1

EXECUTIVE SUMMARY

Introduction

The Corporate tax planning live project was carried out at “Impact of Demographic

variables on the awareness and knowledge of Tax planning among the employees of

BFI sectors in Hubli-Dharwar”. Private general insurance companies.

ICICI Lombard General Insurance Company Limited is a joint venture between ICICI

Bank Limited, India's second largest bank with total assets of over USD 99 billion at 31

March 2014 and Fairfax Financial Holdings Limited, a Canada based USD 37 billion

diversified financial services company engaged in general

insurance, reinsurance, insurance claims management and investment management. ICICI

Lombard GIC Ltd. is the largest private sector general insurance company in India with a

Gross Written Premium (GWP) of Rs 71.34 billion for the year ended 31 March 2014. The

firm offers policy issuance and renewal through its website. It markets assurance products

including Car Insurance, Health Insurance, International Travel Insurance, Overseas

Student Travel Insurance, Two Wheeler Insurance, and Home Insurance. ICICI Lombard

has 221 branches spread across the nation.

Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj

Finance service Limited (formerly part of Bajaj Auto Limited) and Allianz SE.

Bajaj Allianz General Insurance received an Insurance Regulatory and Development

Authority (IRDA) certificate of registration on 2 May 2001 to conduct a general insurance

business, including health insurance, in India. The company has an authorized and paid up

capital of 1.10 billion. Bajaj Finserv Limited holds 74% and the remaining 26% is held

by Allianz SE.

As of 31 March 2010, Bajaj Allianz reported a profit before tax of 1.80 billion,

becoming the only private insurer to cross the 1 billion mark in pre-tax profits in four

years. The after-tax profit was 1.21 billion, 27% higher than the previous year.

Bajaj Allianz is headquartered in Pune and maintains a network of offices in over 200

towns throughout India.

Future Generali is a joint venture between India‟s leading retailer Future Group and

Italy based insurance major Generali. The company was incorporated in 2006 and brings

together the unique qualities of both the founding companies - local experience and

knowledge with global insurance expertise.

Future Generali operates in both Life and General insurance businesses as Future

Generali India Life Insurance Co. Ltd. and Future Generali India Insurance Co. Ltd.

respectively.

2

INTRODUCTION OF STUDY

The practical knowledge helps to analyze the problem, which are likely to arise in the

routine course of a modern organization. This report not only provides compressive

knowledge of the management of a general insurance company but also gives an

opportunity to seek first hand information about the functioning of a general insurance

company.

This report is based on the study at ICICI Gen Ins, Bajaj Gen Ins, and Future Generalli

Gen Ins. These are the public sector general insurance company. The company providing

the general insurance policy for public.

Needs for study

Impact of Demographic Variables on the awareness and knowledge of Tax Planning

among the employees of BFI sectors in Hubli Dharwad

Statement of problem

Objectives

1. Reduction of Tax liability

2. Minimization of litigation

3. Productive investment

4. Healthy growth of economy

5. Economic stability

Importance of study

This report is purely based on the impact of demographic variables on the awareness

and knowledge of tax planning among the employees of BFI sector in Hubli- Dharawad

city. The total number of respondent surveyed is 20 from the Hubli-Dharawad. The time

period of the study was for 1 week.

Methodology

QUESTIONNAIRES

One set of questionnaire was prepared to “Impact of Demographic Variables on the

awareness and knowledge of Tax planning among the employees of BFI sectors in

Hubli Dharwad”. The questionnaires were administered to 30 general insurance company

job holders.

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PRIMARY DATA

The primary data has been collected through survey research. The respondents were

directly interviewed with the help of structured questionnaire. The respondents are Private

sector General insurance company workers.

SECONDARY DATA

The secondary data is that which has been collected by an individual/ organization for

different purpose. The type of data will be useful during the initial stages of the research

and also preparation of

Firm‟s works

Text book

News paper ad magazines

World Wide Web

The secondary data was collected from internet, books and insurance holder provided

company information.

Statistical tools

Using statistical tool is MS excel or using the SPSS

SAMPLING

Sampling and data analysis plays a vital role in the research. Sample size must be

taken in such a way that it should represent the general insurance policy holder.

SAMPLING FRAME

Different type of routes in Hubli city.

SAMPLING METHOD

The sampling method is the way of sampling units to be selected. For the purpose of

present study, I have taken convenient Judgment sampling method.

Judgment sampling is a common nonprobability method. The researcher selects the

sample based on judgment. This is usually and extension of convenience sampling. For

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example, a researcher may decide to draw the entire sample from one "representative"

city, even though the population includes all cities. When using this method, the

researcher must be confident that the chosen sample is truly representative of the entire

population.

Convenience sample: A convenience sample is a matter of taking what you can get. It

is an accidental sample. Although selection may be unguided, it probably is not random,

using the correct definition of everyone in the population having an equal chance of being

selected. Volunteers would constitute a convenience sample.

SAMPLE SIZE

The total size is of 20 respondents. The respondents are different type of GIC

employees.

SAMPLING PLAN

Personally visited the respondents from Hubli city, and get filled questionnaires.

LIMITATIONS

Some respondents refused to participate in the survey and that in turn may have

Affected the result of the study.

Even after assuring the respondents that the data will be used only for academic

Purposes, some respondents were hesitant to reveal certain information.

Time between collection of data and interpreting analysis.

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REVIEW OF LITERATURE

Taxation Policy has been a widely debated issue all over the world. A large number of

studies have been conducted covering different aspects of income tax structure such as

personal income tax, capital gains taxation, agricultural taxation, efficiency of income tax

administration etc. over the years. In this chapter, the available literature was studied to get

an insight into the main objectives of the study. The review of literature is confined to

India only as income tax legal frame work varies from country to country. Moreover,

reports of important committees constituted by Government of India have also been

reviewed. A brief review of relevant studies in this regard is given below.

Indian Taxation Enquiry Committee (1924) was appointed by Government of India

to examine the burden of taxation on different classes of people, equity of taxation and to

suggest alternative sources of taxation under the chairmanship of Charles Todhunter. The

committee recommended the following measures for improvement in taxation of income:

Loss sustained in one year should be allowed to carry forward and set off in the

subsequent year.

The income of married couples should be taxed at the rates applicable to their

aggregate income.

In case private companies are formed just for tax avoidance by withholding

dividends, then such companies should be treated as firm.

The officer should be authorized to compute liabilities of unregistered firm as if it

had been registered in some particular cases if he thinks it reasonable.

Taxation Enquiry Commission (TEC) (1953-54) headed by John Matthai was set up

to review the tax structure in India. It carried out an in-depth study of the central taxes and

their administration. It recommended widening and deepening the tax structure both at the

Centre and the State level for the purpose of financing development outlay and reducing

large inequalities of income. It also recommended for providing tax incentives for

production and investment and periodic appraisal of same. Further, the commission also

recommended the financing of small research sections in selected research institutions by

the government.

Ernment. Kaldor (1956) was invited by the government of India in 1955 to review

personal and business tax in the Indian tax system with a view to augmenting resources for

the second five year plan. He found that prevailing taxation system in India at that time

was inefficient and inequitable. He recommended the introduction of an annual tax on

wealth, taxation of capital gains, a general gift tax and a personal expenditure tax for

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broadening the tax base. For reducing the scope of tax evasion, he also recommended the

institution of a comprehensive reporting system on property transfers and other

transactions of capital nature. It was argued that all direct taxes should be assessed

simultaneously on the basis of a single comprehensive return. He further suggested that

maximum rate of tax on income should not exceed 45 2 per cent. Finally, it was suggested

that to ensure high standard of administration in the Revenue Department, there should be

an adequate increase in the range of salaries payable to income tax officers.

Ambirajan (1961) tried to study the evolution, structure, administration and future

prospects of the corporate income tax in India in the context of changing ideas and

concepts that influenced Indian tax policy. He revealed that revolutionary tax changes

were made only in the post freedom-period. He found that the corporate tax structure had a

minor impact on investment structure in corporate sector. He opined that Indian corporate

tax rates were very high as compared to even many underdeveloped countries. The study

concluded that there was an urgent need of tax reforms.

Boothalingam (1968) was appointed by the Government of India to examine the

structure of direct and indirect taxes in India. He recommended to abolish the

classification of income under various heads for determination of total income and to

allow setting off losses against any kind of income for improvement in income tax

structure. He highlighted that arrears of salary received when spread over a number of past

years, resulted in reopening of many assessments. Thus, he recommended spreading the

arrears of salary received over the future years rather than past years. He suggested for

stablisation in tax rate structure over the years, elimination of surcharge and raising the

exemption limit to Rs. 7500 for individuals and Rs. 10000 for HUF and discontinuation of

personal allowances. He was of the opinion that number 3 of Public Relation Officers

should be increased for the convenience of the taxpayers.

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Overview of corporate tax planning

Many countries impose corporate tax, also called corporation tax or company tax, on

the income or capital of some types of legal entities. A similar tax may be imposed at state

or lower levels. The taxes may also be referred to as income tax or capital tax. Entities

treated as partnerships are generally not taxed at the entity level. Most countries tax all

corporations doing business in the country on income from that country. Many countries

tax all income of corporations organized in the country.

Company income subject to tax is often determined much like taxable income for

individuals. Generally, the tax is imposed on net profits. In some jurisdictions, rules for

taxing companies may differ significantly from rules for taxing individuals. Certain

corporate acts, like reorganizations, may not be taxed. Some types of entities may be

exempt from tax.

Many countries tax corporate entities on income and also tax the owners when the

corporation pays a dividend. Where the owners are taxed, a withholding tax may be

imposed. Generally, these taxes on owners are not referred to as corporate tax.

Overview

Corporate tax or company tax refers to a tax imposed on entities that are taxed at the

entity level in a particular jurisdiction. Such taxes may include income or other taxes. The

tax systems of most countries impose an income tax at the entity level on certain type(s) of

entities (company or corporation). Many systems additionally tax owners or members of

those entities on dividends or other distributions by the entity to the members. The tax

generally is imposed on net taxable income. Net taxable income for corporate tax is

generally financial statement income with modifications, and may be defined in great

detail within the system. The rate of tax varies by jurisdiction. The tax may have an

alternative base, such as assets, payroll, or income computed in an alternative manner.

Most income tax systems provide that certain types of corporate events are not

taxable transactions. These generally include events related to formation or reorganization

of the corporation. In addition, most systems provide specific rules for taxation of the

entity and/or its members upon winding up or dissolution of the entity.

In systems where financing costs are allowed as reductions of the tax base (tax

deductions), rules may apply that differentiate between classes of member-provided

financing. In such systems, items characterized as interest may be deductible, subject

to interest limitations, while items characterized as dividends are not. Some systems limit

deductions based on simple formulas, such as a debt-to-equity ratio, while other systems

have more complex rules.

Some systems provide a mechanism whereby groups of related corporations may

obtain benefit from losses, credits, or other items of all members within the group.

Mechanisms include combined or consolidated returns as well as group relief (direct

benefit from items of another member).

Most systems also tax company shareholders on distribution of

earnings as dividends. A few systems provide for partial integration of entity and member

taxation. This is often accomplished by "imputation systems" or franking credits. In the

past, mechanisms have existed for advance payment of member tax by corporations, with

such payment offsetting entity level tax.

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Many systems (particularly sub-country level systems) impose a tax on particular

corporate attributes. Such non-income taxes may be based on capital stock issued or

authorized (either by number of shares or value), total equity, net capital, or other

measures unique to corporations.

Corporations, like other entities, may be subject to withholding tax obligations upon

making certain varieties of payments to others. These obligations are generally not the tax

of the corporation, but the system may impose penalties on the corporation or its officers

or employees for failing to withhold and pay over such taxes. A company has been defined

as a juristic person having an independent and separate existence from its shareholders.

Income of the company is computed and assessed separately in the hands of the company.

In certain cases, distributions from the company to its shareholders as dividends are taxed

as income to the shareholders.

Corporation defined

A corporation is a legal entity organized under the corporate or company laws of

some jurisdiction. The jurisdiction may be a country or a subdivision of a country. For

example, in Canada, a corporation may be organized under either Federal or provincial

laws. Most jurisdictions recognize as corporations entities organized under the corporate

or company laws of other jurisdictions. Under many tax systems, any entity providing

limitations on the liability of all members for the actions of the entity is considered a

corporation. Characterization as a corporation for tax purposes is based on the form of

organization in most taxing jurisdictions. One notable exception applies for United States

Federal and most state income taxes within the United States under which an entity may

(with exceptions) elect to be treated as a corporation and taxed at the entity level or taxed

only at the member level. See Limited liability company, Partnership taxation, S

corporation, Sole proprietorship.

Governments may impose tax on corporations as separately from their owners. Most

jurisdictions tax companies or corporations at the entity rather than the member level.

Members of the corporate entity are generally not subject to tax on the entity's earnings

until such earnings are distributed. By contrast, most jurisdictions tax partnerships at the

member level and not the entity level. Members of a partnership are generally subject to

tax on the partnership's earnings as they are earned rather than when they are distributed.

Taxation of corporations

Corporations may be taxed on their incomes, property, or existence by various

jurisdictions. Many jurisdictions impose a tax based on the existence or equity structure of

the corporation. For example, Maryland imposes a tax on corporations organized in that

state based on the number of shares of capital stock issued and outstanding. Many

jurisdictions instead impose a tax based on stated or computed capital, often including

retained profits.

Most jurisdictions tax corporations on their income. Generally, this tax is imposed at

a specific rate or range of rates on taxable income as defined within the system. Some

systems have a separate body of law or separate provisions relating to corporate

taxation. In such cases, the law may apply only to entities and not to individuals operating

a trade. Such laws may differentiate between broad types of income earned by

corporations and tax such types of income differently. Generally, however, most such

systems tax all income of a corporation in the same manner.

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Some systems (e.g., Canada and the United States) tax corporations under the same

framework of tax law as individuals. In such systems, there is normally taxation

differences related to differences between the inherent natures of corporations and

individuals or unincorporated entities. For example, individuals are not formed,

amalgamated, or acquired, and corporations do not generally incur medical expenses

except by way of compensating individuals.

Many systems allow tax credits for specific items. Such direct reductions of tax are

commonly allowed for foreign taxes on the same income and for withholding tax. Often

these credits are the same as those available to individuals or for members of flow through

entities such as partnerships.

Most systems tax both domestic and foreign corporations. Often, domestic

corporations are taxed on worldwide income while foreign corporations are taxed only on

income from sources within the jurisdiction. Many jurisdictions imposing an income tax

impose such tax income from a permanent establishment within the jurisdiction.

Corporations are also subject to property tax, payroll tax, withholding tax, excise

tax, customs duties, value added tax, and other common taxes, generally in the same

manner as other taxpayers. These, however, are rarely referred to as “corporate tax.”

Taxable income

Most systems impose income tax at a specified rate of tax times taxable income as

defined in the system. Many systems define taxable income by reference to net income

before income taxes per financial statements prepared under locally accepted accounting

principles. Such income may be decreased for income subject to tax exemption. Other

adjustments often apply.

Some systems define taxable income within the system. The United States system

defines taxable income for a corporation as all gross income (sales plus other income

minus cost of goods sold and tax exempt income) less allowable tax deductions, without

the allowance of the standard deduction applicable to individuals.

Principles for recognizing income and deductions may differ from financial

accounting principles. Key areas of difference include differences in the timing of income

or deduction, tax exemption for certain income, and disallowance or limitation of

certain tax deductions. The United States system requires that these differences be

disclosed in considerable detail for non-small corporations on Schedule M-3 to Form

1120.

Most systems tax resident corporations (generally those organized within the

country) on their worldwide income, and nonresident corporations only on their income

from sources within the country. A few systems, such as Hong Kong, tax resident and

nonresident corporations only on income from sources within the country.

Corporate tax rates

Corporate tax rates generally are the same for differing types of income. However,

many systems have graduated tax rate systems under which corporations with lower levels

of income pay a lower rate of tax. Some systems impose tax at different rates for different

types of corporations. Tax rates vary by jurisdiction. In addition, some countries have sub-

country level jurisdictions that also impose corporate income tax. Some jurisdictions also

impose tax at a different rate on an alternative tax base.

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Data Analysis

1. Are you aware of Tax Planning?

Interpretation: According to the above graph is that 20 employees are said yes while as

no one choose no option.

0

5

10

15

20

25

1 2

Total

Total

Yes No

Total 20 0

11

3. As an Individual Do you feel Tax planning is ………..

Very Imp Imp Not so Imp Not required

Total 11 8 1 0

Interpretation: According to the above graph is that 11 employees choose the very

important, 8 employees choose the important and only one employee choose not so

important while no one choose the not required of the tax planning.

0

2

4

6

8

10

12

1 2 3 4

Total

Total

12

4. Do you file IT Return?

Yes No

Total 14 6

Interpretation: As the above graph shows that 14 employees marked „Yes‟, while as 6

employees marked „No‟.

0

5

10

15

1 2

Total

Total

13

5. Do you file manual IT return or E filing?

Manual IT return E filling

Total 06 12

Interpretation: As the above graph shows that out of the 20 employees only 6 employees

are choose the manual IT return and 12 employees choose the file of E-Filling.

0

2

4

6

8

10

12

14

1 2

Total

Total

14

6. Who prepare tax return?

Me

Tax

Consultant CA

Total 7 13 0

Interpretation: According to the above graph shows that among 20 employees only 7

employees expressed that they can prepare the tax return themselves while as 13

employees expressed their opinion that tax consultant only prepare the tax return.

0

5

10

15

1 2 3

Total

Total

15

8. What is the maximum limit of Deduction under Sec 80C?

Rs.

50000

Rs.

1,50,000 2,00,000

Total 1 15 3

Interpretation: According to the above graph shows that among the 20 employees 1

employee expressed his opinion about limit of deduction that Rs 50,000, 15 employees

expressed that Rs1, 50,000 and only 3 employees expressed Rs 2,00,000 about the limit of

deduction sec 80C.

0

2

4

6

8

10

12

14

16

1 2 3

Total

Total

16

9. Which of the following are the deductions eligible for Individual under Income Tax

Act?

80C 80CC 80 CCD 80 D 80 DD 80 E 80 GG 80 U

Total 15 4 6 5 0 1 1 0

Interpretation: As the above graph shows 15 employees choose 80C deduction eligible, 4

employees choose 80CC, 6 employees choose 80CCD, 5 employees 80D, no one could

choose 80DD and 80U, while as 1 employee choose 80E, and Also 1 employee choose

80GG,

0

2

4

6

8

10

12

14

16

1 2 3 4 5 6 7 8

Total

Total

17

10. Which of following are the instruments for Tax Planning?

Health

Insurance

Policy

Life

Insurance

Policy

Fixed

Deposit

Public

Provident

Fund ELSS

NSC,

KVP Gold Shares

Total 15 17 9 6 3 4 8 7

Interpretation: According to the above graph 15 employees choose health insurance

policy for instruments for tax planning while as 17 employees choose life insurance

policy, 9 employees choose fixed deposits, 6 employees choose public provident fund, 3

employees ELSS, 4 employees NSC/KVP, 8 employees Gold and 7 employees choose

share for instruments for tax planning.

0

2

4

6

8

10

12

14

16

18

1 2 3 4 5 6 7 8

Total

Total

18

11. In which Financial Instruments have you invested in?

Shares

Fixed

Deposit Gold LIC

Health

Insurance

Mutul

fund

NSC,

KVP

Public

Provident

Fund

Real

Estate

Total 7 8 7 15 13 5 5 6 5

Interpretation: According to the above graph 7 employees invested the shares of

financial instruments, 8 employees invested fixed deposits, 7 employees gold, 15

employees LIC, 13 employees health insurance policy, 5 employees Mutual fund, 5

employees NSC/ KVP, 6 employees Public provident Fund, And at the last 5 employees

invested Real estate financial instruments.

0

2

4

6

8

10

12

14

16

1 2 3 4 5 6 7 8 9

Total

Total

19

12. Have you utilized the maximum deduction u/s 80C of Rs. 150000 while filing IT

returns?

Yes No

Total 16 3

Interpretation: According to the above graph among the 20 employees, 16 employees

expressed their opinion that „Yes‟about utilize the maximum deduction while as 3

employees expressed their opinion „No‟.

0

2

4

6

8

10

12

14

16

18

1 2

Total

Total

20

15. How do you enrich your knowledge of Tax Planning?

Reading

Newspaper

By Taking Advise

from Friends and

Relatives

By taking help

from tax

consultant

Through analyzing

different financial

assets

Total 8 8 8 3

Interpretation: As the above graph shows 8 employees enrich their knowledge by the

reading newspaper, 8 employees by taking advise from friends and relatives, 8 employees

by taking help from tax consultant and only 3 employees enrich their knowledge through

analyzing different financial assets.

0

1

2

3

4

5

6

7

8

9

1 2 3 4

Total

Total

21

16. Rate your level of knowledge in Tax Planning?

Very Good Good Average Poor

Total 8 8 4 0

Interpretation: According to the above graph shows that 8 employees rated their level of

knowledge is very good, 8 employees good, 4 employees average and no one rated the

level of knowledge poor.

0

1

2

3

4

5

6

7

8

9

1 2 3 4

Total

Total

22

17. What are the Advantage you get by doing Tax Planning?

Saving

in Tax

Inculcate Saving

Habits.

Enriches knowledge of various Tax

saving financial Instruments

Total 14 6 3

Interpretation: As above graph shows 14 employees get advantage saving in tax by doing

tax planning, 6 employees get advantage in inculcate saving habits and only 3 employees

get advantage in enriches knowledge of various tax saving financial instruments by doing

tax planning.

0

2

4

6

8

10

12

14

16

1 2 3

Total

Total

23

Findings:

We have chosen 20 samples all are the aware of tax planning.

Among the all samples no one can choose CA for prepare the tax return.

Some employees are not aware of remaining under Sec 80C deduction of max limit

RS150000.

More employees enriched their knowledge by the Reading newspaper, by taking

advise from friends and relatives and by taking help from tax consultant but no one

enrich their knowledge through analyzing different financial assets.

Conclusion:

In generally more employees aware briefly about corporate tax but they don‟t

know in depth so they should aware of the full knowledge about corporate tax

planning.

All employees should utilize the deductions.