A Project Report on

“A STUDY ON TAX PLANNING BEHAVIOR OF INDIVIDUALS”

Submitted by

BANDI LITHIN VARMA

(H.T.NO:1004-17-408-074)

Under the guidance of

Prof. J. RAVI KUMAR

DEPARTMENT OF COMMERCE

UNIVERSITY COLLEGE OF COMMERCE

AND BUSINESS MANAGEMENT

OSMANIA UNIVERSITY

ACADEMIC YEAR

2017 – 2019

i
 CERTIFICATE

This is to certify that project entitled “A STUDY ON TAX PLANNING BEHAVIOR

OF INDIVIDUALS”, is being submitted by the student BANDI LITHIN VARMA

(1004-17- 408-074), in partial fulfillment of the requirement for the award of

degree of Master of Commerce to University College of Commerce and Business

Management, Osmania University, is a record of Bonafide work carried out by

her under my supervision during the period 2017-19.

Signature of Project Guide

(Prof. J. RAVI KUMAR)

ii
 Department of Commerce

University College of Commerce and Business Management

Osmania University, Hyderabad, Telangana State - 500007

CERTIFICATE

This is to Certify that this project work entitled “A STUDY ON TAX

PLANNING BEHAVIOR OF INDIVIDUALS” submitted by BANDI LITHIN
VARMA (Hall ticket No.1004-17-408-074), A Student in Department of
Commerce, University College of Commerce & Business Management, Osmania
University, Hyderabad, for partial fulfillment of the requirement for degree award
of Master of Commerce, is a record of the bonafide work carried out by him
under my guidance and supervision during the academic year 2017-2019.

PROJECT GUIDE
PROF. J. RAVI KUMAR
FACULTY OF COMMERCE

Prof. PRASHANTA ATHMA Prof. V. APPA RAO

HEAD DEPT. OF COMMERCE PRINCIPAL, UCC&BM, OU

iii
 DECLARATION

I hereby declare that the enclosed project entitled “A STUDY ON TAX

PLANNING BEHAVIOR OF INDIVIDUALS” submitted to “OSMANIA

UNIVERSITY, HYDERABAD” in partial fulfillment of “MASTERS OF

COMMERCE”, the project is an original work done by me to the best of my

knowledge this work is not submitted to any other university or college for award

of any other degree, diploma or fellowship.

BANDI LITHIN VARMA

H.T.NO: 1004-17-408-074

iv
 ACKNOWLEDGEMENT

I grab this opportunity to thank my guide Prof. J. RAVI KUMAR for giving me

the privilege to present this report. This program has helped me in gaining

practical knowledge, improve confidence and widen my knowledge.

I am extremely grateful to my supervising professor, Prof. Prashanta Athma,

Head, Department of Commerce , Osmania University College of Commerce and

Business Management ,for having prescribed this project work to me as a part of

the academic requirement.

v
 TABLE OF CONTENTS
SECTION CONTENT Page No
Chapter 1 INTRODUCTION 1
1.0 Introduction 2-4
1.1 Objectives of the study 4-5
1.2 Research methodology of the study 4
1.3 Need for the study 5
1.4 Scope of the study 5-6
1.5 Limitations of the study 6
Chapter 2 REVIEW OF LITERATURE 7
2.0 Introduction 8-10
Chapter 3 DATA ANALYSIS AND INTERPRETATION
3.0 Table No 1.1 12-13
3.0 Table No 1.2 14-15
3.0 Table No 1.3 15-16
3.0 Table No 1.4 17-18
3.0 Table No 1.5 19-21
3.0 Table No 1.6 22-24
3.0 Graph 1.0 24-25
3.0 Graph 2.0 26
3.0 Pie chart 1 27
3.0 Pie chart 2 28
3.0 Pie chart 3 29
3.0 Table No 2.0 30
Chapter 4 FINDINGS CONCLUSIONS AND SUGGESTIONS 31
5.0 Findings 32
5.1 Conclusions 33
5.2 Suggestions 33
I BIBLIOGRAPHY 34-35
II Annexure - I 36-42

vi
 Chapter-1
INTRODUCTION

1|Page
1.0 INTRODUCTION:

Planning assumed a dominating role towards the close of the twentieth century and continues

with ever expanding horizon in the twenty-first century also. For the economic development

of any country, planning has to be resorted to in order to distribute the economic resources

evenly or on priority basis to better the economic position of the weaker sections of the

society. For the proper implementation of the development programs, a sound base of public

finance has also to be built up which requires huge revenue and a major part of which is

achieved through the collection of taxes. Raising public revenue through taxation is a popular

policy of an economy and it does not entail any extra burden on the government as in the case

of borrowings. Thus taxation is considered to be the most effective source of raising public

revenue.

The practical concept of taxation law is to realize the maximum revenue, of course, with

in the frame work of law. On the other hand payment of taxes reduces the disposable income

of the tax payers and imposes a burden on them. Since tax by definition is a payment without

direct quid pro quo, every tax payer wants to pay the minimum in the form of taxes.

Therefore the modern tax payer is ‘in between the lines’: whether he has to remain content

after what is left by the taxing authorities or whether there is any scope for him to reduce the

incidence of tax to the minimum possible extent. It is here that tax planning has assumed far

reaching importance in the confounding complexities of the taxation laws. The planning has

proved a savior of the economic life of the tax payer who can reduce the incidence of tax to

the minimum if he is able to plan his tax affairs diligently and intelligently.

Tax planning may be defined as an arrangement of one’s financial affairs in such a way

that without violating in any way the legal provisions, full advantage is taken of all

exemptions, deductions, concessions, rebates, allowances and other reliefs or benefits

2|Page
permitted under the Act so that the burden of taxation, as far as possible, is the least. Tax

planning may, therefore, be regarded as a method of intelligent application of expert

knowledge while planning one’s affairs with a view to securing the consciously provided tax

benefits on the basis of national priorities in keeping with the legislative and judicial opinion.

Tax planning is neither tax evasion nor tax avoidance. It is the scientific planning of one’s

financial affairs in such a way as to attract minimum liability to tax or postponement of the

tax liability for the subsequent period by availing of various incentives, concessions,

allowances, rebates and reliefs provided for, in the context of existing tax laws. The

exemptions, deductions, rebates and relief have been provided by the legislature to achieve

certain social and economic goals and to encourage savings and investments for the economic

development of the country. Tax planning is an act with in the four corners of the Act and it

is not a colourable device to avoid the tax. Thus, if a person takes the advantage of the

deductions and rebates, he not only reduces his tax liability, but also helps in achieving the

objectives of the legislature, which is lawful, social and ethical. Tax planning involves in

every case a thorough and up-to-date knowledge of tax laws. Not only is an up-to-date

knowledge of the statute law necessary, but one must also be aware of the judge-made laws

in the form of various decisions of the Courts. One of the best methods to study tax planning

is through the case law. The judgments of the Supreme Courts and various High Courts

reveal instances of successful and unsuccessful tax planning. The judgments touch up on

various provisions of tax laws and their application to different situations. The question of

interpretation of law can also have a bearing on the success or failure of tax planning. The

circulars issued by the Central Board of Direct Taxes from time to time will be of much use

to the tax payers. Moreover, a sound method of tax planning should be carefully chartered

after considering that whatever is done is not only strictly within the frame work of law but is

3|Page
also in consonance with the legislative intentions and should sound sensible to any reasonable

person.

1.1 OBJECTIVES OF THE STUDY:

1. The primary objective is to analyze Tax planning behavior of individuals with respect

to their levels of income and their chapter VI A deduction plans by considering different

aspects such as such as age, profession, etc.

2. The secondary objectives are:-

 To study whether taxpayers are satisfied with the current tax rates and policies.

 To study whether the tax payers are taking the advice of professionals like Charted

Accountants, Tax consultants, etc.

 To study whether tax payers are planning for the tax or not.

1.2 RESEARCH METHODOLOGY:

The study is targeting people from various age groups, sections, etc., as respondents.

Respondents are chosen by convenience sampling method in which each respondent is

willing to answer the questionnaire by Google forms as a third party agent to collect data. In

this research, probability random sampling is used to collect the data, i.e., each respondent

has equal probability of being selected. The sample size of the study is 25. Participants were

given a two page questionnaire. The first page was based on personal information and the

second page second part was based on study based questions. All the above were close ended

except personal information. The questions had a 5-point Likert scale. The participants were

sent link of questionnaire to be filled online. Over 100 individuals were sent the link out of

which 25 responded. The questions are filled in such a way that can be easily understood and

4|Page
they can fill out the questionnaire accurately and honestly. And some of the secondary data

was collected through income tax web site which is more accurate and reliable.

The tool used to analyze the data was Microsoft Excel.

1.3 NEED FOR THE STUDY:

The need for the study of tax planning behavior of individuals is

 Tax planning can be rewarding and challenging.

 Rewarding, because we can choose the tax-saving instrument that best suits our needs.

 Challenging, because if we make the wrong choice, we are stuck with an unsuitable

investment.

 Tax Planning is resorted to maximize the cash inflow and minimize the cash outflow.

 Since Tax is kind of cost, the reduction of cost shall increase the profitability.

 Every prudence person, to maximize the return, shall increase the profits by resorting

to a tool known as a Tax Planning.

 It is not tax evasion. It involves sensible planning of our income and investments.

 The tax planning exercise ranges from devising a model for specific transaction as

well as for systematic corporate planning.

 To know the pattern of savings investment of individual will be very helpful to

knowing nation‘s savings and investment. Any change in individual behaviour of

savings and investments play a vital role in the improvement overall growth of

savings and investment of the nation.

5|Page
1.4 SCOPE OF THE STUDY:

Tax planning should be an important component of your overall financial plan. Careful

planning is the key to successfully and legally reducing your tax liability. There are proven

strategies for reducing taxes for individuals and families. The taxation laws offer large

avenues for the productive investments of the earnings granting absolute of substantial relief

from the taxation. A taxpayer has to be constantly aware of such legal avenues as are

designed to open floodgates of his well-being, prosperity and happiness. When earnings

invested in the avenues recognized by law, they are not only relieved of the brunt of taxation

but they are also converted into means of furthering earnings. The growth of a nation's

economy is synonymous with the growth and prosperity of its citizens. In this context, a

saving of earnings by legally sanctioned devices fosters the growth of both, because savings

by dubious means lead to generation of black money, the evils of which are obvious.

Conversely, tax planning measures are aimed at generating white money having a free flow

and generating without reservations for the overall progress of the nation.

1.5 LIMITATIONS OF THE STUDY:

Since personal income taxation is a very sensitive matter, people generally were

reluctant to disclose information relating to their savings, investments and tax planning

measures adopted for the period under study. Hence, more time and effort had to put to

collect the data. And more even the data collected was small sample which is less reliable

than large sample.

In spite of the above limitations, all efforts were made to ensure correctness in the

data collection.

6|Page
 CHAPTER-2
REVIEW OF LITERATURE

7|Page
Tax Evasion and Tax Avoidance

Tax Evasion:

It refers to a situation where a person try to reduce his tax liability by deliberately

suppressing the income or by inflating the expenditure showing the income lower than the

actual income and resorting to various types of deliberate manipulations. An assessee guilty

of tax evasion is punishable under the relevant law. Tax evasion may involve stating an

untrue statement knowingly, submitting misleading documents, suppression of facts, not

maintaining proper accounts of income earned (if required under the law) omission of

material facts in assessments. An assessee, who dishonestly claims the benefit under the

statute by making false statements, would be guilty of tax evasion.

Tax avoidance:

The line of demarcation between tax planning and tax avoidance is very thin and

blurred. There could be element of mollified motive involved in the tax avoidance also. Any

planning which, though done strictly according to legal requirements defeats the basic

intention of the legislature behind the statute could be termed as instance of tax avoidance. It

is usually done by adjusting the affair in such a manner that there is no infringement of

taxation laws and taking full advantage of the loopholes there in so as to attract the least

incidence of tax.

B. Tax Planning Excludes:

Tax Planning is not tax evasion. It involves sensible planning of your income sources

and investments. It is not tax evasion, which is illegal under Indian laws. Tax Planning is not

just putting your money blindly into any 80C investments. Tax Planning is not difficult. Tax

Planning is easy. It can be practiced by everyone and with a very little time commitment as

long as one is organized with their finances.

8|Page
C. Types of Tax Planning:

The tax planning exercise ranges from devising a model for specific transaction as

well as for systematic corporate planning. These are short and long range tax planning.

Short range planning refers to year-to-year planning to achieve some specific or

limited objective. For example, an individual assessee whose income is like to register

unusual growth in a particular year as compared to the preceding year, may plan to subscribe

to the PPF/NSC’s within the prescribed limits in order to enjoy substantive tax relief. By

investing in such a way, he is not making permanent commitment but is substantially saving

in the tax.

Long range planning on the other hand involves entering in to activates, which may

not pay off immediately, For example, when an assessee transfers his equity shares to his

minor son he knows that the income from the shares will be clubbed with his own income,

but clubbing would also cease after minor attains majority.

Permissive tax planning is tax planning under the express provisions of tax laws.

Tax laws of our country offer many exemptions and incentives. Purposive Tax planning:

Purposive tax planning is based on the measures, which circumvent the law. The permissive

tax planning has the express sanction of the statute while the purposive tax planning does not

carry such sanctions, For example, under section 60 to 65 of the income tax.1961 the income

of the other persons is clubbed in the income of the assessee. If the assessee is in a position to

plan in such a way that these provisions do not get attracted, such a plan would work in favor

of the tax payer because it would increase his disposable resources. Such a tax plan could be

termed as “Purposive Tax Planning”.

D. Tax management:

Tax management is an internal part of the tax planning. It takes necessary precautions

to comply with the legal formalities to avail the tax exemption/ deductions, rebates or relief

9|Page
as are contempt’s in the scheme of tax planning. Tax management plays a vital role in

calming allowance, deductions and tax exemptions by complying with the required

conditions. For example, Where an assessee follows mercantile system of accounting, the

claim of expenses should be made, subject to the provisions of section 43B, on accrual bases,

if the assessee fails to make such a claim, such expenses cannot be deducted in subsequent

years. Similarly, the specified deductions under section 80IA, section 80JJA, etc., cannot be

allowed by the assessing officer suo motu. Tax management also protects an assessee against

penalty and prosecution by discharging tax obligations in time. Thus, the study of tax

planning is incomplete without tax management. Tax planning without the study of tax

management is like knowing the medicine without knowing how to administer it.

10 | P a g e
 CHAPTER-3

DATA ANALYSIS AND INTERPRETATION

11 | P a g e
 Table No: 1.1

No. of persons opting for deduction under various sections of “chapter VI A” with

respect to age
Ag
PP LI NS UT M PENSIO F HL T I H HL MI C
e
F C C I F N D PRINCIP F F E INT P F

AL

<3
11 14 7 2 3 3 5 5 5 0 0 3 5 4
0

% 44 56 28 8 12 12 20 20 20 0 0 12 20 16

30-
0 2 0 0 0 0 0 0 0 0 0 0 0 0
45

% 0 8 0 0 0 0 0 0 0 0 0 0 0 0

>4
1 2 0 0 0 1 0 0 2 0 0 0 1 0
5

% 4 8 0 0 0 4 0 0 8 0 0 0 4 0

Source: primary data

The above table 1.1 shows the different type of deductions claimed by different age

groups. Deduction for Public provident fund u/s 80C is claimed by 44% of respondents

whose age is below 30, 0% of respondents whose age is between 30 to 45 and 4% of

respondents whose age is above 45. The deduction for LIC u/s 80C is claimed by 56% of

respondents whose age is below 30, 8% of respondents whose age is between 30 to 45 and

8% of respondents whose age is above 45. Deduction for National saving scheme u/s 80C is

claimed by 28% of respondents whose age is below 30, 0% of respondents whose age is

between 30 to 45 and 0% of respondents whose age is above 45. The deduction for Unit Trust

of India u/s 80C is claimed by 8% of respondents whose age is below 30, 8% of people

12 | P a g e
whose age is between 30 to 45 and 0% of respondents whose age is above 45. The deduction

for investment in Equity linked Mutual funds u/s 80C is claimed by 12% of respondents

whose age is below 30, 0% of respondents whose age of between 30 to 45 and 0% of

respondents whose age is above 45. The deduction for Pension fund u/s 80C is claimed by

12% of respondents whose age is below 30, 0% respondents whose age is between 30 to 45

and 0% of people whose age is above 45. The deduction for investment in tax saving fixed

deposit u/s 80C, Repayment of Housing Loan principal u/s 80C and payment of Tuition fees

u/s 80C is claimed by 20% of respondents whose age is below 30, 0% of people whose age

between 30 to 45 and above 45. The deduction for investment in Approved Infrastructure

Bonds u/s 80C and Interest on Loan for Higher Education u/s 80E is claimed by 0% of

respondents in all the age groups. The deduction for payment of interest on Housing loan u/s

24b is claimed by 12% of respondents whose age is below 30 and 0% of respondents whose

age is between 30 to 45 and above 45. The deduction for contribution to Medical Insurance

Policy u/s 80D is claimed by 20% of respondents whose age is below 30, 0% of respondents

whose age is between 30 to 45 and above 45. The deduction for Donation to Charitable fund

u/s 80G is claimed by 16% of respondents whose age is below 30 and 0% of respondents

whose age is between 30 to 45 and above 45.

13 | P a g e
 GEND No. of persons opting for deduction under various sections of “chapter VI A” with
ER respect to gender

H
HL
PP LI NS U M PENSI F T I H L MI C
F C C TI F ON D PRINCIP F F E P F
IN
AL
T

MALE 7 13 5 2 3 2 4 5 6 0 0 3 5 4

% 1 2 1
28 52 20 8 12 8 6 20 4 0 0 12 20 6

FEMALE 4 3 2 0 0 1 1 0 0 0 0 0 0 0

% 16 12 8 0 0 4 4 0 0 0 0 0 0 0

Table No: 1.2

Source: primary data

The above table 1.2 shows the different types of deductions claimed by male

and female. 28% of the male respondents claimed deduction for PPF u/s 80C, 52% of male

respondents claimed deduction for investment in LIC policy u/s 80C. 20% of male

respondents claimed deduction for both investment in National Saving Certificate u/s 80C

and contribution to Medical Insurance Policy u/s 80D. 8% of male respondents claimed

deduction for investment in Unit Trust in India u/s 80C and investment in Pension fund u/s

80C. 12% of male respondents claimed deduction for investment in Equity linked mutual

funds u/s 80C and payment of housing loan interest u/s 24b. 16% of male respondents

claimed deduction for investment in tax saving Fixed Deposits u/s 80C and donations

towards Charitable Fund u/s 80G. 24% of male respondents claimed deductions for paying

Tuition fees u/s 80C. 0% of the male respondents claimed deductions for investment in

approved infrastructure bonds and paying of interest on loan for higher education.

14 | P a g e
 When comes to female respondents, 16% of them claimed deduction for contribution

towards PPF, 12% of them claimed deduction for contribution towards LIC, 8% of them

claimed deduction for investment in National Saving Certificate, 4% of them claimed

deduction for contribution towards pension fund and investment in tax saving related Fixed

Deposit and 0% of them claimed deduction for investing in Mutual Funds, Unit Trust of

India, repayment of housing loan principal, tuition fees, infrastructure bonds, interest on

higher education loan, payment of housing loan interest, medical interest policy and

donations.

15 | P a g e
 Table No: 1.3

No. of persons opting for deduction under various sections of “chapter VI A” with respect to
RESIDENCE

HL HL
I
RESIDENCE PPF LIC NSC UTI MF PENSION FD PRINCIPAL TF F HE INT MIP CF

RURAL 3 7 2 1 1 0 3 2 2 0 0 1 1 0

% 12 28 8 4 4 0 12 8 8 0 0 4 4 0

URBAN 4 6 2 1 2 1 0 2 2 0 0 1 2 2

% 16 24 8 4 8 4 0 8 8 0 0 4 8 8

SEMI URBAN 4 3 3 0 0 2 2 1 2 0 0 1 2 2

% 16 12 12 0 0 8 8 4 8 0 0 4 8 8

Source: primary data

The above table 1.3 shows different types of deductions claimed by different

residents. 28% of urban respondents and 16% of semi urban respondents claimed

deduction for contribution towards PPF u/s 80C. 28% of rural respondents, 24% of

urban respondents and 12% of semi urban respondents claimed deduction for

investment in LIC u/s 80C. 8% of rural respondents, 8% of urban respondents and

12% of semi urban respondents claimed deduction for investment in National Saving

Certificate u/s 80C. 4% of rural respondents, 4% of urban respondents and 0% of semi

urban respondents claimed deduction for investment in Unit Trust of India u/s 80C.

4% of rural respondents, 8% of urban respondents and 0% of semi urban respondents

claimed deduction for investment in Equity linked Mutual Funds u/s 80C. 0% of rural

respondents, 4% of urban respondents and 8% of semi urban respondents claimed

deduction for contribution towards Pension fund u/s 80C. 12% of rural respondents,

16 | P a g e
 0% of urban respondents and 8% of semi urban respondents claimed deduction for

investment in tax saving Fixed Deposit u/s 80C. 8% of rural respondents, 8% of urban

respondents and 4% of semi urban respondents claimed deduction for repayment of

housing loan principle amount u/s 80C. 8% of the rural, urban and semi urban

respondents claimed deduction for payment of tuition fees u/s 80C. 4% of the rural,

urban and semi urban respondents claimed deduction for payment of interest on

Housing Loan. 4% of rural respondents, 8% of urban respondents and 8% of semi

urban respondents claimed deduction for contribution towards Medical Insurance

Policy u/s 80D. 0% of rural respondents, 8% of urban respondents and 8% of semi

urban respondents claimed deduction for donation towards Charitable Funds u/s 80G.

And 0% of the rural, urban and semi urban respondents claimed deduction for

investment in approved Infrastructure bonds and payment of interest on Loan for

higher education.

17 | P a g e
 Table No: 1.4

No. of persons opting for deduction under various sections of “chapter VI A”

with respect to profession

H
OCCUPATION HL
PP LI NS U M PENSI F T I H L MI C
F C C TI F ON D PRINCIP F F E IN P F
AL
T

private
7 10 4 1 2 0 2 3 2 0 0 2 2 2
employee

% 28 40 16 4 8 0 8 12 8 0 0 8 8 8

public
3 3 1 0 0 2 2 1 2 0 0 1 1 1
employee

% 12 12 4 0 0 8 8 4 8 0 0 4 4 4

self-
1 1 0 0 0 1 0 0 1 0 0 0 0 0
employed

% 4 4 0 0 0 4 0 0 4 0 0 0 0 0

professional 0 2 2 1 1 0 1 1 1 0 0 0 2 1

% 0 8 8 4 4 0 4 4 4 0 0 0 8 4

student 0 0 0 0 0 0 0 0 0 0 0 0 0 0

% 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Source: primary data

The above table 1.4 shows different types if deductions claimed by different type of

respondents i.e., private employees, public employees, self-employed, professional and

student. In the above table 12% of public employees, 28% of private employees, 4% of self-

employed, 0% of professional and 0% of students claimed deduction for contribution towards

PPF u/s 80C. 12% of public employees, 40% of private employees, 4% of self-employed,

0% of professional and 0% of students claimed deduction for investment in LIC u/s 80C. 0%

of public employees 4% of private employees, 0% of self-employed, 8% of professional and

0% of students claimed deduction for investment in National Saving Certificate u/s 80C. 0%

18 | P a g e
of public employees, 4% of private employees, 0% of self-employed, 4% of professional and

0% of students claimed deduction for investment in UTI u/s 80C. 0% of public employees,

8% of private employees, 0% of self-employed, 4% of professional and 0% of students

claimed deduction for investment in mutual funds u/s 80C. 8% of public employees, 0% of

private employees, 4% of self-employed, 0% of professional and 0% of students claimed

deduction for contribution towards Pension Fund u/s 80C. 8% of public employees, 8% of

private employees, 0% of self-employed, 4% of professional and 0% of students claimed

deduction for investment tax saving Fixed Deposits u/s 80C. 4% of public employees 12% of

private employees, 0% of self-employed, 4% of professional and 0% of students claimed

deduction for repayment of Housing Loan principle u/s 80C. 8% of public employees, 8% of

private employees, 4% of self-employed, 4% of professional and 0% of students claimed

deduction for contribution towards Tuition Fees u/s 80C. 4% of public employees, 8% of

private employees, 0% of self-employed, 0% of professional and 0% of students claimed

deduction for paying of interest on housing loan u/s 80C. 4% of public employees, 8% of

private employees, 0% of self-employed, 8% of professional and 0% of students claimed

deduction for contribution towards Medical Insurance Policy u/s 80D. 4% of public

employees, 8% of private employees, 0% of self-employed, 4% of professional and 0% of

students claimed deduction for contribution of donation towards Charitable Funds u/s 80G.

0% of public employees, private employees, self-employed, professional and students

claimed deduction for investment in approved Infrastructure Bonds and payment of Interest

on Loan for Higher Education.

19 | P a g e
 Table No: 1.5

No. of persons opting for deduction under various sections of “chapter VI A” with respect to
ANNU annual income
AL
HL HL
INCOM PP LI NS UT M PENSIO F T I H MI C
E IN
F C C I F N D PRINCIP F F E P F
AL T

BELO
W
4 5 3 0 0 1 2 3 4 0 0 1 2 3
2,50,0
00

% 16 20 12 0 0 4 8 12 16 0 0 4 8 12

2,50,0
00-
1 5 1 1 2 0 0 0 0 0 0 0 1 0
5,00,0
00

% 4 20 4 4 8 0 0 0 0 0 0 0 4 0

5,00,0
00-
5 5 2 0 0 2 2 1 2 0 0 1 1 1
10,00,
000

% 20 20 8 0 0 8 8 4 8 0 0 4 4 4

10,00,
000-
1 1 1 1 1 0 1 1 0 0 0 1 1 0
1,00,0
0,000

% 4 4 4 4 4 0 4 4 0 0 0 4 4 0

ABOV
E
0 0 0 0 0 0 0 0 0 0 0 0 0 0
1,00,0
0,000

% 0 0 0 0 0 0 0 0 0 0 0 0 0 0

20 | P a g e
Source: primary data

The above table 1.5 shows different type of deductions claimed by

different income groups. In the above table 16% of respondents having income less

than 2.5 lakhs, 4% of respondents having income between 2.5 and 5 lakhs, 20% of

respondents having income between 5 and 10 lakhs, 4% of respondents having

income between 10 lakhs and 1crore and 0% of respondents having income above

1crore is claiming deduction for contribution towards PPF u/s 80C. 20% of

respondents having income less than 2.5 lakhs, 20% of respondents having income

between 2.5 and 5 lakhs, 20% of respondents having income between 5 and 10 lakhs,

4% of respondents having income between 10 lakhs and 1crore and 0% of

respondents having income above 1crore is claiming deduction for contribution

towards LIC u/s 80C. 12% of respondents having income less than 2.5 lakhs, 4% of

respondents having income between 2.5 and 5 lakhs, 8% of respondents having

income between 5 and 10 lakhs, 4% of respondents having income between 10 lakhs

and 1crore and 0% of respondents having income above 1crore is claiming deduction

for investment in NSC u/s 80C. 0% of respondents having income less than 2.5 lakhs,

4% of respondents having income between 2.5 and 5 lakhs, 0% of respondents having

income between 5 and 10 lakhs, 4% of respondents having income between 10 lakhs

and 1crore and 0% of respondents having income above 1crore is claiming deduction

for investment in UTI u/s 80C. 0% of respondents having income less than 2.5 lakhs,

8% of respondents having income between 2.5 and 5 lakhs, 0% of respondents having

income between 5 and 10 lakhs, 4% of respondents having income between 10 lakhs

and 1crore and 0% of respondents having income above 1crore is claiming deduction

for investment in equity linked mutual funds u/s 80C. 8% of respondents having

income less than 2.5 lakhs, 0% of respondents having income between 2.5 and 5

21 | P a g e
 lakhs, 8% of respondents having income between 5 and 10 lakhs, 4% of respondents

having income between 10 lakhs and 1crore and 0% of respondents having income

above 1crore is claiming deduction for investment in tax saving fixed deposits u/s

80C. 12% of respondents having income less than 2.5 lakhs, 0% of respondents

having income between 2.5 and 5 lakhs, 4% of respondents having income between 5

and 10 lakhs, 4% of respondents having income between 10 lakhs and 1crore and 0%

of respondents having income above 1crore is claiming deduction for repayment of

housing loan principal u/s 80C. 16% of respondents having income less than 2.5

lakhs, 0% of respondents having income between 2.5 and 5 lakhs, 8% of respondents

having income between 5 and 10 lakhs, 0% of respondents having income between 10

lakhs and 1crore and 0% of respondents having income above 1crore is claiming

deduction for payment of tuition fees u/s 80C. 4% of respondents having income less

than 2.5 lakhs, 0% of respondents having income between 2.5 and 5 lakhs, 4% of

respondents having income between 5 and 10 lakhs, 4% of respondents having

income between 10 lakhs and 1crore and 0% of respondents having income above

1crore is claiming deduction for payment of interest on housing loan u/s 24b. 8% of

respondents having income less than 2.5 lakhs, 4% of respondents having income

between 2.5 and 5 lakhs, 4% of respondents having income between 5 and 10 lakhs,

4% of respondents having income between 10 lakhs and 1crore and 0% of

respondents having income above 1crore is claiming deduction for contribution

towards medical insurance policy u/s 80D. 12% of respondents having income less

than 2.5 lakhs, 0% of respondents having income between 2.5 and 5 lakhs, 4% of

respondents having income between 5 and 10 lakhs, 0% of respondents having

income between 10 lakhs and 1crore and 0% of respondents having income above

1crore is claiming deduction for donations u/s 80G. And 0% of all income levels of

22 | P a g e
 respondents are claiming deductions for investment in approved mutual funds and

interest on loan taken for higher education.

Table No: 1.6

No. of persons opting for deduction under various sections of “chapter VI A” with respect to income
saved
INCOME
HL HL
SAVED
PPF LIC NSC UTI MF PENSION FD TF IF HE MIP CF
PRINCIPAL INT

Up to
4 4 1 0 1 1 0 2 2 0 0 1 1 3
10%

% 16 16 4 0 4 4 0 8 8 0 0 4 4 12

10-20% 3 7 4 1 1 1 3 2 3 0 0 1 2 1

% 12 28 16 4 4 4 12 8 12 0 0 4 8 4

20-30% 2 2 2 1 1 0 1 1 0 0 0 1 1 0

% 8 8 8 4 4 0 4 4 0 0 0 4 4 0

30-40% 1 2 0 0 0 0 1 0 0 0 0 0 0 0

% 4 8 0 0 0 0 4 0 0 0 0 0 0 0

above
1 1 0 0 0 1 0 0 1 0 0 0 1 0
40%

% 4 4 0 0 0 4 0 0 4 0 0 0 4 0

Source: primary data

The above table 1.6 shows different types of deductions claimed and different levels

of income saved by respondents. In the above table 16% of the respondents saved income up

to 10%, 12% of the respondents saved income between 10-20%, 8% of the respondents saved

income between 20-30% and 4% of the respondents who saved income between 30-40%, and

23 | P a g e
4% of the respondents saved income above 40% claimed deduction for contribution towards

PPF u/s 80C. 16% of the respondents saved income up to 10%, 28% of the respondents who

saved income between 10-20%, 8% of the respondents saved income between 20-30% and 8

% of the respondents who saved income between 30-40% and 4% of the respondents saved

income above 40% has claimed deduction for contribution towards LIC premium u/s 80C.

4% of the respondents saved income up to 10%, 16% of the respondents saved income

between 10-20%, 8% of the respondents saved income between 20-30% and 0% of the

respondents saved income between 30-40%, and 0% of the respondents saved income above

40% has claimed deduction for investing in UTI bonds u/s 80C. 4% of the respondents saved

income up to 10%, 4% of the respondents saved income between 10-20%, 4% of the

respondents saved income between 20-30% and 0% of the respondents saved income

between 30-40%, and 0% of the respondents saved income above 40% has claimed deduction

for investment in equity linked mutual funds u/s 80C. 4% of the respondents saved income up

to 10%, 4% of the respondents saved income between 10-20%, 0% of the respondents saved

income between 20-30% and 0% of the respondents saved income between 30-40%, and 4%

of the respondents saved income above 40% has claimed deduction for contribution towards

pension fund u/s 80C. 0% of the respondents saved income up to 10%, 12% of the

respondents saved income between 10-20%, 4% of the respondents saved income between

20-30% and 4% of the respondents saved income between 30-40%, and 0% of the

respondents saved income above 40% has claimed deduction for investing in tax saving fixed

deposits u/s 80C. 8% of the respondents saved income up to 10%, 8% of the respondents

saved income between 10-20%, 4% of the respondents saved income between 20-30% and

0% of the respondents saved income between 30-40%, and 0% of the respondents saved

income above 40% has claimed deduction for repayment of housing loan principle principal

u/s 80C. 8% of the respondents saved income up to 10%, 12% of the respondents saved

24 | P a g e
income between 10-20%, 0% of the respondents saved income between 20-30% and 0% of

the respondents saved income between 30-40%, and 4% of the respondents saved income

above 40% has claimed deduction for contribution towards tuition fees u/s 80C. 4% of the

respondents saved income up to 10%, 4% of the respondents saved income between 10-

20%, 4% of the respondents saved income between 20-30% and 0% of the respondents saved

income between 30-40%, and 0% of the respondents saved income above 40% has claimed

deduction for payment of interest on housing loan u/s 24b. 4% of the respondents saved

income up to 10%, 8% of the respondents saved income between 10-20%, 4% of the

respondents saved income between 20-30% and 0% of the respondents saved income

between 30-40%, and 4% of the respondents saved income above 40% has claimed

deduction for contribution towards medical insurance policy u/s 80D. 12% of the respondents

saved income up to 10%, 4% of the respondents saved income between 10-20%, 0% of the

respondents saved income between 20-30% and 0% of the respondents saved income

between 30-40%, and 0% of the respondents saved income above 40% claimed has

deduction for contribution towards PPF u/s 8G. 0% of respondents has claimed deduction for

investment in approved infrastructure bonds and payment of interest on loan for higher

education.

25 | P a g e
 Graph 1.0

Source: primary data

The above graph 1.0 shows the deductions claimed by overall the categories of

respondents. The blue bar shows the number of respondents who claim deductions under

respective sections and the red bar shows the number of respondents who did not claim

deductions under the respective section. From the above graph we can find that out of 25

respondents 11 respondents are contributing towards public provident fund and remaining 14

respondents has not contributed towards public provident fund. 16 respondents are claiming

deductions for contributing towards life insurance corporation premium u/s 80C and

remaining 9 respondents has not contributed towards life insurance premium. 7 respondents

out of 25 are claiming deductions for investing in national saving certificates u/s 80C whereas

remaining 18 respondents has not invested in National saving certificate. 2 out of 25

respondents has claimed deduction for investing in UTI bonds u/s 80C and remaining 23

respondents has not invested in UTI. 3 out of 25 respondents has claimed deduction for

investing in approved mutual funds u/s 80C and remaining 22 has not invested in approved

26 | P a g e
mutual funds. Same as mutual funds 3 out of 25 respondents has claimed deduction for

contributing towards pension fund u/s 80C and remaining 22 respondents has not contributed

towards pension fund. 5 out of 25 respondents has claimed deduction for investing in tax

saving fixed deposits u/s 80C and remaining 20 respondents has not invested in tax saving

fixed deposits. 5 out of 25 respondents has claimed deduction for repayment of housing loan

principle u/s 80C and remaining 20 respondents has not contributed towards repayment of

housing loan. 6 out of 25 respondents has claimed deduction for payment of tuition fees u/s

80C and remaining 19 respondents has not paid any tuition fees. None of the respondents has

invested in approved infrastructure bonds and no one has taken loan for higher education. 3

out of 25 respondents has claimed deduction for paying interest on housing loan u/s 24b and

remaining 22 respondents has not claimed deduction u/s 24b. 5 out of 25 respondents claimed

deduction for contribution towards medical insurance policy u/s 80D and remaining 20

respondents has not contributed towards medical insurance policy. And finally 4 respondents

out of 25 respondents has claimed deduction for contribution towards donation u/s 80G

whereas remaining 21 respondents has not claimed any deduction u/s 80G.

27 | P a g e
 Graph 2.0

Source: primary data

The above graph 2.0 shows the satisfaction level of respondents towards government
tax rates and policies in a 5 point scale in which point 5 represents lowest importance towards
the prevailing tax rates and point 1 represents highest importance towards the existing tax
rates. Thus, from above chart it is clear that most of the respondents (13 out of 25
respondents) feel that the existing tax rates are very high. Similarly (10 out of 25
respondents) feel that the nominal rates are also felt as high but in comparison with overall
tax rates they hold a less negative opinion towards it. Where as the (9 out of 25) respondents
also poses a strong feeling towards minimizing the tax liability of individual and increasing
the tax net for the govt. Deduction of tax at source is much supported by the (12 out of 25)
tax payers so that the cost of tax administration can be reduced as if the GST is included in
the MRP of a product itself. Also, the (12 out of 25) respondents feel that tax incentives are to
be provided for investments made in specific areas. Tax planning education is also wanted by
10 respondents out of 25 respondents. As day to day life is getting busy scheduled most of the
respondents (13 out of 25) feel that the e-filing of returns should be popularized i.e.,
awareness must be created.

28 | P a g e
 Pie chart-1

Source: primary data

The above pie chart-1 shows the percentage of respondents who used the service of

professional in making investment decisions. From the above chart it is clear that most of the

respondents (52%) has never took the service of professional financial advisors. Just only 4%

of the respondents are always taking the advice of professionals for investment decision

making. About 20% of the respondents are often taking the advice of professional and 24% of

them are taking occasionally.

29 | P a g e
 Pie Chart -2

Source: primary data

The above pie chart-2 shows the percentage of respondents who use the service of tax

consultants for filing of returns. From the above chart it is evident that most of the

respondents (52%) has never used the service of tax consultants for filing of returns. 16% of

the respondents are always using the service of tax consultant. 20% of the respondents are

often taking the service of tax consultants and only 12% of them are taking the service of tax

consultants.

30 | P a g e
 Pie Chart-3

Source: primary data

The above pie chart-3 shows the percentage of respondents who plan tax at different

times in a year. From the above pie chart it is clear that only 20% of the respondents plan tax

at the beginning of the year. 16% of the respondents plan tax at the end of the year. 32% of

the respondents plan tax at any time in the year. That means they don’t have particular time

for planning the tax. And 32% of the respondents has no tax planning at all.

31 | P a g e
 Table No: 2.0

Source: secondary data

The above table 2.0 shows the growth in ITR’s from FY 2017-18 to 2018-18. From

the table it is clear that the total ITR’s has reduced from 6,74,74,904 to 6,68,09,129. The

decrease in percentage is 0.99%

32 | P a g e
 CHAPTER-4
FINDINGS CONCLUSIONS AND SUGGESTIONS

33 | P a g e
Findings:

The following are the finding from the study:-

1. On the basis of the study, the respondents rank various tax saving instruments

according their priority of saving tax. The most adopted tax saving instrument is Life

Insurance policy, which got the first rank in this study. The second most adopted tax

instrument is Provident Fund. Further the third choice is National Saving Certificate.

Fourth choice is Tuition Fees. Fifth most adopted tax saving instruments are tax

saving Fixes Deposits, Housing Loan principle and Medical Insurance Premium.

Donation for charitable trust is the sixth most adopted tax saving instrument. After

that Approved Mutual Funds, Pension fund and interest on Housing Loan. The

instrument, which is least adopted, as tax saving instrument is UTI bonds which

comes in the eighth rank in the study. Very least or none has adopted Infrastructure

bonds and Interest on Higher Education Loan.

2. On the analysis of satisfaction level, it is found that the respondents are not

satisfactory towards the government tax rate and policies.

3. Most of the respondents are not taking the advice of professionals like charted

accountants, tax consultants, etc.

4. On the analysis of planning behavior of respondents, it is found that, most of the

respondents did not make any tax planning. Among the respondents who plan tax,

most of them will not follow particular time for planning tax.

5. It is found from the Income Tax web site that there is a reduction in the number of tax

payers in FY 2018-19 compared to FY 2017-18.

34 | P a g e
Conclusion:

It is concluded that most of the tax payers coming under higher slab rates are not

showing much interest to adopt tax saving instruments. And most of the people are reluctant

to use the advice of professionals and plan for tax.

Suggestions:

1. Tax planning education should be provided to the public, mostly to the people

residing in rural areas.

2. Precautions should be taken so that the web site for e-filing should not get struck on

the last day of financial year.

3. Tax rates should be lowered.

4. Items which come under deductions should be expanded and Infrastructure bonds and

interest on loan for higher education should be removed from deductions.

35 | P a g e
 BIBLIOGRAPHY

36 | P a g e
 1. Banks, J., Andrew Dilnot and Sarah Tanner (1997): “Taxing Household Saving: What

Role for the New Individual Savings Account?” Commentary No. 66, London: The

Institute for Fiscal Studies.

2. Capital Tax Group (1989): “Neutrality in the Taxation of Savings: An Extended Role

for PEPs”, Commentary No. 17, London: Institute for Fiscal Studies.

3. Chelliah, Raja J. (1996): “An Agenda for Comprehensive Tax Reform” Towards

sustainable Growth- Essays in Fiscal and Financial Sector Reforms In India, Oxford

University Press, New Delhi.

4. Chelliah, Raja J. and R. Kavita Rao (2001): “Rational Ways of Increasing Tax

Revenues in India” presented in World Bank Conference Fiscal Policies to Accelerate

Economic Growth, New Delhi, May 21-22.

5. Dr. Ahuja, Girish and Dr. Gupta, Ravi. (2007): “Systematic approach to Income Tax

and Central Sales Tax” Book, Bharat Law House Pvt. Ltd. Publication, New Delhi.

6. Lal, B.B and Vashisht, N. (2008): “Direct Taxes, Income Tax, Wealth Tax and Tax

planning” Book, Pearson Education, New Delhi.

7. Planning Commission, Government of India (2001): “Report of the Advisory Group

on Tax Policy and Tax Administration for the Tenth Plan”, New Delhi.

8. Dornbusch, R., Fischer, S., Startz R. (2004). Macroeconomics 9th Ed. New York:

McGraw-Hill.

9. Romer, D. (2001). Advanced macroeconomics (2nd Ed). New York: McGraw-Hill.

10. Warner, KE. (1999). The psychology of saving. Cheltenham: Edward Elgar

Publishing Limited

11. www.incometax.com (website)

37 | P a g e
 ANNEXURE - I
QUESTIONNAIRE ON TAX PLANNING BEHAVIOUR OF
INDIVIDUALS
* Required

1. AGE *
Mark only one oval.

Below 30

Between 30 and 45

Above 45

2. GENDER *
Mark only one oval.

male
Female

Other:

3. PLACE OF RESIDENCE *
Mark only one oval.

Rural
Urban
Semi Urban

38 | P a g e
 4. SERVICE IN COMPLETED YEARS *

Mark only one oval.

Below 10 years

Between 10 and 20 years

Between 20 and 30 years

Above 30 years

5. STATUS OF EMPLOYER *

Mark only one oval.

Private
Public

6. DESIGNATION *

ANNUAL INCOME FOR THE PREVIOUS YEAR 2018-2019 *

Mark only one oval.

Below 2,50,000
Rs.2,50,000 to Rs.5,00,000
Rs.5,00,000 to Rs.10,00,000
Rs.10,00,000 to Rs.1,00,00,000
Above Rs.1,00,00,000

7. HOW MUCH OF YOUR INCOME IS SAVED IN A YEAR *

39 | P a g e
 Mark only one oval.

Up to 10%

10-20%

20-30%

30-40%

Above 40%

8. DID YOU ADOPTED ANY OF THE TAX PLANNING MEASURES BELOW (Deduction claimed u/s
80C, 80CCC and 80CD (maximum Rs.1,50,000) .

yes no

PF/PPF

Life Insurance Policy

National Savings Certificate, Post Office Savings Bank a/c

UTI

Approved Mutual Fund Approved Pension Fund Fixed Deposits

Repayment of Housing Loan Payment of Tuition fees

Approved Infrastructure Bonds

Interest on loan taken for higher education

Interest on Housing Loan

Contributions to Medical Insurance Policy

Donations to Charitable Fund

40 | P a g e
 9. Do you seek the service of Professional Financial Advisor for
making investment decisions *
Mark only one oval.

Always
Often
Occasionally
Never

10. When do you formulate your tax plan during a financial year? *

Mark only one oval.

Beginning of the year

End of the year
At any time
No planning at all

11. Do you seek the service of Tax Consultant for filing Returns *

Mark only one oval.

Always
Often
Occasionally
Never

41 | P a g e
12. Give your ranks based on your priority

*Mark only one oval per row.

1 2 3 4 5

Tax rates should be lowered.

Nominal rates should be deducted

from all employees at source, thereby
avoiding the necessity for filing
returns.

Tax liability should be minimized and total tax

revenue to the Govt. should be enhanced through
widening the tax net.

Cost of tax administration can be reduced where

monthly tax is deducted at source.

Investments in selected avenues should be

promoted by providing tax incentives.

Tax planning Education should be provided.

E-filing should be popularised.

42 | P a g e