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A Project Report on

TAXATION PLANNING FOR INDIVIDUAL


WITH RESPECT TO ASSESSEE
BY

RATHNAVATHY RAMACHANDRAN
1206

Submitted to

Oriental Institute of Management,
Vashi, Navi Mumbai

In partial fulfillment of the requirements for the award of the degree of
MASTERS IN FINANCIAL MANAGEMENT

Under the guidance of
Prof Ankita Srivastava



Oriental Institute of Management,
Vashi, Navi Mumbai
2012-2015

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DECLARATION

I, RATHNAVATHY RAMACHANDRAN, ROLL NO-1206 student of MFM 3
rd

Year declare that this report titled TAXATION PLANNING FOR INDIVIDUAL
WITH RESPECT TO ASSESSEE is a record of independent work carried out by
me under the guidance and supervision of Prof Ankita Srivastava towards the
partial fulfillment of requirements for the M.FM. degree course UNIVERSITY OF
MUMBAI

I further declare that this project report is the result of my own efforts and that it has
not been submitted to any other university or institute for the award of a degree or
diploma or any other similar title of recognition.




RATHNAVATHY RAMACHANDRAN
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CERTIFICATE

This is to certify that RATHNAVATHY RAMACHANDRAN, ROLL NO-
1206, is a bonafide student of Masters in Financial Management course of the
Institute (2012-2015), affiliated to University of Mumbai. Project report on
TAXATION PLANNING FOR INDIVIDUAL WITH RESPECT TO
ASSESSEE is prepared by his under the guidance of Prof Ankita Srivastava in
partial fulfillment of the requirements for the award of the degree of Masters in
Financial Management of University of Mumbai.




Prof. Ankita Srivastava Prof. Sahar Kapdi
(Internal Guide) In Charge Director










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ACKNOWLEDGEMENT

The final project of MFM course was undoubtedly a great learning experience for me
and has helped me learn immensely. I feel great pleasure in expressing my regards
and profound sense of gratitude to my guide Prof .Ankita Srivastava for her
inspiration, guidance and support in the completion of this project report.

This project would not have been possible without the regular reading of Tax
Columns from the business related newspapers; hence, I am thankful to all the authors
who contributed such informative articles which helped me accomplish my this
assignment.

I express my sincere thanks to my college at Oriental Institute of Management
(OIM), who provided adequate support and facilities to accomplish my work of data
collection and completion of project report on time.

Last but not the least; I am highly thankful to my friends who were always there
whenever their support was needed.











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INDEX
TABLE OF CONTENTS
1. List of Tables ........................................................................................................... i
2. Introduction ..............................................................................................................9
3. An Extract from Income Tax Act, 1961 ................................................................13
4. Computation of Total Income ................................................................................25
5. Deductions from Taxable Income ..........................................................................53
6. Computation of Tax Liability ................................................................................61
7. Tax Planning - Recommendations and Useful Tips ..............................................65
8. Conclusion.76
9. Bibliography ..........................................................................................................77

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List of Tables
Table 1: Tax Rates for A.Y. 2014-15 - For Individuals (Other than Specified
Individuals )And Hindu Undivided Families Only ......................................................62
Table 2: Tax Rates for A.Y. 2014-15 - For Individual, Being Resident in India,
Who is of the Age of 60Years or More But less than 80 Years ) ................................63
Table 3: Tax Rates for A.Y. 2014-15 - For Individual, Being Resident in India,
Who is of the Age of 80 Years or More) .....................................................................63


















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CHAPTER 1
INTRODUCTION
Need for Study
Objectives
Scope & Limitations

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INTRODUCTION

Income Tax Act, 1961 governs the taxation of incomes generated within India and of
incomes generated by Indians overseas. This study aims at presenting a lucid yet
simple understanding of taxation structure of an individuals income in India for the
assessment year 2014-15.

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

This project covers the basics of the Income Tax Act, 1961 as amended by the
Finance Act, 2013 and broadly presents the nuances of prudent tax planning and tax
saving options provided under these laws. Any other hideous means to avoid or evade
tax is a cognizable offence under the Indian constitution and all the citizens should
refrain from such acts.


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

This prodded me to study this aspect leading to this project during my MBA course
with the university, hoping this concise yet comprehensive write up will help this
salaried individual assessee class to save whatever extra rupee they can from their
hard-earned monies.

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Objectives

To study taxation provisions of The Income Tax Act, 1961 as amended by
Finance Act, 2013.
To explore and simplify the tax planning procedure from a laymans perspective.
To present the tax saving avenues under prevailing statures.

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Scope & Limitations
This project studies the tax planning for individuals assessed to Income Tax.
The study relates to non-specific and generalized tax planning, eliminating the
need of sample/population analysis.
Basic methodology implemented in this study is subjected to various pros & cons,
and diverse insurance plans at different income levels of individual assessees.
This study may include comparative and analytical study of more than one tax
saving plans and instruments.
This study covers individual income tax assessees only and does not hold good for
corporate taxpayers.
The tax rates, insurance plans, and premium are all subject to FY 2014-15 only.

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CHAPTER 2
AN EXTRACT FROM INCOME TAX ACT, 1961
Tax Regime in India
Basic Knowledge of Income Tax
Chargeability of Income Tax
Income
Scope of Total Income
Total Income
Concepts used in Tax Planning
o Tax Evasion
o Tax Avoidance
o Tax Planning
o Tax Management
The Income Tax Equation


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Tax Regime in India
The tax regime in India is currently governed under The Income Tax, 1961 as amended
by The Finance Act, 2013 notwithstanding any amendments made thereof by recently
announced Union Budget for assessment year 2014-15.

Basic Knowledge of Income Tax
According to Income Tax Act 1961, every person, who is an assessee and whose total
income exceeds the maximum exemption limit, shall be chargeable to the income tax at
the rate or rates prescribed in the Finance Act. Such income shall be paid on the total
income of the previous year in the relevant assessment year.
Assessee means a person by whom (any tax) or any other sum of money is payable under
the Income Tax Act, and includes

(a) Every person in respect of whom any proceeding under the Income Tax Act
has been taken for the assessment of his income or of the income of any other
person in respect of which he is assessable, or of the loss sustained by him or
by such other person in respect of which he is assessable, or of the loss
sustained by him or by such other person, or of the amount of refund due to
him or to such other person;
(b) Every person who is deemed to be an assessee under any provisions of the
Income Tax Act.
(c) Every person who is deemed to be an assessee in default under any provision
of the Income Tax Act.

Where a person includes:-
o Individual
o Hindu Undivided Family (HUF)
o Association of persons (AOP)
o Body of Individual (BOI)
o Company
o Firm
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o A local authority and
o Every artificial judicial person not falling within any of the preceding
categories.
Income tax is an annual tax imposed separately for each assessment year (also called the
tax year). Assessment year commence from 1
st
April and ends on the next 31
st
March.

The total income of an individual is determined on the basis of his residential status in
India. For tax purposes, an individual may be resident, nonresident or not ordinarily
resident.

Types of Residents



Resident [S 6(1)]
An individual is treated as resident in a year if present in India:
1. For 182 days during the year or
2. For 60 days during the year and 365 days during the preceding four years.
Individuals fulfilling neither of these conditions are nonresidents. (The
All
Assessees
Resident
Only Individual
& HUF
Resident & Ordinary
Resident
Resident But Not
Ordinary Resident
Non Resident
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rules are slightly more liberal for Indian citizens residing abroad or leaving in
India for employment abroad)

Non-Resident Individual [S.2(30)]
According to Section 2(30) of the Act a non-resident means a person who is not a
resident. Basically, a non-resident is a person who is not a resident. Thus, an individual
who does not satisfy the test mentioned above in Section 6(1), is to be called a non-
resident.

Resident & Ordinarily Resident Individual [S. 6(6)]
A resident individual may be either an ordinary resident or a not-ordinary resident. Every
individual who has stayed be in India for the specified number of days in a particular year
is a resident in India for that previous year. But, a resident individual would also be an
ordinary resident in India if he has been a resident in India for a large number of years in
the past.
An individual who is a resident in India is treated as an ordinary resident if
(a) he has been a resident in India for at least 2 out of the 10 years immediately
preceding the previous year,
(b) he has been in India for a period of 730 days or more during the 7 years
immediately preceding the previous year.

Not Ordinary Resident
An individual who is a resident, according to the tests laid down in S 6(1), but who fails
to satisfy the additional tests laid down in S 6(6) is called a resident but not ordinary
resident [RNOR]. A person would be not ordinarily resident in Indian in any previous
year if such person is an individual who has been a non-resident in India
(a) 9 out of 10 previous years preceding that year, or
(b) has during 7 previous years preceding that year been in India for a period of
729 days of less.


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Chargeability of Income Tax
As per Income Tax Act, 1961, income tax is charged for any assessment year at
prevailing rates in respect of the total income of the previous year of every person.
Previous year means the financial year immediately preceding the assessment year.

Income [S.2(24)]
(What is charged to tax)

DEFINITION
As per Section 2(24) of the Act the term Income includes
(1) profits and gains
(2) dividends
(3) voluntary contributions received by
a. a charitable or religious trust
b. a specified institution
(4) perquisites taxable under the head Salaries under S. 17(2) or profits in lieu
of salary taxable as salaries under S.17(3)
(5) special allowance or benefit specifically granted to an employee to meet
expenses for the performance of his duties.
(6) Allowance to an employee to meet his personal expenses at office, or to
compensate him for the increased cost of living (e.g. Dearness Allowance)
(7) benefit or perquisite obtained from a Company by a director or a person
having substantial interest.
(8) Profits on sale of an import licence, taxable u/s. 28(iiia)
(9) Capital gains chargeable under S.45 of the Act.
(10) Profits of any business of insurance carried on by a mutual insurance
company or a co-operative society, taxable u/s. 44 or the First Schedule to the
Act.
(11) the profits and gains of any business of banking (including providing credit
facilities) carried on by a Co-operative society with its members.

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(12) Winnings from lotteries, prizes by draw of lots or by chance, crossword
puzzles, races including horse races, card games, game show, entertainment
programme on television in which people compete to win prizes, gambling or
betting.
(13) Contribution from employees to Provident Fund, or Superannuation Fund, or
Employees Insurance Fund etc. deducted by the employer from the salaries of
the employees.
(14) any sum received under a Keyman Insurance Policy (i.e policy taken on the
owner/Director etc.), including bonus on such policy.
(15) any sum exceeding Rs. 50,000 received without consideration (i.e. a gift)by
an individual or an HUF, is taxable.


Scope of Total Income
The following points should be noted in regard to scope of income

Resident & Ordinary Resident
A Resident and Ordinary Resident is taxable in respect of any income, from whatever
source derived, which:
is received or is deemed to be received in India in such year by or on behalf of such
person; or
accrues or arises or is deemed to accrue or arise to him in India during such year; or
accrues or arises to him outside India, during the previous year




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Resident But Not Ordinary Resident
A person not ordinarily resident in India, is taxable in respect of any income, from
whatever source derived, which
is received or deemed to be received in India, in the previous year, by or on behalf of
such person; or
accrues or arises or is deemed to accrue or arise to him, in India during the previous
year; or
accrues or arises to him outside India, from a business controlled from or a profession
set up in India.

Non-Resident
A person who is a non-resident, is taxable in respect of any income, from whatever
source derived, which
is received in India, or is deemed to be received in India, in the previous year, by or
on behalf of such person; or
accrues or arises or is deemed to accrue or arise to him, in India during the previous
year.








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Residential Status And Taxability of Income
Nature of Income
Resident &
Ordinary
Resident
Resident But
Not Ordinary
Resident
Non Resident
Income received in India Taxable Taxable Taxable
Income which accrues or arises in India Taxable Taxable Taxable
Income deemed to be received in India Taxable Taxable Taxable
Income deemed to accrue in India Taxable Taxable Taxable
Income which accrues and arises
outside India from a business controlled
from India/ profession set up in India
Taxable Taxable Not Taxable
Any other Income which accrues or
arises outside India
Taxable Not Taxable Not Taxable



Total Income
For the purposes of chargeability of income-tax and computation of total income, The
Income Tax Act, 1961 classifies the earning under the following heads of income:
Salaries
Income from house property
Capital gains
Profits and gains of business or profession
Income from other sources




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Concepts used in Tax Planning

Tax Evasion
Tax Evasion means not paying taxes as per the provisions of the law or minimizing tax
by illegitimate and hence illegal means. Tax Evasion can be achieved by concealment of
income or inflation of expenses or falsification of accounts or by conscious deliberate
violation of law.

The devices adopted in Tax Evasion are unethical and have to be condemned. Evasion
once proved not only attracts heavy penalties but also could lead to prosecution.

Example: Mr. A, was invited at a religious function and the host of which was Mr. B
(Businessman). Mr. A observed that people were calling him Sethji (Mr. B) and he was
informed that Mr. B had donated Rs.2,00,000 in the temple along with 500 blankets to
the poor people. He has also arranged for feast for 1000 people.

Mr.A asked him How did you donate money in the temple, by cheque or by draft?

Mr. B replied If I had donated through cheque or draft, my white money would have got
affected. I therefore had to pay by cash.

This means that the money he evaded from tax and gave in the temple was called
Donation and the same person is treated with respect in spite of the fact that he has
robbed nations wealth by doing so. He is a traitor but surprisingly our society calls him
Sethji instead.

Tax Avoidance
Tax Avoidance is minimizing the incidence of tax by adjusting the financial affairs in
such a manner that although it is within the four corners of taxation laws, but the
advantage is taken by finding out loopholes in laws.
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The shortest definition of tax avoidance is the art of dodging tax without breaking the
law.

In tax avoidance, the tax payer apparently circumvents the law without giving rise to the
criminal offence by use of a scheme, arrangement or device normally of a complex
nature, where the main purpose is to defer, reduce, completely avoid the tax payable
under law.

Example: Mr. A, having rendered service to another person Mr. B, is entitled to receive a
sum of say Rs. 50,000/- from Mr. B. Mr. As other income is Rs. 200,000/-. Mr. A tells
Mr. B to pay cheque of Rs. 50,000/- in the name of Mr. C instead of in the name of Mr.
A. Mr. C deposits the cheque in his bank account and account for it as his income. But
Mr. C has no other income and therefore pays no tax on that income of Rs. 50,000/-. By
diverting the income to Mr. C, Mr. A has resorted to Tax Avoidance.

Tax Planning
Tax planning is the arrangement of financial activities in such a way that maximum tax
benefits are enjoyed by making use of all beneficial provisions in the tax laws. It entitles
assess to avail certain exemptions, deductions, rebates and relief so as to minimize his tax
liability. All these are permitted by law and not frowned upon.

Tax planning may be legitimate provided it is within the framework of law. It is the
obligation of every citizen to pay taxes honestly without restoring to subterfuges

Example: Saving Tax through your Family! Surprised! Yes we can save tax through our
family members i.e Parents,
Through Parents:-
Assuming that both the parents are senior citizens. Heres how you go about it. Income
tax deductions allow senior citizens a tax free income of Rs. 2.5 lacs . To exhaust this
limit, say you gift Rs. 28 lacs to each parent in cash. Of this, both can individually put
Rs.15 lacs in a senior citizens savings scheme that earns a return of 9% and pays interest
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every quarter. Each will get yearly interest of nearly Rs.1.4 Lacs. If they invest the
remaining Rs.13 lacs each in the State Bank of Indias (SBI) fixed deposit of eight years
(at an interest of 7.5%) that pays interest each quarter, it will fetch them an income of
nearly Rs. 1 lac (approx). That means both parents have earned Rs.2.8 lacs from the
senior citizen saving scheme the tax-free limit (Rs.2.4 lacs) that each parent enjoys. So
they dont even need to file tax returns.

Tax Management
Tax Management is an expression which implies actual implementation of tax planning
ideas. While that tax planning is only an idea, a plan, a scheme, an arrangement, tax
management is the actual action, implementation, the reality, the final result.

It includes maintenance of accounts, filing of return, payment of taxes, deduction of tax
at source, timely payment of advance tax etc. Poor tax management is likely to result in
levy of interest, penalty and prosecution, etc.


To sum up all these four expressions, we may say that:
Tax Evasion is fraudulent and hence illegal. It violates the spirit and the letter of the
law.
Tax Avoidance, being based on a loophole in the law is legal since it violates only the
spirit of the law but not the letter of the law.
Tax Planning does not violate the spirit nor the letter of the law since it is entirely
based on the specific provision of the law itself.
Tax Management is actual implementation of a tax planning provision. The net result
of tax reduction by taking action of fulfilling the conditions of law is tax
management.


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The Income Tax Equation:
For the understanding of any layman, the process of computation of income and tax
liability can be outlined in following five steps. This project is also designed to follow the
same.
Calculate the Gross total income deriving from all resources.
Subtract all the deduction & exemption available.
Applying the tax rates on the taxable income.
Ascertain the tax liability.
Minimize the tax liability through a perfect planning using tax saving schemes.
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CHAPTER 3
COMPUTATION OF TOTAL INCOME
Income from Salaries
Income from House Property
Profits and Gains of Business or Profession
Capital Gains
Income from Other Sources

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INCOME FROM SALARIES

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

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

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

Advance Salary:
Advance salary is taxable in the year it is received. It is not included in the income of
recipient again when it becomes due. However, loan taken from the employer against
salary is not taxable.

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

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

Pension:
Pension received by the employee is taxable under Salary Benefit of standard deduction
is available to pensioner also. Pension received by a widow after the death of her husband
falls under the head Income from Other Sources.

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Profits in lieu of salary:
Any compensation due to or received by an employee from his employer or former
employer at or in connection with the termination of his employment or modification of
the terms and conditions relating thereto;
Any payment due to or received by an employee from his employer or former employer
or from a provident or other fund to the extent it does not consist of contributions by the
assessee or interest on such contributions or any sum/bonus received under a Keyman
Insurance Policy.

Any amount whether in lump sum or otherwise, due to or received by an assessee from
his employer, either before his joining employment or after cessation of employment.

Allowances from Salary Incomes
Allowance is defined as a fixed amount of money given periodically in addition to the
salary for the purpose of meeting some specific requirements connected with the service
rendered by the employee or by way of compensation for some unusual conditions of
employment. It is taxable on due/accrued whether it is paid in addition to the salary or in
lieu thereof.
Dearness Allowance/Additional Dearness (DA):
All dearness allowances are fully taxable

City Compensatory Allowance (CCA):
CCA is taxable as it is a personal allowance granted to meet expenses wholly,
necessarily and exclusively incurred in the performance of special duties unless
such allowance is related to the place of his posting or residence.
Certain allowances prescribed under Rule 2BB, granted to the employee either to
meet his personal expenses at the place where the duties of his office of
employment are performed by him or at the place where he ordinarily resides, or
to compensate him for increased cost of living are also exempt.


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House Rent Allowance (HRA):
HRA received by an employee residing in his own house or in a house for which
no rent is paid by him is taxable. In case of other employees, HRA is exempt up
to a certain limit

Entertainment Allowance:
Entertainment allowance is fully taxable, but a deduction is allowed in certain
cases.

Academic Allowance:
Allowance granted for encouraging academic research and other professional
pursuits, or for the books for the purpose, shall be exempt u/s 10(14).

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

Deduction under S.16
Entertainment Allowances:
Received by an employee will first be included in employees income under the
head Salary and thereafter a deduction there from is permissible subject to the
conditions and limits laid down under section 16(ii). From assessment year 2002-
03 and onwards, entertainment allowance received by an employee of non-
Government employer, is not eligible for deduction u/s. 16(ii) and hence said
allowance will be taxed as income under the head Salaries.

Tax on Employment:
Any sum paid by an employee on account of the tax on employment (i.e.
Professional Tax) which is levied by a State Government is allowable as
deduction from the salary of the employee provided it has been paid by him.
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INCOME FORM HOUSE PROPERTY

Incomes Termed as House Property Income:

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

However, following incomes shall be taxable under the head Income from House
Property'.

1. Income from letting of any farm house agricultural land appurtenant thereto for any
purpose other than agriculture shall not be deemed as agricultural income, but taxable as
income from house property.

2. Any arrears of rent, not taxed u/s 23, received in a subsequent year, shall be taxable in
the year.

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






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Incomes Excluded from House Property Income:
The following incomes are excluded from the charge of income tax under this head:
Annual value of house property used for business purposes
Income of rent received from vacant land.
Income from house property in the immediate vicinity of agricultural land and used as
a store house, dwelling house etc. by the cultivators

Annual Value: [S.23]
Income from house property is taxable on the basis of annual value. It is charged to tax a
notional amount called annual value (AV), i.e the estimated value of income expected if
the property is rented. AV indicates the capacity of the property to produce income.

Annual Value is RLV or Actual Rent
AV broadly speaking, may be either of the following tow amounts
1. Reasonable Lettable Value (RLV) :- This is the expected rent i.e the sum for
which the property might reasonably be expected to let from year to year.
(i) RLV is to be computed whether the property is actually let or not
(ii) RLV is a notional figure. But it is not a fictitious figure. It must be
computed on a long term basis since it indicates the expected rent from
year to year.
(iii) RLV may be estimated on the basis of
a. Fair Rent:- rent fetched by a similar house in the same locality
b. Municipal Rent:- Gross Rateable Value fixed by the Municipality for
levy of the property taxes.
c. Standard Rent:- is fixed under the Rent Control Act, if any,
applicable to the area in which the property is situated. It is not
mentioned in the Income Tax Act.



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(iv) RLV is computed as follows:-
Reasonable Lettable Value Rs
A. Fair Rent XX
B. Municipal Value XX
C. Higher of [A] and [B] XX
D. Standard Rent, if any XX
E. Lower of [C] and [D] = [RLV] XX
Notes:
(I) If Standard Rent is not applicable, RLV is equal to Higher of Fair Rent
and Municipal Value
(II) While RLV cannot exceed standard rent, RLV, may, however, be lower
that the standard rent

2. Actual Rent (AR):- This is the actual rent received or receivable by the owner in
respect of a property which is actually let.
(i) Actual Rent is applicable only if the property is actually let. It is
irrelevant in case the property is not rented but is self-occupied or is
un-occupied or is deemed to be let.
(ii) Amount of Actual Rent would not include the amount of rent which
the owner cannot realise to the extent allowable under the Income-tax
Rules
(iii) Actual Rent is computed as below:-
Actual Rent Rs.
Rent Received/Receivable XX
Less:- Allowable Unrealised Rent XX
= (AR) XX



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Annual Value depends on use of Property:
Whether is property is let out entirely, or let out but remains vacant partly, or self-
occupied or un-occupied or is deemed to be let.

Deductions from House Property Income:

Standard Deduction:
A lumpsum amount equal to 30% of the Net Annual Value (NAV), can be deducted on
account of all expenses on property (repairs, collection charges, ground rent, insurance,
and so on except interest explained below). Such deduction is allowed on notional basis
irrespective of who (owner or tenant) bears the expenses or the amount of actual expenses
incurred.

Interest on Borrowed Capital:

Interest on Borrowed Capital is allowable as deduction on accrual basis. The capital must
be borrowed for the purpose of purchase, construction, repair, renewal or reconstruction
of the house property.

The deduction is allowed only in case of house property which is owned and is in the
occupation of the employee for his own residence. However, if it is not actually occupied
by the Assessee in view of his place of the employment being at other place, his
residence in that other place should not be in a building.

Following points should be kept in view:
As deduction is available on accrual basis, it should be claimed on yearly basis
even if the interest is not actually paid during the year.
Deduction is available even if neither the principal nor the interest is a charge on
property. Interest on unpaid interest is deductible.
No deduction is allowed for any brokerage or commission for arranging loan.
Interest on fresh loan taken to repay original loan is also allowable as deduction.
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The quantum of deduction allowed as per table below:
Sr.No Purpose of Borrowing Capital
Date of
Borrowing
Capital
Maximum
Deduction
allowable
1
Repair or renewal or
reconstruction of the house
Any time Rs.30,000/-
2
Acquisition or Construction of the
house
Before 01.04.1991 Rs.30,000/-

3
Acquisition or Construction of the
house
On or After
01.04.1991
Rs. 1,50,000/-



Amounts not deductible from House Property Income:

Any interest chargeable under the Act payable out of India on which tax has not been
paid or deducted at source and in respect of which there is no person in India who may be
treated as an agent, shall not be deducted in computing Income from House Property.

Expenditures not specified as specifically deductible. For instance, no deduction can be
claimed in respect of expenses on electricity, water supply, salary of liftman, etc.

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PROFITS AND GAINS OF BUSINESS OR PROFESSION

Income from Business or Profession:
The following incomes shall be chargeable under this head
Profit and gains of any business or profession carried on by the assessee at any time
during previous year.
Any compensation or other payment due to or received by any person, in connection
with the termination of a contract of managing agency or for vesting in the
Government management of any property or business.
Income derived by a trade, professional or similar association from specific services
performed for its members.
Profits on sale of REP licence/Exim scrip, cash assistance received or receivable
against exports, and duty drawback of customs or excise received or receivable
against exports.
The value of any benefit or perquisite, whether convertible into money or not, arising
from business or in exercise of a profession.
Any interest, salary, bonus, commission or remuneration due to or received by a
partner of a firm from the firm to the extent it is allowed to be deducted from the
firms income. Any interest salary etc. which is not allowed to be deducted u/s 40(b),
the income of the partners shall be adjusted to the extent of the amount so disallowed.
Any sum received or receivable in cash or in kind under an agreement for not
carrying out activity in relation to any business, or not to share any know-how, patent,
copyright, trade-mark, licence, franchise or any other business or commercial right of,
similar nature of information or technique likely to assist in the manufacture or
processing of goods or provision for services except when such sum is taxable under
the head capital gains or is received as compensation from the multilateral fund of
the Montreal Protocol on Substances that Deplete the Ozone Layer.
Any sum received under a Keyman Insurance Policy referred to u/s 10(10D).
35

Any allowance or deduction allowed in an earlier year in respect of loss, expenditure
or trading liability incurred by the assessee and subsequently received by him in cash
or by way of remission or cessation of the liability during the previous year.
Profit made on sale of a capital asset for scientific research in respect of which a
deduction had been allowed u/s 35 in an earlier year.
Amount recovered on account of bad debts allowed u/s 36(1) (vii) in an earlier year.
Any amount withdrawn from the special reserves created and maintained u/s 36 (1)
(viii) shall be chargeable as income in the previous year in which the amount is
withdrawn.
Expenses Deductible from Business or Profession:

Following expenses incurred in furtherance of trade or profession are admissible as
deductions.
Rent, rates, taxes, repairs and insurance of buildings.
Repairs and insurance of machinery, plat and furniture.
Depreciation is allowed on:
Building, machinery, plant or furniture, being tangible assets,
Know how, patents, copyrights, trademarks, licences, franchises or any other business
or commercial rights of similar nature, being intangible assets, acquired on or after
1.4.1998.
Unabsorbed Depreciation:-
Means the excess of the depreciation over the profits for the year. In such a case, the
depreciation amount is more than the profits of the relevant business.
Development rebate.
Development allowance for Tea Bushes planted before 1.4.1990.
Amount deposited in Tea Development Account or 40% profits and gains from
business of growing and manufacturing tea in India,
Amount deposited in Site Restoration Fund or 20% of profit, whichever is less, in
case of an assessee carrying on business of prospecting for, or extraction or
production of, petroleum or natural gas or both in India. The assessee shall get his
36

accounts audited from a chartered accountant and furnish an audit report in Form 3
AD.
Reserves for shipping business.
Scientific Research
Expenditure on scientific research related to the business of assessee, is deductible in
that previous year.
One and one-fourth times any sum paid to a scientific research association or an
approved university, college or other institution for the purpose of scientific research,
or for research in social science or statistical research.
One and one-fourth times the sum paid to a National Laboratory or a University or an
Indian Institute of Technology or a specified person with a specific direction that the
said sum shall be used for scientific research under a programme approved in this
behalf by the prescribed authority.
One and one half times, the expenditure incurred up to 31.3.2005 on scientific
research on in-house research and development facility, by a company engaged in the
business of bio-technology or in the manufacture of any drugs, pharmaceuticals,
electronic equipments, computers telecommunication equipments, chemicals or other
notified articles.
Expenditure incurred before 1.4.1998 on acquisition of patent rights or copyrights,
used for the business, allowed in 14 equal instalments starting from the year in which
it was incurred.
Expenditure incurred before 1.4.1998 on acquiring know-how for the business,
allowed in 6 equal instalments. Where the know-how is developed in a laboratory,
University or institution, deduction is allowed in 3 equal instalments.
Any capital expenditure incurred and actually paid by an assessee on the acquisition
of any right to operate telecommunication services by obtaining licence will be
allowed as a deduction in equal instalments over the period starting from the year in
which payment of licence fee is made or the year in which business commences
where licence fee has been paid before commencement and ending with the year in
which the licence comes to an end.
37

Expenditure by way of payment to a public sector company, local authority or an
approved association or institution, for carrying out a specified project or scheme for
promoting the social and economic welfare or upliftment of the public. The specified
projects include drinking water projects in rural areas and urban slums, construction
of dwelling units or schools for the economically weaker sections, projects of non-
conventional and renewable source of energy systems, bridges, public highways,
roads promotion of sports, pollution control, etc.
Expenditure by way of payment to association and institution for carrying out rural
development programmes or to a notified rural development fund, or the National
Urban Poverty Eradication Fund.
Expenditure incurred on or before 31.3.2002 by way of payment to associations and
institutions for carrying out programme of conservation of natural resources or a
forestation or to an approved fund for a forestation.
Amortisation of certain preliminary expenses, such as expenditure for preparation of
project report, feasibility report, feasibility report, market survey, etc., legal charges
for drafting and printing charges of Memorandum and Articles, registration expenses,
public issue expenses, etc. Expenditure incurred after 31.3.1988, shall be deductible
up to a maximum of 5% of the cost of project or the capital exployed, in 5 equal
instalments over five successive years.
One-fifth of expenditure incurred on amalgamation or demerger, by an Indian
company shall be deductible in each of five successive years beginning with the year
in which amalgamation or demerger takes place.
One-fifth of the amount paid to an employee on his voluntary retirement under a
scheme of voluntary retirement, shall be deductible in each of five successive years
beginning with the year in which the amount is paid.
Deduction for expenditure on prospecting, etc. for certain minerals.
Insurance premium for stocks or stores.
Insurance premium paid by a federal milk co-operative society for cattle owned by a
member.
Insurance premium paid for the health of employees by cheque under the scheme
framed by G.I.C. and approved by the Central Government.
38

Payment of bonus or commission to employees, irrespective of the limit under the
Payment of Bonus Act.
Interest on borrowed capital.
Provident and superannuation fund contribution.
Approved gratuity fund contributions.
Any sum received from the employees and credited to the employees account in the
relevant fund before due date.
Loss on death or becoming permanently useless of animals in connection with the
business or profession.
Amount of bad debt actually written off as irrecoverable in the accounts not including
provision for bad and doubtful debts.
Provision for bad and doubtful debts made by special reserve created and maintained
by a financial corporation engaged in providing long-term finance for industrial or
agricultural development or infrastructure development in India or by a public
company carrying on the business of providing housing finance.
Family planning expenditure by company.
Contributions towards Exchange Risk Administration Fund.
Expenditure, not being in nature of capital expenditure or personal expenditure of the
assessee, incurred in furtherance of trade. However, any expenditure incurred for a
purpose which is an offence or is prohibited by law, shall not be deductible.
Entertainment expenditure can be claimed u/s 37(1), in full, without any
limit/restriction, provided the expenditure is not of capital or personal nature.
Payment of salary, etc. and interest on capital to partners
Expenses deductible on actual payment only.
Any provision made for payment of contribution to an approved gratuity fund, or for
payment of gratuity that has become payable during the year.
Special provisions for computing profits and gains of civil contractors.
Special provision for computing income of truck owners.
Special provisions for computing profits and gains of retail business.
39

Special provisions for computing profits and gains of shipping business in the case of
non-residents.
Special provisions for computing profits or gains in connection with the business of
exploration etc. of mineral oils.
Special provisions for computing profits and gains of the business of operation of
aircraft in the case of non-residents.
Special provisions for computing profits and gains of foreign companies engaged in
the business of civil construction, etc. in certain turnkey projects.
Deduction of head office expenditure in the case of non-residents.
Special provisions for computing income by way of royalties etc. in the case of
foreign companies
Expenses deductible for authors receiving income from royalties
In case of Indian authors/writers where the amount of royalties receivable during a
previous year are less than Rs. 25,000 and where detailed accounts regarding
expenses incurred are not maintained, deduction for expenses may be allowed up to
25% of such amount or Rs. 5,000, whichever is less. The above deduction will be
allowed without calling for any evidence in support of expenses.
If the amount of royalty receivable exceeds Rs.25,000 only the actual expenses
incurred shall be allowed.

Set Off and Carry Forward of Business Loss:

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

However, loss in a speculation business can be adjusted only against profits of another
speculation business. Losses not adjusted in the same year can be carried forward to
subsequent years.

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CAPITAL GAINS

Any profits or gains arising from the transfer of capital assets effected during the
previous year is chargeable to income-tax under the head Capital gains and shall be
deemed to be the income of that previous year in which the transfer takes place. Taxation
of capital gains, thus, depends on following aspects
Capital assets
Transfer
Previous Year
Profits and gains


Capital Asset:

Capital Asset means property of any kind held by an assessee, whether or not connected
with his business or profession. Property may be tangible or intangible. Examples of
Capital Assets are Land, Building, Vehicles, Tenancy rights, Licences, Patents,
Trademark etc.


Transfers Resulting in Capital Gains

Sale or exchange of assets;
Relinquishment of assets;
Extinguishment of any rights in assets;
Compulsory acquisition of assets under any law;
Conversion of assets into stock-in-trade of a business carried on by the owner of
asset;
Handing over the possession of an immovable property in part performance of a
contract for the transfer of that property;
41

Transactions involving transfer of membership of a group housing society, company,
etc.., which have the effect of transferring or enabling enjoyment of any immovable
property or any rights therein ;
Distribution of assets on the dissolution of a firm, body of individuals or association
of persons;
Transfer of a capital asset by a partner or member to the firm or AOP, whether by
way of capital contribution or otherwise; and
Transfer under a gift or an irrevocable trust of shares, debentures or warrants allotted
by a company directly or indirectly to its employees under the Employees Stock
Option Plan or Scheme of the company as per Central Govt. guidelines.
Year of Taxability:

Capital gains form part of the taxable income of the previous year in which the transfer
giving rise to the gains takes place. Thus, the capital gain shall be chargeable in the year
in which the sale, exchange, relinquishment, etc. takes place.

Where the transfer is by way of allowing possession of an immovable property in part
performance of an agreement to sell, capital gain shall be deemed to have arisen in the
year in which such possession is handed over. If the transferee already holds the
possession of the property under sale, before entering into the agreement to sell, the year
of taxability of capital gains is the year in which the agreement is entered into.

In case of destruction or damage of a capital asset in fire, flood, riot, etc, and receipt of
any money or asset as insurance claim, the capital gain shall be chargeable to tax in the
year such money or asset is received.





42


Classification of Capital Gains:

Short Term Capital Gain

A capital assets held by the assessee for not more than 36 months (12 months in case of a
share held in a company or any other security listed in a recognized stock exchange in
India, or a unit of the UTI or of a mutual fund specified u/s 10(23D) ) immediately
preceding the date of its transfer is called as short term capital asset and capital gain
arising on its transfer is called short term capital gain.


Long Term Capital Gain:

A capital asset held by the assessee for more than 36 months (12 months in case of shares
held in a company or any other listed security or a unit of the UTI or of a specified
mutual fund) is called long-term capital asset and capital gain arising on its transfer is
called long-term capital gain



Period of Holding a Capital Asset:

Generally speaking, period of holding a capital asset is the duration for the date of its
acquisition to the date of its transfer. However, in respect of following assets, the period
of holding shall exclude or include certain other periods.





43

Computation of Capital Gains:

1. As certain the full value of consideration received or accruing as a result of the
transfer.
2. Deduct from the full value of consideration-
Transfer expenditure like brokerage, legal expenses, etc.,
Cost of acquisition of the capital asset/indexed cost of acquisition in case of
long-term capital asset and
Cost of improvement to the capital asset/indexed cost of improvement in
case of long term capital asset.
3. The balance left-over is the gross capital gain/loss.
4. Deduct the amount of permissible exemptions u/s 54, 54B, 54D, 54EC, 54ED, 54F,
54G and 54H.
5. The balance is the net capital gain/loss, chargeable to tax.

Full Value of Consideration:

This is the amount for which a capital asset is transferred. It may be in money or moneys
worth or combination of both. For instance, in case of a sale, the full value of
consideration is the full sale price actually paid by the transferee to the transferor. Where
the transfer is by way of exchange of one asset for another or when the consideration for
the transfer is partly in cash and partly in kind, the fair market value of the asset received
as consideration and cash consideration, if any, together constitute full value of
consideration.

In case of damage or destruction of an asset in fire flood, riot etc., the amount of money
or the fair market value of the asset received by way of insurance claim, shall be deemed
as full value of consideration.



44


Transfer Expenses:
Transfer expenses include brokerage paid for arranging the deal, legal expenses incurred
for preparing conveyance deed and other documents, cost of inserting advertisement in
newspaper for sale of the asset and commission paid to auctioneer.

Cost of Acquisition:

Cost of acquisition is the amount for which the capital asset was originally purchased by
the assessee.

Cost of acquisition of an asset is the sum total of amount spent for acquiring the asset.
Where the asset is purchased, the cost of acquisition is the price paid. Where the asset is
acquired by way of exchange for another asset, the cost of acquisition is the fair market
value of that other asset as on the date of exchange.

Any expenditure incurred in connection with such purchase, exchange or other
transaction e.g. brokerage paid, registration charges and legal expenses, is added to price
or value of consideration for the acquisition of the asset. Interest paid on moneys
borrowed for purchasing the asset is also part of its cost of acquisition.

Where capital asset became the property of the assessee before 1.4.1981, he has an option
to adopt the fair market value of the asset as on 1.4.1981, as its cost of acquisition.

Cost of Acquisition of Property received by way of Gift:

Where any property received by an individual or HUF, on or after 01.10.2009 [or any
share received by a firm/private company/ closely held public company on or after
01.06.2010], without consideration or for inadequate consideration, is taxed as income of
the recipient u/s. 56 (2) (vii), the cost of acquisition of such property shall be the amount
subjected to tax under said section.
45


Cost of Improvement:

Cost of improvement means all capital expenditure incurred in making additions or
alterations to the capital assets, by the assessee. Betterment charges levied by municipal
authorities also constitute cost of improvement. However, only the capital expenditure
incurred on or after 1.4.1981, is to be considered and that incurred before 1.4.1981 is to
be ignored.

In case of intangible assets like goodwill, right to manufacture, etc. cost of improvement
shall be nil.

Indexed cost of Acquisition/Improvement:

For computing long-term capital gains, Indexed cost of acquisition and Indexed cost of
Improvement are required to be deducted from the full value of consideration of a capital
asset. Both these costs are thus required to be indexed with respect to the cost inflation
index pertaining to the year of transfer.

Accordingly, Indexed Cost of Acquisition and Indexed Cost of Improvement shall be
computed as under:

Indexed Cost of = Cost of Acquisition X Cost of Inflation Index
Acquisition for the year of transfer
Cost Inflation Index for the year of acquisition
Or 1981-82, whichever is later

Indexed Cost of = Cost of Improvement X Cost Inflation Index
Improvement for the year of transfer
Cost Inflation Index for the year of
Improvement
46

It may further be noted that where additions/alterations to a capital asset had taken place
over a number of years, then indexed cost of improvement, for each year in which there
was an additional/alteration, shall be worked out separately and then aggregated to arrive
at the Total Indexed Cost of Improvement, in respect of that asset.

Rates of Tax on Capital Gains:

Short-term Capital Gains
Short-term Capital Gains are included in the gross total income of the assessee and after
allowing permissible deductions under Chapter VI-A. Rebate under Sections 88, 88B and
88C is also available against the tax payable on short-term capital gains.

Long-term Capital Gains
Long-term Capital Gains are subject to a flat rate of tax @ 20% However, in respect of
long term capital gains arising from transfer of listed securities or units of mutual
fund/UTI, tax shall be payable @ 20% of the capital gain computed after allowing
indexation benefit or @ 10% of the capital gain computed without giving the benefit of
indexation, whichever is less.

Capital Loss:

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





47

Set Off and Carry Forward of Capital Loss

Any short-term capital loss can be set off against any capital gain (both long-term
and short term) and against no other income.
Any long-term capital loss can be set off only against long-term capital gain and
against no other income.
Any short-term capital loss can be carried forward to the next eight assessment
years and set off against capital gains in those years.
Any long-term capital loss can be carried forward to the next eight assessment
year and set off only against long-term capital gain in those years.

Capital Gains Exempt from Tax:

Capital Gains from Transfer of a Residential House

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

Capital Gains from Transfer of Agricultural Land

Any capital gain arising from transfer of agricultural land, shall be exempt from tax, if
the assessee purchases within 2 years from the date of such transfer, any other
agricultural land. Otherwise, the amount can be deposited under Capital Gains Accounts
Scheme, 1988 before the due date for furnishing the return.




48


Capital Gains from Compulsory Acquisition of Industrial Undertaking

Any capital gain arising from the transfer by way of compulsory acquisition of land or
building of an industrial undertaking, shall be exempt, if the assessee
purchases/constructs within three years from the date of compulsory acquisition, any
building or land, forming part of industrial undertaking. Otherwise, the amount can be
deposited under the Capital Gains Accounts Scheme, 1988 before the due date for
furnishing the return.

Capital Gains from an Asset other than Residential House

Any long-term capital gain arising to an individual or an HUF, from the transfer of any
asset, other than a residential house, shall be exempt if the whole of the net consideration
is utilized within a period of one year before or two years after the date of transfer for
purchase, or within 3 years in construction, of a residential house.

If however, only a part of net consideration is so utilised, the amount of exemption shall
be equal to:

Capital Gains X Cost of New Residential House
Amount of Net Consideration

Further, if the amount cannot be so utilised before filing the return, then in order to avail
of the exemption, it may be deposited under the Capital Gains Accounts Scheme 1988
before the due date for filing the return.





49

Tax Planning for Capital Gains

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

Assessees having income below Rs. 5,00,000 should go for short-term capital gain
instead of long-term capital gain, since income up to Rs. 5,00,000 is taxable @ 10%
whereas long-term capital gains are taxable at a flat rate of 20%. Those having income
above Rs. 8,00,000 should plan their capital gains vice versa.

Since long-term capital gains enjoy a concessional treatment, when total income is above
Rs. 8,00,000 the assessee should so arrange the transfers of capital assets that they fall in
the category of long-term capital assets.

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

The assessee should take the maximum benefit of exemptions available u/s 54, 54B, 54D,
54ED, 54EC, 54F, 54G and 54H.

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

Since the income of the minor children is to be clubbed in the hands of the parent, it
would be better if the minor children have no or lesser recurring income but have income
from capital gain because the capital gain will be taxed at the flat rate of 20% and thus
higher slab rate shall not be attracted in case of parent, as a result of clubbing.

50

INCOME FROM OTHER SOURCES

Other Sources

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

Illustrative List

Following is the illustrative list of incomes chargeable to tax under the head Income from
Other Sources:
(i) Dividends
Any dividend declared, distributed or paid by the company to its shareholders is
chargeable to tax under the head Income from Other Sources, irrespective of the fact
whether shares are held by the assessee as investment or stock in trade. Dividend is
deemed to be the income of the previous year in which it is declared, distributed or paid.
However interim dividend is deemed to be the income of the year in which the amount of
such dividends unconditionally made available by the company to its shareholders.

However, any income by way of dividends is exempt from tax u/s 10(34) and no tax is
required to be deducted in respect of such dividends.

(ii) Income from machinery, plant or furniture belonging to the assessee and let on hire, if
the income is not chargeable to tax under the head Profits and gains of business or
profession;
51


(iii) Where an assessee lets on hire machinery, plant or furniture belonging to him and
also buildings, and the letting of the buildings is inseparable from the letting of the said
machinery, plant or furniture, the income from such letting, if it is not chargeable to tax
under the head Profits and gains of business or profession;

(iv) Any sum received under a Keyman insurance policy including the sum allocated by
way of bonus on such policy if such income is not chargeable to tax under the head
Profits and gains of business or profession or under the head Salaries.

(v) Where any sum of money exceeding twenty-five thousand rupees is received without
consideration by an individual or a Hindu undivided family from any person on or after
the 1st day of September, 2004, the whole of such sum, provided that this clause shall not
apply to any sum of money received
(a) From any relative; or
(b) On the occasion of the marriage of the individual; or
(c) Under a will or by way of inheritance; or
(d) In contemplation of death of the payer.

(vi) Any sum received by the assessee from his employees as contributions to any
provident fund or superannuation fund or any fund set up under the provisions of the
Employees State Insurance Act. If such income is not chargeable to tax under the head
Profits and gains of business or profession

(vii) Income by way of interest on securities, if the income is not chargeable to tax under
the head Profits and gains of business or profession. If books of account in respect of
such income are maintained on cash basis then interest is taxable on receipt basis. If
however, books of account are maintained on mercantile system of accounting then
interest on securities is taxable on accrual basis.


52

(viii) Other receipts falling under the head Income from Other Sources:
Directors fees from a company, directors commission for standing as a
guarantor to bankers for allowing overdraft to the company and directors
commission for underwriting shares of a new company.
Income from ground rents.
Income from royalties in general.
Agricultural income from a place outside India
Insurance commission
Income from undisclosed sources

Deductions from Income from Other Sources:

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

1. In the case of dividend income and interest on securities: any reasonable sum paid by
way of remuneration or commission for the purpose of realizing dividend or interest.

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

3. In the case of income from machinery, plant or furniture let on hire:
(a) Repairs to building
(b) Current repairs to machinery, plant or furniture
(c) Depreciation on building, machinery, plant or furniture
(d) Unabsorbed Depreciation.

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

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CHAPTER 4
DEDUCTIONS FROM TAXABLE INCOME
Deduction under section 80C
Deduction under section 80CCC
Deduction under section 80D
Deduction under section 80DD
Deduction under section 80DDB
Deduction under section 80E
Deduction under section 80EE
Deduction under section 80G
Deduction under section 80GG
Deduction under section 80GGA
Deduction under section 80U

54

Deduction and Net Income
A number of deductions under Chapter VI-A i.e. Sections 80C to 80U are allowed from
the gross total income. These deductions are allowed to certain specified tax-payers, in
relation to certain specified incomes or expenditure or investments or donation. These
deductions have to be made from the gross total income, in order to arrive at net
income/taxable income.

80C
Deduction is allowed for the amount paid or deposited by the assessee during the
previous year in specified schemes (given below), subject to a maximum of Rs.
1,00,000/-
Following investments are included in this section:
1. Life Insurance premium for policy :
a. In case of individual, on life of assessee, assessees spouse and any child
of assessee
b. In case of HUF, on life of any member of the HUF
2. Sum deducted from salary payable to Government servant for securing deferred
annuity or making provision for his wife/children [qualifying amount limited to
20% of salary]
3. Contribution by an individual, made under Employees Provident Fund Scheme.
4. Contribution to Public Provident Fund Account in the name of:
(i) In case of individual, such individual or his spouse or any child of such
individual
(ii) In case of HUF, any member thereof.

5. Contribution by an employee to a recognized provident fund
6. Contribution by an employee to an approved superannuation fund.
7. Tuition fees (excluding development fees, donations, etc.) paid by an individual
to any university, college, school or other educational institution situated in India
for full time education of any 2 of his/her children.
8. Certain payments for purchase/construction of residential house property.
55

9. Sum paid towards notified annuity plan of LIC or other insurer
10. 5 year term deposit in an account under the Post Office Time Deposit Rules,
1981

Deduction under section 80CCC
Deduction in respect of contribution to certain Pension Funds:
Deduction is allowed for the amount paid or deposited by the assessee during the
previous year out of his taxable income to the annuity plan (Jeevan Suraksha) of Life
Insurance Corporation of India or annuity plan of other insurance companies for
receiving pension from the fund referred to in section 10(23AAB)
Amount of Deduction: Maximum Rs. 1,00,000/-

Deduction under section 80D
Deduction in respect of Medical Insurance Premium:
Deduction is allowed for any medical insurance premium under an approved scheme of
General Insurance Corporation of India popularly known as MEDICLAIM) or of any
other insurance company, paid by cheque, out of assessees taxable income during the
previous year, in respect of the following
In case of an individual insurance on the health of the assessee, or wife or husband, or
dependent parents or dependent children.
In case of an HUF insurance on the health of any member of the family

Amount of deduction:
(I) In case of Individual assessee:
For insurance on health of self, spouse and dependent children
Maximum Rs.15,000 (Rs. 20,000 in case any person insured is a senior
citizen)

For insurance on health of any parent or parents Maximum Rs.15,000
(Rs.20,000 in case any person insured is a senior citizen)
56

(II) In case of an HUF the maximum deduction is Rs.15,000 (Rs.20,000 in
case any person insured is a senior citizen).

Deduction under section 80DD
Deduction in respect of maintenance including medical treatment of handicapped
dependent:

Deduction is allowed in respect of any expenditure incurred by an assessee, during the
previous year, for the medical treatment training and rehabilitation of one or more
dependent persons with disability; and

Amount deposited, under an approved scheme of the Life Insurance Corporation or other
insurance company or the Unit Trust of India, for the benefit of a dependent person with
disability.

Amount of deduction:
The deduction allowable is Rs. 50,000 (Rs. 1,00,000 in case of severe disability) in
aggregate for any of or both the purposes specified above, irrespective of the actual
amount of expenditure incurred.

Deduction under section 80DDB
Deduction in respect of medical treatment
A resident individual or Hindu Undivided family deduction is allowed in respect of
during a year for the medical treatment of specified disease or ailment for himself or a
dependent or a member of a Hindu Undivided Family.

Amount of Deduction :
(a) Does not exceed Rs. 40,000 (the whole of such amount)
(b) Exceeds Rs. 40,000
57

Where the amount actually paid is in respect of the assessee or his dependent or any
member of a HUF of the assessee and who is a senior citizen, the ceiling limit of
deduction is Rs.60,000, instead of Rs.40,000


Deduction under section 80E
Deduction in respect of Repayment of Loan taken for Higher Education
An individual assessee who has taken a loan from any financial institution or any
approved charitable institution for the purpose of pursuing his higher education i.e. full
time studies for any graduate or post graduate course in engineering medicine,
management or for post graduate course in applied sciences or pure sciences including
mathematics and statistics.

Amount of Deduction:
Any amount paid by the assessee in the previous year, out of his taxable income, by way
of repayment of loan or interest on such loan, without any limit.

Deduction under section 80EE [Only during A.Y.2014-15 & 2015-16]
Deduction in respect of Acquisition of Residential House
Individual can claim benefit under this section only when all the following conditions are
satisfied, these are
Purchase should be first time buyer i.e has never purchased any house and now
he is going to purchase a houe.
Value of the house should not be more than 40 lacs.
Loan taken by individual for the purpose of buying a house should not be more
than 25 lacs.
On the date of sanction of loan individual does not have any own residential
house property.
Loan for this purpose taken by individual should be from the Financial Institution
or Housing Finance Company.
For this purpose, loan should be sanctioned between 01.04.2013 to 31.03.2014
58


Amount of Deduction:
Asseessee can take deduction u/s. 80EE on interest payable on home loan upto 1 lac in
A.Y. 2014-15. It can claim deduction in two assessments year. Means if whole amount of
interest payable upto 1 lac is not claimed as deduction in A.Y. 2014-15 then remaining
balance amount upto 1 lac can claim as deduction in A.Y. 2015-16. Total deduction
under this section shall not be more than 1 lakh.

Example:- Assessee has taken a loan for the purpose of residential house property &
interest payable on loan Rs.90,000/- for the A.Y. 2014-15. In this case assessee can claim
deduction Rs.90,000/- in A.Y. 2014-15 and other remaining balance i.e. Rs. 10,000/-, can
claim in A.Y. 2015-16.

Deduction under section 80G

Donations:
Not Limited to 10% of GTI ; @ 100% of Donation Made
Prime Ministers National Relief Fund, Armenia Earthquake Relief Fund, Africa Fund,
National Foundation of Communal Harmony, Chief Ministers earthquake Relief Fund ,
Any University or any educational institution of national eminence approved by the
prescribed authority, National Sports Fund, National Cultural Fund etc.

Not Limited To 10% of GTI ; @ 50% of Donation Made
Jawaharlal Nehru Memorial Fund, Prime Ministers Drought Relief Fund, National
Childrens Fund, Indira Gandhi Memorial Trust etc.

Limited to 10% of Adj. GTI ; @ 100% of Donation Made
Government or any local authority or an approved institution or association
By a company to the Indian Olympic Association or to an institution notified U/s. 10(23)
for the development of infrastructure for sports and games in India.

59

Limited to 10% of Adj. GTI ; @ 50% of Donation Made
Government or Local Authority to be utilised for any charitable purposes other than the
purpose of family planning.
Any notified temple, mosque, gurudwara, church or other place of historic or a place of
public worship of renown throughout any state for its renovation or repair.


Deduction under section 80GG
Deduction in respect of Rent Paid:
Any assessee including an employee who is not in receipt of H.R.A. u/s 10(13A)
Amount of Deduction: Least of the following amounts are allowable:
Rent paid minus 10% of assessees total income
Rs. 2,000 p.m.
25% of total income
Total Income = Gross total income minus Capital gains, short term capital gains
under section 111A , deductions under section 80C to 80U (other than 80GG) and
income under section 115A .

Deduction under section 80GGA
Deduction in respect of certain donations for scientific, social or statistical research or
rural development programme or for carrying out an eligible project or National Urban
Poverty Eradication Fund shall be allowed

Deduction Amount:
100% of Donations or contributions made

No deduction shall be allowed if contribution is paid in cash in excess of Rs.10,000




60


Deduction under section 80U
A resident individual who, at any time during the previous year, is certified by the
medical authority to be a person with disability [as defined under Persons with
Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act 1995].
Deduction Amount:
Rs.50,000 (Rs.1,00,000 in case of severe disability)














61


CHAPTER 5
COMPUTATION OF TAX LIABILITY
Tax Rates for A.Y. 2014-15
Filing of Income Tax Return

62

Tax Rates for A.Y. 2014-15
Following rates are applicable for computing tax liability for the current Financial Year
ending on March 31 2014, (Assessment Year 2014-15).
Table 1: Income Tax Slab for Individuals who are below than 60 years of age
Net Income Range Income Tax Plus Surcharge
Plus Education
Cess
Income Up to Rs.
2,00,000
Nil Nil Nil
Income from Rs.
2,00,000 to
Rs. 5,00,000
10% of Income
above Rs. 2,00,000
Less: Tax Credit -
10% of taxable
income up to
Rs.2000/- maximum
Nil 3% of Income Tax
Income from Rs.
5,00,001 to
Rs. 10,00,000
Rs. 30,000 + 20% of
Income above Rs.
5,00,000
Nil 3% of Income Tax
Income above Rs.
10,00,000
Rs. 1,00,000 + 30%
of Income above Rs.
10,00,000
Nil 3% of Income Tax

Note:- Surcharge will be applicable @10% when total taxable income in over 1 crore.








63


Table 2: Income Tax Slab for Individuals who are 60 years or over 60 years but
below 80 years of age
Net Income Range Income Tax Plus Surcharge
Plus Education
Cess
Income Up to Rs.
2,50,000
Nil Nil Nil
Income from Rs.
2,50,000 to
Rs. 5,00,000
10% of Income
above Rs. 2,50,000
Nil 3% of Income Tax
Income from Rs.
5,00,000 to
Rs. 10,00,000
Rs. 25,000 + 20% of
Income above Rs.
5,00,000
Nil 3% of Income Tax
Income above
Rs. 10,00,000
Rs. 1,00,000 + 30%
of Income above Rs.
10,00,000
Nil 3% of Income Tax

Note:- Surcharge will be applicable @10% when total taxable income in over 1 crore.


Table 3: Income Tax slab for Individuals who are over 80 years of age
Net Income Range Income Tax Plus Surcharge
Plus Education
Cess
Income Up to Rs.
5,00,000
Nil Nil Nil
Income from Rs.
5,00,000 to
Rs. 10,00,000
20% of Income
above Rs. 5,00,000
Nil 3% of Income Tax
Above Rs.
10,00,000
Rs. 1,00,000 + 30%
of Income above Rs.
10,00,000
Nil 3% of Income Tax

Note:- Surcharge will be applicable @10% when total taxable income in over 1 crore.
64


Filing of Income Tax Return

1. Filing of income tax return is compulsory for all individuals whose gross annual
income exceeds the maximum amount which is not chargeable to income tax i.e.
Rs. 2,00,000 for Individuals (Other than specified individuals) and Hindu
Undivided Families for Senior Citizens who is of the age of 60 years but below
80 years Rs. 2,50,000 and for Individual, being Resident in India who is of the
age of 80 years or more.

2. The last date of filing income tax return in case of individuals is July 31
st
every
year as per Section 139 (1) on or before due date.

3. If the income includes Business or Professional income requiring tax audit (for
Business limit increased to Rs.1 Crore and for Professional it is Rs.25 lacs), the
last date for filing the return is 30
th
September.

4. What is the Penalty if some one failed to filed his return by due date ? [Section
139(1)]
In fact there is no penalty as such for this fault, absolutely no penalty.
Specific penalty for late filing of return is prescribed u/s. 271F which is
briefed here under.
Say For example for previous year 2013-14, assessment year is 2014-15
and it will ends on 31.03.2015, means there is no penalty for late filing of
income tax return up to 31.03.2015 and after that Assessing Officer (AO)
can impose a penalty of Rs.5,000 and that is also his (AO) which he may
or may not exercise after giving due hearing to the assessee.


65

CHAPTER 6
TAX PLANNING - RECOMMENDATIONS AND USEFUL TIPS
Tax Planning
Income Tax and Investment Tips for 2013
o Income Tax file for one and all
o Plan for your minor children
o Real Estate Strategy
o Salaries and Perquisites
o Tax Planning relating to Capital Gain
o Keep your eyes and ears open for DTC
o Time to vigorously think of investments in NPS
o New Life Insurance Policies for your family
o Rajiv Gandhi Equity Savings Scheme
o Your 360 Degree Watch

66

Tax Planning

Tax planning is one of the most important aspects of personal finance. People often fail to
look at tax planning objectively and straight away start making investments related to tax
saving. Also they often tend to mix tax planning and investment planning, which are
totally different and are made with varying objective.
Insurance for long has been the front-runner whenever investments regarding tax savings
are considered. Life insurance is not an investment option but a financial tool, which
protects from any unforeseen eventualities. Buying excessive insurance however leads to
holding unnecessary products.
Savings under section 80C can be broadly classified as investment based and non-
investment based.
Provident Fund (PF), Public Provident Fund (PPF), Employees' Provident Fund (EPF),
National Savings Certificates (NSC), National Pension System (NPS), Fixed deposit (FD)
and Equity Linked Savings Scheme (ELSS)come are investment based savings; while
principal repayment of home loan, tuition fee are non-investment based.
Before making investments related to tax saving it is always important that the
individuals must analyse their risk appetite, and determine the percentage of debt and
equity exposure they are comfortable with. Then they can match these percentages of
debt and equity while investing in the available tax saving investments.
Since the risk appetite, liquidity needs and current portfolio of every individual are
different, making investments based on just returns is not advisable.



67

TAX PLANNING AGE-WISE
23-30
This is generally starting phase of the career for most of the professionals, and therefore
is the right time to start saving for the future. The investments made during this phase
should have a long-term investment horizon. Starting to save and investing for retirement
will give an edge if started at early age because of power of compounding.
Investing in a mix of ELSS and pension-related schemes like EPF, NPS or EPF is a good
option for professionals of this age group. By doing so, they ensure that they plan for
their retirement from an early age. It also provides the advantage of providing equity
exposure to their retirement fund.
It is also advisable for the professionals of this age group to get required life insurance
cover and health insurance cover. They can take the advantage of low premium rates if
they start during this age. Avoid falling in the trap of endowment plans and unit linked
insurance plans.
31-36
During this phase, most of the professionals can generally take advantage of avenues of
tax savings other than investments. Contribution to provident fund by self and employer,
required life insurance cover for self and family form the major portion of 80C. Tuition
fee of the children can also be claimed under the same section.
The average age of an Indian home buyer is 30. Most of the professionals in this age
group can take advantage of tax savings related to a home loan. They can claim the
principal repayment under section 80C and interest repayment under section 24B. For
couples who are both liable to pay tax, it is advisable to take the home loan on a joint
account.
It is also advisable to take required health insurance cover for self and family which
would account for section 80D.
68

For professionals who can still make investments under 80C, they should chalk out the
goals they want to achieve and their respective timelines, before making any tax related
investments. Then based on their risk appetite and time horizon, they can invest in
relevant tax saving investments. Avoid over doing tax-saving investments.
36-45
Non-investment related tax savings will play a major role in tax planning even during this
phase. Principal repayment on existing home loan, employer and self-contribution for PF,
tuition fee of children and life insurance cover for self and family, account for more than
1 lakh under section 80C. So professionals in this age group need not make any
investments for tax saving. In case they have an option to invest in 80C they can opt for
investments pertaining to retirement. They can even claim the interest repayment of home
loan under section 24B and health insurance premium being paid for self and family
under section 80D.
This is also time for the professionals to undo the past mistakes they had made regarding
tax savings. They should assess all their existing tax saving investments and assess the
pros and cons of holding them. It is also important that they avoid over doing tax saving
investments. They should assess all their expenditures and identify the expenses which
are eligible for tax savings. This gives them a fair bit of idea whether they have to make
investments or not.
46-60
This is generally the peak earnings phase of the professionals. Most of them try to pay off
their existing debts and channelize their income towards savings for retirement. The same
factors of home loan, tuition fee and PF account for majority of the tax savings. Most of
the professionals do not opt for health insurance other than the one provided by their
organisations. But getting a health insurance at age 60, or after retirement, is an uphill
task. Most of the service providers have a cut-off age of 60. So if have not got a health
insurance by now, get one. This can be claimed under section 80D.
69

The cut-off age for opening a PPF account is also 60. If they do not have a PPF account
by now, it is advisable to start one, as 60 years is the cut-off for opening a PPF account.
In case, they have to make investments, they can choose any of the debt products related
to retirement. Avoid buying excessive insurance or tax-saving investments.
60 Years
Capital protection should be the motto of the investments being made after retirement.
All investments should be in debt. Retired employees looking for timely pay outs
(monthly or quarterly) can consider investing in senior citizen saving schemes (SCSS).
Since SCSS is backed by government, it provides high security for your capital which is
essential for post-retirement investments.













70

INCOME TAX AND INVESTMENT TIPS FOR 2013
Let us all welcome the year 2013 with varied ideas to bring home tax planning for you
and your family and also take you through Investment Strategies for investing your
money. The following are important Tax and Investment Tips for the year 2013 will
surely help you to achieve your desired results :
1) Income-tax file for one and all
It is time now for every tax payer of the country to make a resolution to have a
separate independent Income-tax File for every member in the family. The objective
of this is to achieve tax planning and cut down on your income-tax payments. Firstly
think of your wife and if she does not have till now a separate independent Income-
tax File, then start of having such independent Income-tax File for your wife. The
concept of gift and loans in the name of your wife will help you to achieve this.
However, do remember that your wife can receive gift from any relative other than
her husband, her father in law and her mother in law. However, wife is free to take
loan with reasonable interest from anyone including the husband. Similarly adopt the
concept of gifting your major children and start having separate independent Income-
tax File for your major children.

2) Plan for your minor children
If you are having a minor child or a grand child, plan right now the different
strategies for the safety and security of your minor child in particular. If you want to
have lots of income and wealth in the name of the minor child and would still like no
clubbing of the income of the minor child, then it is time now to think of creating a
separate independent hundred per cent Specific Beneficiary Trust in the name of
the minor child based on the principles enunciated by the various courts of India
including the Supreme Court of India so that the income of the minor child with
special terms and conditions mentioned in the Trust Deed is not clubbed with the
income of the parents. It is also possible for you to think of starting a PPF account in
the name of the minor child for his or her safety and also do not forget to take out
71

Life Insurance Policies specially in the name of your minor child which will help the
process of investment strategy in the years to come for the safety, security of your
loving children.

3) Real Estate Strategy
In the year 2013 in case you are thinking of buying your sweet home, then at that
point of time do consider various vistas of tax and investment planning and then only
take a decision to buy the property in the name of a particular member of the family.
Generally speaking, it will be worthwhile to buy the property in joint names so as to
reap the full fruits of tax and investment planning. Please do note that every co-
owner of the property will enjoy a separate deduction of interest on housing loan up
to Rs. 1,50,000 per annum and would also enjoy deduction in respect of repayment
of the housing loan and plan now for your Real Estate to grow. Simultaneously, do
not forget to keep in mind the provisions of the Wealth Tax Law so as to take care of
wealth tax liability in respect of Real Estate or plan your wealth tax matter in such a
manner that keeping in view the provisions contained in the Wealth-tax Law wealth-
tax is not attracted on your Real Estate investment. It would also be a good idea to
think of Rental Real Estate investment with the basic aim of getting a fixed secured
rental income and lower tax incidence which is made possible through the special tax
deduction at the rate of 30 per cent available for repairs etc.

4) Salaries and Perquisites
We pray to the Almighty God to give you a good rise in your salary package in the
year 2013. It may also be possible that you might be thinking of changing your job.
In all situations namely when you get a good rise in salary or when you shift your
service, then in both these situations do take care with regard to income-tax
provisions contained in the Income-tax Law to save tax on your salary and
perquisites. Study in greater detail the provisions contained specially in Income-tax
Rules to get hold various of tax free allowances and perquisites for you during the
year 2013. It is time now for you to even design your salary package and finally keep
a strict watch on the comparatively recent new circular of the Central Board of Direct
72

Taxes dealing with various aspects connected with taxation of salary income which
will help you to save your taxes. Likewise, while you make contribution in the year
2013 to Provident Fund, please keep a strict watch during the year because the
definition of salary for the purposes of Provident Fund is expected to be amended.
Hence, your contribution as well as the contribution of your employer during the
year 2013 has to be definitely in tune with the new provisions based on the change of
the definition of salary.
5) Tax Planning relating to Capital Gain
If in the year 2013 you are going to receive certain amount by way of Capital Gain,
then before making your decision to sell your assets, find out in the first place
whether the gain arising to you is a Short-term Capital Gain or is it a Long-term
Capital Gain because generally speaking, if you hold the asset for more than thirty
six months, only then the gain becomes Long-term Capital Gain and is eligible to
various concessions and deductions. Reversely, if the gain happens to be a Short-
term Capital Gain, then there is no advantage at all in most cases. However, the
shares and mutual funds if sold after holding it for more than twelve months,
becomes a Long-term Capital Gain and less than that is a Short-term Capital Gain.
Therefore, during the year 2013 at any point of time whenever you are contemplating
to sell a particular asset, firstly sit down and calculate the period of holding. It is
even possible that just postponing your sale to couple of months later or in some
cases couple of days later may enable you to get full advantage of Long-term Capital
Gain. Hence, do not sell the asset till you calculate the tax impact thereon. Also take
care to save your Long-term Capital Gains either by investing in Capital Gain Bonds
or in a residential property or finally investing in shares of certain new companies
which are micro and small enterprises so that your tax liability with reference to
Long-term Capital Gain becomes a big zero.

6) Keep your eyes and ears open for DTC
All tax payers should keep a watch over the changes which are going to be proposed
through the Direct Taxes Code. We are not sure whether the Direct Taxes Code or
DTC will be presented in the year 2013 but going by the common expectations one
73

can reasonably come to a conclusion that during the year 2013 Direct Taxes Code
may be introduced in the Parliament which will completely result into makeover of
the Income-tax Act, 1961. Hence, we should carefully peep into all the intricate
provisions contained in the Direct Tax Code so that we can plan our tax and
investment strategy for the years to come keeping in view the proposed amendments
introduced in the tax laws of the country through the Direct Taxes Code. The
investment strategy for you and your family will have to be geared up with new
dimension specially after the coming into operation of the Direct Taxes Code. As
soon as the Direct Taxes Code is presented it would be a good idea to forget all about
the Income-tax Act and to concentrate on the deep study of the new Direct Taxes
Code. As soon as the new Code is presented, all the tax payers of India must
carefully screen the new provisions and should plan their strategy and tax planning in
the years to come.
7) Time to vigorously think on investments in NPS
Please focus your investment strategy for the year 2013 on investment vistas
connected with New Pension Scheme. Although by now the New Pension Scheme
popularly known as NPS is into operation for the last couple of years. However, still
now NPS investment has not become the darling of tax payers of India. However, it
is time now to show your love and affection to the investment in new Pension
Scheme. It is time now for you to study the new provisions in greater detail and try
to open separate NPS account for different members in your family. For those tax
payers who are having high income and wealth, it is recommended that two tier
account in NPS should also be obtained. Finally if you are going to complete sixty
years of age during the year 2013, then you should be more careful to immediately
open NPS account in your name. This is mainly because of the fact that once you
have completed sixty years of age, you cannot open a new NPS Account. Please note
that after sixty years of age one cannot go in for opening an NPS account. But if you
have already opened NPS account, then you can continue contributing in the said
account. Hence, in the year 2013 you should aim at bringing NPS as a preferred tool
of investment in your family.
74

8) New Life Insurance Policies for your family
Are you adequately insured ? Let this question be asked by every adult income-tax
payer in his family. I would like every tax payer to take care of securing his family
during the year against calamity. One of the best way to protect the family is to
adequately insure all the family members. It is time now for you not just to count
your Life Insurance Policies for different members in the family but to sit down and
ponder whether all the family members are adequately insured. In most cases I am
sure the answer that will come in conclusion would be that most of the family
members are not adequately insured. Hence, during the year 2013 please take a call
to answer the question whether you and your family members are adequately insured.
Do not forget to take an insurance policy for your dear loving daughter too.


9) Rajiv Gandhi Equity Savings Scheme
For all those tax payers who have never had any exposure in the stock market let the
year 2013 be their first year for investing in the stock market. Firstly the action plan
to enter into the stock market would be to open a Demat Account in your name. To
inspire all those who have never had any exposure in the stock market tax incentive
is being made available in the Income-tax Law in terms of the provision contained in
section 80CCG whereby first time investors in the stock market can go in for making
investment up to Rs. 50,000 and enjoy a tax deduction equal to 50 per cent of such
investment. Thus, tax saving can be made by taking an exposure to Rajiv Gandhi
Equity Investment Scheme and thereby cutting down your tax payment by Rs. 2,500
to Rs. 5,000.







75



10) Your 360 Degree Watch
All those who are big spenders should be very careful in the year 2013 because
Government is going to keep a strict 360 Degree watch on such spenders because the
Income-tax Department has been collecting data in respect of its 360 Degree High
Profile Spenders. It may be noted that there is no problem in your spending the
money for the purpose which you like. But what is relevant is that you should have
adequate sources and resources to prove the spending by you. Hence, in the year 2013
do keep records and details of high spending by you in different vistas so that if the
tax radar comes to you, you can adequately answer about the spending by you either
on holidays or on big purchase of assets etc.























76





CONCLUSION


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

77



BIBLIOGRAPHY


Books:
Dr. Vinod K. Singhania (2013), Students Guide to Income Tax, Taxman
Publications, New Delhi
Income Tax Ready Reckoner A.Y. 2014-15, TaxMann Publications, New Delhi
Ainapure & Ainapure Direct & Indirect Taxes A.Y. 2014-15, Manan Prakashan
Nabis Income Tax Guidelines & Mini Ready Reckoner A.Y. 2013-14 & 2014-15 ,
A Nabhi Publication

Websites:
www.Incometaxindia.gov.in
www.taxguru.in
www.moneycontrol.com
www.google.com