PROJECT REPORT

ON
Income Tax Planning with respect to Individual
Assessee
Submitted in the partial fulfillment for the award of degree in

MASTER OF BUSINESS ADMINISTRATION

Submitted By:MADHU SONI
Semester -4th , 33rd Batch
Under the Guidance of
Dr SUMAT JAIN

Department of Business Studies

Babulal Tarabai Institute of Research and Technology
(Dr. H.S. Gour University, Sagar , 2015-2016)

ACKNOWLEDGEMENT

I am overwhelmed in all humbleness and gratefulness to acknowledge

all those who have helped me to put the ideas, well above the level of simplicity
and into something concrete. I owe a great debt to my guide Dr. Sumat Jain
who provided wholesome direction and support to me at every stage of this
work. His wisdom, knowledge and commitment to the highest standards
inspired and motivated me.

Madhu Soni

DECLARATION

I hereby declare that the project titled Income Tax Planning in India with
respect to Individual Assessee is an original piece of research work carried
out by me under the guidance of Dr. Sumat Jain the information has been
collected form genuine and authentic sources. The work has been submitted in
practical fulfillment of the requirement of degree of Master of Business
Administration to BTIRT college Sagar(M.P).

Madhu Soni

PREFACE
The present project is designed to benefit the masses especially to the people related to Finance.
It includes information regarding different financial services and people benefited by it are
different fields.
One can easily get the information from this project and can decide for herself special care has
been taken to develop this project. It includes study matter as well as diagrammatic
representation to make the person understand it clearly.
I take this privilege to thank all those who help me directly or indirectly in preparing this project.
I am specially thankful to my guide. Dr Sumat Jain without his support this project would not
have been complete.
Last but not the least i express my gratitude towards god for giving me this beautiful opportunity.
All possible efforts have been made to make this presentation as best as possible.

Thanks to everyone

CERTIFICATE
This is certify that the project work entitle, Income Tax Planning in India with
respect to Individual Assessee as a major project in MBA 4th SEM embody the work
of Madhu Soni which has been undertaken and successfully completed under the guidance in
the Department of Business Studies, BTIRT college Sironja Road Sagar (mp) during the session
2015.
During their work we found them sincere preserving and hardworking. I hereby forward this
project.

Project Guide
Dr Sumat Jain

Head of the Departement

Dr Jayant Dubey

INDEX
Acknowledgements
Declaration
PREFACE
CERTIFICATE

Chapter

Introduction

1
1.1 Objective for Income Taxes
1.2 The Basic Principles Income Taxes
1.3 An extract from income tax Act,1961
1.4 Computation of total income
1.5.Deduction from Taxable Income

Chapter

Organization Profile

2
2.3 C.A. Profile
2.2 Introduction works of organization
2.3 Organization its founders
2.4 Vision & Mission

Chapter

Statement of Problem

Chapter

Research Methodology

4
4.1 Objectives of Study

4.2 Need / Significance of the Study.

4.3 Scope / Limitations of the study
4.4 Data Collection - Primary/Secondary
4.5 Tools of Analysis

Chapter

Data analysis & Interpretation

5
5.1 The results of general information

5.2 Income Tax Slabs & Rates for Assessment

Year
2015-16

Chapter

Conclusion

6
6.1 Recommendations &Suggestions
6.2 Conclusion

Appendix
I

Bibliography

CHAPTER 1

INTRODUCTION

Introduction

Income Tax Act, 1961 governs the taxation of incomes generated within India
and of incomes generated by Indians overseas. This study aims at presenting a
lucid yet simple understanding of taxation structure of an individuals income
in India for the assessment year 2004-15.

Income Tax Act, 1961 is the guiding baseline for all the content in this report
and the tax saving tips provided herein are a result of analysis of options
available in current market. Every individual should know that tax planning in
order to avail all the incentives provided by the Government of India under
different statures is legal.

This project covers the basics of the Income Tax Act, 1961 as amended by the
Finance Act 2007, and broadly presents the nuances of prudent tax planning
and tax saving options provided under these laws. Any other hideous means to
avoid or evade tax is a cognizable offence under the Indian constitution and all
the citizens should refrain from such acts.

1.1Objective for Income Taxes

The objective of income taxe on an accrual basis is to recognize the amount of

current and deferred taxes payable or refundable at the date of the financial
statements(a) as a result of all events that have been recognized in the financial
statements and (b) as measured by the provisions of enacted tax laws. Other
events not yet recognized in the financial statements may affect the eventual
tax consequences of some events that have been recognized in the financial
statements. But that change in tax consequences would be a result of those
other later events, and the Board decided that the tax consequences of an
event should not be recognized until that event is recognized in the financial
statements.
1.2The Basic Principles Income Taxes
To implement that objective, all of the following basic principles are applied:
While tax rules vary widely, there are certain basic principles common to most
income tax systems. Tax systems in Canada, China, Germany, Singapore, the
United Kingdom, and the United States, among others; follow most of the
principles outlined below. Some tax systems, such as India, may have
significant differences from the principles outlined below. Most references
below are examples; see specific articles by jurisdiction

Taxpayers and rates

--------------Residents and nonresidents

Defining income

-------------------------Deductions allowed

Business profits

---------------------------------------- Credits

Alternative taxes

State, provincial, and local -------------------------- Wage based taxes

--------------------------------------Administration

1.3AN EXTRACT FROM INCOME TAX ACT, 1961

1.3.1 Tax Regime in India
The tax regime in India is currently governed under The Income Tax, 1961 as
amended by The Finance Act, 2015 notwithstanding any amendments made
thereof by recently announced Union Budget for assessment year 2015-15.

1.3.2 Chargeability of Income Tax

As per Income Tax Act, 1961, income tax is charged for any assessment year at
prevailing rates in respect of the total income of the previous year of every
person. Previous year means the financial year immediately preceding the
assessment year.
Basic Knowledge of Income Tax
According to Income Tax Act 1961, every person, who is an assessee and whose
total income exceeds the maximum exemption limit, shall be chargeable to the
income tax at the rate or rates prescribed in the Finance Act. Such income

shall be paid on the total income of the previous year in the relevant
assessment year.
Assessee means a person by whom (any tax) or any other sum of money is
payable under the Income Tax Act, and includes

(a)

Every person in respect of whom any proceeding under the Income

Tax Act has been taken for the assessment of his income or of the
income of any other person in respect of which he is assessable, or of
the loss sustained by him or by such other person in respect of which
he is assessable, or of the loss sustained by him or by such other
person, or of the amount of refund due to him or to such other
person;

(b)

Every person who is deemed to be an assessee under any provisions

of the Income Tax Act.

(c)

Every person who is deemed to be an assessee in default under any

provision of the Income Tax Act.

Where a person includes:o Individual

o Hindu Undivided Family (HUF)
o Association of persons (AOP)
o Body of Individual (BOI)
o Company
o Firm
o A local authority and
o Every artificial judicial person not falling within any of the
preceding categories.

Income tax is an annual tax imposed separately for each assessment year (also
called the tax year). Assessment year commence from 1 st April and ends on the
next 31st March.
The total income of an individual is determined on the basis of his residential
status in India. For tax purposes, an individual may be resident, nonresident
or not ordinarily resident.

Types of Residents

Figure 1 : Types of Residents

1.3.3 Scope of Total Income

Under the Income Tax Act, 1961, total income of any previous year of a person
who is a resident includes all income from whatever source derived which:

is received or is deemed to be received in India in such year by or on behalf

of such person;
accrues or arises or is deemed to accrue or arise to him in India during
such year; or

accrues or arises to him outside India during such year:

Provided that, in the case of a person not ordinarily resident in India, the
income which accrues or arises to him outside India shall not be included
unless it is derived from a business controlled in or a profession set up in
India.

1. Total Income
For the purposes of chargeability of income-tax and computation of total
income, The Income Tax Act, 1961 classifies the earning under the following
heads of income:

Salaries
Income from house property
Capital gains
Profits and gains of business or profession
Income from other sources

Concepts used in Tax Planning

2. Tax Evasion
Tax Evasion means not paying taxes as per the provisions of the law or
minimizing tax by illegitimate and hence illegal means. Tax Evasion can be
achieved by concealment of income or inflation of expenses or falsification of
accounts or by conscious deliberate violation of law.
Tax Evasion is an act executed knowingly willfully, with the intent to deceive so
that the tax reported by the taxpayer is less than the tax payable under the
law.

3. Tax Avoidance

Tax Avoidance is the art of dodging tax without breaking the law. While
remaining well within the four corners of the law, a citizen so arranges his
affairs that he walks out of the clutches of the law and pays no tax or pays
minimum tax. Tax avoidance is therefore legal and frequently resorted to. In
any tax avoidance exercise, the attempt is always to exploit a loophole in the
law. A transaction is artificially made to appear as falling squarely in the
loophole and thereby minimize the tax. In India, loopholes in the law, when
detected by the tax authorities, tend to be plugged by an amendment in the
law, too often retrospectively. Hence tax avoidance though legal, is not long
lasting. It lasts till the law is amended.

1.3.4 Tax Planning

Tax Planning has been described as a refined form of tax avoidance and
implies arrangement of a persons financial affairs in such a way that it
reduces the tax liability. This is achieved by taking full advantage of all the tax
exemptions, deductions, concessions, rebates, reliefs, allowances and other
benefits granted by the tax laws so that the incidence of tax is reduced.
Exercise in tax planning is based on the law itself and is therefore legal and
permanent.
1.3.5 Tax Management
Tax Management is an expression which implies actual implementation of tax
planning ideas. While that tax planning is only an idea, a plan, a scheme, an
arrangement, tax management is the actual action, implementation, the reality,
the final result.

To sum up all these four expressions, we may say that:

Tax Evasion is fraudulent and hence illegal. It violates the spirit and the

letter of the law.

Tax Avoidance, being based on a loophole in the law is legal since it violates

only the spirit of the law but not the letter of the law.
Tax Planning does not violate the spirit nor the letter of the law since it is

entirely based on the specific provision of the law itself.

Tax Management is actual implementation of a tax planning provision. The
net result of tax reduction by taking action of fulfilling the conditions of law
is tax management.

1.3.6 The Income Tax Equation

For the understanding of any layman, the process of computation of income
and tax liability can be outlined in following five steps. This project is also
designed to follow the same.

Calculate the Gross total income deriving from all resources.

Subtract all the deduction & exemption available.
Applying the tax rates on the taxable income.
Ascertain the tax liability.
Minimize the tax liability through a perfect planning using tax saving
scheme

1.4COMPUTATION OF TOTAL INCOME

Figure 2: Income Head of Taxation

1.4.1 Income from Salaries

Incomes termed as Salaries:

Existence of master-servant or employer-employee relationship is absolutely
essential for taxing income under the head Salaries. Where such relationship
does not exist income is taxable under some other head as in the case of
partner of a firm, advocates, chartered accountants, LIC agents, small saving
agents, commission agents, etc. Besides, only those payments which have a
nexus with the employment are taxable under the head Salaries.

Salary is chargeable to income-tax on due or paid basis, whichever is earlier.

Any arrears of salary paid in the previous year, if not taxed in any earlier
previous year, shall be taxable in the year of payment.

Advance Salary:

Advance salary is taxable in the year it is received. It is not included in the

income of recipient again when it becomes due. However, loan taken from the
employer against salary is not taxable.

Arrears of Salary:
Salary arrears are taxable in the year in which it is received.

Bonus:
Bonus is taxable in the year in which it is received.

Pension:
Pension received by the employee is taxable under Salary Benefit of standard
deduction is available to pensioner also. Pension received by a widow after the
death of her husband falls under the head Income from Other Sources.
Profits in lieu of salary:
Any compensation due to or received by an employee from his employer or
former employer at or in connection with the termination of his employment or
modification of the terms and conditions relating thereto;

Any payment due to or received by an employee from his employer or former

employer or from a provident or other fund to the extent it does not consist of
contributions by the assessee or interest on such contributions or any
sum/bonus received under a Keyman Insurance Policy.

Any amount whether in lump sum or otherwise, due to or received by an

assessee from his employer, either before his joining employment or after
cessation of employment.
Allowances from Salary Incomes

Dearness Allowance/Additional Dearness (DA):

All dearness allowances are fully taxable
City Compensatory Allowance (CCA):
CCA is taxable as it is a personal allowance granted to meet expenses wholly,
necessarily and exclusively incurred in the performance of special duties
unless such allowance is related to the place of his posting or residence.

Certain allowances prescribed under Rule 2BB, granted to the employee either
to meet his personal expenses at the place where the duties of his office of
employment are performed by him or at the place where he ordinarily resides,
or to compensate him for increased cost of living are also exempt.
House Rent Allowance (HRA):
HRA received by an employee residing in his own house or in a house for which
no rent is paid by him is taxable. In case of other employees, HRA is exempt up
to a certain limit
Entertainment Allowance:
Entertainment allowance is fully taxable, but a deduction is allowed in certain
cases.
Academic Allowance:
Allowance granted for encouraging academic research and other professional
pursuits, or for the books for the purpose, shall be exempt u/s 10(14).
Similarly newspaper allowance shall also be exempt.

Conveyance Allowance:
It is exempt to the extent it is paid and utilized for meeting expenditure on
travel for official work.

1.4.2 Income from House Property

Incomes Termed as House Property Income:

The annual value of a house property is taxable as income in the hands of the
owner of the property. House property consists of any building or land, or its
part or attached area, of which the assessee is the owner. The part or attached
area may be in the form of a courtyard or compound forming part of the
building. But such land is to be distinguished from an open plot of land, which
is not charged under this head but under the head Income from Other
Sources or Business Income, as the case may be. Besides, house property
includes flats, shops, office space, factory sheds, agricultural land and farm
houses.

However, following incomes shall be taxable under the head Income from
House Property'.
1. Income from letting of any farm house agricultural land appurtenant thereto
for any purpose other than agriculture shall not be deemed as agricultural
income, but taxable as income from house property.
2. Any arrears of rent, not taxed u/s 23, received in a subsequent year, shall be
taxable in the year.

Even if the house property is situated outside India it is taxable in India if the
owner-assessee is resident in India.

Incomes Excluded from House Property Income:

The following incomes are excluded from the charge of income tax under this
head:

Annual value of house property used for business purposes

Income of rent received from vacant land.
Income from house property in the immediate vicinity of agricultural land

and used as a store house, dwelling house etc. by the cultivators

Annual Value:
Income from house property is taxable on the basis of annual value. Even if the
property is not let-out, notional rent receivable is taxable as its annual value.

The annual value of any property is the sum which the property might
reasonably be expected to fetch if the property is let from year to year.

In determining reasonable rent factors such as actual rent paid by the tenant,
tenants obligation undertaken by owner, owners obligations undertaken by the
tenant, location of the property, annual rateable value of the property fixed by
municipalities, rents of similar properties in neighbourhood and rent which the
property is likely to fetch having regard to demand and supply are to be
considered.
Annual Value of Let-out Property:
Where the property or any part thereof is let out, the annual value of such
property or part shall be the reasonable rent for that property or part or the
actual rent received or receivable, whichever is higher.
Deductions from House Property Income:

Deduction of House Tax/Local Taxes paid:

In case of a let-out property, the local taxes such as municipal tax, water and
sewage tax, fire tax, and education cess levied by a local authority are
deductible while computing the annual value of the year in which such taxes
are actually paid by the owner.
Other than self-occupied properties
Repairs and collection charges: Standard deduction of 30% of the net annual
value of the property.
Interest on Borrowed Capital:
Interest payable in India on borrowed capital, where the property has been
acquired constructed, repaired, renovated or reconstructed with such borrowed
capital, is allowable (without any limit) as a deduction (on accrual basis).
Furthermore, interest payable for the period prior to the previous year in which
such property has been acquired or constructed shall be deducted in five equal
annual instalments commencing from the previous year in which the house
was acquired or constructed.
Amounts not deductible from House Property Income:
Any interest chargeable under the Act payable out of India on which tax has
not been paid or deducted at source and in respect of which there is no person
who may be treated as an agent.

Expenditures not specified as specifically deductible. For instance, no

deduction can be claimed in respect of expenses on electricity, water supply,
salary of liftman, etc.
Self-Occupied Properties

No deduction is allowed under section 24(1) by way of repairs, insurance

premium, etc. in respect of self-occupied property whose annual value has

been taken to be nil under section 23(2) (a) or 23(2) (b) of the act. However, a
maximum deduction of Rs. 30,000 by way of interest on borrowed capital for
acquiring, constructing, repairing, renewing or reconstructing the property is
available in respect of such properties.

In case of self-occupied property acquired or constructed with capital borrowed

on or after 1.4.1999 and the acquisition or construction of the house property
is made within 3 years from the end of the financial year in which capital was
borrowed the maximum deduction for interest shall be Rs. 1,50,000. For this
purpose, the assessee shall furnish a certificate from the person extending the
loan that such interest was payable in respect of loan for acquisition or
construction of the house, or as refinance loan for repayment of an earlier loan
for such purpose.

The deduction for interest u/s 24(1) is allowable as under:

i. Self-occupied property: deduction is restricted to a maximum of Rs. 1,50,000

for property acquired or constructed with funds furrowed on or after 1.4.1999
within 3 years from the end of the financial year in which the funds are
borrowed. In other cases, the deduction is allowable up to Rs. 30,000.
ii. Let out property or part there of: all eligible interests are allowed.
It is, therefore, suggested that a property for self, residence may be acquired
with borrowed funds, so that the annual interest accrual on borrowings
remains less than Rs. 1,50,000. The net loss on this account can be set off
against income from other properties and even against other incomes.

If buying a property for letting it out on rent, raise borrowings from other family
members or outsiders. The rental income can be safely passed off to the other
family members by way of interest. If the interest claim exceeds the annual
value, loss can be set off against other incomes too.
At the time of purchase of new house property, the same should be acquired in
the name(s) of different family members. Alternatively, each property may be
acquired in joint names. This is particularly advantageous in case of rented
property for division of rental income among various family members. However,
each co-owner must invest out of his own funds (or borrowings) in the ratio of
his ownership in the property.
Capital Gains
Any profits or gains arising from the transfer of capital assets effected during
the previous year is chargeable to income-tax under the head Capital gains
and shall be deemed to be the income of that previous year in which the
transfer takes place. Taxation of capital gains, thus, depends on two aspects
capital assets and transfer.

Capital Asset:
Capital Asset means property of any kind held by an assessee including
property of his business or profession, but excludes non-capital assets.
Transfers Resulting in Capital Gains

Sale or exchange of assets;

Relinquishment of assets;
Extinguishment of any rights in assets;
Compulsory acquisition of assets under any law;
Conversion of assets into stock-in-trade of a business carried on by the
owner of asset;

Handing over the possession of an immovable property in part performance

of a contract for the transfer of that property;

Transactions involving transfer of membership of a group housing society,
company, etc.., which have the effect of transferring or enabling enjoyment

of any immovable property or any rights therein ;

Distribution of assets on the dissolution of a firm, body of individuals or

association of persons;
Transfer of a capital asset by a partner or member to the firm or AOP,

whether by way of capital contribution or otherwise; and

Transfer under a gift or an irrevocable trust of shares, debentures or
warrants allotted by a company directly or indirectly to its employees under
the Employees Stock Option Plan or Scheme of the company as per Central
Govt. guidelines.

Year of Taxability:
Capital gains form part of the taxable income of the previous year in which the
transfer giving rise to the gains takes place. Thus, the capital gain shall be
chargeable in the year in which the sale, exchange, relinquishment, etc. takes
place.
Where the transfer is by way of allowing possession of an immovable property
in part performance of an agreement to sell, capital gain shall be deemed to
have arisen in the year in which such possession is handed over. If the
transferee already holds the possession of the property under sale, before
entering into the agreement to sell, the year of taxability of capital gains is the
year in which the agreement is entered into.

Full Value of Consideration:

This is the amount for which a capital asset is transferred. It may be in money
or moneys worth or combination of both. For instance, in case of a sale, the
full value of consideration is the full sale price actually paid by the transferee
to the transferor. Where the transfer is by way of exchange of one asset for
another or when the consideration for the transfer is partly in cash and partly
in kind, the fair market value of the asset received as consideration and cash
consideration, if any, together constitute full value of consideration.
In case of damage or destruction of an asset in fire flood, riot etc., the amount
of money or the fair market value of the asset received by way of insurance
claim, shall be deemed as full value of consideration.
1. Fair value of consideration in case land and/ or building; and
2. Transfer Expenses.
Cost of Acquisition:
Cost of acquisition is the amount for which the capital asset was originally
purchased by the assessee.
Cost of acquisition of an asset is the sum total of amount spent for acquiring
the asset. Where the asset is purchased, the cost of acquisition is the price
paid. Where the asset is acquired by way of exchange for another asset, the cost
of acquisition is the fair market value of that other asset as on the date of
exchange.

Any expenditure incurred in connection with such purchase, exchange or other

transaction e.g. brokerage paid, registration charges and legal expenses, is
added to price or value of consideration for the acquisition of the asset. Interest
paid on moneys borrowed for purchasing the asset is also part of its cost of
acquisition.
Where capital asset became the property of the assessee before 1.4.1981, he
has an option to adopt the fair market value of the asset as on 1.4.1981, as its
cost of acquisition.
Rates of Tax on Capital Gains:
Short-term Capital Gains
Short-term Capital Gains are included in the gross total income of the assessee
and after allowing permissible deductions under Chapter VI-A. Rebate under
Sections 88, 88B and 88C is also available against the tax payable on shortterm capital gains.
Long-term Capital Gains
Long-term Capital Gains are subject to a flat rate of tax @ 20% However, in
respect of long term capital gains arising from transfer of listed securities or
units of mutual fund/UTI, tax shall be payable @ 20% of the capital gain
computed after allowing indexation benefit or @ 10% of the capital gain
computed without giving the benefit of indexation, whichever is less.

Capital Loss:
The amount, by which the value of consideration for transfer of an asset falls
short of its cost of acquisition and improvement /indexed cost of acquisition
and improvement, and the expenditure on transfer, represents the capital loss.
Capital Loss may be short-term or long-term, as in case of capital gains,
depending upon the period of holding of the asset.

Set Off and Carry Forward of Capital Loss

Any short-term capital loss can be set off against any capital gain (both

long-term and short term) and against no other income.

Any long-term capital loss can be set off only against long-term capital gain

and against no other income.

Any short-term capital loss can be carried forward to the next eight

assessment years and set off against capital gains in those years.
Any long-term capital loss can be carried forward to the next eight
assessment year and set off only against long-term capital gain in those
years.

Capital Gains Exempt from Tax:

Capital Gains from Transfer of a Residential House
Any long-term capital gains arising on the transfer of a residential house, to an
individual or HUF, will be exempt from tax if the assessee has within a period of
one year before or two years after the date of such transfer purchased, or
within a period of three years constructed, a residential house.

Capital Gains from Transfer of Agricultural Land

Any capital gain arising from transfer of agricultural land, shall be exempt from
tax, if the assessee purchases within 2 years from the date of such transfer,
any other agricultural land. Otherwise, the amount can be deposited under
Capital Gains Accounts Scheme, 1988 before the due date for furnishing the
return.
Capital Gains from Compulsory Acquisition of Industrial Undertaking
Any capital gain arising from the transfer by way of compulsory acquisition of
land or building of an industrial undertaking, shall be exempt, if the assessee
purchases/constructs within three years from the date of compulsory
acquisition, any building or land, forming part of industrial undertaking.
Otherwise, the amount can be deposited under the Capital Gains Accounts
Scheme, 1988 before the due date for furnishing the return.
Capital Gains from an Asset other than Residential House
Any long-term capital gain arising to an individual or an HUF, from the transfer
of any asset, other than a residential house, shall be exempt if the whole of the
net consideration is utilized within a period of one year before or two years after
the date of transfer for purchase, or within 3 years in construction, of a
residential house.
Tax Planning for Capital Gains

An assessee should plan transfer of his capital assets at such a time that
capital gains arise in the year in which his other recurring incomes are

below taxable limits.

Assessees having income below Rs. 60,000 should go for short-term capital
gain instead of long-term capital gain, since income up to Rs. 60,000 is
taxable @ 10% whereas long-term capital gains are taxable at a flat rate of
20%. Those having income above Rs. 1,50,000 should plan their capital

gains vice versa.

Since long-term capital gains enjoy a concessional treatment, the assessee
should so arrange the transfers of capital assets that they fall in the

category of long-term capital assets.

An assessee may go for a short-term capital gain, in the year when there is
already a short-term capital loss or loss under any other head that can be

set off against such income.

The assessee should take the maximum benefit of exemptions available u/s

54, 54B, 54D, 54ED, 54EC, 54F, 54G and 54H.

Avoid claiming short-term capital loss against long-term capital gains.
Instead claim it against short-term capital gain and if possible, either create
some short-term capital gain in that year or, defer long-term capital gains to
next year.

Profits and Gains of Business or Profession

1.4.3Income from Business or Profession:
The following incomes shall be chargeable under this head

Profit and gains of any business or profession carried on by the assessee at

any time during previous year.

Any compensation or other payment due to or received by any person, in
connection with the termination of a contract of managing agency or for

vesting in the Government management of any property or business.

Income derived by a trade, professional or similar association from specific

services performed for its members.

Profits on sale of REP licence/Exim scrip, cash assistance received or
receivable against exports, and duty drawback of customs or excise received

or receivable against exports.

The value of any benefit or perquisite, whether convertible into money or

not, arising from business or in exercise of a profession.

Any interest, salary, bonus, commission or remuneration due to or received
by a partner of a firm from the firm to the extent it is allowed to be deducted
from the firms income. Any interest salary etc. which is not allowed to be
deducted u/s 40(b), the income of the partners shall be adjusted to the

extent of the amount so disallowed.

Any sum received or receivable in cash or in kind under an agreement for
not carrying out activity in relation to any business, or not to share any
know-how, patent, copyright, trade-mark, licence, franchise or any other
business or commercial right of, similar nature of information or technique
likely to assist in the manufacture or processing of goods or provision for
services except when such sum is taxable under the head capital gains or
is received as compensation from the multilateral fund of the Montreal

Protocol on Substances that Deplete the Ozone Layer.

Any sum received under a Keyman Insurance Policy referred to u/s 10(10D).
Any allowance or deduction allowed in an earlier year in respect of loss,
expenditure or trading liability incurred by the assessee and subsequently

received by him in cash or by way of remission or cessation of the liability

during the previous year.

Profit made on sale of a capital asset for scientific research in respect of

which a deduction had been allowed u/s 35 in an earlier year.

Amount recovered on account of bad debts allowed u/s 36(1) (vii) in an

earlier year.
Any amount withdrawn from the special reserves created and maintained
u/s 36 (1) (viii) shall be chargeable as income in the previous year in which
the amount is withdrawn.

Set Off and Carry Forward of Business Loss:

If there is a loss in any business, it can be set off against profits of any other
business in the same year. The loss, if any, still remaining can be set off against
income under any other head.

However, loss in a speculation business can be adjusted only against profits of

another speculation business. Losses not adjusted in the same year can be
carried forward to subsequent years.

1.4.4 Income from Other Sources

Other Sources

This is the last and residual head of charge of income. Income of every kind
which is not to be excluded from the total income under the Income Tax Act

shall be charge to tax under the head Income From Other Sources, if it is not
chargeable under any of the other four heads-Income from Salaries, Income
From House Property, Profits and Gains from Business and Profession and
Capital Gains. In other words, it can be said that the residuary head of income
can be resorted to only if none of the specific heads is applicable to the income
in question and that it comes into operation only if the preceding heads are
excluded.

Deductions from Income from Other Sources:

The income chargeable to tax under this head is computed after making the
following deductions:

1. In the case of dividend income and interest on securities: any reasonable

sum paid by way of remuneration or commission for the purpose of realizing
dividend or interest.

2. In case of income in the nature of family pension: Rs.15, 000or 33.5% of

such income, whichever is low.

3. In the case of income from machinery, plant or furniture let on hire:

(a) Repairs to building
(b) Current repairs to machinery, plant or furniture
(c) Depreciation on building, machinery, plant or furniture
(d) Unabsorbed Depreciation.

4. Any other expenditure (not being a capital expenditure) expended wholly and
exclusively for the purpose of earning of such income

1.5.DEDUCTIONSFROM TAXABLE INCOME

Deduction under section 80C
This new section has been introduced from the Financial Year 2005-06. Under
this section, a deduction of up to Rs. 1,00,000 is allowed from Taxable Income
in respect of investments made in some specified schemes. The specified
schemes are the same which were there in section 88 but without any sectoral
caps (except in PPF).

80C
Under this section 100%deduction would be available from Gross Total Income
subject to maximum ceiling given u/s 80CCE.Following investments are
included in this section:

Contribution towards premium on life insurance

Contribution towards Public Provident Fund.(Max.70,000 a year)

Contribution towards Employee Provident Fund/General Provident Fund

Unit Linked Insurance Plan (ULIP).

NSC VIII Issue

Interest accrued in respect of NSC VIII Issue

Equity Linked Savings Schemes (ELSS).

Repayment of housing Loan (Principal).

Tuition fees for child education.

Investment in companies engaged in infrastructural facilities.

Deduction under section 80CCC

Deduction in respect of contribution to certain Pension Funds:
Deduction is allowed for the amount paid or deposited by the assessee during
the

previous

year

out

of

his

taxable

income

to

the

annuity

plan

(JeevanSuraksha) of Life Insurance Corporation of India or annuity plan of

other insurance companies for receiving pension from the fund referred to in
section 10(23AAB)
Amount of Deduction: Maximum Rs. 10,000/Deduction under section 80D
Deduction in respect of Medical Insurance Premium
Deduction is allowed for any medical insurance premium under an approved
scheme of General Insurance Corporation of India popularly known as
MEDICLAIM) or of any other insurance company, paid by cheque, out of
assessees taxable income during the previous year, in respect of the following
In case of an individual insurance on the health of the assessee, or wife or
husband, or dependent parents or dependent children.
In case of an HUF insurance on the health of any member of the family
Amount of deduction: Maximum Rs. 10,000, in case the person insured is a
senior citizen (exceeding 65 years of age) the maximum deduction allowable
shall be Rs. 15,000/-.
Deduction under section 80DD
Deduction

in

respect

handicapped dependent:

of

maintenance

including

medical

treatment

of

Deduction is allowed in respect of any expenditure incurred by an assessee,

during the previous year, for the medical treatment training and rehabilitation
of one or more dependent persons with disability; and
Amount deposited, under an approved scheme of the Life Insurance
Corporation or other insurance company or the Unit Trust of India, for the
benefit of a dependent person with disability.
Amount of deduction: the deduction allowable is Rs. 50,000 (Rs. 40,000 for A.Y.
2003-2004) in aggregate for any of or both the purposes specified above,
irrespective of the actual amount of expenditure incurred. Thus, if the total of
expenditure incurred and the deposit made in approved scheme is Rs. 45,000,
the deduction allowable for A.Y. 2004-2005, is Rs. 50,000

Deduction under section 80DDB

Deduction in respect of medical treatment
A resident individual or Hindu Undivided family deduction is allowed in respect
of during a year for the medical treatment of specified disease or ailment for
himself or a dependent or a member of a Hindu Undivided Family.

Amount of Deduction Amount actually paid or Rs. 40,000 whichever is less (for
A.Y. 2003-2004, a deduction of Rs. 40,000 is allowable In case of amount is
paid in respect of the assessee, or a person dependent on him, who is a senior
citizen the deduction allowable shall be Rs. 60,000.
Deduction under section 80E
Deduction in respect of Repayment of Loan taken for Higher Education
An individual assessee who has taken a loan from any financial institution or
any approved charitable institution for the purpose of pursuing his higher
education i.e. full time studies for any graduate or post graduate course in
engineering medicine, management or for post graduate course in applied
sciences or pure sciences including mathematics and statistics.
Amount of Deduction: Any amount paid by the assessee in the previous year,
out of his taxable income, by way of repayment of loan or interest thereon,
subject to a maximum of Rs. 40,000
Deduction under section 80G
Donations:
100 % deduction is allowed in respect of donations to: National Defence Fund,
Prime Ministers National Relief Fund, Armenia Earthquake Relief Fund, Africa
Fund, National Foundation of Communal Harmony, an approved University or
educational institution of national eminence, Chief Ministers earthquake Relief
Fund etc.
In all other cases donations made qualifies for the 50% of the donated amount
for deductions.
Deduction under section 80GG

Deduction in respect of Rent Paid:

Any assessee including an employee who is not in receipt of H.R.A. u/s 10(13A)
Amount of Deduction: Least of the following amounts are allowable:

Rent paid minus 10% of assessees total income

Rs. 2,000 p.m.
25% of total income
Deduction under section 80GGA

Donations for Scientific Research or Rural Development:

In respect of institution or fund referred to in clause (e) or (f) donations made
up to 31.3.2002 shall only be deductible.
This deduction is not applicable where the gross total income of the assessee
includes the income chargeable under the head Profits and gains of business or
profession. In those cases, the deduction is allowable under the respective
sections specified above.
Deduction under section 80CCE
A new Section 80CCE has been inserted from FY2005-06. As per this section,
the maximum amount of deduction that an assessee can claim under Sections
80C, 80CCC and 80CCD will be limited to Rs 100,000.

CHAPTER 2

ORGANISATION PROFILE

Organization Profile
2.1

Profile

Swapnil Shukla, CHARTERD ACCOUNTANTS

Date: 07/03/2013
CHARTERD ACCOUNTANTS
Email ID: caswapnilshukla@gmail.com
Address: in front of gayatri temple gopalganj, Dist sagar.

2.2Introduction work of organisation

Introduction of The Swapnil Shukla, CHARTERD ACCOUNTANTS
Chartered Accountants work in a wide range of business sectors and in a broad
spectrum of roles, from Chief Executives to Financial Controllers. Below are a
few examples of the type of positions that Chartered Accountants occupy.

Tax Accountant
Management Accountants
Financial Accountants

Budget Analysts
Auditor

2.3Organization its founders

The Swapnil Shukla, CHARTERD ACCOUNTANTS
Dated 01/12/2014 Chartered Accountants profile In Gopalganj Sagar
Dist Sagar.
2.4 Vision & Mission
Vision Statement
We will become the Tax advisor of choice through the creation of an
environment where we want to give of our best
Mission Statement
prime objective the provision of an integrated range of client focused services
that will exceed our client's expectations and assist them to improve the and
reduce and maintain Tax Liability
We are committed to creating a client focused culture and supporting our staff
to achieve the prime objective.
Our professional and local communities are an integral part of our ability to
deliver on this mission

CHAPTER 3

STATEMENT OF PROBLEM

An individual is not aware about the rules and regulations of income-tax.

Hence they need the services of CA for computing their personal income-tax.
The firm has to use new way of working by reminding the clients about the last
date of filing the income tax returns. This way they can increase their client
base.

CHAPTER 4

RESEARCH METHODOLOGY

4.1 Objective of Study:

To study taxation provisions of The Income Tax Act, 1961 as amended by

Finance Act, 2015.

To explore and simplify the tax planning procedure from a laymans

perspective.
To present the tax saving avenues under prevailing statures.

4.2Need for Study

In last some years of my career and education, I have seen my colleagues and
faculties grappling with the taxation issue and complaining against the tax
deducted by their employers from monthly remuneration. Not equipped with
proper knowledge of taxation and tax saving avenues available to them, they
were at mercy of the HR/Admin departments which never bothered to do even
as little as take advise from some good tax consultant.

Need for computerization:

Reliable & efficient services to student.

To reduce the paperwork & manual mistakes.
To reduce the labor cost.
To manage the tax records efficiently & accurately

4.3 Scope & Limitations

Scope

This project studies the tax planning for individuals assessed to Income Tax.
The study relates to non-specific and generalized tax planning, eliminating

the need of sample/population analysis.

Basic methodology implemented in this study is subjected to various pros &
cons, and diverse insurance plans at different income levels of individual

assessees.
This study may include comparative and analytical study of more than one

tax saving plans and instruments.

This study covers individual income tax assessees only and does not hold

good for corporate taxpayers.

The tax rates, insurance plans, and premium are all subject to FY 2014-15

Limitation
1) The project studies the tax planning for individual assessed to income Tax.
2) The Study relates to non-specific and generalized tax planning, eliminating
the need of sample/population analysis.
3) Basic Methodology implemented in this study is subjected to various pros &
cons and diverse insurance plans.
4) This study may include comparative and analytical study of more than one tax
saving plans and instruments.
5) This study covers individual income tax assessees only and does not hold
good for corporate tax payers.
6) The tax rates, insurance plans, and premium are all subjected to FY 2014-15

4.4 Data Collection

Primary Data:-

Primary research entails the use of immediate data in determining the for
stable all tax system. Primary data is more accommodating as it shows latest
information. The site ministry of finance , income tax

reports data on

quarterly/ monthly/ half yearly/ annually respectively.

Secondary Data:Whereas Secondary research is means to reprocess and reuse collected
information as an indication for betterment of service or product. In this data
related to a past period. As tax consultant I collected data of my project form
work in chartered Accountants office

related to different department are

handle like tax planning ,auditing tax consultant, audit report etc.. List of
customer for advisory, tax details, fee structure etc. Data is collected from past
record that means history.
& I collected the data for tax planning for the tax payer.
4.5 Tools of Analysis
Tax Planning Tools

Following are the tax planning tools that simultaneously help the assessees
maximize their wealth too.
Here are some guidelines to help you wade through the various options and
ensure the following:
1. Tax is saved and that you claim the full benefit of your section 80C
benefits
2. Product are chosen based on their long term merit and not like fire
fighting options undertaken just to reach that Rs 1 lakh investment
mark

CHAPTER 5

DATA ANLYSIS &INTERPRETANTION

5.1 The results of general information

India Personal Income Tax Rate 2004-2015
The Personal Income Tax Rate in India stands at 33.99 percent. Personal
Income Tax Rate in India averaged 30.73 percent from 2004 until 2014,
reaching an all time high of 33.99 percent in 2013 and a record low of 30
percent in 2005. Personal Income Tax Rate in India is reported by the Ministry
of Finance, Government of India.

Figure 3: India Personal Income Tax Rate 2004-2015

In India, the Personal Income Tax Rate is a tax collected from individuals and is
imposed on different sources of income like labour, pensions, interest and
dividends. The benchmark we use refers to the Top Marginal Tax Rate for
individuals. Revenues from the Personal Income Tax Rate are an important
source of income for the government of India. This page provides - India
Personal Income Tax Rate - actual values, historical data, forecast, chart,

statistics, economic calendar and news. Content for - India Personal Income
Tax Rate - was last refreshed on Friday, April 17, 2015.

5.2 Income Tax Slabs & Rates for Assessment Year 2015-16
1. Individual resident aged below 60 years (i.e. born on or after 1st April
1955) or any NRI/ HUF/ AOP/ BOI/ AJP*
Income Tax

Table 1 :Individual resident aged below 60 years

Surcharge : 10% of the Income Tax, where taxable income is more than Rs. 1
crore. (Marginal Relief in Surcharge, if applicable)
Education Cess : 3% of the total of Income Tax and Surcharge.
Abbreviations

used

NRI - Non Resident Individual; HUF - Hindu Undivided Family; AOP -

Association of Persons; BOI - Body of Individuals; AJP - Artificial Judicial

Person

2. Senior Citizen (Individual resident who is of the age of 60 years or

more but below the age of 80 years at any time during the previous year
i.e. born on or after 1st April 1934 but before 1st April 1954)
Income Tax :

Table 2 :Senior Citizen age Above 60 yeard ( Income Tax Slab )

Surcharge : 10% of the Income Tax, where taxable income is more than Rs. 1
crore. (Marginal Relief in Surcharge, if applicable)
Education Cess : 3% of the total of Income Tax and Surcharge.

3.

Super Senior Citizen (Individual resident who is of the age of 80

years or more at any time during the previous year i.e. born before 1st
April 1934)
Income Tax :

Table No: 3 Senior Citizen age Above 80 year or more

CHAPTER 6

CONCLUSION

6.1 Recommendations &Suggestions

Tax Planning

Proper tax planning is a basic duty of every person which should be carried out
religiously. Basically, there are three steps in tax planning exercise.

These three steps in tax planning are:

Calculate your taxable income under all heads i.e., Income from Salary,
House Property, Business & Profession, Capital Gains and Income from
Other Sources.

Calculate tax payable on gross taxable income for whole financial year (i.e.,
from 1st April to 31st March) using a simple tax rate table, given on next

page.
After you have calculated the amount of your tax liability. You have two
options to choose from:
1. Pay your tax (No tax planning required)
2. Minimise your tax through prudent tax planning.

Most people rightly choose Option 'B'. Here you have to compare the advantages
of several tax-saving schemes and depending upon your age, social liabilities,
tax slabs and personal preferences, decide upon a right mix of investments,
which shall reduce your tax liability to zero or the minimum possible.

Every citizen has a fundamental right to avail all the tax incentives provided by
the Government. Therefore, through prudent tax planning not only income-tax
liability is reduced but also a better future is ensured due to compulsory
savings in highly safe Government schemes. We should plan our investments in
such a way, that the post-tax yield is the highest possible keeping in view the
basic parameters of safety and liquidity.

For most individuals, financial planning and tax planning are two mutually
exclusive exercises. While planning our investments we spend considerable
amount of time evaluating various options and determining which suits us
best. But when it comes to planning our investments from a tax-saving
perspective, more often than not, we simply go the traditional way and do the
exact same thing that we did in the earlier years. Well, in case you were not

aware the guidelines governing such investments are a lot different this year.
And lethargy on your part to rework your investment plan could cost you dear.

Why are the stakes higher this year? Until the previous year, tax benefit was
provided as a rebate on the investment amount, which could not exceed Rs
100,000; of this Rs 30,000 was exclusively reserved for Infrastructure Bonds.
Also, the rebate reduced with every rise in the income slab; individuals earning
over Rs 500,000 per year were not eligible to claim any rebate. For the current
financial year, the Rs 100,000 limit has been retained; however internal caps
have been done away with. Individuals have a much greater degree of flexibility
in deciding how much to invest in the eligible instruments. The other
significant changes are:

The rebate has been replaced by a deduction from gross total income,

effectively. The higher your income slab, the greater is the tax benefit.
All individuals irrespective of the income bracket are eligible for this
investment. These developments will result in higher tax-savings.

We should use this Rs 100,000 contribution as an integral part of your overall

financial planning and not just for the purpose of saving tax. We should
understand which instruments and in what proportion suit the requirement
best. In this note we recommend a broad asset allocation for tax saving
instruments for different investor profiles.

For persons below 30 years of age:

In this age bracket, you probably have a high appetite for risk. Your disposable
surplus maybe small (as you could be paying your home loan installments), but

the savings that you have can be set aside for a long period of time. Your
children, if any, still have many years before they go to college; or retirement is
still further away. You therefore should invest a large chunk of your surplus in
tax-saving funds (equity funds). The employee provident fund deduction
happens from your salary and therefore you have little control over it.
Regarding life insurance, go in for pure term insurance to start with. Such
policies are very affordable and can extend for up to 30 years. The rest of your
funds (net of the home loan principal repayment) can be parked in NSC/PPF.

For persons between 30 - 45 years of age:

Your appetite for risk will gradually decline over this age bracket as a result of
which your exposure to the stock markets will need to be adjusted accordingly.
As your compensation increases, so will your contribution to the EPF. The life
insurance component can be maintained at the same level; assuming that you
would have already taken adequate life insurance and there is no need to add
to it. In keeping with your reducing risk appetite, your contribution to
PPF/NSC increases. One benefit of the higher contribution to PPF will be that
your account will be maturing (you probably opened an account when you
started to earn) and will yield you tax free income (this can help you fund your
children's college education).

For persons over 55 years of age:

You are to retire in a few years; then you will have to depend on your
investments for meeting your expenses. Therefore the money that you have to
invest under Section 80C must be allocated in a manner that serves both near
term income requirements as well as long-term growth needs. Most of the
funds are therefore allocated to NSC. Your PPF account probably will mature
early into your retirement (if you started another account at about age 40
years). You continue to allocate some money to equity to provide for the latter
part of your retired life. Once you are retired however, since you will not have
income there is no need to worry about Section 80C. You should consider
investing in the Senior Citizens Savings Scheme, which offers an assured
return of 9% pa; interest is payable quarterly. Another investment you should
consider is Post Office Monthly Income Scheme.

Investing the Rs 100,000 in a manner that saves both taxes as well as helps
you achieve your long-term financial objectives is not a difficult exercise. All it
requires is for you to give it some thought, draw up a plan that suits you best
and then be disciplined in executing the same.

Strategic Tax Planning

So far with whatever you have done in the past, it is important to understand
the future implications of your tax saving strategy. You cannot do much about
the statutory commitments and contribution like provident fund (PF) but all
the rest is in your control.

1. Insurance

If you have a traditional money back policy or an endowment type of policy

understand that you will be earning about 4% to 6% returns on such policies.
In years to come, this will be lower or just equal to inflation and hence you are
not creating any wealth, infact you are destroying the value of your wealth
rapidly.

Such policies should ideally be restructured and making them paid up is a

good option. You can buy term assurance plan which will serve your need to
obtaining life cover and all the same release unproductive cash flow to be
deployed into more productive and wealth generating asset classes. Be careful
of ULIPS; invest if you are under 35 years of age, else as and when the stock
markets are down or enter into a downward phase. Your ULIP will turn out to
be very expensive as your age increases. Again I am sure you did not know this.

2. Public Provident Fund (PPF)

This has been a long time favourite of most people. It is a no-brainer and hence
most people prefer this but note this. The current returns are 8% and quite
likely that sooner or later with the implementation of the exempt tax (EET)
regime of taxation investments in PPF may become redundant, as returns will
fall significantly.

How this will be implemented is not clear hence the best option is to go easy on
this one. Simply place a nominal sum to keep your account active before there
is clarity on this front. EET may apply to insurance policies as well.

3. Pension Policies

This is the greatest mistake that many people make. There is no pension policy
today, which will really help you in retirement. That is the cold fact. Tulip
pension policies may help you to some extent but I would give it a rating of four
out of ten. It is quite likely that you will make a sizeable sum by the time you
retire but that is where the problem begins.

The problem with pension policies is that you will get a measly 2% or 4%
annuity when you actually retire. To make matters worse this will be taxed at
full marginal rate of income tax as well. Liquidity and flexibility will just not be
there. No insurance company or agent will agree to this but this is a cold fact.

Steer clear of such policies. Either make them paid up or stop paying Tulip
premiums, if you can. Divest the money to more productive assets based on
your overall risk profile and general preferences. Bite this Rs 100 today will be
worth only Rs 32 say in 20 years time considering 5% inflation.

4. Five year fixed deposits (FDs), National Savings Scheme (NSC), other bonds

These products are fair if your risk appetite is really low and if you are not too
keen to build wealth. Generally speaking, in all that we do wealth creation
should be the underlying motive.

5. Equity Linked Savings Scheme (ELSS)

This is a good option. You save tax and returns are tax-free completely. You get
to build a lot of wealth. However, note that this is fraught with risk. Though it

is said that this investment into an ELSS scheme is locked-in for three years
you should be mentally prepared to hold it for five to 10 years as well.

It is an equity investment and when your three years are over, you may not have
made great returns or the stock markets may be down at that point. If that be
the case, you will have to hold much longer. Hence if you wish to use such
funds in three-four years time the calculations can go wrong.

Nevertheless, strange as it may seem, the high-risk investment has the least
tax liability, infact it is nil as per the current tax laws. If you are prepared to
hold for long really long like five-ten years, surely you will make super normal
returns.

That said ideally you must have your financial goal in mind first and then see
how you can meet your goals and in the process take advantage of tax savings
strategies.

There is so much to be done while you plan your tax. Look at 80C benefits as a
composite tool. Look at this as a tax management tool for the family and not
just yourself. You have section 80C benefit for yourself, your spouse, your HUF,
your parents, your fathers HUF. There are so many Rs 1 lakh to be planned
and hence so much to benefit from good tax planning.

Traditionally, buying life insurance has always formed an integral part of an

individual's annual tax planning exercise. While it is important for individuals
to have life cover, it is equally important that they buy insurance keeping both

their long-term financial goals and their tax planning in mind. This note
explains the role of life insurance in an individual's tax planning exercise while
also evaluating the various options available at one's disposal.
Term plans
A term plan is the most basic type of life insurance plan. In this plan, only the
mortality charges and the sales and administration expenses are covered.
There is no savings element; hence the individual does not receive any maturity
benefits. A term plan should form a part of every individual's portfolio. An
illustration will help in understanding term plans better.
Cover yourself with a term plan

Tax benefits*
Premiums paid on life insurance plans enjoy tax benefits under Section 80C
subject to an upper limit of Rs 100,000. The tax benefit on pension plans is
subject to an upper limit of Rs 10,000 as per Section 80CCC (this falls within
the overall Rs 100,000 Section 80C limit). The maturity amount is currently
treated as tax free in the hands of the individual on maturity under Section 10
(10D).

Income Head-wise Tax Planning Suggestion

Salaries Head: Following propositions should be borne in mind:

1.

It should be ensured that, under the terms of employment, dearness

allowance and dearness pay form part of basic salary. This will minimize the
tax incidence on house rent allowance, gratuity and commuted pension.
Likewise, incidence of tax on employers contribution to recognized provident
fund will be lesser if dearness allowance forms a part of basic salary.

2.

The Supreme Court has held in Gestetner Duplicators (p) Ltd. Vs. CIT

that commission payable as per the terms of contract of employment at a fixed

percentage of turnover achieved by an employee, falls within the expression
salary as defined in rule 2(h) of part A of the fourth schedule. Consequently,
tax incidence on house rent allowance, entertainment allowance, gratuity and
commuted pension will be lesser if commission is paid at a fixed percentage of
turnover achieved by the employee.

3.

An uncommitted pension is always taxable; employees should get their

pension commuted. Commuted pension is fully exempt from tax in the case of
Government employees and partly exempt from tax in the case of government
employees and partly exempt from tax in the case of non government employees
who can claim relief under section 89.

4.

An employee being the member of recognized provident fund, who resigns

before 5 years of continuous service, should ensure that he joins the firm
which maintains a recognized fund for the simple reason that the accumulated
balance of the provident fund with the former employer will be exempt from tax,
provided the same is transferred to the new employer who also maintains a
recognized provident fund.

5.

Since employers contribution towards recognized provident fund is

exempt from tax up to 12 percent of salary, employer may give extra benefit to
their employees by raising their contribution to 12 percent of salary without
increasing any tax liability.

6.

While medical allowance payable in cash is taxable, provision of ordinary

medical facilities is no taxable if some conditions are satisfied. Therefore,

employees should go in for free medical facilities instead of fixed medical
allowance.

7.

Since the incidence of tax on retirement benefits like gratuity, commuted

pension, accumulated unrecognized provident fund is lower if they are paid in

the beginning of the financial year, employer and employees should mutually
plan their affairs in such a way that retirement, termination or resignation, as
the case may be, takes place in the beginning of the financial year.

8.

An employee should take the benefit of relief available section 89

wherever possible. Relief can be claimed even in the case of a sum received
from URPF so far as it is attributable to employers contribution and interest
thereon. Although gratuity received during the employment is not exempt u/s
10(10), relief u/s 89 can be claimed. It should, however, be ensured that the
relief is claimed only when it is beneficial.

9.

Pension received in India by a non-resident assessee from abroad is

taxable in India. If however, such pension is received by or on behalf of the

employee in a foreign country and later on remitted to India, it will be exempt

from tax.

10.

As the perquisite in respect of leave travel concession is not taxable in

the hands of the employees if certain conditions are satisfied, it should be

ensured that the travel concession should be claimed to the maximum possible
extent without attracting any incidence of tax.

11.

As the perquisites in respect of free residential telephone, providing use

of computer/laptop, gift of movable assets(other than computer, electronic

items, car) by employer after using for 10 years or more are not taxable,
employees can claim these benefits without adding to their tax bill.

12.

Since the term salary includes basic salary, bonus, commission, fees

and all other taxable allowances for the purpose of valuation of perquisite in
respect of rent free house, it would be advantageous if an employee goes in for
perquisites rather than for taxable allowances. This will reduce valuation of
rent free house, on one hand, and, on the other hand, the employee may not
fall in the category of specified employee. The effect of this ingenuity will be
that all the perquisites specified u/s 17(2)(iii) will not be taxable.

House Property Head: The following propositions should be borne in mind:

1.

If a person has occupied more than one house for his own residence,

only one house of his own choice is treated as self-occupied and all the other
houses are deemed to be let out. The tax exemption applies only in the case of
on self-occupied house and not in the case of deemed to be let out properties.

Care should, therefore, be taken while selecting the house( One which is having
higher GAV normally after looking into further details ) to be treated as selfoccupied in order to minimize the tax liability.

2.

As interest payable out of India is not deductible if tax is not deducted at

source (and in respect of which there is no person who may be treated as an

agent u/s 163), care should be taken to deduct tax at source in order to avail
exemption u/s 24(b).

3.

As amount of municipal tax is deductible on payment basis and not on

due or accrual basis, it should be ensured that municipal tax is actually

paid during the previous year if the assessee wants to claim the deduction.

4.

As a member of co-operative society to whom a building or part thereof is

allotted or leased under a house building scheme is deemed owner of the

property, it should be ensured that interest payable (even it is not paid) by the
assessee, on outstanding installments of the cost of the building, is claimed as
deduction u/s 24.

5.

If an individual makes cash a cash gift to his wife who purchases a house

property with the gifted money, the individual will not be deemed as fictional
owner of the property under section 27(i) K.D.Thakar vs. CIT. Taxable income
of the wife from the property is, however, includible in the income of individual
in terms of section 64(1)(iv), such income is computed u/s 23(2), if she uses
house property for her residential purposes. It can, therefore, be advised that if
an individual transfers an asset, other than house property, even without

adequate consideration, he can escape the deeming provision of section 27(i)

and the consequent hardship.

6.

Under section 27(i), if a person transfers a house property without

consideration to his/her spouse(not being a transfer in connection with an

agreement to live apart), or to his minor child(not being a married daughter),
the transferor is deemed to be the owner of the house property. This deeming
provision was found necessary in order to bring this situation in line with the
provision of section 64. But when the scope of section 64 was extended to cover
transfer of assets without adequate consideration to sons wife or minor
grandchild by the taxation laws(Amendment) Act 1975, w.e.f. A.Y. 1975-76
onwards the scope of section 27(i) was not similarly extended. Consequently, if
a person transfers house property to his sons wife without adequate
consideration, he will not be deemed to be the owner of the property u/s 27(i),
but income earned from the property by the transferee will be included in the
income of the transferor u/s 64. For the purpose of sections 22 to 27, the
transferee will, thus, be treated as an owner of the house property and income
computed in his/her hands is included in the income of the transferor u/s 64.
Such income is to be computed under section 23(2), if the transferee uses that
property for self-occupation. Therefore, in some cases, it is beneficial to transfer
the house property without adequate consideration to sons wife or sons minor
child.

Tax on short-term capital gain can be avoided if

Another capital asset, falling in that block of assets is acquired at any time
during the previous year; or

Benefit of section 54G is availed

Tax payers desiring to avoid tax on short-term capital gains under section 50
on sale or transfer of capital asset, can acquire another capital asset, falling in
that block of assets, at any time during the previous year.
6.

If securities transaction tax is applicable, long term capital gain tax is

exempt from tax by virtue of section 10(38). Conversely, if the taxpayer has
generated long-term capital loss, it is taken as equal to zero. In other words, if
the shares are transferred, in national stock exchange, securities transaction
tax is applicable and as a consequence, the long-term capital loss is ignored. In
such a case, tax liability can be reduced, if shares are transferred to a friend or
a relative outside the stock exchange at the market price (securities transaction
tax is not applicable in the case of transactions not recorded in stack exchange,
long term loss can be set-off and the tax liability will be reduced). Later on, the
friend or relative, who has purchased shares, may transfer shares in a stock
exchange.

6.2CONCLUSION

At the end of this study, we can say that given the rising standards of Indian
individuals and upward economy of the country, prudent tax planning beforehand is must for all the citizens to make the most of their incomes. However,
the mix of tax saving instruments, planning horizon would depend on an
individuals total taxable income and age in the particular financial year.

6.3Learning Outcomes
Course Learning Outcomes

Provide students with the fundamental concepts of Indian income tax law
and tax planning

Apply critical thinking and problem solving skills to resolve income tax
and tax planning issues

Assist students to communicate effectively orally income tax information

and solutions to income tax and tax planning issues

Assist students to communicate effectively in writing income tax

information and solutions to income tax and tax planning issues

Explain the different approaches to accounting for business income

Explain the income tax treatment of trading stock, capital allowances,

small business entity system, prepayment, black-hole expenditure and
the company and trust loss rules

Appendix I

Bibliography

BIBLIOGRAPHY
Articles:
1.
2.
3.
4.
5.
6.

Article 265 of the Indian Constitution,

"Analysis of Tax and Non-tax Revenue Receipts Included in Annex".
Article 246 of the India Constitution,
Seventh Schedule of the Indian Constitution,
Distribution of Powers between Centre, States and Local Governments,
"Union Budget 2012: GAAR empowers I-T department to deny tax benefits

to 'companies'". Income Tax India..

7. Indian Income Tax Act, 1961,
8. Section 14 of Income Tax Act,
9. "Direct Taxes Code Bill: Government keen on early enactment".

Books:

T. N. Manoharan (2007), Direct Tax Laws (7 th edition), Snowwhite

Publications P.Ltd., New Delhi.

Dr. Vinod K. Singhania (2007), Students Guide to Income Tax, Taxman

Publications, New Delhi

Income Tax Ready Reckoner A.Y. 2007-08, TaxMann Publications, New

Delhi

Dr. Vinod K. Singhania (2013), Students Guide to Income Tax, Taxman

Publications, New Delhi

Income Tax Ready Reckoner A.Y. 2014-15,TaxMann Publications, New

Delhi

Ainapure&Ainapure

Direct

&

Indirect

Taxes

A.Y.

2014-15,

MananPrakashan

Nabis Income Tax Guidelines & Mini Ready Reckoner A.Y. 2013-14 &
2014-15 , A Nabhi Publication


6.4 Websites:

http://in.taxes.yahoo.com/taxcentre/ninstax.html

http://in.biz.yahoo.com/taxcentre/section80.html

http://www.bajajcapital.com/financial-planning/tax-planning

www.Incometaxindia.gov.in

www.taxguru.in

www.moneycontrol.com

www.google.com