Direct Taxes

CIA 3

Submitted by:
1923201 Abhameet Panigrahi
1923233 Sahil Ali
1923257 Neha Cherian
1923263 Praveena C
1923265 Rashi Gulgulia
Mr Kanishk is a railway Employee in Bangalore. He is an ordinary resident. To pay his taxes help kanishk in computi
his tax liability in both new and old regime, this case can leverage kanishk in opting the best regime and save his tax
liability. Few details are as follows
axes help kanishk in computing
best regime and save his tax

II

III

IV

V
Income From Salary
1) Salary
2) DA @ 50% of Salary (enters)
3) Travelling Allowance
4) Entertainment Allowance
5) Bonus
6) Contribution to RPF by self and employe
7) Education Allowance @600pm per child
8) House Rent Allowance at 20% of salary
9) Actual Rent Paid Rs 7000 per month

Income From House Property

He is the owner of two houses in marthahalli, kormangala .

9000 per month and the other (whose annual value is 20000
The two houses are subjected to Municipal Taxes o

Income From Capital Gains

During the year, he sold shares of infosys and earned a short

Income From Other Source

2) He pays HDFC Life Insurance Premium

Additional Information
1) He spent Rs 4500 of the Travelling All
expen
2) He donated Rs 6000 to Mother Theresa
 43500
50% of Salary (enters) 21750
ing Allowance 9000
inment Allowance 5000
100000 pa
bution to RPF by self and employer each @13% of salary
ion Allowance @600pm per child for three child 21600
Rent Allowance at 20% of salary
Rent Paid Rs 7000 per month

ouses in marthahalli, kormangala . One of which is let out at a rent of Rs

her (whose annual value is 20000) remained vacant throughout the year.
re subjected to Municipal Taxes of 6000 and 2000 respectively

ares of infosys and earned a short term capital gain of 65000.

s HDFC Life Insurance Premium of Rs 13000 on his life policy of 450,000

pent Rs 4500 of the Travelling Allowance to meet his official travelling

expenses
nated Rs 6000 to Mother Theresa Foundation
Solution 2 Computation of Total Income of Mr Yash for the Assessment Year 2021-2022

Under Old Tax Regime

Income from Salary
Salary
DA @50% of Salary
Travelling Allowance =9000*12
=6000*12
Bonus
Employer Contribution to RPF @13%
Less: Exempted upto 12@ of 810000

Education Allowance =600*3*12

Less: Exempted upto two children =100*2*12
House Rent Allowance
i) Actual HRA Recieved =20%*(522000+261000
ii)40% of Salary
iii)Rent paid over 10% of Salary in Excess =(12*12000)-10%*8100
Actual HRA - Exempted Amount
Entertainment Allowance
Gross Salary
Less: Deduction u/s 16
Entertainment Allowance
i) Actual EA Recieved (=5000*12) 60000
ii) 20% of Basic Pay (=20%*540000) 104400
iii) Statutory Limit 5000
U/s 16 (ii) Entertainment Allowance w.e is less
U/s 16 (ia) Standard Deduction

Income from Salary

Income from House Property

Rent of Let Out House
Less: Municipal taxes
Net Annual Value
Less: Deduction u/s 24
Standard Deduction 30% of NAV

The other house is exempted u/s 23 (2)

Income from House Property

Income from Capital Gain

Capital gain on Shares

Income from Other Sources

Interest from Sovereign Gold Bonds

Income from Other Sources

Gross Total Income

Less: Deductions u/s 80
U/s 80C
1. Own Contribution to RPF @12% =12%*7830000
2. Life Insurance Premium
U/s 80TTA

Total Income

Imcome Tax Calculation under Old Tax Regime

Income Rate
0 - 250000 NIL
250000 - 500000 5%
500000-1000000 20%
1000000 and more 30%

Total Tax Liability

Add: Health and Education Cess @ 4% of tax

Tax Payable
 Under New Tax Regime
Income from Salary
522000 Salary
261000 DA @50% of Salary
108000 Travelling Allowance
72000 36000 Bonus
100000 Employer Contribution to RPF @13%
101790 Less: Exempted upto 12@ of 810000
93960 7830
Education Allowance
21600 House Rent Allowance Recieved
2400 19200 Entertainment Allowance Recieved
Income from Salary
156600
313200 Income from House Property
65700 Rent of Let Out House
90900 Less: Municipal taxes
60000 Net Annual Value
1096930 Less: Deduction u/s 24
Standard Deduction 30% of NAV

The other house is exempted u/s 23 (2)

Income from House Property

5000 Income from Capital Gain

50000 Capital gain on Shares
55000
1041930 Income from Other Sources
Interest from Sovereign Gold Bonds

108000
6000
102000 Income from Other Sources

30600 Gross Total Income

71400 Less: Deductions u/s 80
NIL U/s 80TTA
 71400

Total Income
65000

16000 New Tax Regime

Income
16000 0-2,50,000
2,50,000-5,00,000
5,00,000-7,50,000
7,50,000-10,00,000
1194330 10,00,000-12,50,000
12,50,000- 15,00,000

93960 Total Tax Liability

13000 Add: Cess @4%
Tax Payable
106960

1087370

egime

Amount
NIL
12500
100000
26211

138711

5548.44

144259.44
Under New Tax Regime

522000
261000
=9000*12 108000
80000
=13%*783000 101790
=12%*783000 93960 7830

=600*3*12 21600
156600
60000
1217030

108000
6000
102000

30600

NIL
71400

65000

16000

16000

1369430
tal Income 1369430

Tax Regime
Rate Amount
Nil NIL
5% 12500
10% 25000
15% 37500
20% 50000
25% 29857.5

154857.5
6194.3
161051.8
INTERPRETATION

Case 1
Ms Harshini's tax liability comes around Rs 46,105 in the New Tax regime whereas
in the Old Tax Regime it is around Rs 78,672. So we can say that it is definitely
beneficial for Harshini to opt New Tax Regime.

Case 2
Mr Yash's tax liability comes around Rs 141,086 in the New Tax regime whereas in
the Old Tax Regime it is around Rs 164,000. So we can say that it is definitely
beneficial for Yash to opt Old Tax Regime.

FINDINGS FROM THE CASE

After analyzing the two cases, we found that One can claim many deductions and exemptions under
the current (old) taxes system. On the other hand, the new tax slabs are more straightforward with
reduced tax rates, except for a few exceptions.
In terms of tax planning, deciding on a tax regime at the start of the financial year is critical. A
taxpayer must compare the new tax regime's income tax to the previous regime's income tax.
Individuals in the Rs.5-10 lakh income group with more minor deduction claims will gain from the
new system. Individuals with an annual income of more than Rs.15 lakh, on the other hand, might
benefit more from the current regime by making tax-saving investments.

SUGGESTIONS TO IMPROVE TAX PLANNING

Both Harshini and Yash should check the following items to enhance their tax planning:

Step 1: Examine the exemptions. Out of all the exemptions that have been eliminated, determining
how many are relevant and how much money may be saved by choosing each will aid in the
following step's decision.

Step 2: Based on the net taxable income after exemptions/deductions, total income tax under the old
and new regimes must be calculated. If taxable income is less than five lakhs or more than 15 lakhs,
the tax rates are the same in both cases; so, the previous system with exemptions is better.

Step 3: In addition to taxable income, one's lifestyle, life stage, short- and long-term priorities, and
financial goals are all good indicators of which tax regime one should choose. With rising inflation,
consumerism, and wants, it's critical to start saving early and spend wisely.
Step 4: Finally, it's vital to remember that one can switch tax regimes every financial year because
both will be active simultaneously. At first, taxpayers may opt for the new tax system since it is
easier to understand and equates to lesser tax liabilities. On the other hand, investments offer long-
term financial rewards, and taxpayers will prefer the previous system since it is more cost-effective.
New Tax regime whereas
say that it is definitely

ew Tax regime whereas in

ay that it is definitely

ons and exemptions under

re straightforward with

ial year is critical. A

gime's income tax.
claims will gain from the
n the other hand, might

tax planning:

eliminated, determining
ach will aid in the

income tax under the old

hs or more than 15 lakhs,
ptions is better.

ong-term priorities, and

ose. With rising inflation,
.
y financial year because
tax system since it is
investments offer long-
it is more cost-effective.