the partial completion of the degree of Master of Business Administration AT

Internal guide: Mr. Amrinder Singh

Submitted by: Archana Singh Roll No: 1172556


 Declaration  Certificate from the Organization  Certificate of Supervisor (Guide)

 Acknowledgement
 Chapter-1 Introduction Page No 06-11 12-17 18-18 19-20 21-84 85-85 Research Methodology 85-86 87-88 88-88 88-89 89-89 89-90 91-91 1.1 Profile of the Organization 1.2 About the Topic 1.3 Need of the study 1.4 Objectives of the study 1.5 Income Tax Act 1.6 Objective of study  Chapter-2

2.1 Statement of the research methodology 2.2 Research Design 2.3 Sampling Techniques used 2.4 Selection of Sample Size 2.5 Data Collection 2.6 Statistical Tools Used 2.7 Limitations of the Study  Chapter-3 Data Analysis and interpretation  Chapter-4 Conclusion and Suggestions  Questionnaire  Bibliography


97-102 103-105 106-106


I, Archana Singh, a Student of MBA 2011-13 Batch, Bhai Gurdas Institute of Engg. & Technology, hereby declare that the project on “INCOME TAX PLANNING IN INDIA” is my original work and that it has not previously formed the basis for the award of any other Degree, Diploma, Fellowship or other similar titles.

Archana Singh



Jalandhar.CERTIFICATE OF APPROVAL This is to certify that the project work entitled “ INCOME TAX PLANNING IN INDIA” is a bonafide work carried out by Mss. Amrinder Singh Lecturer (BGIET. The project report has been approved here with. Archana Singh in partial fulfillment for the degree of Master Business Administration from BGIET. SANGRUR) 5 . Punjab Technical University. Mr.

I want to owe my thanks to all those individuals who guided me to move on the track. Amrinder Singh Lecturer for educating and guiding me at each and every stage and providing me the information related to my chosen topic. I would like to appreciate the pain staking effort of Mr. I owe my special regards to my parents and my elders for their blessings and good wishes. guidance and knowledge dispensed to me by Respected Supervisor. Archana Singh 6 . This report entitled “Income Tax Planning in India ” is the outcome of my final project report . Amrinder Singh who not only lent her considerable time and energy to the understanding. Words are not sufficient to express the greatness for the help. Last but not least. but also helped me a great deal in making this report see the light of the day.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 am equally thankful to the whole team of MBA department of “ Bhai Gurdas Institute of Engineering and Technology” Sangrur extended their full co-operation and assistance. Mr.

7 .  Development of Education-cum-Software Marketing Estate at Okhla. epitomizes the entire nation. assisted.  Education – Roopantar Scheme  Construction of Hospital-cum-Medical Complex. a city of some 10 million people.COMPANY PROFILE Delhi State Industrial and Infrastructure Development Corporation Ltd. Okhla.  Development of housing for urban poor. Delhi State Industrial and Infrastructure Development Corporation Ltd.  Education – Construction of New Schools. counseled. DSIIDC has projected. Estate.  Development of IT-cum-Flatted Factory Complex. (DSIIDC) has played a key role in propelling the development of Delhi by shaping up the Indian capital. (DSIIDC) Delhi.  Development of DTC Bus Depot at I. financed and promoted projects to transform the face of Delhi.P.  Re-development of Office Building at Wazirpur. aided. Vikas Bhawan. DSIIDC is poised for huge responsibility as many big projects are at various stages of inception and/or execution.  Development of Integrated Office Complex. Important among these are:  Knowledge based industrial Park (KBI) at Baprola  Development of Built-up Factory Complex at Rani Khera. being the capital. Since it was established in February 1971.

8 .

000/.55. The Corporation during the year 2011-12 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.600/-. Government of NCT of Delhi by providing Modern Fireproof Night Shelters for the homeless people of Delhi especially during the harsh winter. supports various social causes of Delhi.and our engineers also provided technical support to DUSIB in timely setting up of the Night Shelters. The total support by the Corporation for this noble cause was Rs.Corporate Social Responsibility The Corporation in addition to its service to the citizens of Delhi by providing industrial infrastructure facilities. The Corporation provided monetary support of Rs.14.14.19. Organization Structure 9 . The Corporation supported the Delhi Urban Shelter Improvement Board.

of India. white metal and other handicraft products. fabric. India.Marketing Division One of the objectives of DSIIDC is to promote the sales of products of SSI Units situated in National Capital of Delhi. to make it an ideal shopping store. paintings. marble. Delhi Administration. wood-carving. exhibition and everything else that goes with it. 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. With its products. 100/b) New Registration Charges -. India’s vast cultural and ethnic diversity is reflected through easily accessible and consumer friendly concept of exhibit and sale of products.Rs. on a nominal fee as per the details given below: a) Cost of application form for Registration-. the SSI Units. Under this Marketing Scheme. entrepreneurs of DSIIDC. public undertakings and State-Govt. each inimitable in style. shawls.Rs. 1000/The registered Business Associates are supplying their products to the purchasing departments of Govt. concept. Delhi Emporium 'Bharati' “Bharti” a showcase of the creations of Indian craftsmen. theme. The ‘ONE – SHOP’ emporium is a treasure-trove of a mesmerizing range of art forms and conventional crafts. garments. leather. handloom. brass ware. paintings. aroused curiosity. ambience. 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. like sarees. A rare fusion of tradition & modernity the emporium provides wide array of quality products. zardoze. 10 . carpets. the emporium provides you with an aroma of what real India is all about. weavers and folk artists has inspired trends. It is well equipped with the right know-how and customer-need awareness. 2000/c) Renewal charges for one year -. enchanted tourists and left an impression on the minds of everybody who has visited it. the decor. has been an enigma to many across the globe. structure and expression.Rs.

 Bharti Emporium provides opportunity to the ‘grass-root’ artisans & master craftsmen as well as national and state level awardees to demonstrate their products. 395 lakhs approximately. It has been vigorously pursuing a policy aimed at providing assistance and protection to the products manufactured by them. Come and experience the magic of India through “Bharti”. Welcome to this enchanting extravaganza created by skilled master craftsmen.  11 . Turnover for the year 2010-11 was Rs. the kind that have made a lasting impression in the markets of India and across the world. Products : BHARTI markets all the beautifully handcrafted creations of the designers and master craftsmen.

12 .


ABOUT THE TOPIC "It was only for the good of his subjects that he collected taxes from them. taxes were also levied sometime on the basis of turnover and sometimes on occupations. just as the Sun draws moisture from the Earth to give it back a thousand fold" – --Kalidas in Raghuvansh eulogizing KING DALIP. has been in force in one form or another even from ancient times. 2007 and broadly presents the nuances of prudent tax planning and tax saving options provided under these laws. In India. In Northern England. 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. This project covers the basics of the Income Tax Act. leather and hides. For many centuries. taxes were levied on land and on moveable property such as the Saladin title in 1188. Income Tax Act. 1961 as amended by the Finance Act. 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. and indirect taxes known as "Ancient Customs" which were duties on wool. There are references both in Manu Smriti and 14 . 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. These were levied either on the sale and purchase of merchandise or livestock and were collected in a haphazard manner from time to time. 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. Later on. 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. Germany and Roman Empires. the system of direct taxation as it is known today. In Greece. 1961 governs the taxation of incomes generated within India and of incomes generated by Indians overseas. Income Tax Act. The origin of the word "Tax" is from "Taxation" which means an estimate. administration of justice and such other functions of the State. revenue from taxes went to the Monarch. these were supplemented by introduction of poll taxes. there went out a decree from Ceaser Augustus that all the world should be taxed. Nearly 2000 years ago. 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.

f.  Central charge created at Calcutta.Sarkar commends the system of taxation in ancient India in his book "Public Finance in Ancient India". cattle. An excess Profits Tax was also collected.  Excess Profits Tax introduced w.  A class of officers known as AACs came into existence. although more emphasis was laid on direct tax. The taxes were varied and the large variety of taxes reflected the life of a large and composite population". The wise sage advised that taxes should be related to the income and expenditure of the subject. 1940  Directorate of Inspection (Income-tax) came into being. This taxation was not progressive but proportional to the fluctuating income. singers and even dancing girls. 1941  Income tax Appellate Tribunal came into existence. Collection of Income-tax was well organized and it constituted a major part of the revenue of the State. Important events affecting the administrative set up in the Income-tax department:1939  Appellate functions separated form inspecting functions.Arthasastra to a variety of tax measures. the king should arrange the collection of taxes in such a manner that the subjects did not feel the pinch of paying taxes. dancers. taxes were also levied on various classes of people like actors. while the agriculturists were to pay 1/6 th.e. cautioned the king against excessive taxation and stated that both extremes should be avoided namely either complete absence of taxes or exorbitant taxation. The learned author K. General Sales-tax was also levied on sales and the sale and the purchase of buildings was also subject to tax. even in ancient times. According to him. musicians. the ancient sage and law-giver stated that the king could levy taxes. The tax-structure was a broad based one and covered most people within its fold.B. He laid down that traders and artisans should pay 1/5 th of their profits in silver and gold.  Jurisdiction of Commissioners of Income tax extended to certain classes of cases and a central charge was created at Bombay. raw-materials and also by rendering personal service. 15 . grains. etc. Not only this. Taxes were paid in the shape of gold-coins. 01/09/1939. (1978 Edition) as follows:"Most of the taxes of Ancient India were highly productive. according to Sastras. The admixture of direct taxes with indirect Taxes secured elasticity in the tax system. A big portion was collected in the form of income-tax from dancers. actors and dancing girls. 1/8th and 1/10th of their produce depending upon their circumstances. He. The detailed analysis given by Manu on the subject clearly shows the existence of a well-planned taxation system. however. Manu.

1943  Special Investigation Branches set up. 1947 1951  Report of Income tax Investigation Commission known as Vardharchari Commission received.R.(DT) Staff College started functioning at Nagpur and much later four R.selection and ordinary grades . 1953 came into existence w.T.e. stationed at Bombay. Bangalore and Lucknow opened.f. 16  Business Profits tax enacted(for the period 01/04/1946 to 31/03/1949).  Two grades of Inspectors .merged into one single grade. 1959  Direct Taxes Administration Enquiry Committee submitted its report.  Inspector of Income tax declared as an I.T.  Excess profits tax act repealed. 1957 . 1952  Directorate of Inspection (Investigation) set up.  Report of Law Commission received.  The Wealth tax Act. Statistics & Publications)was set up. 1958  The Gift tax Act. 1953  Estate Duty Act. 1958 introduced w.  Voluntary Disclosure Scheme introduced.S. 1946  A few officers of Class-I directly recruited. authority.e. 1957 introduced w.  Taxation Enquiry Commission known as John Mathai Commission set up. Calcutta.  Demonetization of high denomination notes made. 1-4-1958.f 15/10/1953. 1-4-1957.e.  I.Is.  Act XXV of 1953 gave effect to the recommendations of Commission appointed under Taxation of Income (Investigation Commission) Act 1947. 1960  Directorate of Inspection (Research. 1954  Internal Audit Scheme in the Income tax Department introduced.f.

 Creation of 65 posts of Dy.  Study report on 4th cadre review of Group 'A' officers (IRS) of the Department prepared by Directorate of Income Tax (Organization and Management Services). Commissioner of I.1961  Direct Taxes Advisory Committee set up . 1-4-1962.  New PAN introduced. Authority for Advance Rulings set up.  Regional Computer Centres (RCCs) were set up in Chennai.  Infrastructure for operational needs strengthened.  Revenue Audit introduced for the first time in the Department. 1974 revived.  2068 additional posts in Group B. A comprehensive phased cadre review for Group B. Tax (Systems) started reporting directly to board.e. C and D initiated. Commissioner of I.f. Tax.  New procedure for search assessment introduced.  New system for evaluation of work done by Income-tax Officers introduced. 1961 came into existence w. 1995 1996  77 posts of Commissioners of Income-tax created. 1993    1994 40 additional posts of Commissioner of Income-tax (Appeals) created.  The post of Director General of Income-tax (Management Systems) was abolished. 1997 17 . Tax by up gradation of equal number of posts of Asstt.5.  Income-tax Act. 1992  Rs. 1990  Gift tax Bill introduced on 31.1990.  Directorate of I.  50 years of training commemorated and "Seminar Twenty Five" introduced by National Academy of Direct Taxes. 1400 Presumptive Taxation scheme introduced as a measure to widen tax base. 1991  Interest Tax Act. C and D sanctioned.Direct Taxes Administrative Enquiry Committee constituted. Delhi and Mumbai.

rebates etc. 2001  The restructuring of the Department resulted in reducing the stagnation at all levels and large number of personnel were promoted in various grades.  National Computer Centre (NCC) was set up in Delhi. acknowledgments to serve as intimations. deductions. 1/6 Scheme & penalty for non-filing of return introduced to widen tax base. 18 .  Samman Scheme introduced in 1999 to honour deserving tax payers.  Voluntary Disclosure Scheme 1997 introduced. 2002  Computerized processing of returns all over the country introduced.  Total sanctioned work force reduced from 61.  New posts were created at the level of DGIT/DIT in the areas of Research. ii.315. recommended: i.10.  Kelkar Committee Report. Gift-tax abolished for gifts made after 1.031 to 58. Designation of Asstt.  Presumptive tax scheme discontinued. Commissioner (Junior Administrative Grade) to Joint Commissioner.1998. Kar Vivad Samadhan Scheme 1998 introduced. reliefs.  Legal measures to widen tax base on certain economic indicators introduced in selected cities. Reduction in exemptions.  Minimum Alternate Tax introduced. Commissioner and that of Dy. 1998       Sec. International Taxation and Infrastructure.  Certain rationalization measures at structural levels introduced.  Jurisdiction pattern was revamped.  Prima-facie adjustments to return done away with. 260A introduced enabling direct appeals to High Court. 1999  Furnishing details of bank account and credit cards in the prescribed form made mandatory for refund purpose. Rates of Income-tax reduced significantly. 2000  The process of implementation of restructuring of the Department commenced to increase efficiency and to deal with increased workload.  Interest-tax Act terminated with effect from 1-4-2000. inter alia. Outsourcing of non-core functions of the department. Silver Jubilee of Regional Training Institutes celebrated. Commissioner (Senior Time Scale) changed to Dy.

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. Not equipped with proper knowledge of taxation and tax saving avenues available to them. 19 . This prodded me to study this aspect leading to this project during my MBA course with the university. I have seen my colleagues and faculties grappling with the taxation issue and complaining against the tax deducted by their employers from monthly remuneration. 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.Need for Study In last some years of my career and education.

 Income tax rates.  To make compliance easy. 1961 as amended by Finance Act.  To formulate progressive tax policies. 2007. efficient and effective administration and improved voluntary compliance” .  Concept of assessment year and previous year.  To study taxation provisions of The Income Tax Act.  What is regarded as income under the Income-tax Act.  To show gross total income.  To present the tax saving avenues under prevailing statures.  To enforce tax laws with fairness.  How to charge tax on income.Objective of the study “To partner is the nation building process through progressive tax policy.  To explore and simplify the tax planning procedure from a layman’s perspective.  Meaning of person and assessee. 20 .

 To get full knowledge about Income tax.  Main objective is pay tax without the help of CA or other person. 21 . 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.

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 22 .

Previous year means the financial year immediately preceding the assessment year. 1961. 1961 classifies the earning under the following heads of income: Salaries Income from house property Capital gains 23 . or accrues or arises to him outside India during such year: Provided that. The Income Tax Act.Tax Regime in India The tax regime in India is currently governed under The Income Tax. 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. 2007 notwithstanding any amendments made thereof by recently announced Union Budget for assessment year 2008-09. in the case of a person not ordinarily resident in India. 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. Scope of Total Income Under the Income Tax Act. or accrues or arises or is deemed to accrue or arise to him in India during such year. 1961 as amended by The Finance Act. Total Income For the purposes of chargeability of income-tax and computation of total income. 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.

is not long lasting. a citizen so arranges his affairs that he walks out of the clutches of the law and pays no tax or pays minimum tax. A. having rendered service to another person Mr. Tax avoidance is therefore legal and frequently resorted to.000/.000/. 24 . Tax Avoidance Tax Avoidance is the art of dodging tax without breaking the law. A transaction is artificially made to appear as falling squarely in the loophole and thereby minimize the tax. loopholes in the law.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 cash and thus does not account for it as his income. Tax Evasion is an act executed knowingly willfully. A has resorted to Tax Evasion. is entitled to receive a sum of say Rs. too often retrospectively. when detected by the tax authorities. Mr. In India. While remaining well within the four corners of the law. Example: Mr. with the intent to deceive so that the tax reported by the taxpayer is less than the tax payable under the law. B. B.from Mr. the attempt is always to exploit a loophole in the law. 50. Tax Evasion can be achieved by concealment of income or inflation of expenses or falsification of accounts or by conscious deliberate violation of law. A tells B to pay him Rs. It lasts till the law is amended. In any tax avoidance exercise. tend to be plugged by an amendment in the law. 50. Hence tax avoidance though legal.

25 . 60. 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. the reality. By diverting the income to Mr.receives income of Rs. Mr. C. To sum up all these four expressions. an arrangement. B.and thereby pays no tax on income of Rs.000/. Example: Mr.000 in his PPF account and saving tax of Rs. But Mr. Tax Management. tax management is the actual action. A tells Mr. It violates the spirit and the letter of the law. a plan. B.000/.Example: Mr. 60. his PPF account and saves the tax of Rs. Example: Action of Mr. A depositing the name of Mr.000/. 50. A has resorted to Tax Avoidance.000/ -. B. Mr. 12.000/from Mr. C instead of in the name of Mr.000/.000/-. Mr. A. This is achieved by taking full advantage of all the tax exemptions. having rendered service to another person Mr. the final result. C has no other income and therefore pays no tax on that income of Rs. 12. A having other income of Rs. 50. 50.000. Mr. 50. Actual action on Tax Planning provision is Tax Management. C deposits the cheque in his bank account and account for it as his income. Exercise in tax planning is based on the law itself and is therefore legal and permanent. 50. A’s other income is Rs. A to save tax deposits Rs. deductions.000/. 200. allowances and other benefits granted by the tax laws so that the incidence of tax is reduced. While that tax planning is only an idea. a scheme. we may say that: Tax Evasion is fraudulent and hence illegal.000/. Tax Management Tax Management is an expression which implies actual implementation of tax planning ideas. 200. concessions. B to pay cheque of Rs. rebates. is entitled to receive a sum of say Rs. Mr.from Mr. A.

Applying the tax rates on the taxable income. Calculate the Gross total income deriving from all resources. 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. Subtract all the deduction & exemption available. The net result of tax reduction by taking action of fulfilling the conditions of law is tax management. This project is also designed to follow the same. 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 Avoidance. Tax Management is actual implementation of a tax planning provision. 26 . Minimize the tax liability through a perfect planning using tax saving schemes. Ascertain the tax liability. 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.

COMPUTATION OF TOTAL INCOME Income from Salaries Income from House Property Capital Gains Profits and Gains of Business or Profession Income from Other Sources 27 .

Besides. LIC agents. Where such relationship does not exist income is taxable under some other head as in the case of partner of a firm. Arrears of Salary: Salary arrears are taxable in the year in which it is received. advocates. etc. It is not included in the income of recipient again when it becomes due. whichever is earlier. small saving agents. if not taxed in any earlier previous year. chartered accountants. shall be taxable in the year of payment. commission agents. loan taken from the employer against salary is not taxable. Advance Salary: Advance salary is taxable in the year it is received. Pension received by a widow after the death of her husband falls under the head ‘Income from Other Sources.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”. However. Pension: Pension received by the employee is taxable under ‘Salary’ Benefit of standard deduction is available to pensioner also. Salary is chargeable to income-tax on due or paid basis. Profits in lieu of salary: 28 . Bonus: Bonus is taxable in the year in which it is received. only those payments which have a nexus with the employment are taxable under the head ‘Salaries’. Any arrears of salary paid in the previous year.

In case of other employees.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. HRA is exempt up to a certain limit Entertainment Allowance: Entertainment allowance is fully taxable. 29 . Certain allowances prescribed under Rule 2BB. or to compensate him for increased cost of living are also exempt. 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. 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. 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. but a deduction is allowed in certain cases. necessarily and exclusively incurred in the performance of special duties unless such allowance is related to the place of his posting or residence. Any amount whether in lump sum or otherwise. due to or received by an assessee from his employer. 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. either before his joining employment or after cessation of employment.

but taxable as income from house property. following incomes shall be taxable under the head ‘Income from House Property'. house property includes flats. 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. 2. shall be taxable in the year. Conveyance Allowance: It is exempt to the extent it is paid and utilized for meeting expenditure on travel for official work. Income from letting of any farm house agricultural land appurtenant thereto for any purpose other than agriculture shall not be deemed as agricultural income. not taxed u/s 23. or its part or attached area. agricultural land and farm houses. Besides. Similarly newspaper allowance shall also be exempt. But such land is to be distinguished from an open plot of land. 1. Any arrears of rent. shops. factory sheds. which is not charged under this head but under the head ‘Income from Other Sources’ or ‘Business Income’.Academic Allowance: Allowance granted for encouraging academic research and other professional pursuits. or for the books for the purpose. However. House property consists of any building or land. 30 . of which the assessee is the owner. received in a subsequent year. shall be exempt u/s 10(14). as the case may be. The part or attached area may be in the form of a courtyard or compound forming part of the building. office space.

Even if the property is not 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. owners’ obligations undertaken by the tenant. dwelling house etc. Annual Value of Let-out Property: Where the property or any part thereof is let out. annual rateable value of the property fixed by municipalities. the local taxes such as municipal tax. fire tax. water and sewage tax.Even if the house property is situated outside India it is taxable in India if the ownerassessee is resident in India. by the cultivators Annual Value: Income from house property is taxable on the basis of annual value. 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. notional rent receivable is taxable as its annual value. whichever is higher. 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. location of the property. 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. tenant’s obligation undertaken by owner. and education cess levied by a local authority are deductible while 31 . Income from house property in the immediate vicinity of agricultural land and used as a store house. In determining reasonable rent factors such as actual rent paid by the tenant. Deductions from House Property Income: Deduction of House Tax/Local Taxes paid: In case of a let-out property.

30. However. etc. salary of liftman.4. 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. constructing. 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. repairing.000 by way of interest on borrowed capital for acquiring. is allowable (without any limit) as a deduction (on accrual basis). For instance. Furthermore. where the property has been acquired constructed. Interest on Borrowed Capital: Interest payable in India on borrowed capital. renovated or reconstructed with such borrowed capital. no deduction can be claimed in respect of expenses on electricity.1999 and the acquisition or construction of the house property is made within 32 . insurance premium. water supply. renewing or reconstructing the property is available in respect of such properties. Other than self-occupied properties Repairs and collection charges: Standard deduction of 30% of the net annual value of the property. In case of self-occupied property acquired or constructed with capital borrowed on or after 1.computing the annual value of the year in which such taxes are actually paid by the owner. a maximum deduction of Rs. Expenditures not specified as specifically deductible. 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. Self Occupied Properties No deduction is allowed under section 24(1) by way of repairs. etc. repaired.

each co-owner must invest out of his own funds (or borrowings) in the ratio of his ownership in the property.50. It is.50. the deduction is allowable up to Rs. The rental income can be safely passed off to the other family members by way of interest. In other cases. therefore. 30. raise borrowings from other family members or outsiders.50. However.1999 within 3 years from the end of the financial year in which the funds are borrowed. Let out property or part there of: all eligible interests are allowed. Self-occupied property: deduction is restricted to a maximum of Rs. 1. The net loss on this account can be set off against income from other properties and even against other incomes.000. This is particularly advantageous in case of rented property for division of rental income among various family members.000. If the interest claim exceeds the annual value. or as refinance loan for repayment of an earlier loan for such purpose. If buying a property for letting it out on rent. the same should be acquired in the name(s) of different family members. ii. Alternatively. 1. 1. The deduction for interest u/s 24(1) is allowable as under: i. At the time of purchase of new house property. For this purpose. suggested that a property for self. each property may be acquired in joint names. 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. loss can be set off against other incomes too. so that the annual interest accrual on borrowings remains less than Rs.000 for property acquired or constructed with funds furrowed on or after 1. residence may be acquired with borrowed funds.3 years from the end of the financial year in which capital was borrowed the maximum deduction for interest shall be Rs.4. 33 .000.

Extinguishment of any rights in assets. etc. depends on two aspects – ‘capital assets’ and transfer’. Compulsory acquisition of assets under any law. Taxation of capital gains. thus. Handing over the possession of an immovable property in part performance of a contract for the transfer of that property. whether by way of capital contribution or otherwise. Capital Asset: ‘Capital Asset’ means property of any kind held by an assessee including property of his business or profession. Conversion of assets into stock-in-trade of a business carried on by the owner of asset. Relinquishment of assets.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. and 34 .. company.. but excludes non-capital assets. which have the effect of transferring or enabling enjoyment of any immovable property or any rights therein . Transfer of a capital asset by a partner or member to the firm or AOP. Distribution of assets on the dissolution of a firm. Transactions involving transfer of membership of a group housing society. Transfers Resulting in Capital Gains Sale or exchange of assets. body of individuals or association of persons.

Transfer under a gift or an irrevocable trust of shares. guidelines. etc. exchange. 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. the capital gain shall be chargeable in the year in which the sale. Where the transfer is by way of allowing possession of an immovable property in part performance of an agreement to sell. However. the period of holding shall exclude or include certain other periods. takes place. the year of taxability of capital gains is the year in which the agreement is entered into. relinquishment. 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). in respect of following assets. before entering into the agreement to sell. or a unit of the UTI or of a mutual fund specified u/s 10(23D) immediately preceding the date of its transfer. Thus. 35 . 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. If the transferee already holds the possession of the property under sale. 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. 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. capital gain shall be deemed to have arisen in the year in which such possession is handed over.

the amount of money or the fair market value of the asset received by way of insurance claim. 54EC. 54ED. 54B. 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. As certain the full value of consideration received or accruing as a result of the transfer. Transfer Expenses. riot etc. 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. Full Value of Consideration: This is the amount for which a capital asset is transferred. legal expenses. 2.. Deduct the amount of permissible exemptions u/s 54. etc. in case of a sale.Computation of Capital Gains: 1. For instance. Fair value of consideration in case land and/ or building. In case of damage or destruction of an asset in fire flood. The balance left-over is the gross capital gain/loss. 54G and 54H. 1. It may be in money or money’s worth or combination of b oth. if any. the full value of consideration is the full sale price actually paid by the transferee to the transferor. shall be deemed as full value of consideration. and 2.. Cost of Acquisition: 36 . 54F. 54D. Deduct from the full value of considerationTransfer expenditure like brokerage. together constitute full value of consideration.

Where capital asset became the property of the assessee before 1. he has an option to adopt the fair market value of the asset as on 1. Betterment charges levied by municipal authorities also constitute cost of improvement.4. Both these costs are thus required to be indexed with respect to the cost inflation index pertaining to the year of transfer.4. 37 . by the assessee.1981.4. Indexed cost of Acquisition/Improvement: For computing long-term capital gains. However. brokerage paid. Cost of acquisition of an asset is the sum total of amount spent for acquiring the asset.4. Cost of Improvement: Cost of improvement means all capital expenditure incurred in making additions or alterations to the capital assets. Interest paid on moneys borrowed for purchasing the asset is also part of its cost of acquisition. exchange or other transaction e.1981. registration charges and legal expenses. only the capital expenditure incurred on or after 1.g. the cost of acquisition is the price paid. Where the asset is acquired by way of exchange for another asset. is to be considered and that incurred before 1. ‘Indexed cost of acquisition and ‘Indexed cost of Improvement’ are required to deducted from the full value of consideration of a capital asset.1981. as its cost of acquisition.Cost of acquisition is the amount for which the capital asset was originally purchased by the assessee.1981 is to be ignored. Any expenditure incurred in connection with such purchase. the cost of acquisition is the fair market value of that other asset as on the date of exchange. Where the asset is purchased. is added to price or value of consideration for the acquisition of the asset.

Capital Loss: The amount. Rebate under Sections 88. 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. 88B and 88C is also available against the tax payable on short-term capital gains.  Any long-term capital loss can be set off only against long-term capital gain and against no other income. represents the capital loss.  Any short-term capital loss can be carried forward to the next eight assessment years and set off against ‘capital gains’ in those years. in respect of long term capital gains arising from transfer of listed securities or units of mutual fund/UTI.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. 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 longterm and short term) and against no other income. and the expenditure on transfer. Capital Loss’ may be short term or long-term. 38 . 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. whichever is less. Long-term Capital Gains Long-term Capital Gains are subject to a flat rate of tax @ 20% However.

or within 3 years in construction. 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. 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. 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. 1988 before the due date for furnishing the return. other than a residential house. any other agricultural land. to an individual or HUF. 1988’ before the due date for furnishing the return. if the assessee purchases/constructs within three years from the date of compulsory acquisition. a residential house. shall be exempt. any building or land. 39 . shall be exempt from tax. Otherwise. forming part of industrial undertaking. of a residential house. Capital Gains from an Asset other than Residential House Any long-term capital gain arising to an individual or an HUF. the amount can be deposited under Capital Gains Accounts Scheme. Otherwise. if the assessee purchases within 2 years from the date of such transfer. 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. or within a period of three years constructed. shall be exempt if the whole of the net consideration is utilized within a period of one year before or two years after the date of transfer for purchase. Capital Gains from Transfer of Agricultural Land Any capital gain arising from transfer of agricultural land. the amount can be deposited under the ‘Capital Gains Accounts Scheme. from the transfer of any asset.

000 is taxable @ 10% whereas long-term capital gains are taxable at a flat rate of 20%. 54D.000 should go for short-term capital gain instead of long-term capital gain.  Avoid claiming short-term capital loss against long-term capital gains. 1. the assessee should so arrange the transfers of capital assets that they fall in the category of long-term capital assets. 54ED. 60.  Assessees having income below Rs. 54F. Those having income above Rs. 54EC. since income up to Rs.  The assessee should take the maximum benefit of exemptions available u/s 54.  Since long-term capital gains enjoy a concessional treatment.  An assessee may go for a short-term capital gain. 40 . 60.50. 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. either create some shortterm capital gain in that year or.  Since the income of the minor children is to be clubbed in the hands of the parent. 54B. 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.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. 54G and 54H.000 should plan their capital gains vice versa. defer long-term capital gains to next year. Instead claim it against short-term capital gain and if possible.

whether convertible into money or not. salary. arising from business or in exercise of a profession.  Any interest. which is not allowed to be deducted u/s 40(b).  Income derived by a trade. in connection with the termination of a contract of managing agency or for vesting in the Government management of any property or business. bonus. patent. 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. professional or similar association from specific services performed for its members.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. and duty drawback of customs or excise received or receivable against exports.  The value of any benefit or perquisite. the income of the partners shall be adjusted to the extent of the amount so disallowed. cash assistance received or receivable against exports. similar nature of information or 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 .  Profits on sale of REP licence/Exim scrip. licence.  Any compensation or other payment due to or received by any person. Any interest salary etc. copyright. trade-mark.  Any sum received or receivable in cash or in kind under an agreement for not carrying out activity in relation to any business. franchise or any other business or commercial right of. or not to share any know-how.

 Development rebate. Expenses Deductible from Business or Profession: Following expenses incurred in furtherance of trade or profession are admissible as deductions. being tangible assets. patents. Know how.  Rent.  Amount recovered on account of bad debts allowed u/s 36(1) (vii) in an earlier year.  Any allowance or deduction allowed in an earlier year in respect of loss.  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.  Repairs and insurance of machinery.from the multilateral fund of the Montreal Protocol on Substances that Deplete the Ozone Layer. plant or furniture. acquired on or after 1.  Any sum received under a Keyman Insurance Policy referred to u/s 10(10D). 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.  Depreciation is allowed on:  Building. plat and furniture. trademarks.1998. copyrights. licences.4. being intangible assets.  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. 42 . franchises or any other business or commercial rights of similar nature. taxes. rates. repairs and insurance of buildings. machinery.

 Amount deposited in Site Restoration Fund or 20% of profit.  Scientific Research Expenditure on scientific research related to the business of assessee. One and one-fourth times any sum paid to a scientific research association or an approved university.  Amount deposited in Tea Development Account or 40% profits and gains from business of growing and manufacturing tea in India. is deductible in that previous year.3. the expenditure incurred up to 31. or extraction or production of. pharmaceuticals. by a company engaged in the business of bio-technology or in the manufacture of any drugs. 43 . The assessee shall get his accounts audited from a chartered accountant and furnish an audit report in Form 3 AD. One and one half times. electronic equipments.  Reserves for shipping business. college or other institution for the purpose of scientific research. petroleum or natural gas or both in India.1990. or for research in social science or statistical research. in case of an assessee carrying on business of prospecting for.2005 on scientific research on in-house research and development facility. chemicals or other notified articles. whichever is less. computers telecommunication equipments. Development allowance for Tea Bushes planted before 1. 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.4.

4. The specified projects include drinking water projects in rural areas and urban slums. construction of dwelling units or schools for the economically weaker sections. 44 . deduction is allowed in 3 equal instalments. used for the business. bridges.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. or the National Urban Poverty Eradication Fund. University or institution. etc.3. public highways. projects of non-conventional and renewable source of energy systems. allowed in 6 equal instalments.  Expenditure incurred before 1.4. allowed in 14 equal instalments starting from the year in which it was incurred.  Expenditure incurred on or before 31.1998 on acquiring know-how for the business. pollution control. for carrying out a specified project or scheme for promoting the social and economic welfare or enlistment of the public.  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.1998 on acquisition of patent rights or copyrights. roads promotion of sports.  Expenditure by way of payment to association and institution for carrying out rural development programmes or to a notified rural development fund. Where the know-how is developed in a laboratory. Expenditure incurred before 1. local authority or an approved association or institution.

in 5 equal instalments over five successive years.1988. public issue expenses.  Insurance premium paid by a federal milk co-operative society for cattle owned by a member.  Any sum received from the employees and credited to the employees account in the relevant fund before due date.  Insurance premium paid for the health of employees by cheque under the scheme framed by G.  One-fifth of the amount paid to an employee on his voluntary retirement under a scheme of voluntary retirement. irrespective of the limit under the Payment of Bonus Act. registration expenses. Insurance premium for stocks or stores. for certain minerals. etc. shall be deductible up to a maximum of 5% of the cost of project or the capital exployed. market survey. Amortisation of certain preliminary expenses. etc. 45 .  Approved gratuity fund contributions.. legal charges for drafting and printing charges of Memorandum and Articles.C.  Deduction for expenditure on prospecting.I. feasibility report.  Provident and superannuation fund contribution. such as expenditure for preparation of project report. shall be deductible in each of five successive years beginning with the year in which the amount is paid. Expenditure incurred after 31.3. feasibility report.  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. and approved by the Central Government. etc.  Interest on borrowed capital.  Payment of bonus or commission to employees.

 Special provisions for computing profits and gains of civil contractors. any expenditure incurred for a purpose which is an offence or is prohibited by law. However. or for payment of gratuity that has become payable during the year.  Family planning expenditure by company.  Special provision for computing income of truck owners.  Contributions towards Exchange Risk Administration Fund.  Amount of bad debt actually written off as irrecoverable in the accounts not including provision for bad and doubtful debts. 46 . in full. provided the expenditure is not of capital or personal nature.  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. and interest on capital to partners  Expenses deductible on actual payment only. Loss on death or becoming permanently useless of animals in connection with the business or profession. without any limit/restriction. etc.  Special provisions for computing profits and gains of shipping business in the case of non-residents.  Entertainment expenditure can be claimed u/s 37(1).  Special provisions for computing profits and gains of retail business. shall not be deductible. incurred in furtherance of trade.  Expenditure.  Payment of salary. not being in nature of capital expenditure or personal expenditure of the assessee.  Any provision made for payment of contribution to an approved gratuity fund.

5. However. loss in a speculation business can be adjusted only against profits of another speculation business. 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.  Special provisions for computing income by way of royalties etc. of mineral oils. if any. Special provisions for computing profits or gains in connection with the business of exploration etc.  If the amount of royalty receivable exceeds Rs. 47 . etc.  Special provisions for computing profits and gains of foreign companies engaged in the business of civil construction.25.000. 25. in certain turnkey projects.  Deduction of head office expenditure in the case of non-residents.000 and where detailed accounts regarding expenses incurred are not maintained. whichever is less. Losses not adjusted in the same year can be carried forward to subsequent years. it can be set off against profits of any other business in the same year.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. still remaining can be set off against income under any other head. The loss. The above deduction will be allowed without calling for any evidence in support of expenses.  Special provisions for computing profits and gains of the business of operation of aircraft in the case of non-residents. deduction for expenses may be allowed up to 25% of such amount or Rs.

Income From House Property. 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. 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.Income from Other Sources Other Sources This is the last and residual head of charge of income. Profits and Gains from Business and Profession and Capital Gains. Illustrative List Following is the illustrative list of incomes chargeable to tax under the head Income from Other Sources: (i) Any dividend declared. 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. 48 . 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. distributed or paid by the company to its shareholders is chargeable to tax under the head ‘Income from Other Sources”. distributed or paid. if it is not chargeable under any of the other four heads-Income from Salaries. 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. In other words. However.

plant or furniture. If such income is not chargeable to tax under the head Profits and gains of business or profession. the whole of such sum. if it is not chargeable to tax under the head Profits and gains of business or profession. (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. 2004.(ii) Income from machinery. plant or furniture belonging to him and also buildings. plant or furniture belonging to the assessee and let on hire. (iii) Where an assessee lets on hire machinery. or In contemplation of death of the payer. provided that this clause shall not apply to any sum of money received (a) (b) (c) (d) From any relative. If books of 49 . the income from such letting. or On the occasion of the marriage of the individual. or Under a will or by way of inheritance. (vii) Income by way of interest on securities. (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. if the income is not chargeable to tax under the head Profits and gains of business or profession. if the income is not chargeable to tax under the head Profits and gains of business or profession. and the letting of the buildings is inseparable from the letting of the said machinery.

plant or furniture (d) Unabsorbed Depreciation. 2. 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. 50 . 4. 3. books of account are maintained on mercantile system of accounting then interest on securities is taxable on accrual basis. whichever is low. 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. machinery. (viii) Other receipts falling under the head “Income from Other Sources’:  Director’s fees from a company. Any other expenditure (not being a capital expenditure) expended wholly and exclusively for the purpose of earning of such income. 000or 33.15.account in respect of such income are maintained on cash basis then interest is taxable on receipt basis. In case of income in the nature of family pension: Rs. plant or furniture (c) Depreciation on building.5% of such income. Deductions from Income from Other Sources: The income chargeable to tax under this head is computed after making the following deductions: 1.  Income from ground rents. plant or furniture let on hire: (a) Repairs to building (b) Current repairs to machinery. In the case of income from machinery.  Income from royalties in general. If however.

51 .


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


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.

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, ou t 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


000.Y. who is a senior citizen the deduction allowable shall be Rs. 40. 45. 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. and Amount deposited. 15. in case the person insured is a senior citizen (exceeding 65 years of age) the maximum deduction allowable shall be Rs. Thus. 50. for the benefit of a dependent person with disability. under an approved scheme of the Life Insurance Corporation or other insurance company or the Unit Trust of India. if the total of expenditure incurred and the deposit made in approved scheme is Rs. the deduction allowable for A. Amount of deduction: the deduction allowable is Rs. 2003-2004.000/-. during the previous year. 50. 2003-2004) in aggregate for any of or both the purposes specified above. a deduction of Rs.000 is allowable In case of amount is paid in respect of the assessee.Y. for the medical treatment training and rehabilitation of one or more dependent persons with disability. or a person dependent on him. 10.000.000 for A.000.000 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. 40.Amount of deduction: Maximum Rs. 40. irrespective of the actual amount of expenditure incurred.Y. 2004-2005. is Rs.000 whichever is less (for A. Amount of Deduction Amount actually paid or Rs. 60.000 (Rs. 55 .

subject to a maximum of Rs. an approved University or educational institution of national eminence. management or for post graduate course in applied sciences or pure sciences including mathematics and statistics.R. by way of repayment of loan or interest thereon.m. u/s 10(13A) Amount of Deduction: Least of the following amounts are allowable: Rent paid minus 10% of assessee’s total income Rs. Amount of Deduction: Any amount paid by the assessee in the previous year. 2. Chief Minister’s earthquake Relief Fund etc. 25% of total income Deduction under section 80GGA 56 .000 Deduction under section 80G Donations: 100 % deduction is allowed in respect of donations to: National Defence Fund.e. National Foundation of Communal Harmony. full time studies for any graduate or post graduate course in engineering medicine. out of his taxable income. Deduction under section 80GG Deduction in respect of Rent Paid: Any assessee including an employee who is not in receipt of H. Prime Minister’s National Relief Fund.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.A. In all other cases donations made qualifies for the 50% of the donated amount for deductions. Armenia Earthquake Relief Fund.000 p. Africa Fund. 40.

As per this section. the maximum amount of deduction that an assessee can claim under Sections 80C. 57 .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.3.000. Deduction under section 80CCE A new Section 80CCE has been inserted from FY2005-06. 80CCC and 80CCD will be limited to Rs 100.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. the deduction is allowable under the respective sections specified above.

4. 1. 1.000 Rs. 2.Y.00.10.000 + 20% of Income above Rs.Y.000 10% of Income above Rs.000 10% of Income Tax Tax surcharge and 58 . 10.49.000 Income Tax Nil Plus Surcharge Nil Plus Edu Cess Nil Rs. 2.000 Rs. to Rs.000 + 30% of Nil Nil 3% of Income Tax Rs.10. 2. 10.000 Rs. 2007-08  Sample Tax Liability Calculations  Filing of Income Tax Return Tax Rates for A. Income above Rs. 1. 24.000 Nil 3% of Income Tax Rs. (Assessment Year 2007-08). 2.000 + 30% of Income above Rs.50.001 to Rs.10.000 3% of Income Tax 3% of Income Above Rs.000 to Rs. 2007-08 Following rates are applicable for computing tax liability for the current Financial Year ending on March 31 2007.50.00. 1. 10. Table 1: For Resident Male Individuals below 65 years of age Net Income Range Up to Rs.COMPUTATION OF TAX LIABILITY  Tax Rates for A. 1.

000 Rs.000 Income above Rs. 1.45.000 10% of Income Tax 3% of Income Tax and surcharge 59 .Table 2: For Resident Female Individuals below 65 years of age Net Income Range Up to Rs.000 Rs.45.36.000 Rs.95.45. 11.50. 1.00. 10. 1. 500 + 20% of Income above Rs. 1.000 Rs.95. 10.50. 10. 2. 10. 20.000 Income above Rs.000 10% of Income Tax 3% of Income Tax and surcharge Table 3: For Resident Senior Citizens (who are 65 years or more at any time during the Financial Year 2007-08) Net Income Range Up to Rs. 2. 2. 2.000 Rs.45.001 to Rs.000 Income Tax Nil 20% of Income above Rs. 1. 2.000 Rs. to Rs. 2.00. 1.1.000 Rs. to Rs.00. 2.95.001 to Rs.000 Rs.000 Rs.00.500 + 30% of Income above Rs.000 Income Tax Nil 10% of Income above Rs.000 Rs.50.000 + 30% of Plus Surcharge Nil Nil Plus Education Cess Nil 3% of Income Tax Nil 3% of Income Tax Nil 3% of Income Tax Above Rs.000 + 30% of Plus Surcharge Nil Nil Plus Education Cess Nil 3% of Income Tax Nil 3% of Income Tax Above Rs. 1. 10.50.50. 2.001 to Rs.000 + 30% of Income above Rs.

00. 2008 will be treated as a Senior Citizen.00.00.2009-2010.50.001 upwards Sample Tax Liability Calculations Table 4: For Resident Male Individuals below 65 years of age Annual Taxable Income 110000 145000 150000 195000 200000 Income Tax 0 3500 4000 13000 14000 Surcharge 0 0 0 0 0 Education Cess 0 105 120 390 420 Total 0 3605 4120 13390 14420 Nil 20 30 60 . Tax Rates for A.2010-2011 &2011-2012 All rates are same.Y.000 (for resident individual of 60 years till 80 years) 200.00.Note: The rules for “Senior Citizen” are the same as for ‘Men’ as well as ‘Women’. Tax Rates for Assessment Year 2013-14 (Previous year 2012-13) Income Tax Rates/Slab for Assessment Year 2013Rate(%age) 14 (Previous Year 2012-13) Up to 2. 2007-08.000 (for women) NIL Up to 2. Any person who turns 65 on any day prior to or on March 31.00. 2008-2009.000 (for resident individual of 80 years and above.000 10.000 10 Up to 500.00.001 – 5.001 – 10.000 Up to 2. Tax is nil) 5.

250000 300000 400000 500000 1000000 1100000 24000 39000 69000 99000 249000 279000 0 0 0 0 0 27900 720 1170 2070 2970 7470 9207 24720 40170 71070 101970 256470 316107 Table 5: For Resident Female Individuals below 65 years of age Annual Taxable Income 110000 145000 150000 195000 200000 250000 300000 400000 500000 1000000 1100000 Income Tax 0 0 500 9500 10500 20500 35500 65500 95500 245500 275500 Surcharge 0 0 0 0 0 0 0 0 0 0 27550 Education Cess 0 0 15 285 315 615 1065 1965 2865 7365 9092 Total 0 0 515 9785 10815 21115 36565 67465 98365 252865 312142 61 .

3. 62 .000 for Senior Citizens and Rs.e. The last date of filing income tax return is July 31.95.Table 6: For Resident Senior Citizens (over 65 years age at any time during F. 1.10. the last date for filing the return is October 31. 2. 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. Rs. in case of individuals who are not covered in point 3 below.Y. Rs. 1.45. If the income includes business or professional income requiring tax audit (turnover Rs.000 for other individuals and HUFs. 2007-08) Annual Taxable Income 110000 145000 150000 195000 200000 250000 300000 400000 500000 Income Tax 0 0 0 0 1000 11000 26000 56000 86000 Surcharge 0 0 0 0 0 0 0 0 0 Education Cess 0 0 0 0 30 330 780 1680 2580 Total 0 0 0 0 1030 11330 26780 57680 88580 24308 1000000 236000 0 7080 0 30137 1100000 266000 26600 8778 8 Filing of Income Tax Return 1. 1.000 for Resident Women. 40 lakhs).

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). other bonds o Equity Linked Savings Scheme (ELSS)  Income Head-wise Tax Planning Tips 63 . 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 . 5000. The penalty for non-filing of income tax return is Rs.4. National Savings Scheme (NSC).

Basically. that the post-tax yield is the highest possible keeping in view the basic parameters of safety and liquidity. For most individuals. Pay your tax (No tax planning required) 2. Income from Salary... Business & Profession. While planning our investments we spend considerable amount of time evaluating various options and determining which suits us best. Therefore. You have two options to choose from: 1.e. from 1st April to 31st March) using a simple tax rate table. House Property.e. financial planning and tax planning are two mutually exclusive exercises. After you have calculated the amount of your tax liability. Minimise your tax through prudent tax planning. Here you have to compare the advantages of several tax-saving schemes and depending upon your age. These three steps in tax planning are: Calculate your taxable income under all heads i. Most people rightly choose Option 'B'. decide upon a right mix of investments. given on next page. Capital Gains and Income from Other Sources. tax slabs and personal preferences.Tax Planning Proper tax planning is a basic duty of every person which should be carried out religiously. We should plan our investments in such a way. which shall reduce your tax liability to zero or the minimum possible. Calculate tax payable on gross taxable income for whole financial year (i. there are three steps in tax planning exercise. social liabilities. 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. But when it comes to planning our 64 . Every citizen has a fundamental right to avail all the tax incentives provided by the Government.

000 contribution as an integral part of your overall financial planning and not just for the purpose of saving tax. For persons below 30 years of age: In this age bracket. Your children. All individuals irrespective of the income bracket are eligible for this investment. more often than not. or retirement is still further away. you probably have a high appetite for risk.000 limit has been retained. in case you were not aware the guidelines governing such investments are a lot different this year.000 per year were not eligible to claim any rebate. but the savings that you have can be set aside for a long period of time. Regarding life 65 . Also. For the current financial year. The other significant changes are: The rebate has been replaced by a deduction from gross total income. Why are the stakes higher this year? Until the previous year. You therefore should invest a large chunk of your surplus in tax-saving funds (equity funds).000 was exclusively reserved for Infrastructure Bonds. the Rs 100. the rebate reduced with every rise in the income slab. tax benefit was provided as a rebate on the investment amount. however internal caps have been done away with. of this Rs 30. if any. Individuals have a much greater degree of flexibility in deciding how much to invest in the eligible instruments. The higher your income slab.000. The employee provident fund deduction happens from your salary and therefore you have little control over it. still have many years before they go to college. effectively. we simply go the traditional way and do the exact same thing that we did in the earlier years. Well. These developments will result in higher tax-savings. which could not exceed Rs 100. We should use this Rs 100. the greater is the tax benefit. In this note we recommend a broad asset allocation for tax saving instruments for different investor from a tax-saving perspective. individuals earning over Rs 500. Your disposable surplus maybe small (as you could be paying your home loan installments). We should understand which instruments and in what proportion suit the requirement best. And lethargy on your part to rework your investment plan could cost you dear.

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 < 30 Life insurance premium EPF 10,000 PPF / NSC ELSS Total 50,000 100,000 35,000 100,000 25,000 100,000 25,000 100,000

20,000 20,000 30,000 25,000 35,000 30,000 65,000

30 - 45 10,000 45 - 55 10,000 > 55 10,000

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

- 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.


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 4. Products that you choose help you optimise returns while you save tax in the immediate future.


this will be lower or just equal to inflation and hence you are not creating any wealth. Be careful of ULIPS. In years to come. Your ULIP will turn out to be very expensive as your age increases. it is important to understand the future implications of your tax saving strategy. Again I am sure you did not know this. which will really help you in retirement. infact you are destroying the value of your wealth rapidly. 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. 3. as returns will fall significantly. EET may apply to insurance policies as well. Pension Policies This is the greatest mistake that many people make.Strategic Tax Planning So far with whatever you have done in the past. Simply place a nominal sum to keep your account active before there is clarity on this front. That is the cold fact. Such policies should ideally be restructured and making them paid up is a good option. 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. There is no pension policy today. Tulip pension policies may help you to 69 . Public Provident Fund (PPF) This has been a long time favourite of most people. 1. invest if you are under 35 years of age. It is a no-brainer and hence most people prefer this but note this. How this will be implemented is not clear hence the best option is to go easy on this one. You cannot do much about the statutory commitments and contribution like provident fund (PF) but all the rest is in your control. 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. 2. else as and when the stock markets are down or enter into a downward phase.

the high-risk investment has the least tax liability. However. Bite this – Rs 100 today will be worth only Rs 32 say in 20 years time considering 5% inflation. National Savings Scheme (NSC). It is quite likely that you will make a sizeable sum by the time you retire but that is where the problem begins. Hence if you wish to use such funds in three-four years time the calculations can go wrong. if you can. surely you will make super normal returns. No insurance company or agent will agree to this but this is a cold fact. 5. other bonds These products are fair if your risk appetite is really low and if you are not too keen to build wealth. Nevertheless. Divest the money to more productive assets based on your overall risk profile and general preferences. If that be the case. infact it is nil as per the current tax laws. 4. you may not have made great returns or the stock markets may be down at that point. You save tax and returns are tax-free completely.some extent but I would give it a rating of four out of ten. You get to build a lot of wealth. If you are prepared to hold for long really long like five-ten years. 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. note that this is fraught with risk. you will have to hold much longer. Equity Linked Savings Scheme (ELSS) This is a good option. 70 . It is an equity investment and when your three years are over. 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. in all that we do wealth creation should be the underlying motive. Generally speaking. The problem with pension policies is that you will get a measly 2% or 4% annuity when you actually retire. Five year fixed deposits (FDs). strange as it may seem. Either make them paid up or stop paying Tulip premiums. Steer clear of such policies.

While it is important for individuals to have life cover. Term plans A term plan is the most basic type of life insurance plan. There are so many Rs 1 lakh to be planned and hence so much to benefit from good tax planning. buying life insurance has always formed an integral part of an individual's annual tax planning exercise. your spouse.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. Look at this as a tax management tool for the family and not just yourself. You have section 80C benefit for yourself. Traditionally. only the mortality charges and the sales and administration expenses are covered. There is so much to be done while you plan your tax. your HUF. An illustration will help in understanding term plans better. your father’s HUF. your parents. hence the individual does not receive any maturity benefits. A term plan should form a part of every individual's portfolio. 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. Look at 80C benefits as a composite tool. In this plan. it is equally important that they buy insurance keeping both their long-term financial goals and their tax planning in mind. 71 . There is no savings element.

A certain insurance company also has an upper limit of Rs 1. It becomes important therefore to evaluate all the options at their disposal before finalizing a plan from any one company.620 NA NA NA NA NA 4.977 2.188 4.954 2.Cover yourself with a term plan Table 7: Term Plan Returns Comparison Tenure (Years) HDFC Standard Life ICICI Prudential (Term Assurance) (Life Guard) LIC (Anmol Jeevan I) SBI Life (Shield) Kotak Mahindra Old Mutual (Preferred Term plan) Tenure 20 25 30 20 25 30 20 25 30 20 25 30 20 25 30 Age 25 2. Unit linked insurance plans (ULIPs) 72 .354 NA NA 7. wants to buy a term plan for tenure of 20 years and a sum assured of Rs 1. In case of an eventuality during the policy tenure.  Taxes as applicable may be levied on some premium quotes given above.977 3.534 NA 3.000.755 Age 35 3.747 4.000 for its sum assured. some insurance companies offer a term plan with a maximum tenure of 25 years while other companies do so for 30 years.970 NA  The premiums given in the table are for a sum assured of Rs 1. Individuals are advised to contact the insurance companies for further details.000 for a healthy.424 2. For example.375 NA 3.535 2.797 8.900 NA Age 45 7. a term plan is offered by insurance companies at a very affordable rate.120 4.000. As the table shows.820 2.000.770 2.000.542 4.180 NA 2. Individuals should also note that the term plan offering differs across life insurance companies.861 NA 1. non-smoking male.  The premium quotes are as shown on websites of the respective insurance companies.739 NA NA NA 8.544 2.000.720 2.000. the individual's nominees stand to receive the sum assured of Rs 1.078 4.613 5.150 2.580 4. Let us suppose an individual aged 25 years.750 4.

73 . the individual has already invested in tax saving funds while conducting his tax planning exercise.Unit linked plans have been a rage of late. Today. investments in ULIPs should be in tune with the individual's risk appetite. Also. and his financial portfolio or his risk appetite doesn't 'permit' him to invest in ULIPs. 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. we believe that equities are best equipped to give better returns from a long term perspective as compared to other investment avenues like gold. ULIPs' mandate is to invest a major portion of their corpus in stocks. corporate bonds and government securities (Gsecs). They invest the premium in market-linked instruments like stocks. Having said that. With the advent of the private insurance companies and increased competition. policy returns really depend on how well the company is able to manage its finances. Individuals who have a propensity to take risks could consider buying ULIPs with a higher equity component. property or bonds. ULIP investments should fit into an individual's financial portfolio. However. then what he may need is a term plan and not unit linked insurance. If for example. This holds true especially in light of the fact that assured return life insurance schemes have now become a thing of the past. The basic difference between ULIPs and traditional insurance plans is that while traditional plans invest mostly in bonds and Gsecs. Individuals need to understand and digest this fact well before they decide to buy a ULIP.

However. A retirement plan from a life insurance company helps an individual insure his life for a specific sum assured.000.09 74 . Premiums paid for pension plans from life insurance companies enjoy tax benefits up to Rs 10.070 65202 Tenure (Yrs) 15 15 Maturity Amount Actual rate of (Rs)* 1.559 return (%) 6.766.000 under Section 80CCC.000 1. who want an insurance cover. which he receives at the time of retirement. At the same time.684. As already mentioned earlier.000 Assured Premium (Rs) 65. it helps him in accumulating a corpus. Traditional endowment/endowment type plans Individuals with a low risk appetite. The return that an individual can expect on such plans should be in the 4%-7% range as given in the illustration below. which will also give them returns on maturity could consider buying traditional endowment plans. such investments should be in tune with their risk appetites.000. Gsecs and the money market. individuals could contemplate investing in pension ULIPs since retirement planning is a long term activity. Table 8: Traditional Endowment Plan Returns Age (Yrs) Company A 30 Company B 30 Sum (Rs) 1. Unit linked pension plans are also available with most insurance companies.000 1. Such plans invest most of their monies in corporate bonds.55 7. Individuals while conducting their tax planning exercise could consider investing a portion of their insurance money in such plans.Pension/retirement plans Planning for retirement is an important exercise for any individual.

A variant of endowment plans are child plans and money back plans. gratuity and commuted pension. under the terms of employment.000 Section 80C limit). 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. The tax benefit on pension plans is subject to an upper limit of Rs 10. 75 . Individuals are advised to contact the insurance companies for further details. Tax benefits Premiums paid on life insurance plans enjoy tax benefits under Section 80C subject to an upper limit of Rs 100. It should be ensured that. dearness allowance and dearness pay form part of basic salary. they still remain endowment plans in essence. 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: 1.000 as per Section 80CCC (this falls within the overall Rs 100. This will minimize the tax incidence on house rent allowance. While they may be presented differently. incidence of tax on employer’s contribution to recognized provident fund will be lesser if dearness allowance forms a part of basic salary.   The maturity amounts shown above are at the rate of 10% as per company illustrations. Taxes as applicable may be levied on some premium quotes given above. Likewise. They fit into an individual's tax planning exercise provided that there exists a need for such plans.000. Returns calculated by the company are on the premium amount net of expenses.

falls within the expression “salary” as defined in rule 2(h) of part A of the fourth schedule. tax incidence on house rent allowance.2. While medical allowance payable in cash is taxable. 76 . provision of ordinary medical facilities is no taxable if some conditions are satisfied. C onsequently. employees should get their pension commuted. 3. gratuity and commuted pension will be lesser if commission is paid at a fixed percentage of turnover achieved by the employee. 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. employer may give extra benefit to their employees by raising their contribution to 12 percent of salary without increasing any tax liability. The Supreme Court has held in Gestetner Duplicators (p) Ltd. Therefore. entertainment allowance. provided the same is transferred to the new employer who also maintains a recognized provident fund. 6. An uncommented pension is always taxable. who resigns before 5 years of continuous service. 4. 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. employees should go in for free medical facilities instead of fixed medical allowance. An employee being the member of recognized provident fund. Since employers’ contribution towards recognized provident fund is exempt from tax up to 12 percent of salary. 5. Vs CIT that commission payable as per the terms of contract of employment at a fixed percentage of turnover achieved by an employee.

accumulated unrecognized provident fund is lower if they are paid in the beginning of the financial year. car) by employer after using for 10 years or more are not taxable. If however. electronic items. it will be exempt from tax. As the perquisites in respect of free residential telephone.7. It should. As the perquisite in respect of leave travel concession is not taxable in the hands of the employees if certain conditions are satisfied. be ensured that the relief is claimed only when it is beneficial. employer and employees should mutually plan their affairs in such a way that retirement. it should be ensured that the travel concession should be claimed to the maximum possible extent without attracting any incidence of tax. bonus. 8. gift of movable assets(other than computer. takes place in the beginning of the financial year. however. 9. 77 12. 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. Since the incidence of tax on retirement benefits like gratuity. An employee should take the benefit of relief available section 89 wherever possible. Since the term “salary” includes basic salary. as the case may be. Pension received in India by a non resident assessee from abroad is taxable in India. such pension is received by or on behalf of the employee in a foreign country and later on remitted to India. This will reduce valuation of rent free house. 11. fees and all other taxable allowances for the purpose of valuation of perquisite in respect of rent free house. Although gratuity received during the employment is not exempt u/s 10(10). commission. relief u/s 89 can be claimed. termination or resignation. employees can claim these benefits without adding to their tax bill. commuted pension. 10. providing use of computer/laptop. it would be advantageous if an employee goes in for perquisites rather than for taxable allowances. .

it should be ensured that interest payable (even it is not paid) by the assessee. Care should. The tax exemption applies only in the case of on selfoccupied house and not in the case of deemed to be let out properties. If an individual makes cash a cash gift to his wife who purchases a house property with the gifted money. The effect of this ingenuity will be that all the perquisites specified u/s 17(2)(iii) will not be taxable. only one house of his own choice is treated as self-occupied and all the other houses are deemed to be let out. care should be taken to deduct tax at source in order to avail exemption u/s 24(b). As amount of municipal tax is deductible on “payment” basis and not on “due” or “accrual” basis.on one hand. and. 4. the employee may not fall in the category of specified employee. 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. on the other hand. 3. 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. 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). is claimed as deduction u/s 24. House Property Head: The following propositions should be borne in mind: 1. 5. 2. therefore. it should be ensured that municipal tax is actually paid during the previous year if the assessee wants to claim the deduction. the individual will not be deemed as fictional 78 . If a person has occupied more than one house for his own residence. on outstanding installments of the cost of the building.

or to his minor child(not being a married daughter). w.Y.owner of the property under section 27(i) – K. This deeming provision was found necessary in order to bring this situation in line with the provision of section 64. in some cases. Consequently. if the transferee uses that property for self-occupation. the transferor is deemed to be the owner of the house property. it is beneficial to transfer the house property without adequate consideration to son’s wife or son’s minor child. Such income is to be computed under section 23(2). he can escape the deeming provision of section 27(i) and the consequent hardship. if she uses house property for her residential purposes.e. For the purpose of sections 22 to 27. It can. 1975-76 onwards the scope of section 27(i) was not similarly extended. 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. he will not be deemed to be the owner of the property u/s 27(i).D. thus. be advised that if an individual transfers an asset. 6. the transferee will. such income is computed u/s 23(2). Capital Gains Head: The following propositions should be borne in mind 79 . A. 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). therefore.f. even without adequate consideration. however. includible in the income of individual in terms of section 64(1)(iv). other than house property. Taxable income of the wife from the property is. Therefore. Under section 27(i). if a person transfers house property to his son’s wife without adequate consideration. CIT. but income earned from the property by the transferee will be included in the income of the transferor u/s 64. 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.Thakar vs.

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). In order to claim advantage of exemption under sections 54. 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. 54B. 54G and 54GA the tax payer should ensure that the newly acquired asset is not transferred within 3 years from the date of acquisition. the taxpayer should obtain loan against the security of such asset (even by pledge) to meet the exigency. 80 . 54EC. Alternatively. taxpayers should so plan as to transfer their capital assets normally only 36 months after acquisition. Since long-term capital gains bear lower tax. the period for which it was held by the previous owner is also to be counted in computing 36 months. 54EF. 54ED. 54F. 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. 54G and 54GA into money. 3. 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. 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. In this context.1. Consequently. 4. 54D. 54D. 2. 54B. it will be advisable that instead of selling or converting assets acquired under sections 54.

If securities transaction tax is applicable. can acquire another capital asset. Tax on short-term capital gain can be avoided if – Another capital asset. 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. who has purchased shares. falling in that block of assets is acquired at any time during the previous year. in national stock exchange. In 2 cases. though all the assets falling in that block are not transferred. 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. the friend or relative. Conversely. may transfer shares in a stock exchange. Clubbed Incomes Head: The following propositions should be borne in mind 1. Later on. tax liability can be reduced. at any time during the previous year. long term loss can be set-off and the tax liability will be reduced). either individually or jointly with his relatives. as far as possible spouse should be employed in which employee does not have any interest. even if a 81 . the long-term capital loss is ignored. Under section 64(1) (ii). 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. To avoid this clubbing. In such a case. (ii) when a block of assets ceases to exist.5. if the shares are transferred. falling in that block of assets. In such a case this section will not be attracted. is taxable in the hands of the individual. 6. long term capital gain tax is exempt from tax by virtue of section 10(38). it is taken as equal to zero. In other words. securities transaction tax is applicable and as a consequence. salary earned by the spouse of an individual from a concern in which such individual has a substantial interest. if the taxpayer has generated long-term capital loss.

X (whose marginal tax is nil) in exchange of gold of Rs.09 x Rs 100000) without attracting provisions of section 64. 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. X (whose marginal rate of tax is 33. 4.100. 82 . he can reduce his tax bill by Rs.e. is not clubbed in the hands of transferor. Income from property transferred to spouse is clubbed in the hands of transferor. the spouse may be employed in a concern which is inter related with the concern in which the individual has substantial interest.close relative of the individual has substantial interest in the concern. 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.66%) can transfer fixed deposit in a company of Rs. Income from property transferred to spouse in accordance with an agreement to live apart. Consequently income from property transferred without consideration before marriage is not clubbed in the income of the transferor even after marriage. For instance. However. 0.. 3029(i. Alternatively. an allowance given to wife by husband for her dress and usual house hold expenditure) is not included in the taxable income of husband.. It may be noted that the expression “ to live apart” is of wider connotation and covers even voluntary agreement to live apart.e. to Mrs. 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..e.000.100.3366 x 0. it has been held that income from savings out of pin money (i. a prenuptial transfer (i.000 bearing 9% interest. 2. 3. Likewise. Exchange of asset between one spouse and another is outside the clubbing provisions if such exchange of assets is for adequate consideration.

7. and. 6. . however. provisions of section 64 are not attracted. If. If an individual transfers property without adequate consideration to son’s wife. the provisions of section 64 (IA) are not applicable. income from the property is always clubbed in the hands of the transferor. 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. is not clubbed in the hands of the transferor. 83 9. 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.5. the transaction would be outside the scope of section 64 (1) (vi) and 64 (2)(c). as is received by son’s wife. consequently. This offers attractive approach for minimizing income to be clubbed by transfers for temporary periods during the course of the previous year. If gifts are made by HUF to the wife. greater share is given out of the transferred property to son’s wife or son’s minor child. income derived from the transferred property. an individual transfer’s property wit hout consideration to his HUF and the transferred property is subsequently partitioned amongst the members of the family. or daughter in law of any of its male or female members (including karta). if. with a stipulation that income shall accrue for a specified period and the corpus going to the trust afterwards. at the time of partition. minor child. 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. 8. If a trust is created by a male member to settle his separate property thereon for the benefit of HUF. provisions of section 64 are not attracted.

income arising to the transferee. or  any institution. 2. 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.10. 3. The Company is defined under section 2(17) as to mean the following:  any Indian Company . income arising from the accretion of such transferred assets or from the accumulated income cannot be clubbed in the hands of the transferor. 12. which is declared by general or special order of the CBDT to be a company. or  any institution. association or a body. However. A loan is not a “transfer” for the purpose of section 64. has made prescribed arrangements for the declaration and payment of dividends within India in accordance with section194. 1970. association or a body which is assessed or was assessable/ assessed as a company for any assessment year commencing on or before April 1. or  any body corporate incorporated under the laws of a foreign country . whether incorporated or not and whether Indian or non Indian. is taxable in the hands of transferor. 1. 11. 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. from property transferred without adequate consideration. Domestic Company means an Indian company or any other company which. 84 . An Indian Company means a company formed and registered under the companies’ act 1956. Business and Profession head: The following propositions should be borne in mind to save tax. In cases covered in section 64. in respect Of its income liable to tax under the Act.

should be payable only at a place within India to all share holders 5. at least from April 1 of the relevant assessment year. 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. 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 dividends declared. ii. iii. in respect of any assessment year. 85 . A Foreign company means a company which is not a domestic company.4. 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. 6. The share register of the company for all share holders should be regularly maintained at its principal place of business in India. if any.

 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. 86 . efficient and effective administration and improved voluntary compliance” .  To get full knowledge about Income tax.  To show gross total income.  What is regarded as income under the Income-tax Act.Objective of the study “To partner is the nation building process through progressive tax policy.  How to charge tax on income.  Meaning of person and assessee.  Main objective is pay tax without the help of CA or other person.

Research Methodology 87 .

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. the resolution of a problem. 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. qualitative. Validity means that correct procedures have been applied to find answers to a question. which is frequently called research methodology. Research is a process through which we attempt to achieve systematically and with the support of data the answer to a question. 3 is designed to be unbiased and objective. This process. or a greater understanding of a phenomenon. has eight distinct characteristics:  Research originates with a question or problem. Philosophies means approaches e. quantitative and the academic discipline in which you have been trained.Research Methodology When you say that are undertaking a research study to find answers to a question.  Research requires a clear articulation of a goal.g. 88 .

Descriptive research is used in this project report in order to know about cash management services to clients and determining their level of satisfaction. generally used in survey research design and most useful in describing the characteristics of consumer behavior.  Research accepts certain critical assumptions. which data are relevant. helical.  Research requires the collection and interpretation of data in attempting to resolve the problem that initiated the research. Every design has its positive and negative sides. There are two kinds of research designs namely. The method used was following:  Questionnaire method  Direct Interaction with the clients. Research follows a specific plan of procedure. what data to collect. In sociology. cyclical. and cross-sequential. dealing with at least four problems: which questions to study. or more exactly. there are three basic designs. or hypothesis. these are crosssectional. and how to analyze the results.  Research usually divides the principal problem into more manageable sub problems. longitudinal.  Research is guided by the specific research problem.  Research is. by its nature. The best design depends on the research question as well as the orientation of the researcher. question. which are considered to generate reliable data.  Exploratory 89 . Research Design: - Research design is considered as a "blueprint" for research. This is the most popular type of research technique.

books and newspaper articles. 2.Non. Sample unit: .All the Person of the DSIIDC.Taxation Department. Type of sampling:.900 above members. Is an exploratory cum descriptive research. exploratory kind of research is done to explore the possible outcomes. The sources are as follows:I. Sampling Design:1. Descriptive The project assigned to me “Income Tax Reports”. Situation Analysis: .Conducting a situational analysis means analyzing the company. The situation analysis is a background investigation. II. With this mean primary data has been collected. research.Office members. Total sample size:.The sources of secondary data were internet. Sample Area: . Secondary data: . 90 . 5.Probability 3. and as the project title is itself suggesting that I will be exploring the influence of Timely Pay Income Tax returns by individual & organization. Primary Source: . its market. It involves obtaining information about the company and its business environment by means of library. 4.The questionnaire has been designed and same is asked to the customers in the stores itself. Sources of Data :I have collected the information from only Primary sources. its competition and the industry in general. Descriptive research design is a scientific method which involves observing and describing the behavior of a subject without influencing it in any way. Sampling universe:.

Data representation technique:. Sampling procedure:. 10.purposive sampling. 9. Sample collection Duration:.All the data has been analyzed on the basis of percentage basis.Data analysis instrument:.Questionnaire method 7.Pie Chart.6. 8.45 days. Sample collection technique: . 91 .

and premium are all subject to FY 2007-08 only.Limitations  This project studies the tax planning for individuals assessed to Income Tax. eliminating the need of sample/population analysis.  The study relates to non-specific and generalized tax planning.  This study covers individual income tax assessees only and does not hold good for corporate taxpayers.  Basic methodology implemented in this study is subjected to various pros & cons.  The tax rates. insurance plans.  This study may include comparative and analytical study of more than one tax saving plans and instruments. 92 . and diverse insurance plans at different income levels of individual assessees.

Data Analysis And Interpretation 93 .

in different business. suggesting conclusions. 1. 94 . and social science domains. transforming. and modeling data with the goal of highlighting useful information. and supporting decision making. Are you Pay Income Tax returns? a) Yes b) No income tax returns No 30% Yes 70% 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. encompassing diverse techniques under a variety of names. science. cleaning. Data analysis has multiple facets and approaches.Analysis of data is a process of inspecting.

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 fill tax agent online 0% 10% 10% do not pay tax 30% 50% Analysis of the above diagram According to company workers 10% fill tax manually. 30% fill tax through online and 10% do not pay tax. 50% fill tax through agent. 95 .2.

001 up to 20% c.0000 up to10% b. 50.0001-1.3. 96 . 00. 00.00.15. 20. 1. 5 lacs above pay tax 20% and 10 lacs & up to pay tax 30%.0001-50. 0000 up to 30% tax percentage 2.00.000 500001-100001 1000000 up to 17% 50% 33% Analysis of the above diagram According to tax slab rate 2 lacs above pay tax 10%. Kindly select the slab of your income with respect to tax percentage: a.00.

What kind of tax you are paying? a) Income tax b) Property tax c) Corporate tax paying tax income tax property tax corporate tax 38% 33% 29% Analysis of the above diagram According to this chat kind of paying tax income tax.4. property tax and corporate tax. 97 .

Are you paying tax for your movable and immovable property? a) Yes b) No income tax returns No 30% Yes 70% Analysis of the above diagram According to this diagram 30% movable property and 70% immovable property.5. 98 .

9% say good and 5% say not good.6. 19% say very good. Rate your overall tax clearance experience: a) b) c) d) Excellent Very good Good Not so good clearance tax excellent very good good not so good 5% 9% 19% 67% Analysis of the above diagram According to this diagram overall tax clearance experience 67% say excellent. 99 .

We provide easy to fill the tax with the help of e. planning horizon would depend on an individual’s total taxable income and age in the particular financial year.  Income tax is charged in assessment year at rates specified by the Finance Act applicable on 1st April of the relevant assessment year. refunds. However.  Total Income is to be computed as per the provisions of the Act.filling returns. If don’t paid the tax at the fix time then according to Income tax Law we charge penalty.  It is charged on the total income of every person for the previous year.  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. prudent tax planning before-hand is must for all the citizens to make the most of their incomes. 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. 100 . the mix of tax saving instruments. we can say that given the rising standards of Indian individuals and upward economy of the country.CONCLUSION At the end of this study.

capital gains. dearness allowance. 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. You can invest up to Rs 1 lakh in any option under Sec 80C. which will lead to a big tax outstanding at the end of the year. for instance. etc) has been factored in. bonds and on the balance in your savings bank account. Some salary components such as the basic salary. conveyance and other reimbursements are exempt subject to rules. If you don't do that. rent.SUGGESTIONS : For most Generation Y professionals. But since tax is payable on the combined total income. NSCs. The threshold is higher for senior citizens but we won't get into that. Tax planning may appear complicated but once you get the hang of it. Your choice should be guided by your needs and ability and willingness to 101 . Do you have to pay tax? That depends on how much you earn and under what heads. If you invest in stocks or funds. there may be dividend income and capital gains as well. Just spend a little time to understand what it is all about and the knowledge will benefit you for the rest of your life. Tax deduction at source Your employer calculates the tax payable and deducts it from your salary. The other options are PPF. it can be empowering and rewarding. 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. this basic limit will be raised to Rs 2 lakh. Here are some basics of tax planning. But apart from the income from your employer. life insurance policies and pension plans. ELSS mutual funds. Others such as house rent allowance. tax saving FDs. the TDS by your employer may not suffice unless your income from other sources (interest. you must report the income from the previous employer a s well. From next year. there may be rental income coming in.9 lakh for females).8 lakh (Rs 1. Some of these are automatic-your contribution to the PF. If you changed jobs during the year. If you own property. you have to pay tax on it. If the income you earned in a financial year (1 April to 31 March) exceeds the basic exemption limit of Rs 1. you may also earn interest on fixed deposits. It needn't be like that. special allowance and bonuses are taxable. you will end up availing the basic exemption twice in a year.

Don't jump into equitybased ELSS funds if you can't stomach the risk of stock investments. Many countries want to know if you are financially stable before they issue you a visa.The sooner you do it. These details need to be filled in the tax return form. You can be slapped with a penalty of up to `5. the Form 16 has nearly all the details they need to put in their tax return form. the only way you can get it back is by filing your return. If you submitted documentary proof of all these investments to your employer within the stipulated time. However. There are other deductions too. Don't buy an insurance plan if you don't have dependants.take risk. 102 .000 in a year and you should have paid the tax due on it. this interest should not exceed Rs 10. Not filing your return can have serious repercussions. the better it is for you because the faster your tax refund reaches you. A refund is not the only reason to file your tax return. The income tax return i s your single sheet answer to all these queries. going abroad or even taking a large insurance cover. the TDS will be low. But if they have other investments as well. Understanding your Form 16 Your employer must have given you a Form 16. If you have paid more tax than due. But if you missed the deadline. it will unnecessarily raise suspicion and the income tax department may scrutinize your finances further. you would have paid more tax than was due. Instead. Besides. which is a certificate of the TDS from your salary. Your return is a declaration of your income and will come handy when you are seeking a loan. Also. Insurance companies want to know if the cover you want is commensurate with your income. 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 . 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.000 even though all your taxes are paid. You should also not have any tax refund due. Banks want to see your income details before they extend a loan. For most salaried individuals. you can avail of this exemption only if you have income from salary and bank interest. there could be TDS certificates from the bank or bond issuer on the interest they might have earned. Medical insurance policies for yourself or your parents are eligible for deduction under Sec 80D. Don't look at filing your tax return as a painful exercise. buying property.

Once you get the hang of it. some portals even cross check your return before it is filed to make sure it is error free. 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. For as little as Rs 200-250. They even choose the correct ITR form for you based on your income so there is zero chances of you going wrong. by yourself or with the help of a tax professional. you can start filing your return by yourself.How to file your return You can file your return online or offline. There are websites that guide you at every step of the process. It is advisable to take the help of a tax professional at least for the first time. It is a small fee to pay for peace of mind. Online filing is very simple and doesn't require too much effort. 103 .

Did you fill your income tax last year? If yes. 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 Q3.0001-1. 0000. Kindly select the slab of your income with respect to tax percentage: d.0000 up to10% 51.1. 50.0000-50. 00. g. 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. 20. Choose the dedications/ credits from the following:      Registered saving plans Public pass transit receipts Moving expenses Charitable donations Labour sponsored funds Q5. 001 up to 20% 1. please do mention the slab percentage for the same: _____________________ Q2. 0000 up to 30% Above than this. e. 11.Questionnaire Q1. f. please mention: _________________ 104 .

Rate your overall tax clearance experience: e) f) g) h) Excellent Very good Good Not so good Q10. According to you what is the best benefit of paying tax:     Clean record for commencing business Country Infrastructure growth Social security Others: __________________ Q9. Did you change your income tax circle since you are filing for income tax?  Yes  No Q11.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. 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 105 .

Are you filing the tax return as a couple jointly?  Yes  No Q16.Q12. Have you enclosed all of your employee business expenses?  Yes  No Q15. Are you sure these above enclosed statements are true and similar with your previous tax file claim?  Yes  No  Not sure Q13. 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: _____________________ 106 . Kindly ensure if you have put in all credit statement:  Yes  No Q14.

BIBLIOGRAHY Income tax India – www. Muktesh Self Notes 107 .gov.www.dsiidc.Divisional Account Officer (Taxation cell) Mr.

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