CA Inter Taxation (Income Tax & GST): High Weightage Topics & Practical Computation Techniques
Conquering Paper 3: Income Tax & GST
Taxation (Paper 3) is historically the most volatile paper in CA Intermediate. Students struggle with recent Finance Act amendments, complex Section 115BAC default regime calculations, and multi-head set-off rules. By implementing standardized computation templates and mastering GST credit sequencing, scoring 65+ is mathematically predictable.
1. Default Tax Regime Under Section 115BAC
Always check whether the assessee has opted out. By default, compute tax under the revised concessional slab rates:
| Total Income Slab (₹) | Income Tax Rate | Marginal Relief / Rebate |
|---|---|---|
| Up to ₹3,00,000 | Nil | Base exemption for all individuals. |
| ₹3,00,001 to ₹6,00,000 | 5% | Full rebate under Section 87A if Total Income does not exceed ₹7,00,000. |
| ₹6,00,001 to ₹9,00,000 | 10% | Marginal relief available if Total Income marginally exceeds ₹7,00,000. |
| ₹9,00,001 to ₹12,00,000 | 15% | — |
| ₹12,00,001 to ₹15,00,000 | 20% | — |
| Above ₹15,00,000 | 30% | Surcharge capped at 25% under Section 115BAC (unlike 37% in old regime). |
2. Standardized Working Notes for Total Income
In Question 1 (14 Marks), present your working notes before the main computation table. This lets the examiner award full marks for each intermediate sub-calculation even if an arithmetic error occurs later:
WN 1: Profits and Gains of Business or Profession (PGBP)
Start with Net Profit as per P&L, then adjust systematically:
- ➕ Add: Disallowable expenses debited to P&L (Depreciation as per Books, Personal Expenses, Section 40(a)(ia) 30% TDS default, Section 40A(3) cash payments exceeding ₹10,000, Section 43B unpaid statutory dues).
- ➖ Less: Allowable expenses not debited (Section 32 Tax Depreciation, Additional Depreciation).
- ➖ Less: Income credited to P&L taxable under other heads (Dividend, Rental income, Capital gains).
WN 2: Capital Gains (Section 45 to 55)
Determine whether transfer involves Short-Term (STCG) or Long-Term (LTCG). Check holding period thresholds (12 months for listed equity, 24 months for unlisted shares/immovable property). Check Section 50C full value of consideration (stamp duty value if it exceeds 110% of stated sale consideration).
3. GST High-Yield Core: Input Tax Credit (ITC) Rules
Section 16 and 17(5) questions constitute 15 to 20 marks across every CA Inter paper. Keep these statutory tests on your fingertips:
Section 16: Eligibility Criteria
- ✅ Possession of valid tax invoice or debit note.
- ✅ Details reflected in GSTR-2B.
- ✅ Actual receipt of goods or services.
- ✅ Tax actually paid to the Government by supplier.
- ✅ Filing of GSTR-3B return.
- ⚠️ Recipient must pay supplier within 180 days; else ITC reversed with interest.
Section 17(5): Critical Blocked Credits
- ❌ Motor vehicles for transport of persons having seating capacity ≤ 13 persons (unless used for transportation of goods, making taxable supply of vehicles, or driving training).
- ❌ Food & beverages, outdoor catering, beauty treatment (unless used for making outward taxable supply of same category).
- ❌ Works contract services for construction of immovable property (other than plant & machinery).
- ❌ Goods lost, stolen, destroyed, written off, or disposed of as gifts or free samples.
Practice Taxation Practical Questions on Cadada
Taxation requires muscle memory for slab rates, surcharges, and GST set-offs. Practice 2,000+ chapter-wise MCQs and descriptive computation problems on Cadada's gamified portal.
Frequently Asked Questions
Is Section 115BAC (New Tax Regime) the default tax regime in CA Intermediate exams?▼
Yes. Under current Finance Act provisions applicable for the examination, Section 115BAC is the default tax regime for individuals and HUFs. Unless the question explicitly states that the assessee opted out under Section 115BAC(6), calculate total income and tax liability using the new regime slab rates.
Which standard deductions and exemptions are available under default Section 115BAC?▼
Under Section 115BAC, standard deduction from salary under Section 16(ia) is ₹50,000, employer contribution to NPS under Section 80CCD(2) is allowed (up to 14% for Central/State Govt and 10% for others), and Section 80CCH for Agniveer corpus is allowed. Major Chapter VI-A deductions (80C, 80D, 80G) and HRA/LTA exemptions are forgone.
How are marks divided between Income Tax and GST in CA Intermediate Paper 3?▼
Paper 3 is divided into Section A: Income Tax Law (50 Marks) and Section B: Goods and Services Tax (50 Marks). Scoring 35+ in GST is critical to securing an aggregate 60+ exemption.
What is the order of utilization of Input Tax Credit (ITC) under GST?▼
IGST credit must be completely exhausted first against IGST liability, and any balance against CGST and SGST in any proportion. CGST credit is then used against CGST, then IGST. SGST credit is used against SGST, then IGST. CGST and SGST credits can never cross-utilize against each other.
What is the best presentation format for the 14-mark Total Income question?▼
Present a clean multi-column table: Particulars, Amount (₹), and Working Note Cross-Reference. Calculate Gross Total Income across the 5 heads first, subtract eligible Chapter VI-A deductions, compute Tax on Total Income under Section 115BAC slab rates, apply Section 87A rebate if applicable, add Surcharge, add 4% Health & Education Cess, and round off to the nearest ₹10 under Section 288B.
