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Abstract
Objectives
Abstract
Income Tax Act, 1961 governs the taxation of incomes generated within India and of
incomes generated by Indians overseas. This study aims at presenting a lucid yet simple
understanding of taxation structure of an individuals income in India for the assessment year
2013-14.
Income Tax Act, 1961 is the guiding baseline for all the content in this report 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
This project covers the basics of the Income Tax Act, 1961 as amended by the Finance Act,
2007 and broadly presents the nuances of prudent tax planning and tax saving options
provided under these laws. Any other hideous means to avoid or evade tax is a cognizable
offence under the Indian constitution and all the citizens should refrain from such acts.
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In last some years of my career and education, I have seen my colleagues and faculties
grappling with the taxation issue and complaining against the tax deducted by their
employers from monthly remuneration. Not equipped with proper knowledge of taxation and
tax saving avenues available to them, they were at mercy of the HR/Admin departments
which never bothered to do even as little as take advise from some good tax consultant.
This prodded me to study this aspect leading to this project during my MBA course with the
university, hoping this concise yet comprehensive write up will help this salaried individual
assesse class to save whatever extra rupee they can from their hard-earned monies.
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Objectives
To study taxation provisions of The Income Tax Act, 1961 as amended by Finance Act,
2007.
To explore and simplify the tax planning procedure from a laymans perspective.
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This project studies the tax planning for individuals assessed to Income Tax.
The study relates to non-specific and generalized tax planning, eliminating the need of
sample/population analysis.
Basic methodology implemented in this study is subjected to various pros & cons, and
This study may include comparative and analytical study of more than one tax saving
This study covers individual income tax assesses only and does not hold good for
corporate taxpayers.
The tax rates, insurance plans, and premium are all subject to AY 2013-14 only.
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COMPANY PROFILE
IFIANS Corporate Service Pvt . Ltd. team is a professional firm since 1997,
offering services and has been synthesizing the learning from a vast experience-
base and converting that into advantage for its clients.
The sphere of our service network includes Corporate Houses, Banks, Co-Op
Societies, Public Sector Undertakings, NGO, NRI's and individuals. We are
committed to provide tailor made services to the individual needs of each client.
Our aim is to provide a professional service to our clients at a reasonable cost
using state of the art technology.
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Filling of Income return for Individuals, HUF, Firms, Trust, Co-Op. Soc.,
Private Limited & Limited Companies (including MNCs).
Income tax returns for Landlords, Rental income, Professionals ,Doctors,
Architects.
Electrical & Engg. Contractors.
Rectification, Revision or Appeal of Income tax orders.
To follow up for income tax refunds.
To get the clearance certificate for going abroad.
Payments on which income tax deduction at source required.
Annual return for TDS in electronic form ( eTDS ).
Registration of trust for charitable purposes.
Advance tax computation.
Obtaining advance Ruling.
Tax planning, Specific advice on taxation & Consultancy in TDS matters.
Other Compliances as per Income Tax Act.
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Management Team
Our clients
Elements
M/s Lisa Home Solutions Pvt. Ltd. (www.lisahomesolutions.com)
ASC Computers
TXIS (Technology Xpress Info Systems) Pvt. Ltd.
Jain Excellency Services
M/s Ashwamegh Travels
Virtual HR Services
Lily Chilly
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Income Tax, Wealth Tax, etc., where the entire burden falls in the taxpayer
directly is called as Direct Taxes, whereas like Service Tax, VAT, etc., are
called as indirect taxes as these will be passed on through a third party.
Income tax can be defined as all sources of income other than agricultural
income which Central Government collects levies on that and shares the same
with the states.
As per Income Tax Act of 1961, all persons who are considered as an assessee
determined on the basis of the persons residential status in India and their
when their income exceeds the maximum exemption in the prescribed limit and
the income tax will be levied at the prescribed rates according to finance act,
such type of income tax has to be paid on the total income in the previous year
to be paid in relevant assessment year.
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HISTORY
The history of taxation system shows that taxes were levied on either on the
sale and purchase of merchandise or livestock. Further it suggests that the
process of levying and the manner of tax collection were unorganized. But it
suggests that all historical leaders and head countrymen collected taxes to run
its authority. In other words taxes on income, sale, purchase and properties
were collected to run the ruling Government machineries. Further, these taxes
were collected to meet their military and civil expenditure and also to meet the
common needs of the subjects like maintenance of roads, drainage system,
government buildings, administration of justice and other functions of the
region.
In India, the tradition of taxation has been in force from ancient times. There
was a perfect admixture of direct taxes with indirect taxes and they were varied
in nature. India's history of taxation suggests existence of a large and
composite taxable population. With the advent of the moguls in India the
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The period of British rule in India witnessed some remarkable change in the
whole taxation system of India. Although, it was highly in favor of the British
government and its exchequer but it incorporated modern and scientific method
of taxation tools and systems. In 1922, the country witnessed a paradigm shift
in the overall Indian taxation system. Setting up of administrative system and
taxation system was first done in the history of taxation system in India. The
period thereafter witnessed rapid growth and modernization of the Indian
taxation system and the present.
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OBJECTIVES OF TAXES
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Canon of diversity: The canon of diversity requires that the tax system
should be such that the government depends on the number of the taxes so that
every class of citizen may be called upon to contribute something towards the
state revenue.
Canon of simplicity: The tax system should be easy and simple so that
the tax payer can easily understand its implication, the basis and the method of
calculation etc. without the costly help of the expert
There are seven categories of persons chargeable to tax under the Act.
a) an individual
b) a Hindu undivided family
c) a company
d) a firm
e) an association of person or body of individuals ,whether incorporated or
not
f) a local authority
g) every artificial juridical person not falling within any of the preceding
categories.
Therefore any person not falling in the above mentioned categories, may still
fall in the four corners of the term person and accordingly may be liable to
tax under section 4.
The person by whom income tax or other sum of money is payable under the
Act is the ASSESSEE
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RESIDENTIAL STATUS
Residential Status
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Income from
Salary
Income from
Income from
Business or
Capital Gains
Profession
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holding. Sale of long term assets give rise to long term capital gains which are
taxable as below:
As per Section 10(38) of Income Tax Act, 1961 long term capital gains
on shares/securities/ mutual funds on which Securities Transaction Tax (STT)
has been deducted and paid, no tax is payable. Higher capital gains taxes will
apply only on those transactions where STT is not paid.
For other shares & securities, person has an option to either index costs
to inflation and pay 20% of indexed gains, or pay 10% of non indexed gains.
For all other long term capital gains, indexation benefit is available and
tax rate is 20%
Income from Other Sources
This is a residual head , under this head income which does not meet criteria to
go to other heads is taxed. There are also some specific incomes which are to
be taxed under this head.
1. Income by way of Dividends
2. Income from horse races
3. Income from winning bull races
4. Any amount received from key man insurance policy as donation.
5. Income from shares (dividend other than Indian company)
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TAX DEDUCTION
There are various India Tax Deductions or tax exemptions provided by the
Indian Income Tax Act. The tax deductions help to deduct an amount from the
taxable income and help to save tax. Each year, one can save thousands of
rupees in income tax through income tax exemptions.
The Central Board for Direct Taxes (CBDT) governs the Indian Income Tax
department. The department is also part of the Department of Revenue which is
managed under the Indian Revenue Service (IRS) under the Ministry of finance
govt. Of india.
Some of the income tax deductions and tax exemption limits for the financial
year 2012-2013 are given below
Section 80c of Section 80C is one of the most common income tax
the Indian deductions. This is quite popular as it encourages
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TAX EXEMPTIONS
Tax Exemptions have the authority to bring about social and economic
changes within the society followed by unprecedented consequences. However,
for such exemptions on tax some conditions are mandatory to follow. Some of
them are like -
India tax exemptions are specified incomes on which a person can get
exemptions. It means that at the time of calculating annual income, this type of
income will not come under the purview of tax.
Agriculture Income.
Share of partner in total income of a firm which is assessed separately.
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However, one should not get confused with the concepts of Tax Deduction and
Tax Exemption, as when an expense received by a taxpayer is deduced from
the gross income it results in the lowering of the net taxable income it is tax
deduction and not Tax Exemption. There are many types of income and
benefits being exempted from income taxes to a limited extent.
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Note:-
Those who have total income above 5 lakh rupees &
those people who have exemption under sec. 10/c is
above than 5,000 Rupees they require to fill the ITR -II
form & it is mandatory to do E filling.
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TAX RETURNS
1. Normal Return
2. Belated Return
3. Revised Return
4. Defective Return
5. Returns In Response To Notices
1. Normal Return
Returns filed within the return filing due date. that is 31 July of
concerned previous year.
2. Belated Return
In case of failure to file the return on or before the due date, belated
return can be filed before the expiry of one year from the end of the
relevant assessment year.
3. Revised Return
4. Defective Return
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In India, online tax filing has become an integral part of the process of
registering tax returns. With the increasing penetration of internet and rising
levels of web awareness and work pressure among tax payers, many people
now prefer to fill the tax according to their convenience and avoid the cues.
The basic steps for filing tax returns online in India can be mentioned as below:
Following are the major benefits for tax payers who use the tax filing portals:
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E-FILLING
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above mentioned period, it will be deemed that the return in respect of which
the Form ITR-V has been filed was never furnished and it shall be incumbent
on the assessee to electronically re-transmit the data and follow it up by
submitting the new Form ITR-V within 120 days. This completes the Return
filing process for non-digitally signed Returns.
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Many people are, naturally, unhappy to see the tax deducted at source (TDS)
eroding their salaried income. They are a bit happy too, in a way, as they feel
the major task of paying tax is finished with & they need not worry about
anything. Well, they are so wrong! Anybody who pays tax has to also file
income tax returns.
Every single person who pays tax in India has to file his/her income tax. Do not
assume that just because you do not have your own business and are getting a
salary working for somebody, that you dont need to file the tax returns. Yes,
even a salaried individual in India has to file income tax returns.
Many salaried people think that the tax is deducted at source (called TDS), but
are unaware that it is not only their income from a job that is taxed. Their
income from any other source is also liable for tax, such as if they are earning a
part-time income from an online job, are having fixed deposits in a Bank, etc.
So you must file your income tax returns before the end of the financial year.
The process of tax filing involves submission of tax along with necessary
documents declaring yearly income of the individual or company. In India the
process of tax filing is governed by the Ministry of Finance. The Ministry of
Finance of Government of India has different departments that are involved
with the process of tax collection.
The most important department that is associated with the process of tax filing
in India is the Department of Income Tax, Government of India. The corpus
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Over the years the process of tax filing in India has made tremendous progress.
Gone are the days when one had to wait for endless hours to see his yearly tax
declaration being verified and accepted. Today, the department of Income Tax
under the government of India has facilitated its citizens with e-fling process.
The procedure involves filing of income tax returns over Internet. This has in
fact simplified the arduous mechanical tax declaration process in India. Now an
individual or company can file his tax according to his convenience by simply
quoting the unique PAN. All the required information regarding filing process
and necessary documents are mentioned therein. The concerned individual or
company should fill-up the relevant electronic form according to the
instructions given therein.
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The important declarations that are to be made while undertaking the process
of e-filing tax are as follows -
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Yes, there definitely is a fine for not filing income tax returns in India. For
every month delayed, you are paying 1.5% per month. If you do not file your
income tax returns before the last date of the assessment year (March 31st),
you will have to pay a fine of Rs.5000/-.
What is the last date of filing income tax returns in India?
1. For those with income above INR 40lakhs, the last date for filing income tax
returns in India is September 31st.
2. For those whose income is below INR 40lakhs, the last date for filing
income tax returns in India is July 31st.
3. For both the above groups of tax payers, they can still file their income tax
returns before March 31st; but then each month delayed means more interest to
be paid on the delayed tax.
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TAX PENALTIES
The major number of penalties initiated every year as a ritual by Income Tax
Authorities is under section 271(1)(c)which is for either concealment of
income or for furnishing inaccurate particulars of income.
(a) has failed to comply with a notice under sub-section (1) of section 142 or
sub-section (2) of section 143 or fails to comply with a direction issued under
sub-section (2A) of section 142, or
(ii) in the cases referred to in clause (a), in addition to any tax payable by him,
a sum of ten thousand rupees for each such failure;
(iii) in the cases referred to in clause (b), in addition to any tax payable by him,
a sum which shall not be less than, but which shall not exceed three times, the
amount of tax sought to be evaded by reason of the concealment of particulars
of his income or the furnishing of inaccurate particulars of such income
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Economical: Direct taxes are very economical in the sense that the cost of
collecting these taxes are relatively less as they are usually collected at the
source and they are paid to the government directly.
Certainty: Direct taxes satisfy the canon of certainty. The tax payers know
that how much they have to pay and on what basis they have to pay. The
government also knows fairly the amount of tax it is going to collect.
Equity: Direct taxes can be made to conform to the principle of ability to pay
by choosing the most appropriate rate schedules. By making the rate structure
possible and progressive their burden can be put more on rich than poor.
Civic consciousness: When one knows that his taxes shall be well utilized
for the benefit of the public such as the developmental and defense projects ,
infrastructural development, establishment of government schools, hospitals,
maternity homes etc., they take active part in the process of payment of taxes.
They pay their dues on time and pay it will honesty. On the other hand, the in
direct taxes go in the hands of the traders and the citizens do not have any
account whatsoever in the utilization of these taxes. Hence, it acts an
disincentive for them.
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Inconvenience: The main drawback of the direct taxes is that they cause
a lot of inconvenience to the tax payers. Sometimes, the tax payers are required
to pay the entire tax in one instalment. Besides, the tax payers have to give and
elaborate documents on their income and expenditure.
Adverse effects on the will to work and save: Direct taxes may have an
adverse impact on the will to work and save. Higher rates of income tax may
discourage people to work hard or work overtime. Similarly, the direct taxes
may reduce their willingness to save.
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CONCLUSION
At the end of this study, we can say that given the rising standards of Indian individuals and
upward economy of the country, prudent tax planning before-hand is must for all the citizens to
make the most of their incomes. However, the mix of tax saving instruments, planning horizon
would depend on an individuals total taxable income and age in the particular financial year.
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BIBLIOGRAPHY
Books:
T. N. Manoharan (2007), Direct Tax Laws (7th 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
Websites:
http://in.taxes.yahoo.com/taxcentre/ninstax.html
www.efiling.incometaxofinfia.gov.in
emudra
http://in.biz.yahoo.com/taxcentre/section80.html
http://www.bajajcapital.com/financial-planning/tax-planning
http://www.incometaxindia.gov.in
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