SUMMER INTERNSHIP PROJECT REPORT

On A STUDY OF TAXATION AND INSURANCE AT HDFC LIFE

Submitted in partial fulfillment of the requirements of Post Graduate Programme

By

MOHITA AGARWAL

2010-12

PGP20102198

ACKNOWLEDGEMENT

The special thank goes to my helpful supervisor, Mr.Rahul Trivedi. The supervision and support that he gave truly help the progression and smoothness of the internship program. The cooperation is much indeed appreciated. My grateful thanks to Mr.Shambhu Nath. A big contribution and hard work from you during the eight week is very great indeed. All projects during the program would be nothing without the enthusiasm and imagination from both of you. Besides, this internship program makes me realize the value of working together as a team and as a new experience in working environment, which challenges us every minute. Not forget, great appreciation go to the rest of the HDFC staff that help me from time to time during the project. The whole program really brought us together to appreciate the true value of friendship and respect of each other. I would also thank my Institution and my mentor Mrs.Parul Sinha without whom this project would have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.

DECLARATION FORM

I hereby declare that the Project work entitled Taxation and Insurance submitted by me for the Summer Internship during the Post Graduate Program to IILM Institute for Higher Education is my own original work and has not been submitted earlier either to IILM or to any other Institution for the fulfillment of the requirement for any course of study. I also declare that no chapter of this manuscript in whole or in part is lifted and incorporated in this report from any earlier / other work done by me or others.

Signature of Student: Name of Student: Mohita Agarwal

Signature of Company Mentor Company Mentor: Mr.Rahul Trivedi Designation: Business Development Manager

Date: 07-07-2011 Place: Gurgaon

Date: 07-07-2011 Place: Noida

CONTENTS
OBJECTIVE 7

COMPANY PROFILE ........................................................................................................................ 8 HISTORICAL BACKGROUND OF THE COMPANY ....................................................................... 9 VISION AND VALUES.................................................................................................................... 10 BOARD OF MEMBERS ................................................................................................................... 11 FINANCIAL INFORMATION ......................................................................................................... 12 WORKING METHODOLOGY DURING THE TRAINING ............................................................. 16 SURVEY QUESTIONNAIRE - NEED IDENTIFICATION .............................................................. 18 INTRODUCTION TO INSURANCE ................................................................................................ 20 DIFFERENT TYPES OF INSURANCE POLICIES PROVIDED BY HDFC LIFE 21 Taxation of Life Insurance Companies ............................................................................................... 23 TAX BENEFITS ............................................................................................................................... 26 Tax Benefits - Deductions, Rebates & Donations:- ............................................................................. 27 Income Tax on Donations :- ............................................................................................................... 31 Income Tax Deductions:- ................................................................................................................... 35 DEDUCTIONS AND EXEMPTIONS PROVIDED BY HDFC LIFE ................................................ 40 LIMITATIONS OF THE PROJECT .................................................................................................. 41 LEARNING ...................................................................................................................................... 42 REFERENCES .................................................................................................................................. 44

OBJECTIVE
The Summer Internship Program is meant to bridge the gap between the real-life business and academic institutions. It is a simulation of the business environment and enabled me to experience the rigors of a business organization. This project provided me the opportunities to apply the concepts learnt in the class-room to real-life situations. It helped me to sensitize the nuances of a work place by assigning time-bound projects in a company. It provided me a platform to network which will be useful to further my career prospects. The project also provided me the opportunity to test my interest in a particular career before permanent commitments are made. It helped me to develop skills in the application of theory to practical work situations. It also helped me in adjusting from college to full-time employment. The project gave me an opportunity to develop attitudes conducive to effective interpersonal relationships and provided me the in-depth knowledge of the formal functional activities of a participating organization. The main objective of this project was to understand, analyze and then critically evaluate the taxation of insurance at HDFC LIFE.

COMPANY PROFILE

HDFC Life, one of India's leading private life insurance companies, offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC), India's leading housing finance institution and Standard Life plc, the leading provider of financial services in the United Kingdom. HDFC Ltd. holds 72.43% and Standard Life (Mauritius Holding) Ltd. holds 26.00% of equity in the joint venture, while the rest is held by others. HDFC Life's product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health. Customers have the added advantage of customizing the plans, by adding optional benefits called riders, at a nominal price. The company currently has 29 retail and 5 group products in its portfolio, along with five optional rider benefits catering to the savings, investment, protection and retirement needs of customers. HDFC Life continues to have one of the widest reaches among new insurance companies with more than 500branches servicing customer needs in over 700 cities and towns. The company has a strong base of Financial Consultants.

HISTORICAL BACKGROUND OF THE COMPANY

HDFC Limited HDFC Limited, India's premier housing finance institution has assisted more than 3.8 million families own a home, since its inception in 1977 across 2400 cities and towns through its network of over 289 offices. It has international offices in Dubai, London and Singapore with service associates in Saudi Arabia, Qatar, Kuwait and Oman to assist NRI's and PIO's to own a home back in India. As of March 2011, the total asset size has crossed more than Rs.1, 32,727 crores including the mortgage loan assets of more than Rs.1, 17,126 crores. The corporation has a deposit base of over Rs. 24,625 crores, earning the trust of nearly one million depositors. Customer Service and satisfaction has been the mainstay of the organization. HDFC has set benchmarks for the Indian housing finance industry. Recognition for the service to the sector has come from several national and international entities including the World Bank that has lauded HDFC as a model housing finance company for the developing countries. HDFC has undertaken a lot of consultancies abroad assisting different countries including Egypt, Maldives, Mauritius, and Bangladesh in the setting up of housing finance companies.

Standard Life Plc. Established in 1825, Standard Life Plc. is a leading provider of long term savings and investments to around 6 million customers worldwide. Headquartered in Edinburgh, Standard Life has around 9,000 employees across the UK, Canada, Ireland, Germany, Austria, India, USA, Hong Kong and mainland China. The Standard Life group includes savings and investments businesses, which operate across its UK, Canadian and European markets; corporate pensions and benefits businesses in the UK and Canada; Standard Life Investments, a global investment manager, which manages assets of over 157bn globally; and its Chinese and Indian Joint Venture businesses. At the end of April 2011 the Group had total assets under

administration of 198.4bn. Standard Life plc is listed on the London Stock Exchange and has approximately 1.5 million individual shareholders in over 50 countries around the world.

VISION AND VALUES

VISION

'The most successful and admired life insurance company, which means that we are the most trusted company, the easiest to deal with, offer the best value for money, and set the standards in the industry'.

VALUES

Values that we observe while we work:

Integrity Innovation Customer centric People Care "One for all and all for one" Team work Joy and Simplicity

BOARD OF MEMBERS

Mr. Deepak S. Parekh is the Chairman of the Company. He is also the Chairman and Director of Housing Development Finance Corporation Limited (HDFC Limited). He joined HDFC Limited in a senior management position in 1978. He was inducted as a whole-time director of HDFC Limited in 1985 and was appointed as its Chairman in 1993. Mr. Parekh is a Fellow of the Institute of Chartered Accountants (England & Wales). Ms. Renu S. Karnad is the Managing Director of HDFC Limited. She is a graduate in Law and holds a Master's degree in Economics from Delhi University. She has been employed with HDFC Limited since 1978 and was appointed as the Executive Director in 2000 and Deputy Managing Director in 2007. She is responsible for overseeing all aspects of lending operations of HDFC Limited. Mr. Ravi Narain is the Managing Director & CEO of National Stock Exchange of India Limited. Mr. Ravi Narain was a member of the core team to set-up the Securities & Exchange Board of India (SEBI) and is also associated with various committees of SEBI and the Reserve Bank of India (RBI). Mr. Ravi Narain is a Cambridge University-trained Economist and an MBA from Wharton School, University of Pennyslvania, and USA. Mr. Amitabh Chaudhry is the MD and CEO of HDFC Standard Life. Before joining HDFC Standard Life, he was the MD and CEO of Infosys BPO and was also heading an Independent Validation Services unit in Infosys Technologies. He started his career with Bank of America delivering diverse roles ranging from Head of Technology Investment Banking for Asia, Regional Finance Head for Wholesale Banking and Global Markets and Chief Finance Officer of Bank of America (India). Mr. Chaudhry completed his Engineering in 1985 from Birla Institute of Technology and Science, Pilani and MBA in 1987 from IIM, Ahmadabad.

FINANCIAL INFORMATION Premium Income

A robust 17% growth in individual new business (regular premium) Focus on single premium polices in H2 results in growth of 120% High quality of existing business & continued focus on persistency led to 36% increase in renewal premium A growth of 29% in total premium

Growth
New ULIP regulations have impacted growth in H2 FY11 In H2 we have grown 1.6%, while private industry de-grew by 40.7% One of the very few private insurers to achieve positive growth in FY11 We are fastest growing amongst the top 15 private players Since last 3 years grown faster than private industry

Market Share
Have adapted well to post September 1, 2010 regime. Ranked # 1 in H2 FY 11 amongst private insurance companies Ranked # 3 in private sector for the full year; # 5 during same period last year Highest market share gain of 4.2% in private space in FY11 over same period last year

Total Capital

Capital infusion by promoters has scaled down over the last 3 financial years Generation of surplus on existing policies has reduced the need for capital drawdown Out of the capital infusion of `1.9 bn promoters brought in 1.7 billion. Solvency Ratio as at 31st Mar 2011 was 172% as against regulatory requirement of 150%

WORKING METHODOLOGY DURING THE TRAINING

On the first day of the training we were given a brief description about the company and its working. We were told how the company actually works and its long term as well as short term goals. We were also given company mentors whose job is to guide us and help us in understanding the workings of the company. All these details were given to us by the branch manager of the company Mr. Shambhu Nath. My company mentor was Mr. Rahul Trivedi. We were also given projects according to the profile applied for. All the students were divided in a group of three and we as a group had to complete the project. A list of ten projects was given to us and we had to choose one among them. I and my group members opted for a financial project in Taxation and Insurance Industry. On the next day our training started for duration of five days. The training was given to us by Mrs. Natasha Singh. She told us about the different types of insurance policies provided by the company and a brief description about all the features and benefits of the policies. As we had to do sales also it was necessary for us to know about all the features and benefits of the different policies provided by the company. The trainer one by one explained all the policies to us. She also took an assessment and gave awards to the students. We also did a role-play where one student was buyer and the other was seller. This helped the students in building an understanding of the types of questions raised by the customers before purchasing the policy. We were also asked to prepare a list of fifty potential customers who according to us are capable of purchasing the policy. The list required the details of the customers name, address, and phone number. These customers can be anyone we know like our family, friends and relatives. To have a better idea of the market we were also asked to do a survey of the surrounding market and know the perceptions of the customers and for this purpose we were given survey sheets and it required the following information from the customers. NAME ADDRESS

OCCUPATION DETAILS OF DEPENDENTS ANNUAL INCOME SAVINGS HABBIT INVESTMENT PLANS FINANCIAL GOALS.

Each student was asked to fill in thirty such survey sheets and feed the data in excel sheet and submit it to their respective company mentors. After the completion of the five days training sessions we were now actually asked to go into the fields and get the policies done of the potential customers. We were given brochures and form of the various policies. We will also be given incentives on doing the insurance of any person and this incentive structure varied from policy to policy. To assist us we were asked to take along our company mentors in case we require them in order to influence and explain the policies to the customers. Our mentors were a great helping hand to us because when they came along with us on a call we actually came to know the different tactics and procedure to convince a person to purchase the policy.

When we met the customers we came to know that in reality practical life is much different than the theoretical life and along with the classroom teachings, it is this fieldwork only which actually teaches us how to sustain ones position in the company and get business. This experience also taught us how to handle work pressure and achieve the targets.

SURVEY QUESTIONNAIRE - NEED IDENTIFICATION

Name of the person contacted Age Address Gender Status Details of dependents : : : : : : 1. 2. 3. Occupation Housewife : Service/ Self employed/ Student/ Professional/ Male / Female

1. What is your average monthly income? Less than 5000 / 5000-10000 / 10000-20000 / 20000-25000 / 25000-30000/ 30000-40000 / 40000-50000 / 50000 & Above 2. Do you save regularly? 3. If yes can enlighten us on the pattern of your savings? Recurring Deposits / Fixed Deposits / PPF / Postal Savings / Insurance / Others (Please specify) 4. Can you briefly mention the financial goals / dreams you have for yourself and for your family? No dreams / childrens education / childrens marriage / buying a property / business / world travel / others 5. Have you started making provision for those financial goals? Yes / No

6. Have you done review of these financial goals? Yes / No 7. If yes when did you last review your financial goals? 8. Do you have any outstanding debts / loans (housing loan, car loans) etc? Yes / No 9. Have you protected your family against the repayment of these loans? Yes / No 10. Have you planned for the peaceful retired life? Yes / No 11. If yes please specify the nature of additional provision made for the retired life? Deposit / fixed deposit / PPF / postal savings / insurance / others 12. Have you done review on your retire provision? Yes / No 13. If yes when did you last review the same? 14. Would you like to review these goals, one more time, with an expert, only to ensure that you are guided properly in achieving your financial goals? Yes / No
15. If yes can you tell us the convenient date, time and place for conducting review on your financial goals?

INSURANCE
Insurance is a risk management technique primarily used to hedge against the risk of a contingent, uncertain loss that may be suffered by those individuals or entities who have an insurable interest in scarce resources, by transferring the possibility of this loss from one interested person, persons, or entity to another. The scarce resources referred to here fall into three divisions: human resources, financial resources, and capital, or tangible resources. In the context of insurance, scarce resources are also known as "exposures," because they are "exposed" to perils, those things, or forces, which cause destruction or reduction, in the usefulness, or value, of an exposed resource. Human resources are thus exposed to perils such as illness or death; financial resources to legal judgments that may result from negligent acts, and capital resources to physical perils such as fire, theft, windstorm, and vandalism, to name but a few. In the context of commercial trade, insurance is further defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for consideration, payment, in the form of a risk premium. The insurance premium develops at an actuarially-determined rate. This rate is a factor used to determine the amount of premium to charge for a certain limit, and type, of insurance on the scarce resource. The premium can further be viewed as a guaranteed, known, relatively small financial loss to the insured, paid to the insurer, in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a loss to the insured resource(s). The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be indemnified.

DIFFERENT TYPES OF INSURANCE POLICIES PROVIDED BY HDFC LIFE ARE AS FOLLOWS:CHILDREN PLAN Children's Plans helps you save so that you can fulfill your child's dreams and aspirations. These plans go a long way in securing your child's future by financing the key milestones in their lives even if you are no longer around to oversee them. As a parent, you wish to provide your child with the very best that life offers, the best possible education, marriage and life style. Types of Children's Plans

RETIREMENT PLAN Retirement Plans provide you with financial security so that when your professional income starts to ebb, you can still live with pride without compromising on your living standards. By providing you a tool to accumulate and invest your savings, these plans give you a lump sum on retirement, which is then used to get regular income through an annuity plan. Given the high cost of living and rising inflation, employer pensions alone are not sufficient. Pension planning has therefore become critical today. Types of Retirement Plans

SAVING AND INVESTMENT PLAN

You have always given your family the very best. And there is no reason why they shouldn't get the very best in the future too. As a judicious family man, your priority is to secure the wellbeing of those who depend on you. Not just for today, but also in the long term. More importantly, you have to ensure that your family's future expenses are taken care, even if something unfortunate were to happen to you. Types of Savings & Investment Plans

HEALTH PLAN Health plans give you the financial security to meet health related contingencies. Due to changing lifestyles, health issues have acquired completely new dimension overtime, becoming more complex in nature. It becomes imperative then to have a health plan in place, which will ensure that no matter how critical your illness is, it does not impact your financial independence. Types of Health Plans

Taxation of Life Insurance Companies

The taxable income of a life insurance company is the sum of investment income, net of expenses if any from the shareholders' fund and profits and gains from the life insurance business. There are two methods of assessing the profits and gains of a life insurance business. In the first method, the profit is defined as (income minus expenses) or net income. Here, "Income'' means only investment income. In the second method, the profit is defined as (income minus outgo minus increase in liability). It is necessary to define the three terms, income, outgo and liability. Income is the sum of premium income, investment income and any miscellaneous income. Outgo is the sum of all payments made to policyholders and management expenses such as commission to agents, salary to employees and the like. A life insurance company incurs a liability whenever a premium is received. This liability is to be estimated by special techniques, known as actuarial techniques. The difference between the total liability as at the end and beginning of a financial year is known as the increase in liability during the year. The profit determined this way is known as the valuation surplus. The entire valuation surplus cannot, however, be termed as taxable profit from business as a substantial portion of this surplus gets allocated back to the policyholders in the form of bonus. Logically, only the balance surplus, known as net surplus, can be treated as profit. However, under the Income-tax Act, 1922, the entire valuation surplus was treated as profit. In 1934, the Indian Life Offices Association (ILOA) represented to the Government that this basis of taxation was not fair and that the method of taxation introduced in the U.K. should be adopted also in India. Under this system, the life insurance companies in the U.K. were assessed for tax from 1923 onwards, on the basis of higher of: Investment income less expenses of management and

Valuation surplus less that portion of the surplus paid to or reserved for or expended on behalf of policyholders.

This is a fair method of assessing the profit of a life insurance company. In the case of mature companies, the first factor will be the higher and the second factor will be the higher in the case of young companies. And, none can escape the tax net. In response to the representation, the Government appointed an Expert Enquiry Committee. On the basis of the committee's recommendations, the Income-tax (Amendment) Bill was introduced in the Legislative Assembly in 1938. But the Bill was referred to the Select Committee (headed by Bhulabhai J. Desai) which, after hearing the arguments put forward by the ILOA, recommended the adoption of the British model with certain modifications. As per the recommendations, the profit of life insurance business has to be assessed as the higher of: Investment income less expenses of management and Valuation surplus less that portion of the surplus paid to or reserved for or expended on behalf of policyholders. But, a ceiling was placed on the "management expenses'' on a quantified basis as the sum of 85 per cent of the first year premium and 8.5 per cent of the renewal premium and only 50 per cent of that portion of surplus allocated to the policyholders was allowed as deduction from the valuation surplus. In 1944, the provisions for management expenses were raised to 90 per cent and 12 per cent respectively and in 1953, to 90 per cent and 15 per cent. In 1953, 80 per cent of the surplus allocated to policyholders was allowed as deduction from the valuation surplus. These were quite significant concessions. The Income-tax Act, 1922 was replaced by the Income-tax Act, 1961 and the new Act came into effect from April 1, 1962. Sec.44 of the Act and the Rules contained in the First Schedule

governed taxation of life insurance. However, there was no significant change in the existing provisions. Meanwhile, life insurance business was nationalized in 1956 and the Life Insurance Corporation (LIC) of India was set up on September 1. The nationalization did not however lead to any change in the method of assessment of life insurance business. The rate of tax was however raised continuously. From 28.12 per cent in the assessment year 1950-51, it rose gradually to 52.5 per cent in 1965-66. In addition, a surcharge of 2.5 per cent was imposed in 1972-73. This was raised to 5 per cent in 1973-74.

TAX BENEFITS
INCOME-TAX AND TAX BENEFITS FROM LIFE INSURANCE

A] INCOME-TAX RATES FOR ASSESSMENT YEAR 2011-2012 (FINANCIAL YEAR 2010-2011)

Education Cess : An additional surcharge called as Education Cess is levied at the rate of 2% on the amount of Income tax and surcharge (if any) in all cases shall be levied. Secondary and Higher: An additional surcharge, called the "Secondary and Higher Education Cess on income- at the rate of 1% of income-tax and surcharge (not including the Education Cess on Income-tax) in all cases shall be levied.

Tax Benefits - Deductions, Rebates & Donations:Income Tax Rebates

Section 80C :INSERT (AY2008-09) Senior Citizens Savings Scheme 2004 and the Post Office Time Deposit Account added to the basket of saving instruments under Section 80C of the Income Tax Act.

Section 80L used to allow deduction of interest earned on, say, a National Savings Certificate or a bank deposit up to a limit of Rs 12,000. But now all these are gone .In their place has come Section 80C -- "u/s 80CCC, & u/s 80CCD", as the Finance Bill puts it. Thus, the new Section 80C of the Income Tax Act proposed in Union Budget gives you a bigger tax break than what the current regime offers.

Deduction in respect of Life Insurance Premium, Contribution to Provident Fund, etc. Rs 1 lakh can be invested under this section without any individual sub-limits except in the case of Rs 10,000 in pension funds.

Sections 88, 80L, 80CCC and 80CCD are clubbed in.

INSERT (AY2007-08) It is proposed to insert clause (xxi) in sub-section (2) of this section in order to provide that the investment in a term deposit for a fixed period of not less than five years with any scheduled bank shall be eligible for a deduction under this section.

Schemes eligible for Section 80C benefits

PPF

ELSS - Mutual Funds NSC KVP Life Insurance Senior Citizen Saving Scheme 2004 Post Office Time Deposit Account

Note: - Section 80CCC is for deduction in respect of contribution to certain Pension Funds. Section 80L is for deductions in respect to Interest on certain Securities, Dividends, etc

Sections abolished from Union Budget 2005-06

88 (Rebate on Life Insurance Premium, Contribution to Provident Fund, etc.) 80L (Deductions in respect to Interest on certain Securities, Dividends, etc.) Note:Rebate of Rs 5,000 for women and Rs 20,000 for senior citizens have been wiped off. -

The key features of the new provision

Exemption available to all taxpayers irrespective of income bracket -earlier Section 88 did not provide benefit to those having income exceeding Rs 500,000.

No exemption/adjustment for interest income All saving modes/options under Section 88 covered and also 80CCC and 80CCD covered.

Following benefits will continue irrespective of changes

Interest paid on housing loan for self-occupied house property. Medical insurance premium. (Additional deduction of Rs 15000 u/s 80D to an individual paying medical insurance premium for his/her parent(s)

Specified expenditure on disabled dependant. Expenses for medical treatment for self or dependant or member of an HUF. Deduction in respect of interest on loans for pursuing higher studies - Section 80E. Deduction to person with disability.

Section10 (33) Dividends from mutual funds are fully exempt from income tax under Section 10(33). Equity funds (schemes that invest 50 per cent of their funds in equity) are also exempt from dividend tax. This means that unlike companies, they do not have to pay tax at the rate of 10.2 per cent on the dividend that they distribute. INSERT (AY2008-09) Coir Board included in Section 10(29A) and exempted from income tax.

Section88 Upto 31 March 2005, rebates were available on the tax payable under three sections. According to the section, 30 per cent or 20 per cent or 15 per cent of the amount invested in certain schemes (schemes referred in Section 80C) was available as a rebate on the tax payable.

30 per cent of the amount invested was available as rebate only if the salary income of the individual was less than Rs. 1 lakh and if it constituted 90 per cent or more of the assessee's gross total income.

20 per cent of the amount invested was available as rebate if the gross total income of the individual was less than Rs 1.5 lakh and the case did not fall under the above mentioned case.

If gross total income was more than Rs. 1.5 lakh but less than Rs 5 lakh of the individual, a rebate of 15 per cent of the amount invested was available.

If gross total income was more than Rs 5 lakh of the individual, then there is no rebate.

Section 88B INSERT (AY2008-09) A new sub-section (11C) in Section 80-IB to grant a five year tax holiday to encourage hospitals to be set up anywhere in India, except certain specified urban agglomerations, and especially in tier-2 and tier-3 towns in order to serve the rural hinterland. This window will be open for the period April 1, 2008 to March 31, 2013, during which the hospital must commence operations.

Under this section, an individual resident in India and above the age of 65 years was allowed to a maximum rebate of Rs.20, 000 on the tax payable.

Section88C Under this section a lady resident in India, aged below 65 years, was allowed a maximum rebate on the tax payable of Rs5, 000.

Section89 (1) This is available to an employee when he receives salary in advance or in arrear or when in one financial year, he receives salary of more than 12 months or receives 'profits in lieu of salary' W.e.f. 1.6.89, relief u/s 89(1) can be granted at the time of TDS by employees of all companies co-operative societies, universities or institutions as well as govt./public sector undertakings. The relief should be claimed by the employee in Form No. 10E and should be worked out as explained in Rule 21A of the Income Tax Rules.

Income Tax on Donations :Section 80G:-

For the Assessment Year 2009-10

Donations to electoral trusts to be allowed as a 100 percent deduction in the computation of the income of the donor. For the Assessment Year 2006-07

Under this section deduction is made in respect of donations to certain funds, charitable institutions, etc. Deduction is not available for donations given in kind.

The deduction is available only for the entity to which donations is made is an approved charitable institution by the government. A receipt of the institute, in evidence made, should be attached to the return of income.

Section 80GG:Under this section a non-salaried person or a salaried person, if, not getting house rent allowance, he/she can claim to the deduction for the rent he pays for a residential accommodation. The deduction available is least of the following:

Rent paid in excess of 10 per cent of total income. 25 per cent of total income.

Rs 2,000 per month.

The total income of the individual is computed after reducing the amount deductible under other sections, receipts exempt from tax, and long-term & short-term capital gains taxable at concessional rates.

The deduction is not available if the assessee or his spouse or minor child owns the accommodation in which he stays or works, or carries on his business or profession. Deduction is even not allowed, if the assessee owns a house in any other place, and the concession in respect of self-occupied house is claimed by him.

Section80GGA An individual, who is not engaged in any business or profession, is eligible for a deduction of the amount donated to certain institutions engaged in scientific research, rural development, etc.

Section 80GGC It is the deduction in respect of contributions given by any person to political parties. An individual shall be allowed to a deduction of any amount contributed by him to a political party.

Approved Entities Under Section 80G (Donation) Particulars Qualifying Amount Whether Restricted (% of Contribution) to 10% of Gross Total Income National Defense Fund Jawaharlal Nehru Memorial Fund 100 50 No No

Prime Minister's Drought Relief Fund Prime Minister's National Relief Fund

50 100

No No No

Prime Minister's Armenia Earthquake Relief 100 Fund Africa (Public Contributions-India) Fund National Children's Fund Indira Gandhi Memorial Trust Rajiv Gandhi Foundation 100 50 50 50

No No No No No No No No No No No

National Foundation for Communal Harmony 100 Approved university/educational institution Chief Minister's Earthquake Relief Fund Zila Saksharta Samiti National Blood Transfusion Council Medical Relief Funds of state govt. 100 100 100 100 100

Army Central Welfare Fund, Indian Naval 100 Ben. Fund, Air Force Central Welfare Fund National Illness Assistance Fund 100

No

Chief Minister's or Lt. Governor's Relief Fund 100 National Sports Fund National Cultural Fund 100 100

No No No Yes

Donations to govt./ local authority for 50 charitable planning) Authority/ corporation having income exempt 50 under erstwhile section or u/s 10(26BB) Govt./ local authority/ institution/ association 100 towards promoting family planning Donations for repair/ renovation of notified 50 places of worship Central Govt.'s Fund for Technology 100 purposes (excluding family

Yes

Yes

No

No

Development & Application National Trust for Welfare of Persons with 100 Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities Indian Olympic Association/ other such 100 notified association Any other approved fund or institution 50 Yes No No No

Andhra Pradesh Chief Minister's Cyclone 100

Relied Fund

Income Tax Deductions:Section 80CCC:-

Any individual who makes a contribution for any annuity plan of the Life Insurance Corporation of India or any other insurer is eligible for a deduction of the amount paid or Rs. 10,000, whichever is less. When an individual or his nominee receives any amount under the following circumstances it will be taxed as the income of the individual or his nominee, in the year of withdrawal or the year in which the pension is received:

On the surrender of the annuity plan or As pension received from the annuity plan.

INSERT (AY 2007-08) The limit of investment is proposed to increase from Rs 10,000 to Rs 1,00,000 subject to overall cap of Rs 1,00,000 provided under section 80CCE.

Section 80CCD The deduction for contributions to a pension scheme of the Central Government is available only to those individual who have been employed by the central government on or after 1st January 2004, and will be allowed for any amount deposited in such a pension scheme. But, in this case, deduction of more than 10 per cent of the employee's salary shall not be allowed.

The contributions to the fund are also made by the Central Government. Deduction will be available for any contribution which is made by the Central Government or 10 per cent of the employee's salary, whichever is less.

When the individual or his nominee receives any amount out of the scheme which meets the following descriptions, it shall be taxed in the hands of the recipient.

On closure/ opting out of the pension scheme; or As pension received from the annuity plan.

The term 'salary' here includes Dearness Allowance (if considered for retirement benefits), but it excludes other allowances and perquisites.

The aggregate deduction under the Sections 80C, 80CCC and 80CCD cannot exceed Rs 1 lakh as whole.

Section 80D INSERT (AY 2008-09) Additional deduction of Rs 15,000 under Section 80D is allowed to an individual who pays medical insurance premium for his/ her parent or parents.

Any Premium which is paid for medical insurance that has been taken on the health of the assessee, his spouse, dependent parents or dependent children, is allowed as a deduction, subject to a ceiling of Rs 10,000.

Where any premium is paid for medical insurance for a senior citizen, an enhanced deduction of Rs 15,000 is allowed. The deduction is available only if the premium is paid by cheque. INSERT (AY 2007-08)

Under section 80D, the deduction has been increased to Rs 15,000 and for senior citizen it is now Rs 20,000.

Section 80DD Deduction under this section is available to an individual who:

Incurs any expenditure for the medical treatment, training and rehabilitation of a disabled dependant; or

Deposits any amount in schemes like Life Insurance Corporation for the maintenance of a disabled dependant. An annuity or a lump sum amount is paid to the dependant or to a nominee for the benefit of the dependant in the event of the death of the individual depositing the money, from the said scheme,

A deduction of Rs 50,000 is available. Where the dependant is with a severe disability, a deduction of Rs 1, 00,000 is allowed. (As per AY 2009-10)

If the death of the dependant occurs before that of the assessee, the amount in the scheme is returned to the individual and is taxable in his hands in the year that it is received.

An individual should furnish a copy of the issued certificate by the medical board constituted either by the Central government or a state government in the prescribed form, along with the return of income of the year for which the deduction is claimed.

The term 'dependent' here refers to the spouse, children, parents and siblings of the assessee who are dependent on him for maintenance and who themselves haven't claimed a deduction for the disability in computing their total incomes.

This deduction is also available to Hindu Undivided Families (HUF).

Section 80DDB

An individual, resident in India spending any amount for the medical treatment of specified diseases affecting him or his spouse, children, parents, brothers and sisters and who are dependent on him, will be eligible for a deduction of the amount actually spent or Rs 40,000, whichever is less.

Note: - For the complete list of disease specified, refer to Rule 11DD of the Income Tax Rules. For any amount spent on the treatment of a dependent senior citizen an individual is eligible for a deduction of the amount spent or Rs 60,000, whichever is less is available. The individual should furnish a certificate in Form 10-I with the return of income issued by a specialist working in a government hospital.

If any amount of medical expenditure is borne by the employer or is reimbursed under an insurance scheme, the eligibility of the deduction is the reduction to that extent. This deduction is also available to Hindu Undivided Families (HUF).

Section 80E INSERT (AY 2009-10) Deduction under section 80E of the Income-tax Act allowed in respect of interest on loans taken for pursuing higher education in specified fields of study to be extended to cover all fields of study, including vocational studies, pursued after completion of schooling.

Under this section, deduction is available for payment of interest on a loan taken for higher education from any financial institution or an approved charitable institution. The loan should be taken for either pursuing a full-time graduate or post-graduate course in engineering, medicine or management, or a post-graduate course in applied science or pure science.

The deduction is available for the first year when the interest is paid and for the subsequent seven years. Up to March 2005, deduction was available for the repayment of principal and interest aggregating to Rs 40,000 a year.

Section 80U It is deduction in the case of a person with a disability. An individual who is suffering from a permanent disability or mental retardation as specified in the persons with disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999, shall be allowed a deduction of Rs 50,000. In case of severe disability it is Rs. 75,000.

The assessee should furnish a certificate from a medical board constituted by either the Central or the State Government, along with the return of income for the year for which the deduction is claimed.

DEDUCTIONS AND EXEMPTIONS PROVIDED BY HDFC LIFE

LIMITATIONS OF THE PROJECT

The first limitation of the project was the internship was only eight weeks long and the topic of the project i.e. A study of taxation and insurance at HDFC LIFE is such a vast topic that duration of eight weeks to study and understand the topic was not enough.

HDFC LIFE deals with only life insurance therefore I studied taxation related to life insurance only and not general insurance.

Although I was also given the job of getting the questionnaire filled as a part of the marketing team but we were not required to do the analysis of it.

LEARNING

The day I joined HDFC LIFE made me realize the reason why it is one of the most sought after companies by people looking for a responsible and coveted job. The level of energy, dedication and enthusiasm in the employees of HDFC stunned me. I got to witness the working of one of the most successful companies, from the inside. Working with HDFC LIFE made me understand the importance of time and how to manage time at times of work pressure. I was determined to use every moment of my internship in gaining knowledge and insights from the market. I made use of every available moment to get to know the actual consumer and customer characteristics. Some customers were really nice they welcome us, understand us and answer straight whether they are interested in your product or not but some customers are stringent they call us ten times and then they return us empty handed. Sometimes it was very heartbreaking that after so many efforts I was able to convince a customer to buy a policy but just then when the deal was about to close the customer denied, at first it hurts but every time I fall it taught me a lesson to how to stand up again. My manager always encouraged me and showed confidence in me that I would be able to prove myself and I must say that it was his encouragement and support that I was able to meet my targets. My manager taught me how to conduct oneself at workplace, how to create interpersonal relations, how to handle work pressure, and most importantly how to approach a customer, know his requirements and then not only convince him to purchase the product but also make him realize that whatever hes purchasing is best in the market. When we met the customers we came to know that in reality practical life is much different than the theoretical life and along with the classroom teachings, it is this fieldwork only which actually teaches us how to sustain ones position in the company and get business. This experience also taught me how to handle work pressure and achieve the targets. It is a good experience working with HDFC LIFE. My mentor was extremely supportive and helped me at all points of time. He is with the organization for about five years and thus he supports me a lot through his valuable experience and guidance.

I got some very harsh lessons in corporate culture too. When to call your Manager and what decisions to take by yourself; concepts like how to get work done through people, which we had learned in our HRM and Organizational Behavior courses, got life in front of my eyes. Nonverbal message delivery was a very important thing I learned by observing my Manager. My summer internship pushed me beyond the wall and made me come up with innovative solutions for the problems I had never thought of would exist in real life. I can say that the two months of my summer internship were the best out-of-campus days in my PGDM which changed me to every grain. Soft skills are what you cannot learn in books and which are of utmost importance in Sales and Marketing. I was very lucky to have got such a multi-skilled Manager whom I had the opportunity to observe and learn from. I am exhilarated to say that I cherished every day I spent working at HDFC LIFE.

REFERENCES
Financial institutions and markets by Anthony Saunders www.hdfclife.com www.hindu.com
http://finance.indiamart.com/taxation/tax_rebates/income_tax_deductions.html http://m.paycheck.in/main/work-and-pay/incometax-info/savings-contributions-tax-benefits