Shivani Modi Black Book

lOMoARcPSD|31074645
Shivani Modi Black Book
Bachelors of commerce (Accountancy and finance) (University of Mumbai)
Studocu is not sponsored or endorsed by any college or university

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)
lOMoARcPSD|31074645
PROJECT REPORT ON
A STUDY ON LEVEL OF AWARENESS ABOUT TAX DEDUCTION & EXEMPTION

AVAILABLE TO SALARIED INDIVIDUAL.
SUBMITTED BY
SHIVANI ANAND MODI
TYBAF SEMESTER – VI
2020 - 2021
UNDER THE GUIDANCE OF
DR. POONAM MIRWANI
SUBMITTED TO
UNIVERSITY OF MUMBAI
VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY
(AFFILIATED TO UNIVERSITY OF MUMBAI) VIDYALANKAR MARG,
WADALA (E), MUMBAI 400 037.

lOMoARcPSD|31074645
VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY

(Affiliated to Mumbai University)
Certificate
This is to certify that
Mr./Ms.
of B.Com. in Banking & Insurance, /Bachelor in
Management studies/ B.Com. in financial Markets
Semester has undertaken & completed the project
work titled
during the academic year under
the guidance of Mr./Ms. submitted
on to this college in fulfilment of the curriculum of
B.Com. in Banking & Insurance /Bachelor in
Management studies/ B.Com. in financial Markets
University of Mumbai.

lOMoARcPSD|31074645
This is a bonafide project work & the

information presented is True & original to the best
of our knowledge and belief.
PROJECT COURSE EXTERNAL PRINCIPAL
GUIDE CO-ORDINATOR EXAMINER

lOMoARcPSD|31074645
ACKNOWLEDGMENT
I hereby acknowledge all those who directly or indirectly helped me in drafting

of this project report. It would not have been possible for me to complete the
task without their help and guidance.
First, I would like to thank to the principal Dr. Rohini Kelkar, the Vice Principal
Mr. Vijay Gawde, and our Project in-charge Prof. Gunasundari Jawaharlal who
gave me the opportunity to do this project work. They also conveyed the
important instructions from the university time to time. Secondly, I am very
much obliged of Dr. Poonam Mirwani for giving guidance for completing the
project.
Last but not the least; I am thankful to the University of Mumbai for offering the
project in the syllabus. I must mention my hearty gratitude towards my family,
other faculties and friends who supported me to go ahead with the project.

lOMoARcPSD|31074645
DECLARATION
Vidyalankar School of Information Technology

(Affiliated to University of Mumbai)
Vidyalankar Marg, Wadala (E),
Mumbai 400 037
I Shivani Anand Modi, student of T.Y.B.Com. B.Com. in Accounting

and Finance Semester VI, Vidyalankar School of Information
Technology, hereby declare that I have completed the project on A
study on level of awareness of Tax deduction and exemption available
to salaried individual in academic year 2020 – 21.
The information submitted is true and original to the best of my

knowledge.
Signature of student
Shivani Anand Modi
EXCEUTIVE SUMMARY

lOMoARcPSD|31074645
This study is mainly based on A study of tax deduction and exemption available to
salaried individual. As we all know that there are number of deduction and exemption
available to salaried person but do, they actually know about them is the question here.
There are people who are getting paid & are earning salary monthly but they don’t know
where the amount of their salary is been reduced. This study is done to check whether
people are fully or partially aware about tax deduction and exemption. To know if they are
a regular tax payer, if yes then are they paying tax with full honesty or not.
This research also contains detailed explanation about Tax deduction u/s 80 which are
available for salaried earner only and a detailed study about Tax exemption provided to
them. It studies the importance of Tax exemption and deduction, also it explains different
types of deduction and exemption provided to the salary person in detail.
As the feedback of salaried individual is very essential, in these study selectively Private
and Government employees are interviewed. Few scholarly papers related to Taxation,
Income tax and their deduction and exemption have been considered in this project. In this
study several topics related to tax deduction and tax exemption available to salaried
individual are going to be focus on this project.

lOMoARcPSD|31074645
TABLE OF CONTENTS
Sr. No. Page Title Page No.

1 List of Tables
2 List of Figures
3 Ch.1 Introduction
4 1.1 Introduction to the Study
5 1.2 Objectives of the Study
6 1.3 Scope and Significance of Study
7 1.4 Methodology and Sources of Data
8 1.5 Limitations of the Study
9 Ch.2 Review of Literature
10 Ch.3 Introduction to Topic
11 Ch.4 Data Analysis
12 Ch.5 Findings and Suggestions
13 Ch.6 Conclusion
14 Ch.7 Annexure
15 7.1 Questionnaire
16 Ch.8 Webliography

lOMoARcPSD|31074645
LIST OF TABLES
Table No. Page Title Page No.
Table 3.3.1.1 Income-tax exemptions claimed in specific

cases
Table 3.4 Payments exempt u/s 10

3
10
11
12
13
14
15
16
LIST OF FIGURES

lOMoARcPSD|31074645
Sr. No. Page Title Page No.
Figure 3.2.3 Format of Salary Slip

2
10
11
12
13
14
15
16
CHAPTER 1

lOMoARcPSD|31074645
INTRODUCTION
1.1 Introduction to the Study
1.1.1 What is Income Tax?
Income tax is an annual tax on income. The Indian Income Tax Act (Section 4) provides that
in respect of the total income of the previous year of every person, income tax shall be
charged for the corresponding assessment year at the rates laid down by the Finance Act for
that assessment year. Section 14 of the Income tax Act further provides that for the purpose of
charge of income tax and computation of total income all income shall be classified under the
following heads of income:
a) Salaries
b) Income from house property
c) Profits and gains of business or profession.
d) Capital gains
e) Income from other sources.
The total income from all the above heads of income is calculated in accordance with the
provisions of the Act as they stand on the first day of April of any assessment year.
1.1.2 What is Tax Deduction?

Salaried taxpayers primarily earn their income from salary. The salaried are normally offered
a salary package or CTC (cost to company). The taxability of the salary income is determined
by the employer. The employer also deducts a tax (TDS) on the salary paid to them. Thus, the
monthly salary receipts would be credited after the tax deduction.
Deduction lowers the person tax liability by reducing the taxable income. Deduction is
provided as per Chapter 6A section 6. Example of deduction are as follows: -

lOMoARcPSD|31074645
• 80D deduction related to premium paid to medical insurance

• 80DD Deduction for dependent handicapped
• 80U Deduction for self handicapped
• 80G Deduction for donation toward social cause
• 80TTA Deduction under interest earned from bank
• 80E Deduction under interest paid to education loan
• 80C Deduction is up to 1,50,000 under any Investment, etc.
1.1.2 What is Tax Exemption?

Income tax exemptions are provided on particular sources of income and not on the total
income. It can also mean that you do not have to pay any tax for income coming from that
source. Tax exemptions are related to but distinct from tax deductions. A tax deduction is a
portion of taxable income that may be excluded from taxation when certain conditions are
satisfied, while a tax exemption constitutes income that is not subject to taxation in the first
place.
Here's a glance at useful tax exemption for salaried employees:
• HRA Exemption for Salaried Employees

• Income Tax Exemption on Leave Travel Allowance
• Exemption on Encashment of Leaves for Salaried Employees
• Tax Exemption from Pension Income for Salaried Employees
• Income Tax Exemption on Gratuity for Salaried Employees
• Income Tax Exemption on VRS Received
• Income Tax Exemption for Perquisites
• Exemption of Various Allowances

lOMoARcPSD|31074645
1.2 Objective of the Study
1.2.1 To understand and evaluate the importance of deduction and exemptions.
1.2.2 To ascertain the level of awareness of salary earning people about Tax
exemption and Tax Deduction.
1.2.3 To check whether the tax exemption and deduction are beneficially to
earners.

lOMoARcPSD|31074645
1.3 Scope and Significance of Study
1.3.1 Scope of the study
The Research study on Tax deduction & exemption available to salary earners is limited to
Mumbai district. The study contain various Tax exemption and deduction provided to salary
person in detail. The scope of the present study is limited to the tax payers’ measures adopted
by the salaried income tax assesses of the State. The study also evaluates the extent of
awareness of employees on tax laws and tax benefits measures. The savings habits,
investment pattern, repayment of liabilities, tax planning measures adopted for the period and
the level of awareness of employees on tax laws and tax planning measures were studied and
evaluated.
Income-tax in India is one of the important sources of revenue for the government. But the
major contribution comes from the business class whereas the contribution from Salaried
class is negligible. Salaried class have a fixed income and they hardly have an “opportunity”
to evade tax. Middle-aged salaried people are extremely worried about their future and try to
save as much as possible but it becomes difficult due to changing provisions from year to
year. It seems that the acute problems encountered by the salaried class have received the
scant attention of the government.
The present study seeks to discuss the various aspects of salary taxation. It will focus on the
historical background of taxation. It will include the basic considerations for tax policy and
structure for taxation for India. It will also include the objectives of personal taxation, and
characteristics of a good tax system; in the process it will reflect on the reform of personal
taxation. It will throw light on the three major considerations in framing an effective tax
system.
The study will embrace the present status of salary taxation in India analysing the available
statistics on it. It will also discuss the issues like discrepancy between salaried class and
business class or Private employee and government employee.
1.3.2 Significance of the study
 Saving tax with deductions

lOMoARcPSD|31074645
The most common type of tax benefit comes in the form of a tax deduction. When you
claim a tax deduction, it reduces the amount of your income that is subject to tax. The
amount of the deduction you are eligible to claim is precisely the amount of the reduction
to your taxable income. Frequently claimed deductions cover the cost of tuition and fees,
medical expenses, charitable contributions and state income taxes. Another benefit to a
deduction is that it reduces income subject to the highest tax brackets first.
 Excluding income from income tax

An exclusion from tax provides the ultimate tax benefit because the income never ends up
on your tax return, and if it does, it generally comes off in another section of your return.
Exclusions essentially classify certain types of income as tax-free. One of the largest
exclusions available to taxpayers is the foreign earned income exclusion. In 2019 for
example, the law allows you to exclude up to $105,900 of income that you earn outside
the United States provided you remain in a foreign country for most of the tax year.
Unlike deductions, exclusions are not subject to limitations or reductions; you either meet
the requirements to exclude the income or you don’t.
 Claiming tax credits

A tax credit generally has more tax-savings potential than a deduction as it provides a dollar-for-
dollar reduction in the amount of income tax you owe rather than merely reducing the amount of
income subject to tax. Tax credits exist for an array of expenses you might incur during the year
from college tuition to the installation of energy-efficient equipment in the home.
When claiming any tax credit, the IRS generally requires you to prepare a separate credit-
specific form to document and calculate the amount you are eligible for, regardless of the
amount you are claiming. In contrast, most of the available tax deductions do not require
you to fill out additional forms.
 Reducing income tax with capital losses

Losing money is never a pleasant experience. However, the one advantage to a loss is that
it may provide you with a tax-reducing benefit. Frequently, taxpayers sell their stocks
during the year for less than they paid for them. You can use this capital loss to offset
other capital gains you have during the year.

lOMoARcPSD|31074645
1.4 Methodology and Sources of Data
The data for this research has be gathered from two sources:

lOMoARcPSD|31074645
 Primary data:
› Observations
› Interviews
› Surveys
› Questionnaires
Sample Size (N=100)
 Secondary data:
› Previous research papers
› Web sites
› Reference Books
1.5 Limitation of the study
10

lOMoARcPSD|31074645
The subject Tax Deduction and Exemption on income from salary requires vast study of the
tax law and has limitations of material and time for its study of all its aspects. The research,
has therefore, been concentrated on certain important aspects of the study,
 Salaries class of assessees also manipulate provisions of the Act to evade tax liability, the
responsibility of the correct deduction of tax at source is thrown on the employers. While
in the case of a business or profession, they themselves are responsible for declaring
correct Income. The salaried class may also earn money apart from the fixed monthly
salary If they work outside beyond office hours or if they Indulge In corrupt practices.
 There is a sort of distrust between the assessing Business or professional on one side
Income tax department thinks that the Business or Professional community is mainly
responsible for large scale of tax evasion and unscrupulous interpretation of tax law. On
the other hand, Business or professional feels that the Government spending create black
money through corruptions and malpractices. They feel that income tax Act Is used as a
tool by the Government to harass the Business person particularly provisions of search
and seizure are used to achieve political objectives. These views have obstructed the
honest information from them. A study is however, limited to Salary person.
 the study Is limited to the provisions relating to the computation of income from salary ,
rate structure , tax planning and Government expenditure which are also responsible for
evasion of tax,
 the data available for this study are collected from different salary class of in respective of
any organizations or company or Type but it is limited to Mumbai
 The methodology of Interviews and questionnaire have yielded valuable information but
it will be obvious that many controversial points cannot be either proved or disproved
conclusively on the basis of such information
CHAPTER 2
REVIEW OF LITERATURE
11

lOMoARcPSD|31074645
The literature on the tax reforms and comparative picture of personal income taxes across
countries is meagre, presumably because of the inherent difficulties associated with
attempting such an exercise and some of the best-known works are represented in this part.
2.1 Jayakumar and Elavarasan (2015), their study on:
“Impact of tax reforms among salaried assesses in tamilnadu”
This paper concerns about Impact of Tax Reforms among Salaried Assesses in Tamilnadu.
The aim of the paper is finding out whether and how the tax reforms affect the level of
salaried assesses. Conveyance on-random sampling method was used and 100 tax payers
were returned and usable in the pilot study. This study data was analyses descriptive
statistics, Chi square test and Anova test the formulated hypotheses and the significant
relationship between assesses‟ personal information and opinion level of tax allowances.
Tax payers are asked to indicate their level of agreement with a given statement by of a
Likert’s five-point scale. This study shows that, overall, the assesses have been negative
opinion towards Impact of Tax Reforms made tax system in India.
2.2 Vaneeta Rani (2014), her study on:
“Taxation of Income in India: A Study of Post Liberalisation Period”
Opinion that DTC seeks to consolidate and amend the law relating to all direct taxes,
namely income tax, dividend distribution tax and wealth tax so as to establish an
economically efficient, effective and equitable direct tax system which will facilitate
voluntary compliance and help increase the tax-GDP ratio. All the direct taxes have been
brought under a single code and compliance procedures unified, which will eventually
pave the way for a single unified taxpayer reporting system. The need for DTC arose
from concerns about the complex structure of half a century old Income Tax Act, 1961,
which has been amended a large number of times, making it incomprehensible to the
average taxpayer.
12

lOMoARcPSD|31074645
Vaneeta Rani (2014) found that when the Indian economy faced an unprecedented
macroeconomic crisis in 1991, Fiscal consolidation constituted a major objective of the
policy response. For this purpose, it became necessary to:
 enhance tax and non-tax revenue,

 curtail current expenditure growth,
 restructure public sector undertakings, including disinvestment,
 improve Fiscal and monetary co-ordination, and
 deregulate financial system.
The need for improvements in budgetary practices led to the enactment of the Fiscal
Responsibility and Budget Management (FRBM) Act, 2003 which ushered the Indian
economy in an era of Fiscal consolidation based on Fiscal policy rules. Tax Reforms
introduced by the Government since 1991 have helped to build a structure which is
simple, relies on moderate tax rates but with a wider base and better enforcement.
Moreover, they have helped in correcting structural imbalances in the tax system. They
are soft on industry with a view to create new investment climate and make India
internationally competitive. By lowering the tax rates, the Government expects speedy
industrial development and hence buoyancy in tax revenues. The country is keenly
awaiting implementation of Direct Taxes Code (DTC) and National Level Goods and
Services Tax (GST). GST is India’s most ambitious indirect tax reform. Lack of political
consensus is holding up progress and implementation of GST. This paper gives a vivid
account of recent reforms in the Indian tax system as a part of the on-going policy of
liberalization and globalization of the Indian economy.
2.3 Sury, M. M. (2014)
“Issues in Designing a System of Income Tax”

Stated that among the various indices of ability to pay taxes, income is regarded, by far,
as the most appropriate. This is borne out by the popularity of income taxes the world
over. Income tax is levied on the annual income of various taxable entities, mainly
individuals and companies. For operating an income tax system successfully, Fiscal
authorities, particularly in developing countries, are required to resolve various issues to
13

lOMoARcPSD|31074645
make it compatible with the socio-economic objectives of government policy. This paper
examines general policy issues relevant for designing and reshaping a suitable income tax
system
2.4 Sopan Kasinath (2013)
“Finance Act, 2013: A Financial Literacy Input for the Individual Tax Payers”
The taxpayers in India are the elite group and contribute tax purely in the economic
growth and development of Indian economy. Direct and indirect taxes are one of the
sources of revenue to the government for the welfare of the general public. As per the
income tax act, 1961, the taxpayers should avail the deductions of Rs. 100,000 for reduce
the tax liability. Tax payers can reduce the tax liability through tax avoidance but not
through tax evasion.
2.5 Kamal Pant, Arya A. (2012), his study on:
“Assesses Perception towards Direct Tax Code (DTC)”
He conducted the New Direct Tax code which was said to be introduced from the
financial year, 2012-13 replacing the five-decade old Income tax Act,1961 has the
objective to make the Indian tax structure clear-cut. The Income Tax Act 1961 has
become very complex and virtually unintelligible to the common man by virtue of a
complicated structure, numerous amendments, frequent policy changes and a multitude of
judgments that gave varying interpretations to already undecipherable provisions. This
complexity has not only increased the cost of compliance for the average tax payer, but
also made it costly for the administration to collect tax. For the replacement of Income
Tax 1961, the new Direct Tax Code which is completely new gives moderate relief to tax
payers, reduce unnecessary exemptions and improve compliance for improving
collections. The tax payers themselves can compute and file Income Tax Returns without
the help of experts. This paper highlights the overview of the Direct Taxes Code in a
nutshell.
14

lOMoARcPSD|31074645
2.6 Kalpana Satija, C. (2009)
“Economic reforms and social justice in India”
The purpose of this paper is to specify some historical and current issue regarding this
subject, the relative importance attached to the different aspects of policy; the pace and
progress of reform process. The paper begins with a short discussion of the background of
the study and overview of post-independence economic policy. Hence it is a descriptive
study that it finds some data from government site. This from government site. This paper
is thought to provide more reliable information about above impacts for policy makers
and State and Central Government. The paper specifically focuses upon economic
reforms and social justice in India, issues relating to the progress of economic reforms,
need of reforms for human face. More generally, the paper suggests that government
should make relatively limited use of key performance Indicators for economic reforms
and have high-level participation rates benchmarking for social justice exercises. Some
implications are the timing of the various policies and more importantly, their sequencing
and the relative importance attached to the different aspects of policy, in as much as
domestic priorities relating to the provision of education, health and employment,
globalization of the economy. The paper can help to promote administrative, managerial,
and financial support for economic reforms and social justice in India
and emphasis the responsibility to the state and central to enlarge reforms opportunities
and encourage economic development. Originality: Indian Government decides to
accelerate the rate of economic growth and to speed up industrialization, to develop heavy
industries, to reduce disparities in income and wealth through economic reforms and
social justice.
2.5 Raja J. Chelliah (1980)
“Case for an Expenditure Tax”
Found that a fairly high rate of wealth taxation in addition to, a progressive income tax
co-existing with large scale tax evasion is prima facie evidence of the failure of the design
15

lOMoARcPSD|31074645
of the present tax system and the policy underlying it. The author argues for a more
comprehensive system of direct taxes in place of the existing system. The guiding
principles of the new system should be the enlargement of the base coupled with more
moderation in the rates of income tax, simplification of several provisions and greater
emphasis than hitherto on the objective of directly reducing disparities in the standards of
current consumption. The comprehensive system should contain a personal income tax
with lower rates, a net worth tax, a direct tax on nonessential consumption, a simplified
tax on capital gains, a gifts tax and a more moderate corporate profits tax coupled with a
tax on indirect expenditure of corporations. The growth of the base would make possible
reduction in marginal and average rates and improve the horizontal equity of the system
without reducing effective progression. The shift from the income base to the expenditure
base would, besides mitigating the harmful effects and inequities of a non-inclusive
unadjusted income tax, serve to reduce extravagant consumption and promote savings to
a significantly larger extent than the present system. Another gain would be the placing of
a part of personal taxation on a family basis is without imposing high marginal burdens
on the incomes of working wives.
2.6 Gupta Anupam (1972)
“Taxation of Income in India (A study of personal Income Taxation in India from

1951to 1965)”
He studied the effect of changes in the exemption, the rates of tax, distribution of income
among the assesses‟ and the deductions and rebates on the income elasticity of personal
income tax yield, distribution of disposable income tax yield, distribution of disposable
income and the supply of work effort. In India with the data of personal
income tax assessment the elasticity is found to be less than unity. Exercise with data
shown that revision of the rates of tax produces insignificant effect upon the measure of
elasticity; only increase in the level of exemption limit significantly raises the elasticity.
The main reason for income elasticity of personal income taxation being less than the
unity in India is found to be the increasing equality in the distribution of taxable income
among the assesses over the period of the study.
16

lOMoARcPSD|31074645
CHAPTER 3
INTRODUCTION TO THE TOPIC
Government can raise funds needed for the development and defence of the country by
collecting tax such as Income tax, excise duties, etc. from the citizens. As revenue collected
from income tax help the development of the country, it is said that income tax is the price
one pay for civilization. Under constitution of India the central government has right to
collect income tax. The law governing such collection of income tax is specified in the
Income Act, 1961.
3.1 History & Evolution of Income Tax Act in India
17

lOMoARcPSD|31074645
In India, the system of direct taxation as it is known today has been in force in one form or
another even from ancient times. In this article, we are discussing how the Income Tax
evolved over the time in India.
 1860- The Tax was introduced for the first time by Sir James Wilson. India’s First “Union
Budget” Introduced by Pre-independence finance minister, James Wilson on 7 April,
1860. The Indian Income Tax Act of 1860 was enforced to meet the losses sustained by
the government on account of the military mutiny of 1857. Income was divided into four
schedules taxed separately:
 Income from landed property;

 Income from professions and trades;
 Income from Securities;
 Income from Salaries and pensions.
Time to time this act was replaced by several license taxes.
 1886- Separate Income tax act was passed. This act remained in force up to, with various
amendments from time to time. Under the Indian Income Tax Act of 1886, income was
divided into four schedules taxed separately:
 Salaries, pensions or gratuities;

 Net profits of companies;
 Interests on the securities of the Government of India;
 Other sources of income.
 1918- A new income tax was passed. The Indian Income Tax Act of 1918 repealed the
Indian Income Tax Act of 1886 and introduced several important changes.
 1922- Again it was replaced by another new act which was passed in 1922. The
organizational history of the Income-tax Department starts in the year 1922. The Income-
tax Act, 1922, gave, for the first time, a specific nomenclature to various Income-tax
authorities. The Income Tax Act of 1922 remained in force until the year 1961.
18

lOMoARcPSD|31074645
The Income Tax Act of 1922 had become very complicated on account of innumerable
amendments. The Government of India therefore referred it to the law commission
in1956 with a view to simplify and prevent the evasion of tax
 1961– In consultation with the Ministry of Law finally the Income Tax Act, 1961 was
passed. The Income Tax Act 1961 has been brought into force with 1 April 1962.It
applies to the whole of India (including Jammu and Kashmir).
 Since 1962 several amendments of far-reaching nature have been made in the Income Tax
Act by the Union Budget every year which also contains Finance Bill. After it is passed
by both the houses of Parliament and receives the assent of the President of India, it
becomes the Finance act.
At present, there are five heads of Income:
 Income from Salary;

 Income from House Property;
 Income from Profits and Gains of Business or Profession;
 Income from Capital Gains;
 Income from Other Sources.
3.2 What is the Salary Slip?
A salary slip is a document issued monthly by an employer to its employees. A salary slip
contains a detailed breakdown of employee’s earnings and deductions for a given period. This
document can be either a printed hard copy or mailed to the employees.
A company is legally bound to issue a payslip periodically as proof of salary payments to its
employees and deductions made.
3.2.1 What is the difference between Cost to Company (CTC) and in-hand/gross salary?
Cost to the Company CTC is the total amount spent by the employer on an employee. The
cost to company comprises components such as housing rent allowance HRA, Conveyance
allowance, Gratuity, Medical expenses, Employee Provident Fund (EPF), Other allowances,
etc. While Gross salary is the amount, an employee receives before any deductions. In other
19

lOMoARcPSD|31074645
words, it is the amount committed by the employer to the employee every month. Gross
Salary doesn’t include PF and gratuity. Net pay is the salary employee receives after
deductions.
3.2.2 What are the Components in a Salary Slip?
Every month, your finance department will send you a salary slip once the salary gets paid
out. For most people, the importance of salary slip is only when they apply for a loan or a
new credit card. Otherwise, the confusing terms and figures seem like a puzzle you don't
want to solve. But here’s why you might want to understand your salary slip better.
 Choose smartly from competing offers when you are looking to switch jobs
 Optimize tax liability by making full use of the deductions available
 Understand what percentage of your salary is forced savings (EPF, ESI etc.)
3.2.3 Salary Slip
20

lOMoARcPSD|31074645
Figure 3.2.3: Format of Salary Slip
 The components that form part of the Income/Earnings side of the salary statement are:
 Basic Salary
It’s the most important component of your salary and generally comprises 35-50 % of
your total salary. Most of the other components are structured around it.
› Tax Implications: 100% taxable

› Adds to in-hand? Yes
 Dearness Allowance
It is paid to offset the impact of inflation on one’s pay. It is usually 30-40% of the
basic pay. DA is directly based on the cost of living; hence it is different for different
locations.
› Tax Implications: 100% taxable
› Adds to in-hand? Yes
 House Rent Allowance

It’s an allowance to pay your house rent. Normally, HRA is 40-50 % of the basic,
based on your location (metro or non-metro).
Tax Implications: You get tax exemption based on whichever of the following is lower
› 40% of basic pay (Non - metro) & 50% of the basic pay for (Metro cities)
› Actual rent minus 10 % of pay (basic + DA)
› HRA component specified on your salary slip
› Adds to in-hand? Generally, Yes
 Conveyance Allowance
It’s paid by the company towards cost of travel from home to work and back and is
exempt from Income tax.
› Tax Implications: Rs 1600 per month or the conveyance allowance component
in your salary slip, whichever is lower, is exempted from tax.
› Adds to in-hand? Yes, depending on how much you actually spend.
 Medical Allowance
21

lOMoARcPSD|31074645
It is given by employers to cover any medical expenses incurred during the period of
employment. It is also generally a reimbursed expense and thus subject to providing
proof of expense.
› Tax Implications: The allowance is exempt up to 15,000 per annum subject to
proof of expenses such as medical bills.
› Adds to in-hand? Yes. If you fail to provide the proof, you still receive the
amount, but will be fully taxed.
 Leave Travel Allowance:

It’s given by employers to cover the cost of employee travel while on leave. It
includes travel expenses of your immediate family members as well.
› Tax Implications: Proof of journey required to avail deduction subject to
certain limits. Any expenses incurred during the trip apart from travel does not
count towards your LTA tax exemption. The exemption is also applicable only
for 2 journeys undertaken in a block of 4 calendar years.
› Adds to in-hand? No.
 Performance Bonus and Special Allowance:

It is given to reward or encourage employee performance and varies with performance
or company guidelines.
› Tax Implication: 100% Taxable
› Adds to in-hand? Yes. It can be variable and therefore, difficult to assess as
part of your in-hand.
 The components that form part of the Deductions side of the salary statement are:
The deduction part of the salary slip has the professional tax, TDS and EPF. The same is
explained below.
 Performance Bonus and Special Allowance:

This is payable only in the following states-Karnataka, West Bengal, Andhra Pradesh,
Telangana, Maharashtra, Tamilnadu, Gujarat, Assam, Chhattisgarh, Kerala,
Meghalaya, Orissa, Tripura, Jharkhand, Bihar, and Madhya Pradesh. It normally
amounts to just a few hundred rupees each month and is subject to your gross tax slab.
22

lOMoARcPSD|31074645
This amount is deducted from your taxable income.

› How to lower this deduction? This deduction cannot be lowered.
 Tax Deduction at Source:
This amount, which is decided based on your overall tax slab, is deducted on behalf of
the income-tax department by your employer.
› How to lower this deduction? You can reduce this burden by investing in tax
savings instruments under Section 80 C or other sections under the IT act.
› Things to keep in mind when comparing salary slips in offers:
a) Your basic salary is critical as most of your allowances will be based on
that figure.
b) Look for special allowances and check whether they are performance or
event based.
c) Do not focus only on the in-hand salary. Look at the other benefits the
company provides (health insurance, accident insurance, free food, bus
transport, better career growth) which might outmatch a higher in-hand
salary offer from some other company.
 Provident Fund:
PF is typically 12% of your basic salary which is put into a government-controlled
body, Employees' Provident Fund Organisation. Your contribution is typically
matched by the company subject to certain maximum amount, defined as per the
company policy. You can also choose to opt out from the PF scheme.
› How to lower this deduction? You can choose to opt out of the PF scheme. In
case you opt out, make sure you invest it regularly in better investment options
like equity mutual funds that gives you a higher return. If you are unsure of
investing the money, it’s best to stay invested in PF.
3.2.4 Why is a Salary Slip Important?
Preserving salary slips is as important as the employment certificate. The salary slip helps
employees in seeking loans, future employment, income tax planning, availing government
subsidies, and acts as a legal document of employment.
23

lOMoARcPSD|31074645
With an in-depth understanding of the salary slip components, let us first examine its
importance.
 Proof of employment
A salary slip serves as legal proof of employment. While applying for travel visas or
universities and colleges, applicants must submit a copy of salary slip as legal proof
of the last drawn salary and designation. Also, the salary slip is one of the most
critical documents for background checks. The document holds as legal proof against
the salary claim. The salary slip also has the current designation. All the past slips can
be used to show the career trajectory of the employee at the firm.
 Income Tax Planning

A salary slip contains the monthly break-up of earnings and deductions. It also
includes components that are tax-deductible. The break-up of earnings, i.e., basic
salary, HRA, medical allowance, travel allowance. As well as deductions i.e.,
profession tax, EPF, and TDS. TDS helps an employee plan his/her tax liability in
advance. The take-home salary is hence higher due to these deductions. The tax is
then calculated on take-home salary based on income tax slabs.
Therefore, it is essential to keep track of the salary break-up to keep up with Income
Tax.
 Seeking future employment

A salary slip is a legal proof of current employment and the pay scale at which the
employee is currently working at. This document helps in negotiating with
prospective employers at an aggregate level i.e., total cost to company CTC and each
component level, i.e., basic salary, allowances. Almost all companies ask for past
payslips as proof of employment and earnings.
Also, the employees can compare the offers given by new employers based on past
salary slips. It plays a significant role in evaluating the experience. Therefore, salary
slip plays an important role in the job search.
 Avail loans and credit card

A salary slip has all the details of the salary and designation. It serves as legal proof of
the credit paying ability of an employee. Further, availing loans, credit cards,
24

lOMoARcPSD|31074645
mortgages, and other borrowing are based on the salary slip. Therefore, this document
is required when applying for a loan, credit card, mortgage, etc. Lending institutions
and banks ensure they take a copy of the salary slip. The creditworthiness of the
borrower is analyzed based on the salary statements.
The salary slip helps in setting a credit limit. Also, it acts as an eligibility criterion to
avail of a loan or credit card. With this, salary slip determines your taxes in the
financial year as well.
 Avail government subsidies

The salary slip can be used to avail of certain free services. In fact, they can also be
used to avail services that have a heavy subsidy. Such services include medical care,
food grains, etc.
One can use Scrip box’s income tax calculator to determine the taxable income which
will help in filing income tax returns. The calculator also recommends mutual funds
investment (ELSS) for tax savings. Use the calculator and save the tax.
25

lOMoARcPSD|31074645
3.3 Who is Taxable?
 Employer-Employee relationship
Salary means the remuneration received by an employee from his employer for
service rendered. Only an individual can earn salary since only an individual can
render personal service. Any individual who receives remuneration from his employer
is liable to be taxed on his/her Income from Salaries. For a payment regarded as
salary, it is essential that the best relationship between the payer and payee is that of
an employer and employee or a master and servant. The payee must be working under
a contract of service and not a contract for service. Payment received by individual
from a person other than an employer is not taxable salary. Thus, e.g., examination
fees received by professor from his college are taxable salary but examination fees
received by same professor from university are taxable as Income from other sources.
Monthly amount received by freedom fighter from government are not taxable as
salary because the freedom fighter is not employed by the government for securing
freedom for India.
An employee maybe of full time or part time employee further, he may be ordinary
resident and non-resident or resident but not ordinary resident in India. The employee
on the other hand maybe a person e.g., an individual, a firm, a company, Government,
local authority or foreigner etc.
 Remuneration of directors
The remuneration received by director from a company is taxable as salary if the

director is an employee of the company in terms of the contract of employment or the
26

lOMoARcPSD|31074645
Article of Association Otherwise it is taxable income from business or income from

other sources depending upon the fact of each cases.
 Remuneration of a partner
Any salary, bonus, commission or remuneration due to receive by a partner from the
firm is not to be regarded as salaries Such amount are taxable as profit from business
in the hand of the partner.
3.3.1 Who is Salary Taxable?
According to section 15 the following income shall be chargeable to tax under the head
“Salaries”-
 Any salary due from an employer or a former employee to an assessee in the previous
year whether paid or not;
 Any salary paid or allowed to him, in the previous year, by or on behalf an employer
or former employer, though not due or before it became due to him;
 Any arrears of salary paid or allowed in the previous year by or on behalf of employer
or former employer, if not charged to Income tax in any earlier previous year.
The salary for the purpose of calculation of income from salary includes:
› Wages;
› Pension;
› Annuity;
› Gratuity;
› Advance Salary paid;
› Fees, Commission, Perquisites, Profits in lieu of or in addition to Salary or Wages;
› Annual accretion to the balance of Recognized Provident Fund;
› Leave Encashment;
› Transferred balance in Recognized Provident Fund;
› Contribution by Central Govt. or any other employer to Employees Pension A/c as
referred in Sec. 80CCD.
27

lOMoARcPSD|31074645
Salaried employee gets deduction & exemptions to the salary they earned. Allowance is an
exemption that reduces the income tax of the salaried person, Employer deduct from
employee pay check. Allowance has two type taxable and non-taxable.
3.3.1.1 Income-tax exemptions claimed in specific cases:
The employer calculates the tax exemption on the retirement and resignation benefits
mentioned below. The balance of the component (non-exempt portion) is taxed along with the
basic salary of the employee.
Income Criteria for Exemption allowed

component exemption
Gratuity Allowed on Least of the following:

retirement or
 Last salary (basic + dearness allowance) *
resignation or
number of years of employment* 15/26;
death or
 Rs 20 lakh (which has been hiked from Rs 10
disablement
lakh as per the amendment);
 Gratuity actually received
Pension Commuted value

 If the employee receives gratuity, then one-third
of the pension
of the amount of pension
allowed at the
 If only pension received, one-half of the
time of retirement
pension
Leave Allowed at the Least of the following:

encashment time of retirement
 Average salary drawn for the last 10 months;
or resignation
 Salary per day* unutilised leave (considering
maximum 30 days leave per year) for every
year of completed service
 Leave encashment received
28

lOMoARcPSD|31074645
(i) Leave encashment received by Central or State

government employee at the time of retirement or
resignation is fully exempt;
(ii) Leave encashment received by legal heirs of

deceased employees is fully exempt
Table 3.3.1
3.4 What is Perquisites?
Meaning: Perquisites mean any casual emoluments or benefits attached to an office or

position in addition to Salary. Perquisite is a personal advantage or benefit derived by virtue
of employment office or position. It is an incidental income from employment in addition to
the regular salary. Mere reimbursement of expenses does not amount to a perquisite, A
perquisite denote an additional monetary benefit going into the pocket of or enriching the
employee. Perquisites may be in cash or kind.
Definition: The definition of Perquisites under s,17 can be summarised and studied under
following heads:
A. Perquisites taxable in case of all employees

B. Perquisites taxable only case of specified employees like directors. and
C. Perquisites not taxable at all.
3.4.1 Perquisites Taxable in Case of All Employees
The following perquisites are taxable in case every employee:
1) Value of rent-free accommodation provided by the employer.
2) Value of concession in rent in respect of accommodation provided by employer
According to an explanation to s.17(2/1), "concession in rent" shall be deemed to be

provided certain circumstances, as explained in the following table:
29

lOMoARcPSD|31074645
No. Employer Own Hired Own Furniture Hired

Accommodation Accommodation Furniture
1 Govt. License fee Licensee fee 10%p.a x cost Hire
charges
2 Other Specified Lower of 15% of 10%p.a x cost Hire
percentage “salary” or rent charges
 If the charges for accommodation or use of furniture recovered from the employee are
less than the above amounts, it will be deemed that con cession has been provided
 "Specified Percentage" for own accommodation is as per the table below-
No Population as per 2001 census of concerned City Specified % of salary
1 Exceeding 25 lakh 15%
2 Exceeding 10 lakh but not exceeding 25 lakhs 10%
3 Not exceeding 10 lakhs 7.5 %
 "Salary" includes-Basic salary, D.A., bonus, commission, fees, taxable allowances

and monetary payments, but excludes -D.A. not considered for calculating retirement
benefits employer's contribution to PF, exempt allowances and perquisites/payments
u/s 17(2)
 "Furniture" includes TV, radio sets, fridge, household appliances, Air Conditioners
and similar equipment/gadgets.
 If such concession in rent is deemed to be provided as above, the valuation is to be

done according to Rule 3.
3) Sum paid by the employer in respect of any obligaion payable by the assesse.
30

lOMoARcPSD|31074645
4) Sum payable by the employer to effect an assurance on the life of the assessee or to effect
a contract for an annuity However this is not applicable to sums paid as employer's
contribution to: -
 a recognised provident fund

 an approved superannuation fund (upto R IS0,000)
 a Deposit-linked Insurance Fund, etc.
5) Value of security under Employee Stock Option Plan (ESOP) or sweat equity shares
allotted/transferred by the employer, free of cost or at concessional rate
6) Value of any other prescribed fringe benefit or amenity i.e.
 interest-free or concessional
 Use of movable assets, and
 transfer of movable assets.
3.4.2 Perquisites Taxable Only in Case of Specified Employees
The value of any benefit or amenity Given free of cost or at a concessional rate to a specified
employee is treated as a perquisite and Included in the salary of a specified employee.
Specified employee means
 a director who is an employee of the company
 an employee having substantial interest in the company (1.e. an employee holding
equity shares in the employer-company carrying more than 2070 or more voting
power)
 any other employee whose income from Salary is more than 50, 000 during the
relevant previous year. (The amount of ₹50,000 is to be computed after excluding
31

lOMoARcPSD|31074645
non-monetary benefits and deducting entertainment allowance and professional tax
under S. 16, explained later).
The following perquisites are taxable in case of a specified employee
1) Gas, electricity or water supply provided free of cost.
2) Free education facilities for family members of employee.
3) Free domestic servants such as sweeper, watchman, gardener, cook.
3.4.3 Perquisites Not Taxable at All
 Section 17 specifically provides that following are not regarded as perquisites in any
case-
1) Cost of medical treatment, in a hospital maintained by the employer provided to an
employee or any member of his family
2) Reimbursement of medical expenses incurred by employee on medical treatment of
himself or his family member in a hospital maintained by the Government or any
local authority or approved by Government.
3) Any sum paid by an employer directly to a hospital, approved by the Chief
Commissioner of income-tax, tor medical treatment of the employee or his family
member
4) Reimbursement by employer of any expenditure incurred by the employee on medical
treatment of himself or his family in any hospital approved by the Chief
Commissioner of Income-tax, Subject to the condition that the employee will attach
with his return of income a certificate from the hospital specifying the disease or
ailment for which medical treatment was required, and the receipt for the amount paid
to the hospital tor such treatment.
32

lOMoARcPSD|31074645
5) Reimbursement of medical expenses up to 15,000 incurred by employee on medical
treatment of himself or his family member in the previous year
6) Premium on Employee Health Insurance under any scheme approved by the Central
Government under S.36(1) (1b)
7) Premium on Insurance (Medi-claim) on the health of employee or his family member
under any Scheme approved for the purpose of S. 80D.
8) Expenditure incurred by employer on
(a) medical treatment of the employee or his family member outside India,
(b) travel or stay abroad of the employee or his family member tor medical
treatments,
(c) travel and stay abroad of one attendant who accompanies the patient in
connection of Such treatment;
(d) expenditure on medical treatment and stay abroad will be exempt only to the
extent permitted by the Reserve Bank of India; and
(e) expenditure on travel shall be exempt only it the gross total income of such an
employee does not exceed 2,00,000 in the previous year.
9) Reimbursement of expenses specified in 8 above.
 The following Perquisites are not taxable at all as per other Acts/decision of Courts /
circulars issued by the Central Boar of Direct Taxes: -
1) Telephone provided by an employer to an employee at his residence,
2) Transport facility provided by an employer engaged in the business of carrying of
passenger or good to his employees either free of charge or at concessional rate,
3) Privilege passes and privilege ticket orders granted by Indian Railways to ifs
employees,
33

lOMoARcPSD|31074645
4) Perquisites allowed outside India by the Government to a citizen of India for
rendering services outside India,
5) sum payable by an employer to a RPE or an approved superannuation fund or deposit-
linked Insurance fund established under the Coal Mines Provident Fund or the
Employees Provident Fund Act
6) Employer s contribution to staff group insurance schemed
7) Leave travel concession:
8) Payment of annual premiums by employer on personal accidents policy effected by
him on the Life of the employee,
9) Refreshment provided to all employees during working hours in office premises
10) Subsidised lunch or dinner provided to an employee
11) Recreational facilities, including club facilities, extended to employees in general i.e.,
not restricted to a few select employees
12) Amount spent by the employer or training of employees or amount paid for refresher
management course including expenses on boarding and lodging
13) Medical facilities subject to certain prescribed limits
14) Rent-tree official residence provided to a Judge of a High Court or the Supreme
Court;
15) Rent-free furnished residence including maintenance provided to an Officer of
Parliament. Union Minister and a Leader of Opposition in Parliament;
16) Conveyance facility provided to High Court Judges under section 22B of the High
Court Judges (Conditions of Service) Act, 1954 and Supreme Court Judges under
section 23A of the Supreme Court Judges (Conditions of Service) Act, 1958.
34

lOMoARcPSD|31074645
3.4 Profit in Lieu of Salary.
The term Profit in lieu of salary. according to Section 17(3), includes the following
1. Compensation for Termination of Employment: Normally, compensation for termination

employment, being a capital receipt, is not taxable at all. But Section 173) has specifically
provided that such compensation would be taxable under the head Salary. However, the
following compensations are exempt under Section 10
a) Retrenchment compensation to workers |S.10(10B) J
b) Voluntary Retirement compensation to employees [S. 10(10C)]
2. Compensation for Modification of the terms and conditions relating to employment.
3. Payments from Employer or Provident or any other Fund over and above the employee's
own contributions and interest, except the following payments exempt u/s 10
Gratuity Sec 10
Commutation of Pension Sec 10 (A)
Retrenchment Compensation Sec 10 (B)
Payment from Statutory or Public Provident Fund Sec 10 (11)
Payment from Recognised Provident Fund Sec 10 (12)
Payment from Approved Superannuation Fund Sec 10 (13)
Table 3.4 Payments exempt u/s 10
35

lOMoARcPSD|31074645
Thus, lump sum payments from Unrecognised Provident Fund to an employee, on his
retirement. Over and above his own contributions, are taxable under this provision. The
annuity received from a former employer is also taxable under this provision.
4. Receipt from Keyman insurance policy including bonus if any

5. If any amount due to receive in lump sum or otherwise by assessed from any person: -
a) Before his joining any employment with the person or
b) After cessation of his employment with that person
36

lOMoARcPSD|31074645
3.5 Forms available for salary individual under Income Tax Act.
3.5.1 Form 16
One of the most important income tax form is Form 16. It contains most of the information
you need to prepare your income tax return in India.
Form 16 is a certificate, in which employer certifies the details about the salary and the tax
deducted at source from the salary during the year. Form 16 is issued once in a financial
year, on or before 31st May of the next year immediately following the financial year in
which tax is deducted. Form 16 has two parts:
Form 16 Part A has
• Name and address of the employer
• TAN & PAN of employer
• PAN of the employee
• Summary of tax deducted & deposited quarterly, which is certified by the employer
• Assessment Year
• Period of employment with the employer
• Form 16 Part A must be generated and downloaded through Traces portal
• Part A of the Form 16 also has a unique TDS Certificate Number.
Form 16 Part B has
 Detailed breakup of salary paid
 Deductions allowed under the income tax act (under chapter VIA)
37

lOMoARcPSD|31074645
 Relief under section 89
 If you have held more than one job during the year, you’ll have more than one Form
16.
 Part B is prepared by the employer manually and issued along with Part A. (Are you
an employer? If you are an employer, file your TDS Return here)
3.5.2 Form 26AS
TDS is deducted on Salary and other income, and deposited with Income Tax Department.
So, how to check if these TDS amounts are actually deposited with the department or not?
 Form-26AS gives you all the details of Tax credits. It is a form which indicates that
the tax that has been deducted has also been deposited with the Govt.
 The Form 26AS contains details of tax deducted on behalf of the taxpayer (you) by
deductors (employer, bank etc.). So, TDS deductions that are given in Form 16 / Form
16 A can be cross checked using Form 26AS. The TDS amounts reflected in Form
26AS and Form 16/16A should always be the same.
 Form 26AS is required to be issued Under Section 203AA of the Income-tax Act. It is
a consolidated tax credit statement issued to a taxpayer and shows the Income tax that
has been deposited with the government with respect to the taxpayer and Form 26AS
 Form 26AS Contains all the details of the taxes paid and deposited with the Income
Tax Department.
 All the details uploaded on the form help an individual to check your tax liabilities
and rectify any error before it is too late.
38

lOMoARcPSD|31074645
3.6 Tax Deduction
39

lOMoARcPSD|31074645
3.6 Tax Exemption
40

lOMoARcPSD|31074645
CHAPTER 4
DATA ANALYSIS
4.1 Gender of the Respondents
Sr. No. Options Respondents Percentage
1 Male 69 57.5%
2 Female 51 41.5%
2 Others 0 0
Table 4.1: Gender of Respondents.
Gender
120 responses
Fe-
male
Female; 42.50%
Male
Others
Male; 57.50%
Figure 4.1: Gender of Respondents.

Interpretation:
The above pie chart illustrates the gender of the employees. All the three genders have
mentioned here. Roughly, more than 58 percent of males have responded. Followed by
females around 42 percent and no one respondent for others.
4.2 Age of the Respondents

41

lOMoARcPSD|31074645
1 Below 25 years 46 38.3%
2 25 to 35 years 43 35.8%
2 35 to 45 years 14 11.7%
3 45 to 55 years 16 13.3%
4 More than 55 years 1 0.9%
Table 4.2: Age group of the employees.
Age group
120 responses
45 - 55;
13.33% More than
55 ; 0.83%
35 - 45; Below 25;
11.67% 38.33%
25 - 35;
35.83%
Below 25 25 - 35 35 - 45 45 - 55 More than 55
Figure 4.2: Age group of the employees.

Interpretation:
The above pie chart gives us the date about the age group of the respondents. I targeted
almost all age groups from below 25 years up to more than 55 years. It has been observed
that the response received is mostly from below 25 years age group (38%) to 25 – 35 years of
age group (36%). Followed by 12% of 35 – 45year age group and 13% of 45 – 55 year of age
group. There was only 1 respondent who fall under the age group of More than 55 years.
4.3 Employment of the Respondents
42

lOMoARcPSD|31074645
1 Govt Employee 16 13.3%
2 Private Employee 99 82.5%
3 Business 2 1.7%
4 Student 3 2.5%
Table 4.3: Employment of the individual.
Employment
120 responses
120
99
100
Number of employees
80
60
40
20 16
2 3
0
Government Private Business Student
Figure 4.3: Employment of the individual.
Interpretation:
The above clustered chart represents employment of the respondents i.e., there are about
82.5% of private employee and 13.3 % of the individual fall under government employee and
the remaining 4.2 % of the respondents contains 2.5% of student who are doing part time /
internship and 1.7% are business man who are self-employed.
Hence, it stated that most of the respondents were Private employee
4.4 Range of Annual salary of the Respondents
43

lOMoARcPSD|31074645
1 Less than 3 Lakhs 45 37.5%
2 3 Lakhs to 6 Lakhs 47 39.2%
5 More than 10 Lakhs 8 6.7%
Table 4.4: Salary range of the individual.
Salary Range
120 responses
8
Less than 3 lakhs
Salary range
4 3 Lakhs to 6 Lakhs
More than 10 Lakhs
45
0 5 10 15 20 25 30 35 40 45 50
Number of people
Figure 4.4: Salary range of the individual.
Interpretation:
The above bar graph gives us the date about the salary range of the respondents. There were
about 45 employee whose salary was Less than 3 Lakhs, followed by 47 employees with
salary 3 Lakh to 6 Lakhs. After that there are 16 people whose salary was between 6 Lakhs to
8 Lakhs, also including 4 people with salary 8 Lakhs to 10 Lakhs and lastly there were only 8
people whose salary was More than 10 Lakhs.
4.5 Are you a regular Tax payer?
44

lOMoARcPSD|31074645
1 Yes 82 71.7%
2 No 34 28.3%
Table 4.5: Tax Payer
Tax Payer
120 responses
No; 28.33%
Yes
No
Yes; 71.67%
Figure 4.5: Tax Payer
Interpretation:
The above doughnut pie chart gives us the date about Tax payer among the respondents. Out
of 100% of the responses there were about 71.7% of the individual who are a regular tax
payer and unfortunately there were about 28.3% of the individual who weren’t a regular tax
payer.
4.6 Tax Assessment years
45

lOMoARcPSD|31074645
1 Less than 2 years 64 53.3%
2 2 years to 5 years 29 24.2%
3 5 years to 10 years 14 11.7%
4 More than 10 years 13 10.8%
Table 4.6: Tax assessment year of individuals.
Chart Title
70
64
60
50
40
Axis Title
29
30
20
14
13
10
0
L ess t h an 2 y ear s 2 t o 5 year s 5 t o 1 0 y ear s Mo r e t h an 1 0 year s
Axis Title
Figure 4.6: Tax assessment year of individuals.
Interpretation:
The above bar chart gives us the date about Tax assessment year of individual. As the
employee were more of young generation so there were about 64 people who were doing tax
assessment from less than 2 years & 29 people doing assessment from 2 to 5 years, also there
were about 14 people who were doing since 5 to 10 years and lastly there were 13 people
who were doing from more than 10 years.
4.7 Process of Income tax filing.
46

lOMoARcPSD|31074645
1 Easy 24 20%
2 (2) 25 20.8%
3 (3) 50 41.7%
4 (4) 17 14.2%
5 Hard 4 3.3%
Table 4.7: Process of IT filing of individuals.
120 responses
60
50
50
Number of employee
40
30
24 25
20 17
10
4
0
1 2 3 4 5
EASY
Figure 4.7: Process of IT filing of individuals.
Interpretation:
4.8. Rate your knowledge about Tax deduction & exemption available to you.
47

lOMoARcPSD|31074645
1 Excellent 8 6%
2 Good 61 50%
3 Average 50 41%
4 Poor 4 3%
Table 4.8: Knowledge of individuals.
Figure 4.8: Knowledge of individuals.
Interpretation:
4.9 Do you plan for reducing your tax liability?
48

lOMoARcPSD|31074645
1 Yes 70 58.3%
2 No 10 8.3%
3 Maybe 40 33.3%
Table 4.9
80
70
70
60
50
40
40
30
20
10
10
0
Yes No Maybe
Figure 4.9
Interpretation:
4.10 Do you invest in tax saving option?
1 Yes 97 80.8%
49

lOMoARcPSD|31074645
2 No 23 19.2%
Table 4.10
120 responses
Yes No
19.17%
80.83%
Figure 4.10
Interpretation:
4.11 If yes, then what are the options you invest in?
50

lOMoARcPSD|31074645
1 Fixed Deposit 56 46.7%
2 Public Provident Fund 49 40.8%
3 Equity Linked Saving Schemes (ELSS) 22 18.3%
4 Life Insurance 63 52.5%
5 Home Loan 19 15.8%
6 Other 14 9.1%
Table 4.11
Investment
60
50
Fixed Deposit
40
Public Provident Fund
Axis Title
Equity Linked Saving Schemes: ELSS

30 Life Insurance
Home loan
20 Others:
10
0
Axis Title
Figure 4.11
Interpretation:
4.12 Do you think today’s Income tax policies are beneficial for Salaried
Individual?
51

lOMoARcPSD|31074645
1 Strongly Agree 7 5.8%
2 Agree 47 39.2%
3 Neutral 48 40%
4 Disagree 13 10.8%
5 Strongly Disagree 5 4.2%
Table 4.12
Tax policies
120 responses
5 7
13
47
48
Strongly Agree Agree Neutral Disagree Strongly Disagree
Figure 4.12
Interpretation:
4.13 What is your level of awareness regarding the following:
52

lOMoARcPSD|31074645
1 Excellent 8 6%
2 Good 61 50%
3 Average 50 41%
4 Poor 4 3%
Table 4.
Exemption available to Tax payer

60
50
Number of people
40 Lack of awarness
Low level of awarness
30 Medium level of awarness
High level of awarness
20
Complete awarness
10
0
Level of awarness
Figure 4.
Interpretation:
53

lOMoARcPSD|31074645
1 Excellent 8 6%
2 Good 61 50%
3 Average 50 41%
4 Poor 4 3%
Table 4.
Exemption available for salary individual

60
50
Number of people
40 Lack of awarness
20
Complete awarness
10
0
Level of awarness
Figure 4.
Interpretation:
54

lOMoARcPSD|31074645
1 Excellent 8 6%
2 Good 61 50%
3 Average 50 41%
4 Poor 4 3%
Table 4.
Deduction available to Tax payer

60
50
Number of people
40 Lack of awarness
20
Complete awarness
10
0
Level of awarness
Figure 4.
Interpretation:
55

lOMoARcPSD|31074645
1 Excellent 8 6%
2 Good 61 50%
3 Average 50 41%
4 Poor 4 3%
Table 4.
Other ways of reducing tax liability within legal confine

50
45
40
Number of people
35 Lack of awarness
30 Low level of awarness
20 High level of awarness
15 Complete awarness
10
5
0
Level of awarness
Figure 4.
Interpretation:
4.14 Do you plan your investment & expenses according to your tax liability?
56

lOMoARcPSD|31074645
1 Yes 88
2 No 32
Table 4.
120 responses
No
Yes
No
Yes
Figure 4.
Interpretation:
CHAPTER 5
FINDINGS AND RECOMMENDATION
57

lOMoARcPSD|31074645
We need to have more knowledge related to the topic TAX, as it's a huge topic to be covered
with lot of information. People nowadays have not enough knowledge related to the topics
about tax which leads to misunderstanding and issues.
There must be a mandatory teaching related to topics about tax.
CHAPTER 6
CONCLUSION
58

lOMoARcPSD|31074645
Conclusively, the objectives which were set have been achieved after the collection of both
primary data as well as secondary data. Interviews and questionnaire from salaried individual
have played a key role in achieving the objectives. Besides, the above scholarly research
papers also played a crucial role to achieve the objectives.
Thus, we have seen that there are various deductions available to an individual under the
Income Tax Act, 1961. These should not exceed the gross total income and for claiming each
a set of conditions need to be fulfilled. The law is pretty clear on deductions and there is not
much scope for interpretation.
Getting tax deduction is easy for salary earners but some rigid rules have to be followed by
them. Allowance and Tax deduction is beneficial to salary earners it help to save from tax
paying and There are so many Tax exemption and Tax deduction are available to the salary
earners which been study in detailed.
CHAPTER 7
ANNEXURE
59

lOMoARcPSD|31074645
❖ Questionnaire
A study on capital sources of franchise with reference to
To be filled by Salaried Individual only
*Required
1. Name *
2. Gender *
Female
Male
Others
3. Age group *
Below 25 years
25 to 35 years
35 to 45 years
45 to 55 years
More than 55 years
4. Employment *
Government Employees
Private Employees
Others:
5. Range of annual salary? *
60

lOMoARcPSD|31074645
Less than 3 Lakhs

3 Lakhs to 6 Lakhs
6 Lakhs to 8 Lakhs
8 Lakhs to 10 Lakhs
More than 10 Lakhs
6. Are you a regular Tax payer? *
Yes
No
7. Since how many years you’re doing Tax assessment? *
Less than 2 years

2 years to 5 years
5 years to 10 years
More than 10 years
8. According to you how easy/hard is process of Income tax filing? *
1 2 3 4 5
Easy Hard
9. Rate your knowledge about Tax deduction & exemption available to you? *
Excellent Good Average Poor
Rate
10. Do you plan for reducing your tax liability? *
Yes
61

lOMoARcPSD|31074645
No
Maybe
11. Do you invest in tax saving options? *
Yes
No
12. If, yes then what are the option you invest in? *
Fixed Deposit
Public Provident Fund
Equity Linked Saving Schemes: ELSS
Life Insurance
Home loan
Others:
13. Do you think today’s Income tax policies are beneficial for Salaried Individual? *
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
14. What is you level of awareness regarding following: *
62

lOMoARcPSD|31074645
Lack of Low level of Medium level High level of Complete

awareness awareness of awareness awareness awareness
Exemption available
to tax payer
Exemption
exclusively available
for salary individual
Deductions available
to tax payer
Other ways of
reducing tax liability
within legal confine
15. Do you plan your investments & expenses according to your tax liability? *
Yes
No
16. Any comment? *
CHAPTER 8
BIBLIOGRAPHY
63

lOMoARcPSD|31074645
Bibliography
1. www.wikipedia.org/
2. https://scholar.google.com/
3. http://shodhganga.inflibnet.ac.in:8080/jspui/subject-search
4. https://cleartax.in/
5. https://taxguru.in/
6. http://www.moneycontrol.com/tax/salaries/what-is-
gratuity_665038.html?classic=true
7. https://taxguru.in/income-tax/allowances-exemptions-categories-tax-
payers.html
8. https://life.futuregenerali.in/tax-hacks/allowances.html
9. https://www.lawyersclubindia.com/articles/Research-paper-on-
Analysis-of-important-deductions-available-to-an-individual-under-
Income-Tax-Act-3422.asp
10. https://m.economictimes.com/wealth/tax/10-salary-components-that-
can-help-employees-reduce-tax-burden/articleshow/70259461.cm
11.
64

Shivani Modi Black Book

Uploaded by

Copyright:

Available Formats

Shivani Modi Black Book

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Shivani Modi Black Book

Uploaded by

Copyright:

Available Formats

lOMoARcPSD|31074645

Shivani Modi Black Book

Bachelors of commerce (Accountancy and finance) (University of Mumbai)

Studocu is not sponsored or endorsed by any college or university

A STUDY ON LEVEL OF AWARENESS ABOUT TAX DEDUCTION & EXEMPTION

SHIVANI ANAND MODI

UNDER THE GUIDANCE OF

DR. POONAM MIRWANI

VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY

(AFFILIATED TO UNIVERSITY OF MUMBAI) VIDYALANKAR MARG,

WADALA (E), MUMBAI 400 037.

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

This is a bonafide project work & the

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

I hereby acknowledge all those who directly or indirectly helped me in drafting

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

Vidyalankar School of Information Technology

I Shivani Anand Modi, student of T.Y.B.Com. B.Com. in Accounting

The information submitted is true and original to the best of my

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

Sr. No. Page Title Page No.

4 1.1 Introduction to the Study

5 1.2 Objectives of the Study

6 1.3 Scope and Significance of Study

7 1.4 Methodology and Sources of Data

8 1.5 Limitations of the Study

9 Ch.2 Review of Literature

10 Ch.3 Introduction to Topic

11 Ch.4 Data Analysis

12 Ch.5 Findings and Suggestions

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

Table No. Page Title Page No.

Table 3.3.1.1 Income-tax exemptions claimed in specific

Table 3.4 Payments exempt u/s 10

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

Sr. No. Page Title Page No.

Figure 3.2.3 Format of Salary Slip

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

1.1 Introduction to the Study

1.1.1 What is Income Tax?

b) Income from house property

c) Profits and gains of business or profession.

e) Income from other sources.

1.1.2 What is Tax Deduction?

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

• 80D deduction related to premium paid to medical insurance

1.1.2 What is Tax Exemption?

• HRA Exemption for Salaried Employees

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

1.2 Objective of the Study

1.2.1 To understand and evaluate the importance of deduction and exemptions.

Downloaded by amztrade theory (amztradetheoryllp@gmail.com)

1.3 Scope and Significance of Study

1.3.1 Scope of the study

1.3.2 Significance of the study

 Saving tax with deductions