing officer under this section cannot assess income below the returned income or cannot assess the loss higher than the returned income.

No order of assessment/ reassessment under section 144 shall be made after the expiry of 21 months(18 months for A.Y. 2018-19 and 12 months wef A.Y. 2019-20) from the end of relevant Assessment Year.

Example: Last date for assessment order u/s 143(2):
for FY 2015 -16 (AY 2016-17) – 31^st Dec. 2018
for FY 2016 -17 (AY 2017-18) – 31^st Dec. 2019
for FY 2017 -18 (AY 2018-19) – 30^th Sep. 2020
for FY 2018 -19 (AY 2019-20) – 31^st Mar. 2021

Where a reference has been made to Transfer Pricing Officer to determine Arm’s Length Price, then no order of assessment/reassessment under section 144 shall be made after the expiry of 33 months (30 months for A.Y. 2018-19 and 24 months wef A.Y. 2019-20) from the end of relevant Assessment Year.

Situation	Treatment
Assessing Officer has not provided opportunity of being heard by servicing notice?	Assessment is Void
Assessing Officer has not provided opportunity of being heard but notice under 142(1) was already issued?	Assessment is Void
If assessment carried out after 2 years of completion of assessment year	Assessment is Void

(5) Protective Assessment

Sometimes it may happens that one particular income is assessed in one more than one hand i.e. one assessing officer is treating the some income in the hands of ‘A’ and same income might be treated in the hands of ‘B’ by some different assessing officer. And some time same officer may assess the same income in the hands of one person and also in the hands of a firm / family also.

It has been held by the Supreme Court in Lalji Haridas v. ITO, (43 ITR 387), that the officer may, when in doubt, to safeguard the interest of revenue, assess it in more than one hand. But this procedure is allowed at the level of assessment only and at higher level it is possible to give clear findings as who is really liable to be assessed leaving the one and in such case department should provide relief suo motu to one of them. (ITO vs. Bachu lal kapoor (1966) 60 ITR 74 (SC))

(6) Income escaping assessment u/s 147

Subject to provisions of section 148 to 153, if any assessing officer believes that any income, chargeable to tax, has escaped assessment for any assessment year, he may:

a) assess or reassess such income which has escaped assessment;

b) recompute the loss or depreciation allowance or any other allowance as the case may be, for the assessment year concerned i.e. the relevant assessment year

Deemed cases of escapement:

a) where no return has been filed and no assessment is done but his total income or total income of any other person in respect of which he is assessable, exceeds the maximum amount which is not chargeable to tax

b) where a return of income filed but no assessment is done and assessing officer noticed understatement of income or excessive claim of loss, deduction, allowance or relief etc.

c)  where assessee fails to report international transactions u/s 92E

d) where assessment u/s 143(3) / 144 has been made but income chargeable to tax:

(i) has been under assessed; or

(ii) has been assessed at low rate; or

(iii)has been assessed with excessive relief; or

(iv) excessive loss or depreciation or other allowance has been computed

Note: if any case is pending under appeal / revision then that case cannot be opened under section 147.

Notice u/s 148 (1)

Before making any assessment u/s 147, the assessing officer shall serve on the assesse a notice requiring him to furnish a return of his income or income of any other person in respect of which he is assessable during the previous year corresponding to the relevant assessment year with in such period as may be specified in the notice.

Note:

i) even though notice u/s 139 or 142(1) have been issued, then also notice under section 148 is must.

ii) return filed in response to notice u/s 148 (1) shall be treated as if the same is filed u/s 139 and for making assessment u/s 147 read with section 143(3), assessing officer is required to issue notice u/s 143(2) within a period of 6 months from the end of financial year in which such return is filed by the assessee.

iii) As per section 148(2), assessing officer is required to record the reasons for issuing notice u/s 148(1).

iv) However as per explanation 3 to section 147, reassessment can be done for an issue which is not already recorded.

v) Separate notice u/s 148(1) is required for each assessment year for which income has escaped.

Time limit and sanctions for issue of notice: section 149 /151

As per section 149(1) notice u/s 148(1) can be issued only:

a) within 4 years from the end of the relevant assessment year for any income escaping assessment’ or

Example: for FY 2015 -16 notice u/s 148(1) can be issued on or before 31^st March 2021.

b) within 6 years from the end of the relevant assessment in cases where the amount of income escaping assessment is likely to be Rs. 1,00,000/- or more for that year, or

c) within 16 years from the end of the relevant assessment year if the income in relation to any asset (including financial interest in any asset) located outside India, chargeable to tax, has escaped assessment.

In clause b) and c) above notice can be issued only after getting sanction from Principle Chief Commissioner or Chief Commissioner or Principle Commissioner or Commissioner.

Proviso to section 147

Where an assessment u/s 143(3) or 147 has already been made for relevant assessment year no any action u/s 147 is possible after expiry of 4 year as mentioned in clause b) and c) above, unless any income chargeable to tax has escaped assessment by reason of the failure on the part of assessee. However above proviso do not apply in relation to income from asset located outside India.

No time limit for issue of notice u/s 148 (1) in following situation:

If the notice u/s 148(1) is required to be issued to give effect to any finding or direction contained in a passed by:

i) By any authority in any proceeding under this Act by way appeal or revision

ii) By a Court / Supreme Court / High Court

iii) CIT Appeal u/s 250, ITAT u/s 254, Commission u/s 263 or 264 of Income Tax Act

(7) Assessment in case of search u/s 153A

Commissioner of Income Tax:

He is an important income tax authority which has executive and judicial powers. The central board of revenue is the appointing authority for commissioner of income tax. Normally commissioner is appointed as an incharge of a zone. He is responsible for the administration of the area assigned to him. He is subordinate regional commissioner income tax.

Appointment of Income-Tax Authorities [Sec. 117]

1. Power of Central Government: The Central Government may appoint such persons as it thinks fit to be income-tax authorities. It kept with itself the powers to appoint authorities upto and above rank of an Assistant Commissioner of Income-Tax [ Sec. 117 (1) ]
2. Power of the Board and Other Higher Authorities: Subject to the rules and orders of the Central Government regulating the conditions of service of persons in public services and posts, the Central Government may authorize the Board, or a Director-General, a Chief Commissioner or a Director or a Commissioner to appoint income-tax authorities below the rank of an Assistant Commissioner or Deputy Commissioner.  [ Sec. 117 (2) ]
3. Power to appoint Executive and Ministerial Staff: Subject to the rules and orders of the Central Government regulating the conditions of service of persons in public services and posts, an income-tax authority authorized in this behalf by the Board may appoint such executive or ministerial staff as may be necessary to assist it in the execution of its functions.

Control of Income: Tax Authorities [ Sec. 118 ]

The Board may, by notification in the Official Gazette, direct that any income-tax authority or authorities specified in the notification shall be subordinate to such other income-tax authority or authorities as may be specified in such notification.

Jurisdiction:

1. In a specific area which is assigned to him, he performs both the function judicial and executive.
2. If specific area is not assigned then he performs his duties according the directions of central board of revenue.

Function and powers of commissioner of income tax:

The commissioner exercises the power to control the staff of income tax department working in his jurisdiction. He is also responsible for the efficiency of work in all respect in his zone.

Following are the important functions and powers of commissioner of income tax.

1. Determine The Jurisdiction:

He has the power to determine the jurisdiction and assign the work to subordinate inspecting additional commissioners income tax and deputy commissioners.

2. Final Authority To Decide The Dispute:

Commissioner income tax is the final authority to decide the disputes if two subordinate income tax authorities are not in agreement regarding their areas of juries diction or the assessment of a person.

3. Transfer Of Jurisdiction:

He is empowered to transfer the jurisdiction from one income tax authority to another.

4. Revision Of Orders:

He may revise any other passed by his subordinates however these orders should not be prejudicial to the assessee.

5. Power To With Held The Refund:

The commissioner of income tax is empowered to order that the refund must be with held if the department wants to appeal against the refund.

6. Refer The Case To High Court:

If he is not satisfied with the decision of appalled tribunal, he can request the tribunal to refer the case to high court provided that the decision involves the point of law.

7. Power To Compound Offence:

He may either before or after the institution of proceedings compound such offence where a person has committed any offence under the income tax law.

8. Order To Person For Payment:

He may order a person who has committed an offence to pay the amount for which the offence may not compound.

9. Power To Disqualify The Practitioners:

If he finds any practitioners qualify of misconduct, he may disqualify an income tax practitioner to appear before any income tax authority.

10. Power To Amend His Orders:

To rectify any mistake from the record the commissioner income tax may amend his orders passed by him.

11. Power To Receive Evidence:

The commissioner has the power to receive the evidence on affidavit.  For the examination of witness he can issue the orders to commissioners.

12. Power To Demand Documents:

He can compel any person to produce his books of accounts or any other documents for investigation. He can also enforce any person to attend his office and he can examine him.

13. Power to Extend the Petition Period:

He can extend the normal period for filling a revision petition, If he is satisfied about the cause of delay.

14. Power to Decide the Revision Petitions:

Against the decision of his subordinates he entertains, hears and decides the revision petitions of aggrieved assesses.

15. May Direct for Appeal:

The commissioner of income tax (Head quarter) may direct the deputy commissioner to appeal to appellate tribunal against the decision made by the commissioner income tax (appeal).

16. Penalty:

If the notice has been issued to any taxpayer but he has failed to obey the notice. In this case commissioner income tax may impose penalty on that person.

17. Best Judgement Assessment:

If any person fails to file the return of income tax with in due date then the commissioner can make the best judgement of assessment.

18. Power of Recovery Of Tax:

The commissioner income tax can take various steps to recover the amount if any person fails to pay the due tax.

19. Inventory of Articles:

If any article is not entered and it is found in the premises the commissioner can make inventory of that article.

20. Provisional Assessment:

The commissioner income tax has the power to make the provisional assessment if any person fails to file the return.

21. Notice for Tax:

The commissioner income tax can issue the notice to any person for filling the return or for the collection of tax from the tax payer.

22. Retain The Documents:

The commissioner income tax is empowered to retain the important documents of the taxpayers for the purpose of prosecutions.

23. Change The Method Of Accounting:

If any person wants to change his method of accounting, the commissioner income tax may allow him to change.

Every assessee, who earns income in excess of the basic exemption limit in a Financial Year (FY), must file a statement containing details of his income, deductions, and other related information. This is called the Income Tax Return. Once you as a taxpayer file the income returns, the Income Tax Department will process it. There are occasions where, based on set parameters by the Central Board of Direct Taxes (CBDT), the return of an assessee gets picked for an assessment.

The various forms of assessment are as follows:

1. Self Assessment

The assessee himself determines the income tax payable. The tax department has made available various forms for filing income tax return. The assessee consolidates his income from various sources and adjusts the same against losses or deductions or various exemptions if any, available to him during the year. The total income of the assessee is then arrived at. The assessee reduces the TDS and Advance Tax from that amount to determine the tax payable on such income. Tax, if still payable by him, is called self assessment tax and must be paid by him before he files his return of income. This process is known as Self Assessment.

2. Summary Assessment

It is a type of assessment without any human intervention. In this type of assessment, the information submitted by the assessee in his return of income is cross-checked against the information that the income tax department has access to. In the process, the reasonableness and correctness of the return are verified by the department. The return gets processed online, and adjustment for arithmetical errors, incorrect claims, disallowances etc are automatically done. Example, credit for TDS claimed by the taxpayer is found to be higher than what is available against his PAN as per department records. Making an adjustment in this regard can increase the tax liability of the taxpayer.

After making the aforementioned adjustments, if the assessee is required to pay tax, he will be sent an intimation under Section 143(1). The assessee must respond to this intimation accordingly.

3. Regular Assessment

The income tax department authorizes the Assessing Officer or Income Tax authority, not below the rank of an income tax officer, to conduct this assessment. The purpose is to ensure that the assessee has neither understated his income or overstated any expense or loss or underpaid any tax.

The CBDT has set certain parameters based on which a taxpayer’s case gets picked for a scrutiny assessment.

• If an assessee is subject to a scrutiny assessment, the Department will send a notice well in advance. However, such notice cannot be served after the expiry of 6 months from the end of the Financial year, in which return is filed.
• The assessee will be asked to produce the books of accounts, and other evidence to validate the income he has stated in his return. After verifying all the details available, the assessing officer passes an order either confirming the return of income filed or makes additions. This raises an income tax demand, which the assessee must respond to accordingly.

4. Best Judgement Assessment

This assessment gets invoked in the following scenarios:

1. If the assessee fails to respond to a notice issued by the department instructing him to produce certain information or books of accounts
2. If he/she fails to comply with a Special Audit ordered by the Income tax authorities
3. The assessee fails to file the return within due date or such extended time limit as allowed by the CBDT
4. The assessee fails to comply with the terms as contained in the notice issued under Summary Assessment

After providing the assessee with an opportunity of being heard, the assessing officer passes an order based on all the relevant materials and evidence available to him. This is known as Best Judgement Assessment.

5. Income Escaping Assessment

When the assessing officer has sufficient reasons to believe that any taxable income has escaped assessment, he has the authority to assess or reassess the assessee’s income. The time limit for issuing a notice to reopen an assessment is 4 years from the end of the relevant Assessment Year. Some scenarios where reassessment gets triggered are given below.

1. The assessee has taxable income but has not yet filed his return.
2. The assessee, after filing the income tax return, is found to have either understated his income or claimed excess allowances or deductions.
3. The assessee has failed to furnish reports on international transactions, where he is required to do so.

Assessment, in the case of some taxpayers, could close quickly while for some, it could prove to be quite gruelling. In case you are not comfortable dealing with income tax officers, it is suggested that you take the help of a Chartered Accountant to help you with your case.

Set off of losses means adjusting the losses against the profit/income of that particular year. Losses that are not set off against income in the same year, can be carried forward to the subsequent years for set off against income of those years. A set-off could be:

1. An intra-head set-off
2. An inter-head set-off

1. Intra-head Set Off

The losses from one source of income can be set off against income from another source under the same head of income.

For eg: Loss from Business A can be set off against profit from Business B where Business A is one source and Business B is another source and the common head of income is “Business”.

Exceptions to an intra-head set off:

1. Losses from a Speculative business will only be set off against the profit of the speculative business. One cannot adjust the losses of speculative business with the income from any other business or profession.
2. Loss from an activity of owning and maintaining race-horses will be set off only against the profit from an activity of owning and maintaining race-horses.
3. Long-term capital loss will only be adjusted towards long-term capital gains. Interestingly, a short-term capital loss can be set off against long-term capital gain or short-term capital gain.
4. Losses from a specified business will be set off only against profit of specified businesses. But the losses from any other businesses or profession can be set off against profits from the specified businesses.

2. Inter-head Set Off

After the intra-head adjustments, the taxpayers can set off remaining losses against income from other heads.

Eg. Loss from house property can be set off against salary income

Given below are few more such instances of an inter-head set off of losses:

1. Loss from House property can be set off against income under any head
2. Business loss other than speculative business can be set off against any head of income except income from salary.

One needs to also note that the following losses can’t be set off against any other head of income:

1. Speculative Business loss
2. Specified business loss
3. Capital Losses
4. Losses from an activity of owning and maintaining race-horses

Carry forward of losses

After making the appropriate and permissible intra-head and inter-head adjustments, there could still be unadjusted losses. These unadjusted losses can be carried forward to future years for adjustments against income of these years. The rules as regards carry forward differ slightly for different heads of income. These have been discussed here:

Losses from House Property:

• Can be carry forward up to next 8 assessment years from the assessment year in which the loss was incurred
• Can be adjusted only against Income from house property
• Can be carried forward even if the return of income for the loss year is belatedly filed.

Losses from Non-speculative Business (regular business) loss:

• Can be carry forward up to next 8 assessment years from the assessment year in which the loss was incurred
• Can be adjusted only against Income from business or profession
• Not necessary to continue the business at the time of set off in future years
• Cannot be carried forward if the return is not filed within the original due date.

Speculative Business Loss:

• Can be carry forward up to next 4 assessment years from the assessment year in which the loss was incurred
• Can be adjusted only against Income from speculative business
• Cannot be carried forward if the return is not filed within the original due date.
• Not necessary to continue the business at the time of set off in future years

Specified Business Loss under 35AD:

• No time limit to carry forward the losses from the specified business under 35AD
• Not necessary to continue the business at the time of set off in future years
• Cannot be carried forward if the return is not filed within the original due date
• Can be adjusted only against Income from specified business under 35AD

Capital Losses:

• Can be carry forward up to next 8 assessment years from the assessment year in which the loss was incurred
• Long-term capital losses can be adjusted only against long-term capital gains.
• Short-term capital losses can be set off against long-term capital gains as well as short-term capital gains
• Cannot be carried forward if the return is not filed within the original due date

Losses from owning and maintaining race-horses:

• Can be carry forward up to next 4 assessment years from the assessment year in which the loss was incurred
• Cannot be carried forward if the return is not filed within the original due date
• Can only be set off against income from owning and maintaining race-horses only

Points to note:

1. A taxpayer incurring a loss from a source, income from which is otherwise exempt from tax, cannot set off these losses against profit from any taxable source of Income
2. Losses cannot be set off against casual income i.e. crossword puzzles, winning from lotteries, races, card games, betting etc.

Wealth tax is imposed on the richer section of the society. The intention of doing so is to bring parity amongst the taxpayers. However, wealth tax was abolished in the budget of 2015 (effective FY 2015-16) as the cost incurred for recovering taxes was more than the benefit is derived. Abolishing the wealth tax also simplified the tax structure. As an alternative to the wealth tax, the finance minister hiked the surcharge from 2% to 12% for the super rich section. Individuals with an income of above Rs.1 crore and companies with an income of over Rs.10 crore fall under the ambit of the super-rich segment.

Wealth tax is applicable to individuals, HUFs, and companies. The deciding factor for applicability of wealth tax is the residential status. The thumb rule is the resident Indians are subject to wealth tax on their global assets. However, NRI’s fall under the ambit of wealth tax for the assets held in India.

If the total net wealth of an individual, HUF or company exceeds Rs. 30 lakhs, on the valuation date, tax @1% will be leviable on the amount in excess of Rs. 30 lakhs.  Every person whose net wealth exceeds such limit shall furnish a return of net wealth. The due date is same as that of Income tax return.

Components of Wealth

Assets:An asset is a resource which is held and has future economic benefit

1. Any building or land appurtenant whether used for residential/ other purposes, but doesn’t include:
2. House allotted by accompanying/ employer to be used exclusively for residential purposes, where the gross total salary of the assessee is less than Rs.10 lakhs
3. House which forms part of Stock in trade
4. House occupied by the assessee for business/ professional purpose
5. Residential property let out for minimum of 300 days in the previous year
6. Property in the nature of commercial establishment or complex
7. Motorcars, other than those used for running them on hire or those held as stock in trade
8. Jewellery, bullion, furniture, utensils or other articles made fully/ partly of gold, silver, platinum or such precious metals
9. Yachts, boats and aircrafts other than those used for commercial purpose
10. Urban land situated in the Specified area, other than:
11. Those classified as agricultural land and used for such purpose
12. Those in which building construction is not permissible
13. Land occupied by building, which was constructed with the approval of the appropriate authority
14. Unused land held by assessee for industrial purposes for a period of 2 years from the date of acquisition.
15. Land held by the assessee as stock in trade for over 10 years from the date of acquisition
16. Cash in hand in excess of Rs. 50,000

Deemed Assets: These are assets, though not legally belonging to the assessee, are clubbed as his assets while computing his net wealth

1. Assets transferred to Spouse otherwise than in connection with agreement to live apart.
2. Assets transferred to a person/ Association of Persons for the immediate or deferred benefit of assessee or spouse.
3. Assets transferred to son’s wife.
4. Assets transferred to a person/ Association of Persons for the immediate or deferred benefit of son’s wife.
5. Assets held by minor child other than those acquired using the skills of minor or those belonging to a minor with disability.
6. Interest of assessee in the asset of a firm/association of people where he is a partner or member.
7. Self-acquired property that is converted as the property of the family/transferred with inadequate consideration.
8. Assets transferred under revocable transfer.
9. Gift of money made in books maintained by assessee, by way of mere book entries.

• Impartible assets held by assessee
• Building allotted to assessee under a Homebuilding scheme.
• Building in which a person is allowed to take/ retain possession in part performance of a contract.
• Building for which assessee has acquired the rights.

Exempted Assets: Assets which are not considered as a part of wealth for the computation of wealth tax

1. Property held under trust/ for the purpose of charitable/religious purposes.
2. Interest in coparcenary property of Hindu Undivided family.
3. Jewellery in possession of ruler not being his personal property.
4. Money/Asset brought by a person of Indian origin/by an Indian citizen.
5. In case of an Individual/HUF, a house/ part of house or plot of land not exceeding 50sq.mtr in area.

Wealth tax Rules

According to Wikipedia, Exploratory research is carried out for a difficulty which has not been clearly defined. It helps in figuring out the best research design, data collection method and choice of subjects.

It should draw definitive conclusions only with extreme caution. Given its basic nature, it usually concludes that an identified problem doesn’t actually exist. The purpose is to find out ideas and information.

Types of Exploratory Research Design

Some of the more popular methods of exploratory research design include literature searches, depth interviews, focus groups, and case analyses.

Types of Exploratory Research
Literature Search	Depth Interviews	Focus Group	Case Analysis

Literature Search: It is one of the fastest and least expensive means to discover hypotheses. There is enormous quantity of information available in libraries, via internet sources, in commercial data bases, and so on. The literature search may include newspapers, magazines, trade literature, academic literature, or published statistics from research organizations or governmental agencies Census Bureau.  Example: Assume an issue is “Why are product sales lower?” This can easily be evaluated with the aid of published data which should indicate “whether the issue is an “industry problem” or a “firm problem”.

If we acknowledge the specific situation that our company’s sales and profits are lower regardless of the market showing an up trend, then we must evaluate the marketing mix variables.

Depth Interviews: It’s important to start with a good literature search, but at some point it is desirable to talk to persons who are well informed in the area being investigated. These people could be professionals or persons outside the organisation. Here, we don’t need questionnaire. The approach adopted should be highly unstructured, so that the participant can give divergent views.

Depth interviews are widely used to tap the knowledge and experience of individuals with information strongly related the situation or opportunity at hand. Anybody with related information is a potential candidate for a depth interview, such as existing clients, members of the target market, executives and supervisors of the client organization, sales representatives, suppliers, retailers, and so on.

Focus Group: Yet another frequently used method in exploratory research is the focus group. In a focus group, only a few people are brought together to study and talk over some theme of interest. The discussion is directed by a moderator who is in the room with the focus group participants. The group usually is of 8-12 persons. While choosing these individuals, care must be taken to see that they should have a common background and have comparable experiences in buying. This is certainly needed since there should not be a conflict among the group members on the common problems that are being talked about. Throughout the discussion, future buying attitudes, present buying opinion etc., are collected.

Case Analyses: Researchers can understand a lot in regards to a problem by studying carefully selected examples or cases of the phenomenon. Case histories of businesses that have gone through an identical problem may be available. These case studies are suitable to undertake exploratory research. A researcher must examine carefully the previously published case studies with regard to variables like price, advertisement, changes in the trend, etc.

Examples of Exploratory Research

Literature Search Examples

Example 1: A Washing machine producing firm feels that its share of the market is decreasing whereas the overall industry is thriving.

Example 2: As a result of a trade restriction imposed by a country, auto exports are down and hence sales of a company making cars for exports is on the decline.

The above mentioned information enables you to pinpoint the reason for declining sales.

Depth Interviews

For example, a children’s book publisher obtained useful information regarding a sales decline by speaking with librarians and school teachers who revealed that increasing numbers of people were using library facilities and possibly buying fewer books for their children.

Case Analyses

For example, L.L.Bean is recognized for its exceptional order fulfillment.  Even during the busy Christmas season, the corporation usually fills over 99 % of its orders correctly. For that reason, various other businesses have sought to improve their own order fulfillment by benchmarking L.L.Bean.

This research is conducted to clarify ambiguous problems. In this article, we have discussed about the different types of exploratory research design, its examples, and methods. Post your feedback or queries in comments.