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PROJECT REPORT ON

INDIAN TAXATION SYSTEM

UNIVERSITY OF MUMBAI

BACHELOR OF COMMERCE

(FINANCIAL MARKETS)

SEMESTER V

2011-12

SUBMITTED BY

NIKET DATTANI

PROJECT GUIDE

SAIRA BANOO SHAIKH

K.P.B HINDUJA COLLEGE OF COMMERCE

315, NEW CHARNI ROAD, MUMBAI-400 004


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B.Com (Financial Markets)

5th SEMESTER


SUBMITTED BY

NIKET DATTANI

ROLL NO.: 47


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CERTIFICATE

This is to certify that Mr. NIKET DATTANI of B.Com Financial Markets

Semester 5th [2011-2012] has successfully completed the Project on INDIANTAXATION SYSTEMunder the guidance of Ms. SAIRA BANOO SHAIKH

Project Guide ________________

Course Coordinator ________________

Internal Examiner ________________

External Examiner ________________

Principal ________________


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DECLARATION

I Mr. NIKET DATTANI student of B.Com-Financial Markets, 5

th

semester(2011-2012), hereby declare that I have completed the project on


The information submitted is true and original copy to the best of our

knowledge.

NIKET DATTANI

(Signature)


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ACKNOWLEDGEMENTS

I feel the pleasure to have an opportunity to express my deep and sincerefeelings of gratitude towards all the personalities who have helped me to convert

my dreams into the reality.

Sincere thanks to my Project Mentor Prof. Saira Banoo Shaikh for her

guidance and support at every step while completing this project and providing me the

accurate and detailed information to complete this report as part of my curriculum.

Without her continuous help and enthusiasm the project would not have been

materialized in the present form.

I also extent my sincere thanks to our Course Co-ordinator, Prof. Khyati Vora, for

her much required coordination and support which helped me in coming up with

successful completion of this project.

I pay my sincere regards to my parents and friends who always encouraged and

helped me in the preparation of this project.

NIKET DATTANI


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INDEX

CONTENTS

1. INTRODUCTION

1.1 Introduction

1.2 Research Objective

1.3 Research Methodology

2. TAXATION IN INDIA

2.1 Income Tax in India

2.2 Service Tax in India

2.3 Wealth Tax in India

2.4 Sales Tax in India

2.5 VAT replaces Sales Tax

2.6 Gift Act in India

2.7 Securities Transaction Tax

2.8 Customs Duty

2.9 Excise Duty

2.10 Double Tax Avoidance Treaty

3. SALARY AND PERQUSITIES IN INDIAN TAXATION SYSTEM

4. CAPITAL GAIN IN INDIAN TAX SYSTEM

5.RETIREMENT BENEFITS IN INDIAN TAX SYSTEM

6. HOUSING PROPERTY TAX IN INDIA


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7. PARTNERSHIP FIRMS, CORPORATE, TRUSTS IN INDIAN TAX

SYSTEM

8. POLICIES OF TDS, TCS, TAN and PAN

9. DIRECT TAX CODE

10. BUDGET REVIEW

11. CONCLUSION

BIBLIOGRAPHY

CHAPTER 1


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INTRODUCTION

1.1 Introduction

1.2 Research Objective

Researcher objective in this project is to show the structure of Indian tax,

different tax levied, some policies, tax planning and the highlights of the budget.

1.3 Research Methodology

There are Two types of Data Collection Method of research i.e.

Primary and Secondary data.

In these project Secondary data is used.

Secondary data is one which already exists and is collected from the published

sources. The sources from which secondary data was collected are:

Books,

Newspaper, and

Internet

CHAPTER 2


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TAXATION IN INDIA

The Government ofIndiaimposes an income tax on taxable income of

Individuals, Hindu Undivided Families (HUFs), Companies, Firms, Co-operativesocieties and Trusts (identified as body of individuals and association of persons)

and any other Artificial Person.

Levy of tax is separate on each of the Persons.

India has a well developed tax structure with a three-tier federal structure,

comprising the Central Government, the State Governments and the Urban/Rural

Local Bodies. The power to levy taxes and duties is distributed among the three

tiers of Governments, in accordance with the provisions of the Indian Constitution.

The main taxes/duties that the Central Government is empowered to levy are

Income Tax (except tax on agricultural income, which the State Governments can

levy), Customs duties, Central Excise and Sales Tax and Service Tax.

The principal taxes levied by the State Governments are Sales Tax (tax on intra-

State sale of goods), Stamp Duty (duty on transfer of property), State Excise (duty

on manufacture of alcohol), Land Revenue (levy on land used for agricultural/non-

agricultural purposes), Duty on Entertainment and Tax on Professions and Callings.

The Local Bodies are empowered to levy tax on properties (buildings, etc.), Octroi

(tax on entry of goods for use/consumption within areas of the Local Bodies), Tax

on Markets and Tax/User Charges for utilities like water supply, drainage, etc.

Since 1991 tax system in India has under gone a radical change, in line with liberal

economic policy and WTO commitments of the country. Some of the changes are:
http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Income_taxhttp://en.wikipedia.org/wiki/Hindu_joint_familyhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Income_taxhttp://en.wikipedia.org/wiki/Hindu_joint_family


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Reduction in customs and excise duties

Lowering corporate Tax

Widening of the tax base and toning up the tax administration

2.1 Income Tax in India

A tax that is applicable on income that has been generated from any source is

termed as Income tax. The central board of direct tax (CBDT) is the governing body

that takes care of the Indian Income tax. Income tax is imposed by the government

on an individual, company, business, Hindu undivided families (HUFs), co-

operative organization and trusts. The tax structure is different on different

commodities and products. Indian income tax is regularized under income tax

act 1961.

2.1.1 History of Income tax

In India Income tax comes into existence in the year 1860. Initially at the

time when it was imposed it had taken almost five years to regularize and

implement the income tax however income tax act lapsed in the year 1865.

Act of 1886 was again came into force it defines the full fledged law of income tax

it includes the exemption in various agricultural professions, income tax rules on

industries and corporation.

In the year 1922 another income tax act came into existence as a result of

recommendation by the all India income tax committee. With this act a new clause

was introduced under which unlike earlier where the collection of income tax in the


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current assessment year depends on the estimated collection of income tax of

previous year.

The income tax act of 1922 existed till 1961 however government had handed over

the income tax clause to the law commission to review and recast it in a logical way

so that the tax amended in an easy way without changing the basic tax structure.

There are various industries where government offers wavers in subsidies time to

time. The present income tax act is same as of 1961 income tax act of India. As per

the constitution of India every individual is bound to pay income tax for the

progress of the nation. Any individual or an organization if earning any income inthe country has to pay income tax. Although in the present day tax structure there is

a different slab for man and women and senior citizens

2.1.2 Basis of Resident

Residential Status

Taxation of individuals is determined by their residential status. An

individual is 'resident' if he stays in India in the fiscal year (April 1 to March 31)

either:

182 days or more, or

60 days or more (182 days or more for NRIs) and has been in India in

aggregate for 365 days or more in the previous four years.

An individual who does not satisfy either of these requirements is a 'non-resident'.

A resident individual is considered to be 'ordinarily resident' in any fiscal year if he

has been resident in India


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Nine out of the previous Ten years and, in addition,

Has been in India for a total of 730 days or more in the previous seven years.

Residents who do not satisfy these conditions are called individuals 'not ordinarilyresident'.

Taxability of individuals is summarized in the table below.

-----------------------------------------------------------------------------------------------------

Status Indian Income Foreign Income

-----------------------------------------------------------------------------------------------------

Resident and Ordinarily resident Taxable Taxable

Resident but Not Ordinarily resident Taxable Not taxable

Non-Resident Taxable Not taxab

-----------------------------------------------------------------------------------------------------

Remuneration for work done in India is taxable irrespective of the place of receipt.

Remuneration includes salaries and wages, pension, fees, commissions, profits in

lieu of or in addition to salary, advance salary and perquisites. Allowances, deferred

compensation and tax equalization are also taxable. Perquisites are taxes

beneficially.

2.1.3 Income from Salary

Under this head, income received as salary under Employer-Employee

relationship is taxed. If income exceeds minimum exemption limit, then Employers

must withhold tax compulsorily as Tax Deducted at Source (TDS). The employees


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should also be provided with a Form 16 which shows the tax deductions and net

paid income.

Form 16 also contains any other deductions provided from salary as follows:

o Medical reimbursement up to Rs. 15,000 per year is tax exempt provided bills

are given

o Conveyance allowance up to 9600 per year is tax free

o Professional taxes which are usually a slab amount based on gross income are

deductible from income tax.

o House rent allowance:

The minimum of the following is available as deduction

The actual HRA received

50per cent/40 per cent (metro/non-metro) of 'salary'

Rent paid minus 10per cent of 'salary'

2.1.4 Income from House Property

Income from House property is calculated by considering the Annual Value.

The annual value (for a let out property) will be maximum of the following:

Actual Rent received

Municipal Valuation

Fair Rent (as determined by the I-T department)

However if a house is not let out and not self-occupied, then annual value is

assumed to have accrued to the owner i.e. Deemed Let Out Property


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In case of a self occupied house, annual value is to be taken as NIL.

But if there is more than one self occupied house then the annual value of the other

house/s is taxable.

From this, Municipal Tax paid is deducted to arrive at the Net Annual Value. From

this Net Annual Value, the following are deducted:

30per cent of Net value as repair cost - mandatory deduction

Interest paid or payable on a housing loan for the house

2.1.5 Income from Business or Profession:

Income arising from profits and gains of any Business or Profession;

Income derived by a Trade/ Professional/ similar Association by performing

specific services for its members; Any benefit from business whether convertible

into money or not, Incentives for Exporters; Any Salary, Interest, Bonus,

Commission or Remuneration received by Partner of a firm; Income from

Managing Agency and Speculative Transactions; are taxable.

2.1.6 Income from Capital Gains

Under section 2(14) of the I.T. Act, 1961, Capital asset is defined as property

of any kind held by an assessee such as real estate, equity shares, bonds, jewellery,

paintings, art etc. but does not consist of items like stock-in-trade for businesses or

for personal effects. Capital gains arise by transfer of such capital assets.

Long term and short term capital assets are considered for tax purposes. Long term

assets are those assets which are held by a person for three years except in case of

shares or mutual funds which becomes long term just after one year of holding.


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Sale of long term assets give rise to long term capital gains which are taxable as

below:

As per Section 10(38) of Income Tax Act, 1961 long term capital gains on

shares/securities/ mutual funds on which Securities Transaction Tax (STT)

has been deducted and paid, no tax is payable.

For all other long term capital gains, indexation benefit is available and tax

rate is 20per cent

2.1.7 Income from Other Sources

There are some specific incomes which are to be taxed under this category

such as income by way of dividends, horse races, winning of bull races, winning of

lotteries, amount received from key man insurance policy.

2.2 Service Tax in India

Dr. Manmohan Singh, the then Union Finance Minister, in his Budget speech

for the year 1994-95 introduced the new concept of Service Tax and stated that ''There is no sound reason for exempting services from taxation, therefore, I propose

to make a modest effort in this direction by imposing a tax on services of

telephones, non-life insurance and stock brokers.''

Service Tax has been introduced in order to explore new avenues for taxation and to

bring more people into the tax net. Service Tax generated revenue of Rs 2612 crores

in 2000-2001.

The Service Tax assesses is the person/firm who provides the service. Hence,

the Service Tax must be paid by the person/firm providing the service.


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Chapter V of the Finance Act, 1994 (32 of 1994) (Sections 64 to 96) deals with

imposition of Service Tax inter alia on-

a. Service rendered by the telegraph authorities to the subscribers in

relation to telephone connections.

b. Service provided by the insurer to the policy-holder in relation to

general insurance business.

c. Service provided by a stockbroker.

The Finance Acts of 1996, 1997, 1998, 2001, 2002 and 2003 added more services

to tax net by way of amendments to Finance Act, 1994. At present total number ofservices on which Service Tax is levied has gone upto 58 despite withdrawal of

certain Services from the tax net or grant of exemptions (Goods Transport

Operators, Outdoor Caterers, Pandal and Shamiana Contractors, and Mechanized

Slaughter Houses).

2.2.1 Service taxIncludes

Service tax is a form of indirect tax that is applicable to the services that are

taxable in nature. This tax came into existence as government wants an easy option

that is transparent in nature that can generate revenue for the nation in an easy way.

In past few years service tax is applied on various new services.

Unlike value added tax that is applicable on goods and commodities, this tax is

imposed on various services that is provided by the financial institutions such as

banks, stock exchange, colleges, transaction providers, telecom providers.

Banks are the first that charges service tax to its customer since inception

often they termed service charges as processing fees. The responsibility of


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collecting the tax lies with the Central Board of Excise and Customs (CBEC) it is a

body under the Ministry of Finance. This body formulates the tax structure in the

country.

Service tax was imposed first in India in July 1994. The service tax is applicable all

over India however due to the national interest and for the betterment of the people

of Jammu and Kashmir it is waved off. In 2006- 2007 service tax was increased

from 10per cent to 12per cent however it was again reduced from 12per cent to

10per cent in the Union budget of 2009. It is often noticed that there is a lack

of service tax information among the people. Government has gradually increased

the list of taxable services to increase the revenue.

Some of the major services that comes under the scanner of service tax:

-Telecommunication

-Traveling agencies (air, road and railway services)

- Universities, colleges and schools

- Broadcasting services (television and radio)

- Banking and other financial services

- Export import unit

- Cargo and shipping

- Hospitals and health care services

- Stock broker

- Real estate agents

2.3 Wealth Tax in India

Wealth tax came into existence on 1st April 1957. Wealth tax is derived from

the property owned by the proprietor. The proprietor needs to pay tax every year on


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property owned by them. The residential property that does not yield any income to

its owner is also subjected to wealth tax. Wealth tax is termed as most significant

direct tax.

As per the wealth taxact, wealth tax is applicable to the following:

An individual person

A group of people who own a property

A company or organization

A Hindu undivided family (HUF)

A representative or heir of a dead person

The chargeability of a wealth tax in India for its residence or foreign citizens are

different. Any person who is resident of India has to pay wealth tax under his/her

name. If a person owns a citizenship of a foreign country and he/she acquires a

property in India as well as in foreign country, under those circumstances the

property owned by the owner in India is taxable.

2.3.1 The following assets are subjected to wealth tax

o Guesthouse, farm-house, commercial complex, shopping mall

and residential complex are subjected to the wealth tax.

o Valuable items like jewelry and any items made up of precious metals like

gold, silver, platinum or any other precious metals.

o Aircrafts, yachts, boats that is used for non-commercial purpose

o Cash in hand that is more than 50,000, for individual and Hindu undivided

families.

o Any cash that is not recorded on the account log book is subjected to

the wealth tax.


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o Motor car that is owned by an individual.

o Any urban land situated in the jurisdiction where there is a total population of

ten thousand as per last census is subjected to the wealth tax.

2.3.2 Assets that are exempted from the list of wealth tax are:

o Air craft or boat used for business purpose provided by the company.

o Furniture, apparels and electronic items that is for personal use.

o Accommodation provided by the company or organization to its employee.

o The annual salary of the employee is less than Rs 500,000.

o Any land donated for the religious purpose or to charitable trust is not

subjected to wealth tax.

2.3.3 There are few assets that are termed as deemed assets:

o Assets transferred from one spouse to another

o Assets held by a minor child. As per the income tax act such wealth is taxed

individually and will not be termed as the net asset of the main

owner/parents/guardian.

o Assets transferred to the sons wife.

o Assets transfer to the grandchildren.

2.3.4 There are few exceptional assets that are exempted by the government:


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o The belongings such as residential building and palace belongs to rulers are

considered as national heritage and wealth tax is exempted for it.

o Former Ruler's jewellery is also excluded from the wealth tax. As per the

government is termed as national asset.

o Assets belonging to the Indian repatriate for 7 years on fulfillment of the

conditions prescribed.

2.4 Sales Tax in India

Sales tax is levied on the sale of a commodity which is produced or imported

and sold for the first time. If the product is sold subsequently without being

processed further, it is exempt from sales tax.

Sales tax can be levied by the Central or State Government, Central Sales tax

department. Also, 4 per cent tax is generally levied on all inter-State sales. State

sales tax, that apply on sales made within a State, have rates that range from 4 to 15

per cent. Sales tax is also charged on works contracts in most States and the value

of contracts subject to tax and the tax rate vary from State to State. However,

exports and services are exempt from sales tax. Sales tax is levied on the seller who

recovers it from the customer at the time of sale.

Apart from sales tax, certain states also impose extra charges such as works

contracts tax, turnover tax and purchaser tax. Thus, sales tax plays a major role in

acting as a major generator of revenue for the various State Governments.

Under the sales tax which is an indirect form of tax, it is the responsibility of seller

of the commodity to collect or recover the tax from the purchaser. Generally, the

sale of imported items as well as sale by way of export is not included in the range


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of commodities that require payment of sales tax. Moreover, luxury items (such as

cosmetics) are levied higher sales tax rates. The Central Sales Tax (CST) Act that

comes under the direction of Central Government takes into consideration all the

interstate sales of commodities.

2.5 VAT replacesSales Tax

Most of the states in India, from April 01, 2005, have supplemented the sales tax

with the new Value Added Tax (VAT).

VAT in India is classified under the following tax slabs:

0 per cent for the essential commodities

1 per cent on gold ingots as well as expensive stones

4 per cent on capital merchandise, industrial inputs, and commodities of mass

consumption

12.5 per cent on all other items

Variable rates (depending on state) are applicable for tobacco, liquor,

petroleum products, etc.

A Central Sales Tax which is at the rate of 4per cent is also levied on inter-State

sales but would be eliminated gradually.

2.5.1 Municipal/Local Taxes

Octroi/Entry tax: Certain municipal jurisdictions levy an Octroi/Entry tax on

the entry of goods

2.5.2 Other State Taxes


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Stamp duty on the transfer of assets

Property/building tax that is levied by local bodies

Agriculture income tax levied by the State Governments on the income from

plantations

Luxury tax that is levied by certain State Government on specified goods

2.6 Gift Tax in India

Financial act 1998 had deleted gift tax act w.e.f.1.10.1998 consequently, all

gifts made on or after 1.10.98 are free from gift tax. Neither the donor nor the

receiver would have to pay any tax. Financial act 2004 has revived it partially, but it

is in the form of receiver - based income tax instead gift.

The clubbing provisions in the Income Tax Act 1961 and Wealth Tax Act, 1957 are

not deleted. Therefore, income and wealth from assets transferred directly or

indirectly without adequate consideration to minor children, the spouse (otherwise

than in connection with an agreement to live apart) or daughter-in-law will continue

to be deemed income and wealth of the transferor. Same is the case when assets are

held by a person or an Association of Persons for benefit of assesses, the spouse,

daughter-in-law and minor children.

Gift tax was not applicable to gifts of movable property situated in Jammu and

Kashmir. Now, that the Gift Tax Act, 1958 is abolished, the clubbing provisions

would be applicable to gifts of movable properties in J & K also.

The Gift tax in India is regulated by Gift Tax Act that was constituted on

April 1, 1958. It came into effect in nearly all parts of the country except Jammu


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and Kashmir. As per this Act 1958, all gifts exceeding Rs. 25,000, in the form of

cash, draft, check or others, received from one who does not have blood relations

with the recipient, were taxable.

However from October1, 2009, individuals receiving shares or jewellery, valuable

artifacts, valuable drawings, paintings or sculptures or even property valued over Rs

50,000 as gifts from non-relatives, shall have to start paying tax.

2.6.1 Gifts are Taxable Only in the Case of Individuals and HUFs

U/s 56(2) (vi) certain gifts are taxable according to income tax as "income

from other sources". However, this provision applies only for individuals and Hindu

Undivided Families (HUFs). Thus, if gift is received by any Trust or A.O.P., then it

shall not be liable to income tax as "income from other sources".

2.6.2 Minors

The entire income that arises or accrues to a minor is to be included in the

income of that parent whose total income is higher. When the marriage of the parent

does not subsist, the income of the minor will be included in the income of that

parent who maintains the minor child. Income arising in the succeeding year shall

not be included in the other spouse unless the assessing officer is satisfied that it is

necessary to do so..

Where the income of the individual includes the income of his minor children,

an exemption up to Rs. 1,500 in respect of each minor child can be claimed by the

individual u/s10 (32)..

2.7 Securities Transaction Tax


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Transactions in equity shares, derivatives and units of equity-oriented funds

entered in a recognized stock exchange attract Securities Transaction Tax at the

following rate:-..

Delivery base transactions in equity shares or buyer and seller

each units of an equity-oriented fund - 0.075per cent.........................

Sale of units of an equity-oriented fund to the seller mutual fund - 0.15per cent

Non delivery base transactions in the above - 0.015per cent................................

Derivatives (futures and options) seller - 0.01per cent

2.8 Customs Duty

The levy and the rate of customs duty in India are governed by the Customs

Act 1962 and the Customs Tariff Act 1975. Imported goods in India attract basic

customs duty, additional customs duty and education cess. The rates of basiccustoms duty are specified under the Tariff Act. Customs duty is calculated on the

transaction value of the goods.

Rates of customs duty for goods imported from countries with whom India has

entered into free trade agreements such as Thailand, Sri Lanka, South Asian

countries.

Customs duties in India are administrated by Central Board of Excise and Customs

under Ministry of Finance.

2.9 Excise Duty


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Manufacture of goods in India attracts Excise Duty under the Central Excise

act 1944 and the Central Excise Tariff Act 1985. Herein, the term Manufacture

means bringing into existence a new article having a distinct name, character, use

and marketability and includes packing, labeling etc.

Most of the products attract excise duties at the rate of 16%. Some products also

attract special excise duty/and an additional duty of excise at the rate of 8% above

the 16% excise duty. 2% education cess is also applicable on the aggregate of the

duties of excise.

2.10 Double Tax Avoidance Treaty

India has entered into DTAA with 65 countries including the US. In case of

countries with which India has Double tax Avoidance Agreement, the tax rates are

determined by such agreements. Domestic corporations are granted credit onforeign tax paid by them, while calculating tax liability in India.

In the case of the US, dividends are taxed at 20%, interest income at 15% and

royalties at 15%.


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CHAPTER 3

SALARY AND PERQUISITES IN INDIAN TAX SYSTEM

Salary includes wages, fees, commissions, perquisites, profits in lieu of, or, in

respect of encashment of leave etc. It also includes the annual accretion to the

employee's account recognized provident fund in excess of 12per cent of the salary

of the employee, along with interest applicable, shall be included in the income

of the employee.

Salary can be any of the following forms:

Wages;

Any annuity or pension;

Any gratuity;

Any fees/commissions, profits/perquisites in lieu of any salary or wages;

Any salary advance;

Any payment that employee receives for a period of leave not taken by him;

Any annual accreditation to provident fund balance at the credit of an

employee

The total of all sums that are comprised in the transferred balance

3.1 Tax on Pension

U/s 9(1)(iii), the pension is taxable in India only if it is earned in India.

3.2 Tax upon bonus, fees and commissions

The bonus received in the gross salary in a year is taxable on receipt basis.

Any fees/commission received/receivable by an employee is fully taxable and it's

included in the gross salary.


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3.3 Tax on Gratuity

Employee receives gratuity at the time of retirement or his legal heir receives

gratuity incase the employee dies. The gratuity that employee receives on

retirement and legal heir receives on death of employee; both are taxable under the

heads "Salary" and "Income from other sources" respectively.

3.4 Tax on Annuity

The annual grant that an employee receives from the employer is called

annuity and comes under salary. It may be paid by the employer either voluntarily

or on contractual agreement. Deferred annuity is not taxed unless right to receive it

arises. Annuities given in a will or given by life insurance companies and annuities

arising due to a contract come under "Income from other sources" and are taxable.

3.5 Tax upon profits in lieu of or in addition to salary

This includes any compensation received by an assessee from his employer/former

employer on termination of employment or changes in terms and conditions relating

thereto.

3.6 Tax upon advance salary and perquisites

This includes value of rent free accommodation given to assessee by employer,

value of any amenity granted free of cost/at concessional rate to an employee being

the director or an employee having substantial interest in Company and value of any

other fringe benefits.


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3.7 Perquisites for Salaried will be taxed From April 2009

Perquisites given by employer like residential accommodation, conveyance facility

as well as other benefits for employee's family could soon be added to the salary for

income tax purposes and the Government may give a notification soon on valuation

of such perks.

Initially, tax on such perks was paid by employer in the form of the Fringe Benefit

Tax (FBT) which was done away with in the Budget 2009-10 by Pranab Mukherjee,

the Finance Minister.

The perquisites that are included in taxable salary include residential

accommodation given by the employer, motor car expenses for official/personal

use, driver's salaries, salaries of gardener and sweeper if paid by employer and

concessional education given to the employee's children.

Under the FBT regime, tax burden of perquisites that was on the employer, will

now be on the employee.


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CHAPTER 4

CAPITAL GAIN IN INDIAN TAX SYSTEM

Income-tax act, 1961 deal with the Capital Gains under Section 45 to 55A.Section 45 of the Act, provides that any profits or gains arising from the transfer of

a capital asset effected in the previous year shall, save otherwise provided in section

54, 54B, 54D, 54EA, 54EB, 54F 54G and 54H [with effect from 1-4-1991] be

chargeable to income-tax under the head ''Capital Gains'' and shall be deemed to be

the income of the previous year in which the transfer took place. Section 2(24) of

the Income-tax Act specifically provides that ''income'' includes 'any capital

gains chargeable under section 45'.

The requisites of a charge to income tax, of capital gains under section 45 are :-

o There must be a capital asset.

o The capital asset must have been transferred.

o The transfer must have been effected in the previous year.

o There must be a gain arising on such transfer of a capital asset.

4.1 Capital Gain

An income that is derived from the sale of an investment is known as Capital

gain. Capital investment can be in the form of a home, a farm, a ranch, a family

business, or a work of art. When any kind of property is purchased at a lower price

and then sold at a higher price, the seller makes a gain. Then this sale of a capital

asset is known as capital gain.

This type of gain is a one-time gain and not a regular income such as salary

or house rent. Hence we can say that capital gain is is not recurring.


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4.2 Capital Asset

Any kind of property (movable, immovable, tangible, intangible) held by an

assessee, whether or not connected with his business or profession, is nothing but a

"Capital Asset".

The following assets are excluded from the definition of capital Asset:-

Stock-in-trade, consumable stores, raw materials held for the purpose of

business/profession

Items of personal effects, that is, personal use excluding jewellery, costly

stones, silver, and gold

Agricultural land in India

Specified Gold Bonds and special Bearer Bonds

Gold Deposit Bonds

4.3 Types of Capital Assets:

Two types of Capital Assets are present as follows:

4.3.1Short Term Capital Assets [STCA]:

An asset which is held by an assessee for less than 36 months, immediately

before its transfer, is called Short Term Capital Asset. In other words, an asset,

which is transferred within 36 months of its acquisition by assessee, is called Short

Term Capital Asset. However, if the investment is in the form of mutual

funds/company shares, the allowed time duration is one year


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4.3.2 Long Term Capital Assets [LTCA]:

An asset, which is held by an assessee for 36 months or more, immediately

before its transfer, is called Long Term Capital Asset. In other words, an asset

which is transferred on or after 36 months of its acquisition by assessee, is Long

Term Capital Asset. Selling mutual funds and company shares after one year also

constitutes a long-term capital gain.

4.4 Transferof capital assets

Transfer of capital assets includes the following:-

Sale of asset

Exchange of asset

Relinquishment of asset (that is surrender of asset)

Extinguishments of any right on asset

Compulsory acquisition of asset

4.5 Capital gaintax rates

In case of short-term capital gains, you will be taxed depending on the tax

slab relevant to you after you have added the capital gain to your annual income.

However if the transaction was levied with Securities Transaction Tax (STT), your

gain will be taxed 10per cent.

In case of long term capital gains, you will be taxed 20per cent. When the

transaction is levied with STT, you don't need to pay any tax on your gain. In this

case, you can either calculate your capital gain using an indexed acquisition cost, or

choose not to opt for indexing.


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4.6 Calculation/Computation of Capital Gains

Capital gain can be calculated as follows:

Full Value of Consideration

Less:

Cost of Acquisition

Cost of Improvement

Expenditure of Transfer

Capital gains

Less:

Exemption u/s 54

Taxable Capital Gains


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CHAPTER 5

RETIREMENT BENEFITS IN INDIAN TAX SYSTEM

Every employee must know the quantum of the various retirement benefits hewould be getting, as well as its tax implications. The employee may get more

benefits if he chooses a good employer but he has no choice in respect of taxes.

Retirement benefits received by an employee are taxable under the head Salary.

Thus, the employer must take these benefits into account while computing the

time of retirement of an employee. Some retirement benefits are fully or

partially exempt from tax.

Some of the retirement benefits are:

5.1 Pension

Pension is the income received by an employee after his retirement. It is a

periodical allowance, on account of past service, given by a former employer

after the retirement of an employee. When a lump-sum payment is made in lieu of a

periodical pension, it is termed as commuted pension. Pension of an employee is

taxable under the head salary. Taxability of pension depends on whether it is

periodic or lump-sum. Periodic payment is fully taxable in case of both government

and non-government employees. Lump-sum Payment (commuted pension) is tax-

free in case of government employees. In case of other employees, if that employee

is also receiving gratuity, then 1/3rd of the commuted pension would be exempt

from tax. If gratuity is not received by an employee, half of the commuted pension

will be exempt from tax.


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5.2 Gratuity

Gratuity is a lump-sum payment made by an employer as a mark of gratitude

for the services rendered by his employee. It is an important form of social security

benefit. Gratuity is payable at the end of the employment (by way of retirement,

death, termination or resignation). Every employer who has more than 10 salaried

workers is allowed to grant gratuity to workers. The law which governs gratuity in

India is the Payment of Gratuity Act, 1972.

To receive gratuity, the employee should at least have completed 5 years of service.

The payment of gratuity is made to the employee based on the duration of his totalservice to that employer. The benefit is payable by taking the last drawn salary as

the basis for calculation.

For the purpose of Income Tax, gratuity received by an employee of the central

government, state government or any local authority is completely exempt from tax.

For other employees, the least of the following is exempt from tax

Rs. 10,00,000 (as per amendment from march 2010)

Gratuity actually received, or

Half month's average salary (average of last 10 months salary) for each

completed year of service.


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5.3 Leave Encashment

Leave encashment is the encashment of unused leave of an employee. The

employee surrenders the leave at the time of retirement and is paid for the same.

Taxability of leave encashment received at the time of retirement is as follows

In case of government employees, it is fully exempt from tax.

In case of non-government employees, the least of the following is exempt

o Rs. 3,00,000/-

o 10 months average salary

o Leave encashment actually receivedo Cash equivalent to the leaves surrendered

5.4 Voluntary Retirement Compensation

Many companies today provide its employee with the option of taking

voluntary retirement under the Voluntary Retirement Scheme (VRS). This scheme

is drawn to right-size the existing strength of employees within a company. The

benefits derived by an employee by opting VRS can also be considered as

retirement benefit.

VRS is applicable to only those employees who have completed 10 years of service

or are of the age of 40 years. Under VRS, the employees are offered a onetime

lump-sum amount.

For income tax purposes, this compensation amount received is exempt up to Rs.

5,00,000/- if all the conditions under the scheme are fulfilled.


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CHAPTER 6

HOUSING PROPERTY TAX IN INDIA

Income Tax Act deals with taxability of income in respect of house property

under Section 22 to 27. The following basic conditions must be satisfied for income

to be taxed under this head:-

The property consists of buildings or land adjacent thereto.

The assessee must own property.

The property must not be used for the purpose of business or profession of

the assessee. It must be used only for renting out so as to derive rental

income.

Therefore any income from a property which is not owned by the assessee will not

be treated as ''income from house property'' but as other income and other

provisions of the Income Tax Act will apply in this connection.

6.1 Income from House Property

The property for which the annual value consists of buildings/lands

appurtenant thereto of which the assessee is the owner shall be chargeable to

income tax under the head "Income from House Property". A person may occupy

the property for the purpose of business or profession, the profits of which are

taxable.


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Annual value of any property shall deem to be:

The sum for which the property might reasonably be able to let/give from

year to year

Where any part of the property is let and the rent received by the owner is in

excess of the sum

Where any part of the property is let and was vacant during the whole or any

part of the previous year and the actual rent received by the owner in respect

thereof is less than the sum

6.2 Deductions Permitted

Deductions from income from house property are:

A sum equal to 30 per cent of the Net Annual Value towards repairs and

maintenance

In case the property is acquired/constructed/repaired/renewed or even

reconstructed with borrowed capital, then the amount of any interest

payable on such capital.

6.3 Self Occupied House Property:

A property becomes a self occupied house property when it consists of a

house or part of a house which:

Is in the owner's occupation as purpose of his own residence

The amount of deduction towards interest payable on borrowed capital will

not exceed Rs. 1,50,000/-


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CHAPTER 7

PARTNERSHIP FIRMS, CORPORATE, TRUSTS IN

INDIAN TAX SYSTEM

7.1 Partnership Firms

A partnership is a common vehicle in India for carrying on business

activities on a small or medium scale. A profession is generally carried on through

a partnership. There is no restriction on a company's participation in a partnership,

but this is rate in practice.

Under the general law a partnership is not a separate entity distinct from the

partners, but for tax purposes a partnership is an entity.

Partnership firm arises from a contract between two or more persons who contribute

some tangible and some intangible assets together with an objective of earning

profit there from which will be shared between them in predefined portion.

7.1.1 Income Tax Rates for Partnership Firms

Assessment Year 2010-11

Rate of tax is 30 per cent on the total income of the firm.

Surcharge: Nil

Education Cess: 2 per cent of the amount of Income Tax

Secondary and Higher Education Cess: 1 per cent on the amount of Income Tax


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7.2 Corporate Tax

Corporate tax rate in India is at par with the tax rates of other nations of the

world. The corporate tax rate in India is based on the origin of the company.

If the company is domicile to India, then the tax rate is flat at 30 per cent. But for a

foreign company, then the tax rate depends on several other factors and

considerations. For companies that are domicile to India, tax is charged on the

global income whereas for the foreign companies present in India, tax is charged on

their income within Indian Territory. Incomes that are taxable for foreign

companies include income from the capital assets in India, interest gained, incomefrom sale of equity shares of the company, royalties, dividends earned, etc.

7.2.1 Domestic Corporate Income Taxes Rates:

Incase of Domestic Corporations the effective tax rate as well the tax

rate with surcharge as is 30 per cent. It should be noted that if the taxable income is

greater than Rs. 10,00,000 then a surcharge of 10 per cent of the tax on income is

also levied.

7.2.2 Foreign Companies income Tax Rates

For dividends: - 20 per cent for non-treaty foreign companies

For interest gains: - 20per cent for non-treaty foreign companies

For royalties: - 30per cent for non-treaty foreign companies

For the technology based services in case of non-treaty foreign companies is

30per cent

For all other kinds of income and gains: - 55per cent in case of non-treaty

foreign companies


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7.2.3 Some of the tax rebates undercorporate taxrate in India:

Gains pertaining to long term capital are subject to low tax incidence

Venture capital funds and venture capital companies have special tax

provisions

Specula tax provisions are applicable for non resident Indians involved in

activities in India

Under the Finance Bill 1996, the minimum alternative tax (MAT) is levied

on the corporate sector

7.3 Religious and Charitable Trusts

Social welfare is the basic responsibility of government. Charitable and

Religious Trusts lessen this burden. Therefore, tax concessions are offered. Income

applied for predefined and declared charitable object is exempt from income

tax. Wealth tax is also not charged on properties held. If eligible, donors are alsogiven deduction from income tax u/s 80G or section 80GGA. Skillful and

Intelligent tax planner tends to use trust for evasion of taxes.


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CHAPTER 8

POLICIES OF TDS, TCS, TAN and PAN

8.1 Tax Deduction at Source (TDS)

Tax deduction at source means the tax required to be paid by assesses, is

deducted by the person paying the income to him. Thus, the tax is deducted at the

source of income itself. The income tax act enjoins on the payer of such income to

deduct the given percentage of income as income tax and pay the balance amount to

the recipient of such income. The tax so deducted at source by the payer is to be

deposited in the income tax department account. The tax so deducted from the

income of the recipient is deemed to be payment of income tax by the recipient at

the time of his assessment.

For example, person responsible for paying any income which is chargeable to tax

under the head 'Salaries' is required to compute the tax liability in respect of such

income and deduct tax at source at the time of payment.

Similarly, person responsible for paying any income by way of 'interest on

securities' or any other interests are required to deduct tax at source at the

prescribed rates at the time of credit of such income to the account of the payee or

at the time of payment, whichever is earlier.


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8.1.1 The income from the following sources is subjected to

tax deduction at source

Salary and all other positive incomes under any head on income

( Section 192)

Interest on securities ( Section 193)

Interest other than interest on securities( Section 194A)

Winnings from Lottery or crossword puzzles( Section 194B)

Winnings from horse races( Section 194BB)

Payments to contractors and sub-contractors( Section 194C) Payment to non-resident sportsman including athlete or sports

association/institution. ( Section 194E)

Payment on account of repurchase of Units by Mutual Fund or UTI ( Section

194F)

Payment for Commission or brokerage( Section 194H)

Payment of rent ( Section 194I)

Payment of fees for professional or technical services( Section 194J)

Any interest other than interest on securities payable to non-residents not

being a company or to a foreign company( Section 195)

Income from Units purchased in foreign currency or long-term capital gain

arising from the transfer of such Units purchased in foreign currency

( Section196B)

Payment of any income to non-residents in respect of interest or dividend on

bonds and shares ( Section 196C) and so on.
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8.2 Tax Collection at Source (TCS)

Tax collection at source arises on the part of the seller of goods. Here, tax is

collected at the source of income itself. It is to be collected at source from the

buyer, by the seller at the point of sale. Such tax collection is to be made by the

seller at the time of debiting the amount payable to the buyer to the account of the

buyer or at the time of receipt of such amount from the buyer, whichever is earlier.

A person collecting tax shall furnish a certificate specifying whether tax has been

collected or not, what sum has been collected, the rate of tax applied on it and other

such particulars as may be prescribed. It shall be furnished within 10 days from thedate of debit or receipt of the amount furnished to the buyer to whose account such

amount is debited or from whom such payment is received. The taxes collected

must be remitted into the income tax department's account. Every person collecting

tax shall, within such time as may be prescribed, apply to the Assessing Officer for

the allotment of a tax-collection account number.

The following goods when sold must be subjected to tax collection at source :-

Alcoholic liquor for human consumption (other than Indian made foreign

liquor).

Timber obtained under a forest lease.

Timber obtained by any mode other than under a forest lease.

Any other forest produce not being timber.
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8.3 Tax Deduction and Collection Account Number (TAN)

Tax Deduction and Collection Account Number is a 10 digit alpha numeric

number required to be obtained by all persons who are responsible for deducting or

collecting tax. All those persons who are required to deduct tax at source or collect

tax at source on behalf of Income Tax Department are required to apply for and

obtain TAN. TAN is allotted by the Income Tax Department on the basis of the

application submitted to TIN Facilitation Centre managed by National Securities

Depository Limited (NSDL). NSDL will intimate the TAN which will be required

to be mentioned in all future correspondence relating to TDS/TCS. An applicationfor allotment of TAN is to be filled in Form 49Band submitted at any of the TIN

Facilitation Centre meant for receipt of e-TDS returns. The income tax act makes it

mandatory for TAN to be quoted in all TDS/TCS returns, all TDS/TCS payment

challans and all TDS/TCS certificates to be issued. Failure to apply for TAN or

comply with any of the other provisions of the Act attracts a penalty.

8.4 Permanent Account Number (PAN)

PAN is an all India, unique ten-digit alphanumeric number, issued in the

form of a laminated card by the Income Tax Department.

For obtaining PAN related information the Income Tax department has authorized:

(i) UTI Technology Services Ltd (UTITSL) to set up and manage IT PAN Service

Centers in all those cities or towns where there is an Income Tax office and

(ii) National Securities Depository Limited (NSDL) to dispense PAN services from

Tax Information Network (TIN) Facilitation Centers.
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8.4.1 Person who can apply for PAN :-

Income Tax Act provides that every person whose total income exceeds the

maximum amount not chargeable to tax or every person who carries on any

business or profession whose total turnover or gross receipts exceed Rs. 5 lakhs in

any previous year or any person required to a file a return of income shall apply for

PAN. Besides, any person not fulfilling the above conditions may also apply for

allotment of PAN. With effect from 01.04.2006 a person liable to furnish a return of

fringe benefits is also required to apply for allotment of PAN. Since income of any

financial year is taxed in the subsequent year called as the assessment year,application for PAN must be made on or before the 30th of June of the relevant

assessment year.

Application for PAN :-

Application for allotment of PAN is to be made in Form 49A.

Transactions in which quoting of PAN is mandatory :-

Purchase and sale of immovable property.

Purchase and sale of motor vehicles.

Transaction in shares exceeding Rs. 50,000.

Opening of new bank accounts.

Fixed deposits of more than Rs. 50,000.

Application for allotment of telephone connections.

Payment to hotels exceeding Rs. 25,000.
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CHAPTER 9

DIRECT TAX CODE

The direct tax code seeks to consolidate and amend the law relating to all

direct taxes, namely, income-tax, dividend distribution tax, fringe benefit tax and

wealth-tax so as to establish an economically efficient, effective and equitable

direct tax system which will facilitate voluntary compliance and help increase the

Tax-GDP ratio. Another objective is to reduce the scope for disputes and minimize

litigation.

It is designed to provide stability in the tax regime as it is based on well accepted

principles of taxation and best international practices. It will eventually pave the

way for a single unified taxpayer reporting system.

The salient features of the code are:

Single Code for direct taxes: All the direct taxes have been brought under a

single Code and compliance procedures unified. This will eventually pave the

way for a single unified taxpayer reporting system.

Elimination of regulatory functions: Traditionally, the taxing statute has

also been used as a regulatory tool. However, with regulatory authorities

being established in various sectors of the economy, the regulatory functionof the taxing statute has been withdrawn. This has significantly contributed to

the simplification exercise.
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Use of simple language: With the expansion of the economy, the number of

taxpayers can be expected to increase significantly. The bulk of these

taxpayers will be small, paying moderate amounts of tax. Therefore, it is

necessary to keep the cost of compliance low by facilitating voluntary

compliance by them. This is sought to be achieved, inter alia, by using simple

language in drafting so as to convey, with clarity, the intent, scope and

amplitude of the provision of law. Each sub-section is a short sentence

intended to convey only one point. All directions and mandates, to the extent

possible, have been conveyed in active voice.

Reducing the scope for litigation: Possibly, an attempt has been made to

avoid ambiguity in the provisions that invariably give rise to rival

interpretations. The objective is that the tax administrator and the tax payer

are ad idem on the provisions of the law and the assessment results in a

finality to the tax liability of the tax payer. To further this objective, power

has also been delegated to the Central Government/Board to avoid protracted

litigation on procedural issues.

Flexibility: The structure of the statute has been developed in a manner

which is capable of accommodating the changes in the structure of a growing

economy without resorting to frequent amendments. Therefore, to the extent

possible, the essential and general principles have been reflected in the statute

and the matters of detail are contained in the rules/schedules.


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Ensure that the law can be reflected in a Form: For most taxpayers,

particularly the small and marginal category, the tax law is what is reflected

in the Form. Therefore, the structure of the tax law has been designed so that

it is capable of being logically reproduced in a Form.

Consolidation of provisions: In order to enable a better understanding of tax

legislation, provisions relating to definitions, incentives, procedure and rates

of taxes have been consolidated. Further, the various provisions have also

been rearranged to make it consistent with the general scheme of the Act.

Providing stability: At present, the rates of taxes are stipulated in the

Finance Act of the relevant year. Therefore, there is a certain degree of

uncertainty and instability in the prevailing rates of taxes. Under the Code, all

rates of taxes are proposed to be prescribed in the First to the Fourth

Schedule to the Code itself thereby obviating the need for an annual Finance

Bill. The changes in the rates, if any, will be done through appropriate

amendments to the Schedule brought before Parliament in the form of an

Amendment Bill.


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CHAPTER 10

Tax Planning for Year 2010-11

10.1 Deduction

While exemption is on income some deduction in calculation of taxable

income is allowed for certain payments.

10.2 Use of Deductions

While the use of the above sections helps one to pay less or no money as tax

if one falls in the tax bracket, one should look at this more as an investment-return

opportunity. One should still file income tax return, even if one is not paying any

tax. Except ELSS (Equity Linked Savings Scheme) and the NPS (National Pension

Scheme), other schemes under 80C typically offer a relatively risk-free investment

and guaranteed returns.

10.3 Following are some of the best tax saving investment options for the

current assessment year [AY 2011-2012]

It is generally observed that during the last few months of a financial year

people make last moment impulsive decisions to invest in tax saving instruments. In

the process they may end up buying products that are actually not right for

them. Tax planning is something that needs to be done a few months in advance so

that one has ample time to understand & evaluate different options available to suit

his/her financial situation.


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Following are a few simple tips for planning your taxes for this financial year:

10.3.1 Utilize the Income Tax exemptions

10.3.1.a Section 80C

Under this section one can claim up to Rs. 1 lakh in deductions. The options

in this section include

Employee Provident Fund (EPF),

Public Provident Fund (PPF) - up to Rs.70, 000 per annum,

National Savings Certificate (NSC),

5-year bank fixed deposits,

Life insurance policies,

Equity-Linked Savings Schemes (ELSS),

Unit Linked Insurance Plans (ULIPs),

School fees, and

Home loan principal repayment.

In order to make investments in this section one needs to decide on the ideal debt

vs. equity mix which is right based on factors like age, risk-return profile & goals.

10.3.1.b Section 80D

One can claim deductions up to Rs 15,000 incase you have taken a medical

insurance plan for yourself or your spouse or dependant parents or children (and an

additional Rs.15, 000 for your parents' medical insurance) under Section 80D for

premiums paid. This limit has now been enhanced to Rs 20,000 for senior citizens

on the condition that the premiums are paid via cheque.


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10.3.1.c Section 80DD

Under Section 80DD, expenses related to the medical treatment of a

dependent having disability qualifies for tax benefits. This section allows

deductions up to Rs. 50,000 or 75, 000 to be claimed depending on the severity.

10.4 Interest on home loan

Interest component of a home loan is allowed as a deduction under the head

income from house property' U/s 24(b) up to a limit of Rs 1.5 lakhs a year for a

self-occupied house. The claim can also be made on loans taken for

repair, renewal or reconstruction of an existing property.

10.5 Shuffle and switch strategy

Shuffling is a popular strategy that is used by ELSS [Equity Linked Savings

Scheme] investors. They have a mandatory lock-in period of 3 years. Incase you

have been investing an amount Rs 50,000 for last few years but don't have cash to

invest this year, then you can easily redeem the investments made 3 years ago and

re-invest that amount this year so as to claim the benefits. You need not pay any

long term capital gains as you will be redeeming after more than one year. Hence

you will be enjoying tax benefits without making any fresh investments. The only

risk here is the NAV that can go up or down in the shuffle process which may lead

to a small profit or loss. Some fund houses also allow switch option for tax benefits.

Suppose an investor with previous ELSS investments doesn't have the money to

make further investment in current financial year. In such a case, he can consider

switching it to a liquid fund and then back into the ELSS fund within a short period

of time like 10-15 days to avail the tax benefits.


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10.6 Tax Deduction on Charitable Donations

You can get a tax relief if you donate to institutions that are approved U/s

80G of the Income Tax Act. The rate of deduction is either 50 or 100 %, depending

upon the type of the charity fund. There is no upper limit on the amount given to a

charity. However, donations should be made only to the specified trusts and only

donations of up to 10 per cent of the total income qualify for such deduction.

10.7 Division of Income

Generally, if you invest either in your wife's or child's name, then the income

generated from these investments will be clubbed with your income & taxed

accordingly. But, if you transfer money by way of a deed to a child who is a major

i.e. over 18 years of age and invest in his name, then the income generated from this

investment will not be clubbed with your income. Instead, it will be clubbed with

the income of your child/wife and will be taxed accordingly. Cash gifts that are

received from specified relatives are tax exempt and there is no upper limit. Also,

cash gifts of any amount from anyone received during child birth, marriage or any

other specified event are totally tax-exempt. But, any cash that is received from a

non-relative where the value of gift is in excess of Rs 50,000 in a particular year

will be considered as income and taxed accordingly.


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CHAPTER 10

BUDGET REVIEW

10.1 Indias Budget 2009-2010

The Acting Finance Minister, Pranab Mukherjee presented

the budget revealing spending plans for year 2009-10 from April to July, taking

care of essential spending during and in immediate after month of the general

elections.

10.1.1 HighlightsofBudget2009-2010:

Commodities Transaction Tax (CTT) to be scrapped

10per cent surcharge on personal Income tax scrapped

Fringe Benefit Tax (FBT) to be scrapped

IT exemption limit for Women hiked to Rs 190,000

IT exemption limit for Senior Citizens hiked to Rs 240,000

Service Tax to be now applicable on law firms

Bio-diesel custom duty lowered

Customs Duty on import of Gold and Silver increased

Unique Identification (UID) project under Nandan M. Nilekani to be out in

12-18 months

Saral 2 forms to simply tax filing process

Small scale businesses to be exempted from advance tax 50per cent reduction in the Custom Duty on LCD panels

Goods and Services Tax (GST) to be in effect from April, 2010

Textile units to enjoy continued tax holidays


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The fuel prices are likely to rise very soon. Finance minister Pranab

Mukherjee announced in the parliament that excise duty on petrol and diesel will be

increased to Rs 1/litre.

An announcement was also made to restore 5per cent duty on crude petroleum and

7.5per cent duty on petrol and diesel.

With this announcement there was uproar in the parliament and the opposition

walkout in Lok Sabha

10.2.3 Income Tax Slabs Relaxations and Slab Restructured

Mr. Pranab Mukherjee announced the restructuring of Income tax slabs while

presenting the budget for 2010-11. The new slabs include 30per cent tax on income

over Rs 8 lacs, 20per cent tax on income between Rs 5 to 8 lacs and 10per cent tax

on income between Rs1.6 to 5 lacs. Also, the surcharge has been withdrawn.

Current surcharge on companies has been reduced to 7.5per cent.

The presumptive tax limit has been raised to Rs 60 lacs.

An announcement was also made for a deduction of Rs 20000 on investment in

infra bonds.

10.2.4 Direct Tax Code from April 1, 2012

Finance minister Pranab Mukherjee made an important announcement while

presenting the budget 2010-11 that the Direct Tax Code will be implemented from

April 1, 2012.

10.3 BUDGET 2011-2012


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NEW DELHI: Finance ministerPranab Mukherjee presented to Parliament India's

budget for the coming financial year beginning in April.

Following are the highlights of the budget:

10.3.1 TAXES

Standard rate of excise duty held at 10 percent; no change in CENVAT

rate

Personal income tax exemption limit raised to Rs 180,000 from Rs

160,000 for individual tax payers

For senior citizens, the qualifying age reduced to 60 years and

exemption limit raised to Rs 2.50 lakh

Citizens over 80 years to have exemption limit of Rs 5 lakh.

To reduce surcharge on domestic companies to 5 percent from 7.5

percent.

A new revised income tax return form 'Sugam' to be introduced for

small tax payers.

To raise minimum alternate tax to 18.5 percent from 18 percent

Direct tax proposals to cause 115 billion rupees in revenue loss

Service tax rate kept at 10 percent

Customs and excise proposals to result in net revenue gain of 73

billion rupees

Iron ore export duty raised to 20 percent

Nominal one per cent central excise duty on 130 items entering the tax

net. Basic food and fuel and precious stones, gold and silver jewellery will be

exempted.
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Peak rate of customs duty maintained at 10 per cent in view of the

global economic situation.

Basic customs duty on agricultural machinery reduced to 4.5 per cent

from 5 per cent.

Service tax on air travel increased by Rs 50 for domestic travel and Rs

250 for international travel in economy class. On higher classes, it will be ten

per cent flat.

Electronic filing of TDS returns at source stabilized; simplified forms

to be introduced for small taxpayers.

Works of art exempt from customs when imported for exhibition in

state-run institutions; this now extended to private institutions.

CHAPTER 11


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CONCLUSION

BIBLOGRAPHY

BOOKS


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Richard Kohan, Mark Nash, and Brittney Saks in book

PriceWaterhouseCoopers 2008 Guide to Tax and Financial Planning, Published

by John Wiley & Sons on November 2008..............................

A.D.Mascarrenhas & P.A.Johnson in book Business Economics III Published

by Manan Prakashan

WEBSITES

http://220.227.161.86/16791tsibf.pdf

http://www.indianembassy.org/taxation-system-in-india.php

http://www.tax4india.com/

http://en.wikipedia.org/wiki/Income_tax_in_India

http://www.incometaxindia.gov.in/

http://www.cbec.gov.in/
http://220.227.161.86/16791tsibf.pdfhttp://www.indianembassy.org/taxation-system-in-india.phphttp://www.tax4india.com/http://en.wikipedia.org/wiki/Income_tax_in_Indiahttp://www.incometaxindia.gov.in/http://www.cbec.gov.in/http://220.227.161.86/16791tsibf.pdfhttp://www.indianembassy.org/taxation-system-in-india.phphttp://www.tax4india.com/http://en.wikipedia.org/wiki/Income_tax_in_Indiahttp://www.incometaxindia.gov.in/http://www.cbec.gov.in/

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