Personal Tax Planning

At Symbiosis Center for Management Studies, Noida

By T P A Narayanan, B.Com(H), FCA

Mobile # 89808 11434
 Overall Structure of the Session

• Contents

• Quizzes

• Overall Assignment
 Contents of the Session

• Heads of Income under IT Act with brief explanations and Deductions

thereon
• Tax Planning/Saving Methods
• Incomes exempt from Tax
• Tax Rates Applicable for the current year
 Heads of Income under IT Act

• Salary
• Income from House Property
• Profits and Gains of Profession/Business
• Capital Gains
• Income from Other Sources
 Salary

• Pre-requisites: Employer employee Relationship

• Includes: Any remuneration, Allowances, Advance Salary, Pension,

Commission, Gratuity, Perquisites, Bonus etc. payable in cash or in kind
or by whatever name called, paid to or paid on behalf of employees.
 Salary- Exempt Allowances

• Conveyance Allowance – Exempt up to Rs.800 Per Month

• House Rent Allowance(HRA)- Least of the following is exempt:
_ Actual HRA Received or
_ 50% of the Basic Salary + Dearness Allowance(DA) for Metros and
40%
for Non Metros or
_ Actual Rent paid less 10% of Salary
 Salary- Exempt Allowances(Cont’d)

• Leave Travel Allowance(LTA)- Exempt in any two years in a block of 4

years for travel in India.

• Medical Allowance- Actual Expenses up to Rs.15,000 Per Annum is

exempt

• Perquisites are valued as per Section 17 of the Income Tax(IT) Act.

 Income from House Property

• Self occupied property(2 Nos.) are exempt from tax

• Gross Annual Value(GAV) is the actual rent received or Notional Rent for others
• Deduct from GAV, actual Property Tax Paid to arrive at Net Annual Value(NAV)
• From the NAV 30% Standard Deduction is allowed
• Interest on Housing Loan is allowed as a deduction- For self Occupied house up
to Rs.2 Lacs and for Rented house actual amount paid is allowed.
 Quiz#1

• Mr.A is a visiting lecturer in Symbiosis Center. Remuneration paid to him will be taxed
as Salary. Yes/No and give reasons.
• Mr.X works in a Company ABC Ltd. He gets Profit Linked Incentive of Rs.5 Lacs
during the current year. Will it be taxable as salary? Give Reasons.
• Mr.Y is working in a company GHQ Ltd. As per the policy of the Company, he is
paid/reimbursed electricity charges of the house where he lives. Will it be taxable in his
hands? Give reasons for the answer.
• Mr.Z lives in his own house in Delhi. The Municipal Taxes that he pays for the this
house can be claimed as deduction for Tax purposes? Yes/No and give reasons
 Profits & Gains of Business and Profession

• Means Profits earned from carrying on business or Profession

• Profits is the difference between Income and Expenses
• Pre-requisites
• There should be business or Profession
• The Business or Profession should be carried on by Tax Payer
• Should have been carried on for the full or part of the year
• Profits earned during Financial Year are subject to Tax
• Profits earned by Tax Payer in his own name or otherwise
 Capital Gains

• Pre-requisites
• Capital Asset
• Can be moveable/immoveable
• Generally Land, Building, House Property, Vehicles, Patents, Trade
Marks, Leasehold Rights etc are Capital Assets
• Stock, Consumables, Raw Materials, Personal Goods, Some types of
agricultural lands are not considered Capital Asset
 Capital Gains

• Profit on sale of such asset is Capital Gain

• Two types of Capital gains
• Short Term Capital gain for assets sold with 24 months(Except for Jewellery/Units
of Debt MFs for which it is 36 months) or shares or units of Equity MF sold within
12 months
• Long Term Capital gain for assets sold after 24 months(Other than Jewellery and
Units of Debt MF) and shares sold after 12 months
 Tax Rates on Capital Gains

Tax Type Condition Applicable Tax

Long-term capital gains tax (LTCG) On sale of Equity shares/ units of 10% over and above Rs 1 lakh
equity oriented fund

Long-term capital gains tax (LTCG) Except on sale of equity shares/ 20%
units of equity oriented fund

Short-term capital gains tax (STCG) When Securities Transaction Tax The short-term capital gain is added
(STT)is not applicable to your income tax return and the
taxpayer is taxed according to
income tax slab rates.

Short-term capital gains tax (STCG) When STT is applicable 15%.

 Quiz#2

• Mr.X is carrying on a business in his wife’s name and claims that the income thereon needs to be
taxed to his wife. Is it tenable? Give reasons for the answer.
• Mr.G used to carry on his business of shoes retailing which was closed almost 4 years back. In
the current year, he managed the sell all the stocks in his store to Mr.L. Under which head Profit
will be taxed? Give reasons for the answer.
• Mr.G is a stock broker and buys and sells shares on his own account also in addition to clients.
He claims that his gain thereon should be treated as short term capital Gains. What do you think?
Give reasons.
• Mr.J is a dealer in 2nd hand cars and buys these cars on his account and sells them at a profit later
on when gets the good price. He feels that in these gains he should be treated as Capital Gains. Is
he right? Give reasons.
 Income from Other Sources

• Broad conditions to be satisfied:

• Income has been generated
• This income is not exempt to Tax
• Cannot be taxed under the any of the four referred Heads
• Generally following are treated as from Other Sources- Dividends from
Company, One time Income, Interest Income, Gifts beyond certain
amount, Income from Sub-letting, Insurance Commission, Rent on vacant
plot of land, Interest paid by Govt. on Tax etc.
 Tax Planning/Saving Methods

• Sec.80C- Deductions on Investments.

Following Investments are eligible for Sec.80C deduction
• ELSS Funds subject a lockin of 3 years
• Investment in NPS
• Unit Linked Insurance Plan(ULIP)
• Tax Saving FD with a lock in of 5 years
• PPF with a minimum lockin of 15 Years
• National Savings Certificate(NSC)/Kisan Vikas Patra(KVP)
• Others
Maximum Investment allowed for deduction is Rs.1,50,000
 Tax Planning/Saving Methods…. Cont’d

• Additional deduction of Rs.50,000 for contribution to National Pension Scheme U/s

80CCD(1b)
• Sec.80TTA- Interest earned on Savings Bank Account- Max.Rs.10,000 PA
• Sec.80E- Interest on Eduction Loan of self, Spouse or dependent children
• Sec.80D- Medical Insurance for Self, Spouse and dependent Children up to Rs.25,000
• Sec.80G- Donation depending on to whom donated either 50% or 100% of amount
donated.
Besides above, there are other deductions also which are not elaborated here
 Income Exempt from Tax in India

• Agricultural Income
• Leave Travel Assisstance with some conditions
• Grautity with certain conditions
• Commuted value of pension received with certain conditions
• Leave Encashment received at the time of retirement with certain conditions
• Payment from PF at the time of retirement with certain conditions
• Childrent Education Allowance Rs.100 PM per child for maximum two children
 Tax Rates Applicable for FY 22-23

• Net Income up to Rs.2,50,000 – Nil

• Net Income Rs.2,50,000 to Rs.5,00,000- 5%
• Net Income Rs.5,00,000 to Rs.7,50,000- 10%
• Net Income Rs.7,50,000 to Rs. 10,00,000- 15%
• Net Income Rs.10,00,000 to Rs.12,50,000- 20%
• Net Income Rs.12,50,000 to Rs.15,00,000- 25%
• Above Rs.15,00,000- 30%
 Overall Assignment

Personal Particulars: Name- Mr.H Gender- Male, Age -47 years Two School going Children

Working with a large Indian Company in Mumbai as General Manager, Marketing

Details of Income and Investments of Mr. H for the period 1st April 22 to 31st March 23
S.No Particulars Amount(Rs.) Remarls
1Basic Salary 75000 PM
2House Rent Allowance 40000 PM Actual Rent Paid by him for his house in Mumbai Rs.45,000 PM
3Conveyance Allowance 1500 PM
4Bonus expected 7,50,000 PA
5LTA Expected 1,50,000 PA He has spent Rs.175,000 on south tour with family during year
6Medial Allowance Rs.2000 PM During the year, he is expected to spend Rs.12,000 towards Medical expenses

7Rent from own house in Delhi Rs.35,000 PM Municipal Taxes paid during the year Rs.5000

8Interest on housing loan for the above house Rs.2,10,000 PA

9Short Term Capital gain on sale of shares 76000 PA STT paid

10Long Term Capital gain on sale of shares 126000 PA
11Dividend from Shares Expected 55000 PA

12Interest income from Bank Savings Bank A/c 12000 PA

13PF Contribution @12% of Basic Salary 9,000 PM
14PPF Contribution during the year 75000 PA
15Contribution to NPS 30000 PA

16Medical Insurance for self, spouse and Children 18000 PA

Compute Mr.H's Taxable income for the current year and Tax Liability
Thank You