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Tax Laws

Income Tax Indian Stamp Duty Service Tax

LEARNING OBJECTIVE
Will be able to explain: the important provisions relating 1) Income Tax Act, 2)Indian Stamp Act, 3)Service Tax,
TOPICS FOR DISCUSSION : 1) Nature of Tax Laws 2) The Income Tax Act as applicable to Bankers 3) Provisions of the Indian Stamp Act 4)Provisions of Service Tax Act

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Taxation in India
Direct Taxes : -Income Tax Laws -Corporation Tax Laws -Property Tax -Estate Duty or Inheritance Tax -Gift Taxes Indirect Taxes : -Customs Duty -Central Excise Duty -Service Tax -Sales Tax + VAT
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Features of Tax Laws


Tax rates are subject to changes , decided at the time of the budget period. Different rates for different Taxes Provision for Tax Deduction at the Source, by the Employer, or at the time of making the payment. Failure to recover the tax at the source by the employer , is an offence , punishable with fine. Employer has the authority/responsibility under the Income Tax Act : 1) to assess the income of the employees & to deduct the appropriate tax 2) to remit the tax to the govt & submit the required information / returns to the I T officials, as per the I T act . Types of Taxes : Corporate Tax Minimum Alternative Taxes Personal Tax

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Important Sections of It Act


Section 80 C: Investments in approved schemes up to Rs 1 .00 lakhs is allowed as deduction in the in the Income. This includes repayment of the Housing Loan EMIs. (LIC, Pension Schemes , PPF ,EPF , NSCs, Fixed Deposits with Banks /Post offices , Senior Citizens Savings Scheme )

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80 D : Health insurance
Popularly known as Mediclaim Policies, provides a deduction of upto Rs. 35,000.00 - Rs. 15,000.00 for premium payments towards policies on self, spouse and children and (a) Rs. 15,000.00 for premium payment towards nonSenior citizen dependent parents or (b) Rs. 20,000.00 for premium payment towards Senior citizen dependent. This deduction is in addition to Rs. 1,00,000 savings under IT deductions clause 80C.
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80 E: Interest on Educational Loans


Interest paid on the Educational Loan for higher studies in the Country or abroad . No benefit for repayment of the Principal amount.

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80 G: Donations
Donations to National Defence Funds , Prime Minister Relief Fund etc or other relief funds .

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80 GG:
Deduction of the Rent paid by the assesse, who is not receiving the H RA .

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Home Loan repayment


Repayment of the Principal amount : Up to Rs 1.00 lakh , part of 80CC section. Interest up to Rs 1.5 lakhs if the house is self occupied , no income is generated. If the house is rented , the entire interest can claimed for the exemption. But, the income generated is included as income for the tax . Section 24 : Standard deduction of 30% of the Net Annual Value of House property . Property Tax paid on the House is also reduced before arriving the Net annual Value.
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Income Tax Act ( as applicable to Bankers)


An expenditure in excess of Rs 20,000/ will be permitted as an expense from the Income if the payment is made by means of a Crossed Cheque, Search warrants for Lockers signed by the Commissioner of Income Tax before the search is permitted, Specified Income Tax Authorities may seek information on Customer accounts as may be necessary, If the aggregate of Principal & Interest Rs 20,000/ or more, then repayment has to be made by means of A/C payee Draft or the Bankers Cheque, or credit the depositors account, Role of the Employer as Tax Deducting Authority : - Even recovery of the Tax from the employees -Payment of the Tax within the stipulated time -Submission of Form No 26 annually before 30 th April -No tax on NRI /FCNR deposits

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Other information
Penalty provision for not following the above direction , Attachment Orders Tax Administration : -Demand by the IT officer, Customs Officer, Service Tax Officer, -Appellate Tribunal -Jurisdiction of the High Court & the Supreme Court
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TDS on deposits
Applicable to Interest on Term Deposits , on payment of Interest of Rs 10,000/ & above , as and when the provision is made in the bank books. Not applicable to the Recurring Deposit Accounts. Interest earned will be taken as income at the time of maturity. Interest on Savings Bank Accounts are outside the purview of TDS up to Rs 10,000/ ( From this year) Rates : Residents: Individuals 10.25% Others -20 % Submission of 15 G & H forms Non submission of 15 G & H forms

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Service Tax
What is Service Tax and who pays this tax? Service tax is, as the name suggests, a tax on Services. It is a tax levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994. It is an indirect tax (akin to Excise Duty or Sales Tax) which means that normally, the service provider pays the tax and recovers the amount from the recipient of taxable service.
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Who is liable to pay service tax?


Normally, the person who provides the taxable service on receipt of service charges is responsible for paying the Service Tax to the Government (Sec.68 (1) of the Act). See Appendix 1 of the Act to know the type of service provider for paying the Tax.

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Administration of the Act


The Service Tax is administered by the Central Excise Dept In addition 7 Service Tax Commissonarates & 5 Large Tax Payers units will also administer, Registration is mandatory, Returns have to be submitted at half yearly intervals, Penalty provision for non compliance of the Act,
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Payment & Rate


How to make the payment, & the procedure to make the payment : Through the approved Bank Branches electronically , Rate of service tax 12.36%

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Service Tax relating to Banks


Tax payable on Services : -Fees & Commission received -Merchant Banking Activities -Advisory Services -Safe Deposit Locker services -Foreign Exchange Brokerage Tax NOT payable : - ON Interest Income
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Indian Stamp Act


Categories of Stamp: -Judicial Stamps, -Non-Judicial Stamps, Central Stamp Duty, State Stamp Duty, Proper Stamping: -Right type of Stamps -Adequate Stamp Duty, -Documents to be stamped before or at the time of the execution , -Adhesive Stamp should be properly cancelled as per law, Effect of Under Stamping: -Short payment of the Stamp duty in respect of: a) 1) P N 2) Usance Bill of Exchange 3) Debt Acknowledgement letter , will make these documents invalid, & will not be revived, b) Agreements & undertakings can be adequately stamped before filing a Court Case, Types of Stamp: -Impressed Stamps : -Adhesive Stamps,
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Indian Stamp Act


When to stamp the Documents: -Drawn in India, -Drawn out side India: To be stamped within three months from the date of receipt of the same in the Country, -BOE/ DPN drawn outside the Country: To be stamped by the first holder as required, Cancellation of Stamps: -Purpose of the cancellation of stamps, -How to cancel the stamps, -Effect of not cancellation of the stamps, Execution of documents in different States &Stamp duty payable, Refund of unused & obsolete stamps, Penalty for under/non stamping,

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Summary
In this Session we have learnt: Important Provisions relating to: The Tax Laws

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