How to prepare for CA Inter Taxation Systematically | Strategy with ABC Analysis

Life takes a different turn after passing school. No matter which professional course you choose, there is a lot of competition everywhere. In order to crack these competitive exams with flying colors, one has to prepare for them extensively and with full dedication & concentration. And if you are planning to prepare for CA, i.e., Chartered Accountancy, you need to make up your mind for the intensive study planning and proper approach to the study material available.

Tax has always been the most scoring subject; you just need to study properly. Taxation has two sections:

1. Direct Tax, also known as Income tax.
2. Indirect Tax, also known as GST and Customs. 

How to study Tax

Whether it is Inter or Final, Tax is always a scoring subject until and unless you are not proper with your studies. You can score high in this subject, but there is a need for proper planning and guidance to score well.

Divide the subject into sub-topics and allocate time to each sub-topic. – This will help you gauge your progress vis-à-vis the scoring weightage for each sub-topic.

Begin with Direct Taxes – When you begin to study CA Intermediate Taxation, cover the basic five heads of income, as the subject is vast. Here is a suggested flow: Income from house property → Capital Gains → Income from other sources → Income from business/profession → Income from Salary

Move to the Indirect Taxes chapters like ITC, supply, time of supply, value of supply, Exemptions, Charge of GST, and tax invoice.  

Pay attention to peripheral topics as well –Topics like Residential status, Provisions related to filing returns, TDS, Advance Tax, etc., are quite crucial and cannot be missed

Weightage and No. of Revision:

Practice/revise the chapters according to the number of times mentioned above for better results

Study Plan/ ABC Analysis

The table below mentions the chapters in an ABC analytical manner. It will help you focus on the most important topics accordingly.

Also Check: Sec 143(3) Audit Report Amendments For Nov 2021

From which chapter to start preparing

Start with five heads of income. Do not spend much time on theory; quickly revise from your class notes and then start attempting problems. Most of your concepts will be cleared through solving problems. and Move to Indirect Taxes chapters like ITC, supply, time of supply, value of supply, Exemptions, Charge of GST, and tax invoice.

Other Peripheral topics can be easily covered in the last 15 days. For this part, ICAI questions are more than sufficient.  

More scoring part

The most important part of the Capital Gain is the exemption starting from Section 54.

Thoroughly understand LTCG, STCG, cost of acquisition, improvement, and also practice Indexation. Thereafter, cover Sec 50C.

Before starting the question, it is very important to check the status of the assessee, i.e., whether it is a firm or company, or an HUF, as provisions as well as tax rates are different for them. Due dates are also different.

Most important section under Deduction are 80C, 80CCD, 80DD, 80EE, 80TTA, 80TTB

Important sections under TDS 194DA, 194-IA, 201 TCS entire chapter is important

Do not forget to devote special focus to amendments or new additions. You may find most of the questions in exams based on the latest case laws and Amendments. So it is very important to prepare the latest case laws.

Also Read: How to prepare for CA Inter Taxation Systematically | Strategy with ABC Analysis

GST

In the ITC, important topics

• Provisional ITC vs Final ITC

Any tax period – return filed claiming credit – this ITC is allowed provisionally as per Section 41

Post-matching as per provisions of Sec 42, it becomes final

• Time limit for availment of ITC

• ITC admissibility in case of Bill to .. Ship to ….transactions

• ITC reversals if the supplier remains unpaid for more than 180 days

• Blocked Credit

• ITC apportionment procedure

•Special Credits 

Time of Supply

• Sec 12: ToS of Goods

o 12(2): ToS in case of FCM liability

Sec 148 (Spl Procedure) – Advances will not attract GST

o 12(3): ToS in case of RCM liability

• Sec 13: ToS of Services

o 13(2): ToS in case of FCM liability

o 13(3): ToS in case of RCM liability

• ToS in case of Vouchers – Sec 12(4) + 13(4)

Manner of distribution of ITC

Full-length practical question

Do not forget to learn provisions because, along with treatments, you are required to write relevant provisions also for scoring good marks. Many students lack this point.

Past trending Chapters 

The table shows the number of questions in the past exams:

You can practice the questions according to the weightage mentioned above.

Which questions to attempt first

It was experienced in the past that the IDT part is the most scoring, mostly students score well in this part, and it is easy too compared to other parts. In the first 20 minutes, try to attempt all the MCQs that you know very well, then come to the IDT section and attempt all the questions. After 60 to 70 minutes, go to the DT section and attempt questions from small chapters first. In the last 1-hour attempt, questions from 5 heads, total income, or other lengthy questions. In this manner, you can cover the maximum portion. 

Maintain your word limit according to the marks allotted to each question. Be specific and brief for short answer questions. Evaluators always prefer correctness and specificity.

In IDT, always use proper format like

In the first paragraph, write the provision from the Act, and quote the section number or reference to the Act.

In the Second Para, explain the Provision written in the First Para.

Third, explain how your answer is related to the question given.

In the fourth paragraph, give a conclusion to the question.

Important Questions/Amendments

1. GST valuation, Exemptions
2. PGBP and CG.
3. Amendments applicable to that exam
4. TDS and Set off of loss.
5. ITC
6. Time and value of supply
7. Exemption and charge of GST

 Amendments for this attempt are covered separately.

Common Mistakes / Tips 

• While doing the direct tax preparation, solve a few questions immediately after reading a particular topic to improve retention.
• After practicing problems about different heads, attempting multiple problems related to total income will help you gain confidence in the overall application of theory in Taxation.
• During preparation, do not make notes or refer to many notes, as you may fall into confusion. While reading through the material and subsequently solving sums, you may note down tricky parts that you need to remember and revise at the end.
• Any new amendments, such as those introduced in Capital Gains, etc., are important and need to be known by every CA aspirant attempting the CA intermediate taxation paper.
• Go through the illustrations provided in the study material. They can help you give an edge over many aspirants.
• Although writing the section number gives an edge over other students, more than 90% students do not write the section numbers, so there is no need to worry about it if you are not able to write section numbers.
• And in Taxation Writing, the correct answer is not sufficient to gain marks in CA papers. Besides writing the correct answer, you have to present it properly. The answer must be given in a sequence as demanded by ICA. You should also support your answer with a provision, section, or case law if possible. At last, end your answer with the appropriate conclusion.
• Do not write irrelevant answers, as this is not a BCOM exam. Every treatment should be according to the provisions.
• Keep in mind that Working Notes carry marks. Always mention brief working notes/assumptions. It is better to mention working notes separately under the heading Working Notes. Do not include Working Notes in the Main Answer.
• In the heading of the calculation, the relevant assessment year and the name of the assessee.

To prepare for CA Taxation, the first and foremost step is to select the correct study material instead of going with some other teachers notes. You can also practice with the CA mock test series available online. Stick to one material rather than jumping to one or another material, and revise it two to three times before the final attempt.

5 heads of Income

As per section 14 of the Income Tax Act, for tax and computation of total income. Although only one tax is calculated under various heads, there are different rules of computation of income under each head, and income has to be computed under the head of income after applying the rules applicable to that head only.

•  Salaries: An income can be taxed under this head if there is a relationship between the payer and the payee of an employer and employee. If there is no such relationship between them, then the income would not be deemed to be income from salary. And if this is the case, the income is not assessable under this head.

This is the most lengthy and important chapter in Inter-level. It will help boost your confidence and will motivate you to cover the entire syllabus. Keep practicing with the CA test series, and it will be really beneficial for you.

•  House Property: Tax on income from house Property is the tax on the rental income being earned from a house Property. However, if the property is not rented out, tax will be levied on the expected rent that would have been received if the property were rented out. House property tax is the only tax that is charged on a notional basis. And this head not only covers the rented house Property but also the commercial and all other types of properties. Many deductions are also applicable in this head, like standard deduction, deduction for municipal taxes paid, and the deduction for interest on a home loan is also allowed. TDS on rent 10% is also to be deducted in case the value of rent is more than the specified limit. Service tax on rent is also to be levied in some special cases.

Start with this head as it is short and easy to cover, and important too because most of the time questions are combined with house property and other heads.

• Profits and Gains of Business or Profession: Any income earned from a business, trade, commerce, manufacture, or profession is to be chargeable under this head after deducting the specified expenses.

This one needs proper attention and dedication,n and most importantly, you need to understand the concepts in detail. So whenever you start with this chapter, be focused, calm, and patient.

• Capital Gains: Any income earned from the transfer of a capital asset effected in the financial year shall be chargeable to income tax under this head. And the income is deemed to be the income of the year in which the transfer took place unless such capital gain is exempt under sections 54, 54B, 54D, 54EC, 54ED, 54F, 54G, or 54GA.

While preparing for this chapter, make short notes to get the proper, detailed understanding, and it will be easier for you to do the revision. Also, you can revise with the help of the CA Inter test series or mock test ICAI.

• Other Sources: Any income that is not taxable under the other heads falls under this head, provided that the income is not exempt from the computation of total income.

It is not as lengthy as the other heads, but do not avoid or skip this head. Try to practice mock test series online or any other CA Final test series to boost your confidence.

The total income falling under these heads of income is added and then disclosed in the Income Tax Return. The tax on the total income (taxable) after allowing all the deductions is then calculated as the Income Tax Slab. There are several incomes that are tax-free, and there are incomes from which deductions are also allowed, which help a taxpayer in reducing the tax liability substantially. 

To make a strong grip on this subject, you need to keep revising the heads by the CA mock test series or the ICAI mock test series. You do not have to learn them word by word, but make sure you understand them properly so that you can explain them clearly in the finals. Moreover, it is the most interesting subject, and getting distracted while studying this is not an option; instead, it can bring your study mood back. 

Never forget to Attempt Test Papers before your exams.

Motivation: “To succeed, your desire for success should be greater than your fear of failure”.

Best of luck