Assessment of Tax Liability under Key Heads

A
PROJECT REPORT
ON
“ASSESSMENT OF TAX LIABILITY UNDER THE INCOME TAX ACT,1961 INCOME

UNDER THE HEAD SALARIES & PROFITS AND GAINS FROM BUSINESS AND
PROFESSION.”
For
FINBIZZ PROFESSIONAL
SUBMITTED BY
VISHAL PRAMODRAO DAROKAR
MBA-II
SUBMITTED TO
SAVITRIBAI PHULE PUNE UNIVERSITY
UNDER THE GUIDANCE OF
PROF. MONIKA GORKHE
In partial fulfillment of the
Requirement for the award
Of the degree of
MASTER OF BUSINESS ADMINISTRATION(MBA)
(Batch 2018-20)
Dr D. Y. PatilPratishtan’s
Dr.D.Y.Patil Institute of Management Studies,
Akurdi,
Pune-411044
1
Declaration
I, Vishal Pramodaro Darokar hereby declare that the Project Report titled “ASSESSMENT OF
TAX LIABILITY UNDER THE INCOME TAX ACT,1961 INCOME UNDER THE HEAD
SALARIES & PROFITS AND GAINS FROM BUSINESS AND PROFISSION” written and
submitted by me to the Savitribai Phule Pune University, in partial fulfillment of the requirement
for the award of degree of Master of Business Administration under the guidance of Prof. Monika
Gorkhe is my original work and the conclusions drawn therein are based on the material collected
by myself.
Place:
Date: Student’s Name & Signature
2
ACKNOWLEDGEMENT
I have taken efforts in this project. However, it would not have been possible without the kind
support and help of many individuals and organization. I would like to extend my sincere thanks
to all of them.
I express sincere thankfulness to Director, Dr. Ashutosh Misal of Dr. D. Y. Patil Institute of
Management Studies, Akurdi, Pune for his valuable inputs to complete Summer Internship
Project Report on “ASSESSMENT OF TAX LIABILITY UNDER THE INCOME TAX
ACT,1961 INCOME UNDER THE HEAD SALARIES & PROFITS AND GAINS FROM
BUSINESS AND PROFISSION”
3
I am highly indebted Mr. Sumeet Shingi and CA Priyanka Shingi for their guidance and constant
supervision as well as for providing necessary information regarding the project and also for their
support in completing the project.
I would like to express my gratitude towards my parents my guide Prof.Monika Gorkhe and
member of Finbizz Professionals for their kind co-operation and encouragement which help in
completion of this project.
I would like to express my special gratitude and thanks to the staff of the organization for giving
me such attention and time.
My thanks and appreciations also go to my colleague in developing in developing the project and
people who have willingly helped me out with their abilities.
Vishal Darokar
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EXECUTIVE SUMMARY
During the internship, with the help of theoretical as well as practical approach the basic fine
point of income tax in CA firm has been learnt. The 3 months duration of my internship was a
comprehensive learning for me. An exposure of various theoretical aspects of Income Tax return
has been done through regular meetings in the office, where the discussion taxation regarding
computed income from salary, profit and gain use to take place. The various important
terminologies were made familiar during internship.
All above concepts were the backbone of my learning, and a better understanding have been
developed to interrelate other things and perform practically. A proper guidance was provided by
the respective officer and was explained in detail about the whole process from basic to the final
process.
The data collection is analyzed and practical as well as computerized tools were applied to get
the clear and accurate result of the study.
The project report has 10 Chapters in the first chapter introduction to the project, in the second
chapter Theoretical Background is given. And in the remaining chapters Company Profile,
Research Methodology, Data analysis & Interpretation, Findings, Conclusion, Suggestions and
Bibliography is given.
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INDEX
Sr. Particulars Page

No.
No.
1 Introduction
2. Literature Review
2 Theoretical background
3 Company Profile
4 Objectives of the Study
5 Scope of the Study
6 Research Methodology
7 Data Anatysis,Interpretation
8 Limitation
9 Conclusion
10 Bibliography
11
12
13
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Chapter 1.
INTRODUCTION TO THE PROJECT
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INTRODUCTION:-
PROJECT TITLE:
“ASSESSMENT OF TAX LIABILITY UNDER THE INCOME TAX ACT,1961 INCOME

UNDER THE HEAD SALARIES & PROFITS AND GAINS FROM BUSINESS AND
PROFESSION.”
REASONS OF CHOOSING THE COMPANY AND THE PROJECT:
I have chosen this company because ,I wanted to get overall knowledge about taxation and also to
understand practically how income tax working is done and for that I found “Finbizz
Professionals” would be the best option for me among the other to explore and to improve my
skills, knowledge and make ready for the future.
LOCATION:
“SANMATI” Plot No.105/27, Near Old Post Office, Pradhikaran Nigdi. Pune-411044.Mobile
No.9190961 32981
DURATION OF THE PROJECT:
Time duration of the project was 3 months; which was from 15th May, 2019 to 25th August, 2019.
OBJECTIVES OF THE RESEARCH

1. To study the concept of Direct Tax in India.
2. To study calculation of tax liability of income from Salary with the help of case study
3. To calculate the tax labiality of income from the business and profession with the help of
case study.
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SCOPE
 This project studies the tax calculation for individuals assessed to Income Tax.
 The study relates to non-specific and generalized tax calculation, 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 assesses.
 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 2018-19 only.
LIMITATIONS
 Many employees were not present at their respective places due to various commitments
and this posed a difficulty in collection of information.
 The time provided for the completion of the project was only three- months; because of
this it was not possible to collect the in-depth information on each and every aspect of the
topic.
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CHAPTER 3
THEORETICAL BACKGROUND
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 LITERATURE REVIEW
The review of literature guides the researchers for getting better understanding of methodology
used, limitations of various available estimation procedures and data base and lucid
interpretation and reconciliation of the conflicting results. Besides this, the review of empirical
studies explores the avenues for future and present research efforts related with the subject
matter. In case of conflicting and unexpected results, the researcher can take the advantage of
knowledge of other researchers simply through the medium of their published works. A large
number of research studies have been carried out on different aspects of the working of public
and private sector by the researchers, economists and academicians in India. Different authors
have analyzed financial performance in different perspective
Kumar Mishra (2012)

Income from business and profession ,every owner should be take care of the expenses, and
all expense are relating to the business are allowed non business expenditure is disallowed
under the income tax , so while computing the tax liability need to work out the disallowed
expenditure, so every business person are claim the business expenditure.
Satish Shah (2015),

To study the perception of income from salary, many people are not aware of the TDS on
salary and they are paying the tax at the year end, so many individuals are paying the interest
at the time of the return filling, so salaried person take care of the income as well as tax liability
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Project Information
What is a 'Tax Liability'

A tax liability is the total amount of tax debt owed by an individual, corporation or other entity to
a taxing authority like the Internal Revenue Service (IRS). It is the total amount of tax you're
responsible for paying to the taxman. Tax liabilities are incurred due to earning income, a gain
on the sale of an asset or other taxable events.
NEED OF STUDYING INCOME TAX LIABILITY
 From the Perspective of the Government, it is one of main source of revenue.

 We all know Government Introduce various Welfare Schemes, Perform International
Activities, Develop Infrastructure, Maintain Healthy Domestic Market. All such
Activities require Funds, and one of the Funds Source is Income Tax.
 To end corruption, ensure employment for all
 For public it is their contribution towards nation building.
India has a well-developed tax structure. The power to levy taxes and duties is distributed among
the three tiers of Government, in accordance with the provisions of the Indian Constitution. The
main taxes/duties that the Union Government is empowered to levy are:- Income Tax (except tax
on agricultural income, which the State Governments can levy), Customs duties, Central Excise
and Sales Tax and Service Tax. The principal taxes levied by the State Governments are:- Sales
Tax (tax on intra-State sale of goods), Stamp Duty (duty on transfer of property), State Excise
(duty on manufacture of alcohol), Land Revenue (levy on land used for agricultural/non-
agricultural purposes), Duty on Entertainment and Tax on Professions & Callings. The Local
Bodies are empowered to levy tax on properties (buildings, etc.), Octroi (tax on entry of goods
for use/consumption within areas of the Local Bodies), Tax on Markets and Tax/User Charges
for utilities like water supply, drainage, etc.
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In the wake of economic reforms, the tax system in India has under gone a radical change, in line
with the liberal policy. Some of the changes include:- rationalization of tax structure; progressive
reduction in peak rates of customs duty ; reduction in corporate tax rate; customs duties to be
aligned with ASEAN levels; introduction of value added tax ; widening of the tax base; tax laws
have been simplified to ensure better compliance. Tax policy in India provides tax holidays in
the form of concessions for various types of investments. These include incentives to priority
sectors and to industries located in special area/ regions. Tax incentives are available also for
those engaged in development of infrastructure.
Direct Tax
A Direct tax is a kind of charge, which is imposed directly on the taxpayer and paid directly to
the government by the persons (juristic or natural) on whom it is imposed. A direct tax is one
that cannot be shifted by the taxpayer to someone else. The some important direct taxes imposed
in India are as under:
A government levy on the income, property, or wealth of people or companies. A direct tax is
borne entirely by the entity that pays it, and cannot be passed on to another entity.
Examples include corporation tax, income tax, and social security contributions. Unlike
consumption taxes (see indirect tax), direct taxes are based on the ability to pay principle but
they sometimes work as a disincentive to work harder and earn more because that would mean
paying more tax. See also progressive tax.
Indirect Tax
Charge levied by the State on consumption, expenditure, privilege, or right but not on
income or property. Customs duties levied on imports, excise duties on production, sales tax or
value added tax (VAT) at some stage in production-distribution process, are examples of indirect
taxes because they are not levied directly on the income of the consumer or earner. Since they
are less obvious than income tax (because they don't show up on the wage slip) politicians are
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tempted to increase them to generate more state revenue. Also called consumption taxes, they are
regressive measures because they are not based on the ability to pay principle.
 GST –
GST is a single tax on the supply of goods and services, right from the manufacturer to the
consumer. The Input Tax credit paid at each stage will be available in the subsequent stage of
value addition, which makes GST essentially a tax only on value addition at each stage.It is the
end consumer who will bear only the GST charged by the last dealer in the supply chain, with
set-off benefits at all the previous stages. With the streamlining of the multiple taxes, the final
cost to the consumer will turn out to be low because of elimination of double charging system.
Goods and services are divided into five tax slabs for collection of tax - 0%, 5%, 12%,18% and
28%. Petroleum products, alcoholic drinks, electricity, and real estate are taxed separately by the
individual state governments. There is a special rate of 0.25% on rough precious and semi-
precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST
applies on few items like aerated drinks, luxury cars and tobacco products. Pre-GST, the
statutory tax rate for most goods was about 26.5%, Post-GST, most goods are expected to be in
the 18% tax range.
The tax came into effect from July 1, 2017 through the implementation of One Hundred and First
Amendment of the Constitution of India by the Indian government. The tax replaced existing
multiple cascading taxes levied by the central and state governments.
The tax rates, rules and regulations are governed by the GST Council which comprises finance
ministers of centre and all the states. GST simplified a slew of indirect taxes with an unified tax
and is therefore expected to dramatically reshape the country's 2.4 trillion dollar economy.
Trucks' travel time in interstate movement dropped by 20%, because of no interstate check posts
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Four benefits of indirect taxes are:
1. Contribution by the poor
The poor people are exempt from indirect taxes and this is the only way of reaching this
section of the society. This meets the basic principle of making every person pay towards the
growth of the country through the state governments.
2. Convenient
Taxpayers are not burdened with the indirect taxes because these are paid only while making
purchases. Furthermore, it is convenient for the state authorities because the taxes are directly
collected at the factories or the ports, which saves time as well as effort.
3. Easy collection
The collection of all these taxes is automatically performed during the selling and purchasing
goods and services. This helps the authorities collect taxes easily while reducing the
possibility of tax evasion.
4. Equitable
Indirect tax is directly related to the prices of the goods and services. Therefore, rich people
purchasing luxury items pay higher taxes and vice versa.
Comparison Chart of Direct Tax and Indirect Tax
Basis For Direct Tax Indirect Tax

Comparison
Meaning Direct tax is referred to as the tax, Indirect Tax is referred to as the tax,
levied on person's income and levied on a person who consumes the
wealth and is paid directly to the goods and services and is paid indirectly
government. to the government.
Nature Progressive Regressive
Incidence Falls on the same person. Falls on different person.

and Impact
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Types Wealth Tax, Income Tax, Property Central Sales tax, VAT (Value Added
Tax, Corporate Tax, Import and Tax), Service Tax, STT (Security
Export Duties. Transaction Tax), Excise Duty, Custom
Duty.
Evasion Tax evasion is possible. Tax evasion is hardly possible because it

is included in the price of the goods and
services.
Inflation Direct tax helps in reducing the Indirect taxes promotes the inflation.
inflation.
Imposition Imposed on and collected from Imposed on and collected from

and assessees, i.e. Individual, HUF consumers of goods and services but
collection (Hindu Undivided Family), paid and deposited by the assessee.
Company, Firm etc.
Burden Cannot be shifted. Can be shifted
Event Taxable income or wealth of the Purchase/sale/manufacture of goods and

assesse provision of services
 Tax Regime in India

 Chargeability of Income Tax
 Scope of Total Income
 Total Income
Tax Regime in India
The tax regime in India is currently governed under The Income Tax, 1961 as amended by The
Finance Act, 2007 notwithstanding any amendments made thereof by recently announced Union
Budget for assessment year 2017-18.
Chargeability of Income Tax
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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.
Scope of Total Income
Under the Income Tax Act, 1961, total income of any previous year of a person who is a resident
includes all income from whatever source derived which:
 is received or is deemed to be received in India in such year by or on behalf of such person;
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 such year:
Provided that, in the case of a person not ordinarily resident in India, the income which accrues
or arises to him outside India shall not be included unless it is derived from a business controlled
in or a profession set up in India.
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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Income from salaries
Definition of Word 'Salary' [Sec. 17(1)]

According to Section 17(1) salary includes the following amounts received by an employee from
his employer, during the previous year
1. Wages;
2. any annuity or pension; (Family pension received by heirs of an employee is taxable
under income from other sources);
3. any gratuity;
4. any fees, commission, perquisites or profits in lieu of or in addition to any salary or
wages;
5. any advance of salary;
6. any payment received by an employee in respect of any period of leave not availed of
by him; (Leave encashment or salary in lieu of leave);
7. the annual accretion to the balance at the credit of an employee participating in a
recognised provident fund, to the extent to which it is chargeable to tax under Rule 6 of
part A of the Fourth Schedule; and
8. the aggregate of all sums that are comprised in the transferred balance as referred to in
sub-rule (2) of Rule 1] of Part A of the Fourth Schedule, of an employee participating
in a recognised provident fund, to the extent to which it is chargeable to tax, under sub-
rule (4) there, i.e., taxable portion of transferred balance from unrecognised provident
fund to recognised provident fund.
9. the contribution made by the Central Government or any other employer in the
previous year, to the account of an employee under a pension scheme referred to in
Section 8OCCD.
The above definition of word ‘salary’ U/s 17(1) includes the above mentioned items. These can
be explained in following manner
1. Wages—any amount received by a person for work done or job rendered is called
wages. It may be received under the name of ‘Pay’, ‘Basic Pay’, ‘Salary’, ‘Basic
salary’ or ‘Remuneration’. It may be for actual work or leave salary or actually
received or due during the relevant previous year. Salary in lieu of Notice. It is fully
taxable uls 15 if received during the relevent previous year.
2. Any Annuity or Pension—Any amount received by employee from past employer
after attaining the age of retirement or superannuation is fully taxable. It may be
received direct as pension or out of a superannuation fund created by employer; in both
cases it is taxable.
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3. Any Gratuity—Any sum received by employee from his past employer as a token of
gratitude for services rendered in past is called gratuity. This amount is exempted upto
certain limits given u/s 10(10) and it is dealt with in this very chapter at a later stage.
4. (a) any Fee—any amount received from employer under the name of fee is also fully
taxable.
(b) any Commission—any commissions given by employer to employee is fully

taxable. Any commission received by a director for standing guarantee for repayment
of loan, and if he is not employee of the company, shall be taxable under “Income
from other sources”. In case commission is given to an employee and it is paid as a
fixed percentage of turnover achieved by such employee, such commission shall also
be treated as part of the salary for all practical purposes. [Gestener Duplicators (P)
Ltd. vs. C.I. T. (1979) SC).
(c) any Bonus—Bonus is fully taxable under the head ‘Salaries’ on receipt basis. In
case arrears of bonus are received in a previous year, these are fully taxable. Bonus
can be of two types :
Statutory Bonus—It is received under some legal or contractual obligation and is

fully taxable.
Gratuitous Bonus—It is a casual benefit and is taxable as a receipt from employer

and having no other implication.
(d) any Perquisite—Any benefit or amenity allowed by employer to employee.

These are explained in detail later in this chapter u/s 17(2).
(e) any Profit in lieu of or in addition to salary—any cash payment received by

employee from employer is called profit in lieu of salary and these are explained later
in this chapter u/s 17(3).
5. any salary in lieu of leave received during service is fully taxable.
6. any advance salary—In case an assessee receives some salary in advance in a

previous year and which was actually not due in that year shall be taxable in the year of
receipt. It does not include any loan or advance taken from employer.
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Profits and gains of business or profession
Definition of the Head ' Business or Profession'-[Sec.-28]

Under sections 28 to 44 of the Income-tax Act 1961, Profits & Gains of business or profession
form part of total income of an assessee. This head is the most important source of tax collection
for the Government. The computation of income under this head is a very complex and difficult
method but before going into calculation of income under this head, it is necessary to understand
the meaning of terms used in this head.
Business [Section 2(13)]
Business simply means any economic activity carried on for earning profits. Section 2(13) has
defined the term as “any trade, commerce, manufacture or any adventure or concern in the nature
of trade, commerce and manufacture”. In the words of Justice SR. Dass, “The word ‘business’
connotes some real, substantive and systematic or organised course, activity or conduct with a set
purpose”.
In this connection it is not necessary that there should be a series of transactions in a business and
also it should be carried on permanently. Neither repetition nor continuity of similar transactions
is necessary. As already defined under section 2(13), the income derived from any adventure in
the nature of trade is also treated as business income. So a brief explanation of this term is
necessary
Profession [Section 2(36)]
A profession is an occupation requiring purely intellectual skill or manual skill controlled by the
intellectual skill of the operator, e.g., lawyer, accountant, engineer, surgeon, author etc. So
profession refers to those activities where the livelihood is earned by the persons through their
intellectual or manual skill. Under section 2(36) profession includes vocation.
Vocation simply means a way of living for which one has special fitness. A vocation does not
involve any organized or systematic activity like business. So vocation simply means any type
of activity in which a person is engaged and he earns his livelihood from such activity. The
practice of a religion may also amount to vocation.1 Any gain or receipt arising out of vocation
is certainly taxable under this head of income. Writing of articles in the magazines is also a
vocation.2
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Business or Professional Income [Section 28(i)]
The profits and gains of any business or profession which was carried on by the assessee at any
time during the previous year are assessed under this head. The business or profession should be
carried on in the previous year and it is not necessary that it should continue throughout the year.
The owner of the business is to be charged under this section, whether he may carry business
personally or through a manager, agent or servant.
Business outside India and Business in India stand on the same footing for the purposes of this
section.
All revenue profits arising from business or profession are chargeable even if they are of a
casual and non-recurring nature.
Illegality of the business or profession does not exempt its income from tax.
INCOME CHARGEABLE UNDER BUSINESS/PROFESSION
The following are few examples of incomes which are chargeable under this head:-
1. Normal Profit from general activities as per profit and loss account of business entity.
2. Profit from speculation business should be kept separate from business income and shown
separately.
3. Any profit other than regular activities of a business should be shown as casual income and will
be shown under “income from other sources” head.
4. Profit earned on sale of REP License/Exim scrip, cash assistance against export or duty
drawback of custom or excise.
5. The value of any benefits whether convertible into money or no from business/profession
activities.
6. Any interest, salary, commission etc. received by the partner of a firm will be treated as
business/professional income in hand of partner. However, the share of profit from partnership
firm is exempt in hand of partner.
7. Amount recovered on account of bad debts which were already adjusted in profit in earlier years
etc.
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EXPENSES DEDUCTIBLE FROM INCOME FROM BUSINESS/PROFESSION
All the expenses relating to business and profession are allowed against income. Following are
few examples of expenditures which are allowed against income:-
 Rent rates and insurance of building.

 Payment for know-how, patents, copy rights, trade mark, licenses.
 Depreciation on fixed assets.
 Payment for professional services.
 Expenditures on scientific research for business purposes.
 Preliminary Expenses in case of Limited companies.
 Salary, bonus, commission to employees.
 Salary, interest and remuneration to working partners subject to certain conditions.
 Communication expenses.
 Traveling and conveyance expenses.
 Membership fees etc.
 Advertisement expenses in respect of promotion of business products.
 Discount allowed to customers.
 Interest on loans (Whether Private of Institutional).
 Bank Charges/Bank Commission expenses.
 Entertainment/Business Promotion expenses
 Staff Welfare expenses.
 Festival Expenses.
 Printing and stationery expenses
 Postage expenses.
 All other expenses relating to business/profession
Note: The above expenditures are allowed on the basis of actual payment as well as on accrual
basis at the date of finalization accounts.
EXPENSES WHICH ARE DEDUCTIBLE ON ACTUAL PAYMENT ONLY
Following expenses will be allowed if these expenses have been paid before or on due date or
before filing of income tax return:-
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1. Any tax, duty, cess or fees by whatever name called.
2. Contribution to provident fund, ESI premium, gratuity fund or other funds for welfare of
employees.
3. Bonus or commission or leave encashment payable to employees.
4. Interest on loan from public financial institutions, state financial corporation or from scheduled
bank.
EXPENSES NOT DEDUCTIBLE FROM BUSINESS/PROFESSION INCOME
1. Expenditure on any type of advertisement of political party.

2. Any interest, royalty, fees for technical services or other sums chargeable under this act, which
is payable out side India or in India to non-resident or a foreign company on which tax has not
been deducted or after deduction, not deposited in prescribed time.
3. Any interest, commission, rent, royalty, professional or technical fees paid or payable to any
resident of India or payment to contractor or sub-contractor on which TDS is not deducted, or if
deducted then not deposited before the due date of filing the return.
4. Any tax calculated on the basis of profit of business.
5. Any amount of Wealth Tax paid.
6. Any payment of salaries payable outside India or to a non-resident on which tax is not deducted.
7. Any tax actually paid by an employer on any income by way of perquisites, on behalf of the
employee.
8. Any remuneration paid to non working partner.
9. Any remuneration paid to working partner other than specified in agreement or as per the
specified limits by income tax act.
10. Any interest to partner if not specified in agreement and not more than 12%.
11. Any payment in cash exceeding Rs.20000/= till financial year 2018-19 and with effect from
01.04.17, the limit of cash payments will be Rs.10000/= and (Rs.35000/= in case of payment
made for plying, hiring or leasing goods carriages) except when payments are made under
circumstance specified in Rule 6DD of Indian income tax act.
12. Where a deduction has been claimed on accrual basis during an assessment year and the payment
is made in a subsequent year, and the payment or aggregate of payments made to a person in a
day otherwise than by way of an account payee cheque/DD, exceeds Rs.20000/= (Rs.35000/= in
case of goods carriages), such payments shall be deemed as profit of the assessee for the year in
which the payment is made.
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13. Any provision for the payment of gratuity to the employees.
14. Any personal expenditures.
15. Expenses on defending in any proceedings for breach of any law relating to sales tax etc.
16. With effect from 01.04.17, any payment for a capital expenditure made otherwise than by an
account payee cheque/draft/RTGS/ECS debit card or credit card, exceeding Rs.10000/= shall
neither be deductible nor eligible for depreciation under section 32.
Notes:
 Restriction on acceptance of loans or accept a deposits of Rs.20000/= or more from any other
person except by an account payee cheque/draft. This restriction shall not apply if the loan or
deposit is taken or accepted from government, bank, post office, co-operative bank, government
undertaking etc. With effect from 01.04.17, cash should no be accepted as loan more than
Rs.10000/= in a single day from a single person.
 Restriction on repayment of loans or deposits: No person can repay loan along with interest
except by way of account payee cheque/draft if the amount is Rs.20000/= or more. With effect
from 01.04.17, cash should no be paid more than Rs.10000/= in a single day to a single person to
repay the loan amount.
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Chapter 4
COMPANY PROFILE
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Company profile
a. Name of the Company – Finbizz Professionals
b. Mission –
Finbizz Professionals aim towards an ultimate goal of bringing value to their
clients by providing professionals services in Audit, Taxation, & Business Advisory.
c. Statement - “Business Solution Provider”
d. Vision – The motto is to bring all necessary expertise under one roof to help
businesses address complex or unstructured problems quickly and effectively.
e. Logo –
f. Variety of Services –
Finbizz Professionals is driven to understand the business from ground up, to

anticipate your changing needs and to deliver solutions that fully prepare you to meet
the challenges unique to your business.
At Finbizz business needs of each organization are separately assessed and solutions
unique to each different environment is provided.
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1.Income Tax Advisory:
 Filing of Income tax Returns

 Tax Planning
 Filing of quarterly TDS/TCS Returns under the Income Tax Act ,1961.
 Post Tax Filing support
 Non-Residents -Income Tax Advisory
2.Business Tax Advisory:
 Registrations and compliances for Indirect Taxes Liasoning with

 Departments for Scrutiny /Assessment Tax Advisory –
 Opinions/Transaction Analysis.
3.Goods and Service Tax:
 GST Migration and registration

 Transitional Provisions
 Taxability & Availing of Credits
 Returns & Forms
4.Financial and Management Consultant:
 Virtual CFO
 Accounts & Finance Outsourcing
 Management Information System
 Payroll Processing
 Accounts Receivable
 Design/setup of Accounting procedures
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5. Business Setup Services:
 Startup Advisory
 Incorporation & registration of Companies/LLP/Partnership
 Registration of Trademark
 Certifications & Drafting of Deeds/agreements
 Projected Financial Statements
6. Audit and Advisory
 Financial Statement Audit

 Fixed Asset & Inventory Audit
 Internal Financial Control Audit
 Due Diligence & Fraud Investigation
g. List of Competitors –
1. Navdeep Jindal & Associates
2. R M Rajapurkar & Company
3. CA Rutuja
28
CHAPTER 5
RESEARCH METHODOLOGY
29
Definition of Research Methodology:
Research Methodology is a way to find out the result of a given problem on a specific matter or
problem that is also referred as research problem. In Methodology, researcher uses different
criteria for solving/searching the given research problem.
Purpose of the research /Need for Study
An Individuals not aware of the rules and regulations of income tax hence they need to
understand what are the exemptions and allowances are applicable under the income tax
All the relevant information for the study has been obtained from the representative
samples of the salaried section and without referring to any records.
OBJECTIVES OF THE RESEARCH

4. To study the concept of Direct Tax in India,
5. To study calculation of tax liability of income from Salary with the help of case study
6. To calculate the tax labiality of income from the business and profession the help of case
study
METHODS OF DATA COLLECTION:
Types of Data Collection:
There are two types of data collection methods a) Primary Data b) Secondary Data
For this research I have used secondary data.
30
Secondary Data-
Secondary data is study information that has been collected earlier and that scientists can access.
The word contrasts with primary data, which is straight from its source gathered information.
For this study the data has been collected from various websites, Research articles and books.
And also, data has been taken from the organization where I have completed my SIP
This data is collected from the different types of websites which are related to income tax ,
Published Research Papers, The official income tax website.
Scope
Using case study method, this research focuses on the calculation of wage revenue and
deductions that they can use when filing ITR. For the 2019-20 evaluation year, salaried people
who submitted their income tax returns through the services offered by Finbizz Professionals an
e-Filling Intermediary registered with the Income Tax Department.
The study focuses on the staff of both the private and public sectors who are the main component
of the Finbizz professionals.
Study period: The study conducted from 15 May 2019 to 25 August 2019 during the summer
internship.
RESEARCH DESIGN
Research can be defined as “A Scientific and Systemic Search for pertinent information on a
specific topic”. Therefore, research could be understood as an organized activity with specific
objectives on a problem or issues supported by compilation of related data and facts, involving
application of relevant tools of analysis and deriving logically on originality.
Research Design is the arrangement of condition for collection and analysis of data in
manner that aims to combine relevance to the research purpose with the economy in procedure.
Research Design is important primarily because of the increased complexity in the market as well
31
as marketing approaches available to the researchers. A research design specifies the methods and
procedures for conducting a particular study.
TYPE OF RESEARCH
Analytical Research
In this type of research has to use facts or information already available, and analyze
these to make a critical evaluation of the material. The researcher depends on existing data for
his research work. The analysis revolves round the material collected or available.
Limitations
 The data interpretation and feedback is based on the perception level of the respondents.
 Many employees were not present at their respective places due to various commitments
and this posed a difficulty in collection of information.
 The time provided for the completion of the project was only two months, because of this
it was not possible to collect the in depth information on each and every aspect of the
topic.
32
CHAPTER 6.
DATA ANALYSIS AND INTERPRETATION & PRESENTATION
33
Here I have taken 4 different types cases of clients whose computation has been done in by our
organization.
Case No.1: Employee having income from Salary and Business Profession
Illustration: Employee having basic salary Rs.506167. HRA of Rs. 39660.Professional Tax
Rs.2500. He had loss from his speculative business of Rs. 37368.Employee has gained Rs.11110
from Listed Securities. Employee has earned saving bank interest of Rs.5119. He has contributed
in EPF Rs.19038 and he has got stamp duty on purchase of plot Rs.173900.
COMPUTATION OF TOTAL INCOME
Salaries 506167
Jfe Engineering India Private Limited (Tan:

Pnej09942c) : S.no.169/1,2nd Floor, North Wing,,
Westend Center Iii, Aundh, Pune, Maharashtra-
411007
Salary 548667
HRA 39660
Less Exempt U/s 10(13A) 39660
Gross Salary 548667

Less: Standard Deduction U/s 16(ia) 40000
Less: Professional Tax U/s 16(iii) 2500
Taxable Salary 506167
Profits and Gains From Business And Profession 0
Abhijeet Chaudhari (Speculation Business)

Profit Before Tax as Per Profit and Loss Account -37368
-37368
34
Speculation Business Loss C/f Rs. 37368
Capital Gains 11110
Short Term Capital Gain on Listed Securities (STT 11110
Paid)
Income from Other Sources 5119
Saving Bank Interest 5119
Total 5119
Gross Total Income 522396
Less Deductions Under Chapter-VIA

80C Deduction 150000
80TTA Interest on Deposits In Savings Account 5119
Total Deductions 155119
Total Income 367277
Total Income Rounded Off U/s 288A 367280
COMPUTATION OF TAX ON TOTAL INCOME
Tax on Rs. 250000 Nil

Tax on Rs. 106170 (356170-250000) @ 5% 5308
Tax on Rs. 356170 5308
Tax on Short Term Listed Securities U/s 111A Rs. 1666
11110 @ 15%
6974
Add: Health and Education Cess @ 4% 279
7253
Less Tax Deducted at Source
Salary 18572 18572
-11319
Refundable (11319)
Tax Rounded Off U/s 288B (11320)
Detail Of Deduction U/s 80C

EPF 19038
Stamp Duty on Purchase of Plot 173900
Total 192938
Interpretation: Above analysis indicates that the employee has total taxable income of
Rs.367277. in this he has got the deduction u/s 80C of Rs.192938 out of which only Rs.150000
35
deduction can be availed by the employee.Rs.150000 is the limit for Section 80C deduction u/s
80TTA he also got the deduction of saving bank interest of Rs.5119. Employee did not know
that he have to pay taxes for his business professions.
Case no.2: Employee having Three Employers

Illustration: Mrs. Reshma Kathalkar aged 35 years is working with 3 organizations. Her basic
salary is of Rs.240000 from 1st employer,Rs.44200 from 2nd employer and Rs.208667 from 3rd
employer. Employee also got bonus from the employer of Rs. 3000. He has paid professional
Taxes of Rs.2300.He has earned saving bank interest o Rs.2428.He has paid LIC of
Rs.54140,ELSS Rs.36000 and also Tuition Fees of Rs.18860.On purchase of plot he has paid
stamp duty of Rs.366000.
Salaries 480567
Polite Buildtech (Tan: Pnep18274e) : Office No 209 &

210, Ashish Plaza Plt Nosdc 01, Sec No 27A,near
Bhel Chowk, Akurdi Pradhikaran, Nigdi, Pune,
Maharashtra-411044
Salary 240000
Diamond Associates : Office No- 209, Ashish Plaza,

Plot No-sdc-01, Sec-27A, Nr. Bhel Chowk, Akurdi,
Pune, Maharashtra-411019
Salary 44200
Diamond Developers : Office No-209, Ashish Plaza,

Plot No-sdc-01, Sec-27A, Nr. Bhel Chowk, Akurdi,
Nigdi Pradhikaran, Pune, Maharashtra-411044
Salary 208667
Bonus 30000
238667
Gross Salary 522867
Profits and Gains from Business And Profession 37653
36
Profit U/s 44AD - Gross Receipts
Profit Deemed U/s 44AD @ 8% Of Rs. 80733 6459
Profit Declared U/s 44AD 37653
Profit (Higher of The Above) 37653
Total 2428

80GG Deduction in Respect Of Rents Paid [See 60000
Note 1]
80TTA Interest on Deposits In Savings Account 2428
Total Income 308220

Tax on Rs. 58220 (308220-250000) @ 5% 2911
Tax on Rs. 308220 2911
2911
Less: Rebate U/s 87A 2500
411
427
Salary 590 590
-163
Refundable (163)
Tax Rounded Off U/s 288B (160)
Detail of Deduction U/s 80C
LIC 54140
ELSS 36000
Tuition Fees 18860
Stamp Duty on Purchase of Plot 366000
Total 475000
37
Rs.520648. In this he has got the deduction u/s 80C of Rs.475000 out of which only Rs.150000
deduction can be availed by the employee.Rs.150000 is the limit for Section 80C deduction u/s
80TTA he also got the deduction of saving bank interest of Rs.2428. After all the calculations his
taxable income is Rs.308220.
Case No.3: Computation of income of a Government employee
Illustration: Mrs. Ankita Pathak aged 49 years is working at PCMC as a Government

employee her computation different. Her basic salary is Rs. .
Salaries 1183824
Pimpri Chinchwad Municipal Corporation (Tan:

Pnee01465c) : Pune, Maharashtra-411018
Gross Salary 1226324
Income From House Property 0

Self Occupied House
Address : Flat No. 107/ Bldg 1a, Swapnapurti Phase
1, Sector 26, Nigdi Pradhikaran, Pune, Maharashtra-
411044
Annual Value Nil
Less: Interest U/s 24(b) -137676
Income From Other Sources 70189

Interest On Bank Fdr 12149
38
Total 70189
Inter-head Adjustment Of Losses U/s 71

House Property Loss Set Off From Salary Income -137676

80TTA Interest On Deposits In Savings Account 10000
Total Income 956337
Tax On Rs. 250000 Nil

Tax On Rs. 250000 (500000-250000) @ 5% 12500
Tax On Rs. 456340 (956340-500000) @ 20% 91268
Tax On Rs. 956340 103768
103768
Add: Health And Education Cess @ 4% 4151
107919
Less Tax Deducted At Source
Other Interest 2131
Salary 94794 96925
10994
Add Interest Payable
Interest U/s 234B 436
Interest U/s 234C 550 986
11980
Less Self Assessment Tax U/s 140A
State Bank Of India - 0011352 - 00983 - 11/07/2019 11980 11980
Tax Payable Nil
Exempted Income
Lic Maturity U/s 10(10D) 6314
6314
Detail Of Deduction U/s 80C
Lic 1440
Gpf 60000
Ppf 150000
Gis 1356
Total 212796
39
Interpretations:
40
Case No. 4: An ex Government employee whose source of income is pension.
Illustration:
Salaries 1148574
Union Bank Of India (Tan: Mumu07901f) : Mumbai,

Maharashtra-400021
Salary 482361
Pension Received 236027
Pension Received 1077727
Less Exempt U/s 10(10A) 1077727
Leave 771186
Less Exempt U/s 10(10AA) 300000 471186
Gratuity 1846963
Less Exempt U/s 10(10) 1846963

Income From House Property 0

Self Occupied House
Address : Plot No. 18, Bhukrupa Society, Sector 27,
Pradhikaran , Pune, Maharashtra-411044
Annual Value Nil
Less: Interest U/s 24(b) -95540
Income From Other Sources 308048

Interest On Bank Fd 281945
Lic Supperannuation Pension 19998
Total 308048
Inter-head Adjustment Of Losses U/s 71

House Property Loss Set Off From Salary Income -95540
41
80D Medical Insurance Premia 36983
80TTB Interest On Deposits In Case Of Senior 50000
Citizens
Total Income 1124099
Tax On Rs. 300000 Nil

Tax On Rs. 200000 (500000-300000) @ 5% 10000
Tax On Rs. 500000 (1000000-500000) @ 20% 100000
Tax On Rs. 124100 (1124100-1000000) @ 30% 37230
Tax On Rs. 1124100 147230
147230
Add: Health And Education Cess @ 4% 5889
153119
Less Tax Deducted At Source
Other Interest 29782
Salary 131757 161539
-8420
Refundable (8420)
Lic 21528
Housing Loan Repayment 125048
Provident Fund 43419
Ppf 20000
Total 209995
Interpretation
42
Case no.4: Employee having income only from salary.
Illustration: Mr. Anand Sharma aged 37 years is working in a private Limited co. His source of income is
only salary and other than that he does not have any other source of income. In this case he has to file
ITR form No.1. His basic salary is Rs.1073021. HRA Rs.35996. saving Bank Interest Rs.5053. Employee has
paid Tuition Fees of Rs.22000, LIC of Rs.60524 and has contributed towards PPF and PF Rs.72000 and
Rs.43209.
Salaries 1073021
Msource (India) Private Limited (Tan: Blrm02592c):

Wtc 3, block B, 1st Floor, Bagmane World Technology,
Marthahalli Outer Ring,doddenekundi, Bangalore,
Karnataka-560048
Salary 1151517
Less HRA Exempt U/s 10(13A) (35996)

Total 5053

80TTA Interest on Deposits in Savings Account 5053
Total Income 923021
43

Tax on Rs. 250000 (500000-250000) @ 5% 12500
Tax On Rs. 423020 (923020-500000) @ 20% 84604
Tax on Rs. 923020 97104
97104
100988
Salary 100990 100990
-2
Refundable (2)
Tax Rounded Off U/s 288B Nil

Tuition Fees 22000
LIC 60524
PPF 72000
Provident Fund 43209
Total 197733
Rs.923020.Employe was unaware of 80C deductions in this he has got the deduction u/s 80C of
Rs.197733 out of which only Rs.150000 deduction can be availed by the employee.Rs.150000 is
the limit for Section 80C deduction u/s 80TTA he also got the deduction of saving bank interest
of Rs.5053. After all the calculations he will refund of Rs.2
44
CHAPTER 6.
FINDINGS,
SUGGESTIONS AND CONCLUSION
45
FINDINGS
1. Direct tax is very huge, interesting to study and Indian taxation system is very friendly
structured.
2. For salaried person there are many exemptions or deductions and perquisites are available,
so that salaried persons can save the tax.
3. In salary taxable income are e.g- - Dearness Allowance, Overtime allowance, Tiffin
allowance.
4. Most of the expenses are disallowed under the income from business and profession
E.g. Gifts, personal Expenses.
5. Majority individuals are not aware of what are the exemptions are applicable to salary,
business and profession.
46
SUGGESTIONS
1. Every Individual person should take the education for the income tax so that he can save
or reduce his tax liability.
2. In Business and Profession income, owner has to take care that the expenses are not dis-
allowed while computing the income tax working.
3. Income from salary seems to be a small portion but it contains lot of provisions, the
salaried people should study and understand the provisions and exemption under salary.
4. Most of the Employees are not aware of the tax and at the end of the year they pay the
tax with the interest, so they have to be aware about the schedule of tax liability.
5. Every individual can claim the exemptions as per the government notifications.
47
CONCLUSION
Direct taxes can help to control inflation. When the inflation is on the uptrend, the government
may balance the tax rate. Due to this, the consumption demand may decline, which in turn may
help reduce inflation.
The Taxation of income received from salaries, Business and profession is not just a concept to
learn only but practically it puts a lot of challenges in front of tax computation and preparers so
as to ensure that correct provisions are applied while computing the net salary income .While
computing the income need to take care of the allowed and disallowed expenditure of expenses.
Income from salary seems to be a very small portion but it contains lot of provisions, the study of
which is must before practically applying it.
Under the income from salary it includes monetary value of those benefits and facilities which
are provided by the employer which are taxable.
This project covers the basics of the Income Tax Act, 1961 as amended by the Finance Act, 2007
and broadly presents the nuances of prudent tax calculation 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.
48
BIBLIOGRAPHY
49
BOOKS
1. Income Tax Act 1961
2. Student’s Guide Taxation-Direct Tax.
REFERENCES
Websites:
https://incometaxindiaefiling.gov.in/
http://www.caclubindia.com/category/income-t+ax.asp
https://cleartax.in/Guide/Understanding
http://taxguru.in/income-tax/
http://www.goodreturns.in/
http://businessjargons.com/tax-planning.html#ixzz4tWIAthTR
50
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“ASSESSMENT OF TAX LIABILITY UNDER THE INCOME TAX ACT,1961 INCOME

In partial fulfillment of the

Requirement for the award

MASTER OF BUSINESS ADMINISTRATION(MBA)

Dr.D.Y.Patil Institute of Management Studies,

Sr. Particulars Page

4 Objectives of the Study

5 Scope of the Study

“ASSESSMENT OF TAX LIABILITY UNDER THE INCOME TAX ACT,1961 INCOME

REASONS OF CHOOSING THE COMPANY AND THE PROJECT:

DURATION OF THE PROJECT:

OBJECTIVES OF THE RESEARCH

Kumar Mishra (2012)

Satish Shah (2015),

What is a 'Tax Liability'

NEED OF STUDYING INCOME TAX LIABILITY

 From the Perspective of the Government, it is one of main source of revenue.

the 18% tax range.

multiple cascading taxes levied by the central and state governments.

1. Contribution by the poor

Comparison Chart of Direct Tax and Indirect Tax

Basis For Direct Tax Indirect Tax

Nature Progressive Regressive

Incidence Falls on the same person. Falls on different person.

Evasion Tax evasion is possible. Tax evasion is hardly possible because it

Imposition Imposed on and collected from Imposed on and collected from

Burden Cannot be shifted. Can be shifted

Event Taxable income or wealth of the Purchase/sale/manufacture of goods and

 Tax Regime in India

Tax Regime in India

Chargeability of Income Tax

Scope of Total Income

Definition of Word 'Salary' [Sec. 17(1)]

(b) any Commission—any commissions given by employer to employee is fully

Statutory Bonus—It is received under some legal or contractual obligation and is

Gratuitous Bonus—It is a casual benefit and is taxable as a receipt from employer

(d) any Perquisite—Any benefit or amenity allowed by employer to employee.

(e) any Profit in lieu of or in addition to salary—any cash payment received by

5. any salary in lieu of leave received during service is fully taxable.

6. any advance salary—In case an assessee receives some salary in advance in a

Definition of the Head ' Business or Profession'-[Sec.-28]

Business [Section 2(13)]

Profession [Section 2(36)]

INCOME CHARGEABLE UNDER BUSINESS/PROFESSION

 Rent rates and insurance of building.

EXPENSES WHICH ARE DEDUCTIBLE ON ACTUAL PAYMENT ONLY

EXPENSES NOT DEDUCTIBLE FROM BUSINESS/PROFESSION INCOME

1. Expenditure on any type of advertisement of political party.

c. Statement - “Business Solution Provider”

Finbizz Professionals is driven to understand the business from ground up, to

 Filing of Income tax Returns

2.Business Tax Advisory:

 Registrations and compliances for Indirect Taxes Liasoning with

3.Goods and Service Tax:

 GST Migration and registration

4.Financial and Management Consultant:

6. Audit and Advisory

 Financial Statement Audit

1. Navdeep Jindal & Associates

2. R M Rajapurkar & Company

Purpose of the research /Need for Study

OBJECTIVES OF THE RESEARCH