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Q1. What are the incomes from house property which are exempted from tax? ANS: Following incomes from house property is completely exempt from any tax liability:
i. ii. iii. iv. Income from any farmhouse forming part of agricultural income; Annual value of any one palace in the occupation of an ex-ruler; Property Income of a local authority; Property Income of an authority, constituted for the purpose of dealing with and satisfying the need for housing accommodation or for the purposes of planning development or improvement of cities, towns and villages or for both. (The Finance Act, 2002, w.e.f. 1.4.2003 shall delete this provision.); Property income of any registered trade union; Property income of a member of a Scheduled Tribe; Property income of a statutory corporation or an institution or association financed by the Government for promoting the interests of the members either of the Scheduled Castes or Scheduled tribes or both; Property income of a corporation, established by the Central Govt. or any State Govt. for promoting the interests of members of a minority group; Property income of a cooperative society, formed for promoting the interests of the members either of the Scheduled Castes or Scheduled tribes or both; Property Income, derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities by an authority constituted under any law for the marketing of commodities; Property income of an institution for the development of Khadi and village Industries;' Self-occupied house property of an assessee, which has not been rented throughout the previous year; Income form house property held for any charitable purposes; Property Income of any political party.
v. vi. vii. viii. ix.
xi. xii. xiii. xiv.
Q2. Define the term tax holidays. What are the different tax incentives for new units established in SEZ? ANS: A tax holiday is a temporary reduction or elimination of a tax. Governments usually create tax
holidays as incentives for business investment. The taxes that are most commonly reduced by national and local governments are sales taxes. In developing countries, governments sometimes reduce or eliminate corporate taxes for the purpose of attracting Foreign Direct Investment or stimulating growth in selected industries. Tax holiday is given in respect of particular activities, and sometimes also only in particular areas with a view to develop that area of business. Or If an assessee is permitted or given exemption for not to pay tax for certain number of year/ years then that particular year or years will be termed as Tax holiday. The following are the some of provisions mentioned by income tax department regarding tax holidays. 1. 100% export oriented units 10 year tax holiday is allowed for 100% of the income. 2. For newly established industrial undertaking in Free trade zones , electronic hardware technology park, software technology park or special economic zone- 10 year tax holiday is allowed for 100% of the profits(except for SEZ) For SEZ the deduction is as follows a) For the first 5 years 100% of export profit b) For the next 2 years 50% of export profit c) For the next 3 years 50% of export profit
Tax incentives for new units established in SEZ:
In India, SEZs are the special zones created by the Government and run by Government-Private or solely Private ownership, to provide special provisions to develop industrial growth in that particular area. The government of India launched its first SEZ in 1965, in Kandla, Gujarat. The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include:• • Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. • Exemption from minimum alternate tax under section 115JB of the Income Tax Act. External Commercial Borrowing by SEZ units up to US $ 12500 billion in a year without any maturity restriction through recognized banking channels. • • • • Exemption from Central Sales Tax. Exemption from Service Tax. Single window clearance for Central and State level approvals. Exemption from State sales tax and other levies as extended by the respective State Governments. The major incentives and facilities available to SEZ developers include:• • • • • • Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA. Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act. Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act. Exemption from dividend distribution tax under Section 115O of the Income Tax Act. Exemption from Central Sales Tax (CST). Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).
Currently there are 114(as on Oct 2010) SEZs operating throughout India in the following states. Karnataka - 18; Kerala - 6; Chandigarh - 1; Gujarat - 8; Haryana - 3; Maharashtra - 14; Rajastan - 1; Orissa - 1 TamilNadu - 16; Utter Pradesh - 4; West Bengal - 2. Additionally, more than 500 SEZs are formally approved (as on Oct 2010) by the Govt of India in the following states. Andhra Pradesh - 109; Chandigarh - 2; Chattisgarh - 2; Dadra Nagar Haveli - 4; Delhi- 3; Goa - 7; Gujarath - 45; Haryana - 45; Jharkand - 1; Karnataka - 56; Kerala - 28; Madhya Pradesh - 14; Mahrashtra - 105; Nagaland - 1; Orissa - 11; Pondicherry - 1; Punjab - 8; Rajasthan - 8; TamilNadu - 70; Uttarankhand - 3; Utter Pradesh - 33; West Bengal - 22;
Q3. What are the key steps to calculate the tax liability of an individual ? ANS: Steps to calculate the tax liability of an individual are: • Determine residential status- First of all to determine the residential status of the assessee. The incomes are taxed according to residential status i.e. Resident in India, Not Ordinarily resident, or Non resident. • Calculation of gross total income- For the calculation of the gross total income we should have to calculate the income of five heads according to the provisions of Income Tax Act. • Exempted Incomes- While calculating the incomes of the different heads, the incomes which are exempted will not be included. • Income of other persons to be included in the income of assessee- Few incomes of other persons (Sec. 64) includes in the income of assessee. • Set-off of losses- If there is negative income in a particular head then it is to be set off according to the provisions of Income Tax Act. • Deductions u/s 80- After the above steps, the aggregate amount of income is known as Gross Total Income. From the gross total income few deductions which are provided under section 80 of income tax act will be deducted. After deductions, the balance of income is known as Total Income or Taxable Income. The list of deductions available to an individual are as follows: 1. Investments and deposits (sec 80C) 2. Contribution to certain pension funds (sec 80CCC) 3. Contribution of new pension scheme (sec 80CCD) 4. Payment to medical insurance premium (sec 80D) 5. Medical treatment of handicapped dependents and amount deposited for maintenance of handicapped dependents (sec 80DD) 6. Expenditure on medical treatment of certain diseases (sec 80DDB) 7. Repayment of loan and interest thereon taken for higher education (sec 80E) 8. Donations to certain funds/charitable institutions etc. (sec 80G) 9. Deductions in respect of rent paid (sec 80GG) 10. Donations for scientific research and rural development (sec 80GGA) 11. Contribution to political parties (80GGC) 12. Profit and gain of new industrial undertaking set up for infrastructure development (sec 80IA) 13. Profit and gains of new industrial undertakings (sec 80IB) 14. profit and specific industrial undertakings establish in specific states (sec 80IC) 15. Deduction in respect of profits and gains from business of collecting and processing of bio gradable waste (sec 80JJA) 16. Deduction in respect of certain incomes of offshore banking unit (sec 80LA) 17. Deduction in respect of royalty income to authors (80QQB) 18. Deduction in respect of royalty on patent (sec 80RRB) 19. Deduction in case of person with disability (sec 80U) • Total Income rounded off in the multiple of ` 10 – The total income calculated will rounded off in multiple of Rs. 10. For this rupee five or more than Rs. 5 will be treated as Rs. 10 and less than Rs. 5 will be deleted. Q4. Define the treatment of remuneration paid to partners under income tax act. ANS: In all most all the partnership, provision for salary has been included and decided with mutual consent .But as per Income Tax Act, full amount of salary is not allowed as expenses in profit & loss account but salary is restricted to % of profit before salary to the partner. There are some conditions also which are to be complied to claim deduction of salary as expense in P & L account of partnership firm. Conditions are defined in section 40(b) of the income tax act.
1. Salary should be paid to working partner. 2. Salary must be written/authorized by the Partnership deed 3. Salary should be related to the period after the partnership deed date.
4. Salary must be with in limit of % of Book profit. Salary here means: salary, commission, remuneration (or any name whatever name called) Now detail of each condition. 1. Working partner: salary to sleeping partner is not allowed .and working partner definition has been given in explanation 4 of the section 40(b) • working partner means an individual who is actively engaged in conducting the affairs of the business or profession of the firm of which he is a partner From above definition it is clear that " full time" attendance to any or all of the tasks of the partnership . 2. Salary must be written/authorized by the Partnership deed: To claim the expense of salary of partner in p& L salary should be authorized by the partnership deed and it should also be according to the conditions/terms defined in the partnership deed. • • Clause in partnership should be clear and amount should be defined. Board has issued a circular also related to clause in partnership deed for salary to partners
Whether for assessment years subsequent to assessment year 1996-97, no deduction under section 40(b)(v) will be admissible unless partnership deed either specifies amount of remuneration payable to each individual working partner or lays down manner of quantifying such remuneration 1. The Board have received representations seeking clarification regarding this allowance of remuneration paid to the working partners as provided under section 40(b)(v) of the Income-tax Act. In particular, the representations have referred to two types of clauses which are generally incorporated in the partnership deeds. These are : (i) The partners have agreed that the remuneration to a working partner will be the amount of remuneration allowable under the provisions of section 40(b)(v) of the Income-tax Act; and (ii) The amount of remuneration to working partner will be as may be mutually agreed upon between partners at the end of the year. It has been represented that the Assessing Officers are not allowing deduction on the basis of these and similar clauses in the course of scrutiny assessments for the reason that they neither specify the amount of remuneration to each individual nor lay down the manner of quantifying such remuneration. 2. The Board has considered the representations. Since the amended provisions of section 40(b) have been introduced only with effect from the assessment year 1993-94 and these may not have been understood correctly the Board are of the view that liberal approach may be taken for the initial years. It has been decided that for the assessment years 1993-94 to 1996-97 deduction for remuneration to a working partner may be allowed on the basis of the clauses of the type mentioned at 1(i) above. 3. In cases where neither the amount has been quantified nor even the limit of total remuneration has been specified but the same has been left to be determined by the partners at the end of the accounting period, in such cases payment of remuneration to partners cannot be allowed as deduction in the computation of the firms income. 4. It is clarified that for the assessment years subsequent to the assessment year 1996-97, no deduction under section 40(b)(v) will be admissible unless the partnership deed either specifies the
amount of remuneration payable to each individual working partner or lays down the manner of quantifying such remuneration.
Circular: No. 739, dated 25-3-1996. The above circular is very clear so, from ay 1996-97 onwards amount should be defined in the partnership deed. 3. Salary should be related to the period after the partnership deed date: The salary as per partnership deed should be after the partnership deed. If payment is related to period earlier than the date of partnership deed, then it will be disallowed as exp. 4. Salary must be with in limit of % of Book profit. As per section following % has been defined with in which salary can be claimed for partners.% chart is given below:
THE ABOVE RATES HAS BEEN PROPOSED TO BE CHANGED FROM 01.04.2010 means from Assessment year 2010-11 or financial year 2009-10 AS UNDER
Common rate for both type of Firm whether covered under 44AA or not.
New Rates proposed in Budget 2009
On the First three lakh of the Profit or In case of Loss: 150000 or 90 % of profit which ever is more. On balance profit:60% of the profit
Profession notified under section 44AA.
legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration ,profession of authorized representative, the profession of film artist (actor, cameraman, director, music director, art director, dance director, editor, singer, lyricist, story writer, screen play writer, dialogue writer and dress designer),Profession of Company Secretary, Profession of Information Technology.
Calculation Of book Profit. 1. Take profit as per P& L account. 2. Add back salary given to partners if debited in p& L earlier. 3. Make adjustment for expenses allowed/disallowed as per section 28- 44D.
4. If expenses /Income of other head like house property or income from other sorcse, capital
gain has been debited /credit then reverse backs the amount from profit & loss account. 5. As the depreciation b/f is covered under section 32(2) ,so adjustment should be made for b/f depreciation to calculate the book profit but adjustment can be done only upto maximum of profit of current year before depreciation minus b/f loss of the previous years . suppose Profit as per P & L = 220850 Depreciation =111474.00 Net profit after depreciation =109376 salary of partner given =108000 Now salary allowed as per section 40(b) is given below Book profit=109376 • If firm is covered under 44AA(profession prescribed): 1. On first 100000=90% of 100000=90000 2. On balance 9376 @ 60%=5626 Total allowed=90000+5626=95626
if firm is not covered under above: any other firm 1. On first 75000=90% of 100000=67500 2. On (109376-75000=34376) @ 60%=20986
Q5. Describe in brief the provisions for set off and carry forward of losses. ANS:
Set off in Same Assessment Year Carried forward to No of Years for which it Subsequent Assessment can be carried forward Year Only against Income from House Property.
Nature of Loss
Income from House Property
Let Out Property Self Occupied Property
Income from Any Head of Income.
Speculation Business Other Business or Profession
Only against Speculation Profit. Any Income except Salary.
Only against Speculation Profit. Only against Profit or Gains from business or Profession.
Any Loss from Business or Profession other than Speculation Loss and Unabsorbed Depreciation
Long Term Capital Gains
Only against Long term
Only against Long term Capital Gains.
Capital Gains. Capital Gains Short Term Capital Gains Only against Capital Gains (Both Short Term & Long Term). Only against Income from owning and maintaining Race Horses. Any Income. Any Head of Income except Salary. Only against Capital Gains (Both Short Term & Long Term). Only against Income from owning and maintaining Race Horses. No Carry Forward Any Head of Income except Salary.
Income from owning and maintaining Race Horses
Other Sources Profit or Gains from Business or Profession
Income from Other Sources Unabsorbed Depreciation
NA No time limit. Shall be carried forward to Subsequent assessment year and shall be deemed to be the Depreciation of that year.
Profit or Gains from Business or Profession
Scientific and Research Expenditure
Shall be carried forward to Subsequent assessment year and shall be deemed to be the Scientific ans Research Expenditure of that year. Shall be carried forward to Subsequent assessment year and shall be deemed to be the Installment of that year. Shall be carried forward to Subsequent assessment year and shall be deemed to be the Family Planning Expenditure of that year.
Profit or Gains from Business or Profession
Can be carried forward upto the 10th assessment year reckoned from the year of commercial production.
Profit or Gains from Business or Profession
Family Planning Expenditure NA
Q6. Compute the net wealth and wealth tax liability of Golden Jewelers ltd. as on 31-3-11. The company is engaged in the jewellery business export and domestic sales
Factory buildings Bank Balance Unaccounted cash balance Silver ware Gold ornaments Motor cars
520000.00 140000.00 25500.00 1200000.00 3500000.00 150000.00
The company has taken a loan of Rs. 600000.00 for factory premise ANS:
Master of Business Administration- MBA Semester 3 MF0012 – Taxation Management - 4 Credits (Book ID: B1037) Assignment Set- 1
Q1) Write a short note on: a) Cost of acquisition b) Cost of improvement c) Expenditure on transfer d) Transfer ANS: a) Cost of acquisition: Acquisition cost is the pretax amount of money it costs to gain title to any property. Acquisition cost usually applies to fixed assets. The acquisition cost accounting amount is always calculated at the amount after all discounts, closing costs, transfer costs, and other adjustments are made. Used in accounting, acquisition cost is also a term applied to IRA withdrawals for any tax penalty free amount applied to buy a first home. Acquisition cost of a first home would, then, be the post-closing cost including any repairs. Acquisition cost adjustments also include financing costs, so the IRA-eligible withdrawal amounts could include some of the mortgage fees required to close. Acquisition cost of a computer purchased for business use is a common question for IRS expense rules: "The entire acquisition cost of a computer purchased for business use can be expensed under Code section 179 in the first year if qualified, or depreciated over a 5-year recovery period." Acquisition cost is a required accounting line item and calculation for any MACRS expenses deducted. Acquisition cost often appears in summaries of a company's cost to acquire customers. Acquisition cost of a customer is really a sales expense in a customer acquisition context. b) Cost of improvement: is capital expenditure incurred by an assessee in making any additions/improvement to the capital asset. It also includes any expenditure incurred to protect or complete the title to the capital assets or to cure such title. To put it differently, any expenditure incurred to increase the value of the capital asset is treated as cost of improvement. Special provisions under the Income-tax Act in respect of cost of improvement should be noted as under:
Expenditure incurred before April 1, 1981 not considered - Any cost of improvement incurred before April 1, 1981 is not taken into consideration for calculating capital gain chargeable to tax. This rule does not have any exception. In other words, cost of improvement includes only expenditure on improvement incurred on or after April 1, 1981. Expenditure incurred on improvement of a capital asset before April 1, 1981 is always taken as equal to zero. Double deduction not permitted - Cost of improvement does not include any expenditure which is deductible in computing the income chargeable under the heads “Interest on securities”, “Income from house property”, “Profits and gains of business or profession” and “Income from other sources”.
c) Expenditure on Transfer: Expenditure incurred wholly and exclusively in connection with the transfer of a capital asset is deductible from full value of consideration. The expression “expenditure incurred wholly and exclusively in connection with such transfer” means expenditure incurred which is necessary to effect the transfer. Examples of such expenses are brokerage or commission paid for securing a purchaser, cost of stamp, registration fees borne by the vendor, traveling expenses incurred in connection with transfer, litigation expenditure for claiming enhancement of compensation awarded in the case of compulsory acquisition of assets. One should also keep in view the following propositions:
Vague claim for expenses is not allowable Expenditure in connection with transfer need not necessarily have been incurred prior to passing of title.
If a sum has already been subject-matter of deduction under other heads, the same cannot be allowed as deduction under section 48.
Q2) Write a short note on deductions under section: a) 80 DD b) 80 G c) 80 GG d) 80lb e) 80 U ANS:
a) Medical Treatment of Handicapped Dependant [SEC 80DD]
Expenditure incurred for the medical treatment, training and rehabilitation of a handicapped dependant, or the assessee has paid or deposited under any scheme framed in this behalf by the LIC or UTI for maintenance of handicapped dependant. b) Donation [SEC 80G] Donations are classified into a) no limit donation , b ) with limit donation. Each of these can again be classified into two. 1) Deduction allowed @ 100 % of qualifying amount and 2) deduction allowed @ 50 % of qualifying amount. c) Rent Paid [Sec 80GG]. Self employed persons or a salaried employee who is not in receipt of any house rent allowance, are eligible for the deduction. Adjusted total income for this section means gross total income minus LTCG and all deduction u/s 80 other than Sec 80GG. d) Profit from industrial undertakings other than infrastructure and building projects [Sec 80IB] This deduction is available to an assessee, whose gross total income includes profits from specific business. e) Income of handicapped resident individual [Sec 80U] This deduction is available only if it is certified by a physician, surgeon or psychiatrist as the case may be working in a govt. hospital. Such certificate has to be produced before I.T.O in respect of the first AY for which deduction is claimed. In short: Section a) 80DD b) 80G c) 80GG d) 80U Eligible assessee Individual& HUF All assessee Individual & HUF Individual resident in India Eligibility Treatment of handicapped dependant Approved donation Rent paid Disability Quantum of deduction Rs.50000 (for more than 80% disability Rs.75000) 100% in some case and 50% in other case #Rs.2000p.m #Rent paid in excess of 10% of ATI Rs.50000(disability is over 80% , Rs75000)
Q3) Explain the tax provisions for dividend , interest and royalty. ANS: Dividend:
It means any amount paid by a company, out of divisible profits, whether taxable or not taxable, to its share holders in proportion to his share holding in the company. Dividend also includes deemed dividend. The following payments are deemed as dividend. a) any distribution entailing the release of company’s assets b) any distribution of debentures, debenture stock, deposit certificates c) distribution on liquidation of company d) distribution on reduction of capital e) any payment by way of loan or advance by a closely held company Dividend distributed or paid by a domestic company after 31-3-2003 is not taxable in the hands of the shareholder under sec10 (34). On such dividend, the dividend declaring company has to pay tax. But deemed dividend under sec2 (22) is taxable in the hand of the share holders. Interest on securities: Interest on securities is charged to tax under this head if the securities are held by the assessee as fixed assets. If the securities are held as stock in trade then the interest is taxable under the head profit and gains of business or profession. The gross interest (net interest plus tax deducted at source) is taxable. If net interest is given, it should be grossed up in the hands of recipient if tax is deducted at source by the payer. Net interest X 100 100- Rate of TDS No 1 2 3 4 Particulars Interest on any security of central or state government Interest on debentures listed in a recognized stock exchange, statutory bodies and local authority Any other interest on security[unlisted] Winnings from lottery, crossword puzzles, card games, horse race etc TDS Rate No TDS 10% 20% 30%
For the purpose of income tax purpose, the securities can be classified into 1. Government securities: a. Tax-free securities i. Interest fully exempted ii. Not included in the total income b. Less- tax securities i. Issued by central govt. or state govt. ii. Non TDS iii. Taxable securities iv. Interest received should not be grossed up 2. Commercial securities a. Tax-free securities i. Local authority, statutory corporation and company issues in the from of debentures and bond ii. Tax is paid by the issuer iii. Since tax is paid by the issuer it is termed as tax-free securities iv. Interest should be grossed up b. Less tax commercial securities i. Taxable securities ii. TDS is collected iii. Interest should be grossed up if net amount is given
Royalties: (Sometimes, running royalties, or private sector taxes) are usage-based payments made by one party (the "licensee") and another (the "licensor") for ongoing use of an asset, sometimes an intellectual property (IP). Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such. Royalty income of authors [u/s Sec 80 QQB] This deduction is allowable up to maximum Rs. 3.00,000 for a resident individual. Assessee should furnish a certificate in Form 10CCD from the person responsible for paying the person
responsible for paying the income. The book authored by him/her is a work of literary, artistic or scientific nature and it does not include guides, textbook of schools and other similar publication. Royalty on Patents [Sec 80 RRB] This deduction is allowable up to, Rs.300000 or actual amount (which ever is less) for a resident individual. The assessee should furnish a certificate in Form 10 CCE duly signed by controller of Patents Act along with the return of income. If it is received from outside India the income should brought into India in convertible foreign exchange within 6 months from the end of the relevant PY.
Q4) Company A is proposed to be merged with company B . the following are the particulars of the former company Unabsorbed depreciation Rs. 45600000.00 Unabsorbed business loss Rs. 145000.00 Consider which of the benefit can be availed of by the company and advice the latter on the conditions to be fulfilled to claim each such benefit. ANS: Q5) Discuss the provisions relating to set off of losses in the following cases: i) Speculation loss ii) Short term capital loss iii) Long term capital loss iv) Losses from horse race, gambling and cross word puzzles ANS: i) Speculation Loss: Any loss from speculation business can only be set off from another speculation business income, not from general business income. Although general business can be set off against the income from general business as well as from speculation business. Further, loss incurred from speculation loss (e.g. from shares or commodities) cannot be set off against any other income. Also, it is unlikely that the benefit of set off of loss under an activity or source will be available, where the income from an activity or source is exempt from taxation.
ii) Short term capital loss: These losses can only be set off against the Capital Gains (Both Short Term & Long Term). iii) Long term capital loss: LTCL can only be set off against Long Term Capital Gains and cannot be set off against Short Term Capital Gains. iv) Losses from horse race, gambling and cross word puzzles: If there is a loss from horse race then it cannot be set off from other horse income. And also, No loss can be set-off against casual income i.e. Income from lotteries, cross word puzzles, betting gambling and other similar games.
Q6) what are the deductions available from gross salary income? ANS: These deduction are as follows:
1. Entertainment Allowance 2. Tax On Employment 3. Deduction U/S 80c Out Of Gross Total Income
4. Deduction Of Tax From The ‘Salary’
1. Entertainment Allowance [ U/s 16(ii)] Some employees are required to incur expenditure on the entertainment ( tea etc.) of customers, clients etc. who came to meet them in connection with their official or business work. In case employee is given a fixed amount every month to meet this type of expenditure then it is fully added in salary and out of Gross total Salary , a deduction u/s 16(ii) shall be allowed only to Govt. employees. This means that in case this allowance is given to employee working in private sector, it is fully taxable. But in case any amount is reimbursed against any expenditure incurred by employer, it shall be fully exempted. Deduction u/s 16(ii) admission to govt. employee shall be an amount equal to least of following: 1. Statutory Limit of Rs.5,000 p.a. 2. 1/5 th of Basic Salary 3. Actual amount of entertainment allowance received during the previous year. 2. Tax on Employment u/s 16(iii) In case any amount of professional tax is paid by the employee or by his employer on his behalf it is fully allowed as deduction. 3. Deduction U/S 80c Out Of Gross Total Income Savings play a vital role in the fast economic development of nay country. To encourage savings, an incentive in the form of a deduction out of one’s taxable income has been allowed. To channelise those savings, various schemes have been framed and if the assessee deposits those savings in these approved saving schemes, a deduction shall be allowed. Section 80C has been inserted from the assessment year 2006-2007 onwards. Section 80C provides deduction i8n respect of specified qualifying amounts paid deposited by the assessee in the previous year. The following are the main provisions of the newly inserted Section 80C. : 1. Under Section 80C , deduction would be available from Gross Total Income. 2. Deduction under section 80C is available only to individual or HUF. 3. Deduction is available on the basis of specified qualifying investments / contributions / deposits / payments made by the taxpayer during the previous year. 4. The maximum amount deduction under section 80C , 80CCC, and 80CCD can not exceed Rs.1 lakh. Deduction u/s 80C shall be allowed only to the following assessee : 1. An Individual 2. A Hindu Undivided Family (HUF) The Deduction is calculated as per the following steps – Step-1: Gross qualifying Amount which is the aggregate of the following… 1. Life Insurance Premium 2. Payment in respect of non-commutable deferred annuity.
3. Any sum deducted form salary payable to Govt. employee for the purpose of securing him a deferred annuity. 4. Contribution towards Statutory Provident Fund and Recognised Provident Fund. 5. Contribution towards 15-year Public Provident Fund 6. Contribution towards an Approved Superannuation Fund. 7. Subscription to National Saving Certificates, VIII Issue. 8. Contribution for participating in the Unit-linked Insurance Plan (ULIP) of UTI. 9. Contribution for participating in the Unit-linked Insurance Plan (ULIP) of LIC Mutual Fund. 10. Payment to notified annuity plan of LIC 11. Subscription towards notified Units of Mutual Fund or UTI. 12. Contribution to notified Pension Fund set up by Mutual Fund or UTI. 13. Any sum paid as subscription to Home Loan Account Scheme of the National Housing Bank. 14. Any sum paid as Tuition Fees for full time education of any 2 children of an individual. 15. Any payment towards the cost of purchase / construction of a residential Property. 16. Amount invested in approved Debenture of , and equity shares in, public company engaged in infrastructure. 17. Amount deposited in as Term Deposit for a period of 5 years or more in accordance with a scheme framed by the Government. 18. Subscription to any notified Bonds of National Bank for Agriculture and Rural Development ( NABARD) 19. Amount deposited under Senior Citizens Saving Scheme. 20. Amount deposited in 5 Year Time Deposit in Post Office. Step-2: Net Qualifying Amount : Deduction u/s 80C is available on the basis of Net Qualifying Amount which is determined as under … 1. Gross Qualifying Amount ; or 2. Rs. 1,00,000 Whichever is LESS. Step-3: Amount of Deduction: Amount Deduction u/s 80C is computed as under: 1. Net Qualifying Amount ; or 2. Rs. 1,00,000 Whichever is LESS. The aggregate deduction u/s 80C, 80CCC, and 80 CCD can not exceed Rs. 1,00,000.
4. DEDUCTION OF TAX FROM THE ‘SALARY’ [SECTION-192]
The summarized provisions of Sec. 192 are given below : Who is the taxpayer Who is the recipient Payment covered At what time tax has to be deducted at source Maximum amount which can be paid without Tax Deduction Rate of tax deducted at source Employer Employee Taxable salary of the employee At the time of payment The amount of exemption limit ( i.e. Rs.1,80,000 / Rs.2,25,000/Rs.1,50,000 for the assessment year 2009-10.) Normal Rates applicable to an individual
The employee can make an application in Is it possible to get the payment without tax Form No.-13 to the Assessing Officer to get a deduction or with lower tax deduction certificate of lower tax deduction or no tax deduction. Note: Rs. 1,80,000 is for Resident Women below 65 years Rs. 2,25,000 is for Senior Citizen 65 years or more.
RELIEF IN RESPECT OF SALARY IN ARREARS, ADVANCE, ETC. If an individual receives any portion of his salary in arrears or in advance or receives profit in lieu of salary, he can claim relief in terms of Sec.89
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