sip on income tax

7/25/2019 sip on income tax

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PROJECT REPORT

ONIncome Tax Planning with respect to Individual

Assessee

Submitted in the partial ful llment for the award of degree in

M STER O! "#S$NESS %M$N$STR T$ON

Submitted "&'(

M %)# SON$

Seme*ter (+ th , -- rd "at.h

#nder the /uidan.e of

%r S#M T J $N

%epartment of "u*ine** Studie*

"abulal Tarabai $n*titute of Re*ear.h and Te.hnolog&

0%r1 )1S1 /our #ni2er*it&, Sagar , 3456(3457 )


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ACKNOWLEDGEMENT

I am overwhelmed in all humbleness and gratefulness to acknowledge

all those who have h elped me to put the ideas, well above the level of simplicity

and into something concrete. I owe a great debt to my guide Dr. Sumat Jain

who provided wholesome direction and support to me at every stage of

work. His wisdom, knowledge and commitment to the highest standards

inspired and motivated me.

Madhu Soni


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DECLARATION

I hereby declare that t he project t itled Income Tax Planning in India with

respect to Individual Assessee is an original piece of research work carried

out by me under the guidance of Dr. Sumat Jain the information has been

collected form genuine an d authentic sou rces. The work has b een submitted in

practical fulllment of the requirement of degree of Master of Business

Administration to BTIRT college Sagar(M.P).

Madhu Soni


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PREFACE

The present project is designed to benefit the masses especially to the people related to Finance.

It includes information regarding different financial services and people benefited by it are

different fields.

One can easily get the information from this project and can decide for herself special care has

been taken to develop this project. It includes study matter as well as diagrammatic

representation to make the person understand it clearly.

I take this privilege to thank all those who help me directly or indirectly in preparing this project.

I am specially thankful to my guide. Dr !umat "ain# without his support this project would not

have been complete.

$ast but not the least i e%press my gratitude towards god for giving me this beautiful opportunity.

&ll possible efforts have been made to make this presentation as best as possible.


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Thanks to everyone

'( TIFI'&T(

This is certify that the project work entitle* Income Tax Planning in India with

respect to Individual Assessee as a major project in +,& -th !(+ embody the work

of +adhu !oni# which has been undertaken and successfully completed under the guidance in

the Department of ,usiness !tudies* ,TI T college !ironja oad !agar mp) during the session

/012.

During their work we found them sincere preserving and hardworking. I hereby forward this project.

Project Guide Head of the Departement

Dr !umat "ain Dr "ayant Dubey


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INDEX

Acknowledgements

Declaration

PREFACE

CERTIFICATE

Chapter

1

Introduction

1.1 Objective for Income Taxes

1.2 The Basic Principles Income Taxes

1.3 An extract from income tax Act,1961

1.4 Computation of total income

1.5.Deduction from Taxable Income


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Chapter

2

Organization Prole

2.3 C.A. Prole

2.2 Introduction works o f organization

2.3 Organization its founders

2.4 Vision & Mission

Chapter

3

Statement of Problem

Chapter

4

Research Methodology

4.1 Objectives of Study

4.2 Need / Signicance of the Study.

4.3 Scope / L imitations of the study

4.4 Data Collection - Primary/Secondary

4.5 Tools o f Analysis

Chapter

5

Data analysis & Interpretation

5.1 The results of general information


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5.2 Income Tax Slabs & Rates for Assessment Year 2015-16

Chapter

6

Conclusion

6.1 Recommendations &Suggestions

6.2 Conclusion

AppendixI

Bibliography


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CHAPTER 1

INTRODUCTION


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Introduction

Income Tax Act, 1961 governs the taxation of incomes generated within India

and of incomes gen erated by Indians overseas. This study aims at presenting a

lucid yet simple u nderstanding of taxation structure of an individuals income

in India for the assessm ent year 2004-15.


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Income Tax Act, 1961 is t he gu iding baseline for al l the content in this repo rt

and the tax saving tips provided herein are a result of analysis of options

available in current market. Every individual should know that tax planning in

order to avail all the incentives provided by the Government of India under

different statures i s l egal.

This project covers the basi

Finance Act 2007, and broadly presents the nuances of prudent tax planning

and tax saving options provided under these laws. Any other hideous m eans to

avoid or evade t ax is a cognizable offence u nder t he Indian constitution and all

the citizens sh ould refrain from such acts.

1.1Objective for Income Taxes


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The objective of income taxe on an acc

current an d deferred taxes payable or refundable at t he date of the nancial

statements(a) as a resu lt of all events t hat have b een recognized in the nancial

statements and (b) as measured by the provisions of enacted tax laws. Other

events not yet recognized in the nancial statements may affect the eventual

tax consequences of some events that have been recognized in the nancial

statements. But that change in tax consequences would be a result of those

other later events, and the Board decided that the tax consequences of an

event s hould not be recognized until that event is recognized in the nancial

statements.

1.2The Basic Principles Income Taxes

To implement that objective, a

While tax rules vary widely,

income tax systems. Tax systems in Canada, China, Germany , Singapore , the

United Kingdom, and the United States, among others; follow most of the

principles outlined below. Some tax systems, such as India , may have

signicant differences from the principles outlined below. Most references

below are examples; see specic art
http://en.wikipedia.org/wiki/Taxation_in_Germanyhttp://en.wikipedia.org/wiki/Income_tax_in_Singaporehttp://en.wikipedia.org/wiki/Income_tax_in_Indiahttp://en.wikipedia.org/wiki/Taxation_in_Germanyhttp://en.wikipedia.org/wiki/Income_tax_in_Singaporehttp://en.wikipedia.org/wiki/Income_tax_in_India


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Taxpayers and rates --------------Residents and nonresidents

Dening income -------------------------Deductions allowed

Business prots ---------------------------------------- Credits

Alternative taxes ----------------------------

State, provincial, and local -------------------------- Wage based taxes

1.3AN EXTRACT FROM INCOME TAX ACT, 1961

1.3.1 Tax Regime in India

The tax regime in India is curr

amended by The Finance Act, 2015 notwithstanding any amendments made

thereof by recently announced Union Budget for assessment year 2015-15.

1.3.2 Chargeability of Income Tax

As per Income Tax Act, 1961, income tax is

prevailing rates in respect of the total income of the previous year of every

person. Previous year means the nancial year immediately preceding the

assessment year.

Basic Knowledge of Income Tax

According to Income Tax Act 1961, every person, ho

total income exceeds t he m aximum exemption limit, shall be chargeable to the

income tax at the rate or rates prescribed in the Finance Act. Such income


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shall be paid on the total income of the previous year in the relevant

assessment year.

Assessee means a person by whom (any tax) or any other sum of money is

payable under the Income Tax A ct, and includes

(a) Every person in respect of whom any proceeding under the Income

Tax Act has been taken for the assessment of his income or of the

income of any other per son in respect of which he is a ssessable, or of

the loss su stained by him or by su ch other person in respect of which

he is assess able, or of the loss su stained by him or by su ch other

person, or of the amount of refund due to him or to such other

person;

(b) Every person who is deemed to be an assessee under any provisions

of the Income Tax A ct.

(c) Every person who is deemed to be an assessee in default under any

provision of the Income Tax Act.

Where a person includes:-

o Individual

o Hindu Undivided Family (HUF)

o Association of persons (AOP)

o Body of Individual (BOI)

o Company

o Firm

o A local authority and

o Every articial judicial person not falling within any of the

preceding categories.


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Income tax is an annual tax imposed separately for each assessment year (also

called the tax year). Assessment year commence from 1 st April and ends on the

next 31 st March.

The total income of an individual

status in India. For t ax purposes, an individual may be resident, nonresident

or not ordinarily resi dent.

Types of Residents

Figure 1 : Types of Residents

1.3.3 Scope of Total Income

Under the Income Tax Act, 1961, total income of any previous year of a person

who is a resident includes a is r eceived or is d eemed to be received in India in such year by or on behalf

of such person; accrues or a rises or i s deemed to accrue or arise to him in India during

such year; or


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accrues or ari ses t o h im outside India during su ch year:

Provided that, in the case of a person not ordinarily resident in India, t he

income which accrues or arises to him outside India shall not be included

unless it is derived from a business controlled in or a profession set up in

India.

1. Total Income

For the purposes of chargeability of income-tax and computation of total

income, The Income Tax Act, 1961 classies the earning under the following

heads of income: Salaries Income from house property Capital gains Prots a nd gains o f business o r prof ession Income from other sources

Concepts u sed in Tax Planning

2. Tax Evasion Tax Evasion means not paying taxes as per the provisions of the law or

minimizing tax by illegitimate and hence illegal means. Tax Evasion can be

achieved by concealment of income or ination of expenses or f alsication of

accounts o r by conscious d eliberate violation of law.

Tax Evasion is an act executed knowingly wi

that t he tax reported by the taxpayer is less t han the tax payable under the

law.

3. Tax Avoidance


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Tax Avoidance is the art of dodging tax without breaking the lw Whil

remaining well within the four corn ers of the law, a citizen so arranges his

affairs that he walks out of the clutches of the law and pays no tax or pays

minimum tax. Tax avoidance is therefore legal and frequently resorted to. In

any tax avoidance exercise, the attempt is always to exploit a loophole in the

law. A transaction is articially made to appear as falling squarely in the

loophole and thereby minimize the tax. In India, loopholes in the law, when

detected by the tax authorities, tend to be plugged by an amendment in the

law, too often retrospectively. Hence tax avoidance though legal, is not long

lasting. It lasts till the law is amended.

1.3.4 Tax Planning

Tax Planning has been described as a rened form of tax avoidance d

implies arrangement of a persons nancial affairs in such a way that it

reduces the tax liability. This is achieved by taking full advantage of all the tax

exemptions, deductions, concessions, rebates, reliefs, allowances and other

benets granted by the tax laws so that the incidence

Exercise in tax planning is based on the law itself and is therefore l egal and

permanent.

1.3.5 Tax Management

Tax Management is an expression which implies actual implementation

planning ideas. While that t ax planning is only an idea, a plan, a scheme, an

arrangement, tax management is the act ual action, implementation, the reality,

the nal result.


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To sum up all these four expressi

Tax Evasion is fraudulent and hence illegal. I

letter o f the l aw. Tax Avoidance, being based on a loophole in the law

only th e sp irit of the law but not the letter of the law. Tax Planning does not violate the spirit

entirely based on the sp ecic p rovision of the law itself. Tax Management is actual implementation of a tax planning provision.

net result of tax reduction by taking action of fullling the c onditions o f law

is tax management.

1.3.6 The Income Tax Equation

For the understanding of any layman, the process of computation of income

and tax liability can be outlined in following ve steps. This project i s also

designed to follow the sam e.

Calculate the Gross t otal income deriving from all resources. Subtract all the deduction & exemption available. Applying the tax rates on the taxable me. Ascertain the tax liability Minimize the tax liability through a perfect planning using tax saving

scheme

1.4COMPUTATION OF TOTAL INCOME


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Figure 2 : Income Head of Taxation

1.4.1 Income from Salaries

Incomes termed as Salaries:

Existence of master-servant or employer-employee relationship is absolutely

essential for t axing income u nder t he h ead Salaries. Where su ch relationship

does not exist income is taxable under some other head as in the case of

partner of a rm, advocates, chartered accountants, LIC agents, small saving

agents, commission agents, etc. Besides, only those payments which have a

nexus with the employment are taxable under the head Salaries.

Salary i s ch argeable to income-tax on due or p aid basis, whichever is ea rlier.

Any arrears of salary paid in the prev

previous yea r, shall be taxable in the yea r of payment.

Advance Salary:


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Advance salary is taxable in the year

income of recipient again when it becomes due. However, loan taken from the

employer aga inst salary i s n ot taxable.

Arrears of Salary:

Salary a rrears are t axable in the yea r in which it is r eceived.

Bonus :

Bonus is t axable in the yea r in which it is recei ved.

Pension :

Pension received by the em ployee is t axable u nder Salary Benet of standard

deduction is a vailable to pensioner al so. Pension received by a widow after t he

death of her husband falls under the head Income from Other Sources.

Prots in lieu of salary:

Any compensation due to or received by an employee from his employer or

former employer at or in connection with the termination of his em ployment or

modication of the terms a nd conditions re lating thereto;

Any payment due to or received by an employee from his employer or e

employer or f rom a provident or ot her fund to the extent it does not consist of

contributions by the assessee or interest on such contributions or any

sum/bonus received under a Keyman Insurance Policy.


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Any amount whether in lump sum or otherwise, due to or received by an

assessee from his employer, either before his joining employment or after

cessation of employment.

Allowances from Salary Incomes

Dearness Allowance/Additional Dearness (DA):

All dearness allowances are ful

City Compensatory Allowance (CCA):

CCA is taxable as it is a personal allowance gran ted to meet expenses w holly,

necessarily and exclusively incurred in the performance of special d uties

unless su ch allowance i s rel ated to th e p lace o f his p osting or r esidence.

Certain allowances p rescribed under Rule 2BB, granted to the employee either

to meet his personal expenses at the place where the duties of his office of

employment are performed by him or at the place where he ordinarily resides,

or t o compensate h im for increased cost of living a re a lso exem pt.

House Rent Allowance (HRA):

HRA received by an employee residing in his own house or in a house for which

no rent is paid by him is taxable. In case of other employees, HRA is exem pt up

to a certai n limit

Entertainment Allowance:

Entertainment allowance is fully taxable, but a deduction is a llowed in certain

cases.

Academic Allowance:

Allowance granted for encouraging academic research and other

pursuits, or for the books for the purpose, shall be exempt u/s 10(14).

Similarly newspaper allowance sh all also b e exem pt.


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Conveyance Allowance:

It is exempt to the extent it is paid and utilized for m eeting expenditure on

travel for official work.

1.4.2 Income from House Property

Incomes Termed as House Property Income:

The annual value of a house property i

owner of the property. House p roperty consists of any building or land, or its

part or at tached area, of which the assessee i s the owner. The part or at tachedarea may be in the form of a courtyard or compound forming part of the

building. But such land is

is not charged under this head but under the head Income from Other

Sources or Business Income, as the case m ay be. Besides, house property

includes ats, shops, office space, factory sheds, agricultural land and farm

houses.

However, following incomes shall be taxable under the head Income from

House P roperty'.

1. Income from letting of any farm house a gricultural land appurtenant thereto

for any purpose other than agriculture shall not be deemed as agricultural

income, but taxable as i ncome from house property.

2. Any a rrears of rent, not taxed u/s 2 3, received in a subsequent year, shall be

taxable in the yea r.

Even if the h ouse property is si tuated outside India it is t axable in India if the

owner-assessee is resi dent in India.


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Incomes Excluded from House Property Income:

The following incomes are excluded from the charge

head:

Annual value of house property used for business purposes Income of rent received from vacant land. Income from house p roperty in the immediate vicinity of agricultural land

and used as a store h ouse, dwelling h ouse et c. by the cu ltivators Annual Value:

Income from house p roperty is t axable on the basis of annual value. Even if the

property is n ot l et-out, notional rent receivable i s tax able a s i ts a nnual value.

The annual value of any property is the sum which the property might

reasonably be ex pected to fetch if the p roperty is let from year to year.

In determining reasonable ren t factors su ch as actual rent paid by the tenant,

tenants ob ligation undertaken by owner, owners obligations u ndertaken by the

tenant, location of the property, annual rateable value of the property xed bymunicipalities, rents o f similar p roperties i n neighbourhood and rent which the

property is likely to fetch having regard to demand and supply are to be

considered.

Annual Value of Let-out Property:

Where the property or any part thereof i

property or p art shall be the reason able ren t for t hat p roperty or p art or t he

actual rent received or recei vable, whichever i s h igher.

Deductions from House Property Income:

Deduction of House Tax/Local Taxes paid:


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In case of a let-out property, the local taxes su ch as m unicipal tax, water an d

sewage tax, re tax, and education cess levied by a local authority are

deductible while computing the annual value of the year in which such taxes

are act ually paid by the owner.

Other than self-occupied properties

Repairs and collection charges: Standard deduction of 30% of the net annual

value of the property.

Interest on Borrowed Capital:

Interest paya ble in India on borrowed capital, where the property has been

acquired constructed, repaired, renovated or reconstructed with such borrowed

capital, is allowable (without a ny limit) as a deduction (on accrual basis).

Furthermore, interest payable for t he period prior t o the previous yea r in which

such property has b een acquired or constructed shall be deducted in ve equal

annual instalments commencing from the previous year in which the house

was acquired or constructed.

Amounts not deductible from House Property Income:

Any interest chargeable under the Act payabl

not been paid or deducted at source an d in respect of which there is n o person

who may be treated as an agent.

Expenditures not specied as specically deductible. For instance, no

deduction can be claimed in respect of e xpenses on electricity, water su pply,

salary o f liftman, etc.Self-Occupied Properties

No deduction is allowed under section 24(1) by way of repairs, insurance

premium, etc. in respect of self-occupied property whose annual value has


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been taken to be nil under secti

maximum deduction of Rs. 30,000 by way of interest on borrowed capital for

acquiring, constructing, repairing, renewing or recon structing the property is

available in respect of such properties.

In case of self-occupied property acquired or con structed with capital borrowed

on or af ter 1. 4.1999 and the a cquisition or con struction of the h ouse p roperty

is m ade within 3 years from the end of the nancial year in which capital was

borrowed the maximum deduction for interest shall be Rs

purpose, the assessee sh all furnish a certicate from the person extending the

loan that such interest was payable in respect of l oan for acquisition or

construction of the h ouse, or as ren ance loan for r epayment of an earlier loan

for such purpose.

The deduction for interest

i. Self-occupied property: deduction is res tricted to a maximum of Rs. 1,50,000

for p roperty acquired or con structed with funds furrowed on or after 1. 4.1999

within 3 years from the end of the nancial year iwhich

borrowed. In other cases, the c

ii. Let ou t property o r p art there o f: all eligible interests are a llowed.

It is, therefore, suggested that a property for self, residence may be acquired

with borrowed funds, so that the annual interest accrual on borwigsremains less than Rs. 1,50,000. The net loss on this account can be set off

against income from other properties an d even against other incomes.


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If buying a property for l etting it out on rent, raise b orrowings from other f amily

members or outsiders. The rental income can be safely passed off to the other

family members by way of interest. If the interest claim exceeds the annual

value, loss can be set ff

At the time of purchase of new house pr operty, the sam e sh ould be acqu ired in

the name(s) of different family members. Alternatively, each property may be

acquired in joint n ames. This is particularly advantageous in case of rented

property for division of rental income am ong various family members. However,

each co-owner must invest out of his own funds (or borrowings) in the ratio of

his ownership in the property.

Capital Gains

Any prots or gains arising from the

the previous year i s chargeable to income-tax under the head Capital gains

and shall be deemed to be the income of that previous year in which the

transfer t akes p lace. Taxation of capital gains, thus, depends o n two aspects

capital assets and transfer.

Capital Asset:

Capital Asset means property of any kind held by an assessee including

property of his b usiness o r profession, but excludes n on-capital assets.

Transfers Resulting in Capital

Sale or exch ange of assets; Relinquishment of assets; Extinguishment of any rights in assets; Compulsory acqu isition of assets u nder any law; Conversion of assets into stock-in-trade of a business carried on by the

owner of asset;


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Handing over the possession of an immovable property in part performance

of a contract f or t he tr ansfer of that property; Transactions involving transfer of membership of a group housing

company, etc.., which have the effect of transferring or en abling enjoyment

of any immovable property or an y rights t herein ; Distribution of assets on the dissolution of a rm, body of individuals or

association of persons; Transfer of a capital asset by a partner or member to the rm or AOP,

whether by way of capital contribution or o Transfer under a gift or an irrevocable trust of share

warrants allotted by a company directly or i

the Employees Stock Option Plan or Scheme of the company as p er Central

Govt. guidelines.

Year of Taxability:

Capital gains form part of the taxable income of the previous year i n which the

transfer g iving rise to the gains takes place. Thus, the capital gain shall be

chargeable in the yea r in which the sa le, exchange, relinquishment, etc. takes

place.

Where the transfer is by way of al

in part performance of an agreement to sell, capital gain shall be deemed to

have arisen in the year in which such possession is handed over. If the

transferee already holds the possession of the property under sa le, before

entering into the agreement t o sell, the year o f taxability of capital gains is the

year in which the agreement is ent


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Full Value of Consideration:

This is the amount for which a capi

or m oneys worth or com bination of both. For instance, in case of a sale, the

full value of con sideration is the full sale price actually paid by the transferee

to the transferor. Where the transfer is by way of exchange of one asset for

another or when the consideration for t he transfer is p artly in cash and partly

in kind, the fair m arket value of the asset received as consideration and cash

consideration, if any, together co nstitute full value o f consideration.

In case o f damage or d estruction of an asset in re ood, riot etc., the amountof money or t he fair market value of the asset received by way of insurance

claim, shall be deemed as full value of consideration.

1. Fair value of consideration in case land and/ or b uilding; and

2. Transfer Expenses.

Cost of Acquisition:

Cost of acquisition is the amount for which the capital asse t was originally

purchased by the asse ssee.

Cost of acquisition of an asset is the sum total of amount spent for a cquiring

the asset. Where the asset is purchased, the cost of acquisition is the price

paid. Where the asset is acq uired by way of exchange for an other asset, the cost

of acqu isition is the fair m arket value of that ot her a sset as on the date of

exchange.


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Any expenditure incurred in connection wit

transaction e.g. b rokerage paid, registration charges and legal exp enses, i s

added to price or val ue o f consideration for t he a cquisition of the a sset. Interest

paid on moneys borrowed for purchasing the asset is also part of its cost of

acquisition.

Where capital asset became the property of

has a n option to adopt the fair market value of the asset as on 1.4.1981, as its

cost of acquisition.

Rates of Tax on Capital Gains:

Short-term Capital Gains

Short-term Capital Gains are i ncluded in the gross t otal income of the assessee

and after allowing permissible deductions u nder Chapter VI-A. Rebate under

Sections 88, 88B and 88C is a lso available against the tax payable on short-

term capital gains.

Long-term Capital Gains

Long-term Capital Gains are subject to a at rate of tax @ 20% However, in

respect o f long term capital gains arising from transfer o f listed securities or

units of mutual fund/UTI, tax shall be payable @ 20% of the capital gain

computed after allowing indexation benet or @ 10% of the capital gain

computed without giving the benet of indexation, whichever is less.


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Capital Loss:

The amount, by which the value of consideration

short of its cost of acquisition and improvement /i ndexed cost of acquisition

and improvement, and the expenditure on transfer, represents the cap ital loss.

Capital Loss may be short-term or long-term, as in case of capital gains,

depending u pon the period of holding of the asset .

Set Off and Carry Forward of Capital Loss

Any short-term capital loss can be set off against any capi

long-term and short term) and against no other income. Any long-term capital loss can be set off only

and against no other income. Any short-term capital loss can be carried forward to the next eight

assessm ent years a nd set off against capital gains in those yea rs. Any long-term capital loss can be carried forward to the next eight

assessment year an d set off only against long-term capital gain in those

years.

Capital Gains Exempt from Tax:

Capital Gains from Transfer of a Residential House

Any long-term capital gains ari

individual or H UF, will be exem pt from tax if the a ssessee h as within a p eriod of

one year before or two years a fter the date of such transfer purchased, or

within a period of three


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Capital Gains from Transfer of Agricultural Land

Any capital gain arising

tax, if the assessee p urchases within 2 years from the date of such transfer,

any other agricultural land. Otherwise, the amount can be deposited under

Capital Gains Accounts Scheme, 1988 before the due date for furnishing the

return.

Capital Gains from Compulsory Acquisition of Industrial Undertaking

Any capital gain arising fm

land or b uilding of an industrial undertaking, shall be exempt, if the assessee

purchases/constructs within three years from the date of compulsory

acquisition, an y building or land, forming part of i ndustrial u ndertaking.

Otherwise, the amount can be deposited under the Capital Gains Accounts

Scheme, 1988 before the due date for furnishing the return.

Capital Gains from an Asset other than Residential House

Any long-term capital gain ari

of any asset, other t han a residential house, shall be exem pt if the whole of the

net consideration is u tilized within a period of one yea r before or t wo years af ter

the date of transfer for purchase, or w ithin 3 years in construction, of a

residential house.

Tax Planning for Capital Gains


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An assessee sh ould plan transfer of his ca pital assets a t such a time that

capital gains arise in the year in which his other recurring incomes are

below taxable limits. Assessees having income below Rs. 60,000 should go for short-tem capi

gain instead of long-term capital gain, since income up to Rs. 60,000 is

taxable @ 10% whereas long-term capital gains a re taxable at a at rate of

20%. Those having income above Rs. 1,50,000 should plan their capital

gains vi ce versa . Since long-term capital gains en joy a concessional treatment, the assessee

should so arrange the transfers of capital asset s that they fall in the

category of long-term capital assets. An assessee may go for a short-term capital gain,

already a short-term capital loss or l oss u nder any other head that can be

set off against such income. The assessee should take the maximum benet of exemptions available u/s

54, 54B, 54D, 54ED, 54EC, 54F, 54G and 54H. Avoid claiming short-term capital loss against long-term capital gains.

Instead claim it against short-term capital gain and if possible, either creat e

some sh ort-term capital gain in that year or , defer l ong-term capital gains t o

next year.

Prots and Gains of Business or Profession

1.4.3Income from Business or Profession:

The following incomes shall be chargeabl


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Prot and gains of any business or prof ession carried on by the assessee a t

any time during previous year . Any compensation or other payment due to or received by any person, in

connection with the termination of a contract of managing agency or for

vesting in the Government management of any property or business. Income derived by a trade, professional or si milar asso ciation from specic

services p erformed for its m embers. Prots on sale of REP licence/Exim scrip, cash assistance received or

receivable against exports, and duty drawback of customs or exci se r eceived

or receivable a gainst exports. The value of any benet or perquisite, whether convertibl

not, arising from business o r in exercise o f a p rofession. Any interest, salary, bonus, commission or remuneration due

by a partner of a rm from the rm to the ext

from the rms income. Any interest salary etc. which is n ot allowed to be

deducted u/s 40(b), the income of the partners shall be adjusted to the

extent of the am ount so d isallowed. Any sum received or receivable in cash or in kind under an ent

not carr ying out act ivity in relation to any business, or n ot to share any

know-how, patent, copyright, trade-mark, l icence, franchise or any other

business or commercial right of, similar natr

likely to assist in the manufacture or p rocessing of goods or p rovision for

services except when such sum is taxable under the head capital gains or

is received as compensation from the multilateral fund of the Montreal

Protocol on Substances t hat Deplete the Ozone Layer. Any sum received under a Keyman Insurance Policy referred to u/s ) Any allowance or deduction allowed in an earlier year in r

expenditure or trading liability incurred by the assessee a nd subsequently


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received by him in cash or b y way of remission or cessa tion of the liability

during the previous year . Prot m ade on sale of a capital asset f or sci entic research in respect of

which a deduction had been allowed u/s 35 in an earl Amount recovered on account of bad debts allowed u/s 36(1) (vii) in an

earlier year. Any amount withdrawn from the special reserves created and maintained

u/s 3 6 (1) (viii) shall be ch argeable as income in the previous yea r in which

the amount is withdrawn.

Set Off and Carry Forward of Business Loss:

If there is a loss in any business, it can be set off against prots of any other

business in the same year. The l

income under any other head.

However, loss i n a speculation business can be a djusted only against prots of

another speculation business. Losses not adjusted in the same year can becarried forward to su bsequent years.

1.4.4 Income from Other Sources

Other Sources

This is the last and resia

which is not to be excluded from the t


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shall be charge to tax under the head Income From Other Sources, if it is n ot

chargeable under any of the other four heads-Income from Salaries, Income

From House Property, Prots and Gains from Business and Profession and

Capital Gains. In other words, it can be sai d that the residuary head of income

can be resorted to only if none of the sp ecic h eads is a pplicable to th e income

in question and that it comes into operation only if the preceding heads are

excluded.

Deductions from Income from Other Sources:

The income chargeable to tax under this head is mputed a

following deductions:

1. In the case of dividend income and interest on securities: any reasonable

sum paid by way of remuneration or commission for the purpose of realizing

dividend or interest .

2. In case of income in the nature of family pension: Rs.15, 000or 33 .5% of

such income, whichever is low.

3. In the ca se of income from machinery, plant or furniture let on hire:

(a) Repairs t o b uilding

(b) Current repairs t o machinery, plant or furniture

(c) Depreciation on building, machinery, plant or f urniture(d) Unabsorbed Depreciation.

4. Any other expenditure (not being a ca pital expenditure) expended wholly an d

exclusively for t he purpose of earning of such income


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1.5.DEDUCTIONSFROM TAXABLE INCOME

Deduction under section 80C

This new section has been introduced from the

this sect ion, a deduction of up to Rs. 1,00,000 is a llowed from Taxable Income

in respect of investments made in some specied schemes. The specied

schemes are the sam e which were there in section 88 but without any sectoral

caps (except in PPF).

80C

Under this section 100%deduction would be available from Gross Total Income

subject to maximum ceiling given u/s 80CCE.Following investments are

included in this sec tion:

Contribution towards p remium on life insurance

Contribution towards P ublic Provident Fund.(Max.70,000 a yea r)

Contribution towards Employee Provident Fund/General Provident Fund

Unit Linked Insurance Plan (ULIP).

NSC VIII Issue

Interest accrued in respect of NSC VIII Issue

Equity Linked Savings Schemes (ELSS).

Repayment of housing Loan (Principal).

Tuition fees for child education.

Investment in companies en gaged in infrastructural facilities.


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Deduction under section 80CCC

Deduction in respect of contribution to cert ain Pension Funds:

Deduction is a llowed for the amount paid or dep osited by the assessee during

the previous year out of his taxable income to the annuity plan

(JeevanSuraksha) of Life Insurance Corporation of India or annuity plan of

other insurance companies for r eceiving pension from the fund referred to in

section 10(23AAB)

Amount of Deduction: Maximum Rs. 10,000/-

Deduction under section 80DDeduction in respect of Medical Insurance Premium

Deduction is allowed for any medical insurance premium under an approved

scheme of General Insurance Corporation of India popularly known as

MEDICLAIM) or of any other insurance company, paid by cheque, out of

assessees t axable income d uring th e p revious yea r, in respect of the following

In case of an individual insurance on the health of the assessee, or wife or

husband, or dependent parents or dependent children.

In case of an HUF insurance on the health of any member of the family

Amount of deduction: Maximum Rs. 10,000, in case the person insured is

senior citizen (exceeding 65 years of age) the maximum deduction allowable

shall be Rs. 15,000/-.

Deduction under section 80DD

Deduction in respect of maintenance including medical treatment of

handicapped dependent:


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Deduction is a llowed in respect of any expenditure incurred by an assessee,

during the p revious yea r, for t he m edical treatment training and rehabilitation

of one or m ore dependent persons w ith disability; and

Amount deposited, under an approved scheme of the Life Insurance

Corporation or other insurance company or the Unit Trust of India, for the

benet of a dependent person with disabi

Amount of deduction: the deduction allowable

2003-2004) in aggregate for any of or both the purposes specied above,

irrespective of the a ctual amount of expenditure incurred. Thus, if the total ofexpenditure incurred and the deposit made in approved scheme is Rs. 45,000,

the deduction allowable for A.Y. 2004-2005, is Rs. 50,000

Deduction under section 80DDB

Deduction in respect of medical treatment

A resident individual or Hindu Undivi

of during a year for t he medical treatment of specied disease or a ilment for

himself or a dependent or a m ember of a Hindu Undivided Family.


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Amount of Deduction Amount actually paid or Rs. 40,000 whichever

A.Y. 2003-2004, a deduction of Rs. 40,000 is a

paid in respect of the assessee, or a p erson dependent on him, who is a sen ior

citizen the deduction allowable sh all be Rs. 60,000.

Deduction under section 80E

Deduction in respect of Repayment of Loan taken for Higher Education

An individual assessee who has taken a loan y nc

any approved charitable institution for the purpose of pursuing his higher

education i.e. full time studies for any graduate or post gr aduate course in

engineering medicine, management or f or post graduate course in applied

sciences o r pu re sci ences i ncluding m athematics a nd statistics.

Amount of Deduction: Any amount paid by the assessee in the prev

out of his taxable income, by way of repayment of loan or interest thereon,

subject to a m aximum of Rs. 40,000

Deduction under section 80G

Donations:

100 % deduction is a llowed in respect of donations t o: National Defence Fund,

Prime Ministers National Relief Fund, Armenia Earthquake Relief Fund, Africa

Fund, National Foundation of Communal Harmony, an approved University or

educational institution of national eminence, Chief Ministers earthquake ReliefFund etc.

In all other cases donations m ade qualies for the 50% of the donated amount

for deductions.

Deduction under section 80GG


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Deduction in respect of Rent Paid:

Any assessee including an employee who is not

Amount of Deduction: Least of the folnt

Rent paid minus 10 % of assessees total income Rs. 2,000 p.m. 25% of total income

Deduction under section 80GGA

Donations for Scientic Research or Rural Development:

In respect of institution or f und referred to in clause (e) or (f) donations made

up to 31.3.2002 shall only be deductible.

This deduction is not applicable where

includes t he income chargeable u nder the head Prots an d gains of business or

profession. In those cases, t he deduction is allowable under the respective

sections sp ecied above.

Deduction under section 80CCE

A new Section 80CCE has been inserted from FY2005-06. As per this sec

the maximum amount of deduction that an assessee can claim under Sections

80C, 80CCC and 80CCD will be limited to Rs 100,000.


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CHAPTER 2

ORGANISATION PROFILE


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Organization Prole

2.1 Prole

Swapnil Shukla, CHARTERD ACCOUNTANTS

Date: 07/03/2013

CHARTERD ACCOUNTANTS

Email ID: [email protected]

Address: in front of gayatr

2.2Introduction work of organisation

Introduction of The Swapnil Shukla, CHARTERD ACCOUNTANTS

Chartered Accountants work in a wide range of business s ectors an d in a broad

spectrum of roles, from Chief Executives t o Financial Controllers. Below are afew examples of the type of positions t hat Chartered Accountants occu py.

Tax Accountant Management Accountants Financial Accountants
mailto:[email protected]:[email protected]


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Budget Analysts Auditor

2.3Organization its founders

The Swapnil Shukla, CHARTERD ACCOUNTANTS

Dated 01/12/2014 Chartered Accountants prole In Gopalganj Sagar

Dist Sagar.

2.4 Vision & Mission

Vision Statement

We will become the Tax advisor of choice through the creation of an

environment where we want to give of our best

Mission Statement

prime objective th e provision of an integrated range of client focused servicesthat w ill exceed our client's expectations and assist them to improve the and

reduce an d maintain Tax Liability

We are committed to creating a cli

to achieve the prime objective.

Our p rofessional an d local c ommunities are a n integral part of our a bility to

deliver on this m ission


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CHAPTER 3

STATEMENT OF PROBLEM


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An individual is not aware about the rules and regul

Hence t hey need the serv ices of CA for com puting their personal income-tax.

The rm has to use new way of working by reminding the

date of ling the income tax returns. This way they can increase their client

base.


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CHAPTER 4

RESEARCH METHODOLOGY

4.1 Objective of Study:

To study taxation provisions of The Income Tax Act, 1961 as amended byFinance Act, 2015.

To explore and simplify the tax planning procedure from a laymans

perspective. To present the tax saving avenues under prevail


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4.2Need for Study

In last some years of my career and education, I have seen my colleagues an d

faculties grappling with the taxation issue and complaining against t he tax

deducted by their employers from monthly remuneration. Not equipped with

proper kn owledge of taxation and tax saving avenues available to them, they

were at mercy of the HR/Admin departments which never bothered to do ev

as little a s t ake advise from some good tax consultant.

Need for computerization:

Reliable & efficient services t o st udent.

To reduce the paperwork & manual mistakes.

To reduce the labor cost.

To manage the tax records efficiently & accuratel

4.3 Scope & Limitations

Scope


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This project studies the tax planning The study relates to non-specic and generalized tx

the need of sample/population analysis. Basic methodology implemented in this st udy is su bjected to various p ros &

cons, and diverse insurance plans at d ifferent income levels of individual

assessees. This study may include comparative and analytical study of more

tax saving plans an d instruments. This study covers individual income tax assessees only and does

good for corp orate t axpayers. The tax rates, insurance plans, and premium are al

Limitation

1) The project studies the tax planning for individual assessed to income Tax.2) The Study relates to non-specific and generalized tax planning, eliminating

the need of sample population analysis.!) "asic #ethodology implemented in this study is su$jected to various pros %

cons and diverse insurance plans.&) This study may include comparative and analytical study of more than one tax

saving plans and instruments.') This study covers individual income tax assessee(s only and does not hold

good for corporate tax payers.) The tax rates, insurance plans, and premium are all su$jected to *+ 2 1&-1'

4.4 Data C ollection

Primary Data:-


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Primary research entails the use of immediate data in determining the for

stable all tax system. Primary d ata is m ore accommodating as it shows latest

information. The site ministry of nance , income tax reports data on

quarterly/ monthly/ half yearly/ annually respectively.

Secondary Data:-

Whereas Secondary research is means to reprocess and reuse collected

information as a n indication for b etterment of service or prod uct. In this d ata

related to a past period. As t ax consultant I collected data of my project f orm

work in chartered Accountants office related to different department arehandle like tax planning ,auditing tax consultant, au dit r eport et c.. List of

customer for a dvisory, tax details, fee str ucture et c. Data is c ollected from past

record t hat means h istory.

& I collected the d ata for t ax planning for t he t ax payer.4.5 Tools of Analysis

Tax Planning Tools

Following are t he tax planning tools that simultaneously help the assessees

maximize their wealth too.

Here are some guidelines to help you wade through the various options and

ensure the following:

1.Tax is saved and that you claim the full benet of your section 80C

benets

2.Product are chosen based on their long term merit and not like re

ghting options undertaken just to reach that Rs 1 lakh investment

mark


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CHAPTER 5

DATA ANLYSIS &INTERPRETANTION


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5.1 The resu lts of general information

India Personal Income Tax R ate 2004-2015

The Personal Income Tax Rate in India stands at 33.99 percent. Personal

Income Tax Rate in India averaged 30.73 percent from 2004 until 2014,

reaching an all time high of 33.99 percent in 2013 and a record low of 30

percent in 2005. Personal Income Tax Rate in India is r eported by the Ministry

of Finance, Government of India.

Figure 3: India Personal Income Tax R ate 2004-2015

In India, the Personal Income Ta x Rate is a tax collected from individuals a nd is

imposed on different sou rces of income like labour, pensions, interest an d

dividends. The benchmark we use refers to the Top Marginal Tax Rate for

individuals. Revenues from the Personal Income Tax Rate are an important

source of income for the government of I ndia. This page provides - India

Personal Income Ta x Rate - actual values, historical data, forecast, chart,


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statistics, economic calendar a nd news. Content for - India Personal Income

Tax Rate - was last refr

5.2 Income Tax Slabs & Rates for Assessment Year 2015-16

1. Individual resident aged below 60 years (i.e. born on or af ter 1 st April

1955) or any NRI/ HUF/ AOP/ BOI/ AJP*

Income Tax

Table 1 : Individual resident aged below 60 years

Surcharge : 10% of the Income Tax, where taxable income is more than Rs. 1

crore. ( Marginal Relief in Surcharge , if applicable)

Education Cess : 3% of the total of Income Tax a nd Surcharge.

Abbreviations used :

NRI - Non Resident Individual; HUF - Hindu Undivided Family; AOP -
http://finotax.com/income-tax/slabs-next#mrhttp://finotax.com/income-tax/slabs-next#mr


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Association of Persons; BOI - Body of IndividualsP

Person

2. Senior Citizen (Individual resident who is of the age of 60 years or

more but below the age of 80 years at any time during the previous year

i.e. born on or after 1st April 1934 but before 1st April 1954)

Income Tax :

Table 2 :Senior Citizen age Above ( Income Tax S lab )

Surcharge : 10% of the Income Tax, where taxable income is more than Rs. 1

crore. ( Marginal Relief in Surcharge , if applicable)

Education Cess : 3% of the total of Income Tax a nd Surcharge.

3. Super Senior Citizen (Individual resident who is of the age of 80

years or more at any time during the previous year i .e. born before 1st

April 1934)

Income Tax :
http://finotax.com/income-tax/slabs-next#mrhttp://finotax.com/income-tax/slabs-next#mr


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Table No: 3 Senior Citizen age Above

CHAPTER 6

CONCLUSION


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6.1 Recommendations & Suggestions

Tax Planning

Proper tax planning is a b asic duty of every pers on which should be carr ied out

religiously. Basically, there a re t hree st eps i n tax planning exercise.

These three steps in tax

Calculate your taxable income under all heads i.e., Income from Salary,

House Property, Business & Profession, Capital Gains and Income from

Other Sources.


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Calculate t ax payable on gross t axable income for w hole nancial year ( i.e.,

from 1st April to 31st March) using a simple tax rate table, given on next

page. After you have calculated the amount of your tax liabil

options to ch oose from:

1. Pay your tax (No tax planning required)

2. Minimise your tax through prudent tax planning.

Most people rightly choose Option 'B'. Here you have to compare the ad vantages

of several tax-saving schemes and depending upon your age, social liabilities,

tax slabs and personal preferences, decide upon a right m ix of investments,

which shall reduce your tax l

Every ci tizen has a fundamental right to avail all the t ax incentives p rovided by

the Government. Therefore, through prudent tax planning not only income-tax

liability is reduced but also a better future is ensured due to compulsory

savings in highly safe Government schemes. We sh ould plan our investments in

such a way, that t he post-tax yield is t he h ighest possible keeping in view the

basic parameters of safety and

For most individuals, nancial planning and tax planning are two mutually

exclusive exercises. While planning our investments we spend considerable

amount of time evaluating various options and determining which suits us

best. But when it comes to planning our investments from a tax-saving

perspective, more often than not, we simply go the traditional way and do the

exact same thing that we did in the earlier years. Well, in case you were not


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aware t he guidelines governing such investments are a lot different t his year.

And lethargy on your part to rwork

Why are the stakes higher this year? Unti

provided as a rebate on the investment amount, which could not exceed Rs

100,000; of this Rs 30,000 was exclusively reserved for Infrastructure Bonds.

Also, the rebate reduced with

over Rs 5 00,000 per year w ere n ot eligible to claim any rebate. For t he cu rrent

nancial year, the Rs 100,000 limit has been retained; however internal caps

have been done away with. Individuals h ave a much greater degr ee of exibility

in deciding how much to invest in the eligible instruments. The other

signicant changes are :

The rebate has been replaced by a deduction from gross total income,

effectively. The h igher your income sl ab, the great er i s t he tax benet. All individuals irrespective of the income bracket are el

investment. These d evelopments w ill result in higher tax-savings.

We should use this Rs 100,000 contribution as

nancial planning and not just for the purpose of saving tax. We should

understand which instruments and in what proportion suit the requirement

best. In this note we recommend a broad asset allocation for

instruments for d ifferent investor p roles.

For persons b elow 30 years of age:

In this a ge bracket, you probably have a high appetite for ri sk. Your d isposable

surplus m aybe sm all (as you could be paying your home loan installments), but


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the savings that you have can be set aside for a long period of time. Your

children, if any, still have many years b efore t hey go to college; or ret irement i s

still further aw ay. You therefore sh ould invest a large ch unk of your su rplus in

tax-saving funds (equity funds). The employee provident fund deduction

happens from your salary and therefore you have little control over it.

Regarding life insurance, go in for pure term insurance to start w ith. Such

policies a re very affordable a nd can extend for u p to 30 years. The rest of your

funds (net of the home loan principal repayment) can be parked in NSC/PPF.

For persons between 30 - 45 years of age:

Your appetite for risk wi

which your exposure to the stock markets wil

As your compensation increases, so will

insurance component can be maintained at the same level; assuming that you

would have already taken adequate life

to it. In keeping with your reducing risk appetite, your contribution to

PPF/NSC increases. One benet of the higher contribution to PPF will be that

your account will be maturing (you probably opened an account when you

started to earn) and will yield you tax free income (this ca n help you fund your

children's co llege ed ucation).

For per sons over 55 years of age:


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You are to retire in a few years; then you wil

investments for meeting your expenses. Therefore the money that you have to

invest under Section 80C must be allocated in a manner that serves both near

term income requirements as well as long-term growth needs. Most of the

funds a re therefore allocated to NSC. Your PPF account probably will mature

early into your retirement (if you started another a ccount at ab out age 40

years). You continue to allocaoney

part of your r etired life. Once you are ret ired however, since you will not h ave

income there is no need to worry about Section 80C. You should consider

investing in the Senior Citizens Savings Scheme, which offers an assured

return of 9% pa; interest is payable quarterly. Another investment you should

consider is Post Office Monthly Income Scheme.

Investing the Rs 100,000 in a manner that saves both taxes as well as helps

you achieve your long-term nancial object

requires is for you to give it some thought, draw up a plan that s uits you best

and then be d isciplined in executing the sam e.

Strategic Tax Planning

So far with whatever you have done in the past, it is important to understand

the future implications of your tax saving strategy. You cannot do much about

the statutory commitments and contribution like provident fund (PF) but all

the rest is i n your con trol.

1. Insurance


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If you have a traditional money back policy or an endowment type of policy

understand that you will be earning about 4% to 6% returns on such policies.

In years t o come, this will be lower or just equal to ination and hence you are

not creating any wealth, infact you are d estroying the value of your wealth

rapidly.

Such policies should ideally be restructured and making them paid up is a

good option. You can buy term assurance plan which will serve your need to

obtaining life cover an d all the same release unproductive cash ow to be

deployed into more productive and wealth generating asset classes. Be ca reful

of ULIPS; invest if you are u nder 35 years of age, else a s a nd when the stock

markets are down or enter into a downward phase. Your ULIP will turn out to

be very expensive as your age ic

2. Public Provident Fund (PPF)

This has been a long time favouri

most people prefer this but note this. The current returns are 8% and quite

likely that soon er or l ater with the implementation of the exempt t ax (EET)

regime of taxation investments in PPF may become redundant, as returns will

fall signicantly.

How this will be implemented is n ot clear h ence t he best option is to go easy onthis on e. Simply place a nominal sum to keep your accou nt active before there

is cl arity on this front. EET may apply to insurance p olicies a s w ell.

3. Pension Policies


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This is the greatest mis

today, which will really help you in retirement. Th at is the cold fact. Tu lip

pension policies m ay h elp you to so me ext ent but I would give it a rating of four

out of ten. It is quite likely that you will make a sizeable su m by the t ime you

retire but that is where the problem begins.

The problem with pension policies is that you wi

annuity when you actually retire. To make matters worse t his will be taxed at

full marginal rate of income tax as w ell. Liquidity and exibility will just not b e

there. No insurance co mpany or agent will agree t o this b ut this is a c old fact.

Steer clear of such policies. Either m ake them paid up or stop paying Tulip

premiums, if you can. Divest the money to more productive assets based on

your overall risk prole

worth only Rs 32 say in 20 years

4. Five year xed deposits (FDs), National Savings S cheme (NSC), other bonds

These products are fair if

keen to build wealth. Generally speaking, in all that we do wealth creation

should be the underlying motive.

5. Equity Linked Savings Scheme (ELSS)

This is a good option. You save

to build a lot of wealth. However, note th at this is fraught with risk. Though it


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is sa id that t his investment into an ELSS scheme is locked-in for t hree years

you should be mentally prepared to hold

It is an equity investment and when your three year s ar e over, you may not have

made great returns or t he stock markets m ay be down at that point. If that be

the case, you will have to hold much longer. Hence if you wish to use such

funds in three-four years t ime the cal culations ca n go wrong.

Nevertheless, strange as it may seem, the high-risk investment has the least

tax liability, infact i t i s nil as per th e current t ax laws. If you are p repared to

hold for long real ly long like ve-ten years, surely you will make su per n ormal

returns.

That said ideally you must have your nancia

how you can meet your goals an d in the process t ake advantage of tax savings

strategies.

There is so much to be done while you pl

composite tool. Look at this as a tax management tool for the family and not

just yourself. You have sect

your parents, your fathers HUF. There ary s

and hence so much to benet from good tax planning.

Traditionally, buying li

individual's annual tax planning exercise. While it i s important for individuals

to have life cover, it is eq ually important that they b uy insurance k eeping both


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their long-term nancial goals and their tax planning in mind. This note

explains th e rol e of life insurance in an individual's tax planning exercise while

also evaluating th e va rious o ptions a vailable a t one's d isposal.

Term plans

A term plan is the most basic

mortality charges and the sales and administration expenses are covered.

There is no savings element; hence

benets. A term plan should form a part of every indi

illustration will help in understanding term plans b etter.

Cover yourself with a term plan

Tax benets*

Premiums paid on life insurance plans enjoy tax benets u nder Section 80C

subject to an upper limit of Rs 100,000. The tax benet on pension plans is

subject to an upper limit of Rs 1 0,000 as per S ection 80CCC (this falls within

the overall Rs 100,000 Section 80C limit). The maturity amount is currently

treated as t ax free in the hands of the individual on maturity under Section 10

(10D).

Income Head-wise Tax Planning Suggestion

Salaries Head: Following propositions sh ould be borne in mind:


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1. It should be ensured that, under the terms of employment, dearness

allowance and dearness p ay form part of basic sa lary. This will minimize the

tax incidence on house rent allowance, gratuity and commuted pension.

Likewise, incidence of tax on employers contribution to recognized provident

fund will be lesser i f dearness allowance forms a part of basic sa lary.

2. The Supreme Court has held in Gestetner Duplicators (p) Ltd. Vs. CIT

that commission payable as p er the terms of contract of employment at a xed

percentage of turnover ach ieved by an employee, falls within the expression

salary as d ened in rule 2(h) of part A of the fourth schedule. Consequently,

tax incidence on house re nt allowance, entertainment allowance, gratuity and

commuted pension will be lesser if commission is paid at a xed percentage of

turnover achieved by the employee.

3. An uncommitted pension is always taxable; employees should get their

pension commuted. Commuted pension is fully exempt from tax in the case of

Government employees and partly exempt from tax in the case of government

employees an d partly exempt from tax in the case of non government employees

who can claim relief under sect

4. An employee being the member of recognized provident fund, who resigns

before 5 years of continuous service, u which maintains a recognized fund for

balance of the provident fund wi

provided the same is transferred to the new employer who also maintains a

recognized p rovident fund.


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5. Since employers contribution towards recognized provident fund is

exempt from tax up to 12 percent of salary, employer m ay give extra benet to

their em ployees by raising their con tribution to 12 percent of salary without

increasing any tax liability.

6. While medical allowance payable in cash is taxable, provision of ordinary

medical facilities is no taxable if som e conditions are satised. Therefore,

employees should go in for free medical facilities instead of xed medical

allowance.

7. Since the incidence of tax on retirement benets like gratuity, commuted

pension, accumulated unrecognized provident fund is lower if they a re paid in

the beginning of the nancial year, employer an d employees sh ould mutually

plan their aff airs in such a way that r etirement, termination or r esignation, as

the case m ay be, takes p lace i n the beginning of the nancial year.

8. An employee should take the benet of relief available section 89

wherever possible. Relief can be cled

from URPF so far as it is a ttributable to employers contribution and interest

thereon. Although gratuity received during the employment is n ot exempt u /s

10(10), relief u/s 89 can be claimed. It should, however, be ensured that t he

relief is c laimed only when it is b enecial.

9. Pension received in India by a non-resident assessee from abroad is

taxable in India. If however, such pension is received by or on behalf of the


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employee in a foreign country a nd later on remitted to India, it will be exem pt

from tax.

10. As the perquisite in respect of leave travel concession is not taxable in

the hands of the employees if certain conditions are sa tised, it sh ould be

ensured that the travel concession should be claimed to the maximum possible

extent without attracting a ny incidence o f tax.

11. As the perquisites in respect of free residential telephone, providing use

of computer/laptop, gift of movable assets(other than computer, electronic

items, car) by employer after using for 10 years or more are not taxable,

employees ca n claim these b enets without adding to their tax bill.

12. Since the term salary includes basic salary, bonus, commission, fees

and all other t axable allowances for t he purpose of valuation of perquisite in

respect of rent free h ouse, it would be advantageous if an employee goes in for

perquisites rather t han for t axable allowances. This will reduce valuation of

rent free house, on one hand, and, on the other hand, the employee may not

fall in the category of speci ed employee. The effect of this ingenuity will be

that all the p erquisites specied u/s 1 7(2)(iii) will not b e tax able.

House Propert y Head: The following propositions sh ould be borne in mind:

1. If a person has occupied more than one house for his own residence,

only one house o f his own choice is t reated as self-occupied and all the other

houses ar e deemed to be let out. The tax exemption applies on ly in the case of

on self-occupied house an d not in the case of deemed to be let out properties.


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Care sh ould, therefore, be taken while selecting the house( One which is h aving

higher GAV normally after looking into further d etails ) to be treated as sel f-

occupied in order t o minimize th e tax liability.

2. As interest payable ou t of India is n ot deductible if tax is n ot deducted at

source (and in respect of which there is n o person who may be treated as a n

agent u/s 163), care sh ould be taken to deduct tax at source in order to avail

exemption u/s 2 4(b).

3. As amount of municipal tax is deductible on payment basis and not on

due or accrual basis, it should be ensured that m unicipal tax is a ctually

paid during the previous year if the assessee w ants to claim the deduction.

4. As a m ember of co-operative society to whom a building or part thereof is

allotted or leased under a house building scheme is deemed owner of the

property, it should be ensured that interest payable (even it is n ot p aid) by the

assessee , on outstanding installments of the cost of the building, is cl aimed as

deduction u/s 24 .

5. If an individual makes cash a cash gift to his wife who purchases a h ouse

property with the gifted money, the individual will not be deemed as ctional

owner of the property u nder section 27(i) K.D.Thakar vs. CIT. Taxable income

of the wife from the p roperty is, however, includible in the income of individualin terms of section 64(1)(iv), such income is computed u/s 23(2), if she uses

house p roperty for h er r esidential purposes. It can, therefore, be a dvised that if

an individual transfers an asset, other than house property, even without


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adequate consideration, he can escape the deeming provision of section 27(i)

and the consequent hardship.

6. Under section 27(i), if a person transfers a house property without

consideration to his/her sp ouse(not being a transfer in connection with an

agreement to live apart), or to his m inor ch ild(not being a married daughter),

the transferor is deemed to be the owner of the house property. This deeming

provision was found necessary in order t o bring this si tuation in line with the

provision of section 64. But when the scop e of section 64 was ext ended to cover

transfer of assets without adequate consideration to sons wife or minor

grandchild by the taxation laws(Amendment) Act 1975, w.e.f. A.Y. 1975-76

onwards t he sco pe of section 27(i) was n ot similarly extended. Consequently, if

a person transfers house property to his sons wife without adequate

consideration, he will not be d eemed to be t he owner of the p roperty u/s 2 7(i),

but income earned from the property by the t

income of the transferor u /s 64. For t he purpose of sections 22 to 27, the

transferee will, thus, be treated as an owner of the h ouse p roperty and income

computed in his/her hands is included in the income of the transferor u /s 6 4.

Such income is to be computed under section 23(2), if the transferee u ses t hat

property for sel f-occupation. Therefore, in some c ases, it is b enecial to transfer

the h ouse p roperty without adequate con sideration to sons w ife or s ons m inor

child.

Tax on short-term capital gain

Another capital asset, fal

during the p revious yea r; or


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Benet of section 54G is ava iled

Tax payers desiring to avoid tax

on sale or t ransfer o f capital asset, can acquire a nother ca pital asset, falling in

that block of assets, at any time during the previous yea r.

6. If securities transaction tax is applicable, long term capital gain tax is

exempt from tax by virtue of section 10(38). Conversely, if the taxpayer h as

generated long-term capital loss, it is taken as equal to zero. In other w ords, if

the shares are transferred, in national stock exchange, securities transaction

tax is a pplicable a nd as a consequence, the long-term capital loss is ignored. In

such a case, tax liability ca n be red uced, if shares a re t ransferred to a friend or

a relative outside the st ock exchange a t the m arket price (securities t ransaction

tax is n ot applicable in the ca se of transactions n ot recorded in stack exchange,

long term loss can be set -off and the t ax liability will be red uced). Later on , the

friend or relative, who has purchased shares, may transfer sh ares in a stock

exchange.


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6.2CONCLUSION

At the end of this study, we

individuals an d upward economy of the country, prudent tax planning before-

hand is m ust for all the citizens to make the m ost of their incomes. However,

the mix of tax saving instruments, planning horizon would depend on an

individuals t otal taxable income a nd age i n the p articular nancial year.


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6.3 Learning Outcomes

Course Learning Outcomes

Provide students with the fundamental concepts of Indian income tax law

and tax planning

Apply critical thinking and problem solving skills to

and tax planning issues

Assist students to communicate effectively orally income tax informatin

and solutions to income tax and tax planning issues

Assist students to communicate effectively in writing income tax

information and solutions to income tax and tax planning issues
http://www.adelaide.edu.au/course-outlines/103453/1/sem-1/http://www.adelaide.edu.au/course-outlines/103453/1/sem-1/


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Explain the different approaches to accounting for business income

Explain the income tax treatment of trading stock, capital allowances,

small business entity system, prepayment, black-hole expenditure and

the company an d trust loss r ules


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Appendix I

Bibliography


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BIBLIOGRAPHY

Articles:

1. Article 265 of the Indian Constituti ,2. "Analysis of Tax and Non-tax Revenue Receipts Included in Annex" .3. Article 246 of the India Constitution ,4. Seventh Schedule of the Indian Constitution ,5. Distribution of Powers between Centre, States an d Local Governments ,6. "Union Budget 2012: GAAR empowers I-T department to deny tax benets

to 'companies'" . Income Tax I ndia ..7. Indian Income Tax A ct, 1961 ,8. Section 14 of Income Tax A ct ,9. "Direct Taxes Code Bill: Government keen on early enactment" .

Books:

T. N. Manoharan (2007), Direct Tax Laws (7 th edition), Snowwhite

Publications P. Ltd., New Delhi.

Dr. Vinod K. Singhania (2007), Students Guide to Income Tax, Taxman

Publications, New Delhi Income Tax Ready Reckoner A.Y. 2007-08, TaxMann Publications, New

Delhi

Dr. Vinod K. Singhania (2013), Students Guide to Income Tax, Taxman

Publications, New Delhi

Income Tax Ready Reckoner A.Y. 2014-15,TaxMann Publications, New

Delhi

Ainapure&Ainapure Direct & Indirect Taxes A.Y. 2014-15,

MananPrakashan

Nabis Income Tax Guidelines & Mini Ready Reckoner A.Y. 2013-14 &

2014-15 , A Nabhi Publication
http://lawmin.nic.in/coi/coiason29july08.pdfhttp://indiabudget.nic.in/ub2014-15/rec/annex3.pdfhttp://lawmin.nic.in/coi/coiason29july08.pdfhttp://lawmin.nic.in/coi/coiason29july08.pdfhttp://www.hcicolombo.org/PDF/Presentation%20on%20Distribution%20of%20Powers.ppthttp://economictimes.indiatimes.com/news/economy/policy/union-budget-2012-gaar-empowers-i-t-department-to-deny-tax-benefits-to-companies/articleshow/12291369.cmshttp://economictimes.indiatimes.com/news/economy/policy/union-budget-2012-gaar-empowers-i-t-department-to-deny-tax-benefits-to-companies/articleshow/12291369.cmshttp://www.incometaxindia.gov.in/CCIT/CBDT.asphttp://www.helplinelaw.com/docs/Income%20Tax%20Act%20-%201961http://law.incometaxindia.gov.in/TaxmannDit/DispCitation/ShowCit.aspx?fn=http://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2008ITAct/section14.htmhttp://articles.timesofindia.indiatimes.com/2012-03-16/union-budget/31200773_1_common-identifier-constitution-amendment-bill-pranab-mukherjeehttp://lawmin.nic.in/coi/coiason29july08.pdfhttp://indiabudget.nic.in/ub2014-15/rec/annex3.pdfhttp://lawmin.nic.in/coi/coiason29july08.pdfhttp://lawmin.nic.in/coi/coiason29july08.pdfhttp://www.hcicolombo.org/PDF/Presentation%20on%20Distribution%20of%20Powers.ppthttp://economictimes.indiatimes.com/news/economy/policy/union-budget-2012-gaar-empowers-i-t-department-to-deny-tax-benefits-to-companies/articleshow/12291369.cmshttp://economictimes.indiatimes.com/news/economy/policy/union-budget-2012-gaar-empowers-i-t-department-to-deny-tax-benefits-to-companies/articleshow/12291369.cmshttp://www.incometaxindia.gov.in/CCIT/CBDT.asphttp://www.helplinelaw.com/docs/Income%20Tax%20Act%20-%201961http://law.incometaxindia.gov.in/TaxmannDit/DispCitation/ShowCit.aspx?fn=http://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2008ITAct/section14.htmhttp://articles.timesofindia.indiatimes.com/2012-03-16/union-budget/31200773_1_common-identifier-constitution-amendment-bill-pranab-mukherjee


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6.4 Websites:

http://in.taxes.yahoo.com/taxcentre/ninstax.html

http://in.biz.yahoo.com/taxcentre/section80.html http://www.bajajcapital.com/nancial-planning/tax-planning

www.Incometaxindia.gov.in

www.taxguru.in

www.moneycontrol.com

www.google.com
http://in.taxes.yahoo.com/taxcentre/ninstax.htmlhttp://in.biz.yahoo.com/taxcentre/section80.htmlhttp://www.bajajcapital.com/financial-planning/tax-planninghttp://www.incometaxindia.gov.in/http://www.taxguru.in/http://www.moneycontrol.com/http://www.google.com/http://in.taxes.yahoo.com/taxcentre/ninstax.htmlhttp://in.biz.yahoo.com/taxcentre/section80.htmlhttp://www.bajajcapital.com/financial-planning/tax-planninghttp://www.incometaxindia.gov.in/http://www.taxguru.in/http://www.moneycontrol.com/http://www.google.com/

sip on income tax

Documents