Income Tax

PROJECT REPORT ON
INCOME TAX PALNNING IN INDIA OF DELHI STATE INDUSTRIAL &
INFRASTRUCTUTE DEVELOPMENT CORPORATION LTD
Submitted for the partial completion of the degree of Master of Business
Administration AT
Government of Maharashtra’s
ISMAIL YUSUF COLLEGE
Of Arts, science, & commerce
JOGESHWARI (EAST) 400060
Re-accrdited ‘A’grade by NAAC(CGPA-3.14)
Submitted by: PROF : MOHD. NISHAT S.A. ANSARI
1
DECLARATION
I FAYEQA ABDUL MIRA KONDKARI the student of ISMAIL YUSUF COLLEGE

OF ARTS, SCIENCE AND COMMERCE,MUMBAI-400060 OF MCOM PART II
Semester IV hereby declare that I have completed the project on “INCOME TAX
PLANNING IN INDIA”
for the academic year 2017/18.
The information submitted is true and original to the best of my knowledge.
DATE: 24th March,2018

ACKNOWLEDGEMENT
I feel immense pleasure to give the credit of my project work not only to one
individual as this work is integrated effort of all those who concerned with it. I want to
owe my thanks to all those individuals who guided me to move on the track.
This report entitled "Income Tax Planning in India" is the outcome of my final project report.
I would like to appreciate the pain staking effort of PROF: MOHD. NISHAT S.A. ANSARI
Lecturer for educating and guiding me at each and every stage and providing me the information
related to my chosen topic. I am equally thankful to the whole team of MCOM department of
ISMAIL YUSUF COLLEGE OF ARTS, SCIENCE AND COMMERCE Sangrur
extended their full co-operation and assistance. Last but not least, I owe my special regards to my
parents and my elders for their blessings and good wishes.
TABLE OF
CONTENTS
> Declaration
> Certificate from the Organization
> Certificate of Supervisor (Guide)
>> Acknowledgement
Chapter-1 Introduction Page No
1.1 Profile of the Organization 06
1.2 About the Topic 12
1.3 Need of the study 18
1.4 Objectives of the study 19
1.5 Income Tax Act 21
1.6 Objective of study 85
> Chapter-2 Research Methodology
2.1 Statement of the research methodology 85
2.2 Research Design 87
2.3 Sampling Techniques used 88
2.4 Selection of Sample Size 88
2.5 Data Collection 89
2.6 Statistical Tools Used 89
2.7 Limitations of the Study 91
> Chapter-3
Data Analysis and interpretation 92
> Chapter-4
Conclusion and Suggestions 97
> Questionnaire 103
> Bibliography 106
2
DS II DC
COMPANY PROFILE
Delhi State Industrial and Infrastructure Development Corporation Ltd.
(DSIIDC)
Delhi, being the capital, epitomizes the entire nation. Delhi State Industrial and
Infrastructure Development Corporation Ltd. (DSIIDC) has played a key role in
propelling the development of Delhi by shaping up the Indian capital, a city of
some 10 million people. Since it was established in February 1971, DSIIDC has
projected, aided, counseled, assisted, financed and promoted projects to
transform the face of Delhi.
DSIIDC is poised for huge responsibility as many big projects are at various
stages of inception and/or execution. Important among these are:
• Knowledge based industrial Park (KBI) at Baprola
• Development of Built-up Factory Complex at Rani Khera.
• Development of housing for urban poor.
• Education - Construction of New Schools.
• Education - Roopantar Scheme
• Construction of Hospital-cum-Medical Complex.
• Development of Integrated Office Complex, Vikas Bhawan.
• Development of DTC Bus Depot at I.P. Estate.
• Re-development of Office Building at Wazirpur.
• Development of IT-cum-Flatted Factory Complex, Okhla.
• Development of Education-cum-Software Marketing Estate at Okhla.

DSIIDC
Corporate Social Responsibility
The Corporation in addition to its service to the citizens of Delhi by

providing industrial infrastructure facilities, supports various social causes of
Delhi. The Corporation during the year 2016-17 sponsored Aapki Rasoi Scheme of
the Government of NCT of Delhi's Bhagidari Scheme by providing cost of meal
for 300 persons for one year for a Centre operated by M/s Aksaya Patra. The total
support by the Corporation for this noble cause was Rs. 14,19,600/-.
The Corporation supported the Delhi Urban Shelter Improvement Board,

Government of NCT of Delhi by providing Modern Fireproof Night Shelters for
the homeless people of Delhi especially during the harsh winter. The Corporation
provided monetary support of Rs.55,14,000/- and our engineers also provided
technical support to DUSIB in timely setting up of the Night Shelters.
Organization Structure
Marketing Division DSIIDC
One of the objectives of DSIIDC is to promote the sales of products of SSI Units
situated in National Capital of Delhi. Under this Marketing Scheme, the SSI Units,
entrepreneurs of DSIIDC, artisans and other units located in Community Works
Centre of DSIIDC and sole selling agents of SSI Units are made Business
Associates of the Corporation.
At present such units are registered as Business Associates which have their units
in Delhi registered with the office of Commissioner of Industries or are Sole
Selling Agents of production units, on a nominal fee as per the details given
below:
a) Cost of application form for Registration-- Rs. 100/-
b) New Registration Charges -- Rs. 2000/-
c) Renewal charges for one year -- Rs. 1000/-
The registered Business Associates are supplying their products to the purchasing
departments of Govt. of India, Delhi Administration, public undertakings and
State-Govt.
Delhi Emporium 'Bharati'
"Bharti" a showcase of the creations of Indian craftsmen, weavers and folk artists
has inspired trends, aroused curiosity, enchanted tourists and left an impression on
the minds of everybody who has visited it. India, has been an enigma to many
across the globe. With its products, the decor, ambience, exhibition and everything
else that goes with it, the emporium provides you with an aroma of what real India
is all about. India's vast cultural and ethnic diversity is reflected through easily
accessible and consumer friendly concept of exhibit and sale of products.
The 'ONE - SHOP' emporium is a treasure-trove of a mesmerizing range of art

forms and conventional crafts, each inimitable in style, theme, concept, structure
and expression. It is well equipped with the right know-how and customer-need
awareness, to make it an ideal shopping store. A rare fusion of tradition &
modernity the emporium provides wide array of quality products, like sarees,
8
fabric, carpets, shawls, brass ware, handloom, leather, paintings, wood-carving,
zardoze, garments, paintings, marble, white metal and other handicraft products.
9
• Bharti Emporium provides opportunity to the 'grass-root' artisans &
master craftsmen as well as national and state level awardees to
demonstrate their products. It has been vigorously pursuing a policy
aimed at providing assistance and protection to the products
manufactured by them. Turnover for the year 2016-17 was Rs. 395 lakhs
approximately. Welcome to this enchanting extravaganza created by
skilled master craftsmen. Come and experience the magic of India
through "Bharti".
• Products :
BHARTI markets all the beautifully handcrafted creations of the
designers and master craftsmen, the kind that have made a lasting
impression in the markets of India and across the world.
10
11
INTRODUCTION OF TOPIC
12
ABOUT THE TOPIC
"It was only for the good of his subjects that he collected taxes from them, just as
the Sun draws moisture from the Earth to give it back a thousand fold" -
--Kalidas in Raghuvansh eulogizing KING DALIP.
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 individual's income in
India for the assessment year 2007-08.
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 by the Government of India under
different statures is legal.
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.
It is a matter of general belief that taxes on income and wealth are of recent
origin but there is enough evidence to show that taxes on income in some form or
the other were levied even in primitive and ancient communities. The origin of the
word "Tax" is from "Taxation" which means an estimate. These were levied either
on the sale and purchase of merchandise or livestock and were collected in a
haphazard manner from time to time. Nearly 2000 years ago, there went out a
decree from Ceaser Augustus that all the world should be taxed. In Greece,
Germany and Roman Empires, taxes were also levied sometime on the basis of
turnover and sometimes on occupations. For many centuries, revenue from taxes
went to the Monarch. In Northern England, taxes were levied on land and on
moveable property such as the Saladin title in 1188. Later on, these were
supplemented by introduction of poll taxes, and indirect taxes known as "Ancient
Customs" which were duties on wool, leather and hides. These levies and taxes in
various forms and on various commodities and professions were imposed to meet
the needs of the Governments to meet their military and civil expenditure and not
only to ensure safety to the subjects but also to meet the common needs of the
citizens like maintenance of roads, administration of justice and such other
functions of the
13
State.
In India, the system of direct taxation as it is known today, has been in force
in one form or another even from ancient times. There are references both in Manu
Smriti and
14
Arthasastra to a variety of tax measures. Manu, the ancient sage and law-giver
stated that the king could levy taxes, according to Sastras. The wise sage advised
that taxes should be related to the income and expenditure of the subject. He,
however, cautioned the king against excessive taxation and stated that both
extremes should be avoided namely either complete absence of taxes or exorbitant
taxation. According to him, the king should arrange the collection of taxes in such
a manner that the subjects did not feel the pinch of paying taxes. He laid down that
traders and artisans should pay 1/5 th of their profits in silver and gold, while the
agriculturists were to pay 1/6th, 1/8th and 1/10th of their produce depending upon
their circumstances. The detailed analysis given by Manu on the subject clearly
shows the existence of a well-planned taxation system, even in ancient times. Not
only this, taxes were also levied on various classes of people like actors, dancers,
singers and even dancing girls. Taxes were paid in the shape of gold-coins, cattle,
grains, raw-materials and also by rendering personal service.
The learned author K.B.Sarkar commends the system of taxation in ancient
India in his book "Public Finance in Ancient India", (1978 Edition) as follows:-
"Most of the taxes of Ancient India were highly productive. The admixture of
direct taxes with indirect Taxes secured elasticity in the tax system, although more
emphasis was laid on direct tax. The tax-structure was a broad based one and
covered most people within its fold. The taxes were varied and the large variety of
taxes reflected the life of a large and composite population".
Collection of Income-tax was well organized and it constituted a major part
of the revenue of the State. A big portion was collected in the form of income-tax
from dancers, musicians, actors and dancing girls, etc. This taxation was not
progressive but proportional to the fluctuating income. An excess Profits Tax was
also collected. General Sales-tax was also levied on sales and the sale and the
purchase of buildings was also subject to tax.
Important events affecting the administrative set up in the Income-tax

department:-
1939
• Appellate functions separated form inspecting functions.
• A class of officers known as AACs came into existence.
• Jurisdiction of Commissioners of Income tax extended to
certain classes of cases and a central charge was created at Bombay.
1940
• Directorate of Inspection (Income-tax) came into being.
• Excess Profits Tax introduced w.e.f. 01/09/1939.
15
1941
• Income tax Appellate Tribunal came into existence.
• Central charge created at Calcutta.
1943
• Special Investigation Branches set up.
1946
A few officers of Class-I directly recruited.
Demonetization of high denomination notes made.
Excess profits tax act repealed.
1947
Business Profits tax enacted(for the period 01/04/1946 to 31/03/1949).
1951
Report of Income tax Investigation Commission known as Vardharchari
Commission received.
Voluntary Disclosure Scheme introduced.
1952
Directorate of Inspection (Investigation) set up.
Inspector of Income tax declared as an I.T. authority.
1953
Estate Duty Act, 1953 came into existence w.e.f 15/10/1953.
Act XXV of 1953 gave effect to the recommendations of Commission
appointed
under Taxation of Income (Investigation Commission) Act 1947.
1954
Internal Audit Scheme in the Income tax Department introduced.
Taxation Enquiry Commission known as John Mathai Commission set up.
1957
The Wealth tax Act, 1957 introduced w.e.f. 1-4-1957.
I.R.S.(DT) Staff College started functioning at Nagpur and much later four
R.T.Is. stationed at Bombay, Calcutta, Bangalore and Lucknow opened.
1958
The Gift tax Act, 1958 introduced w.e.f. 1-4-1958.
Report of Law Commission received.
1959
Direct Taxes Administration Enquiry Committee submitted its report.
1960
Directorate of Inspection (Research, Statistics & Publications)was set up.
Two grades of Inspectors - selection and ordinary grades - merged into one
single grade.
16
1961
16
Direct Taxes Advisory Committee set up - Direct Taxes Administrative
• Enquiry
Committee constituted.
Income-tax Act, 1961 came into existence w.e.f. 1-4-1962.
Revenue Audit introduced for the first time in the Department.
New system for evaluation of work done by Income-tax Officers
introduced.
1990
Gift tax Bill introduced on 31.5.1990.
Creation of 65 posts of Dy. Commissioner of I. Tax by up gradation of
equal
number of posts of Asstt. Commissioner of I. Tax.
1991
Interest Tax Act, 1974 revived.
Directorate of I. Tax (Systems) started reporting directly to board.
1992
Rs. 1400 Presumptive Taxation scheme introduced as a measure to widen
tax
base.
The post of Director General of Income-tax (Management Systems) was
abolished.
1993
40 additional posts of Commissioner of Income-tax (Appeals) created.
Authority for Advance Rulings set up.
A comprehensive phased cadre review for Group B, C and D initiated.
1994
2068 additional posts in Group B, C and D sanctioned.
New PAN introduced.
Regional Computer Centres (RCCs) were set up in Chennai, Delhi and
Mumbai.
1995
New procedure for search assessment introduced.
50 years of training commemorated and "Seminar Twenty Five" introduced
by
National Academy of Direct Taxes.
1996
77 posts of Commissioners of Income-tax created.
Infrastructure for operational needs strengthened.
Study report on 4th cadre review of Group 'A' officers (IRS) of the
Department
prepared by Directorate of Income Tax (Organization and Management
Services).
1997
17
17
18
• Rates of Income-tax reduced significantly.
• Legal measures to widen tax base on certain economic
indicators introduced in selected cities.
• Presumptive tax scheme discontinued.
• Voluntary Disclosure Scheme 1997 introduced.
• Minimum Alternate Tax introduced.
• National Computer Centre (NCC) was set up in Delhi.
1998
• Sec. 260A introduced enabling direct appeals to High Court.
• 1/6 Scheme & penalty for non-filing of return introduced to widen
tax base.
• Gift-tax abolished for gifts made after 1.10.1998.
• Kar Vivad Samadhan Scheme 1998 introduced.
• Silver Jubilee of Regional Training Institutes celebrated.
• Designation of Asstt. Commissioner (Senior Time Scale)
changed to Dy. Commissioner and that of Dy. Commissioner (Junior
Administrative Grade) to Joint Commissioner.
1999
• Furnishing details of bank account and credit cards in the
prescribed form made mandatory for refund purpose.
• Prima-facie adjustments to return done away with;
acknowledgments to serve as intimations.
• Samman Scheme introduced in 1999 to honour deserving tax payers.
2000
• The process of implementation of restructuring of the
Department commenced to increase efficiency and to deal with
increased workload.
• Total sanctioned work force reduced from 61,031 to 58,315.
• Certain rationalization measures at structural levels introduced.
• Interest-tax Act terminated with effect from 1-4-2000.
2001
• The restructuring of the Department resulted in reducing the
stagnation at all levels and large number of personnel were promoted
in various grades.
• Jurisdiction pattern was revamped.
• New posts were created at the level of DGIT/DIT in the areas
of Research, International Taxation and Infrastructure.
2002
19
• Computerized processing of returns all over the country introduced.
• Kelkar Committee Report, inter alia, recommended: -
i. Outsourcing of non-core functions of the department;
ii. Reduction in exemptions, deductions, reliefs, rebates etc.
20
Need for Study
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 assessee
class to save whatever extra rupee they can from their hard-earned monies.
21
Objective of the study
"To partner is the nation building process through progressive tax policy,
efficient and effective administration and improved voluntary compliance" .
• 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 layman's
perspective.
• To present the tax saving avenues under prevailing statures.
• To formulate progressive tax policies.
• To make compliance easy.
• To enforce tax laws with fairness.
• Concept of assessment year and previous year.
• Meaning of person and assessee.
• How to charge tax on income.
• What is regarded as income under the Income-tax Act.
• To show gross total income.
• Income tax rates.
• To know how to pay tax time to time
• To reduce the black Money in India
• This project studies the tax planning for individuals assessed to income tax.
22
• Main objective is pay tax without the help of CA or other person.
• To get full knowledge about Income tax.
23
AN EXTRACT FROM INCOME TAX ACT, 1961
Tax Regime in India Chargeability of Income
Tax Scope of Total Income Total Income
Concepts used in Tax Planning
• Tax Evasion
• Tax Avoidance
• Tax Planning
• Tax Management
• The Income Tax Equation
24
Tax Regime in India
The tax regime in India is currently governed under The Income Tax, 1961 as
amended by The Finance Act, 2007 notwithstanding any amendments made
thereof by recently announced Union Budget for assessment year 2016-17.
Chargeability of Income Tax
As per Income Tax Act, 1961, income tax is charged for any assessment year at
prevailing rates in respect of the total income of the previous year of every person.
Previous year means the financial year immediately preceding the assessment year.
Scope of Total Income
Under the Income Tax Act, 1961, total income of any previous year of a person
who is a resident includes all income from whatever source derived which: is
received or is deemed to be received in India in such year by or on behalf of such
person; or
accrues or arises or is deemed to accrue or arise to him in India during such year;
or accrues or arises to him outside India during such year:
Provided that, in the case of a person not ordinarily resident in India, the 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. Total Income
For the purposes of chargeability of income-tax and computation of total income,

The Income Tax Act, 1961 classifies the earning under the following heads of
income: Salaries
Income from house property Capital gains
25
Profits and gains of business or
profession Income from other
sources
Concepts used in Tax
Planning 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 inflation of expenses or falsification of
accounts or by conscious deliberate violation of law.
Tax Evasion is an act executed knowingly willfully, with the intent to deceive so
that the tax reported by the taxpayer is less than the tax payable under the law.
Example: Mr. A, having rendered service to another person Mr. B, is entitled to
receive a sum of say Rs. 50,000/- from Mr. B. A tells B to pay him Rs. 50,000/- in
cash and thus does not account for it as his income. Mr. A has resorted to Tax
Evasion. Tax Avoidance
Tax Avoidance is the art of dodging tax without breaking the law. While remaining
well within the four corners 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
artificially 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
26
retrospectively. Hence tax avoidance though legal, is not long lasting. It lasts till
the law is amended.
27
Example: Mr. A, having rendered service to another person Mr. B, is entitled to
receive a sum of say Rs. 50,000/- from Mr. B. Mr. A's other income is Rs.
200,000/-. Mr. A tells Mr. B to pay cheque of Rs. 50,000/- in the name of Mr. C
instead of in the name of Mr. A. Mr. C deposits the cheque in his bank account and
account for it as his income. But Mr. C has no other income and therefore pays no
tax on that income of Rs. 50,000/-. By diverting the income to Mr. C, Mr. A has
resorted to Tax Avoidance. Tax Planning
Tax Planning has been described as a refined form of 'tax avoidance' and implies
arrangement of a person's financial 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 benefits granted by
the tax laws so that the incidence of tax is reduced. Exercise in tax planning is
based on the law itself and is therefore legal and permanent.
Example: Mr. A having other income of Rs. 200,000/- receives income of Rs.
50,000/-from Mr. B. Mr. A to save tax deposits Rs. 60,000/- in his PPF account
and saves the tax of Rs. 12,000/- and thereby pays no tax on income of Rs. 50,000.
Tax Management
Tax Management is an expression which implies actual implementation of tax
planning ideas. While that tax planning is only an idea, a plan, a scheme, an
arrangement, tax management is the actual action, implementation, the reality, the
final result. Example: Action of Mr. A depositing Rs. 60,000 in his PPF account
and saving tax of Rs. 12,000/- is Tax Management. Actual action on Tax Planning
provision is Tax Management.
To sum up all these four expressions, we may say that:
Tax Evasion is fraudulent and hence illegal. It violates the spirit and the letter of
the law.
28
Tax Avoidance, being based on a loophole in the law is legal since it violates only
the spirit of the law but not the letter of the law.
Tax Planning does not violate the spirit nor the letter of the law since it is entirely
based on the specific provision of the law itself.
Tax Management is actual implementation of a tax planning provision. The net
result of tax reduction by taking action of fulfilling the conditions of law is tax
management.
The Income Tax Equation:

For the understanding of any layman, the process of computation of income and
tax liability can be outlined in following five steps. This project is also designed to
follow the same.
Calculate the Gross total income deriving from all
resources. Subtract all the deduction & exemption
available. Applying the tax rates on the taxable income.
Ascertain the tax liability.
Minimize the tax liability through a perfect planning using tax saving schemes.
29
COMPUTATION OF TOTAL INCOME
Income from Salaries Income from House
Property Capital Gains
Profits and Gains of Business or Profession Income from
Other Sources
30
Income from
Salaries Incomes
termed as Salaries:
Existence of 'master-servant' or 'employer-employee' relationship is absolutely

essential for taxing income under the head "Salaries". Where such relationship
does not exist income is taxable under some other head as in the case of partner of
a firm, 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 is chargeable to income-tax on due or paid basis, whichever is earlier.
Any arrears of salary paid in the previous year, if not taxed in any earlier previous
year, shall be taxable in the year of payment.
Advance Salary:
Advance salary is taxable in the year it is received. It is not included in the income
of recipient again when it becomes due. However, loan taken from the employer
against salary is not taxable. Arrears of Salary:
Salary arrears are taxable in the year in which it is
received. Bonus:
Bonus is taxable in the year in which it is
received. Pension:
Pension received by the employee is taxable under 'Salary' Benefit of standard
deduction is available to pensioner also. Pension received by a widow after the
death of her husband falls under the head 'Income from Other Sources. Profits in
lieu of salary:
31
Any compensation due to or received by an employee from his employer or
former employer at or in connection with the termination of his employment or
modification of the terms and conditions relating thereto;
Any payment due to or received by an employee from his employer or former
employer or from a provident or other 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.
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 fully taxable
City Compensatory Allowance (CCA):
CCA is taxable as it is a personal allowance granted to meet expenses wholly,
necessarily and exclusively incurred in the performance of special duties unless
such allowance is related to the place of his posting or residence.
Certain allowances prescribed 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
to compensate him for increased cost of living are also exempt. 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 exempt up to
a certain limit
32
Entertainment Allowance:
Entertainment allowance is fully taxable, but a deduction is allowed in certain
cases.
33
Academic Allowance:
Allowance granted for encouraging academic research and other professional
pursuits, or for the books for the purpose, shall be exempt u/s 10(14). Similarly
newspaper allowance shall also be exempt. Conveyance Allowance:
It is exempt to the extent it is paid and utilized for meeting expenditure on travel
for official work.
Income from House
Property Incomes Termed as House Property
Income:
The annual value of a house property is taxable as income in the hands of the
owner of the property. House property consists of any building or land, or its part
or attached area, of which the assessee is the owner. The part or attached area may
be in the form of a courtyard or compound forming part of the building. But such
land is to be distinguished from an open plot of land, which is not charged under
this head but under the head 'Income from Other Sources' or 'Business Income', as
the case may be. Besides, house property includes flats, shops, office space,
factory sheds, agricultural land and farm houses.
However, following incomes shall be taxable under the head 'Income from House
Property'.
1. Income from letting of any farm house agricultural land appurtenant thereto for
any purpose other than agriculture shall not be deemed as agricultural income, but
taxable as income from house property.
34
2. Any arrears of rent, not taxed u/s 23, received in a subsequent year, shall be
taxable in the year.

Even if the house property is situated outside India it is taxable in India if the
owner-assessee is resident in India.
Incomes Excluded from House Property Income:
The following incomes are excluded from the charge of income tax under this
head: Annual value of house property used for business purposes Income of rent
received from vacant land.
Income from house property in the immediate vicinity of agricultural land and
used as a store house, dwelling house etc. by the cultivators Annual Value:
Income from house property is taxable on the basis of annual value. Even if the
property is not let-out, notional rent receivable is taxable as its annual value. The
annual value of any property is the sum which the property might reasonably be
expected to fetch if the property is let from year to year.
In determining reasonable rent factors such as actual rent paid by the tenant,
tenant's obligation undertaken by owner, owners' obligations undertaken by the
tenant, location of the property, annual rateable value of the property fixed by
municipalities, rents of similar properties in 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 is let out, the annual value of such property
or part shall be the reasonable rent for that property or part or the actual rent
received or receivable, whichever is higher. Deductions from House Property
Income: Deduction of House Tax/Local Taxes paid:
In case of a let-out property, the local taxes such as municipal tax, water and
sewage
tax, fire tax, and education cess levied by a local authority are deductible while
31
36
computing the annual value of the year in which such taxes are actually 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 payable in India on borrowed capital, where the property has been
acquired constructed, repaired, renovated or reconstructed with such borrowed
capital, is allowable (without any limit) as a deduction (on accrual basis).
Furthermore, interest payable for the period prior to the previous year in which
such property has been acquired or constructed shall be deducted in five 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 payable out of India on which tax has not
been paid or deducted at source and in respect of which there is no person who
may be treated as an agent.
Expenditures not specified as specifically deductible. For instance, no deduction
can be claimed in respect of expenses on electricity, water supply, salary of
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 been
taken to be nil under section 23(2) (a) or 23(2) (b) of the act. However, a
maximum deduction of Rs. 30,000 by way of interest on borrowed capital for
acquiring, constructing, repairing, renewing or reconstructing the property is
available in respect of such properties. In case of self-occupied property acquired
or constructed with capital borrowed on or after 1.4.1999 and the acquisition or
construction of the house property is made within
38
3 years from the end of the financial year in which capital was borrowed the
maximum deduction for interest shall be Rs. 1,50,000. For this purpose, the
assessee shall furnish a certificate from the person extending the loan that such
interest was payable in respect of loan for acquisition or construction of the house,
or as refinance loan for repayment of an earlier loan for such purpose. The
deduction for interest u/s 24(1) is allowable as under:
i. Self-occupied property: deduction is restricted to a maximum of Rs.
1,50,000 for property acquired or constructed with funds furrowed on or after

1.4.1999 within 3 years from the end of the financial year in which the funds
are borrowed. In other cases, the deduction is allowable up to Rs. 30,000.
ii. Let out property or part there of: all eligible interests are allowed.
It is, therefore, suggested that a property for self, residence may be acquired with
borrowed funds, so that the annual interest accrual on borrowings remains less
than Rs. 1,50,000. The net loss on this account can be set off against income from
other properties and even against other incomes. If buying a property for letting it
out on rent, raise borrowings from other family 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 off against
other incomes too.
At the time of purchase of new house property, the same should be acquired in the
name(s) of different family members. Alternatively, each property may be acquired
in joint names. This is particularly advantageous in case of rented property for
division of rental income among 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.
39
Capital Gains
Any profits or gains arising from the transfer of capital assets effected during the
previous year is 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 takes place.
Taxation of capital gains, thus, depends on two aspects - 'capital assets' and
transfer'. Capital Asset:
'Capital Asset' means property of any kind held by an assessee including property
of
his business or profession, but excludes non-capital assets.
Transfers Resulting in Capital Gains
Sale or exchange of assets;
Relinquishment of assets;
Extinguishment of any rights in assets;
Compulsory acquisition of assets under any law;
Conversion of assets into stock-in-trade of a business carried on by the owner of
asset; Handing over the possession of an immovable property in part performance
of a contract for the transfer of that property;
Transactions involving transfer of membership of a group housing society,
company, etc.. , which have the effect of transferring or enabling enjoyment of any
immovable property or any rights therein ;
Distribution of assets on the dissolution of a firm, body of individuals or
association of persons;
Transfer of a capital asset by a partner or member to the firm or AOP, whether by
way of capital contribution or otherwise; and
40
Transfer under a gift or an irrevocable trust of shares, debentures or warrants
allotted by a company directly or indirectly to its employees under the Employees'
Stock Option Plan or Scheme of the company as per Central Govt. guidelines.
Year of Taxability:
Capital gains form part of the taxable income of the previous year in which the
transfer giving rise to the gains takes place. Thus, the capital gain shall be
chargeable in the year in which the sale, exchange, relinquishment, etc. takes
place. Where the transfer is by way of allowing possession of an immovable
property 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 sale, before entering into the
agreement to sell, the year of taxability of capital gains is the year in which the
agreement is entered into. Classification of Capital Gains: Short Term Capital
Gain:
Gains on transfer of capital assets held by the assessee for not more than 36
months (12 months in case of a share held in a company or any other security
listed in a recognized stock exchange in India, or a unit of the UTI or of a mutual
fund specified u/s 10(23D) immediately preceding the date of its transfer. Long
Term Capital Gain:
The capital gains on transfer of capital assets held by the assessee for more than 36
months (12 months in case of shares held in a company or any other listed security
or a unit of the UTI or of a specified mutual fund). Period of Holding a Capital
Asset:
Generally speaking, period of holding a capital asset is the duration for the date of
its acquisition to the date of its transfer. However, in respect of following assets,
the period of holding shall exclude or include certain other periods.
35
42
Computation of Capital Gains:
1. As certain the full value of consideration received or accruing as a result of
the transfer.
2. Deduct from the full value of consideration-
Transfer expenditure like brokerage, legal expenses, etc., Cost of acquisition
of the capital asset/indexed cost of acquisition in case of long-term capital asset
and Cost of improvement to the capital asset/indexed cost of improvement in case
of long term capital asset. The balance left-over is the gross capital gain/loss.
Deduct the amount of permissible exemptions u/s 54, 54B, 54D, 54EC, 54ED,
54F, 54G and 54H.
Full Value of Consideration:

This is the amount for which a capital asset is transferred. It may be in money or
money's worth or combination of b oth. For instance, in case of a sale, the full
value of consideration 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 the transfer is partly in cash and partly in kind, the fair
market value of the asset received as consideration and cash consideration, if any,
together constitute full value of consideration.
In case of damage or destruction of an asset in fire flood, riot etc., the amount of
money or the 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 building; and
2. Transfer Expenses.
Cost of Acquisition:
Cost of acquisition is the amount for which the capital asset was originally
purchased by the assessee.
Cost of acquisition of an asset is the sum total of amount spent for acquiring the
asset. Where the asset is purchased, the cost of acquisition is the price paid. Where
the asset is acquired by way of exchange for another asset, the cost of acquisition
is the fair market value of that other asset as on the date of exchange.
Any expenditure incurred in connection with such purchase, exchange or other
transaction e.g. brokerage paid, registration charges and legal expenses, is added to
price or value of consideration for the acquisition of the asset. Interest paid on
moneys
borrowed for purchasing the asset is also part of its cost of acquisition.
Where capital asset became the property of the assessee before 1.4.1981, he has an
option to adopt the fair market value of the asset as on 1.4.1981, as its cost of
acquisition.
Cost of Improvement:
Cost of improvement means all capital expenditure incurred in making additions
or alterations to the capital assets, by the assessee. Betterment charges levied by
municipal authorities also constitute cost of improvement. However, only the
capital expenditure incurred on or after 1.4.1981, is to be considered and that
incurred before 1.4.1981 is to be ignored. Indexed cost of
Acquisition/Improvement:
For computing long-term capital gains, 'Indexed cost of acquisition and 'Indexed
cost of Improvement' are required to deducted from the full value of consideration
of a capital asset. Both these costs are thus required to be indexed with respect to
the cost inflation index pertaining to the year of transfer.
44
Rates of Tax on
Capital Gains: Short-
term Capital Gains

Short-term Capital Gains are included in the gross total income of the assessee and
after allowing permissible deductions under Chapter VI-A. Rebate under Sections
88, 88B and 88C is also available against the tax payable on short-term capital
gains.
Long-term Capital Gains
Long-term Capital Gains are subject to a flat rate of tax @ 20% However, in
respect of long term capital gains arising from transfer of listed securities or units
of mutual fund/UTI, tax shall be payable @ 20% of the capital gain computed
after allowing indexation benefit or @ 10% of the capital gain computed without
giving the benefit of indexation, whichever is less.
Capital Loss:
The amount, by which the value of consideration for transfer of an asset falls short
of its cost of acquisition and improvement /indexed cost of acquisition and
improvement, and the expenditure on transfer, represents the capital loss. Capital
Loss' may be short -term or long-term, as in case of capital gains, depending upon
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 capital gain
(both long-term and short term) and against no other income.
• Any long-term capital loss can be set off only against long-term
capital gain and against no other income.
45
• Any short-term capital loss can be carried forward to the next eight
assessment years and set off against 'capital gains' in those years.
46
• Any long-term capital loss can be carried forward to the next eight
assessment year and 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 arising on the transfer of a residential house, to an
individual or HUF, will be exempt from tax if the assessee has within a period of
one year before or two years after the date of such transfer purchased, or within a
period of three years constructed, a residential house.
Capital Gains from Transfer of Agricultural Land
Any capital gain arising from transfer of agricultural land, shall be exempt from
tax, if the assessee purchases 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 from the transfer by way of compulsory acquisition of land or
building of an industrial undertaking, shall be exempt, if the assessee
purchases/constructs within three years from the date of compulsory acquisition,
any building or land, forming part of industrial undertaking. 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 arising to an individual or an HUF, from the transfer of
any asset, other than a residential house, shall be exempt if the whole of the net
consideration is utilized within a period of one year before or two years after the
47
date of transfer for purchase, or within 3 years in construction, of a residential
house.
48
Tax Planning for Capital Gains
• An assessee should plan transfer of his capital assets at 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-term
capital gain instead of long-term capital gain, since income up to Rs.
60,000 is taxable @ 10% whereas long-term capital gains are taxable at a
flat rate of 20%. Those having income above Rs. 1,50,000 should plan their
capital gains vice versa.
• Since long-term capital gains enjoy a concessional treatment, the
assessee should so arrange the transfers of capital assets that they fall in the
category of long-term capital assets.
• An assessee may go for a short-term capital gain, in the year when
there is already a short-term capital loss or loss under any other head that
can be set off against such income.
• The assessee should take the maximum benefit 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
create some short-term capital gain in that year or, defer long-term capital
gains to next year.
• Since the income of the minor children is to be clubbed in the hands
of the parent, it would be better if the minor children have no or lesser
recurring income but have income from capital gain because the capital
gain will be taxed at the flat rate of 20% and thus the clubbing would not
increase the tax incidence for the parent.
Profits and Gains of Business or
Profession Income from Business or
Profession:
The following incomes shall be chargeable under this head:-
• Profit and gains of any business or profession carried on by the
assessee at 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 similar association from
specific services performed for its members.
• Profits on sale of REP licence/Exim scrip, cash assistance received
or receivable against exports, and duty drawback of customs or excise
received or receivable against exports.
• The value of any benefit or perquisite, whether convertible into
money or not, arising from business or in exercise of a profession.
• Any interest, salary, bonus, commission or remuneration due to or
received by a partner of a firm from the firm to the extent it is allowed to be
deducted from the firm's income. Any interest salary etc. which is not
allowed to be deducted u/s 40(b), the income of the partners shall be
adjusted to the extent of the amount so disallowed.
• Any sum received or receivable in cash or in kind under an
agreement for not carrying out activity in relation to any business, or not to
share any know-how, patent, copyright, trade-mark, licence, franchise or
any other business or commercial right of, similar nature of information or
50
technique likely to assist in the manufacture or processing of goods or
provision for services except when such sum is taxable under the head
'capital gains' or is received as compensation
41
from the multilateral fund of the Montreal Protocol on Substances that
Deplete
the Ozone Layer.
• Any sum received under a Keyman Insurance Policy referred to u/s
10(10D).
• Any allowance or deduction allowed in an earlier year in respect of
loss, expenditure or trading liability incurred by the assessee and
subsequently received by him in cash or by way of remission or cessation
of the liability during the previous year.
• Profit made on sale of a capital asset for scientific research in respect
of which a deduction had been allowed u/s 35 in an earlier year.
• 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 36 (1) (viii) shall be chargeable as income in the previous
year in which the amount is withdrawn.
Expenses Deductible from Business or Profession:

Following expenses incurred in furtherance of trade or profession are admissible
as deductions.
• Rent, rates, taxes, repairs and insurance of buildings.
• Repairs and insurance of machinery, plat and furniture.
• Depreciation is allowed on:
• Building, machinery, plant or furniture, being tangible assets,
Know how, patents, copyrights, trademarks, licences, franchises or any other
business or commercial rights of similar nature, being intangible assets,
acquired on or after 1.4.1998.
52
• Development rebate.
• Development allowance for Tea Bushes planted before 1.4.1990.
• Amount deposited in Tea Development Account or 40% profits and gains
from business of growing and manufacturing tea in India,
• Amount deposited in Site Restoration Fund or 20% of profit, whichever is
less, in case of an assessee carrying on business of prospecting for, or
extraction or production of, petroleum or natural gas or both in India. The
assessee shall get his accounts audited from a chartered accountant and furnish
an audit report in Form 3 AD.
• Reserves for shipping business.
• Scientific Research
Expenditure on scientific research related to the business of assessee, is
deductible in that previous year.
One and one-fourth times any sum paid to a scientific research association or
an approved university, college or other institution for the purpose of scientific
research, or for research in social science or statistical research. One and one-
fourth times the sum paid to a National Laboratory or a University or an Indian
Institute of Technology or a specified person with a specific direction that the
said sum shall be used for scientific research under a programme approved in
this behalf by the prescribed authority. One and one half times, the expenditure
incurred up to 31.3.2005 on scientific research on in-house research and
development facility, by a company engaged in the business of bio-technology
or in the manufacture of any drugs, pharmaceuticals, electronic equipments,
computers telecommunication equipments, chemicals or other notified articles.
• Expenditure incurred before 1.4.1998 on acquisition of patent rights or
copyrights, used for the business, allowed in 14 equal instalments starting from
the year in which it was incurred.
• Expenditure incurred before 1.4.1998 on acquiring know-how for the
business, allowed in 6 equal instalments. Where the know-how is developed in
a laboratory, University or institution, deduction is allowed in 3 equal
instalments.
• Any capital expenditure incurred and actually paid by an assessee on the
acquisition of any right to operate telecommunication services by obtaining
licence will be allowed as a deduction in equal instalments over the period
starting from the year in which payment of licence fee is made or the year in
which business commences where licence fee has been paid before
commencement and ending with the year in which the licence comes to an end.
• Expenditure by way of payment to a public sector company, local authority
or an approved association or institution, for carrying out a specified project or
scheme for promoting the social and economic welfare or enlistment of the
public. The specified projects include drinking water projects in rural areas and
urban slums, construction of dwelling units or schools for the economically
weaker sections, projects of non-conventional and renewable source of energy
systems, bridges, public highways, roads promotion of sports, pollution
control, etc.
• Expenditure by way of payment to association and institution for carrying
out rural development programmes or to a notified rural development fund, or
the National Urban Poverty Eradication Fund.
55
• Expenditure incurred on or before 31.3.2002 by way of payment to
associations and institutions for carrying out programme of conservation of
natural resources
or afforestation or to an approved fund for afforestation.
44
• Amortisation of certain preliminary expenses, such as expenditure for
preparation of project report, feasibility report, feasibility report, market
survey, etc., legal charges for drafting and printing charges of Memorandum
and Articles, registration expenses, public issue expenses, etc. Expenditure
incurred after 31.3.1988, shall be deductible up to a maximum of 5% of the
cost of project or the capital exployed, in 5 equal instalments over five
successive years.
• One-fifth of expenditure incurred on amalgamation or demerger, by an
Indian company shall be deductible in each of five successive years beginning
with the year in which amalgamation or demerger takes place.
• One-fifth of the amount paid to an employee on his voluntary retirement
under a scheme of voluntary retirement, shall be deductible in each of five
successive years beginning with the year in which the amount is paid.
• Deduction for expenditure on prospecting, etc. for certain
minerals. Insurance premium for stocks or stores.
• Insurance premium paid by a federal milk co-operative society for cattle
owned by a member.
• Insurance premium paid for the health of employees by cheque under the
scheme framed by G.I.C. and approved by the Central Government.
• Payment of bonus or commission to employees, irrespective of the limit
under the Payment of Bonus Act.
• Interest on borrowed capital.
• Provident and superannuation fund contribution.
• Approved gratuity fund contributions.
• Any sum received from the employees and credited to the employees
account in the relevant fund before due date.
57
• Loss on death or becoming permanently useless of animals in connection
with the business or profession.
• Amount of bad debt actually written off as irrecoverable in the accounts not
including provision for bad and doubtful debts.
• Provision for bad and doubtful debts made by special reserve created and
maintained by a financial corporation engaged in providing long-term finance
for industrial or agricultural development or infrastructure development in
India or by a public company carrying on the business of providing housing
finance.
• Family planning expenditure by company.
• Contributions towards Exchange Risk Administration Fund.
• Expenditure, not being in nature of capital expenditure or personal
expenditure of the assessee, incurred in furtherance of trade. However, any
expenditure incurred for a purpose which is an offence or is prohibited by law,
shall not be deductible.
• Entertainment expenditure can be claimed u/s 37(1), in full, without any
limit/restriction, provided the expenditure is not of capital or personal nature.
• Payment of salary, etc. and interest on capital to partners
• Expenses deductible on actual payment only.
• Any provision made for payment of contribution to an approved gratuity

fund, or for payment of gratuity that has become payable during the year.
• Special provisions for computing profits and gains of civil contractors.
• Special provision for computing income of truck owners.
• Special provisions for computing profits and gains of retail business.
58
• Special provisions for computing profits and gains of shipping business in
the case of non-residents.
59
• Special provisions for computing profits or gains in connection with
the business of exploration etc. of mineral oils.
• Special provisions for computing profits and gains of the business of
operation of aircraft in the case of non-residents.
• Special provisions for computing profits and gains of foreign
companies engaged in the business of civil construction, etc. in certain
turnkey projects.
• Deduction of head office expenditure in the case of non-residents.
• Special provisions for computing income by way of royalties etc. in
the case of foreign companies
Expenses deductible for authors receiving income from royalties
• In case of Indian authors/writers where the amount of royalties
receivable during a previous year are less than Rs. 25,000 and where
detailed accounts regarding expenses incurred are not maintained,
deduction for expenses may be allowed up to 25% of such amount or Rs.
5,000, whichever is less. The above deduction will be allowed without
calling for any evidence in support of expenses.
• If the amount of royalty receivable exceeds Rs.25,000 only the
actual expenses incurred shall be allowed.
Set Off and Carry Forward of Business Loss:

If there is a loss in any business, it can be set off against profits of any other
business in the same year. The loss, if any, still remaining can be set off against
income under any other head.
However, loss in a speculation business can be adjusted only against profits of
another speculation business. Losses not adjusted in the same year can be carried
forward to subsequent years.
60
Income from Other Sources
Other Sources
This is the last and residual head of charge of income. Income of every kind which
is not to be excluded from the total income under the Income Tax Act shall be
charge to tax under the head Income From Other Sources, if it is not chargeable
under any of the other four heads-Income from Salaries, Income From House
Property, Profits and Gains from Business and Profession and Capital Gains. In
other words, it can be said that the residuary head of income can be resorted to
only if none of the specific heads is applicable to the income in question and that it
comes into operation only if the preceding heads are excluded. Illustrative List
Following is the illustrative list of incomes chargeable to tax under the head
Income from Other Sources:
(i) Any dividend declared, distributed or paid by the company to its
shareholders is chargeable to tax under the head 'Income from Other
Sources", irrespective of the fact whether shares are held by the
assessee as investment or stock in trade. Dividend is deemed to be the
income of the previous year in which it is declared, distributed or paid.
However interim dividend is deemed to be the income of the year in
which the amount of such dividends unconditionally made available by
the company to its shareholders.
However, any income by way of dividends is exempt from tax
u/s10(34) and no tax is required to be deducted in respect of such
dividends.
61
(ii) Income from machinery, plant or furniture belonging to the assessee
and let on hire, if the income is not chargeable to tax under the head Profits
and gains of business or profession;
(iii) Where an assessee lets on hire machinery, plant or furniture
belonging to him and also buildings, and the letting of the buildings is
inseparable from the letting of the said machinery, plant or furniture, the
income from such letting, if it is not chargeable to tax under the head Profits
and gains of business or profession;
(iv) Any sum received under a Keyman insurance policy including the
sum allocated by way of bonus on such policy if such income is not
chargeable to tax under the head Profits and gains of business or profession
or under the head Salaries.
(v) Where any sum of money exceeding twenty-five thousand rupees is
received without consideration by an individual or a Hindu undivided
family from any person on or after the 1st day of September, 2004, the
whole of such sum, provided that this clause shall not apply to any sum of
money received
(a) From any relative; or
(b) On the occasion of the marriage of the individual; or
(c) Under a will or by way of inheritance; or
(d) In contemplation of death of the payer.
(vi) Any sum received by the assessee from his employees as
contributions to any provident fund or superannuation fund or any fund set
up under the provisions of the Employees' State Insurance Act. If such
income is not chargeable to tax under the head Profits and gains of business
or profession.
62
(vii) Income by way of interest on securities, if the income is not
chargeable to tax under the head Profits and gains of business or profession.
If books of
63
account in respect of such income are maintained on cash basis then
interest is taxable on receipt basis. If however, books of account are
maintained on mercantile system of accounting then interest on
securities is taxable on
accrual basis.
(viii) Other receipts falling under the head "Income from Other Sources':
• Director's fees from a company, director's commission
for standing as a guarantor to bankers for allowing

overdraft to the company and director's commission for
underwriting shares of a new company.
• Income from ground rents.
• Income from royalties in
general. Deductions from Income from Other
Sources:
The income chargeable to tax under this head is computed after making the
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 case of income from machinery, plant or furniture let on hire:
(a) Repairs to building
(b) Current repairs to machinery, plant or furniture
(c) Depreciation on building, machinery, plant or furniture
(d) Unabsorbed Depreciation.
64
4. Any other expenditure (not being a capital expenditure) expended wholly
and exclusively for the purpose of earning of such income.
65
66
DEDUCTIONS FROM TAXABLE INCOME
Deduction under section 80C

Deduction under section 80CCC
Deduction under section 80D
Deduction under section 80DD
Deduction under section 80DDB
Deduction under section 80E
Deduction under section 80G
Deduction under section 80GG
Deduction under section 80GGA
Deduction under section 80CCE
67
Deduction under section 80C
This new section has been introduced from the Financial Year 2005-06. Under this
section, a deduction of up to Rs. 1,00,000 is allowed from Taxable Income in
respect of investments made in some specified schemes. The specified schemes
are the same which were there in section 88 but without any sectoral caps (except
in PPF). 80C
This section is applicable from the assessment year 2006-2007.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 section:
• Contribution towards premium on life insurance
• Contribution towards Public Provident Fund.(Max.70,000 a year)
• 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 engaged in infrastructural
facilities. Notes for Section 80C
1. There are no sectoral caps (except in PPF) on investment in the new
section and the assessee is free to invest Rs. 1,00,000 in any one or
more of the specified instruments.
2. Amount invested in these instruments would be allowed as
deduction irrespective of the fact whether (or not) such investment is

made out of income chargeable to tax.
68
3. Section 80C deduction is allowed irrespective of assessee's income
level. Even persons with taxable income above Rs. 10,00,000 can avail
benefit of section 80C.
4. As the deduction is allowed from taxable income, the exact savings
in tax will depend upon the tax slab of the individual. Thus, a person in
30% tax stab can save income tax up to Rs. 30,600 (or Rs. 33,660 if
annual income exceeds Rs. 10,00,000) by investing Rs. 1,00,000 in the
specified schemes
u/s 80C.
Deduction under section 80CCC
Deduction in respect of contribution to certain Pension Funds:
Deduction is allowed for the amount paid or deposited by the assessee during the
previous year out of his taxable income to the annuity plan (Jeevan Suraksha) of
Life
Insurance Corporation of India or annuity plan of other insurance companies for
receiving pension from the fund referred to in section 10(23AAB)
Amount of Deduction: Maximum Rs. 10,000/-
Deduction under section 80D
Deduction 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
assessee's taxable income during the previous year, 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
69
Amount of deduction: Maximum Rs. 10,000, in case the person insured is a 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:
Deduction is allowed in respect of - any expenditure incurred by an assessee,
during the previous year, for the medical treatment training and rehabilitation of
one or more dependent persons with 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 benefit of a
dependent person with disability.
Amount of deduction: the deduction allowable is Rs. 50,000 (Rs. 40,000 for A.Y.
2003-2004) in aggregate for any of or both the purposes specified above,
irrespective of the actual amount of expenditure incurred. Thus, if the total of
expenditure 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 Undivided family deduction is allowed in respect
of during a year for the medical treatment of specified disease or ailment for
himself or a dependent or a member of a Hindu Undivided Family.
Amount of Deduction Amount actually paid or Rs. 40,000 whichever is less (for
A.Y. 2003-2004, a deduction of Rs. 40,000 is allowable In case of amount is paid
70
in respect of the assessee, or a person dependent on him, who is a senior citizen
the deduction
allowable shall be Rs. 60,000.
71
Deduction under section 80E
Deduction in respect of Repayment of Loan taken for Higher Education An
individual assessee who has taken a loan from any financial institution or any
approved charitable institution for the purpose of pursuing his higher education i.e.
full time studies for any graduate or post graduate course in engineering medicine,
management or for post graduate course in applied sciences or pure sciences
including mathematics and statistics.
Amount of Deduction: Any amount paid by the assessee in the previous year, out
of his taxable income, by way of repayment of loan or interest thereon, subject to a
maximum of Rs. 40,000 Deduction under section 80G Donations:
100 % deduction is allowed in respect of donations to: National Defence Fund,
Prime
Minister's National Relief Fund, Armenia Earthquake Relief Fund, Africa Fund,
National Foundation of Communal Harmony, an approved University or
educational
institution of national eminence, Chief Minister's earthquake Relief Fund etc.
In all other cases donations made qualifies for the 50% of the donated amount for
deductions.
Deduction under section 80GG
Deduction in respect of Rent Paid:
Any assessee including an employee who is not in receipt of H.R.A. u/s 10(13A)
Amount of Deduction: Least of the following amounts are allowable: Rent paid
minus 10% of assessee's total income
Rs. 2,000 p.m.
25% of total income
72
Deduction under section 80GGA
73
Donations for Scientific Research or Rural Development:
In respect of institution or fund referred to in clause (e) or (f) donations made up to
31.3.2002 shall only be deductible.
This deduction is not applicable where the gross total income of the assessee
includes the income chargeable under the head Profits and gains of business or
profession. In those cases, the deduction is allowable under the respective sections
specified above. Deduction under section 80CCE
A new Section 80CCE has been inserted from FY2005-06. As per this section, the
maximum amount of deduction that an assessee can claim under Sections 80C,
80CCC
and 80CCD will be limited to Rs 100,000.
74
COMPUTATION OF TAX LIABILITY
• Tax Rates for A.Y. 2007-08

• Sample Tax Liability Calculations
• Filing of Income Tax Return
Tax Rates for A.Y. 2007-08

Following rates are applicable for computing tax liability for the current Financial
Year ending on March 31 2007, (Assessment Year 2007-08).
Table 1: For Resident Male Individuals below 65 years of age

Net Income Range Income Tax Plus Surcharge Plus Edu Cess
Up to Rs. 1,10,000 Nil Nil Nil
Rs. 1,10,000 to Rs. 10% of Income above Rs.
Nil 3% of Income Tax
1,50,000 1,10,000
Rs. 4,000 + 20% of
Rs. 1,50,001 to
Income above Rs. Nil 3% of Income Tax
Rs. 2,50,000
1,50,000
Rs. 24,000 + 30% of
Rs. 2,50,001 to
Income above Rs. Nil 3% of Income Tax
Rs. 10,00,000
2,50,000
Rs. 2,49,000 + 30% of
3% of Income Tax
Above Rs. 10,00,000 Income above Rs. 10% of Income Tax
and surcharge
10,00,000
Table 2: For Resident Female Individuals below 65 years of age
Plus Education
Net Income Range Income Tax Plus Surcharge
Cess
Rs.1,45,001 to 10% of Income above Rs.
Rs. 1,50,000 1,45,000
Rs. 1,50,001 to Rs. 500 + 20% of Income
Rs. 2,50,000 above Rs. 1,50,000
75
Rs. 2,50,001 to Rs. 20,500 + 30% of
Rs. 10,00,000 Income above Rs. 2,50,000
Rs. 2,45,000 + 30% of
3% of Income Tax and
surcharge
10,00,000
Table 3: For Resident Senior Citizens (who are 65 years or more at any time during the Financial
Year 2007-08)
Net Income Range Income Tax Plus Surcharge Plus Education Cess
Rs. 1,95,001 to Rs. 20% of Income above Rs.
2,50,000 1,95,000
Rs. 2,50,001 to Rs. 11,000 + 30% of Income
Rs. 10,00,000 above Rs. 2,50,000
Rs. 2,36,000 + 30% of
3% of Income Tax and
surcharge
10,00,000
76
Note: The rules for "Senior Citizen" are the same as for 'Men' as well as 'Women'.
Any person who turns 65 on any day prior to or on March 31, 2017 will be treated
as a Senior Citizen.
Tax Rates for A.Y. 2012-13, 2013-2014,2014-2015,2015-2016
&2016-2017 All rates are same.
Tax Rates for Assessment Year 2016-17 (Previous year 2015-16)
Income Tax Rates/Slab for Assessment Year 201314 (Previous Year

Rate(%age
2016-17)
Up to 2,00,000
Up to 2,00,000 (for women) NIL
Up to 2,50,000 (for resident individual of 60 years till 80 years)
200,001 - 5,00,000 10
Up to 500,000 (for resident individual of 80 years and above, Tax is nil) Nil
5,00,001 - 10,00,000 20
10,00,001 upwards 30
Sample Tax Liability Calculations
Table 4: For Resident Male Individuals below 65 years of age
Annual Taxable Income Income Tax Surcharge Education Cess Total
110000 0 0 0 0
145000 3500 0 105 3605
150000 4000 0 120 4120
195000 13000 0 390 13390
200000 14000 0 420 14420
250000 24000 0 720 24720
300000 39000 0 1170 40170
400000 69000 0 2070 71070
500000 99000 0 2970 101970
1000000 249000 0 7470 256470
1100000 279000 27900 9207 316107
Table 5: For Resident Female Individuals below 65 years of age
77
110000 0 0 0 0
145000 0 0 0 0
150000 500 0 15 515
195000 9500 0 285 9785
200000 10500 0 315 10815
250000 20500 0 615 21115
300000 35500 0 1065 36565
400000 65500 0 1965 67465
500000 95500 0 2865 98365
1000000 245500 0 7365 252865
1100000 275500 27550 9092 312142
Table 6: For Resident Senior Citizens (over 65 years age at any time during F.Y. 2007-08)
110000 0 0 0 0
145000 0 0 0 0
150000 0 0 0 0
195000 0 0 0 0
200000 1000 0 30 1030
250000 11000 0 330 11330
300000 26000 0 780 26780
400000 56000 0 1680 57680
500000 86000 0 2580 88580
1000000 236000 0 7080 24308
1100000 266000 26600 8778 30137
Filing of Income Tax Return

1. Filing of income tax return is compulsory for all individuals whose
gross annual income exceeds the maximum amount which is not chargeable
to income tax i.e. Rs. 1,45,000 for Resident Women, Rs. 1,95,000 for
Senior Citizens and Rs. 1,10,000 for other individuals and HUFs.
78
2. The last date of filing income tax return is July 31, in case of
individuals who are not covered in point 3 below.
3. If the income includes business or professional income requiring tax
audit (turnover Rs. 40 lakhs), the last date for filing the return is October
31.
79
4. The penalty for non-filing of income tax return is Rs. 5000. Long term capital
gain on sale of shares and equity mutual funds if the security transaction tax is
paid/imposed on such transactions
TAX PLANNING - RECOMMENDATIONS AND USEFUL TIPS
• Tax Planning
• Tax Planning Tools
• Strategic Tax Planning
o Insurance
o Public
Provident
Fund o
Pension
Policies
o Five year Fixed Deposits (FDs), National Savings Scheme (NSC),
other bonds
o Equity Linked Savings Scheme (ELSS)
• Income Head-wise Tax Planning Tips
80
Tax Planning
Proper tax planning is a basic duty of every person which should be carried out
religiously. Basically, there are three steps in tax planning exercise. These three
steps in tax planning are:
Calculate your taxable income under all heads i.e., Income from Salary, House
Property, Business & Profession, Capital Gains and Income from Other Sources.
Calculate tax payable on gross taxable income for whole financial 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 liability. You have two options to
choose 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 advantages
of several tax-saving schemes and depending upon your age, social liabilities, tax
slabs and personal preferences, decide upon a right mix of investments, which
shall reduce your tax liability to zero or the minimum possible.
Every citizen has a fundamental right to avail all the tax incentives provided 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 should plan our investments in such a way, that the
post-tax yield is the highest possible keeping in view the basic parameters of
safety and liquidity.
For most individuals, financial 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
81
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 aware the guidelines governing such investments are a lot
different this year. And lethargy on your part to rework your investment plan could
cost you dear.
Why are the stakes higher this year? Until the previous year, tax benefit was
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 every rise in the income slab; individuals earning
over Rs 500,000 per year were not eligible to claim any rebate. For the current
financial year, the Rs 100,000 limit has been retained; however internal caps have
been done away with. Individuals have a much greater degree of flexibility in
deciding how much to invest in the eligible instruments. The other significant
changes are: The rebate has been replaced by a deduction from gross total income,
effectively. The higher your income slab, the greater is the tax benefit.
All individuals irrespective of the income bracket are eligible for this investment.
These developments will result in higher tax-savings.
We should use this Rs 100,000 contribution as an integral part of your overall
financial 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 tax saving instruments for different
investor profiles. For persons below 30 years of age:
In this age bracket, you probably have a high appetite for risk. Your disposable
surplus maybe small (as you could be paying your home loan installments), but the
savings that you have can be set aside for a long period of time. Your children, if
any, still have many years before they go to college; or retirement is still further
82
away. You therefore should invest a large chunk of your surplus 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
83
insurance, go in for pure term insurance to start with. Such policies are very
affordable and can extend for up 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 will gradually decline over this age bracket as a result of
which your exposure to the stock markets will need to be adjusted accordingly. As
your compensation increases, so will your contribution to the EPF. The life
insurance component can be maintained at the same level; assuming that you
would have already taken adequate life insurance and there is no need to add to it.
In keeping with your reducing risk appetite, your contribution to PPF/NSC
increases. One benefit 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 can help you fund your children's college
education). Table 6: Tax Planning Tools Mix by Age Group
Age Life insurance premium EPF PPF / NSC ELSS Total
< 30 10,000 20,000 20,000 50,000 100,000

30 - 45 10,000 30,000 25,000 35,000 100,000
45 - 55 10,000 35,000 30,000 25,000 100,000
> 55 10,000 - 65,000 25,000 100,000
For persons between 45 - 55 years of age:

You are now nearing retirement. To that extent it is critical that you fill in any
shortfall that may exist in your retirement nest egg. You also do not want to
jeopardize your pool of savings by taking any extraordinary risk. The allocation
will therefore continue to move away from risky assets like stocks, to safer ones
line the NSC. However, it is important that you continue to allocate some money
to stocks. The reason being that even at age 55, you probably have 15
84
- 20 years of retired life; therefore having some portion of your money invested for
longer durations, in the high risk - high return category, will help in building your
nest egg for the latter part of your retired life. For persons over 55 years of age:
You are to retire in a few years; then you will have to depend on your 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 are therefore
allocated to NSC. Your PPF account probably will mature early into your
retirement (if you started another account at about age 40 years). You continue to
allocate some money to equity to provide for the latter part of your retired life.
Once you are retired however, since you will not have 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 financial objectives is not a difficult exercise. All it
requires is for you to give it some thought, draw up a plan that suits you best and
then be disciplined in executing the same.
85
Tax Planning Tools
Following are the five tax planning tools that simultaneously help the assessees
maximize their wealth too.
Most of what we do with respect to tax saving, planning, investment whichever
way you call it is going to be of little or no use in years to come.
The returns from such investments are likely to be minuscule and or they may not
serve any worthwhile use of your money. Tax planning is very strategic in nature
and not like the last minute fire fighting most do each year.
For most people, tax planning is akin to some kind of a burden that they want off
their shoulders as soon as possible. As a result, the attitude is whatever seems ok
and will help save tax - 'let's go for it' - the basic mantra. What is really foolhardy
is that saving tax is a larger prerogative than that of utilisation of your hard earned
money and the future of such monies in years to come.
Like each year we may continue to do what we do or give ourselves a choice this
year round. Let's think before we put down our investment declarations this time
arou nd. Like each year product manufacturers will be on a high note enticing you
to buy their products and save tax. As usual the market will be flooded by agents
and brokers having solutions for you. 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 benefit of your section 80C benefits
2. Product are chosen based on their long term merit and not like fire fighting
options
undertaken just to reach that Rs 1 lakh investment mark
3. Products are chosen in such a manner that multiple life goals can be
fulfilled and that

they are in line with your future goals and expectations
86
4. Products that you choose help you optimise returns while you save tax in
the immediate
future.
87
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
in your control.
1. Insurance
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 to come, this will be lower or just equal to inflation and hence you are not
creating any wealth, infact you are destroying 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 and all the same release unproductive cash flow to be deployed into
more productive and wealth generating asset classes. Be careful of ULIPS; invest
if you are under 35 years of age, else as and when the stock markets are down or
enter into a downward phase. Your ULIP will turn out to be very expensive as your
age increases. Again I am sure you did not know this.
2. Public Provident Fund (PPF)
This has been a long time favourite of most people. It is a no-brainer and hence
most people prefer this but note this. The current returns are 8% and quite likely
that sooner or later with the implementation of the exempt tax (EET) regime of
taxation investments in PPF may become redundant, as returns will fall
significantly.
How this will be implemented is not clear hence the best option is to go easy on
this one. Simply place a nominal sum to keep your account active before there is
clarity on this front. EET may apply to insurance policies as well.
88
3. Pension Policies
This is the greatest mistake that many people make. There is no pension policy
today, which will really help you in retirement. That is the cold fact. Tulip pension
policies may help you to
89
some extent but I would give it a rating of four out of ten. It is quite likely that you
will make a sizeable sum by the time you retire but that is where the problem
begins. The problem with pension policies is that you will get a measly 2% or 4%
annuity when you actually retire. To make matters worse this will be taxed at full
marginal rate of income tax as well. Liquidity and flexibility will just not be there.
No insurance company or agent will agree to this but this is a cold fact.
Steer clear of such policies. Either make them paid up or stop paying Tulip
premiums, if you can. Divest the money to more productive assets based on your
overall risk profile and general preferences. Bite this - Rs 100 today will be worth
only Rs 32 say in 20 years time considering 5% inflation.
4. Five year fixed deposits (FDs), National Savings Scheme (NSC), other
bonds
These products are fair if your risk appetite is really low and if you are not too
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 tax and returns are tax-free completely. You get to
build a lot of wealth. However, note that this is fraught with risk. Though it is said
that this investment into an ELSS scheme is locked-in for three years you should
be mentally prepared to hold it for five to 10 years as well.
It is an equity investment and when your three years are over, you may not have
made great returns or the stock markets may 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 time the calculations can go wrong.
90
Nevertheless, strange as it may seem, the high-risk investment has the least tax
liability, infact it is nil as per the current tax laws. If you are prepared to hold for
long really long like five-ten years, surely you will make super normal returns.
91
That said ideally you must have your financial goal in mind first and then see how
you can
meet your goals and in the process take advantage of tax savings strategies.
There is so much to be done while you plan your tax. Look at 80C benefits as a
composite
tool. Look at this as a tax management tool for the family and not just yourself.
You have
section 80C benefit for yourself, your spouse, your HUF, your parents, your
father's HUF.
There are so many Rs 1 lakh to be planned and hence so much to benefit from
good tax
planning.
Traditionally, buying life insurance has always formed an integral part of an

individual's annual tax planning exercise. While it is important for individuals to
have life cover, it is equally important that they buy insurance keeping both their
long-term financial goals and their tax planning in mind. This note explains the
role of life insurance in an individual's tax planning exercise while also evaluating
the various options available at one's disposal.
Term plans
A term plan is the most basic type of life insurance plan. In this plan, only the
mortality charges and the sales and administration expenses are covered. There is
no savings element; hence the individual does not receive any maturity benefits. A
term plan should form a part of every individual's portfolio. An illustration will
help in understanding term plans better.
92
Cover yourself with a term plan
Table 7: Term Plan Returns Comparison
Tenure (Years)
HDFC Standard Life ICICI Prudential LIC (Anmol SBI Life Kotak Mahindra
(Term Assurance) (Life Guard) Jeevan I) (Shield) Old

Mutual
(Preferred Term
plan)
Tenure 20 25 30 20 25 30 20 25 30 20 25 30 20 25 30
Age 25 2,720 2,770 2,820 2,977 2,977 3,150 2,544 2,861 NA 1,954 2,180 NA 2,424 2,535 2,755
Age 35 3,580 4,120 4,750 4,078 4,900 NA 4,613 5,534 NA 3,542 4,375 NA 3,747 4,188 4,739
Age 45 7,620 NA NA NA NA NA NA NA NA 8,354 NA NA 7,797 8,970 NA
~ The premiums given in the table are for a sum assured of Rs 1,000,000 for a healthy, non-smoking
male.
~ Taxes as applicable may be levied on some premium quotes given above.
~ The premium quotes are as shown on websites of the respective insurance companies. Individuals are advised to
contact the insurance companies for further details.
Let us suppose an individual aged 25 years, wants to buy a term plan for tenure of
20 years and a sum assured of Rs 1,000,000. As the table shows, a term plan is
offered by insurance companies at a very affordable rate. In case of an eventuality
during the policy tenure, the individual's nominees stand to receive the sum
assured of Rs 1,000,000.
Individuals should also note that the term plan offering differs across life insurance
companies. It becomes important therefore to evaluate all the options at their
disposal before finalizing a plan from any one company. For example, some
insurance companies offer a term plan with a maximum tenure of 25 years while
93
other companies do so for 30 years. A certain insurance company also has an
upper limit of Rs 1,000,000 for its sum assured.
Unit linked insurance plans (ULIPs)
94
Unit linked plans have been a rage of late. With the advent of the private insurance
companies and increased competition, a lot has happened in terms of product
innovation and aggressive marketing of the same. ULIPs basically work like a
mutual fund with a life cover thrown in. They invest the premium in market-linked
instruments like stocks, corporate bonds and government securities (Gsecs).
The basic difference between ULIPs and traditional insurance plans is that while
traditional plans invest mostly in bonds and Gsecs, ULIPs' mandate is to invest a
major portion of their corpus in stocks. Individuals need to understand and digest
this fact well before they decide to
buy a ULIP.
Having said that, we believe that equities are best equipped to give better returns
from a long term perspective as compared to other investment avenues like gold,
property or bonds. This holds true especially in light of the fact that assured return
life insurance schemes have now become a thing of the past. Today, policy returns
really depend on how well the company is able to manage its finances.
However, investments in ULIPs should be in tune with the individual's risk

appetite. Individuals who have a propensity to take risks could consider buying
ULIPs with a higher equity component. Also, ULIP investments should fit into an
individual's financial portfolio. If for example, the individual has already invested
in tax saving funds while conducting his tax planning exercise, and his financial
portfolio or his risk appetite doesn't 'permit' him to invest in ULIPs, then what he
may need is a term plan and not unit linked insurance.
95
Pension/retirement plans
Planning for retirement is an important exercise for any individual. A retirement

plan from a life insurance company helps an individual insure his life for a specific
sum assured. At the same time, it helps him in accumulating a corpus, which he
receives at the time of retirement.
Premiums paid for pension plans from life insurance companies enjoy tax benefits
up to Rs 10,000 under Section 80CCC. Individuals while conducting their tax
planning exercise could consider investing a portion of their insurance money in
such plans.
Unit linked pension plans are also available with most insurance companies. As
already mentioned earlier, such investments should be in tune with their risk
appetites. However, individuals could contemplate investing in pension ULIPs
since retirement planning is a long term activity.
Traditional endowment/endowment type plans
Individuals with a low risk appetite, who want an insurance cover, which will also
give them returns on maturity could consider buying traditional endowment plans.
Such plans invest most of their monies in corporate bonds, Gsecs and the money
Table 8: Traditional Endowment Plan Returns

Age Sum Assured Premium Tenure Maturity Amount Actual rate of
(Yrs) (Rs) (Rs) (Yrs) (Rs)* return (%)
Company A 30 1,000,000 65,070 15 1,684,000 6.55

Company B 30 1,000,000 65202 15 1,766,559 7.09
96
market. The return that an individual can expect on such plans should be in the
4%-7% range as given in the illustration below.
97
~ The maturity amounts shown above are at the rate of 10% as per company illustrations.
Returns calculated by
the company are on the premium amount net of
expenses. ~ Taxes as applicable may be levied on some
premium quotes given above. ~ Individuals are advised to
contact the insurance companies for further details.
A variant of endowment plans are child plans and money back plans. While they
may be presented differently, they still remain endowment plans in essence. Such
plans purport to give the individual either a certain sum at regular intervals (in
case of money back plans) or as a lump sum on maturity. They fit into an
individual's tax planning exercise provided that there exists a need for such plans.
Tax benefits
Premiums paid on life insurance plans enjoy tax benefits under Section 80C
subject to an upper limit of Rs 100,000. The tax benefit on pension plans is subject
to an upper limit of Rs 10,000 as per Section 80CCC (this falls within the overall
Rs 100,000 Section 80C limit). The maturity amount is currently treated as tax free
in the hands of the individual on maturity under Section 10 (10D)
Income Head-wise Tax Planning Tips
Salaries Head: Following propositions should be borne in mind:
1. It should be ensured that, under the terms of employment, dearness

allowance and dearness pay form part of basic salary. This will
minimize the tax incidence on house rent allowance, gratuity and
commuted pension. Likewise, incidence of tax on employer's
98
contribution to recognized provident fund will be lesser if dearness
allowance forms a part of basic salary.
99
2. The Supreme Court has held in Gestetner Duplicators (p) Ltd. Vs
CIT that commission payable as per the terms of contract of employment at
a fixed percentage of turnover achieved by an employee, falls within the
expression "salary" as defined in rule 2(h) of part A of the fourth schedule.
C onsequently, tax incidence on house rent allowance, entertainment
allowance, gratuity and commuted pension will be lesser if commission is
paid at a fixed percentage of turnover achieved by the employee.
3. An uncommented 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 and partly exempt from tax in the case of non
government employees who can claim relief under section 89.
4. An employee being the member of recognized provident fund, who
resigns before 5 years of continuous service, should ensure that he joins the
firm which maintains a recognized fund for the simple reason that the
accumulated balance of the provident fund with the former employer will
be exempt from tax, provided the same is transferred to the new employer
who also maintains a recognized provident fund.
5. Since employers' contribution towards recognized provident fund is
exempt from tax up to 12 percent of salary, employer may give extra
benefit to their employees by raising their contribution 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 some conditions are satisfied.
Therefore, employees should go in for free medical facilities instead of
fixed medical allowance.
100
7. Since the incidence of tax on retirement benefits like gratuity,
commuted pension, accumulated unrecognized provident fund is lower if
they are paid in the beginning of the financial year, employer and
employees should mutually plan their affairs in such a way that retirement,
termination or resignation, as the case may be, takes place in the beginning
of the financial year.
8. An employee should take the benefit of relief available section 89
wherever possible. Relief can be claimed even in the case of a sum received
from URPF so far as it is attributable to employer's contribution and inte
rest thereon. Although gratuity received during the employment is not
exempt u/s 10(10), relief u/s 89 can be claimed. It should, however, be
ensured that the relief is claimed only when it is beneficial.
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
employee in a foreign country and later on remitted to India, it will be
exempt 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 satisfied, it should
be ensured that the travel concession should be claimed to the maximum
possible extent without attracting any incidence of 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 can claim these benefits without adding to their tax bill.
12. Since the term "salary" includes basic salary, bonus, commission,
fees and all other taxable allowances for the purpose of valuation of
101
perquisite in respect of rent free house, it would be advantageous if an
employee goes in for perquisites rather than for taxable allowances. This
will reduce valuation of rent free house,
102
on one hand, and, on the other hand, the employee may not fall in the category of
specified employee. The effect of this ingenuity will be that all the perquisites
specified u/s 17(2)(iii) will not be taxable. House Property Head: The following
propositions should be borne in mind:
1. If a person has occupied more than one house for his own residence,
only one house of his own choice is treated as self-occupied and all the
other houses are deemed to be let out. The tax exemption applies only in
the case of on self-occupied house and not in the case of deemed to be let
out properties. Care should, therefore, be taken while selecting the
house( One which is having higher GAV normally after looking into further
details ) to be treated as self-occupied in order to minimize the tax liability.
2. As interest payable out of India is not deductible if tax is not
deducted at source (and in respect of which there is no person who may be
treated as an agent u/s 163), care should be taken to deduct tax at source in
order to avail exemption u/s 24(b).
3. As amount of municipal tax is deductible on "payment" basis and
not on "due" or "accrual" basis, it should be ensured that municipal tax is
actually paid during the previous year if the assessee wants to claim the
deduction.
4. As a member 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
not paid) by the assessee, on outstanding installments of the cost of the
building, is claimed as deduction u/s 24.
103
5. If an individual makes cash a cash gift to his wife who purchases a
house property with the gifted money, the individual will not be deemed as
fictional
104
owner of the property under section 27(i) - K.D.Thakar vs. CIT.
Taxable income of the wife from the property is, however, includible
in the income of individual in terms of section 64(1)(iv), such
income is computed u/s 23(2), if she uses house property for her
residential purposes. It can, therefore, be advised that if an individual
transfers an asset, other than house property, even without 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 spouse(not being a transfer in connection with an agreement to live
apart), or to his minor child(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 to bring this situation in line with the provision of section 64.
But when the scope of section 64 was extended to cover transfer of assets without
adequate consideration to son's wife or minor grandchild by the taxation
laws(Amendment) Act 1975, w.e.f. A.Y. 1975-76 onwards the scope of section
27(i) was not similarly extended. Consequently, if a person transfers house
property to his son's wife without adequate consideration, he will not be deemed to
be the owner of the property u/s 27(i), but income earned from the property by the
transferee will be included in the income of the transferor u/s 64. For the purpose
of sections 22 to 27, the transferee will, thus, be treated as an owner of the house
property and income computed in his/her hands is included in the income of the
transferor u/s 64. Such income is to be computed under section 23(2), if the
transferee uses that property for self-occupation. Therefore, in some cases, it is
beneficial to transfer the house property without adequate consideration to son's
105
wife or son's minor child. Capital Gains Head: The following propositions
should be borne in mind
106
1. Since long-term capital gains bear lower tax, taxpayers should so
plan as to transfer their capital assets normally only 36 months after
acquisition. It is pertinent to note that if capital asset is one which became
the property of the taxpayer in any manner specified in section 49(1), the
period for which it was held by the previous owner is also to be counted in
computing 36 months.
2. The assessee should take advantage of exemption u/s 54 by investing
the capital gain arising from the sale of residential property in the purchase
of another house (even out of India) within specified period.
3. In order to claim advantage of exemption under sections 54B and
54D it should be ensured that the investment in new asset is made only after
effecting transfer of capital assets.
4. In order to claim advantage of exemption under sections 54, 54B,
54D, 54EC, 54ED, 54EF, 54G and 54GA the tax payer should ensure that
the newly acquired asset is not transferred within 3 years from the date of
acquisition. In this context, it is interesting to note that the transfer (one
year in the case of section 54EC) of a newly acquired asset according to the
modes mentioned in section 47 is not regarded as "transfer" even for this
purpose. Consequently, newly acquired assets may be transferred even
within 3 years of their acquisition according to the modes mentioned in
section 47 without attracting the capital tax liability. Alternatively, it will be
advisable that instead of selling or converting assets acquired under
sections 54, 54B, 54D, 54F, 54G and 54GA into money, the taxpayer should
obtain loan against the security of such asset (even by pledge) to meet the
exigency.
107
5. In 2 cases, surplus arising on sale or transfer of capital assets is
chargeable to tax as short-term capital gain by virtue of section 50. These
cases are: (i) when WDV of a block of assets is reduced to nil, though all
the assets falling in that block are not transferred, (ii) when a block of
assets ceases to exist.
Tax on short-term capital gain can be avoided if -
Another capital asset, falling in that block of assets is acquired at any time
during the previous year; or Benefit of section 54G is availed Tax payers
desiring to avoid tax on short-term capital gains under section 50 on sale or
transfer of capital asset, can acquire another capital asset, falling in that
block of assets, at any time during the previous year.
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
has generated long-term capital loss, it is taken as equal to zero. In other
words, if the shares are transferred, in national stock exchange, securities
transaction tax is applicable and as a consequence, the long-term capital
loss is ignored. In such a case, tax liability can be reduced, if shares are
transferred to a friend or a relative outside the stock exchange at the market
price (securities transaction tax is not applicable in the case of transactions
not recorded in stack exchange, long term loss can be set-off and the tax
liability will be reduced). Later on, the friend or relative, who has
purchased shares, may transfer shares in a stock exchange.
Clubbed Incomes Head: The following propositions should be borne in mind 1.
Under section 64(1) (ii), salary earned by the spouse of an individual from a
concern in which such individual has a substantial interest, either individually or
jointly with his relatives, is taxable in the hands of the individual. To avoid this
108
clubbing, as far as possible spouse should be employed in which employee does
not have any interest. In such a case this section will not be attracted, even if a
109
close relative of the individual has substantial interest in the concern.
Alternatively, the spouse may be employed in a concern which is inter
related with the concern in which the individual has substantial interest.
2. Income from property transferred to spouse is clubbed in the hands
of transferor. However, it has been held that income from savings out of pin
money (i.e., an allowance given to wife by husband for her dress and usual
house hold expenditure) is not included in the taxable income of husband.
Likewise, a pre-nuptial transfer (i.e., transfer of property before marriage)
is outside the mischief of section 64(1) (iv) even if the property is
transferred subject to subsequent condition of marriage or in consideration
of promise to marry. Consequently income from property transferred
without consideration before marriage is not clubbed in the income of the
transferor even after marriage. Income from property transferred to spouse
in accordance with an agreement to live apart, is not clubbed in the hands of
transferor. It may be noted that the expression " to live apart" is of wider
connotation and covers even voluntary agreement to live apart.
3. Exchange of asset between one spouse and another is outside the
clubbing provisions if such exchange of assets is for adequate
consideration. The spouse within higher marginal tax rate can transfer
income yielding asset to other spouse in exchange of an equal value of
asset which does not yield any income. For instance, X (whose marginal
rate of tax is 33.66%) can transfer fixed deposit in a company of Rs.
100,000 bearing 9% interest, to Mrs. X (whose marginal tax is nil) in
exchange of gold of Rs.100,000; he can reduce his tax bill by Rs. 3029(i.e.,
0.3366 x 0.09 x Rs 100000) without attracting provisions of section 64.
110
4. Provisions of section 64 (1) (vi) are not attracted if property is
transferred by an individual to his son in law or daughter in law of his
brother.
111
5. If trust is created for the benefit of minor child and income during
minority of the child is being accumulated and added to corpus and income
such increased corpus is given to the child after his attaining majority, the
provisions of section 64 (IA) are not applicable.
6. Explanation 3 to section 64 (1) lays down the method for computing
income to be clubbed on the basis of value of assets transferred to the
spouse as on the first day of the previous year. This offers attractive
approach for minimizing income to be clubbed by transfers for temporary
periods during the course of the previous year.
7. If a trust is created by a male member to settle his separate property
thereon for the benefit of HUF, with a stipulation that income shall accrue
for a specified period and the corpus going to the trust afterwards,
provisions of section 64 are not attracted.
8. If gifts are made by HUF to the wife, minor child, or daughter in law
of any of its male or female members (including karta), provisions of
section 64 are not attracted.
9. If an individual transfers property without adequate consideration to
son's wife, income from the property is always clubbed in the hands of the
transferor. If, however, an individual transfer's property without
consideration to his HUF and the transferred property is subsequently
partitioned amongst the members of the family, income derived from the
transferred property, as is received by son's wife, is not clubbed in the hands
of the transferor. It may be noted that unequal partition of property amongst
family members is not rare under the Hindu law and it does not amount to
transfer as generally understood under law, and, consequently, if, at the time
of partition, greater share is given out of the transferred property to son's
112
wife or son's minor child, the transaction would be outside the scope of
section 64 (1) (vi) and 64 (2)(c).
113
10. In cases covered in section 64, income arising to the
transferee, from property transferred without adequate consideration,
is taxable in the hands of transferor. However, income arising from
the accretion of such transferred assets or from the accumulated
income cannot be clubbed in the hands of the transferor.
11. A loan is not a "transfer" for the purpose of section 64.
12. Where the assessee withdrew funds lying in capital account of
firm in which he was a partner and advanced the same to his HUF
which deposited the said funds back into firm, the said loan by the
assessee to his HUF could not be treated as a transfer for the purpose
of section 64 and income arising from such deposits was not
assessable in the hands of the assessee.
Business and Profession head:
The following propositions should be borne in mind to save tax.
1. The Company is defined under section 2(17) as to mean the following:
• any Indian Company ; or
• any body corporate incorporated under the laws of a foreign country ; or
• any institution, association or a body which is assessed or was
assessable/ assessed as a company for any assessment year commencing
on or before April 1, 1970; or
• any institution, association or a body, whether incorporated or not
and whether Indian or non Indian, which is declared by general or
special order of the CBDT to be a company.
2. An Indian Company means a company formed and registered under the
companies' act
1956.
114
3. Domestic Company means an Indian company or any other
company which, in respect Of its income liable to tax under the Act, has
made prescribed arrangements for the declaration and payment of dividends
within India in accordance with section194.
115
4. Arrangement for declaration and payment of dividend: Three requirements are
to be satisfied cumulatively by a company before it can be said to be a
company which has made the necessary arrangements for the declaration
and payment of dividends in India within the meaning of section 194:
i. The share register of the company for all share holders

should be regularly maintained at its principal place of
business in India, in respect of any assessment year, at least
from April 1 of the relevant assessment year.
i. The general meeting for passing of accounts of the
relevant previous year and the declaring dividends in respect
therefore should be held only at a place within India.
ii. The dividends declared, if any, should be payable only
at a place within India to all share holders
5. A Foreign company means a company which is not a domestic company.
6. Industrial company is a company which is mainly engaged in the business of
generation or distribution of electricity or any other form of power or in the

construction of ships or in the manufacture or processing of goods or in mining.
116
Objective of the study
"To partner is the nation building process through progressive tax policy,
efficient and effective administration and improved voluntary compliance" .
• Meaning of person and assessee.
• How to charge tax on income.
• What is regarded as income under the Income-tax Act.
• To show gross total income.
• Income tax rates
• To know how to pay tax time to time
• To reduce the black Money in India
• This project studies the tax planning for individuals assessed to income tax.
• Main objective is pay tax without the help of CA or other person.
• To get full knowledge about Income tax.
117
Research
Methodology
118
Research Methodology
When you say that are undertaking a research study to find answers to a question,
you are implying that the process:
1 is being undertaken within a framework of a set of philosophies
(approaches):
2 uses procedures, methods and techniques that have been

tested for their validity and reliability;
3 is designed to be unbiased and objective.
Philosophies means approaches e.g. qualitative, quantitative and the

academic discipline in which you have been trained.
Validity means that correct procedures have been applied to find answers to a
question. Reliability refers to the quality of a measurement procedure that provides
repeatability and accuracy.
Unbiased and objective means that you have taken each step in an unbiased
manner and drawn each conclusion to the best of your ability and without
introduction your own vested interest.
Research is a process through which we attempt to achieve systematically

and with the support of data the answer to a question, the resolution of a
problem, or a greater understanding of a phenomenon. This process, which is
frequently called research methodology, has eight distinct characteristics:
• Research originates with a question or problem.

• Research requires a clear articulation of a goal.
119
• Research follows a specific plan of procedure.
• Research usually divides the principal problem into more manageable
sub problems.
• Research is guided by the specific research problem, question, or
hypothesis.
• Research accepts certain critical assumptions.
• Research requires the collection and interpretation of data in
attempting to resolve the problem that initiated the research.
• Research is, by its nature, cyclical; or more exactly, helical.
Descriptive research is used in this project report in order to know about cash
management services to clients and determining their level of satisfaction. This is
the most popular type of research technique, generally used in survey research
design and most useful in describing the characteristics of consumer behavior. The
method used was following:
> Questionnaire method
> Direct Interaction with the clients.
Research Design: -
Research design is considered as a "blueprint" for research, dealing with at

least four problems: which questions to study, which data are relevant, what data
to collect, and how to analyze the results. The best design depends on the research
question as well as the orientation of the researcher. Every design has its positive
and negative sides. In sociology, there are three basic designs, which are
120
considered to generate reliable data; these are cross-sectional, longitudinal, and
cross-sequential.
There are two kinds of research
designs namely; •
Exploratory
121
• Descriptive
The project assigned to me "Income Tax Reports". Is an exploratory cum
descriptive research, exploratory kind of research is done to explore the possible
outcomes, and as the project title is itself suggesting that I will be exploring the
influence of Timely Pay Income Tax returns by individual & organization.
Descriptive research design is a scientific method which involves observing and
describing the behavior of a subject without influencing it in any way.
Situation Analysis: - Conducting a situational analysis means analyzing

the company, its market, its competition and the industry in general. The situation
analysis is a background investigation. It involves obtaining information about the
company and its business environment by means of library, research.
Sources of Data
I have collected the information from only Primary sources. The sources are as
follows: -
I. Primary Source: - The questionnaire has been designed and same is

asked to the customers in the stores itself. With this mean primary data
has been collected.
II. Secondary data: - The sources of secondary data were internet, books and
newspaper articles. Sampling Design:-
1. Sampling universe:- All the Person of the DSIIDC.
2. Type of sampling: - Non- Probability
3. Total sample size:- 900 above members.
4. Sample Area: - Taxation Department.
5. Sample unit: - Office members.
122
6. Sample collection technique: - Questionnaire method
7. Sample collection Duration:- 45 days.
8. Sampling procedure:- purposive sampling.
9. Data representation technique:- Pie Chart.
10. Data analysis instrument:- All the data has been analyzed on the basis of
percentage basis.
123
Limitations
• 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 diverse insurance plans at different income levels of individual
assessees.
• This study may include comparative and analytical study of more than one
tax saving plans and instruments.
• This study covers individual income tax assessees only and does not hold
good for corporate taxpayers.
• The tax rates, insurance plans, and premium are all subject to FY 2015-16 only.
124
Data Analysis
And
Interpretation
125
Analysis of data is a process of inspecting, cleaning, transforming, and modeling
data with the goal of highlighting useful information, suggesting conclusions, and
supporting decision making. Data analysis has multiple facets and approaches,
encompassing diverse techniques under a variety of names, in different business,
science, and social science domains.
1. Are you Pay Income Tax returns?

a) Yes
b) No
income tax returns
Analysis of the above diagram
According to company worker 70% of them say they are pay income tax time
to time and rest of 30% not pay.
126
2. Choose a suitable term of proceed further?
a) I want to fill my tax

b) I would like to fill it through my agent
c) I would like to complete the procedure online
d) I do not want to file my tax
how to fill tax
According to company workers 10% fill tax manually, 50% fill tax through
agent, 30% fill tax through online and 10% do not pay tax.
127
3. Kindly select the slab of your income with respect to tax percentage:
a. 20,0001-50,0000 up to10%
b. 50,0001-1, 00, 001 up to 20%
c. 1, 00, 0000 up to 30%
tax percentage
According to tax slab rate 2 lacs above pay tax 10%, 5 lacs above pay tax
20% and 10 lacs & up to pay tax 30%.
128
4. What kind of tax you are paying?
a) Income tax
b) Property tax
c) Corporate tax
paying tax
According to this chat kind of paying tax income tax, property tax and
corporate tax.
129
5. Are you paying tax for your movable and immovable property?
a) Yes
b) No
income tax returns
According to this diagram 30% movable property and 70% immovable property.
130
6. Rate your overall tax clearance experience:
a) Excellent
b) Very good
c) Good
d) Not so good
clearance tax
According to this diagram overall tax clearance experience 67% say

excellent, 19% say very good, 9% say good and 5% say not good.
131
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 individual's total taxable income and age in the particular
financial year. Various types of pay tax for example:-
• House property tax
• Vat tax
• Advance tax
• Service tax
It is most important to pay tax time to time. If don't paid the tax at the fix
time then according to Income tax Law we charge penalty.
• Income tax is charged in assessment year at rates specified by
the Finance Act applicable on 1st April of the relevant assessment
year.
• It is charged on the total income of every person for the previous
year.
• Total Income is to be computed as per the provisions of the Act.
• Income tax is to be deducted at source or paid in advance
wherever required under the provision of the Act
So we can say that income tax is a sources of income through the government for
example tax deduction at sources, refunds. We provide easy to fill the tax with the
help of e- filling returns.
132
SUGGESTIONS :
For most Generation Y professionals, tax is something they would rather not be
involved with. These bright youngsters can tackle the toughest corporate challenge
but fumble when it comes to their own tax planning. It needn't be like that. Tax
planning may appear complicated but once you get the hang of it, it can be
empowering and rewarding. Just spend a little time to understand what it is all
about and the knowledge will benefit you for the rest of your life. Here are some
basics of tax planning.
Do you have to pay tax?
That depends on how much you earn and under what heads. Some salary
components such as the basic salary, dearness allowance, special allowance and
bonuses are taxable. Others such as house rent allowance, conveyance and other
reimbursements are exempt subject to rules. But apart from the income from your
employer, you may also earn interest on fixed deposits, bonds and on the balance
in your savings bank account. If you invest in stocks or funds, there may be
dividend income and capital gains as well. If you own property, there may be
rental income coming in.
If the income you earned in a financial year (1 April to 31 March) exceeds the
basic exemption limit of Rs 1.8 lakh (Rs 1.9 lakh for females), you have to pay tax
on it. From next year, this basic limit will be raised to Rs 2 lakh. The threshold is
higher for senior citizens but we won't get into that.
Tax deduction at source
Your employer calculates the tax payable and deducts it from your salary. But
since tax is payable on the combined total income, the TDS by your employer may
not suffice unless your income from other sources (interest, rent, capital gains, etc)
has been factored in. If you changed jobs during the year, you must report the
income from the previous employer a s well. If you don't do that, you will end up
availing the basic exemption twice in a year, which will lead to a big tax
outstanding at the end of the year.
Before your employer deducts tax, you are asked if you have made any tax saving
investments or are eligible for any other deduction or exemption. You can invest
up to Rs 1 lakh in any option under Sec 80C. Some of these are automatic-your
contribution to the PF, for instance. The other options are PPF, NSCs, tax saving
133
FDs, ELSS mutual funds, life insurance policies and pension plans. Your choice
should be guided by your needs and ability and willingness to
134
take risk. Don't buy an insurance plan if you don't have dependants. Don't jump
into equity-based ELSS funds if you can't stomach the risk of stock investments.
There are other deductions too. Medical insurance policies for yourself or your
parents are eligible for deduction under Sec 80D. If you submitted documentary
proof of all these investments to your employer within the stipulated time, the
TDS will be low. But if you missed the deadline, you would have paid more tax
than was due.
Do you have to file your return?
The CBDT has exempted taxpayers with an income of less than Rs 5 lakh from
filing their tax return. However, you can avail of this exemption only if you have
income from salary and bank interest. Also, this interest should not exceed Rs
10,000 in a year and you should have paid the tax due on it. You should also not
have any tax refund due.
If you have paid more tax than due, the only way you can get it back is by filing
your return. Don't look at filing your tax return as a painful exercise. Instead, think
of it as sending a bill to the Income Tax Department demanding a refund of the
amount you overpaid in taxes during the previous year .The sooner you do it, the
better it is for you because the faster your tax refund reaches you.
Understanding your Form 16
Your employer must have given you a Form 16, which is a certificate of the TDS
from your salary. For most salaried individuals, the Form 16 has nearly all the
details they need to put in their tax return form. But if they have other investments
as well, there could be TDS certificates from the bank or bond issuer on the
interest they might have earned. These details need to be filled in the tax return
form.
A refund is not the only reason to file your tax return. Your return is a declaration
of your income and will come handy when you are seeking a loan, buying
property, going abroad or even taking a large insurance cover. Banks want to see
your income details before they extend a loan. Many countries want to know if
you are financially stable before they issue you a visa. Insurance companies want
to know if the cover you want is commensurate with your income. The income tax
return i s your single sheet answer to all these queries.
135
Not filing your return can have serious repercussions. You can be slapped with a
penalty of up to '5,000 even though all your taxes are paid. Besides, it will
unnecessarily raise suspicion and the income tax department may scrutinize your
finances further.
136
How to file your return
You can file your return online or offline, by yourself or with the help of a tax
professional. It is advisable to take the help of a tax professional at least for the
first time. A chartered accountant will be able to guide you on how to fill up the
form and choose the ITR form that is applicable to your case. Once you get the
hang of it, you can start filing your return by yourself. Online filing is very simple
and doesn't require too much effort. There are websites that guide you at every
step of the process.
They even choose the correct ITR form for you based on your income so there is
zero chances of you going wrong. For as little as Rs 200-250, some portals even
cross check your return before it is filed to make sure it is error free. It is a small
fee to pay for peace of mind.
137
Questionnaire
Q1. Did you fill your income tax last year? If yes, please do mention the slab percentage
for the same:
Q2. Choose a suitable term to proceed further?
• I want to file my tax

• I would like to fill it through my agent
• I would like to complete the procedure online
• I do not want to file my tax
Q3. Kindly choose the type of income countable for tax clearance:
• Mutual funds
• Salary income
• Interests & dividends
• Limited partnership income
• Trust income & other pensions
• Business or professional income
Q4. Choose the dedications/ credits from the following:
• Registered saving plans

• Public pass transit receipts
• Moving expenses
• Charitable donations
• Labour sponsored funds
Q5. Kindly select the slab of your income with respect to tax percentage:
d. 20,0000-50,0000 up to10%
e. 51,0001-1, 00, 001 up to 20%
f. 1, 11, 0000- 1, 50, 0000 up to 30%
g. Above than this, please mention:______________________
138
Q6. What kind of tax you are paying?
d) Income tax
e) Property tax
f) Corporate tax
Q7. Are you paying tax for your movable and immovable property?
c) Yes
d) No
Q8. According to you what is the best benefit of paying tax:
• Clean record for commencing business

• Country Infrastructure growth
• Social security
• Others:_____________________
Q9. Rate your overall tax clearance experience:
e) Excellent
f) Very good
g) Good
h) Not so good
Q10. Did you change your income tax circle since you are filing for income tax?
• Yes
• No
Q11. Did you attach the following given documents for claiming your tax release?
• Social security year end statement

• Wages end year statement
• Interest end year statement
• Dividends end year statement
139
Q12. Are you sure these above enclosed statements are true and similar with your
previous tax file claim?
• Yes
• No
• Not sure
Q13. Kindly ensure if you have put in all credit statement:
• Yes
• No
Q14. Have you enclosed all of your employee business expenses?
• Yes
• No
Q15. Are you filing the tax return as a couple jointly?
• Yes
• No
Q16. Are you active partially or fully in any sort of government duty?
• Yes
• No
Q17. Please choose the disbursement option:
• Direct deposit on tax return

• Debit card on tax return
• Check mailed to the above address
• Others:________________________
140
BIBLIOGRAHY
-I- DSIIDC- www.dsiidc.com
-I- Income tax India - www. incometaxindia. gov. in
-I- Questionnaire- www.samplequestionnaire.com
141

Income Tax

Transféré par

Informations du document

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Income Tax

Transféré par

Droits d'auteur :

Formats disponibles

PROJECT REPORT ON

INCOME TAX PALNNING IN INDIA OF DELHI STATE INDUSTRIAL &

INFRASTRUCTUTE DEVELOPMENT CORPORATION LTD

Submitted for the partial completion of the degree of Master of Business

Submitted by: PROF : MOHD. NISHAT S.A. ANSARI

I FAYEQA ABDUL MIRA KONDKARI the student of ISMAIL YUSUF COLLEGE

DATE: 24th March,2018

• Knowledge based industrial Park (KBI) at Baprola

• Development of Built-up Factory Complex at Rani Khera.

• Development of housing for urban poor.

• Education - Construction of New Schools.

• Education - Roopantar Scheme

• Construction of Hospital-cum-Medical Complex.

• Development of Integrated Office Complex, Vikas Bhawan.

• Development of DTC Bus Depot at I.P. Estate.

• Re-development of Office Building at Wazirpur.

• Development of IT-cum-Flatted Factory Complex, Okhla.

• Development of Education-cum-Software Marketing Estate at Okhla.

The Corporation in addition to its service to the citizens of Delhi by

The Corporation supported the Delhi Urban Shelter Improvement Board,

a) Cost of application form for Registration-- Rs. 100/-

b) New Registration Charges -- Rs. 2000/-

c) Renewal charges for one year -- Rs. 1000/-

Delhi Emporium 'Bharati'

The 'ONE - SHOP' emporium is a treasure-trove of a mesmerizing range of art

Important events affecting the administrative set up in the Income-tax

deducted by their employers from monthly remuneration. Not equipped with

at mercy of the HR/Admin departments which never bothered to do even as little

• To study taxation provisions of The Income Tax Act, 1961 as amended by

• To make compliance easy.

• To enforce tax laws with fairness.

• Concept of assessment year and previous year.

• Meaning of person and assessee.

• How to charge tax on income.

• What is regarded as income under the Income-tax Act.

• To show gross total income.

• Income tax rates.

• To know how to pay tax time to time

• To reduce the black Money in India

• To get full knowledge about Income tax.

Tax Regime in India Chargeability of Income

Tax Scope of Total Income Total Income

Concepts used in Tax Planning

• The Income Tax Equation

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

Concepts used in Tax

Planning Tax Evasion

The Income Tax Equation:

Income from Salaries Income from House

Property Capital Gains

Profits and Gains of Business or Profession Income from

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

Income from House

Property Incomes Termed as House Property

taxable in the year.

i. Self-occupied property: deduction is restricted to a maximum of Rs.

1,50,000 for property acquired or constructed with funds furrowed on or after

1. As certain the full value of consideration received or accruing as a result of

Full Value of Consideration:

Capital Gains: Short-

term Capital Gains

Capital Gains Exempt from Tax:

Expenses Deductible from Business or Profession:

• Expenses deductible on actual payment only.