UNIT I | unit 1 income tax act 1961

TLA

UNIT I

Income Tax Act 1961

Q1) Define Tax stating its need in India?

Ans. Taxes are mandatory financial claims by the government on wages, products, administration, exercises or exchanges. Taxes are the basic mode of income for the government, which is used for the welfare of the general population of the state through government strategies, arrangements, and practices. There are references to taxes in ancient writings such as Manusmurti and kautiriya altashastra. It was first started in 1860 to beat the financial crisis of 1857 in India. Thus, it is the Income Tax Act 1961, which is currently implemented in India.

Constitutional Provisions of Taxes in India

The basis of all laws in India is rooted in the Constitution. Under Article 265 of the Constitution, taxes must be collected or collected, except for the powers of law. Under the Constitution there are various provisions that distribute power.

India Constitution Seventh Schedule list I Entry 82 grants power to Parliament to impose taxes on income other than agricultural income. Thus, the income tax is under the Union List, and therefore the central government is responsible for the collection of income tax.

The central government has the authority to collect taxes on income, apart from the agricultural income tax that is levied by the state government. Entry 46 of the list II of the Seventh Schedule of the Indian Constitution lays out that the state government has the authority to collect taxes on agricultural income.

Schedule 7

Listing 1

Entry 82: taxes on income aside from agricultural income.
Entry 83: customs duties, including export duties.
Entry 84: duty of excise duty on tobacco and other goods manufactured or produced in India excluding alcoholic beverages, opium and narcotics for human consumption, but including the preparation of medicines and toilets containing alcoholic beverages, opium or narcotic.
Entry 85-corporation tax
Entry 92A: tax on the buying or selling of goods aside from newspapers during which such sell or buy is established within the process of interstate trade or commerce.
Entry 92B-a tax on consignment of goods in which such consignment is carried out during interstate trade or commerce.
Entry 92c-taxes on services
Entry 97-List II, List III, and other issues not included in the taxes not listed in List II or List III.

Listing 2

Entry 46- tax on agricultural income.
Entry 51- excise duty on all alcoholic beverages, opium and narcotics.
Entry 52-tax on the entry of goods into the local area for consumption, use or sale there (usually referred to as Octroi or entry tax).
Entry 54- taxes on the sale or purchase of goods other than newspapers, except for interstate sales or purchase taxes.
Entry 55- tax on advertising, excluding advertising in newspapers.
Entry 56- tax on goods and passengers carried by road transport or inland waterways.
Entry 59- taxes on professionals, transactions, calls, and employment.

The need for income tax in India

Income tax is a tax on the income of an individual or legal entity. Income tax is the main source of income for the government to perform its functions. The work of government is not only limited to Defence, Law, Order, etc. But it must also carry out activities like welfare and development under areas such as health, education and Rural Development. The government will also have to pay for its own administration. All of these activities require huge finances, which are raised by the collection of taxes.

Purpose of taxation

Money spent on the development of roads, schools, hospitals, market regulation and legal systems, etc. It is raised by the income generated by the collection of taxes’ Redistribution of resources by richer sections to poorer sections of society.
Certain products are taxed to eliminate externalities, such as a tobacco tax to discourage smoking
Subdivision of taxes: direct and indirect taxes.
Income tax may be a tax imposed on individuals. Real estate and wealth taxes were also direct taxes, but these are now abolished
Indirect taxes imposed in India are customs duties, central excise taxes, service taxes, sales taxes, and VAT.

For now, the GST has been implemented and all other indirect taxes have been abolished.

Definition

Although income tax as a concept existed in India for many years, James Wilson, the first financial member of India, introduced the first modern Income Tax Act in 1860. "It was just for the advantage of his subjects that he collected taxes from them, because the sun draws moisture from the world and returns thousand times," Kalidas wrote in his epic Raghuvansh.

The Income Tax Act is a comprehensive statute that focuses on the various rules and regulations governing taxation in a country. It provides to collect, manage, collect and collect income tax for the Indian government. It was enacted in 1961.

The tax law contains a complete of 23 chapters and 298 sections, consistent with the official website of the Indian tax Bureau [1]. These different sections correspond to the surface of taxation. The different heads you have to pay income tax include、:

Salary
Income from home property
Capital gay
Profits and profits from business or profession
Income from other sources

Every year, the government of India presents its fiscal budget during the month of March. The budget brings various amendments to the Income Tax Act. This change also applies to the tax version. For example, the minister of Finance announced that the personal tax rate of the Rs minimum tax bracket. From 2.5 lakh to 5 lakhs will be reduced from 10% to 5% in fiscal 2017. Similarly, taxes on long-term capital gains (LTCG) were reintroduced in the fiscal 2018 budget. As a result, all profits will be greater than Rs. Lakh from equity and equity investment trusts held for more than 1 year is currently subject to LTCG tax at 10%.

Q2) When do I have to pay taxes on my income?

Ans: taxes on income can only be finalized at the completion of the previous year. However, in order to allow regular flow of funds and ease the tax collection process, the Income Tax Act has provisions for pre-payment of taxes before the completion of the year or the previous year of the income itself. It is also known as the due date when you cannot pay for the deals.

Taxes are collected by the government through the following means:

Any payment by the taxpayer to various designated banks, such as pre-tax, self-assessment tax.

1. Taxes withheld

2. Taxes collected at source

Q3) How many taxpayers ' income fall under their heads?

Ans: Section 14 of the Income Tax Act classifies taxpayers ' income under five different heads of income, i.e.

Salary
Income from home property
Profit and profit of business or profession
Capital gains
Income from other sources.

Q4) What is the difference between gross income and gross income?

Ans: gross income is the income from which the tax liability is determined. It is necessary to calculate the gross income to confirm the tax liability. Sections 80C to 80U provide specific deductions that can be claimed from gross income (GTI). After claiming these deductions from the GTI, the remaining income is called gross income. In other words, GTI less deductions (under Sections 80C to 80U) =gross income (TI). Gross income can also be understood as taxable income. The following table better understands the difference between GTI and Ti:

Calculation of gross and taxable income

Specific amount

Income from salary XXXXX

Income from house property XXXXX

Business or profession XXXXX profits and profits

Capital gains XXXXX

Income from other sources XXXXX

Total revenue XXXXX

Less: deductions based on Chapter VI-a (IE, under Section 80C-80U)

（○○○○○○○○)

Gross income (i.e., taxable income) XXXXX

Note: Inter-source loss, Inter-head loss, bring-in loss, unabsorbed depreciation, etc. While calculating the total gross income (if any), should be adjusted (according to the income tax law).

Note: If an eligible evaluator has chosen a concessional tax scheme under sections 115BAA, 115BAB, 115BAC and 115BAD, the assessor's gross income will be deducted from the concessional tax plan without invoicing the specified exemption or deduction.

Q5) Can I claim deductions for personal and household expenditures when calculating taxable income or profits?

Ans: No, you cannot claim a deduction for personal expenses while calculating taxable income.

While calculating income under different heads, deductions can only be claimed for those expenses that are provided under the Income Tax Act.

Q.6 most of my income is given to charity and I have just enough money left to meet my personal requirements. What is considered as my income?

Ans: what is done after the income is earned by you will not give you a tax exemption. However, contributions to approved institutions would give the benefit of deductions from taxable income under Section 80G subject to the restrictions specified there.

Q6) How to calculate the total tax obligations?

Ans: after confirming the gross income, i.e., taxable income responsible, the next step is to calculate the tax liability for that year. The tax liability must be calculated for the rate of use. The following table will help you understand how to calculate the total tax liability of the taxpayer.

Calculation of gross income and tax liability for the year

Particulars	Amount
Income from salary	XXXXX
Income from house property	XXXXX
Profits and gains of business or profession	XXXXX
Capital gains	XXXXX
Income from other sources	XXXXX
Total of head wise income	XXXXX
Set off of Losses	XXXXX
Gross Total Income	XXXXX
Less: Deductions under Chapter VI-A (i.e., under section 80C to 80U))	(XXXXX)
Total Income (i.e., taxable income)	XXXXX
Tax on total income to be computed at the applicable rates (for rates of tax, refer “Tax Rate” section)	XXXXX
Less: Rebate under section 87A (discussed in later FAQ)	(XXXXX)
Tax Liability After Rebate	XXXXX
Add: Surcharge (discussed in later FAQ)	XXXXX
Tax Liability After Surcharge	XXXXX
Add: Health & Education cess @ 4% on tax liability after surcharge	XXXXX
Tax liability before rebate under sections 86, section 89, sections 90, 90A and 91 (if any) (*)	XXXXX
Less: Rebate under sections 86, section 89, sections 90, 90A and 91(if any) (*)	(XXXXX)
Tax liability for the year before pre-paid taxes	XXXXX
Less: Prepaid taxes in the form of TDS, TCS and advance tax	(XXXXX)
Tax payable/Refundable	XXXXX

Q7) Mr Curran is a businessman, 35. His total income in 2020-21 has reached Rs. 1, 07, 00,000. Is he responsible for paying an additional fee, and if so, how much will he benefit from the marginal relief?

Ans. A surcharge is an additional tax that is imposed on the amount of income tax. For taxpayers (i.e., individuals/HUF/AOP/BOI / artificial legal persons), an additional charge of@15% is imposed on the amount of income tax in which the taxpayer's total income exceeds Rs. 1 crore in this case, Mr. Curran's total income exceeds Rs. 1 crore therefore, he is responsible for paying an additional fee. Marginal relief is available if the total revenue is slightly above Rs. 1. The usual tax liability and tax liability under marginal relief (i.e., liability after marginal relief) are as follows:

(1) Normal tax liability (i.e., no marginal relief)

Tax on Rs. 1 crore (at the rates discussed in previous illustration)	28,12,500
Add: Income above Rs. 1 crore	7,00,000
Tax liability under marginal relief	35,12,500

Conclusion

Normal tax liability (i.e., without marginal relief) comes to Rs. 34,75,875 and tax liability under marginal relief comes to Rs. 35,12,500. It can be observed that normal tax liability (i.e., without marginal relief) is lower and, hence, Rs. 34,75,875 will be the tax liability before cess. Total tax liability will be computed as follows:

	Rs.
Normal tax liability i.e., tax liability after surcharge of Rs. 4,53,375	34,75,875
Add: Health & education cess @ 4%	1,39,035
Tax liability	36,14,910

Q8) How to determine the state of housing?

Ans. For the purposes of income tax in India, the income tax law of India classifies the person subject to taxation as follows:

a. Resident

b. A resident who is not a regular resident (RNOR)

c. Non-resident (NR)

The taxability varies for each of the above categories of taxpayers. Before entering the taxable object, let's first understand how the taxpayer becomes a resident, RNOR or NR.

Resident

Taxpayers can qualify as residents of India if they meet any of the following 2 conditions:

Annual stay in India more than 182 days or
Staying in India for the last 4 years is no less than 365 days and no more than 60 days for the relevant fiscal year

If an individual who is a citizen of India or a person of Indian origin leaves India for employment during FY, he is eligible as a resident of India only if he has stayed in India for more than 182 days. Such individuals are allowed to stay in India for a long time of not less than 60 days and less than 182 days. However, from the 2020-21 financial years, for individuals whose gross income (excluding foreign sources) exceeds Rs15lakh, the period will be reduced to more than 120 days.

In another important amendment from the 2020-21 fiscal year, individuals who are citizens of India who are not responsible for taxation in other countries are considered to be residents of India. The conditions of the status of residence considered apply only if the gross income (except for foreign sources) exceeds Rs 15lakh and nil tax liability in another country or region for reasons of his address or residence or other criteria of a similar nature.

2. Resident not usually resident

If an individual qualifies as a resident, the next step is to determine whether he/she is a regular resident (ROR) or RNOR. He will be ROR if he meets both of the following conditions:

1. At least 2 out of 10 years ago, I was a resident of India、

2. Have stayed in India for at least 730 days in the last 7 years

Therefore, if any individual does not meet any of the above conditions, he becomes an RNOR.

From 2020-21, if a citizen or person from India leaves India for employment outside of India, they will be a regular resident if they stay in India for a total of 182 days or more. But this condition applies only if his total income (except for foreign sources) exceeds Rs15lakh.

In addition, Indian citizens who are considered to be resident in India (FY 2020-21) will reside in India and will usually reside in India.

Note: income from foreign sources means income generated or generated outside India (excluding income derived from businesses controlled in India or professions established in India).

Non-resident

Any individual who does not meet any of the conditions set forth in (a) or (b) above will be in the NR for that year.

3. Taxable

Resident: a resident is taxed in India on income earned in India and income earned outside India, i.e., his global income. NR and RNOR: tax liability in India is limited to the income they earn in India. They do not have to pay any taxes in India on their foreign income.

It should also be noted that in the case of double taxation of income, where the same income is taxed in India as well as abroad, you can rely on the Double Taxation Avoidance Agreement (DTAA).

Q9) Mention few List of Exempted Incomes (Tax-Free) Under Section-10.

Ans. Few List of Exempted Incomes (Tax-Free) Under Section-10:

1. Agricultural income [section 10 (1))]

According to Section 10(1), agricultural income earned by Indian taxpayers is exempt from tax. Agricultural income is provided for in Article 2, Paragraph 1 of the Income Tax Act. According to Section 2 (1A), agricultural income generally means:

Any rent or income derived from land located in India and used for agricultural purposes.

Any income derived from such land by agricultural operations, including the processing of agricultural products, as it fits for the market or sale of such agricultural products.

Any income attributable to the farmer subject to the satisfaction of certain conditions specified in this regard in Section 2 (1A). Income obtained from seedlings or seedlings grown in the nursery shall be considered agricultural income.

2. Hindu non-divided families (H.U.F.)

Any sum received by the joint parcener from [Section 10 (2)]

In accordance with Section 10(2), any amount received from the income of the family's property or, in the case of concessional property, any amount received from the income of the family's property by any member of such HUF is exempt from taxation.

Example-. HUF won". The previous year there were 90,000 during 2016-17 and it is not taxable. Mr. A, a co-parcener, “is earning personal income." 40,000p.m. besides his individual income, Mr. ' receives.50, 000 from his HUF.

Mr. A will pay tax on his personal income, but the amount he receives from HUF will be paid by the joint parcener's hand, regardless of whether the HUF is paying tax on that income.

3. Share of income from the company [Section 10(2A)]

In accordance with Section 10 (2A), the share of profits received by the partner from the enterprise is exempt from taxes in the hands of the partner. In addition, the share of profits that an LLP partner receives from an LLP is exempt from taxes in the hands of that partner. This exemption is limited to profit sharing only and does not apply to interest on capital and compensation received by partners from the Company/LLP.

4. Interest paid to non-residents [Section 10(4)(I)]

In accordance with Section 10(4)(i), for non-residents, income from interest on certain notified securities or bonds (including income from a premium on redemption of such bonds) is exempt from taxation.

In the case of an individual in accordance with Section 10 (4) (II), the interest of the money standing on his credit in a non-resident (external) account of an Indian Bank in accordance with the Foreign Exchange Management Act of 1999.

The exemption under Section 10(4) (II) is only available if the individual is a person residing outside India as defined in Section 2 (q) of the act, or is authorized by the Reserve Bank of India to maintain the aforementioned account.

5. Interest on non-residents on non-residents (external) accounts [section 10(4) (II)]

Income from interest on money standing on his credit in a non-resident (external) account of any bank in India shall be exempt from taxes in the case of an individual who is a person residing outside India or who is authorized by the RBI to maintain the aforementioned account. Persons residing outside India shall have the same meaning as defined under the Foreign Exchange Regulation Act, 1973, FEMA, 1999. This exemption shall not be available to income due to interest paid or deposited after 1-4-2005.

6. Interest paid to a person of Indian origin and non-resident [Section 10 (4B)]

If an individual, a citizen of India or a person of Indian origin and a non-resident, income from interest on savings certificates issued by the central government shall be fully exempted so that the government may designate in its place by notice of the Official Gazette. Exemptions under this section should not be allowed for bonds or securities issued after 1-6-2002.

This exemption allows an individual to transfer foreign currency or other foreign currency remitted from a country other than India in accordance with the provisions of the Foreign Exchange Act, 1973, FEMA, 1999 and the rules made there.

To this end, a person must be considered to be of Indian origin if he or any of his parents or grandparents were born in India or undivided India.

7. Leave travel concessions or assistance (LTC/LTA) to Indian civil employees [Section 10 (5)]

An employee is entitled to an exemption under Section 10(5) with respect to the value of travel concessions or assistance received by or for him by his employer or a former employer for himself and his family in connection with his procedures—

On vacation to any place in India.

After retiring from service or after the end of his service to any place in India.

Exemptions shall be granted in accordance with the following conditions:

If the trip is carried out by air—the maximum exemption should be an amount that does not exceed the air economic fare of the domestic airline by the shortest route to the destination;

If the origin and destination of the journey are connected by rail, and the journey is carried out by means of non—air transport-the maximum exemption shall not exceed the air-conditioned first-class railway price by the shortest route to the destination.
In the presence of a recognized public transport system, in transportation by the shortest route to the destination, in some cases, the 1st or Deluxe Class is used.
In the absence of a public transport system, the amount equivalent to the air-conditioned first-class rail fare for the distance of the journey by the shortest route, as if done by rail.

The exemption, however, in no case exceeds the particular expenditure incurred on the performance of the journey.

How many times can I request an exemption?

The assessor can claim an exemption with respect to any two journeys in the 4-year block. To this end, the first block in Year 4 was 1986-89, the second block was 1990-93, the third block was 1994-97, the fourth block was 1998-2001, the fifth block was 2002-05, the sixth block was 2006-09, the seventh block was 2010-2013, the eighth block was 2014-2017, and the ninth block was 2018-2021.

If the assessor does not take advantage of the LTC exemption in a particular block, whether for both journeys or for one trip, he can immediately carry over to the end of the four-calendar year block, that is, the maximum one trip can carry over and only for the first trip in the next calendar year unless the period is extended in another way. Such journeys made during the extended period will not be considered to determine the duty-free of the two journeys for subsequent blocks.

Exemptions only available with respect to two children
Exemptions regarding LTC are not available to two or more surviving children of individuals after 1.10.1998.
Exception: the above law does not apply in case to children who are born before 1.10.1998 and in the case of multiple births after one child.

Important notes:

If LTC is wrapped without making a trip, then the full amount of the amount received by the employee is taxable.

Families for this purpose include、:
Spouses and children of employees;
Parents, brothers and sisters of employees who are completely or largely dependent on him.
Exemptions can be useful for trips carried out during the service's tenure on vacation or even after retirement/dismissal from the service.
Exemptions are only allowed with respect to fares. Expenses incurred during transportation, boarding and accommodation or travel from Porter, residence to train station/airport/bus stand and back are not exempt.
Exemption is possible for the shortest route. If a trip from the place of origin to a different location is made in a circular or other manner, the exemption from the trip is limited to the shortest route allowed from the place of origin to the farthest point.

8. Compensation or salary received by a private who isn't a citizen of India [Section 10(6)]

The following income is exempt when received by individuals who are not citizens of India:

Reward [U / s10 (6) (ii)].

Remuneration received by ambassadors or other officials of foreign embassies, High Commission or legation of India.

Compensation by a foreign consul in India.
Compensation received by trade commissioners or other official representatives of foreign India, if the corresponding official of the Indian government of the country is given a similar concession.
Compensation received by a member of the staff of the personnel listed above (a), (b) and (c).

If the person stated in (A)to (d)is the subject of the country represented and is not engaged in business, occupation or employment in India (otherwise than as a member of such staff), the country represented will give similar concessions to the member of the staff of the corresponding staff of the government of India.

II. Compensation received by him as an employee of a foreign company [U/S10 (6) (VI)]

For the services rendered by him during his stay in India (for example, a technician deputed by a foreign company to work in India), the following conditions are met: —

i) Foreign companies are not engaged in trade or business in India;

Ii) His stay in India does not exceed a period of 90 days in total for such a previous year.

Iii) Such compensation is not liable to be deducted from the income of the employer, which is imposed under the law.

III. Employment on foreign ships[U/s10(6) (viii)].

Income received by such individuals as non-residents, or imposed under the"salary"received by such individuals, as compensation for services rendered in connection with employment on foreign ships, where the total stay in India does not exceed the total of 90 days of the previous year.

IV. Compensation received by employees of foreign governments. During his stay in India, he will receive training in India [U / s10 (6) (xi)].

Such compensation shall be fully exempted if he is trained in any of the following concerns:

Government-owned institutions
A company wholly owned by the central or state government. Or partially owned by the state government, partly by the central
Of the company referred to in the above point (B)
Legal entities established by or under central, state or local law
All societies registered under the social Registration Act; 186Q and are fully funded by the central or state government.

9. Taxes reimbursed by the government or India's main motive over the income of foreign companies [sections 10 (6A), (6B), (6BB) and (6C)]

（6A) :

i) If a foreign company provides technical services to the Indian government or state government or Indian company, and for such services the foreign company does not pay royalties or fees.

Ii) Such fees or royalties are paid by Indian concern to pursue contracts concluded prior to 1-6-2002; such contracts are approved by the Indian government, which is in accordance with the Indian government's industrial policy.

Iii) Since royalties or fees paid to foreign companies occur in India, such income is responsible for being taxed in India, and the payer of Indian Income in accordance with the contract pays the tax obligations of foreign companies.

Iv) Taxes paid by the Indian government or state government or Indian companies will be exempted, that is, they will not raise the income and profits of foreign companies.

For example: Foreign companies provide technical services to Indian companies, and according to the contract, foreign companies are supposed to be paid Rs fees.

1, 00,000. Rs taxes. 30,000 of such fees are paid by an Indian company. Taxes paid by Indian companies are exempt, so they do not raise the income and profit of foreign companies and the income of such foreign companies will be Rs only.

1, 00,000.

（6B) :

The tax liability of a non-resident (not a company) or foreign company is waived if it is paid by Indian concern or Indian government or state government, and therefore is not subject to foreign tax liability.

(6BB):

Taxes paid on income received by foreign governments or foreign companies leasing aircraft.

31-3-1996 and later 1-4-2007, under an agreement concluded before and approved by the central government on behalf of this, such income may be received by a foreign government or foreign company by considering obtaining an aircraft or aircraft engine by lease (excluding payments for providing spares or services for the operation of leased aircraft). The income is paid by such an Indian company on the basis of the terms of this contract. However, taxes paid in such a way shall be fully exempted.

This benefit must be available only to that foreign company, which is a non-resident.

（6℃) :

Any income derived by a foreign company (so notified by the central government. Royalty or royalty for technical services under contract to provide services within and outside India in projects related to security in India.

10. Allowances and allowances paid by the government to employees working outside India [Section 10 (7)]

Allowances or allowances paid or authorized by the government to Indian citizens outside India to provide services outside India are exempt. The following conditions should be met before profits are processed or incurred in India:

Income must be paid under the head " salary";

The payer must be the government of India;

The recipient must be a citizen of India—whether resident or non-resident;

The service should be provided outside India.

The Indian Citizen's salary in the above cases will be deemed to be incurred or incurred in India, but all allowances or benefits paid by the government to the Indian citizen above for rendering services outside India will be exempted under Section 10(7).

11. Foreign employees working in India under the cooperative Technical Assistance Program [Section 10 (8)]

Persons working in India under the cooperation technical assistance program in accordance with the agreement concluded by the central and foreign governments, the following income of such individuals is not included:

Compensation received by him directly or indirectly from a foreign government for such duties performed in India.
With respect to any other income of such individual that occurs or occurs outside of India and is not deemed to occur or occur in India, that individual shall not be liable for any loss or damage incurred in that foreign country.

12. Consultant income [section 10 (8A)]

Remuneration or fees received by the consultant from an international organization funded under a technical assistance grant agreement between such organization and a foreign government, and any other income incurred or incurred outside India (not considered to be incurred or incurred in India) and subject to income tax or Social Security tax in a foreign country, shall be waived in full. How to use it? Consultants of the same service must be approved by competent authorities.

What is a consultant?

(a) Individuals who are not citizens of India, or

(b) Individuals who are citizens but are not normally resident in India.

All the persons who are non-residents and provide technical services in India are in the connection with a technical assistance program or project.

Conditions established for duty free u/S10 (8A)

Technical assistance programs and projects in India will be drawn for technical services where fees and rewards are paid.

The sum is paid directly or indirectly from the funds made available to international organizations in accordance with the agreement between such organizations and foreign governments.

The technical assistance provided is in accordance with such a contract.

The agreement on the appointment of a consultant must be approved by the prescribed authorities.

Any other income generated or generated outside India is subject to income or Social Security taxes in other states.

13. Consultant employee income [section 10 (8B)]

For individuals who are assigned duties in India under a technical assistance program—

Compensation received by him directly or indirectly from a consultant called U / S10 (8A) above
Any other income generated or generated outside India (not considered to be generated or generated in India) and subject to income tax or Social Security tax in a foreign country shall be fully exempt
Such individuals are not citizens of India; or
If you are a citizen, but not a resident, and
The contract for services is approved by the competent authorities.

Conditions established for duty free u/S10 (8B)

The individual must be an employee of the consultant described in Section 8A above.

2. His service contract is approved by the prescribed authority.

3. Compensation will be received in connection with the technical assistance program described in Section 8A.

4. Any other income generated or generated outside India is subject to income or Social Security taxes in other states.

The powers specified in Article 8A and Article 8B are as follows:

Additional Secretary of the Ministry of Finance and economic affairs of the government of India at the same time with members CBDT

14. Income of any member of the family of individuals working in India under the cooperative Technical Assistance Program [Section 10 (9)]

In accordance with Section 10 (9), as described in Section 10 (8) / (8A) / (8B), the income of any member of the family of an individual accompanying to India shall not occur or occur outside India and shall not be deemed to occur or occur in India, and shall not be deemed to have been paid by such member to the government of that foreign country or country of origin. You will be exempt from taxes if you have to pay Social Security taxes.

15. Gratuity: 10 (10))]

A tip is a payment that is paid to the employee by the employer in gratitude for the past service provided by the employee. Your contact number will not be notified of your booking confirmation.

(a) The employee himself at the time of retirement, or

(b)The statutory heir in the event of the death of the employee;

Gratuity received by employees at retirement are taxed under the head" salary "whereas chips received by the statutory heir of a deceased employee must be taxed under the head" income from other sources". However, in both cases described above, according to Section 10 (10), the chip is exempted to certain restrictions. So, if an employee receives a tip, then the salary includes only that part of the chip that is not exempt under Section 10 (10).

Death-cum-retirement payments received by civil servants [Section 10(10)(I))]

Section 10(10) (i) grant exemptions to chips received by government employees (i.e., central or state or local authorities).

B. Gratuity received by non-government employees that are covered by the CHIP Payment Act, 1972[Section 10(10)(II)]

Minimum of the following 3 limits:

(1) The chip actually received, or

(2) if the salary of 15 days per completion year, or part of it exceeds the salary of 7 days per season, or

(3) ₹. 10, 00,000

Salary meaning:

(I) basic salary +Dearness Allowance

(II) Last drawn salary. Average salary for the previous 3 months for a piece-rate employee

(III) no. 26 of the day of the month taken as

C. Other employees

Minimum of the following 3 limits:

(1) actual received chip

(2) Average half-month salary for each length of Service.

(3) ₹. 10,00,000

Salary meaning:

(i) Basic salary plus D.A., if the terms of employment degrees are a fixed percentage of sales, so provide a commission.

(ii) Average salary for the last 10 months before the month in which the event occurred.

(iii) Only the year of completion of the service should be taken.

16. Commuted value of pensions received [Section 10 (10A)]

Gavette employees, municipal employees and employees of legal entities: Complete exemption
Other employees:

If the chip is not received commuting value of half of the pension he is usually entitled to receive.
Commuting value of 1/3 of the pension he is usually entitled to receive if he also receives a chip.

The pension received by the employee is taxable under the head of the "salary". However, the family pension received by the statutory heirs after the death of the employee is discussed in detail under the head" income from other sources "as there is no relationship between the manager and the worker in this case.

17. Amount received as a retirement payment [section 10 (10AA)]

Gavette employee’s i.e., central and state governments. Employees: Complete exemption

2. Other employees: Minimum of four limits below:

Leave the encashment actually received; or
Average salary for 10 months; or
Cash equivalent of non-useful leave calculated on the basis of up to 30 days of leave for each year of actual service rendered; or
.3,00,000

Salary meaning:

Basic salary plus D.A. To the extent the terms of employment provide so plus fees, if a fixed percentage of turnover.
The average salary for the last 10 months quickly advances the retirement date.

18. Reduced revenue compensation received by workers [Article 10(10B)]

Compensation received by workers under the labor-management disputes act of 1947:

Other acts or rules, or orders or notices issued there.
Any standing order; or
Any award, service contract or other way,

The Company shall be exempted to the following limits:

Actual amount received;
An average payment of 15 days for all completed years of service or part of it over 6 months;
The amount specified by the central government, i.e., ①. 5,00,000.

Compensation received beyond the above limits is taxable and, accordingly, will form part of the total salary. However, the assessor shall be eligible for relief under Section 89 as read in rule 21A.

19. Bhopal gas leak disaster (handling of Claims) Act 1985[Section 10 (10BB)]

The amount received under the provisions of the scheme enclosed in such an act or there must be completely exempted, but if a payment is received for the loss or damage to which the deduction is earlier claimed, it must be taxed.

19. Compensation in the event of a disaster [Article 10 (10BC)]

Any amount received from the central or state or local authorities by an individual or his legal heir as compensation for a disaster is exempt from tax. However, the amount received or the amount received cannot be deducted to the extent that such individual or his legal heir is permitted to deduct under the law on loss or damage caused by such disaster. Disaster herein means a natural disaster or man-made cause or accident / negligence that results in substantial loss of human life or damage to property or the environment, resulting in such damages.

20. "Retirement compensation “from public sector companies and other companies [Section 10(10C)]

Under the golden handshake scheme, any compensation received or received by the following employees for any retirement will be waived under Section 10 (10C) :):

Public sector companies; or
Other companies; or
Authority established under central, state or local law; or
Local government, or
Cooperative; or
A university that is established or incorporated by or under central, state or local law and is a university under Section 3, 1956 of the University and college grant Board Act.
Within the meaning of Section 3 (g) of the law of the Indian Institute of technology and technical Association 1961; or
Administrative bodies, such as the central government, may be designated in place of this by the notice of the Official Gazette;
State government;
Central government;
An institution of importance to be notified, throughout India or in any state or province.

Exemptions must be available in accordance with the following conditions:

Compensation is received only upon any retirement or termination of his services, according to any scheme or scheme of any retirement, or in the case of a public sector company, in accordance with the scheme of any separation. Exemption shall be granted even if compensation is received in instalments.

2. Further, the schemes of such companies or authorities or societies or universities or institutions as set forth in paragraphs(vii)and(viii)above are structured in accordance with such guidelines (including, among other things, economic viability criteria) so that, in some cases, payment of such amounts can be governed. In the case of public sector companies, if there is a voluntary separation mechanism, the prescribed guidelines must be followed.

Quantum of immunity:

The exemption amount is the amount of compensation actually received or₹.

5, 00,000, Less on either.

UNIT I

Income Tax Act 1961

Q1) Define Tax stating its need in India?

Constitutional Provisions of Taxes in India

Schedule 7

Listing 1

Entry 82: taxes on income aside from agricultural income.
Entry 83: customs duties, including export duties.
Entry 84: duty of excise duty on tobacco and other goods manufactured or produced in India excluding alcoholic beverages, opium and narcotics for human consumption, but including the preparation of medicines and toilets containing alcoholic beverages, opium or narcotic.
Entry 85-corporation tax
Entry 92A: tax on the buying or selling of goods aside from newspapers during which such sell or buy is established within the process of interstate trade or commerce.
Entry 92B-a tax on consignment of goods in which such consignment is carried out during interstate trade or commerce.
Entry 92c-taxes on services
Entry 97-List II, List III, and other issues not included in the taxes not listed in List II or List III.

Listing 2

Entry 46- tax on agricultural income.
Entry 51- excise duty on all alcoholic beverages, opium and narcotics.
Entry 52-tax on the entry of goods into the local area for consumption, use or sale there (usually referred to as Octroi or entry tax).
Entry 54- taxes on the sale or purchase of goods other than newspapers, except for interstate sales or purchase taxes.
Entry 55- tax on advertising, excluding advertising in newspapers.
Entry 56- tax on goods and passengers carried by road transport or inland waterways.
Entry 59- taxes on professionals, transactions, calls, and employment.

The need for income tax in India

Purpose of taxation

Money spent on the development of roads, schools, hospitals, market regulation and legal systems, etc. It is raised by the income generated by the collection of taxes’ Redistribution of resources by richer sections to poorer sections of society.
Certain products are taxed to eliminate externalities, such as a tobacco tax to discourage smoking
Subdivision of taxes: direct and indirect taxes.
Income tax may be a tax imposed on individuals. Real estate and wealth taxes were also direct taxes, but these are now abolished
Indirect taxes imposed in India are customs duties, central excise taxes, service taxes, sales taxes, and VAT.

For now, the GST has been implemented and all other indirect taxes have been abolished.

Definition

Salary
Income from home property
Capital gay
Profits and profits from business or profession
Income from other sources

Q2) When do I have to pay taxes on my income?

Taxes are collected by the government through the following means:

Any payment by the taxpayer to various designated banks, such as pre-tax, self-assessment tax.

1. Taxes withheld

2. Taxes collected at source

Q3) How many taxpayers ' income fall under their heads?

Ans: Section 14 of the Income Tax Act classifies taxpayers ' income under five different heads of income, i.e.

Salary
Income from home property
Profit and profit of business or profession
Capital gains
Income from other sources.

Q4) What is the difference between gross income and gross income?

Calculation of gross and taxable income

Specific amount

Income from salary XXXXX

Income from house property XXXXX

Business or profession XXXXX profits and profits

Capital gains XXXXX

Income from other sources XXXXX

Total revenue XXXXX

Less: deductions based on Chapter VI-a (IE, under Section 80C-80U)

（○○○○○○○○)

Gross income (i.e., taxable income) XXXXX

Note: Inter-source loss, Inter-head loss, bring-in loss, unabsorbed depreciation, etc. While calculating the total gross income (if any), should be adjusted (according to the income tax law).

Q5) Can I claim deductions for personal and household expenditures when calculating taxable income or profits?

Ans: No, you cannot claim a deduction for personal expenses while calculating taxable income.

While calculating income under different heads, deductions can only be claimed for those expenses that are provided under the Income Tax Act.

Q.6 most of my income is given to charity and I have just enough money left to meet my personal requirements. What is considered as my income?

Q6) How to calculate the total tax obligations?

Calculation of gross income and tax liability for the year

Particulars	Amount
Income from salary	XXXXX
Income from house property	XXXXX
Profits and gains of business or profession	XXXXX
Capital gains	XXXXX
Income from other sources	XXXXX
Total of head wise income	XXXXX
Set off of Losses	XXXXX
Gross Total Income	XXXXX
Less: Deductions under Chapter VI-A (i.e., under section 80C to 80U))	(XXXXX)
Total Income (i.e., taxable income)	XXXXX
Tax on total income to be computed at the applicable rates (for rates of tax, refer “Tax Rate” section)	XXXXX
Less: Rebate under section 87A (discussed in later FAQ)	(XXXXX)
Tax Liability After Rebate	XXXXX
Add: Surcharge (discussed in later FAQ)	XXXXX
Tax Liability After Surcharge	XXXXX
Add: Health & Education cess @ 4% on tax liability after surcharge	XXXXX
Tax liability before rebate under sections 86, section 89, sections 90, 90A and 91 (if any) (*)	XXXXX
Less: Rebate under sections 86, section 89, sections 90, 90A and 91(if any) (*)	(XXXXX)
Tax liability for the year before pre-paid taxes	XXXXX
Less: Prepaid taxes in the form of TDS, TCS and advance tax	(XXXXX)
Tax payable/Refundable	XXXXX

(1) Normal tax liability (i.e., no marginal relief)

Tax on Rs. 1 crore (at the rates discussed in previous illustration)	28,12,500
Add: Income above Rs. 1 crore	7,00,000
Tax liability under marginal relief	35,12,500

Conclusion

	Rs.
Normal tax liability i.e., tax liability after surcharge of Rs. 4,53,375	34,75,875
Add: Health & education cess @ 4%	1,39,035
Tax liability	36,14,910

Q8) How to determine the state of housing?

Ans. For the purposes of income tax in India, the income tax law of India classifies the person subject to taxation as follows:

a. Resident

b. A resident who is not a regular resident (RNOR)

c. Non-resident (NR)

The taxability varies for each of the above categories of taxpayers. Before entering the taxable object, let's first understand how the taxpayer becomes a resident, RNOR or NR.

Resident

Taxpayers can qualify as residents of India if they meet any of the following 2 conditions:

Annual stay in India more than 182 days or
Staying in India for the last 4 years is no less than 365 days and no more than 60 days for the relevant fiscal year

2. Resident not usually resident

If an individual qualifies as a resident, the next step is to determine whether he/she is a regular resident (ROR) or RNOR. He will be ROR if he meets both of the following conditions:

1. At least 2 out of 10 years ago, I was a resident of India、

2. Have stayed in India for at least 730 days in the last 7 years

Therefore, if any individual does not meet any of the above conditions, he becomes an RNOR.

In addition, Indian citizens who are considered to be resident in India (FY 2020-21) will reside in India and will usually reside in India.

Note: income from foreign sources means income generated or generated outside India (excluding income derived from businesses controlled in India or professions established in India).

Non-resident

Any individual who does not meet any of the conditions set forth in (a) or (b) above will be in the NR for that year.

3. Taxable

It should also be noted that in the case of double taxation of income, where the same income is taxed in India as well as abroad, you can rely on the Double Taxation Avoidance Agreement (DTAA).

Q9) Mention few List of Exempted Incomes (Tax-Free) Under Section-10.

Ans. Few List of Exempted Incomes (Tax-Free) Under Section-10:

1. Agricultural income [section 10 (1))]

Any rent or income derived from land located in India and used for agricultural purposes.

Any income derived from such land by agricultural operations, including the processing of agricultural products, as it fits for the market or sale of such agricultural products.

Any income attributable to the farmer subject to the satisfaction of certain conditions specified in this regard in Section 2 (1A). Income obtained from seedlings or seedlings grown in the nursery shall be considered agricultural income.

2. Hindu non-divided families (H.U.F.)

Any sum received by the joint parcener from [Section 10 (2)]

Mr. A will pay tax on his personal income, but the amount he receives from HUF will be paid by the joint parcener's hand, regardless of whether the HUF is paying tax on that income.

3. Share of income from the company [Section 10(2A)]

4. Interest paid to non-residents [Section 10(4)(I)]

5. Interest on non-residents on non-residents (external) accounts [section 10(4) (II)]

6. Interest paid to a person of Indian origin and non-resident [Section 10 (4B)]

To this end, a person must be considered to be of Indian origin if he or any of his parents or grandparents were born in India or undivided India.

7. Leave travel concessions or assistance (LTC/LTA) to Indian civil employees [Section 10 (5)]

On vacation to any place in India.

After retiring from service or after the end of his service to any place in India.

Exemptions shall be granted in accordance with the following conditions:

If the trip is carried out by air—the maximum exemption should be an amount that does not exceed the air economic fare of the domestic airline by the shortest route to the destination;

If the origin and destination of the journey are connected by rail, and the journey is carried out by means of non—air transport-the maximum exemption shall not exceed the air-conditioned first-class railway price by the shortest route to the destination.
In the presence of a recognized public transport system, in transportation by the shortest route to the destination, in some cases, the 1st or Deluxe Class is used.
In the absence of a public transport system, the amount equivalent to the air-conditioned first-class rail fare for the distance of the journey by the shortest route, as if done by rail.

The exemption, however, in no case exceeds the particular expenditure incurred on the performance of the journey.

How many times can I request an exemption?

Exemptions only available with respect to two children
Exemptions regarding LTC are not available to two or more surviving children of individuals after 1.10.1998.
Exception: the above law does not apply in case to children who are born before 1.10.1998 and in the case of multiple births after one child.

Important notes:

If LTC is wrapped without making a trip, then the full amount of the amount received by the employee is taxable.

Families for this purpose include、:
Spouses and children of employees;
Parents, brothers and sisters of employees who are completely or largely dependent on him.
Exemptions can be useful for trips carried out during the service's tenure on vacation or even after retirement/dismissal from the service.
Exemptions are only allowed with respect to fares. Expenses incurred during transportation, boarding and accommodation or travel from Porter, residence to train station/airport/bus stand and back are not exempt.
Exemption is possible for the shortest route. If a trip from the place of origin to a different location is made in a circular or other manner, the exemption from the trip is limited to the shortest route allowed from the place of origin to the farthest point.

8. Compensation or salary received by a private who isn't a citizen of India [Section 10(6)]

The following income is exempt when received by individuals who are not citizens of India:

Reward [U / s10 (6) (ii)].

Remuneration received by ambassadors or other officials of foreign embassies, High Commission or legation of India.

Compensation by a foreign consul in India.
Compensation received by trade commissioners or other official representatives of foreign India, if the corresponding official of the Indian government of the country is given a similar concession.
Compensation received by a member of the staff of the personnel listed above (a), (b) and (c).

II. Compensation received by him as an employee of a foreign company [U/S10 (6) (VI)]

For the services rendered by him during his stay in India (for example, a technician deputed by a foreign company to work in India), the following conditions are met: —

i) Foreign companies are not engaged in trade or business in India;

Ii) His stay in India does not exceed a period of 90 days in total for such a previous year.

Iii) Such compensation is not liable to be deducted from the income of the employer, which is imposed under the law.

III. Employment on foreign ships[U/s10(6) (viii)].

IV. Compensation received by employees of foreign governments. During his stay in India, he will receive training in India [U / s10 (6) (xi)].

Such compensation shall be fully exempted if he is trained in any of the following concerns:

Government-owned institutions
A company wholly owned by the central or state government. Or partially owned by the state government, partly by the central
Of the company referred to in the above point (B)
Legal entities established by or under central, state or local law
All societies registered under the social Registration Act; 186Q and are fully funded by the central or state government.

9. Taxes reimbursed by the government or India's main motive over the income of foreign companies [sections 10 (6A), (6B), (6BB) and (6C)]

（6A) :

i) If a foreign company provides technical services to the Indian government or state government or Indian company, and for such services the foreign company does not pay royalties or fees.

Iv) Taxes paid by the Indian government or state government or Indian companies will be exempted, that is, they will not raise the income and profits of foreign companies.

For example: Foreign companies provide technical services to Indian companies, and according to the contract, foreign companies are supposed to be paid Rs fees.

1, 00,000.

（6B) :

The tax liability of a non-resident (not a company) or foreign company is waived if it is paid by Indian concern or Indian government or state government, and therefore is not subject to foreign tax liability.

(6BB):

Taxes paid on income received by foreign governments or foreign companies leasing aircraft.

31-3-1996 and later 1-4-2007, under an agreement concluded before and approved by the central government on behalf of this, such income may be received by a foreign government or foreign company by considering obtaining an aircraft or aircraft engine by lease (excluding payments for providing spares or services for the operation of leased aircraft). The income is paid by such an Indian company on the basis of the terms of this contract. However, taxes paid in such a way shall be fully exempted.

This benefit must be available only to that foreign company, which is a non-resident.

（6℃) :

Any income derived by a foreign company (so notified by the central government. Royalty or royalty for technical services under contract to provide services within and outside India in projects related to security in India.

10. Allowances and allowances paid by the government to employees working outside India [Section 10 (7)]

Income must be paid under the head " salary";

The payer must be the government of India;

The recipient must be a citizen of India—whether resident or non-resident;

The service should be provided outside India.

11. Foreign employees working in India under the cooperative Technical Assistance Program [Section 10 (8)]

Compensation received by him directly or indirectly from a foreign government for such duties performed in India.
With respect to any other income of such individual that occurs or occurs outside of India and is not deemed to occur or occur in India, that individual shall not be liable for any loss or damage incurred in that foreign country.

12. Consultant income [section 10 (8A)]

What is a consultant?

(a) Individuals who are not citizens of India, or

(b) Individuals who are citizens but are not normally resident in India.

All the persons who are non-residents and provide technical services in India are in the connection with a technical assistance program or project.

Conditions established for duty free u/S10 (8A)

Technical assistance programs and projects in India will be drawn for technical services where fees and rewards are paid.

The sum is paid directly or indirectly from the funds made available to international organizations in accordance with the agreement between such organizations and foreign governments.

The technical assistance provided is in accordance with such a contract.

The agreement on the appointment of a consultant must be approved by the prescribed authorities.

Any other income generated or generated outside India is subject to income or Social Security taxes in other states.

13. Consultant employee income [section 10 (8B)]

For individuals who are assigned duties in India under a technical assistance program—

Compensation received by him directly or indirectly from a consultant called U / S10 (8A) above
Any other income generated or generated outside India (not considered to be generated or generated in India) and subject to income tax or Social Security tax in a foreign country shall be fully exempt
Such individuals are not citizens of India; or
If you are a citizen, but not a resident, and
The contract for services is approved by the competent authorities.

Conditions established for duty free u/S10 (8B)

The individual must be an employee of the consultant described in Section 8A above.

2. His service contract is approved by the prescribed authority.

3. Compensation will be received in connection with the technical assistance program described in Section 8A.

4. Any other income generated or generated outside India is subject to income or Social Security taxes in other states.

The powers specified in Article 8A and Article 8B are as follows:

Additional Secretary of the Ministry of Finance and economic affairs of the government of India at the same time with members CBDT

14. Income of any member of the family of individuals working in India under the cooperative Technical Assistance Program [Section 10 (9)]

15. Gratuity: 10 (10))]

A tip is a payment that is paid to the employee by the employer in gratitude for the past service provided by the employee. Your contact number will not be notified of your booking confirmation.

(a) The employee himself at the time of retirement, or

(b)The statutory heir in the event of the death of the employee;

Death-cum-retirement payments received by civil servants [Section 10(10)(I))]

Section 10(10) (i) grant exemptions to chips received by government employees (i.e., central or state or local authorities).

B. Gratuity received by non-government employees that are covered by the CHIP Payment Act, 1972[Section 10(10)(II)]

Minimum of the following 3 limits:

(1) The chip actually received, or

(2) if the salary of 15 days per completion year, or part of it exceeds the salary of 7 days per season, or

(3) ₹. 10, 00,000

Salary meaning:

(I) basic salary +Dearness Allowance

(II) Last drawn salary. Average salary for the previous 3 months for a piece-rate employee

(III) no. 26 of the day of the month taken as

C. Other employees

Minimum of the following 3 limits:

(1) actual received chip

(2) Average half-month salary for each length of Service.

(3) ₹. 10,00,000

Salary meaning:

(i) Basic salary plus D.A., if the terms of employment degrees are a fixed percentage of sales, so provide a commission.

(ii) Average salary for the last 10 months before the month in which the event occurred.

(iii) Only the year of completion of the service should be taken.

16. Commuted value of pensions received [Section 10 (10A)]

Gavette employees, municipal employees and employees of legal entities: Complete exemption
Other employees:

If the chip is not received commuting value of half of the pension he is usually entitled to receive.
Commuting value of 1/3 of the pension he is usually entitled to receive if he also receives a chip.

17. Amount received as a retirement payment [section 10 (10AA)]

Gavette employee’s i.e., central and state governments. Employees: Complete exemption

2. Other employees: Minimum of four limits below:

Leave the encashment actually received; or
Average salary for 10 months; or
Cash equivalent of non-useful leave calculated on the basis of up to 30 days of leave for each year of actual service rendered; or
.3,00,000

Salary meaning:

Basic salary plus D.A. To the extent the terms of employment provide so plus fees, if a fixed percentage of turnover.
The average salary for the last 10 months quickly advances the retirement date.

18. Reduced revenue compensation received by workers [Article 10(10B)]

Compensation received by workers under the labor-management disputes act of 1947:

Other acts or rules, or orders or notices issued there.
Any standing order; or
Any award, service contract or other way,

The Company shall be exempted to the following limits:

Actual amount received;
An average payment of 15 days for all completed years of service or part of it over 6 months;
The amount specified by the central government, i.e., ①. 5,00,000.

Compensation received beyond the above limits is taxable and, accordingly, will form part of the total salary. However, the assessor shall be eligible for relief under Section 89 as read in rule 21A.

19. Bhopal gas leak disaster (handling of Claims) Act 1985[Section 10 (10BB)]

19. Compensation in the event of a disaster [Article 10 (10BC)]

20. "Retirement compensation “from public sector companies and other companies [Section 10(10C)]

Under the golden handshake scheme, any compensation received or received by the following employees for any retirement will be waived under Section 10 (10C) :):

Public sector companies; or
Other companies; or
Authority established under central, state or local law; or
Local government, or
Cooperative; or
A university that is established or incorporated by or under central, state or local law and is a university under Section 3, 1956 of the University and college grant Board Act.
Within the meaning of Section 3 (g) of the law of the Indian Institute of technology and technical Association 1961; or
Administrative bodies, such as the central government, may be designated in place of this by the notice of the Official Gazette;
State government;
Central government;
An institution of importance to be notified, throughout India or in any state or province.

Exemptions must be available in accordance with the following conditions:

Compensation is received only upon any retirement or termination of his services, according to any scheme or scheme of any retirement, or in the case of a public sector company, in accordance with the scheme of any separation. Exemption shall be granted even if compensation is received in instalments.

Quantum of immunity:

The exemption amount is the amount of compensation actually received or₹.

5, 00,000, Less on either.

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