DIRECT

TAX

SUBMITTED TO –
MAM DIVYA KHATRI
INTRODUCTION
The taxes are the basic source of revenue for the
Government. Revenue raised from the taxes are utilized
for meeting the expense of Government like, provision of
education, infrastructure facilities such as roads, dams
etc.

Tax is the financial charge imposed by the Government on

income, commodity or activity. Government imposes two
types of taxes namely Direct taxes and Indirect taxes

The first Income Tax Act in India was introduced in 1860.

The present law of income tax is contained in Income Tax
Act, 1961.
DIRECT TAX
MEANING
 A direct tax is a tax that a person or
organization pays
directly to the entity that imposed it. An
individual taxpayer,
for example, pays direct taxes to the
government for various
purposes, including income tax, real
property tax, personal
property tax, or taxes on assets.
Advantages of Direct Taxes
 1. Promotes equality
Since direct taxes are based on the ability of a person to pay, it promotes equality among payers and
citizens. Every person is charged a different amount, depending on how much they make.
 
2. Promotes certainty
The good thing about direct taxes is that they are determined and made final before they are even paid.
In the case of income tax, the annual tax is the same every year as long as the salary does not change.
 
3. Promotes elasticity
Taxes are the earnings of the government, and when they fluctuate, the earnings also change. They can
go higher or lower.
 
4. Saves time and money
The government does not need to spend on the collection of taxes because they are already taken right
at the source of the income. Some companies use automatic payroll deduction system, which help save
time and money.
 
 Disadvantages of Direct Taxes:
 Inconvenient:
The great disadvantage of a direct tax is that it pinches the payer. He ‘squeaks’ when a
lump sum is taken out of his pocket. The direct- taxes are thus very inconvenient to
pay. Nobody can help feeling the pinch.

 Evadable:
The assessee can submit a false return of income and thus evade the tax. That is why
a direct-tax is “a tax on honesty.” There is a lot of evasion. Many of those who should
be paying taxes go scot-free by concealing their incomes.

  Disincentive:
If the taxes are too heavy, they discourage saving-sand investment. In that case the
country will suffer economically. A high level of taxation discourages investment and
enterprise in the country.
 SCOPE OF TOTAL INCOME

The scope of income depends upon the residential status of the

person. There are three broad categories of persons:
Resident and ordinary resident
Non Resident
Resident but not ordinary resident
 Heads of Income
A person receives income i.e. taxable income from different sources. All
these different sources of income are classified & Assessed under certain
group or heads. These are know as “ Heads of Income”. The various heads
of Income are:
 Income from Salary
 Income from House Property
 Income from Profit and Gain from
Business and Profession
 Income from Capital Gains
 Income from Other Sources
 Income From Salary
What is Salary?
 Remuneration which is received by an individual for services rendered by him to
undertake a contract whether it is expressed or implied.
 There has to be “employer – employee” relationship.
Salaries U/ S 17 include the following –
1.Wages 6. Annuity
2. Pension 7. Any Advance Salary
3. Gratuity 8. Income from Provident Fund
4. Any fees, Commission, Profit 9. Leave Encashment
5. Bonus 10. Allowances
List Of Allowances Exempted
 Conveyance Allowance
 House rent Allowances
 Entertainment Allowances
 Any Allowance granted to an
employee to meet the hostel
expenditure of child
 Children Education Allowance
 Overtime Allowance
 Income From House
Property
 It is defined as income which is earned by a person through his
house or land.
 The building can be house, office building, go downs etc.
 Points to be remembered –
a). Assessee should be Owner of the Property
b). Should be not be used for Business or Profession
c). In case of dispute regarding title

Tax is based on Annual Value

 Income From Profit/
Gain Of
Business/Profession
 Conditions –
1.There must be a business/profession
2. Business/profession is being carried by assessee
3. Business/ profession have been carried out by assessee in assessment year for which income tax
is filling.
 Deductions allowed are Depriciation of Assets used for –
a). Business
b). Insurance and repairs for Machinery and Furniture, Advertisement
c). Travelling etc.
 Income From Capital Gain
What is Capital Gain?
Income which is derived from the transfer of capital asset held as investments
are chargeable to tax under the head “ Capital Gains”.

Two Types Of Capital Gain –

Long
Short Term Term
Capital
Assest
Capital
Assest
 Applicability Of Capital Gain tax
liability
Capital Gain tax liability Applies when following conditions gets satisfied –
1.There should be a capital asset
2.There should be transfer
3.Transfer should be of previous year 4.Result of Transfer should be profit or
gain.
4. Result Of Transfer Should be Profit or gain.
Exceptions of Applicability –
1.Stock of goods and raw materials used by assessee for his business or
profession,
2 .Movable Property (wearing apparel, furniture, automobile, phone etc.) held by the
assessee. Jewellery which is a movable asset comes under the head of Capital
Asset.
 Income From
Other
Sources


Any income that does not fall under the four heads
above is taxed under the head “ Income From Other
Sources”.
 E.g. – Dividend, Winning of Lottery, Income from
Royalty, Income by way of interest on Securities, Income
From Letting out machinery, plant or Furniture on Hire
basis.
Exemption and Deduction
BASIS FOR COMPARISON DEDUCTION EXEMPTION
Meaning Deductions
Deduction means subtraction i.e. an Exemption means exclusion, i.e. if
amount that is eligible to reduce certain income is exempt from tax
taxable income. then it will not contribute to the
total income of a person.

What is it? Concession Relaxation

Concept The amount of deduction is first The exempted income is not
included in the gross income and considered as a part of total income,
then deducted from it to arrive at the whole amount is an exemption
the net income. for the taxpayer.

Income is Tax deductible Tax free

 Deduction u/s 80C
Eligible Assessee: Individual & HUF
Deduction for: Various Type of INVESTMENTS. Some of the most common investments are as
follows:-
– Payments made Toward Life Insurance Premium (for Self, Spouse, and Children)
– Payments made towards Provident Fund with a Lock in Period – 15 years
– Equity Linked Saving Scheme (ELSS) with a min. lock-in period of 3 years
– Tuition Fees paid maximum for Two Children.
– Payment made towards the Principal amount of Housing Loan
– Having a Fixed Deposit/Deposit in Post Office (Now IPPB) with a min. lock-in of 5 Years
– Amount Deposited in Sukanya Samridhi Account
– National Saving Certificate
– Purchasing Bonds of NABARD.
Max. Deduction: Rs. 1,50,000/-

 Deduction u/s 80CCC

Eligible Assessee: Individual Only.
Deduction for: Premium Paid for Annuity Plan of LIC or Any other Insurer.
Max. Deduction: Rs. 1,50,000 (combined with 80C)
 Deduction u/s 80D:
Eligible Assessee: Individual & HUF
Deduction For: Amount paid for Medical Insurance Premium  / Medical Expenditure / Preventive Health
Check.
Max. Deduction: Rs. 25,000 (For Self, Spouse, Children) + Rs. 25,000 (For Parents)

 Deduction u/s 80DD:

Eligible Assessee: Individual & HUF (Resident Only)
Deduction For: Expenditure incurred on Medical treatment (including nursing), Training, or Rehabilitation of
disabled (Divyang) DEPENDANT.
Max. Deduction: Fixed Deduction of Rs. 75,000 (if Disability is 40% or More) / Rs. 1,25,000 (If Disability is
80% or more)
 Deduction u/s 80DDB
Eligible Assessee: Individual & HUF (Resident Only)
Deduction For: Expenses incurred for the treatment of the specified diseases. Any reimbursement (if any) from
Insurance Company shall be deducted and balance expense amount shall be allowed as deduction.
Max. Deduction: Rs. 40,000 / Rs. 60,000 (for Senior Citizen ie. 60 yrs. or more) / Rs. 80,000 (For Very Senior
Citizen i.e. 80 yrs. or more) 
 Deduction u/s 80E
Eligible Assessee: Individual Only.
Deduction For: Interest on Loan for Higher Education paid during the relevant previous year.
Max. Deduction: 100% Interest amount.

 Deduction u/s 80EE

Eligible Assessee: Individual only (and only when he is purchasing First home ever)
Deduction For: Payment of Interest on Housing Loan which has been taken for the First Home Purchase.
Max. Deduction: Rs. 50,000.

 Deduction u/s 80G:

Eligible Assessee: All Assessees
Deduction For: Donation made towards Certain funds, Charitable Institution etc.
Max. Deduction: 100% or 50% of donation made depending on the type of Donation.
 Deduction u/s 80GG:
Eligible Assessee: Individual only (whether Employed or Self Employed)
Deduction For: Deduction in respect of Rents Paid.
Max. Deduction: It shall be allowed LEAST of the following-
– Rs. 5,000/- Per Month
– 25% of Total Income
– Rent Paid minus 10% of Total Income
 Deduction U/s 80GGA:
Eligible Assessee: All Assessee
Deduction For: Certain Donation for Scientific Research or Rural Development. 
Max. Deduction: 100% Amount of Donation made.

 Deduction u/s 80GGB

Eligible Assessee: Indian Companies Only
Deduction For: Donation made by Indian companies to Political Parties or Electoral Trust.
Max. Deduction: 100% of Donation made.

  Deduction u/s 80GGC

Eligible Assessee: All Assessee (except; Company, Local Authority, Artificial Juridical Person)
Deduction For: Donation made by Indian companies to Political Parties or Electoral Trust.
Max. Deduction: 100% of Donation made.

  Deduction u/s 80QQB:

Eligible Assessee: Individual (Resident Only)
Deduction For: Royalty/Copyright amount on Certain books/media etc.
Max. Deduction: Rs. 3,00,000 or Income Received, whichever is less.
  Deduction u/s 80QQB
Eligible Assessee: Individual (Resident Only)
Deduction For: Royalty/Copyright amount on Certain books/media etc.
Max. Deduction: Rs. 3,00,000 or Income Received, whichever is less.

  Deduction u/s 80RRB

Eligible Assessee: Individual (Resident Only)
Deduction For: Royalty amount on Patents.
Max. Deduction: Rs. 3,00,000 or Income Received, whichever is less.

 Deduction u/s 80TTA

Eligible Assessee: Individual & HUF
Deduction For: Interest on Savings Account (not on FD/RD)
Max. Deduction: Rs. 10,000/-
 
 Deduction u/s 80TTB
Eligible Assessee: Individual (Senior Citizen) Only
Deduction For: Interest on Any Account (including FD/RD)
Max. Deduction: Rs. 50,000/- 
 New Income Tax Slab for FY 2020-21 & AY 2021-22

Annual Income New Tax Regime

Up to Rs.2.5 lakh Exempt

Rs.2.5 lakh - Rs.5 lakh 5%*

Rs.5 lakh - Rs.7.5 lakh 10%

Rs.7.5 lakh - Rs.10 lakh 15%

Rs.10 lakh - Rs.12.5 lakh 20%

Rs.12.5 lakh - Rs.15 lakh 25%

Above Rs.15 lakh 30%

SUBMITTED BY –- GROUP 2
1 ANJALI VIJAY
2 ARPITA SIDDHPURIA
3 CHINMAY JAIN