PROJECT REPORT ON “Direct Tax Study & Overview” Submitted in partial fulfillment of the requirements For Master of Commerce (2015-2016) By Prashant M. Rawal Roll No.: 12 Under the Guidance of Ms. Anuradha Parmar University of Mumbai Sheth T.J. Education Society’s SHETH N.K.T.T. COLLEGE OF COMMERCE & SHETH J.T.T. COLLEGE OF ARTS, THANE (W)
University of Mumbai Sheth T.J. Education Society’s SHETH N.K.T.T. COLLEGE OF COMMERCE & SHETH J.T.T. COLLEGE OF ARTS, THANE (W) CERTIFICATE OF PROJECT WORK This is Certify that PRASHANT M. RAWAL of M.Com-2 (Semester-3) Roll No.12 has undertaken & completed the project work title “ Direct Tax
Study & Overview”. During the academic year 2015-2016 under the Ms. Anuradha Parmar Submitted on ___________ to this college in fulfillment of the curriculum of Master of Commerce, University of Mumbai. This is confiding project work and the information presented is True and Original to the best of or knowledge and belief.
Project Guide
External Examiner
Course Coordinators
PRINCIPAL
DECLARATION I, PRASHANT M. RAWAL hereby declare that the project report entitled “Under Guidance of Ms. Anuradha Parmar, submitted in partial fulfillment of the requirement for the award of the Degree of Master of Commerce to Mumbai University is my Original work.
Signature: Date: Place: Thane
ACKNOWLEDGEMENT
I take this opportunity to express and record my thanks and gratitude to Sheth N.K.T.T. College of Commerce and sheth J.T.T. College of Arts, Thane (w) and also the entire Faculty of Semester III of M.com-2 Course in the College. Further, I also knowledge my sincere and special thanks and gratitude to my project Guide Ms. Anuradha Kayasth, without whose continuous guidance and encouragement it would not have been possible for me to completed this project work.
I express my thanks to all my colleagues, with whom I have had debates and discussions on the on the subject, which also helped me to acquire better understanding and clarity on the subject.
Indian Tax Guide: An initiation to get general public aware about Income Tax In India and also help people to satisfy their queries:
Archive for the ‘Heads of Income’ Category
Defination of Income: August 12, 2008 In order to tax the income of a person the term itself is designed under the Income Tax Act. As per the Act the term Income includes:
A. Profits and gains of Business or Profession: This includes income from carrying on a business or income earned by doing any profession. B. Dividend: C. Profit in lieu of Salary, perqusite: This includes any amount received by an employee from his employer other then the salary amount. D. Allowances granted to the assesse to meet his expenses incurred for performance of his duties: This includes allowances such as HRA, Medical allowance, etc given by an employer to his employee. E. Any capital gains: This means any profit dericed on sale of any capital asset. F. Winning from lotteries, crossword puzzles, races, card game, T.V. Show , etc G. Any sum received for fund created for welfare of employees. One interesting thing in the definition of income is that it can be received in cash or in kind. More over the Income Tax Act does not make distinction between legal source of income or illegal source of income. This means that gambling, smugling income is also chargeable to tax under the Income Tax act. More over gifts of personal nature for eg. birthday/ marriage gifts are not treated as income (but there are some exceptions in this ). In all ties one more thing is that the term income does not only means profits but there is a concept of negative income also.
Heads of Income: August 8, 2008 In the Income Tax any income earned by a person is broadly categorised into five heads of income. Any income earned to be taxed must come under any of the five heads of income. The five heads of income are:
1. Income under Head Salaries: This head taxes the income earned by an individual as salary from any firm or organisation. 2. Income from House Property: This head taxes rental income received by any person from way of renting of any immoveable property. 3. Profits and Gains of Business or Profession: This head of income broadly covers income earned by a person as a result of some business or professional set‑up by him. 4. Capital Gains: This head of income taxes the income earned on sale of any investment in form of gold, precious ornaments, shares, etc or immoveable property. 5. Income from other Sources: This head of income covers any income which is not chargeable to tax under any of the above heads of income. Any income including gambling or profit/loss on running of race horses, camels, interest income , etc are chargeable to tax under this head of income.
We will take each Head of Income one by one but first in the next post we will understand meaning of the term “Income” itself:
OBJECTIVES: After reading this lesson, you should be able to understand: Classification of income into various heads. Concept of salary income Incomes forming part of salary The computation of basic salary in grade system Types of commission an employee can get The concept of allowances Various income tax provisions for computing taxable value of allowances Computation of taxable value of allowances
Income tax in India The Central Government has been empowered by Entry 82 of the Union List of Schedule VII of the Constitution of India to levy tax on all income other than agricultural income (subject to Section 10(1)). The Income Tax Law comprises The Income Tax Act 1961, Income Tax Rules 1962, Notifications and Circulars issued by Central Board of Direct Taxes (CBDT), Annual Finance Acts and Judicial pronouncements by Supreme Court and High Courts. The government of on taxable income of all persons including individuals, Hindu Undivided Families (HUFs), companies, firms, association of persons, body of individuals, local authority and any other artificial judicial person. Levy of tax is separate on each of the persons. The levy is governed by the Indian Income Tax Act, 1961. The Indian Income Tax Department is governed by CBDT and is part of the Department of Revenue under the Ministry of Finance, Govt. of India. Income tax is a key source of funds that the government uses to fund its activities and serve the public. The Income Tax Department is the biggest revenue mobilize for the Government. The total tax revenues of the Central Government increased from ₹1392.26 billion (US$21 billion) in 1997-98 to ₹5889.09 billion (US$89 billion) in 2007-08.
Residential status, Scope of taxable income & Charge Charge to income-tax Whose income exceeds the maximum amount, which is not chargeable to the income tax, is an assesses, and shall be chargeable to the income tax at the rate or rates prescribed under the finance act for the relevant assessment year, shall be determined on basis of his residential status. Income tax is a tax payable, at enacted by the Union Budget (Finance Act) for every Assessment Year, on the Total Income earned in the Previous Year by every Person. The chargeability is based on nature of income, i.e., whether it is revenue or capital. The rates of taxation of income are-: Income Tax Rates/Slabs Rate (%) (Applicable for assessment year 2015-16.)
Net income range (Individual resident (Age below 60 Yrs.) or any NRI
Net income range (For resident
/ HUF / AOP / BOI
senior
/ AJP)
citizen1)
Up to ₹250,000
Up to
Net income range (For super senior
Net income range (For any other person excluding companies and cooperative societies)
Income Tax rates3
Up to ₹500,000
Up to ₹200,000
NIL
_
₹200,001–500,000
10%
₹500,001–
₹500,001–
₹500,001–1,000,000
20%
1,000,000
1,000,000
Above
Above ₹1,000,000
Above ₹1,000,000
30%
citizen2)
₹300,000 ₹250,001–500,000
₹300,001– 500,000
₹500,001–1,000,000 Above ₹1,000,000
₹1,000,000
A. Senior citizen is one who is 60 years or more at any time during the previous year but not more than 80 years on the last day of the previous year. B. Super senior citizen is one who is 80 years or more at any time during the previous year. C. These slab-rates aren't applicable for the incomes which are to be taxed at special rates under section 111A, 112, 115, 161, 164 and 167. For instance, long-term capital gains
(except the one mentioned in section 10(38))for all assesses is taxable at 20%. For individual assesses whose total income does not exceed ₹500,000 after providing for any deduction under Chapter VI A are eligible for a rebate of up to ₹2,000 under section 87A (applicable from assessment year 2014-15 onwards). A surcharge of 10% on income tax payable is applicable for every non-corporate assesses, whose total income exceeds ₹10 million (applicable for assessment year 2014-15).
About 1% of the national population, called the upper class, fall under the 30% slab. It grew 22% annually on average during 2000-10 to 0.58 million income taxpayers. The middle class, who fall under the 10% and 20% slabs, grew 7% annually on average to 2.78 million income taxpayers.
Residential status Residential status of a person other than an individual:
Control & management of affairs of the taxpayer is wholly
Control & management of affairs of the taxpayer is wholly
Control & management of affairs of the taxpayer is partly in India
in India
outside India
partly outside India
HUF
Resident
Non-resident
Resident
Firm
Resident
Non-resident
Resident
Association of Persons
Resident
Non-resident
Resident
Indian company
Resident
Resident
Resident
Foreign company
Resident
Non-resident
Non-resident
Any other person except an individual
Resident
Non-resident
Resident
Type of person
1. HUF is resident or non-resident, the additional conditions (as laid down for an individual) should be checked for the karta to determine whether the HUF is ordinary or not-ordinary resident. 2. An Indian company is the one which satisfies the conditions as laid down under section 2(26) of the Act. 3.
Foreign company is the one which satisfies the conditions as laid down under section 2(23A) of the Act.
Scope of total income: Indian income is always taxable in India not withstanding residential status of the taxpayer.
Foreign income is not taxable in the hands of a non-resident in India. For resident (in case of firm, association of persons, company and every other person) or resident & ordinarily resident (in case of an individual or an HUF), foreign income is always taxable. For resident but not ordinarily resident foreign income is taxable only if it is business income and business is controlled wholly or partly in India or it is a professional income and profession is set up in India. A. Foreign income is the one which satisfies both the following conditions: Income is not received (or not deemed to be received under section 7) in India, and Income doesn't accrue (or doesn't deemed to be accrued under section 9) in India. If such an income satisfies one or none the above conditions then it is an Indian income.
Heads of income: The total income of a person is segregated into five heads: Income from salaries Income from house property Profits and gains of business or profession Capital gains and Income from other sources
Income from salaries: All income received as salary under employer-employee relationship is taxed under this head, on due or receipt basis, whichever arises earlier. Employers must withhold tax compulsorily (subject to Section 192), if income exceeds minimum exemption limit, as Tax Deducted at Source (TDS), and provide their employees with a Form 16 which shows the tax deductions and net paid income. The Act contains exemptions including (the list isn't exhaustive):Particulars Leave travel concession Death-cum-Retirement Gratuity Commuted value of Pension (not taxable for specified Government employees) Leave encashment Retrenchment Compensation Compensation received at time of Voluntary Retirement Tax on perquisite paid by employer Amount received from Superannuation Fund to legal heirs of employee House Rent Allowance Some Special Allowances
Relevant section for computing exemption 10(5) 10(10) 10(10A) 10(10AA) 10(10B) 10(10C) 10(10CC) 10(13) 10(13A) 10(14)
The Act contains list of perquisites which are always taxable in all cases and a list of perquisites which are exempt in all cases (List I). All other perquisites are to be calculated according to specified provision and rules for each. Only two deductions are allowed under Section 16, viz. Professional Tax and Entertainment Allowance (the latter only available for specified government employees). Computation of exemption for gratuity [Section 10(10)] In case of Government employee it is fully exempt from tax. In case of non-government employee covered by Payment of Gratuity Act, 1972 it is exempt from tax up to the least of the following: 15 days' salary for each year of service or part thereof exceeding six months(i.e., 15/26*last drawn salary*completed year of service or part thereof exceeding 6 months), or ₹ 1 million, or Gratuity actually received
In case of non-government employee not covered by Payment of Gratuity Act, 1972 it is exempt from tax up to the least of the following: ₹ 1 million, and Half month's salary for each completed year of service(i.e.,15/30*Average salary*completed year of service), or Gratuity actually received Average salary for above purpose is average salary drawn during 10 months immediately preceding the month in which the employee retired or ceased to exist.
Computation of exemption of House Rent Allowance(HRA) [Section 10(13A)] The least of the following is exempt: Allowance actually received 40 per cent of salary (50 per cent in case of Bombay/Calcutta/Delhi/Madras) Rent paid in excess of 10% of salary Salary for this purpose means basic plus dearness allowance (if terms of employment so provide) plus fixed percent commission on turnover.
Computation of exemption for pension [Section 10(10A)] Uncommuted pension is taxable in all cases. Commuted pension is exempt for specified Government employees. In any other case, commuted pension is exempt to the extent given below:1/3 of normal pension is exempt if the employee is in receipt of gratuity 1/2 of normal pension is exempt if the employee is not in receipt of gratuity
Computation of exemption for Leave encashment [Section 10(10AA)] It is fully exempt in case of specified Government employees In other case, it is exempt from tax to the extent of least of the following: Amount actually received at the time of retirement ₹ 300,000 10 months average salary Cash equivalent of leave salary in respect of the period of earned leave at the credit of the employee at the time of retirement, but it cannot exceed 30 days of average salary for every completed year of service Average salary for the above purpose means average salary drawn during 10 months immediately preceding retirement
Computation of exemption for Retrenchment compensation [Section 10(10B)] It is exempt to the extent of least of the following: ₹ 500,000, or Amount calculated under section 25F(b) of the Industrial Disputes Act
Computation of exemption for Voluntary Retirement Scheme [Section 10(10C)] Least of the following three amounts is exempt in case of approved/recognized scheme: Actual received Rs500,000, Last drawn salary*3*Completed years of service, or, last drawn salary*remaining months of service; whichever is lower
Computation of deduction for Entertainment Allowance [Section 16 (ii)] and Professional Tax [Section 16 (iii)] Section 16(ii) a deduction in respect of any allowance in the nature of an entertainment allowance specifically granted by an employer to the assessee is in receipt of a salary from the Government, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees, whichever is less. Section 16 (iii) a deduction of any sum paid by the assessee on account of a tax on employment within the meaning of clause (2) of article 276 of the Constitution, leviable by or under any law. Professional tax is allowed as a deduction to all the employees. It is allowed as a deduction when actually paid.
Income from house property: Income under this head is taxable if the assessee is the owner of a property consisting of building or land appurtenant thereto and is not used by him for his business or professional purpose. An individual or an Hindu Undivided Family (HUF) is eligible to claim any one property as Selfoccupied if it is used for own or family's residential purpose. In that case, the Net Annual Value (as explained below) will be nil. Such a benefit can only be claimed for one house property. However, the individual (or HUF) will still be entitled to claim Interest on borrowed capital as deduction under section 24, subject to some conditions. In the case of a self occupied house deduction on account of interest on borrowed capital is subject to a maximum limit of ₹150,000 (if loan is taken on or after 1 April 1999 and construction is completed within 3 years) and ₹30,000 (if the loan is taken before 1 April 1999). For let-out property, all interest is deductible, with no upper limits. The balance is added to taxable income.
The computation of income from let-out property is as under:Gross annual value (GAV)
xxxx
Less: Municipal Taxes paid
(xxxx)
Net Annual value (NAV)
xxxx
Less: Deductions under section 24
(xxxx)
Income from House property
xxxx
1) The GAV is higher of Annual Letting Value (ALV) and Actual rent received/receivable during the year. The ALV is higher of fair rent and municipal value, but restricted to standard rent fixed by Rent Control Act. 2) Only two deductions are allowed under this head by virtue of section 24, viz., 30% of Net annual value as Standard deduction Interest on capital borrowed for the purpose of acquisition, construction, repairs, renewals or reconstruction of property (subject to certain provisions).
Profits and Gains of business or profession: The income referred to in section 28, i.e., the incomes chargeable as "Income from Business or Profession" shall be computed in accordance with the provisions contained in sections 30 to 43D. However, there are few more sections under this Chapter, viz., Sections 44 to 44DA (except sections 44AA, 44AB & 44C), which contain the computation completely within itself. Section 44C is a disallowance provision in the case non-residents. Section44AA deals with maintenance of books and section 44AB deals with audit of accounts.
In summary, the sections relating to computation of business income can be grouped as under: Specific
Sections 30 to 37 cover expenses which are expressly allowed as
deductions
deduction while computing business income.
Specific
Sections 40, 40A and 43B cover inadmissible expenses.
disallowance Deemed Incomes
Sections 33AB, 33ABA, 33AC, 35A, 35ABB, 41.
Special provisions
Sections 42, 43C, 43D, 44, 44A, 44B, 44BB, 44BBA, 44BBB, 44DA, 44DB.
Presumptive
Sections 44AD, 44AE 55.
Income
The computation of income under the head "Profits and Gains of Business or Profession" depends on the particulars and information available. If regular books of accounts are not maintained, then the computation would be as under: Income (including deemed income) chargeable as income xxx under this head Less: Expenses deductible (net of disallowances) under this (xx) head
However, if regular books of accounts have been maintained and profit and loss account has been prepared, then the computation would be as under: -
Net Profit as per profit and loss account
xxx
Add : Inadmissible expenses debited to profit and loss account
xx
Add: Deemed incomes not credited to profit and loss account
xx
Less: Deductible expenses not debited to profit and loss account
(xx)
Less: Incomes chargeable under other heads credited to Profit & Loss A/c
(xx)
Income from capital gains: Transfer of capital assets results in capital gains. A Capital asset is defined under section 2(14) of the I.T. Act, 1961 as property of any kind held by an assesses such as real estate, equity shares, bonds, jewellery, paintings, art etc. but does not include some items like any stock-in-trade for businesses and personal effects. Transfer has been defined under section 2(47) to include sale, exchange, relinquishment of asset extinguishment of rights in an asset, etc. Certain transactions are not regarded as 'Transfer' under section 47. Computation of Capital Gains:-
Full value of consideration
xxx
Less: Cost of acquisition
(xx)
Less: Cost of improvement
(xx)
Less: Expenditure pertaining to transfer incurred by the transferor
(xx)
1) In case of transfer of land or building, if sale consideration is less than the stamp duty valuation, then such stamp duty value shall be taken as full value of consideration by virtue of Section 50C. The transferor is entitled to challenge the stamp duty valuation before the Assessing Officer. 2) Cost of acquisition & cost of improvement shall be indexed in case the capital asset is long term.
For tax purposes, there are two types of capital assets: Long term and short term. Transfer of long term assets gives rise to long term capital gains. The benefit of indexation is available only for long term capital assets. If the period of holding is more than 36 months, the capital asset is long term, otherwise it is short term. However, in the below mentioned cases, the capital asset held for more than 12 months will be treated as long term: Any share in any company Government securities Listed debentures Units of UTI or mutual fund, and Zero-coupon bond
Also, in certain cases, indexation benefit is not be available even though the capital asset is long term. Such cases include depreciable asset (Section 50), Slump Sale (Section 50B), Bonds/debentures (other than capital indexed bonds) and certain other express provisions in the Act. There are different scheme of taxation of long term capital gains. These are:
1. As per Section 10(38) of Income Tax Act, 1961 long term capital gains on shares or securities or mutual funds on which Securities Transaction Tax (STT) has been deducted and paid, no tax is payable. STT has been applied on all stock market transactions since October 2004 but does not apply to off-market transactions and company buybacks; therefore, the higher capital gains taxes will apply to such transactions where STT is not paid. 2. In case of other shares and securities, person has an option to either index costs to inflation and pay 20% of indexed gains, or pay 10% of non indexed gains. The cost inflation index rates are released by the I-T department each year. 3. In case of all other long term capital gains, indexation benefit is available and tax rate is 20%.
All capital gains that are not long term are short term capital gains, which are taxed as such: Under section 111A, for shares or mutual funds where STT is paid, tax rate is 10% from Assessment Year (AY) 2005-06 as per Finance Act 2004. With effect from AY 2009-10 the tax rate is 15%. In all other cases, it is part of gross total income and normal tax rate is applicable.
For companies abroad, the tax liability is 20% of such gains suitably indexed (since STT is not paid). Besides exemptions under section 10(33), 10(37) & 10(38) certain specific exemptions are available under section 54, 54B, 54D, 54EC (http://topcafirms.com/index.php/whitepaper/ 4376capital-gains-exemption-us-54ec-of-income-tax-act-1961), 54F, 54G & 54GA. Secti on 54B
Secti on 54D
Sectio Section n 54F 54EC
Section 54G
Individual
Indiv
Any
Any
Individual
Any person
/HUF
idual
perso
perso
/HUF
n
n
Section 54 Wh o is eligi ble to clai
Section 54GA Any person
Sectio n 54GB Indivi dual/H UF
m exe mpti on Whi ch asse t is eligi ble for exe
A residential house property or land appurtena nt thereto (long
mpti term) on
Agri cultu ral land (if used by indiv idual or his paren ts for agric ultur al purp ose durin g at least 2 years imm ediat ely prior to trans fer)
Land/ buildi ng formi ng part of an indust rial under taking which is comp ulsori ly acquir ed by the Gover nment & which is used durin g2 years for indust rial purpo ses prior to acqui
Any long term capita l asset
Any long term capital asset (other than house property) provided that on the date of transfer the assessee does not own more than one residential house
Land/buildin g/plant/machi nery in order to shift an industrial undertaking from urban area to rural area
Land/buildin g/plant/machi nery in order to shift an industrial undertaking from urban area to any Special Economic Zone
Longterm reside ntial proper ty if transfe r takes place betwee n if transfe r takes place during 1 April 2012 and 31 March 2017
Bonds A Land/buildin of residential g/plant/machi Natio house nery
Land/buildin g/plant/machi nery
Equity shares in
property
sition Whi ch asse
Residentia Agri l house cultu ral
Land/ buildi ng
t property shou ld be acqu ired to clai m exe
land in rural or urba n area
for indust rial purpo se
mpti on
nal property High ways Autho rity of India or Rural Electr ificati on Corpo ration Limit ed; Maxi mum exem ption in one financ ial year is ₹ 5
in order to shift undertaking to rural area
in order to shift undertaking to any SEZ
eligibl e compa
1-year backward or 3 years forward
1-year backward or 3 years forward
Equity shares in an eligibl e compa ny to be acquir ed on or before due date of
ny
millio n Wha t is the time limit for acqu iring the new asse t
Purchase: 1-year backward or 2 years forward;C onstructio n:3 years forward
2 years forw
3 years forwa
ard
rd
6 month s forwa rd
Purchase: 1-year backward or 2 years forward;C onstructio n:3 years forward
filing
Ho w muc h is exe mpt
Investmen t in the new asset or capital gain, whichever is lower (The new asset should not be transferre d within 3 years of its acquisitio n)
Inves tmen t in the new asset or capit al gain, whic hever is lowe r (The new asset shoul d not be trans ferre d withi n3 years of its acqui sition )
Invest ment in the new asset or capita l gain, which ever is lower (The new asset shoul d not be transf erred withi n3 years of its acqui sition )
Invest ment in the new asset or capita l gain, which ever is lower (The new asset shoul d not be transf erred within 3 years of its acquis ition); The new asset shoul d not be conve rted into mone y or any loan/a dvanc e shoul d not be
Investmen t in the new asset÷Net sale considerat ion×Capit al gain; The assessee should not complete constructi on of another residential house property within 3 years from the date of transfer of original asset nor should he purchase within 2 years from the date of transfer of original asset another house property
Investment in the new asset or capital gain, whichever is lower (The new asset should not be transferred within 3 years of its
Investment in the new asset or capital gain, whichever is lower (The new asset should not be transferred within 3 years of its
acquisition)
acquisition)
Invest ment in the new asset × capital gain ÷ net sale consid eration . (The exemp tion is revoke d if equity shares are sold/tr ansferr ed within 5 years from acquisi tion or the new asset is sold/tr ansferr ed by the compa ny within 5 years from acquisi tion)
taken on the securi ty of the new asset within 3 years from the date of its acquis ition
Income from other sources: This is a residual head, under this head income which does not meet criteria to go to other heads is taxed. There are also some specific incomes which are to be always taxed under this head. 1. Income by way of Dividends. 2. Income from horse races/lotteries. 3. Employees' contribution towards staff welfare scheme/ provident fund/ superannuation fund or any fund set up under the provisions of ESIC Act, received from the employees by the employer. 4. Interest on securities (debentures, Government securities and bonds). 5. Any amount received from keyman insurance policy including the sum allocated by way of bonus on such policy. 6.Gifts(subject
to
certain
condition
exemptions)(http://www.indiantaxupdates.com/2012/10/21/tax-on-gift-received-cash-or-noncash/). 7. Interest on compensation/enhanced compensation. 8. Income from renting of other than house property. 9. Family pension received by family members after the death of the pensioner. 10. Income by way of interest on other than securities.
and
Agricultural income: Agricultural income is exempt from tax by virtue of section 10(1). Section 2(1A) defines agricultural income as: Any rent or revenue derived from land, which is situated in India and is used for agricultural purposes. Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent-in-kind so as to render it fit for the market or sale of such produce. Income attributable to a farm house (subject to some conditions). Income derived from saplings or seedlings grown in a nursery.
Income partly agricultural and partly business activities: Income in respect of the below mentioned activities is initially computed as if it is business income and after considering permissible deductions. Thereafter, 40,35 or 25 percent of the income as the case may be, is treated as business income, and the rest is treated as agricultural income. Income
Business income 40% 35%
Growing & manufacturing tea in India Sale of latex or cenex or latex based crepes or brown crepes manufactured from field latex or coalgum obtained from rubber plants grown by a seller in India 25% Sale of coffee grown & cured by seller in India Sale of coffee grown, cured, roasted & grounded by seller in 40% India
Agricultural Income 60% 65%
75% 60%
For apportionment of a composite business-cum-agricultural income, other than the above-mentioned, the market value of any agricultural produce, raised by the assesses or received by him as rent-in-kind and utilized as raw material in his business, should be deducted. No further deduction is permissible in respect of any expenditure incurred by the assesses as a cultivator or receiver of rent-in-kind.
Permissible deductions from Gross Total Income: Deductions allowed under Chapter VI-A i.e., sections 80C to 80U, cannot exceed gross total income of an assesses excluding short term capital gains under section 111A and any long term capital gains. Some deductions under sections 80C to 80DDB are listed below.
Section 80C deductions: Deduction under this section is available only to an individual or an HUF. Section 80C of the Income Tax Act allows certain investments and expenditure to be deducted from total income up to the maximum of Rs 1,50,000 from the Financial Year 2014-15.
Section 80CCC (pension): Contribution made by the assesses and by employer to New Pension Scheme is admissible for deduction under this section. The assesses should be an individual who is employed on or after 1 January 2004. The deduction shall be equal to the amount contributed by the assesses and/or by the employer, not exceeding 10% of his salary (basic dearness allowance). Even a self-employed person can claim this deduction which will be restricted to 10% of gross total income.
The total deduction available to an assesses under sections 80C, 80CCC & 80CCD is restricted to 150,000 per annum. However, employer's contribution to Notified Pension Scheme under section 80CCD is not a part of the limit of 150,000.
Sec 80D: (1) In computing the total income of an assesses, being an individual or a Hindu undivided family, there shall be deducted such sum, as specified in sub-section (2) or sub-section (3), payment of which is made by any mode 95[as specified in sub-section (2B),] in the previous year out of his income chargeable to tax.
(2) Where the assesses is an individual, the sum referred to in sub-section (1) shall be the aggregate of the following, namely:- (a) the whole of the amount paid to effect or to keep in force an insurance on the health of the assesses or his family 96[or any contribution made to the Central Government Health Scheme] 96a[or such other scheme as may be notified by the Central
Government in this behalf] 97[or any payment made on account of preventive health check-up of the assesses or his family]as does not exceed in the aggregate fifteen thousand rupees; and (b) the whole of the amount paid to effect or to keep in force an insurance on the health of the parent or parents of the assesses 97[or any payment made on account of preventive health check-up of the parent or parents of the assesses]as does not exceed in the aggregate fifteen thousand rupees.
(3) Where the assessee is a Hindu undivided family, the sum referred to in sub-section (1) shall be the whole of the amount paid to effect or to keep in force an insurance on the health of any member of that Hindu undivided family as does not exceed in the aggregate fifteen thousand rupees.
(4) Where the sum specified in clause (a) or clause (b) of sub-section (2) or in sub-section (3) is paid to effect or keep in force an insurance on the health of any person specified therein, and who is a senior citizen, the provisions of this section shall have effect as if for the words "fifteen thousand rupees", the words "twenty thousand rupees" had been substituted. Explanation:-For the purposes of this sub-section, "senior citizen" means an individual resident in India who is of the age of 60[sixty years] or more at any time during the relevant previous year.
(5) The insurance referred to in this section shall be in accordance with a scheme99 made in this behalf by— (a) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalization) Act, 1972 (57 of 1972) and approved by the Central Government in this behalf; or (b) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).
Amount of Deduction U/Sec 80D HUF
Individual
On whose health insurance Any
Individual
policy can be taken
member
Parents
whether Total
himself, spouse, dependent or not Dependent children
General deduction Additional
deduction
15000 if 5000
15000
15000
30000
5000
5000
10000
20000
20000
40000
insured is a senior citizen Total
20000
Deduction under Section 80D (http://caknowledge.in/deduction-for-medical-insurance-premiumusec-80d/) is also available in respect of contribution to Central Government Health Scheme. However this deduction is not available to HUF. Deduction is available to an individual and only in respect of health insurance policy taken for Individual himself, spouse and dependent children. If an individual takes an insurance policy on health of Parents whether dependent or not, deduction under this Section will not be available.
Deduction under this section within the existing limit, in respect of any payment or contribution made by the assesses to such other health scheme as may be notified by the Central Government.
Section 80DDB: Deduction in respect of medical treatment, etc: Deduction is allowed to resident individual or HUF(Hindu Undivided Family ) in respect of expenditure actually during the PY incurred for the medical treatment of specified disease or ailment as specified in the rules 11DD for himself or a dependent relative or a member of a HUF.
Section 80E: Education loan interest: Interest payment on education loan for education in India gets deduction under this section. Education loan should be for self, spouse, child or the whose legal guardian the assesses is.
Financial institute must be gazette company by the Central Government of India.
Section 80TTA: Interest on Savings Account: Up to Rs 10,000 earned as interest from savings account in bank, post office or a co-operative society can be claimed for deduction under this section. This rebate is applicable for individuals and HUFs.
Section 80U: Disability: Disabled persons can get a flat deduction on Income Tax on producing their disability certificate. If disability is severe Rs 1,00,000 can be claimed else Rs 50,000.server here mean disability 80% or more as per this section.
Section 24: Interest on housing loans: 80CCF and 80D. However, this is only applicable for a residence constructed within three financial years after the loan is taken and also the loan if taken after 1 April 1999.
If the house is not occupied due to employment, the house will be considered self occupied.
For let out properties, the entire interest paid is deductible under section 24 of the Income Tax act. However, the rent is to be shown as income from such properties. 30% of rent received and municipal taxes paid are available for deduction of tax.
P. Chidambaram while announcing his Budget 2013 speech on 28 Feb 2013 also announced that for the year 2013-14, an additional deduction of ₹ 100,000 would be allowed to be deducted for the payment of Interest on Home Loan u/s 80EE.[11] This deduction would be allowed provided that the total value of the loan is not more than ₹ 25,00,000 and the total value of the house is not more than ₹ 40,00,000 and the loan should be a fresh loan taken during the financial year 201314. This deduction would be over and above the ₹ 150,000 deduction.
The losses from all properties shall be allowed to be adjusted against salary income at the source itself. Therefore, refund claims of T.D.S. deducted in excess, on this count, will no more be necessary.
Due date of submission of return: The due date of submission of return shall be ascertained according to section 139(1) of the Act as under:30 September of the Assessment Year(AY)
If the assesses is a company (not having any internation transaction), or If the assesses is any person other than a company whose books of accounts are required to be audited under any law, or If the assesses is a working partner in a firm whose books of accounts are required to be audited under any law.
30 November of the AY
If the assesses is a company and it is required to furnish report under section 92E pertaining to international transactions.
31 July of the AY
In any other case.
If the Income of a Salaried Individual is less than ₹ 500,000 and he has earned income through salary or Interest or both, such Individuals are exempted from filing their Income Tax return provided that such payment has been received after the deduction of TDS and this person has not earned interest more than ₹ 10,000 from all source combined. Such a person should not have changed jobs in the financial year. CBDT has announced that all individual/HUF taxpayers with income more than ₹ 500,000 are required to file their income tax returns online. However, digital signatures won't be mandatory for such class of taxpayers.
Advance tax: Under this scheme, every assessee is required to pay tax in a particular financial year, preceding the assessment year, on an estimated basis. However, if such estimated tax liability for an individual who is not above 60 years of age at any point of time during the previous year and does not conduct any business in the previous year, and the estimated tax liability is below ₹ 10,000, advance tax will not be payable. The due dates of payment of advance tax are:-
In case of corporate assesses
Otherwise
On or before 15 June of the Up to 15% of advance tax previous year
payable
On or before 15 September Up to 45% of balance of Up to 30% of advance tax of the previous year
advance tax payable
payable
On or before 15 December Up to 75% of balance of Up to 60% of advance tax of the previous year
advance tax payable
payable
On or before 15 March of Up to 100% of balance of Up to 100% of advance tax the previous year
advance tax payable
payable
Tax deducted at source (TDS): The general rule is that the total income of an assesses for the previous year is taxable in the relevant assessment year. However, income-tax is recovered from the assesses in the previous year itself by way of TDS. The relevant provisions therein are listed below. (To be used for reference only. The detailed provisions therein are not listed below.) Section
Nature of payment
Threshold limit (up to which no tax is deductible)
TDS to be deducted
192
Salary to any person
Exemption limit
As specified for individual in Part III of I Schedule
193
Interest on securities to any Subject to detailed provisions of given resident Section
10%
194A
Interest (other than interest on ₹ 10000 (for Bank/cooperative securities) to any resident bank) & ₹ 5000 otherwise
10%
194B
Winning from lotteries etc. to ₹ 10000
30%
any person 194BB
Winning from horse races to any ₹ 5000
30%
person 194C
Payment to resident contractors
₹ 30000 (for single contract) & ₹ 75000
2% (for companies/firms)
(for aggregate
& 1% otherwise
consideration in a financial year) 194D
Insurance
to ₹ 20000
commission
10%
resident 194E
Payment
to
non-resident
Not applicable
10%
₹ 2500
20%
₹ 1000
10%
₹ 5000
10%
sportsmen or sports association 194EE
Payment
of
deposit
under
National Savings Scheme to any person 194G
Commission on sale of lottery tickets to any person
194H
Commission/brokerage
to
a
resident 194-I
Rents paid to any resident
194IA
Payment
for
Purchase
₹ 180000
of
₹ 5000000
2% (for plant,machinery,equipment) & 10% (for land,building,furniture) 1%
Immovable Property 194J
Fees for professional/technical
₹ 30000
10%
services; Royalty At what time tax has to be deducted at source and some other specifications are subject to the above sections. In most cases, these payments shall not to deducted by an individual or an HUF if books of accounts are not required to be audited under the provisions of the Income Tax Act, 1961 in the immediately preceding financial year.
Income tax slab for FY 2010-11 / A.Y. 2011-12: New Income tax slab proposed in budget 2010-11 and its impact on Male individual, Female Individual, HUF and senior citizen The Finance Minister, in the Budget today, changed the tax slabs for men, women and senior citizens. The highest tax slab has now been raised from Rs 5 lakh to Rs 8 lakh. The FM has also increased the limit of deduction available under section 80C. He has allowed an additional investment of Rs 20,000 for infrastructure bonds taking the total of the limit under section 80C from the current Rs 1 lakh to Rs 1.2 lakh. Male individual below the age of 65 years& HUF tax payers : New tax slabs: Slabs (Rs)
Rate
0 – 160000
0
160001 – 500000
10
500001 – 800000
20
800001 and above
30
Old tax slabs: Slabs (Rs)
Rate
0-160000
0
160001-300000
10
300001-500000
20
500001 and above
30
Impact: Taxable income (Rs)
Tax
-before
budget Tax after budget
Saving (Rs)
(Rs)
(Rs)
200000
4120
4120
0
500000
55620
35019
20601
1000000
210120
158619
51501
1200000
271919
220419
51500
1500000
364619
313119
51500
2000000
519119
467619
51500
2500000
673619
622119
51500
4000000
1137119
1085619
51500
Female individual taxpayer: New tax slabs: Slabs (Rs)
Rate
0-190000
0
190001-500000
10
500001-800000
20
800001 and above
30
Old tax slabs: Slabs (Rs)
Rate
0-190000
0
190001-300000
10
300001-500000
20
500001 and above
30
Impact: Taxable income (Rs)
Tax
-before
budget Tax after budget
Saving (Rs)
(Rs)
(Rs)
200000
1029
1029
0
500000
52529
31929
20600
1000000
207029
155529
51500
1200000
268829
217329
51500
1500000
361529
310029
51500
2000000
516029
464529
51500
2500000
670529
619029
51500
1134029
1082529
51500
4000000
Senior Citizens New tax slabs: Slabs (Rs)
Rates
0-240000
0
240001-500000
10
500001-800000
20
800001 and above
30
Old tax slabs: Slabs (Rs)
Rates
0-240000
0
240001-300000
10
300001-500000
20
500001 and above
30
Impact: Taxable income (Rs)
Tax (Rs)
(Rs)
200000
0
0
0
500000
47379
26780
20599
1000000
201879
150379
51500
1200000
263679
212179
51500
1500000
356379
304879
51500
2000000
510879
459379
51500
2500000
665379
613879
51500
1128879
1077379
51500
4000000
-before
budget Tax after budget
Saving (Rs)
Income Tax Slabs for FY 2011-12 (AY 2012-13): In Case of General Assesses:
Income Bracket
Rate
0 to Rs. 1,80,000
0%
Rs. 1,80,001 to Rs. 5,00,000
10%
Rs. 5,00,001 to Rs. 8,00,000
20%
Above Rs. 8,00,000
30%
In Case of Women Assesses:
Income Bracket
Rate
0 to Rs. 1,90,000
0%
Rs. 1,90,001 to Rs. 5,00,000
10%
Rs. 5,00,001 to Rs. 8,00,000
20%
Above Rs. 8,00,000
30%
In Case of Senior Citizens (> 60 Years but less than 80 Years):
Income Bracket
Rate
0 to Rs. 2,50,000
0%
Rs. 2,50,001 to Rs. 5,00,000
10%
Rs. 5,00,001 to Rs. 8,00,000
20%
Above Rs. 8,00,000
30%
In Case of Very Senior Citizens (80 Years and above):
Income Bracket
Rate
0 to Rs. 5,00,000
0%
Rs. 5,00,001 to Rs. 8,00,000
20%
Above Rs. 8,00,000
30%
Income tax slab 2012-2013: The latest income tax slab to calculate your tax for Year 2012-2013 based on budget 2012 budget. Tax exemption limit raised to Rs 2 lakhs and tax rates has changed for other slabs too. Use our Free income tax calculator for getting an idea of how much tax you will be saving compared to last year per the latest tax rates.
India Income tax slabs 2012-2013 for General tax payers: Income tax slab (in Rs.)
Tax
0 to 2,00,000
0%
2,00,001 to 5,00,000
10%
5,00,001 to 10,00,000
20%
Above 10,00,000
30%
India Income tax slabs 2012-2013 for Female tax payers: Income tax slab (in Rs.)
Tax
0 to 2,00,000
0%
2,00,001 to 5,00,000
10%
5,00,001 to 10,00,000
20%
Above 10,00,000
30%
India Income tax slabs 2012-2013 for Senior citizens (Aged 60 years but less than 80 years): Income tax slab (in Rs.)
Tax
0 to 2,50,000
0%
2,50,001 to 5,00,000
10%
5,00,001 to 10,00,000
20%
Above 10,00,000
30%
India Income tax slabs 2012-2013 for very senior citizens (Aged 80 and above) Income tax slab (in Rs.)
Tax
0 to Rs. 5,00,000
0%
Rs. 5,00,001 to Rs. 8,00,000
20%
Above Rs. 8,00,000
30%
India Income tax slabs for Assessment Year 2013-14 (Financial Year 2012-2013): General tax payers: Income tax slab (in Rs.)
Tax
0 to 2,00,000
0%
2,00,001 to 5,00,000
10%
5,00,001 to 10,00,000
20%
Above 10,00,000
30%
Education Cess: 3% of the Income-tax.
Female tax payers: Income tax slab (in Rs.)
Tax
0 to 2,00,000
0%
2,00,001 to 5,00,000
10%
5,00,001 to 10,00,000
20%
Above 10,00,000
30%
Education Cess: 3% of the Income-tax.
Senior citizens (Aged 60 years but less than 80 years at any time during the previous year): Income tax slab (in Rs.)
Tax
0 to 2,50,000
0%
2,50,001 to 5,00,000
10%
5,00,001 to 10,00,000
20%
Above 10,00,000
30%
Education Cess: 3% of the Income-tax. Senior citizens (Aged 80 and above at any time during the previous year): Income tax slab (in Rs.)
Tax
0 to Rs. 5,00,000
0%
Rs. 5,00,001 to Rs. 8,00,000
20%
Above Rs. 8,00,000
30%
Income Tax Slab Rates for 2014-15 & 2015-16: The Income Tax Slab Rates for 2014-15 & 2015-16 are the same. The Income Tax Slab Rates are different for different categories of taxpayers. The Income Tax Slab Rates can be divided in the following categories:A. INDIVIDUALS & HUF: For Male Individuals below 60 Years of Age and HUF For Female Individuals below 60 Years of Age For all Senior Citizen above 60 years of Age For all Super Senior Citizen above 80 years of Age
B. BUSINESSES:
Co-operative Society
Firms, Local Authority & Domestic Company
Income Tax Slab Rates: FOR INDIVIDUALS & HUF: 1. For Male Individuals below 60 years of age & HUF:
Income tax slab (in Rs.)
Tax
Where Total Income does not exceed Rs. 2,50,000
NIL
Where the Total Income exceeds Rs. 2,50,000 but does not exceed Rs. 5,00,000 Where the Total Income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000 Where the Total Income exceeds Rs. 10,00,000
10% of the Amount by which it exceeds Rs. 2,50,000 20% of the Amount by which it exceeds Rs. 5,00,000 30% of the Amount by which it exceeds Rs. 10,00,000
2. For Female Individuals below 60 years of Age: Income tax slab (in Rs.)
Tax
Where Total Income does not exceed Rs. 2,50,000
NIL
Where the Total Income exceeds Rs. 2,50,000 but does not exceed Rs. 5,00,000 Where the Total Income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000 Where the Total Income exceeds Rs. 10,00,000
10% of the Amount by which it exceeds Rs. 2,50,000 20% of the Amount by which it exceeds Rs. 5,00,000 30% of the Amount by which it exceeds Rs. 10,00,000
3. For all Senior Citizens above 60 years of Age: Income tax slab (in Rs.)
Tax
Where Total Income does not exceed Rs. NIL 3,00,000 Where the Total Income exceeds Rs. 3,00,000 but does not exceed Rs. 5,00,000
10% of the Amount by which it exceeds Rs. 3,00,000
Where the Total Income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000
20% of the Amount by which it exceeds Rs. 10,00,000
Where the Total Income exceeds Rs. 10,00,000
30% of the Amount by which it exceeds Rs. 10,00,000
4. For all Senior Citizens above 80 Years of Age: Income tax slab (in Rs.)
Tax
Where Total Income does not exceed Rs. NIL 5,00,000 Where the Total Income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000
20% of the Amount by which it exceeds Rs. 5,00,000
Where the Total Income exceeds Rs. 10,00,000
30% of the Amount by which it exceeds Rs. 10,00,000
I.
SLABS FOR BUSINESS:
a. For Co-operative Society: Income tax slab (in Rs.)
Tax
Where the Total Income does not exceed Rs. 10% of the Income 10,000 Where the Total Income exceeds Rs. 10,000 but does not exceed Rs. 20,000
20% of the Amount by which it exceeds Rs. 10,000
Where the Total Income exceeds Rs. 20,000
30% of the Amount by which it exceeds Rs. 20,000
b. For Firms, Local Authority and Domestic Company: Income Tax Slab Rates won’t apply in this case and Tax @ 30% flat shall be computed on the Total Income. Surcharge shall not be levied on Income of Firms and Local Authorities but shall be levied on the Total Income Tax of Domestic Companies @ 5% provided that the Total Income of the Domestic Company exceeds Rs. 1 Crore.
References: 1. Institute of Chartered Accountants of India (2011). Taxation. ISBN 978-81-8441-290-1.
2."Growth
of
Income
Tax
revenue
in
India"
(http://shodhganga.inflibnet.ac.in/bitstream/10603/2876/12/12_chapter%205.pdf)
(PDF).
Retrieved 16 November 2012.
3. http://www.thetaxinfo.com/2013/12/income-tax-rebate-of-2000-calculation-sec-87a/
4.The
Indian
upper
class
grew
rapidly
during
the
Noughts
(http://www.financialexpress.com/news/evasion-of-personal-tax-dips-to-59-of-mopup/1096336)
5. Business Income (http://www.v-krishnan-and-company.com/business_income.html)
6. 80C limit Increased from 1,00,000 to 1,50,000 (http://www.thetaxinfo.com/2014/12/80c-taxdeductions/)
7. The institute of Cost accountants of India (Jan 2012). Applied direct taxation. Directorate of Studies,The Institute of Cost accountants of India. p. 238.
8. http://www.tax.fintotal.com/Sections/80E-Tax-Rebate/5913/68
9. http://www.tax.fintotal.com/Sections/80TTA-Tax-Rebate/6212/68
10. http://www.tax.fintotal.com/Sections/80U-Tax-Rebate/5916/68
11. http://www.thetaxinfo.com/2014/01/additional-deduction-on-interest-on-housing-loan/
12.http://www.incometaxindia.gov.in/publications/1_Compute_Your_Salary_Income/2_Income_ from_house_property.asp
13.
http://www.caclubindia.com/articles/e-filing-is-mandatory-income-is-more-than-5-lacs-
17646.asp
14. Income Tax rates Companies (http://businesssetup.in/blog/view/Income-Tax-rates-forCompanies)
15. Finance Act 2010
