All about TAX

in
Financial Year

2009 – 2010 
From -
 Tax Slab for F.Y. 2009 - 2010
Taxable Income of Senior
Taxable Income of Men Taxable Income of Women Citizens Tax

Upto Rs.1,50,000 Upto Rs.1,80,000 Upto Rs.2,25,000 Nil

Rs.1,50,000 To Rs.3,00,000 Rs.1,80,000 To Rs.3,00,000 Rs.2,25,000 To Rs.3,00,000 10%

Rs.3,00,000 To Rs.5,00,000 Rs.3,00,000 To Rs.5,00,000 Rs.3,00,000 To Rs.5,00,000 20%

Rs.5,00,000 and Above Rs.5,00,000 and Above Rs.5,00,000 and Above 30%

Note :
3% Education Cess also on the tax amount after tax and surcharge (if any)

What is surcharge?
* If salary is above 10 lacs , 10% surcharge will also be applicable.
Following things will be discussed : 
 1. Tax Slab in 2009 for salaried employees

 2. How much will you save and
 

 3. How to Save Tax
 Tax Free Incomes :
The following incomes are completely exempt from Income 
Tax Without any upper limit.
 
1. Interest on PPF/ GPF / EPF.
2. Interest on GOI Tax Free Bonds.
3. Dividends on Shares and on Mutual Funds.

4. Any Capital Receipt from Life Insurance Policies. i.e. 
sums received either on death of the insured or on Maturity 
of Life Insurance Plans. However, in case of Life Insurance 
Policies issued after March 31, 2004, exemption on Maturity 
payment u/s.10(10)D is available only if premium paid on 
any year does not exceeds 20% of the Sum Assured.
 Tax Free Incomes :
5. Interest on Saving Bank Account in Post Office.

6. Long term Capital Gain on sale of shares and equity MF

Dividend Income :
 
Dividend income from companies / equity – oriented Mutual 
Funds is Completely Exempt in the hands of investors. 

Dividend is also Tax Free in the hands of investors in case of 
debt – oriented Mutual Funds Schemes
 Gift Tax
Gift Tax was abolished with effect from 
October 1, 1998.

The gifts are no longer taxable in the hands 
of donor or donee.
However, with effect from September 1, 
2004, any gift received by an individual  or 
HUF will be included in taxable income, 
provided the amount of gift exceeds 
Rs.50000/-.
 Gifts received from following is Tax Free.

1. Spouse
2. Brother or Sister.
3. Brother or Sister of Spouse.
4. Brother or Sister of either of parents of the individual.
5. Any lineal ascendant or descendant of the individual.
6. Any lineal ascendant or descendant of the spouse of the 
individual.
7. Spouse of the persons referred to in  (2) or (6)
8. Gifts received on the occasion of marriage
9. Gift received under a WILL by way of inheritance are also 
tax free.
 Filing of Income Tax Return :

1. Filing of income Tax Return is Compulsory 
for all individuals whose Gross Annual 
Income exceeds the Maximum Amount which 
is not chargeable to income tax i.e. 
Rs.1,80,000 for  Resident Women, Rs. 
2,25,000 for Senior Citizens and Rs. 
1,50,000 for other individuals and HUFs.

2. The last date of filing income tax return is 
July 31, in case of individuals who are not 
covered in point 3 below.
 Filing of Income Tax Return :

3.  If the income includes business or 
professional income requiring tax audit 
(turn over Rs.40 Lakhs), the last date for 
filing the return is September 30.

4.  The penalty for Non- Filing of Income 
Tax Return is Rs.5000 (after 
Assessment Year).
 Computation of Gross
Taxable Income
Income is Computed under the foll.  5 Heads:

1.      Income from salaries
2.      Income from House Properties
3.      Profit & Gains of Business & Profession
4.      Capital Gains
5.      Income from Other Sources 
 
 Salary or Pension Income
 The pay which you get has many components , 
like HRA , conveyance allowance and others.

 Out of this income some things are deductible 
on your hand and after deducting you arrive at a 
amount called Taxable income , on which you 
have to pay tax.
 Income from House Property

 If the property is self occupied then the Income 
from House Property is treated as  NIL.

 If any loan is taken for the purchase of the 
property then the amount paid towards interest 
up to a maximum of Rs. 1,50,000/- is deducted 
from taxable income. 
 Income from House Property
 In case Property is given on rent, then we have to find 
out the :
 Annual Rental Income
 From this deduct Property Tax paid if any
 From balance amount-deduct30% towards repairs & 
maintenance
 From the residual figure- deduct the amount of interest 
paid on loan taken for the purchase of the property.
 The resultant figure is the Income from House Property
Profit from Business / profession

Income as arrived on the 
basis of Profit & Loss A/c
 Income from Interest
 Interest Income from the following sources 
to be included in Gross Taxable Income:
 Interest on company deposits.

 Interest on debentures/bonds.

 Interest on savings bank account/ fixed 
deposits with banks.
 Income from Interest
 Interest on post office savings schemes like 
MIS, NSC, KVP etc.
 Interest on private loans given to relatives, 
friends or any other entity.
 Interest on government securities.

 Note: Deduction u/s 80 L has been omitted 
now and accordingly,interest income from 
the above sources is Fully Taxable now.
 Capital Gains
 Capital gain arises when certain assets like 
property (plot or a built up commercial / 
residential unit) or shares / mutual fund units / 
bonds etc are sold for a profit.
 The treatment of capital gains is slightly different.
 It mainly depends upon whether the capital gain 
(profit on sale) is Short Term or Long Term.
Short Term Capital Gain
 Capital gain is considered to be short term if 
immovable property is sold / transferred 
within THREE years of acquisition.

 Similarly, if shares or other financial 
securities such as mutual fund units are sold 
within ONE year of purchase, the profit 
earned is treated as short term capital gain.
Tax Treatment on Short Term
Capital Gain
 It is included in the gross taxable 

income like other sources of 
income and normal rates of tax 
apply, which depend on the gross 
taxable income from all sources 
including short term capital gains.
Tax Treatment on Short Term
Capital Gain
 In case of Sale of equity shares or 

units of equity oriented Mutual Fund 
schemes, short term capital gains are 
taxed at a Flat Rate of 15%, 
irrespective of the tax slab on other 
sources of income, provided 
securities Transaction Tax is paid on 
such sale.
 Long Term Capital Gain
 If Immovable Property is sold after THREE years 
of purchase, Or

 Financial securities such as shares, deep 
discount bonds, units of open - ended or close – 
ended schemes of mutual funds are 
sold/redeemed/transferred after holding the same 
for more than Twelve Months, then the gain is 
considered to be long term capital gain.
 Tax Treatment on Long Term
Capital Gain
 With effect from October 1, 2004, 

long term capital gain on transfer 
of listed shares/units of equity 
oriented mutual funds schemes 
has been exempted from tax, 
provided securities transaction tax 
has been paid on such sale.
Long Term Capital Gain
 Non listed shares/units of equity 

oriented mutual fund schemes, tax is 
payable in respect of long term 
capital gains at a flat rate 20% and 
the amount of gain has to be 
adjusted for inflation. This inflation 
adjustment is known as indexation 
benefit.
 Section  54 EC
 Long-Term Capital Gain Tax (after availing 
indexation benefit ) can be saved by investing 
amount within 6th months in any of the following 
two schemes specified under section 54 EC 
( upto  Rs. 50 Lakhs only):
1  Bonds issued by Rural Electrification 
Corporation ( REC )
2 Bonds issued by NHAI (National Highways 
Authority of India)
There are various Tax Saving
Schemes:
 Life Insurance Premium.
 Contributions to Employees Provident Fund/ GPF
 Unit-Linked Insurance Plan
 Contribution to Public Provident Fund Scheme (Max. 
Rs.70,000).
 National Savings Certificates VIII
 Tuition Fees Upto Two Children.
 Repayment of  Housing Loan ( Principal)
 Pension scheme of LIC of  India  or any other 
insurance company.

 Subscription to eligible issue of units of Mutual 
Fund (ELSS).

 Interest accrued in respect of NSC VIII issue.

 Fixed Deposit with Banks having a lock – in 
period of 5 Years
 Premium on Mediclaim Policy.
 Life insurance Premium:
 Life insurance is a Very Good Investment. 
It gives Risk Cover, Tax Saving  and Good 
returns.
 It is a contract that pledges payment of an 
amount to the person assured (or his 
nominee) on the death of insured person.
 Savings through life insurance guarantee
full protection against risk of death of the
saver.
 Also, in case of demise, life insurance
assures payment of the entire amount
assured (with bonuses wherever
applicable)
 whereas in other savings schemes,
only the amount saved (with interest)
is payable.
 Long-term savings

 “EASY Instalment” facility.

 Premium payment for insurance is either 
monthly, quarterly, half yearly or yearly.
 LOAN Facility Available.

 Also generally accepted as security,

even for a commercial loan.
 A policy that has a suitable insurance plan or a
combination of different plans can be effectively
used to meet certain monetary needs that may
arise from time-to-time.

 Children's education, start-in-life or marriage

provision or even periodical needs for cash over
a stretch of time can be less stressful with the
help of these policies.
 Alternatively, policy money can be made
available at the time of one's retirement
from service and used for any specific
purpose, such as, purchase of a house or
for other investments.

 Loans are granted to policyholders for

house building or for purchase of flats
(subject to certain conditions).
 National Savings Certificates
(NSC) :
 National Saving Schemes (NSC) is used to be one of
the popular Income Tax Saving schemes. But
nowadays it is not so lucrative.

 This scheme is available throughout the year.

 It can be operated singly, jointly, or by a minor with

his/her parent or guardian.

 Return on this scheme at interest rate of 8%.

 The minimum investment limitation of
the scheme is Rs.100/- and with no
upper limit.

 This scheme has a maturity period of 6

years.

 There is a provision of loan on the basis

of this scheme.
 Working on NSC Interest
 Amt Invested Rs. 100.00

 Interest Earned @ 8% P.A. Rs. 8.00

 Tax @ 30% on Rs.8/- Rs. 2.40
 Net Interest Received Rs. 5.60
Public Provident Fund (PPF) :
 Under this scheme, there is a return at the
interest rate of 8% p.a.

 The minimum investment limit is Rs. 500/- and

maximum limitation is Rs. 70,000/-.

 It can be opened any time throughout the year. It

can be operated either singly or jointly. In case of
minor, with parent / guardian.
 This scheme has a maturity period of
15 years.

 Loan Facility is available.

 Loan amount can be returned in maximum of
36 installments.

 A person can withdraw an amount (not more

than 50% of the balance).

 Tax Benefit Under Section 80C of Income Tax

Act, 1961 is available.

 Interest on this scheme is tax free.

 Mutual Fund (ELSS) / ULIP PLANS
 An ELSS (Equity Linked Savings Scheme)
is a mutual fund scheme that invests in
equity & equity-related securities.

 ULIP Plans (Unit Linked Insurance Plan)

is a Plan that offers Tripple Benefit
 Tax Benefit
 Insurance Cover

 Benefit from the long term growth

potential of equities.
 ULIP & ELSS are also eligible
investments under section 80C of
Income Tax Act 1961.

 ELSS have a lock-in period of three

years. This allows the investors to
benefit from the long term growth
potential of equities.
 ELSS / ULIP – Key Differentiation
ELSS is the only investment product that offers ….

Twin Advantages

•        Equity Returns 
•        Tax Benefits
 ELSS / ULIP – A Comparison
Instrument Expected Returns Lock-In Period

National Savings Certificate - NSC 8.00% 6 years

Public Provident Fund - PPF 8.00% Up to 15 years

Mutual Fund ELSS / ULIP Around 15%-20% 3 years

Investment 1 Lac End Value of Investment in Rs. Lac after - Years

Avenue Returns 3 6 8 10 15 20

NSC 8.16% 1.27 1.60 1.87 2.19 3.24 4.80

PPF 8.00% 1.28 1.63 1.92 2.26 3.40 5.11

ELSS / ULIP 15.00% 1.52 2.31 3.06 4.05 8.14 16.37

Mutual Fund ELSS/ ULIP Plans returns are the assumed returns dependent on the markets
and are not guaranteed or assured
 Deduction u/s 80D 
Mediclaim Policy

 Medical Insurance Premium paid for
 (Self, Spouse and Children Rs. 15,000/-)
 additional for parent Rs. 15,000/- and
 in case of senior citizen Rs. 20,000/-
   
   I hope this information was helpful. If you need
any further help you can get in touch with me via
my email id harishsoneji@hotmail.com
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www.squamble.com