Beruflich Dokumente
Kultur Dokumente
SEMESTER- III
ACADEMIC YEAR:2015-16
SUBMITTED BY
MISS. POOJA MAURYA
ROLL NO: 17
SEMESTER- III
ACADEMIC YEAR:2015-16
SUBMITTED BY
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF MASTER DEGREE OF COMMERCE
MISS. POOJA MAURYA
ROLL NO: 17
CERTIFICATE
This is to certify that the project report on “INCOME FROM SALARY” is bonafide record of project
worked done by MISS. POOJA MAURYA submitted in partual fulfillment of the requirement of the
award of the Master of Commerce Degree University of Mumbai during the period of his/her study in
the academic year 2014-15
INTERNAL EXAMINER:
EXTERNAL EXAMINER:
Principal
Mrs. Rina Saha
DECLARATION
I hereby declare that this Project Report entitled “INCOME FROM SALARY” submitted by me for the the
award of Masters Of Commerce Degree; University of Mumbai is a record of Project work done by me
during the year 2015-16. This is entirely my own work.
Date:
ACKNOWLEDGEMENT
I owe a great many thanks to great many people who helped and supported me doing the
writing of this book.
My deepest thanks to lecturer, Prof. RAJIV MISHRA of the project for guiding and correcting
various documents of mine with attention and care. She/ he has taken pains to go through my project
and make necessary corrections as and when needed.
I extend my thanks to the principal of NES Ratnam College of Arts Science and Commerce,
Bhandup (w), for extending her support.
My deep sense of gratitude to Principal Mrs. Rina Saha of NES Ratnam College of Art, Science
and Commerce for support and guidance. Thanks and appreciation to the helpful people at NES Ratnam
College of Arts, Science and Commerce , for their support.
I would also thank my institution and faculty members without whom this project would have
been a distant reality. I also extend my heartfelt thanks to my family and well-wishers.
A capital gains tax (CGT) is a tax charged on capital gains, the profit realized on
the sale of a non-inventory asset that was purchased at a lower price. The most
common capital gains are realized from the sale of stocks, bonds, precious metals
and property. Not all countries implement a capital gains tax and most have
different rates of taxation for individuals and corporations.
For equities, an example of a popular and liquid asset, national and state
legislation often has a large array of fiscal obligations that must be respected
regarding capital gains. Taxes are charged by the state over the transactions,
dividends and capital gains on the stock market. However, these fiscal obligations
may vary from jurisdiction to jurisdiction because, among other reasons, it could
be assumed that taxation is already incorporated into the stock price through the
different taxes companies pay to the state, or that tax-free stock market
operations are useful to boost economic growth.
India
As of 2008, equities are considered long term capital if the holding period is one
year or more. Long term capital gains from equities are not taxed if shares are
sold through recognized stock exchange and STT is paid on the sale . However
short term capital gain from equities held for less than one year, is taxed at 15%
[7] (w.e.f. 1 April 2009.[8]) (plus surcharge and education cess). This is applicable
only for transactions that attract Securities Transaction Tax (STT).
Many other capital investments (house, buildings, real estate, bank deposits) are
considered long term if the holding period is 3 or more years.[9] Short term
capital gains are taxed just as any other income and they can be negated against
short term capital loss from the same business.
MEANING OF CAPITAL GAINS :-
Capital gains means profits or gains arising to the assesse from the transfer of a
capital asset. Such capital gain is added to the total income of the previous year
in which the transfer of the assets took place.
Capital Gains is the fourth head of income. Section 45(1) of the Income Tax Act,
1961 talks about anyprofits or gains arising from the transfer of a capital asset
effected in the previous year.
In C.I.T. V. H.H. Maharani Usha Devi case the Supreme Court has made it
clear that heirloom jewellery constitutes personal effects under section 2(14) and
its sale would not give rise to any taxable capital gains.
In C.I.T V. D.P. Sandu Brotherscase it was held thatthe value or income from
transfer of capital asset can be taxed only under the head “Capital Gain” and if
it cannot be taxed under this head, then it cannot be taxed at all. Such income
cannot be taxed under the head “Income from other sources”.
WHAT ALL CAPITAL ASSET INCLUDES :-
1. Goodwill of a business.
2. Partner’s share in a firm.
3. Tenancy rights.
4. Actionable claim.
5. Loom hours (Hours for which a worker works in a factory).
6. Patent.
7. Trade-Marks.
8. Lease hold right in mines.
9. License for manufacturing of a commodity.
EXCEPTIONS :-
The term Capital Asset doesn’t include the following :
Provided that in the case of a share held in a company or any other security listed
in a recognized stock exchange in India or a zero- coupon bond, the provisions of
this clause shall have effect as if for the words “36 months”, the words “12
months” had been substituted.
Transfer includes:
(ii) This clause has been omitted by the Finance Act, 1987 w.e.f1-4-1988;
(iii) Any transfer of a capital asset under a gift or will or an irrevocable trust;
http://www.vakilno1.com/bareacts/incometaxact/s47.htm
(iv) Any transfer of a capital asset by a company to its subsidiary company, if:
(a) the parent company or its nominees hold the whole of the share capital of the
subsidiary company; and
(a) The whole of the share capital of the subsidiary company is held by the holding
company, and
Provided that nothing contained in clause (iii) or clause (iv) shall apply to the
transfer of a capital asset made after the 29th day of February, 1988, as stock-in-
trade; (vi) Any transfer, in a scheme of amalgamation, of a capital asset by the
amalgamating company to the amalgamated company if the amalgamated
company is an Indian company;
(b) Such transfer does not attract tax on capital gains in the country, in which the
amalgamating company is incorporated;
(vic) Any transfer in a demerger, of a capital asset, being a share or shares held in
an Indian company, by the demerged foreign company to the resulting foreign
company, if - (a) At least seventy-five per cent of the shareholders of the
demerged foreign company continue to remain shareholders of the resulting
foreign company; and
(b) Such transfer does not attract tax on capital gains in the country, in which the
demerged foreign company is incorporated :
Provided that the provisions of sections 391 to 394 of the Companies Act, 1956 (1
of 1956) shall not apply in case of demergers referred to in this clause;
(viia) Any transfer of capital asset, being bonds or shares referred to in sub-
section (1) of section 115AC, made outside India by a non-resident to another
non-resident;
(viii) Any transfer of agricultural land in India effected before the 1st day of
March, 1970;
(ix) Any transfer of a capital asset, being any work of art, archaeological, scientific
or art collection, book, manuscript, drawing, painting, photograph or print, to the
Government or a University or the National Museum, NationalArtGallery,National
Archives or any such other public museum or institution as may be notified 753 by
the Central Government in the Official Gazette to be of national importance or to
be of renown throughout any State or States.
(xi) Any transfer made on or before the 753ca 31st day of December, 1998, 753ca
by a person (not being a company) of a capital asset being membership of a
recognised stock exchange to a company in exchange for shares allotted by that
company to the transferor.
(xii) Any transfer of a capital asset, being land of a sick industrial company, made
under a scheme prepared and sanctioned under section 18 of the Sick Industrial
Companies (Special Provisions) Act, 1985 (1 of 1986) where such sick industrial
company is being managed by its workers' co-operative :
Provided that such transfer is made during the period commencing from the
previous year in which the said company has become a sick industrial company
under sub-section (1) of section 17 of that Act and ending with the previous year
during which the entire net worth of such company becomes equal to or exceeds
the accumulated losses.
Provided that –
(a) All the assets and liabilities of the firm relating to the business immediately
before the succession become the assets and liabilities of the company;
(b) All the partners of the firm immediately before the succession become the
shareholders of the company in the same proportion in which their capital
accounts stood in the books of the firm on the date of succession;
(c) The partners of the firm do not receive any consideration or benefit, directly or
indirectly, in any form or manner, other than by way of allotment of shares in the
company; and
(d) The aggregate of the shareholding in the company of the partners of the firm
is not less than fifty per cent of the total voting power in the company and their
share holding continues to be as such for a period of five years from the date of
the succession;
Provided that –
(a) All the assets and liabilities of the sole proprietary concern relating to the
business immediately before the succession become the assets and liabilities of
the company;
(b) The shareholding of the sole proprietor in the company is not less than fifty
per cent of the total voting power in the company and his shareholding continues
to so remain as such for a period of five years from the date of the succession;
and
(c) The sole proprietor does not receive any consideration or benefit, directly or
indirectly, in any form or manner, other than by way of allotment of shares in the
company;
(xv) Any transfer in a scheme for lending of any securities under an agreement or
arrangement, which the assessee has entered into with the borrower of such
securities and which is subject to the guidelines issued by the Securities and
Exchange Board of India, established under section 3 of the Securities and
Exchange Board of India Act, 1992 (15 of 1992), in this regard.
COMPUTATION OF CAPITAL GAINS(Section 48).
Transfer of a short term capital asset gives rise to "Short Term Capital Gains'
(STCG) and transfer of a long capital asset gives rise to 'Long Term Capital Gains'
LTCG). Identifying gains as STCG and LTCG is a very important step in computing
the income under the head Gains as method of computation of gains and tax on
the gains is different for STCG and LTCG.
Where the transfer is by way of exchange of one asset for another, fair
market value of the asset received is the full value of consideration. Where
the consideration for the transfer is partly in cash and partly in kind Fair
market value of the kind portion and cash consideration together
constitute full value of consideration.
Where the asset was purchased, the cost of acquisition is the price paid.
Where the asset was 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.
The cost of acquisition of the asset shall be the cost for which the previous owner
of the property acquired it, as increased by the cost of any improvement of the
asset incurred or borne by the previous owner or the assessee, as the case may
be, till the date of acquisition of the asset by the assessee.
If the previous owner had also acquired the capital asset by any of the modes
above, then the cost to that previous owner who had acquired it by mode of
acquisition other than the above, should be taken as cost of acquisition.
Cost of improvement (Section 55(1) (b) )
Long Term Capital Gain from the Transfer of Residential House Proper (Section
54)
The exemption under the Section 54 is available only to an individual or a HUF who
transfers (or sells) a residential house/property that results in a long-term capital
gain, and then invests the amount of gain in acquiring a new residential house. This
exemption is available subject to fulfillment of the following requirements:
(ii) The asset to be transferred must be of long-term capital asset, being buildings
or lands appurtenant thereto, being a residential house,
(iii) The income from such residential house shall be assessable under the head
"Income from House Property",
(iv) The transferor assessee should purchase a residential house in India within a
period of one year before or two years from the date of transfer or construct a
residential house within three years from the date of the transfer of the original
house. (Construction must be completed within these 3 years.), and
(v) The new house property purchased or constructed has not been transferred
within a period of three years from the date of purchase or construction.
Equal to the amount of the capital gain if cost of new house property is more
than the capital gain, or
Equal to the cost of the new house property if the cost is less than the
capital gain.
Deposit Scheme under Section 54. Where the amount of capital gain is not so
utilized for the purchase or construction of a new residential house before the due
date of furnishing of the return of income, it shall be deposited by him on or
before the due date in an account with a public sector bank in accordance with the
Capital Gain Account Scheme, 1988. The amount already utilized on the new house
together with the amount deposited shall be deemed to be the amount utilized for
the purchase of new house under section 54. If the amount deposited is not
utilized for the purpose of purchase or construction of new house within the
stipulated period, then the amount not so utilized will be treated as long term
capital gain of the previous year in which the period of three years expires. In such
case the assessee is entitled to withdraw the amount from the bank.
Consequences of Selling the New House Before 3-years. If the new house property
is transferred within a period of three years from the date of the purchase or
construction, the amount of capital gains arising therefrom, together with the
amount of gains exempted earlier, will be chargeable to tax in the year of sale of
the house property. To attain this, the amount of exemption under section 54 shall
be reduced from the cost of acquisition to the new house, while calculating short-
term capital gains on the transfer of the new asset.
Capital gains arising on the transfer of land used by an individual or his parents for
agricultural purposes for a period of two years immediately preceding the date of
transfer is exempt form the tax if the individual assessee has purchased another
agricultural land within a period of two years from the date of such transfer
(subject to the requirements).
(Not covered: Amount of exemption, scheme of deposit and consequences on not
meeting the requirements).
Capital gains arising on the compulsory acquisition of any land or building forming
a part of an industrial undertaking is exempt subject to the following
requirements:
Such land or building was used by the assessee for the purpose of industrial
undertaking for two years preceding the date of compulsory acquisition,
The assessee has purchased any land or building or constructed a building
within 3 years from the date of the receipt of the compensation, and
Newly acquired land or building should be used for the purpose of shifting or
reestablishing the said undertaking or setting up another industrial
undertaking.
The face value of a bond is generally Rs. 10,000 and the rate of return correctly
averages about 5.5 to 5.75 per cent. This return is taxable income.
Long Term Capital Gain from the Transfer of a Capital Asset other than
Residential House Property (Section 54F)
The exemption is available only to an individual or a HUF who transfers (or sells) a
capital asset that results in a long-term capital gain, and then invests the amount
of gain in acquiring a new residential house. This exemption is available subject to
fulfillment of the following requirements:
(i) The transferor assessee should purchase or a residential house in India within a
period of one year before or two years from the date of transfer or construct a
residential house within three years from the date of the transfer of the original
house. (Construction must be completed within these 3 years.), and
(ii) The new house property purchased or constructed has not been transferred
within a period of three years from the date of purchase or construction.
(Not covered: Amount of exemption, scheme of deposit and consequences on not
meeting the requirements).
(ii) Acquires building or land or constructed building for the purpose of his business
in the said area,
(iii) Shifts the original asset and transferred the establishment in the said area, and
(iv) Incurs expenses on such other purpose as may be specified in a scheme framed
by Central Government for the purpose of this section.
54ED LTCA being Any Listed Within six exemptio If sold within
listed Assess Securitie months from n is 3 years,
securities or e s or units the date of available exempted
units of transfer in only in capital gain
UTI/Mut acquiring respect will be
ual Fund eligible issue of the deemed to be
covered of capital assets income from
u/s. transferr Long Term
10(23D) : ed before Capital Gain
1 year 1-4-2006 (LTCG) of the
assesse in the
year of
transfer of the
new asset.