A PROJECT REPORT

ON

“A STUDY OF ASSESMENT OF INCOME & TAX LIABILITY OF SALARIED

INDIVIDUALS” AT
H & R Block India Pvt LTD.

BY
ESHA MANOJ AGRAWAL

UNDER THE GUIDANCE OF DR. PURVI SHAH

SUBMITTED TO SAVITRIBAI PHULE PUNE UNIVERSITY

IN PARTIAL FUFILLMENT OF REQUIREMENTS FOR THE AWARD
OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION YEAR 2018 TO 2020

FOR
INDIRA INSTITUTE OF MANAGEMENT, PUNE

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 CERTIFICATE

This is to certify that, Ms. Esha Manoj Agrawal, student of Indira Institute of
Management, Pune has successfully completed her project Titled “A STUDY OF
ASSESMENT OF INCOME & TAX LIABILITY OF SALARIED INDIVIDUALS at H & R Block
India Pvt LTD” for the period from 15th May 2019 to 2nd August 2019 in partial
fulfilment of Master in Business Administration (MBA) course.

Dr. Pandit Mali, Dr. Purvi Shah

Director, Internal Project Guide
Indira Institute of Management, Pune Indira Institute of Management, Pune

ii
 ACKNOWLEDGEMENT

The internship opportunity I had with H & R Block Pvt Ltd. was a
great chance for learning and professional development. Therefore, I
consider myself as a very lucky individual as I was provided with an
opportunity to be a part of it. I am also grateful for having a chance to
meet so many wonderful people and professionals who attracted to me
though this internship period.

Bearing in mind previous I am using this opportunity to express my

gratitude to Ms. Aishwarya Pardeshi, Quality Assurance Manager, H &
R Block Pvt Ltd. and my external project guide for the critical insights
which helped me to be on the correct path.

I sincerely express my thanks to my internal project guide Mrs.

Purvi Shah for her valuable guidance and intellectual suggestions
during this project.

I would also express my sincere gratitude towards all the

executives who overlooked my work and pushed me hard so that I could
complete the targets assigned to me. I would really like to thank H & R
Block Pvt Ltd. as a whole because the whole idea about how a market
research firm works was acquired by me during my stint of 2 months. It
was really an enlightening experience. I would like to express my sincere
gratitude towards all the components of H & R Block Pvt Ltd. which
made the internship journey an unforgettable one.

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 DECLARATION

I, Esha Manoj Agrawal, hereby declare that the project work entitled “A
STUDY OF ASSESMENT OF INCOME & TAX LIABILITY OF SALARIED
INDIVIDUALS” at H & R Block Pvt Ltd submitted to the SAVITRIBAI
PHULE PUNE UNIVERSITY, is the record of authentic and original work
carried out by me under the guidance of Mrs Purvi Shah, Faculty Member,
INDIRA INSTITUTE OF MANAGEMENT, PUNE, during the academic
year 2018-20 in the partial fulfilment of the requirement for the degree of
MBA- Marketing.

It is to the best of my knowledge and belief. This is to declare that all

my work indulged in the completion of the project report such as
research, analysis and suggestions is a profound and honest work of
mine. The results embodied in this report have not been submitted to
any other university or institute for the award of any degree.

Place:

Date:

iv
Table of Contents
EXECUTIVE SUMMARY 1
CHAPTER I: INTRODUCTION AND RATIONALE OF THE STUDY 3
1.1 Introduction to the Title 4
1.2 Significance of the study 6
CHAPTER II: INDUSTRY/SECTOR PROFILE 7
2.1 Overview of the Industry/Sector 8
2.2 Major players 9
2.3 Regulatory Framework 10
CHAPTER III: ORGANIZATIONAL PROFILE AND BUSINESS OVERVIEW 11
3.1 About the Organization 12
3.2 Mission and Vision of the Company 12
3.3 Registered Address/Number of Branches 13
3.4 Major Product Lines 13
3.5 Business Segment 14
CHAPTER IV: OUTLINE OF PROBLEM AND TASK UNDERTAKEN 15
4.1 Identification of Problem 16
CHAPTER V: THEORETICAL FRAMEWORK 17
CHAPTER VI: OBJECTIVE AND SCOPE OF THE PROJECT 28
CHAPTER VII: RESEARCH METHODOLOGY 30
CHAPTER VIII: ANALYSIS AND FINDINGS 33
CHAPTER IX: CONCLUSIONS AND SUGGESTIONS 41
CHAPTER X: KEY LEARNINGS AND CONTRIBUTION 44
TO THE HOST ORGANIZATION
BIBLIOGRAPHY/REFERENCES: 47
EXECUTIVE
SUMMARY

1
Executive Summary
Title
The title of the project undertaken is “Assessment of income and tax liability of salaried
individuals”. It was carried out in the organisation- H & R block India private limited,
which is a tax consultancy firm.
The basic aim of the project is to study from what all sources an individual can earn
income and based on that income, how his tax liability can be assessed.
Objectives
There are many objectives related to this project-
 To learn the process of filing ITR1 and ITR2.
 To learn about the various sources of income and its implications in deciding the
tax liability of an individual.
 Understand the complexity of tax situation of an individual.
 To assess to reduce the tax liability of an individual.
Methodology
The methodology used to conduct the research work is CASE STUDY(qualitative
research). For the purpose of collection of data, both the sources are used, i.e. -
 Primary source - information from clients, guidance from seniors and collegues
and documents like- form 16, form 26 AS, investment proofs by the client.
 Secondary source - Concepts studied under Income tax act, 1961. And websites
like- ICAI, income tax department website.
Learnings
The learnings from the project are lifetime experience, which are mentioned below-
 Came to know about various concepts under income tax.
 Filing of ITR1 and ITR2.
 Learnt how to reduce the tax liability and make them understand the complexity of
their tax situation.
 Studied about various types of income and their implications on tax liability.
Utility to the organisation
Working with H & R Block , I communicated with 500+ clients. I prepared tax
summaries for 200 + clients and successfully e-filed 170 income tax returns. Also
generated 50 + leads.

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Conclusion
The salaried individuals also have other sources of income like income from house
property and other sources of income.

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 CHAPTER-1
INTRODUCTION AND RATIONALE OF THE
STUDY

4
 1. INTRODUCTION TO THE TITLE

WHAT IS TAX
A tax is a mandatory financial charge or some other type of levy imposed upon a
taxpayer by a governmental organization in order to fund various public expenditures.
The levying of taxes aims to raise revenue to fund governing and/or to alter prices in
order to affect demand.
INCOME
Income is something earned during a financial year, whether accrued or actually received.
There are 5 sources of income which are classified under income tac act, 1961.they are:

HEADS OF INCOME

INCOME FROM SALARY INCOME FROM INCOME FROM HOUSE

CAPITAL GAINS PROPERTY

PROFITS AND GAINS OTHER INCOME

FROM BUSINESS OR
PROFESSION

Income from salary

Income can be charged under this head only if there is an employer employee relationship
between the payer and payee. Salary includes basic salary or wages, any annuity or
pension, gratuity, advance of salary, leave encashment, commission, perquisites in lieu of
or in addition to salary and retirement benefits. The aggregate of the above incomes, after
exemptions available, is known as Gross Salary and this is charged under the head
income from salary.

Income from house property

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Any residential or commercial property that you own will be taxed as well. Even if your
piece of real estate is not let out, it will be considered earning rental income and you will
need to pay tax on it.The income tax blokes are a bit easy going on this – they tax you on
the capacity of the real estate to earn income and not the actual rent. This is called the
property’s Annual Value and is the higher of the fair rental value, rent received or
municipal rent.

Profits and gains of business or profession

Income earned through your profession or business is charged under the head “profits and
gains of business or profession”. The income chargeable to tax is the difference between
the credits received on running the business and expenses incurred. The deductions
allowed are depreciation of assets used for business; rent for premises; insurance and
repairs for machinery and furniture; advertisements; traveling and many more.

Capital gains
Any profit or gain arising from transfer of capital asset held as investments are
chargeable to tax under the head “capital gains”.

Income from other sources

Any income that does not fall under the four heads above is taxed under the head
“income from other sources”. An example is interest income from bank deposits, winning
from lottery, any sum of money exceeding Rs. 50,000 received from a person (other than
from relative, on marriage, under a will or inheritance).

Income Tax:
Many jurisdictions tax the income of individuals and business entities, including
corporations. Generally, the tax is imposed on net profits from business, net gains, and
other income. Many jurisdictions tax the income of individuals and business entities,
including corporations.

COMPUTATION SHEET FOR CALCULATING TAX

S.NO PARTICULARS AMOUNT TOTAL

AMOUNT

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A. INCOME FROM SALARY XXXX

B. INCOME FORM HOUSE XXXX

PROPERTY

C. PROFIT AND GAIN XXXX

FROM BUSINESS AND
PROFESSION

D. CAPITAL GAINS XXXX

E. INCOME FROM OTHER XXX

SOURCES

F. GROSSTOTAL XXXXX
INCOME(A+B+C+D+E)

G. DEDUCTIONS UNDER XXX

CHAPTER VI A

H. NET TAXABLE INCOME XXXX

(F-G)

I. TAX (ACCORDING TO XX
SLAB RATES)

J. EDUCATION CESS @4% X

K. NET TAX PAYABLE XXX

2. Significance Of The Study

 Studying about the sources of income which is classified according to the income
tax act,1961.

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 To determine from all which sources a person earns income from.

 To assess whether the person has knowledge about the tax planning.

 Find out how the people invest their income.

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 CHAPTER-2
INDUSTRY AND SECTOR PROFILE

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 1. Overview of the Industry:

India has a diversified financial sector undergoing rapid expansion, both in terms of
strong growth of existing financial services firms and new entities entering the market.
The sector comprises commercial banks, insurance companies, non-banking financial
companies, co-operatives, pension funds, mutual funds and other smaller financial
entities. The banking regulator has allowed new entities such as payments banks to be
created recently thereby adding to the types of entities operating in the sector. However,
the financial sector in India is predominantly a banking sector with commercial banks
accounting for more than 64 per cent of the total assets held by the financial system.

The financial services industry plays a vital intermediary role in the world economy as it
moves money from entities with excess funds to those with a need for funds. It includes
firms that are engaged in activities such as investing, lending, insurance, securities
trading, and securities issuance. Its clients are individuals, businesses, non-profit
organizations, and agencies of government.

The industry as a whole encompasses and integrates numerous components and services
in interlocking and co-dependent parts.

Bank deposits provide the capital for bank loans. The sale of stocks and bonds to
investors supports the operations of businesses and governments who issue those stocks
and bonds. Insurance contracts help to pool and manage risks.

Types of Businesses in the Industry

This is not an exhaustive list of businesses or services that contribute to the industry by
any means, but the financial services industry usually encompasses companies in one or
more of the following lines of business:

Banking

Insurance

Securities brokerage or financial advisory services

Investment banking

Securities trading

Investment management or money management

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Securities analysis

2. Players in the industry

 Deloitte
 PWC
 KPMG
 E&Y
 BDO international
 Grant Thornton
 RSM international
 SS Kothari
 Lodha & Co.
 Mazars
 H&R block
 Money plant

1.3 Nature of competition from an economist’s perspective

How the financial advisory companies help in economy’s growth?
Economic activity reflects a balance between what people, businesses, and governments
want to buy and what they want to sell. In the short run—focusing on the next one or two
years—economic policy has greater impact on the demand side. When the economy is
weak, for example, the Federal Reserve tries to boost consumer and business demand by
cutting interest rates or purchasing financial securities. Congress, for its part, can boost
demand by increasing spending and cutting taxes.

Tax cuts increase household demand by increasing workers’ take-home pay. Tax cuts can
boost business demand by increasing firms’ after-tax cash flow, which can be used to pay
dividends and expand activity, and by making hiring and investing more attractive.

MULTIPLIERS

How much tax cuts boost demand (or tax hikes restrain it) depends on the sensitivity of
household and business behaviour—for example, how households divide increased after-
tax income between consumption and saving, and whether businesses choose to hire and
invest more. Economists summarize these effects in a simple measure, the output
multiplier, expressing how many dollars of increased economic activity result from a
dollar reduction in taxes or a dollar increase in government spending. The Congressional
Budget Office (CBO) has estimated such multipliers for a mix of tax and spending
policies.

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 3. Market shares of top 3 and bottom 3 players

Top 3 players Bottom 3 players

NAME REVENUE NAME REVENUE

(in billion $) (in billion $)

DELOITTE 43.2 KPMG 28.96
PwC 41.28 H & R Block 3.16
E&Y 34.8 MAZARS 1.796

4. Regulatory framework

CENTRAL BOARD OF DIRECT TAX

Functions and Organisation

The Central Board of Direct Taxes is a statutory authority functioning under the
Central Board of Revenue Act, 1963. The officials of the Board in their ex-officio
capacity also function as a Division of the Ministry dealing with matters relating to
levy and collection of direct taxes.

Historical Background of C.B.D.T.

The Central Board of Revenue as the apex body of the Department, charged with the
administration of taxes, came into existence as a result of the Central Board of Revenue
Act, 1924. Initially the Board was in charge of both direct and indirect taxes. However,
when the administration of taxes became too unwieldy for one Board to handle, the
Board was split up into two, namely the Central Board of Direct Taxes and Central
Board of Excise and Customs with effect from 1.1.1964. This bifurcation was brought
about by constitution of two Boards u/s 3 of the Central Board of Revenue Act, 1963.

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 CHAPTER-3
ORGANISATIONAL PROFILE AND BUSINESS
OVERVIEW

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Company Profile

In 1955, brothers Henry and Richard Bloch founded the company known today as H&R
Block. The pair began working together in the late 1940s, operating the United Business
Company, which provided bookkeeping services to small businesses in Kansas City,
Missouri.
Henry and Richard saw that concentrating on tax preparation services would be both an
innovative and sound business venture. Thus, H&R Block Inc. was formed with Henry as
president and chief executive officer and Richard as chairman of the board.
As the company has evolved and achieved significant milestones, H&R Block has
remained committed to the factors that led to its success: superior customer service, a
pledge to stand behind our work and a commitment to serving clients. H&R Block is
dedicated to being the most trusted, state-of-the-art tax preparation firm at the best value.
Today, H&R Block is providing tax preparation assistance around the world, including
the United States, Canada, Australia, Brazil and India. Prepare more than 20 million tax
returns annually.

Mission statement of the company:

“We look at your life through tax…and find ways to help.”

Promises:
 Understanding unique tax situations.
 Proactive support– Pay only when satisfied!
 Confidentiality – We keep your documents safe.
 100% Accuracy Guaranteed – If we make an error, we fix it.
 Year Around support – We are open all year to assess you!

H&R Block logo:

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H&R Block operations in various countries:

United States of America:

Founded in 1955
Served 24.2 million clients
12000 retail offices

Canada:
Founded in 1964
Served over 2.4 million clients
12000 retail offices

Australia:
Founded in 1971
Served over 6,75,000 clients
400 retail offices.

Brazil:
Founded in 2012
Served over 25K clients

India:
Founded in 2012
Served thousands’ of clients
6 retail offices

Business and Culture:

Global – The Company is serving clients all over the world.
Year round – Tax filing is a seasonal business. But the company provides year round
support to its clients for further support after tax filing.

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High ambitions
Client focused
Agile – The Company is very responsive for its clients’ needs.
Tax plus – The Company provides various services beyond tax filing.

H&R Block India Pvt. Ltd. It started its operations in India in 2012.It has six retail offices
in India, situated in Gurgaon, Ahmadabad, Mumbai, Pune, Hyderabad, and Bangalore.
The head office is in Pune. The Managing Director of the company is Mr. Rohan Parikh.
Business in India: Unlike USA, business model in India is very different. The main
segment is Online Assisted (OA) channel whereas in USA the main segment is retail
offices.

Various service channels of H&R Block India Pvt. Ltd.:

OA (Online Assisted tax filing service) – This is the most important channel in India as
this channel generates most of the revenue for the company. In this channel, the client is
served and gets assistance online without face to face interaction. For this channel
company has developed its own software and website. This channel is further divided
into three segments:
OMC (Open Market Client) – This is the paid service and the major source of revenues.
CORP (Corporate Clients) – The company has done tie ups with many other
companies. For the employees of the company the return filing service is free and they
are charged only if there is Capital gain or foreign income according to their complexity.
NRI (Non-Resident Indians) – It is the paid service and serves many NRI’s.
Brand office– It is also called as retail office. In this channel, client is served in the retail
offices located in six cities in India. Most of the clients served in this channel are NRIs,
complex cases or small or medium businesses.
DIY (Do it Yourself) – In this channel the client can file his return by his own without
any assistance. This service is also free of cost. The company’s main focus is OA
channel as it generates more revenues in India unlike USA. In USA retail offices is the
most focused channel. H&R Block India Pvt. Ltd. started with a team of 8 tax experts in
2012 and filed around 3000 return in its first year of operation. Last year i.e. in the year
2015 it had served 46000 clients and this year they have a target of serving 250000
clients through 300 Associates in India. In 2013 the number reached to 30 tax experts or
Associates and in 2014 this number went to 100. This year, in 2016, more than 300 tax
experts or Associates are serving their clients through OA channel.

16
Products and services offered:
 Income tax services
 Business services
 Expat ret

17
 CHAPTER – 4
OUTLINE OF PROBLEM AND TASK
UNDERTAKEN

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1. Identification of problem or task undertaken

allotment of documents tax sheet

payment by shared for e-
Hello call clients to send by prepared by e-filing
clients approval verification
tax advisors clients tax advisor

 Hello call is a call made to inform the clients about the tax return e-filing.
 If the clients want to come to board, they have to make the payment according to
the complexity.
 Thereupon, the clients are allotted to the tax advisors.
 Calling the clients asking for the documents like form 16, form 26 AS, other
investment proofs if any, by the client.
 After the documents sent by the client, the tax advisor prepares the tax summary.
 And uploaded by the tax advisor on website for the client’s approval.
 Asking about any other information which has to be mentioned in their ITRs.
 If approved by the client, the e-filing process gets initiated and then gets e-filed.
 After the completion of e-filing process, the client has to do e-verification.

19
 CHAPTER - 5
LITERATURE REVIEW

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E-Taxation means Trans organizational processes with data transfer (upload and
downloads) between the IT systems of professionals and those of the tax authorities. This
processes implies organizational, semantic and technical interoperability, services
oriented architecture etc. The prerequisites for effective tax system are appropriate
methods, software and training. Other major issues to overcome area access to
computerized databases, digital documents and evidence, and the ability to understand e-
taxation system. E-Taxation also has to support tax authority processes by work flow
systems and electronic record management on the one hand, knowledge management and
automated risk analysis to assess the credibility of tax returns on the other hand.
Income tax is an annual tax on income. The Indian Income Tax Act (Section 4) provides
that in respect of the total income of the previous year of every person, income tax shall
be charged for the corresponding assessment year at the rates laid down by the Finance
Act for that assessment year. Section 14 of the Income- tax Act further provides that for
the purpose of charge of income tax and computation of total income all income shall be
classified under the following heads of income
a) Salaries
b) Income from house property
c) Profits and gains of business or profession.
d) Capital gains
e) Income from other sources

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 Income from
salary

Income from
Income from
house
other sources
property

Income from
Income from
business
capital gains
profession

Income from salary

Salary is the remuneration received by or accruing to an individual, periodically, for
service rendered as a result of an express or implied contract. The actual receipt of salary
in the previous year is not material as far as its taxability is concerned. The existence of
employer-employee relationship is the sine-qua-non for taxing a particular receipt under
the head “salaries”. For instance, the salary received by a partner from his partnership
firm carrying on a business is not chargeable as “Salaries” but as “Profits & Gains from
Business or Profession”. Similarly, salary received by a person as MP or MLA is taxable
as “Income from other sources”, but if a person received salary as Minister of State/
Central Government, the same shall be charged to tax under the head “Salaries”. Pension
received by an assess from his former employer is taxable as “Salaries” whereas pension
received on his death by members of his family (Family Pension) is taxed as “Income
from other sources”.

WHAT DOES SALARY INCLUDE?

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Section 17(1) of the Income tax Act gives an inclusive and not exhaustive definition of
“Salaries” including therein

(i) Wages

(ii) Annuity or pension

(iii) Gratuity

(iv) Fees, Commission, perquisites or profits in lieu of salary

(v) Advance of Salary

(vi) Amount transferred from unrecognized provident fund to recognized provident fund

(vii) Contribution of employer to a Recognized Provident Fund in excess of the

prescribed limit

(viii) Leave Encashment

(ix) Compensation as a result of variation in Service contract etc.

(x) Contribution made by the Central Government to the account of an employee under a
notified pension scheme.

DEDUCTION FROM SALARY INCOME

The following deductions from salary income are admissible as per Section 16 of the
Income-tax Act.

 Professional/Employment tax levied by the State Govt.

 Entertainment Allowance- Deduction in respect of this is available to a

government employee to the extent of Rs. 5000/- or 20% of his salary or actual
amount received, whichever is less.

It is to be noted that no standard deduction is available from salary income w.e.f.

01.04.2006 i.e. A.Y.2006-07 onwards.

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PERQUISITES

“Perquisite” may be defined as any casual emolument or benefit attached to an office or

position in addition to salary or wages.

“Perquisite” is defined in the section17 (2) of the Income tax Act as including:

Value of rent-free/concessional rent accommodation provided by the employer.

Any sum paid by employer in respect of an obligation which was actually payable by the
assesse.

Value of any benefit/amenity granted free or at concessional rate to specified employees

etc.

The value of any specified security or sweat equity shares allotted or transferred, directly
or indirectly, by the employer, or former employer, free of cost or at concessional rate to
the assess.

The amount of any contribution to an approved superannuation fund by the employer in

respect of the assess, to the extent it exceeds one lakh rupees; and the value of any other
fringe benefit or amenity as may be prescribed.

PERQUISITES EXEMPT FROM INCOME TAX

Some instances of perquisites exempt from tax are given below:

Provision of medical facilities (Proviso to Sec. 17(2)): Value of medical treatment in any
hospital maintained by the Government or any local authority or approved by the Chief
Commissioner of Income-tax. Besides, any sum paid by the employer towards medical
reimbursement other than as discussed above is exempt up to Rs.15,000/-.

Perquisites allowed outside India by the Government to a citizen of India for rendering
services outside India (Sec. 10(7)).

Rent free official residence provided to a Judge of High Court or Supreme Court or an
Official of Parliament, Union Minister or Leader of Opposition in Parliament.

24
No perquisite shall arise if interest free/concessional loans are made available for medical
treatment of specified diseases in Rule 3A or where the loan is petty not exceeding in the
aggregate Rs.20,000/-

No perquisite shall arise in relation to expenses on telephones including a mobile phone

incurred on behalf of the employee by the employer.

ALLOWANCES

Allowance is defined as a fixed quantity of money or other substance given regularly in

addition to salary for meeting specific requirements of the employees. As a general rule,
all allowances are to be included in the total income unless specifically exempted.
Exemption in respect of following allowances is allowable to the extent mentioned
against each:-

House Rent Allowance:- Provided that expenditure on rent is actually incurred,

exemption available shall be the least of the following :

a) HRA received.

b) Rent paid less 10% of salary.

c) 40% of Salary (50% in case of Mumbai, Chennai, Kolkata, and Delhi) Salary here
means Basic + Dearness Allowance, if dearness allowance is provided by the
terms of employment.

Leave Travel Allowance: The amount actually incurred on performance of travel on

leave to anyplace in India by the shortest route to that place is exempt. This is subject to a
maximum of the air economy fare or AC 1st Class fare (if journey is performed by mode
other than air) by such route, provided that the exemption shall be available only in
respect of two journeys performed in a block of 4 calendar years.

INCOME FROM HOUSE PROPERTY

25
INTRODUCTION

Under the Income Tax Act what is taxed under the head ‘Income from House Property’ is
the inherent capacity of the property to earn income called the Annual Value of the
property. The above is taxed in the hands of the owner of the property.

COMPUTATION OF ANNUAL VALUE

(i) GROSS ANNUAL VALUE (G.A.V.) is the highest of

(a) Rent received or receivable

(b) Fair Market Value.

(c) Municipal valuation.

(If however, the Rent Control Act is applicable, the G.A.V. is the standard rent or rent
received, whichever is higher).

It may be noted that if the let out property was vacant for whole or any part of the
previous year and owing to such vacancy the actual rent received or receivable is less
than the sum referred to in clause (a) above, then the amount actually received/receivable
shall be taken into account while computing the G.A.V. If any portion of the rent is
unrealizable, (condition of unreliability of rent is laid down in Rule 4 of I.T. Rules) then
the same shall not be included in the actual rent received/receivable while computing the
G.A.V.

(ii) NET VALUE (N.A.V.) is the GAV less the municipal taxes paid by the owner.

(iii) ANNUAL VALUE is the N.A.V. less the deductions available u/s 24.

DEDUCTIONS U/S 24: Are exhaustive and no other deductions are available:

(i) A sum equal to 30% of the annual value as computed above.

26
(ii) Interest on money borrowed for acquisition/construction/ repair/renovation of
property is deductible on accrual basis. Interest paid during the pre-
construction/acquisition period will be allowed in five successive financial years starting
with the financial year in which construction/acquisition is completed. This deduction is
also available in respect of a self-occupied property and can be claimed up to maximum
of Rs.30,000/-. The Finance Act, 2001 had provided that w.e.f. A.Y. 2002-03 the amount
of deduction available under this clause would be available up to Rs.1,50,000/- in case
the property is acquired or constructed with capital borrowed on or after 1.4.99 and such
acquisition or construction is completed before 1.4.2003. The Finance Act 2002 has
further removed the requirement of acquisition/ construction being completed before
1.4.2003 and has simply provided that the acquisition/construction of the property must
be completed within three years from the end of the financial year in which the capital
was borrowed.

SOME NOTABLE POINTS

In case of one self-occupied property, the annual value is taken as nil. Deduction u/s 24
for interest paid may still be claimed there from. The resulting loss may be set off against
income under other heads but cannot be carried forward.

If more than one property is owned and all are used for self-occupation purposes only,
then any one can be opted as self-occupied, the others are deemed to be let out.

Annual value of one house away from workplace which is not let out can be taken as NIL
provided that it is the only house owned and it is not let out.

If a let out property is partly self-occupied or is self-occupied for a part of the year, then
the value in proportion to the portion of self-occupied property or period of self-
occupation, as the case may be is to be excluded from the annual value.

From Assessment year 1999-2000 onwards, an assess who apart from his salary income
has loss under the head “Income from house property”, may furnish the particulars of the

27
same in the prescribed form to his Drawing and Disbursing Officer who shall then take
the above loss also into account for the purpose of TDS from salary.

A new section 25B has been inserted with effect from assessment year 2001-2002 which
provides that where the assess, being the owner of any property consisting of any
buildings or lands appurtenant thereto which may have been let to a tenant, receives any
arrears of rent not charged to income tax for any previous year, then such arrears shall be
taxed as the income of the previous year in which the same is received after deducting
there from a sum equal to 30% of the amount of arrears in respect of repairs/collection
charges. It may be noted that the above provision shall apply whether or not the assess
remains the owner of the property in the year of receipt of such arrears.

Profits and gains of business or profession

Income earned through your profession or business is charged under the head “profits and
gains of business or profession”. The income chargeable to tax is the difference between
the credits received on running the business and expenses incurred. The deductions
allowed are depreciation of assets used for business; rent for premises; insurance and
repairs for machinery and furniture; advertisements; traveling and many more.

Capital gains
Any profit or gain arising from transfer of capital asset held as investments are
chargeable to tax under the head “capital gains”.

Income from other sources

Any income that does not fall under the four heads above is taxed under the head
“income from other sources”. An example is interest income from bank deposits, winning
from lottery, any sum of money exceeding Rs. 50,000 received from a person (other than
from relative, on marriage, under a will or inheritance).

The total income from all the above heads of income is calculated in accordance with the
provisions of the Act as they stand on the first day of April of any assessment year
In this report an attempt is being made to discuss the various provisions relevant to the
salaried class of taxpayers as well as pensioners and senior citizens but mainly focusing

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upon the cases which include or show a hint of Double Tax Avoidance Agreement
between countries that came into picture in certain situations and what are its essential
benefits.

FILING OF INCOME TAX RETURN

Section 139(1) of the Income-tax Act, 1961 provides that every person whose total
income during the previous year exceeded the maximum amount not chargeable to tax
shall furnish a return of income.
The return of income can be submitted in the following manner:
a) a paper form;
b) e-filing
Where the return is furnished in paper format, acknowledgement slip attached with the
return should be duly filled in. Returns in new forms are not required to be filed in
duplicate.
Returns can be e-filed through the internet. E-filing of return is mandatory for companies
and firms requiring statutory audit u/s 44AB. From A.Y. 2011-12, it is now also
mandatory for all business entities (including individuals/HUF) liable to tax audit to e-file
their return of income. E-filing can be done with or without digital signature-
 If the returns are filed using digital signature, then no further action is required
from the tax payers.
 If the returns are filed without using digital signature, then the tax payers have to
file ITR-V with the department within 15 days of e-filing.
 The tax payer can e-file the returns through an e-intermediary also who will e-file
and assist him in filing of ITR-V within 15 days.

IMPORTANT TERMS ASSOCIATED WITH FILING OF INCOME TAX ACT

 Financial Year (FY) (or fiscal year) is a period used for calculating annual or
yearly financial statements in businesses and other organizations such as
government. In India, the financial year runs from 1 April to 31 March Example 1
April 2016 to 31 March 2017 for the current financial year (2016–17)
 Previous year (PY) means the financial year in which the individual has actually
earned the income (Currently 2016-17). Income earned in a year is taxable in the
next year. The year in which income is earned is known as the previous year and
the next year in which income is taxable is known as the assessment year.

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  Assessment year (AY) is the year when that income is assessed (currently 2017-
2018). Income is assessed in the next financial year. Assessment year means the
period of 12 months starting from 1st April of every year and ending on 31st
March of the next year.
 Due Date : The last dates for filing income tax return for an Assessment Year is
called due date.
 Assessee: An assessee is a person by whom any tax or any other sum of money is
payable under the Act.
Penalty: Under the existing law, penalty for delay in filing of return of income is
calculated as a percentage of the shortfall of tax. Where tax has already been deducted at
source, or advance tax has been duly paid, no penalty is liveable. It is proposed to amend
the law to provide for the penalty of Rs.1000 even in such cases. This provision is
targeted towards the salary earners who always had the impression that their liability was
over the moment the tax was deducted by the employer.

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 CHAPTER-6
OBJECTIVES AND SCOPE OF THE PROJECT

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Primary objectives
• Learning about all the heads of income.
• To get through various concepts under Income tax act, 1961 e.g residential status.
• knowing various exemptions and deductions under various incomes.
• To understand the basic tax situation of an individual.
• To guide the clients and make them understand their tax situation.

Secondary objectives
 To learn the procedure of filing of income tax return in India in electronic forms.
 To learn the process of basic tax calculation, tax slabs for the assessment year
2017-18 and the process of computation of income under the various heads.
 To understand the Benefits of e-filing and limitations and difficulties faced while
e-filing.

Scope of the project

 The scope of the project is limited to identifying the sources of income.
 The project does not include the provisions of exemptions and deductions.
 The project does not include much about the income from business and profession
and income from capital gains.

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 CHAPTER-7
METHODOLOGY / RESEARCH METHODOLOGY

33
  RESEARCH

"Research is defined as a careful consideration of study regarding a particular concern or

a problem using scientific methods. According to the American sociologist Earl Robert
Babbie, “Research is a systematic inquiry to describe, explain, predict and control the
observed phenomenon. Research involves inductive and deductive methods.”

Inductive research methods are used to analyze the observed phenomenon whereas,
deductive methods are used to verify the observed phenomenon. Inductive approaches are
associated with qualitative research and deductive methods are more commonly
associated with quantitative research.

One of the most important aspects of research is the statistics associated with it,
conclusion or result. It is about the “thought” that goes behind the research. Research is
conducted with a purpose to understand:

 What do organizations or businesses really want to find out?

 What are the processes that need to be followed to chase the idea?
 What are the arguments that need to be built around a concept?
 What is the evidence that will be required that people believe in the idea or concept?

Characteristics of Research
1. A systematic approach is followed in research. Rules and procedures are an integral
part of research that set the objective of a research process. Researchers need to practice
ethics and code of conduct while making observations or drawing conclusions.

2. Research is based on logical reasoning and involves both inductive and deductive
methods.

3. The data or knowledge that is derived is in real time, actual observations in the natural
settings.

4. There is an in-depth analysis of all the data collected from research so that there are no
anomalies associated with it.

5. Research creates a path for generating new questions. More research opportunity can
be generated from existing research.

6. Research is analytical in nature. It makes use of all the available data so that there is no
ambiguity in inference.

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Qualitative Research: Qualitative research is defined as a market research method that
focuses on obtaining data through open-ended and conversational communication.

This method is not only about “what” people think but also “why” they think so. For
example, consider a convenience store looking to improve its patronage. A systematic
observation concludes that the number of men visiting this store are more. One good
method to determine why women were not visiting the store is to conduct an in-depth
interview of potential customers in the category.

On successfully interviewing female customers, visiting the nearby stores and malls, and
selecting them through random sampling, it was known that the store doesn’t have
enough items for women and so there were fewer women visiting the store, which was
understood only by personally interacting with them and understanding why they didn’t
visit the store, because there were more male products than female ones.

Therefore, the qualitative research methods allow for in-depth and further probing and
questioning of respondents based on their responses, where the interviewer/researcher
also tries to understand their motivation and feelings. Understanding how your audience
takes decision can help derive conclusion in market research.

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Case study research: The case study method has evolved over the past few years and
developed as into a valuable qualitative research method. As the name suggests it is used
for explaining an organization or an entity.

This type of research method is used within a number of areas like education, social
sciences and similar. This method may look difficult to operate, however, it is one of the
simplest ways of conducting research as it involves a deep dive and thorough
understanding of the data collection methods and inferring the data.

Qualitative Research: Data Collection and Analysis

A. Qualitative Data Collection

Qualitative data collection allows collecting data that is non-numeric and helps us to
explore how decisions are made and provide us with detailed insight. For reaching such
conclusions the data that is collected should be holistic, rich and nuanced and findings to
emerge through careful analysis.

1. Whatever method a researcher chooses for collecting qualitative data, one aspect is
very clear the process will generate a large amount of data. In addition to the variety of
methods available, there are also different methods of collecting and recording the data.

DATA COLLECTION

• Primary method – Form 16, form 26 AS, Any investment proofs, information from
clients, guidance from seniors and collegues.
• Secondary method – Concepts under Income tax act ,1961 and ICAI website.

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 CHAPTER -8
DATA ANALYSIS AND FINDINGS

37
CASE STUDY

1. Mr. Raj has a salary income of Rs. 7, 00,000. The interest he pays on housing loan
is Rs. 25,000/ month. The principal amount on loan is Rs. 1, 40,000. Ticket
expenses are Rs. 21,000. He gets conveyance allowance from his company. He has
PPF of Rs. 33,600. He pays LIC premium Rs.36, 000. Medical insurance premium
paid for self, spouse & dependant parents amount to Rs. 38,000. Mr Raj has other
income includes interest from saving a/c Rs.7000.

Gross Salary 7,00,000

1. Allowance to exempt under sec 10
HRA -
LTA 21000
2. BALANCE 679000
3. Deductions under chapter VI A
a) Section 80C 150000
Principle on housing loan- 140000
Provident fund -33600
Premium LIC -36000
b) Section 80 TTA 7000
c) Section 80 D 38000
d) Standard deduction 40000
e) Tax on employment 2500
4. Income chargeable under head 448500
“salaries”
5. Income from HP (200000)
6. Income from other sources
Income from savings a/c 7000
7. Total taxable Income 248500

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 8. Tax on Total Income -
9. Education cess @ 4% -
10. Tax payable -
Less : relief under sec 89
11. TDS deducted at source -
12. Tax Liablity Nil

Mr. Raj has taken a housing loan under section 24 he can claim interest paid on House
property upto Rs. 2,00,000 if self-occupied. Even though the premium amounts to Rs.
3,00,000 he can claim upto Rs. 1.5 lakh.

PPF, LIC, Principal amount on housing loan comes under 80C whose limit is Rs. 1.5
Lakh. So irrespective of the amount one can claim upto 1.5 Lakh limit and not beyond
that.

LTA, Conveyance is claimed under section 10. Interest on savings a/c is exempted to the
limit of Rs. 10000 hence Rs.7000 can be claimed under 80 TTA.

Under 80D medical insurance premium paid can be claimed for self, spouse up to Rs.
25000 and for dependant parents Rs. 25000.

Mr. Raj is paying total medical insurance premium of Rs. 38000.

Conclusion:

Mr. Raj has made investment which help meet his financial needs as well as take care of
his tax benefits. Also he doesn’t have to pay the taxes, because his taxable income goes
below 2,50,000. According to the amendments in budget, the person whose income falls
below 2.5lakh , he /she is exempted to pay any taxes.

39
Case study on income from house property (let-out).
2. HOW TO CALCULATE NET TAXABLE INCOME FROM HOUSE
PROPERTY
Mr. Sharma has one let out in which he earns a monthly rent of rs.52000. He
has paid municipal taxes of rs.12445. To construct the property, he had also
taken loan for the same in the year 2015, for which he pays interest rs.145000.
he has invested some amount in fixed deposit for which he earned interest
67000rs. Calculate the total income and tax he has to pay for the year 2018 -
2019.

Particulars Amount Amount

A. Income earned from house property
Total rent (52000*12) (gross asset value) 624000
Less: municipal taxes (12445)
Balance (net asset value) =611555
Less: standard deduction 30% of NAV (183467)
Balance =428088
Less: interest on housing loan (145000)
Taxable income from housing loan =283088
B. Income from other sources
Interest on fixed deposit 67000
Taxable income from other sources =67000
C. Total income 350088
Less: basic exemption limit (250000)
D. Taxable income 100088
Less: 5% of taxable income (5004)
Less: education cess 4% (200)
E. Total tax =5204
F. Total tds cut 6968
G. Tax payable or refund refund =1764

INTERPRETATION:
1) Mr sharma has income from two sources i.e income from house property and
income from other sources.
2) Standard deduction of 30% on NAV is given to compensate for the repair and
maintenance.
3) 10% tds already gets cut by the bank itself.
4) Mr. sharma falls in the tax bracket of 5%, after the basic exemption limit is
deducted.
5) Since the tds deducted was more than the actual tax that Mr. Sharma has to pay for
this financial year 2018-2019, that’s why he has a refund situation of rs. 1764.

40
 3. Mrs. Y, aged 63 years, submitted the details of her income and investment for
financial year 2014-15, as under:

Particulars Amount(In Rupees)

Rental Income from house property 850000/-

House tax paid 50000/-

Interest from fixed deposits with bank 250000/-

Interest from saving bank account 10000/-

Interest from Public Provident Fund Account 120000/-

(PPF)

Deposit in Public Provident Fund Account 60000/-

(PPF)

Life Insurance Premium Paid 20000/-

Medical Insurance Premium paid 10000/-

Sum received from LIC 650000/-

Dividend received 54000/-

Solution:

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 COMPUTATION OF TAXABLE INCOME

PARTICULARS AMOUNT(In AMOUNT(In

Rupees) Rupees)

Income from House Property

Rent received 850000/-

Less: House Tax paid 50000/-

Net Annual Value 800000/-

Less: Standard Deduction for Repairs @ 240000/- 560000/-

30%

Net income from House Property

Income from other sources

Interest from fixed deposits with bank 250000/-

Interest from saving bank account 10000/-

Interest from Public Provident Fund NIL

Account(Rs.120000/=)

Sum assured from LIC 650000/-

Dividend received 54000/-

Gross Total Income 964000/-

42
Less: Deductions under Chapter VI-A
Deposit in Public Provident Fund 60000/-
Account section 80C

Life insurance Premium paid 20000/-

Section 80 C

Medical Insurance Premium paid 10000/-

Section 80 D

Interest from saving bank accounts 10000/- =100000/-

Section 80 TTA

Total taxable income 864000/-

Tax Payable 85300/-

Education Cess @ 4% 3412/-

Total Tax Liability 88712/-

Less: TDS deducted 26000/-

Total tax payable 62712/-

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 Note:

 Mrs. Y is 63 years old. Therefore, her income tax exemption limit for financial
year 2016-17 is Rs.3,00,000/=. In above example her net taxable income is
Rs.7,30,000/=. Therefore, she is liable to pay income tax.

 Interest on Public Provident Fund Account is not taxable.

 Maximum amount of Medical insurance premium is allowed Rs.15000/=. In case of
Senior Citizen who is 60 years or more, maximum amount is allowed Rs.20000/= under
section 80D.
 Interest from saving account is exempted up to Rs.10000/= u/s 80TTA

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 Chapter – 9
CONCLUSIONS & SUGGESTIONS (RESEARCH
PROJECT)

45
 CONCLUSION

 An individual not only has one source of income. Their total income comprises
from many sources.
 Tax planning is most important. Mostly people are unaware of various
exemptions and deduction available for tax benefits. Education to these benefits
that to at the early stage of the career is very important, as this will not help in
better tax planning but financial planning as well. People owing to less or limited
knowledge pay higher taxes and don’t have better investments also, which help
them in later stages of life.
 While the release of detailed income tax data is a good start, much more
remains to be done. First and foremost, data from more years needs to be
released. This means releasing data from prior to assessment year 2017-18. It
also means releasing data from years after assessment year 2017-18. More data
would help Researchers spot trends over the years. Obtaining information from
clients sometimes becomes very tedious task. Sometimes they don’t know what
has to be done, so if any document is asked by the tax advisor, they get irritated
and become reluctant to give any information.

46
 SUGGESTIONS
 Need to improve network or server during peak time.
 Provide data and information safety.
 Provide detailed information regarding return filing and tax payments.
 Provide few kiosks in various cities for people not having computer / internet at
home.
 They should ease their tax filing process
 More customer friendly filing portal.
 Exemption to people residing in rural and backward areas from E-filing.

47
 CHAPTER 10-
KEY LEARNINGS AND CONTRIBUTION TO THE
HOST ORGANISATION

48
 LEARNINGS

 Understood how to invest the income, so to reduce the tax.

• What are the important terms of the income tax

• Process of E-filing
• How to do E-filing with the help of company owned software “INTAX”
• How to handle the clients
• How to interact with the clients
• How to download 26AS
• How to calculate TDS
• How to make tax payment online
• They also taught us how to do the E-verification of income tax return and also
what are the different options available.
• How to revise returns.
• How to work in a team.
• How to manage time.
• How to work in stressful environment.

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 CONTRIBUTION
 Help the clients by giving the information about various exemptions and
deductions under income tax act.
 E-filed 170 IT returns.
 Generated 50 + leads, through 300+cold calls.
 Helped to retain the clients.

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 BIBLIOGRAPHY/ REFERENCES

Websites
1. www.hrblock.in
2. www.bankbazaar.com
3. www.wikipedia.com
4. www.incometaxindiaefiling.gov.in
5. www.TaxSpanner.com
6. www.manupatra.com
7. www.ibadvisors.co
8. www.nriinformation.com
9. www.CAclubindia.com

Books
1. Students’ guide to income tax including GST- by Dr. Vinod K. Singhania &
Dr. Monica Singhania
2. Indian tax structure – Dr. Meena Goyal
3. Systematic approach to income tax -Dr. Girish Ahuja & Dr. Ravi Gupta
4. Income tax Law & Practice – Dr. H.C. Mehrotra & Dr. S.P Goyal

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