THE AWARENESS AND KNOWLEDGE OF TAX PLANNING AMONG THE TAX PAYERS IN HUBLI - DHARWAD
SECTOR - GENERAL INSURANCE
SUBMITTED TO:
PROF. MAHESH BENDIGERI DIRECT TAX
SUBMITTED BY: ADITYA.P. KUMAR MBA 4 SEM TH
ROLL NO - 03
1
Chapter 1:
Introduction
1.1.
Purpose / Need for Study
1.2
Objectives
1.3
Limitations
1.4
Research Methodology
Chapter 2:
Conceptual Aspect about the Topic
Chapter 3:
Analysis and Interpretation
3.1
Graphical interpretation
3.2
Findings
Chapter 4:
Conclusion References Questionnaire
2
Chapter 1:
Introduction
1.1.
Purpose / Need for Study
1.2
Objectives
1.3
Limitations
1.4
Research Methodology
Chapter 2:
Conceptual Aspect about the Topic
Chapter 3:
Analysis and Interpretation
3.1
Graphical interpretation
3.2
Findings
Chapter 4:
Conclusion References Questionnaire
2
CHAPTER 1 INTRODUCTION TAX PLANNING
HISTORY
OF TAX PLANNING:
Over the last eight decades, since the introduction of income-tax, it has been o bserved hat there is a constant struggle between taxpayers and t ax collectors, the former trying to reduce their t heir tax liability and the latter seriously struggling to plug in the loopholes in the statute. India has a well developed taxation t axation structure. The tax system in India is mainly a t hree tier system which is based between the Central, State Governments and the local government govern ment organizations. In most cases, these local bodies bod ies include the local councils and the t he municipalities.
According to the Constituti Co nstitution on of India, the t he government has the right to levy taxes o n individuals and organizations. However, the constitution co nstitution states that no one has the right to levy or charge taxes except the authority of law. Whatever tax is being charged has to be backed by the law passed by the legislature or the t he parliament.
The main body bod y which is responsible for the collection of taxes is the Central Board o f Direct Taxes (CBDT). It is a part of the Depart ment of Revenue under the Ministry of Finance o f the Indian government. The CBDT functions as per the Central Board of Revenue Act of 1963.
Types of direct taxes : Usually, the Central Government levies taxes on income, central excise duties, services taxes and various other types of direct taxes. So me of the various forms of direct taxes are: t he companies and business Corporate Income taxes: According to the Income Tax Act, the organizations in India are taxed on o n the income from their worldwide transactions. In case of o f non resident business organizations, tax is levied on the income which is earned from their business 3
transactions in India or any other Indian sources. In case of the resident or domestic organizations, a tax of 35 % and a 2.5 % surcharge is levied. In case of foreign corporate organizations, a basic tax rate of 40 % and 2.5 % surcharge is levied. In addition to these, 2% of education cess is also charged on the tax amount. In case the net profit becomes more than $ 33333, the organizations have to pay an additional 1 % as wealth tax.
Personal Income Tax: The Central Government levies the Personal Income Tax. It is administered and supervised by the Central Board of Direct taxes as per the provisions of the Income Tax Act. The personal income tax rates are as follows:
0-100,000- No tax needed 1, 00,000-1, 50,000- 10 % 1, 50,000-2, 50,000- 20 % 2,50,000 and above- 30 %
If the personal income becomes more than INR 8, 50,000, a surcharge of 10 % of the total tax amount is levied. Some adjustments have been made in the recent budget about the rates of tax on the personal income. The threshold limit has been increased by INR 10,000 which gives the assessee a tax relief Rs. 1,000. If the assessee is a woman, the threshold limit will be increased to Rs.145, 000 from Rs 135,000 while in case of senior citizens and the aged, the threshold limit has been increased to Rs 195,000 from Rs.185, 000. This will give the assessee a tax relief of Rs 2000. Under the section 80D, the deduction of medical insurance premium has been increased to a maximum limit of Rs 15,000 while for senior c itizens, it has been increased to a maximum of Rs.20, 000.
Capital Gains Tax: The central government also charges tax on the capital gains that is derived from the sale of the assets. There are a number of provisions like:
The Long-term Capital Gains Tax is charged if: The capital assets are kept for more than three years If the securities and shares are listed under any reco gnized Indian stock exchange. 4
In case of the long term capital gains, they are taxed at a basic rate of 20 %. Normal corporate income tax rates are applicable for short term capital gains. 10 % tax is levied on the short term capital gains that take place from the transfer of the units of mutual funds and equ ity shares. In case of the short term and long term capital losses, they are lowed to be carried forward for 8 consecutive years.
Types of indirect taxes : Excise Duty: The central government levies excise duty under the Central Excise act of 1944 and the Central Excise Tariff Act of 1985. In most cases, around 16% excise duty is charged and in some cases, an additional excise duty of around 8 % is also charged. Due to the recent budget amendments, an educational cess of around 2 % is also charged.
In the recent budget, a number of tax exemptions have been initiated. Tax relied has been created in sectors which create jobs like small scale industr ies, cottage industries, food processing sectors, bio diesel and so on. In order to provide access of electricity and purified water, the water plans and purification technology sectors are also exempt from tax. Excise duty has been increased by around 5 % on cigarettes and other tobacco products.
Customs Duty: Customs duty in India falls under the Customs Act 1962 and Customs Tariff Act of 1975. Usually, the goods that are imported to the country are charged customs duty along with educational cess. For industrial goods, the rate has been slashed to 15%. The customs duty is evaluated on the value of the transaction of the goods. The Central Board of Excise and Customs under the Ministry of Finance manages the customs duty process in the country.
Service Tax: Usually, 10 % service tax is levied on various services that are provided in the country. In the recent budget, the tax exemption limit in case of the small service providers has been raised to Rs.800, 000 from Rs.400, 000. Tax relief has also been provided to the services of the Resident Welfare Associations whose members contribute monthly Rs 3000 for the services.
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Types of state taxes : Apart from the central taxes, the states also levy taxes on various good and services. Some of the taxes are:
Sales Tax/VAT:
In most cases, sales taxes are charged on the sale of movable goods. In most of the states, from April 1, 2005, the sales taxes have been replaced with Value Added Tax (VAT). In case of VAT, taxes are only levied on the goods and not the services. VAT comprises 4 slabs: 0% for essential commodities 1% levied on bullion and valuable stones 4% on industrial inputs and capital goods of mass consumption All other items 12.5% The VAT rates of petroleum tobacco, liquor and so on are higher and differ from state to state. In addition, there are some other state and local taxes that are applicable. They are: Octroi/entry tax Stamp duty on asset transfer Property/building tax Agriculture income tax
Tax planning is varied according to: y
Tax planning with reference to setting up of a new business:
In the case of setting up of a new business. One has to take the following decisions:
Where the new undertaking should be located What should be manufactured in the new undertaking What should be the legal form of organization
y y y
6
Tax planning with reference to financial management decisions: Capital structure Dividend policy
y y y y y
y
y
y
Inter-corporate dividend Bonus shares Tax planning with reference to specific managerial decisions: Tax provisions affecting various managerial decisions are given below: Make or buy: Many costing or non-costing considerations guide the decision relating to ³make or buy´. Some of these considerations are: Utilization of capacity Inadequacy of funds Latest technology Variable cost of manufacturing vis ±a-vis purchase price Dependence upon supplier Labor problem in the factory The following tax consideration one has to keep in mind while taking ³make or buy´ decision: Establishing a new unit: If the decision to manufacture a part or component involves setting up a separate industrial unit, then tax incentives available under sections 10A, 10B, 32, 80-IA and 80-IB one has to keep in mind Export: If ³make or buy´ decision is taken for exporting goods, then tax incentive is available under section 10B in case the assesse is a newly established hundred percent export oriented undertaking Sale of plant and machinery: If buying is cheaper than manufacturing and the assessee decides to ³buy´ parts/components for a long period of time, he may like to sell the existing plant and machinery.Tax implications as specified by section 50, one has to consider for taking the decision
Tax planning in respect of employees remuneration:
Two factors require consideration in the case of remuneration planning. First, one has to ensure that while calculating business income of the employer, remuneration paid to employees are fully deductible. If such expenditure is not allowed as deduction then tax bill of the employer increases. On other hand, one has to see that remuneration received by the employees is taxable in their hands at concessional rates, to minimize their tax bill and to maximize their take home pay
Deduction of remuneration in the hand of employer: Tax provisions affecting deduction of remuneration in the ha nd of employers are given below: 7
y
Remuneration to employees engaged in carrying on scientific research[sec 35(1)] Insurance premium on health of employees[sec 36(1)(ib) Bonus and commission to employees[sec36(1)(ii)] Employers contribution towards provident fund/gratuity fund[sec 36(1)(iv)/(v)] Employees contribution to staff welfare schemes[sec 36(1)] Family planning expenditure[sec 36(1)(ix)] Payment of salary/allowances and perquisites[sec 37(1)] Salary payable outside India[sec 40A(2)] Provident fund payment without tax deduction[sec40(a)(iv)] Payment of salary to relatives [sec 40A(2)] Payment of salary exceeding Rs.20,000 in cash or by bearer or cheque[sec 40A(3)]
Tax planning in respect of non-residents: Provisions regulating tax liability of non-residents are available under d ifferent sections of the act as follows: Meaning of non-resident[sec 6] Incidence of tax in the case of a non-resident[sec 5(2)] Income deemed to accrue or arise in India[sec9] Interest to non-residents[sec 10(6)] Salary to non-residents[sec 10(6)] Tax paid on behalf of non-residents[sec 10(6A),(6B)] Technical fees received by a notified foreign company[sec 10(6C)] Fees received by non-resident consultants and their employees[sec 10(8A)(8B)] Interest exempt under section 10(15) Aircraft lease rent[sec 10(15A) Shipping profits of non residents[sec 44B] Income of foreign airlines[sec 44BBA] Profit of the business of civil construction[sec 44BBB] Head office expenses in the case of non-residents[sec 44D] Royalty and technical fees in the case of non-residents[sec44D]under sections Computation of income and tax under sections 115A, 115AB, 115AC, 115AD, 115BBBA, and 115D Capital gains computation in the case of non-residents[sec48] Special provisions relating to non-resident Indians[sec 115C to 115-I]
8
y
9
Tax planning in respect of amalgamation or demerger of companies or business restructuring Amalgamation is a blending of two or more existing undertakings into one undertaking. The shareholders of each blending company become substantially the shareho lders in the company which is to carry on the business of blended undertakings. There may be amalgamation either by the transfer of two or more undertakings to a new company, or by the transfer of one or moe undertakings to an existing company.
1.1
PURPOSE OF THE STUDY:
³TO FIND OUT THE AWARENESS AND KNOWLEDGE OF TAX PLANNING AMONG THE TAX PAYERS IN HUBLI DHARWAD´
1.2 OBJECTIVES OF THE STUDY: y
TO KNOW THE LEVEL OF AWARENESS ABOUT TAX PLANNING AMONG TAX PAYERS OF GENERAL INSURANCE EMPLOYEES
1.3LIMITATIONS OF THE STUDY: y y
STUDY IS RESTRICTED TO GENERAL INSURANCE EMPLOYEES LOCATION:TAX PAYERS WITHIN ³HUBLI-DHARWAD´
1.4 RESEARCH MET HODOLOGY: y
10
PILOT SURVEY(QUESTIONNAIRE)
CHAPTER2 CONCEPTUAL ASPECT OF T HE TAX: Tax planning: Tax planning can be defined as an arrangement of one¶s financial and economic affairs by taking complete legitimate benefit of all deduct ions, exemptions, allowances and rebates so that tax liability reduces to minimum. Essential features of tax planning are as under: y y y
It compromises arrangements by which tax laws are fully complied All legal obligations and transactions(both individually and as who le )are met Transactions do not take the form of colorable devices i.e, those devices where statue is followed in strict words but actually spirit behind the stat ue is marred would be termed as colorable devices
Tax avoidance: The line of demarcation between tax planning and tax avoidance is very thin and blurred. Tax avoidance is reducing or negating tax liability in legally permissible ways and has legal sanction. Essential features of tax voidance are as under: y y y
Legitimate arrangement of affairs in such a way so as to minimize tax liability Avoidance of tax is not tax evasion and carries no public d isgrace with it An act valid in law cannot be treated as fictitious merely on the basis of some underlying motive supposedly resulting in lower payment o f tax to authorities
Tax evasion: All methods by which tax liability is illegally avoided is termed as tax evasion. Tax evasion is an attempt to evade tax liability with the help of unfair means/methods. Tax evasion is tax omission. Tax evasion is unlawful and an assesse guilty of tax evasion may be punished under the relevant laws. Tax evasion is intentional attempt to avoid payment of tax after the liability to tax has arisen.
COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR
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Particulars 1. INCOME FROM SALARIES Income from salary Income by way of allowance Taxable value of perquisite Gross salary less: deduction under section 16 Entertainment allowance Professional tax Taxable income under the head ³salaries´ 2. INCOME FROM HOUSE PROPERTY Adjusted net annual value Less: deductions under section24 Taxable income under the head ³income from house property´ 3. Profits and gains of business and profession: Net profits as per profit loss account Add: amounts which are debited to p& l acc. But are not allowable as deductions under the act Less: expenditures which are debited to p& l acc. But are not allowable as deductions under the act Less: incomes which are credited to P&L a/c but are exempt or taxable under other heads of income 4. Capital gains: Amount of capital gains Less: amount exempt Taxable income under the head ³capital gains´ 5. Income from other sources Gross income Less : Deduction under section 57 Taxable income under the head ³Income from other sources´ Total { 1+2+3+4+5) Less adjustment on account of set of and carry forward Gross total Income Less : Deduction under section 80 C to 80 U Total income or net income to tax Total income or net come liable to tax (rounded off) Computation of tax liability y y y
y y
y
12
Rs
Rs
Tax on net income Add : Surcharge Tax and surcharge Add : Education cess and secondary and higher education cess Less : Reb ate under sections 86, 89, 90 90a and 91 tax
There are various India Tax Deductions or tax exemptions provided by the Indian Income Tax Act. The tax deductions help to deduct an amount from the taxable income and help to save tax. Each year, one can save thousands of rupees in income tax through income tax exemptions. The Central Board for Direct Taxes (CBDT) governs the Indian Income Tax department. The department is also part of the Department of Revenue which is managed under the Indian Revenue Service (IRS) under the Ministry of Finance, Govt. of India. Income taxes are imposed by the government of India on taxable income of Hindu Undivided Families (HUFs), companies, individuals, firms, co-operative societies and trusts (which are identified as a body of Individuals and Association of Persons) and any other artificial person. There are separate levy of taxes on each persons which are governed by the Indian Income Tax Act, 1961.
Some of the income tax deductions and tax exemption limits for the financial year 2008-09 are given below Income Tax deduction - Section 80C of the Indian Income Tax Act Section 80C is one of the most common income tax deductions. This is quite popular as it encourages monthly savings from income. If someone has a taxable income in the highest tax bracket, the deductions under this section can help one reduce the taxable income by 1 lakh rupees. This deduction can be availed if one has invested money in Life Insurance premium, Provident Funds, mutual fund investments in ELSS (Equity Linked Savings scheme), bank deposits (more than 5 years), National Saving Certificate (NSC), tu ition fees, principal part of EMI on housing loan, ULIPS (Unit Linked Insurance Plans). The maximum tax deduction or tax exemption limit is Rs.1, 00,000.
Income Tax deduction - Section 80D of the Indian Income Tax Act 13
This section of India Tax Deduction is helpful if there is no coverage of health and medical expenses. It is better if one gets health and medical insurance for oneself, spouse, dependent parents and dependent children. Through this one can claim deduction till Rs. 15000/- per annum for the insurance premium. The limit for senior citizens is Rs 20,000. Income Tax deduction - Section 80G of the Indian Income Tax Act According to Section 80G in the India tax deduction rules, donations to National Children Foundation, University or educational institution of national importance, Prime Minister's Relief Fund, charitable institutions etc are deductible from the taxable income. Income tax deduction for 50% of the donated amount is eligible for other donations. The maximum tax deduction or tax exemption limit is 100% for various funds and 50% for other donations. Related Links Tax Planning India is an application to reduce tax liability through the finest use o f all accessible allowances, exclusions, deductions, exemptions, etc, to trim down income and/or capital profits. Salaried individuals in India are not fully aware of the tax planning exercise which is why they rush at the end of the tax-planning season and make investments to reduce their tax liability. This has negative effect on tax payable by them and they eventually end up paying more taxes than they are required to.
Tax-planning tips that can assist salaried people to reduce their tax accountability 1. Make full use of the entire Section 80C deduction - The maximum reduction available in Section 80C is Rs 100,000 and salaried citizens whose gross salary is Rs 250,000 o r more are entitled to use the full Rs 100,000 limit.
Individuals who make monetary infusions of over Rs 100,000 in Section 80C in selected areas fail to understand that the advantages are limited. In spite of investing Rs 70,000 and Rs 40,000 in Public Provident Fund and ELSS respectively, the amount entitled by the investor is only Rs 100,000.
Following investments/contributions meet the criteria for Section 80C reduction: Public Provident Fund Accrued interest on National Saving Certificate Life Insurance Premium 14
National Saving Certificate Tuition fees paid for children's education (maximum 2 children) Principal component of home loan repayment 5-Year fixed deposits with banks and Post Office Equity Linked Savings Schemes (ELSS)
2. Reduction of tax liability beyond Section 80C deductions - If your salary surpasses Rs 250,000 pa and the reductions under Section 80C are not enough to minimize the general tax liability consider the following: Home loan: Interest payments of uptoRs 150,000 pa are entitled for reduction under Section 24. Medical insurance: A deduction of uptoRs 15,000 pa under section 80D is applicable under this. Donations: Tax advantages under Section 80G entitle the donations to particular funds/institutions. 3. Assert tax advantages on house rent paid - If HRA is not included in the salary structure then the salaried individuals can asset rent paid by them for residential lodging. This reduction is accessible under Section 80GG and is smallest amount of the following: 25% of the total earnings or, Rs 2,000 every month or, Surplus of housing charge paid over 10% of total salary 4. Reorganize the salary - Reorganizing the salary and incorporating certain apparatus can help in the long run in minimizing the tax liability. In order to assert tax benefits salary reform is a more competent measure. The following can be included in an individual's salary structure: Food coupons can release up to Rs 60,000 per year from tax. Medical expenses which are compensated by the employer spare up to Rs 15,000 per year. House Rent Allowance (HRA) should be incorporated in the salaries of individuals who stay in rented houses Transport allowance discharge uptoRs 800 per month.
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5. Go for a combined home loan - The primary reimbursement on a home loan is entitled for a reduction of up to Rs 100,000 pa and the interest rewarded is entitled for a reduction of up to Rs 150,000 pa. When a home loan is for a considerable amount then the interest and chief reimbursement surpass the allotted limit. A salaried individual can go for a combined joint home loan with his parent, spouse or sibling, to guarantee the best utilization of tax adva ntages.In this way both the owners can assert tax reductions in the percentage o f their stake holding in the loan. ALL ABOUT DEDUCTION U/S 80D FOR MEDICLAIM PREMIUM AVAILABLE TO INDIVIDUAL, HUF AND SENIOR CITIZENS Deduction in respect of Medical Insurance Pre mium (Mediclaim) paid to keep in force insurance by individual either on his own health or on the health of spouse, dependent parents andchildren or HUF on the health of any members of the family. A Mediclaim policy is a mustbecause should you fall sick or meet with an accident, your medical bills could wipe out yoursavings. Features of Mediclaim policy
1. Premium based on Age: - As in term insurance, the premium rates will vary among the insurers and will also depend on your age. The older you are, the heftier the premium. For instance, Mediclaim policy from General Insurance Corporation has a fixed premium till 35 years and then it changes in 10-year slabs. 2. Who is it available to? Individual (resident or non resident, Indian Citizen or foreign citizen):In case any individual is taking the deduction, the medical insurance policy can be taken in the name of any of the following: the taxpayer or the spouse, parents or dependent children* of the taxpayer. HUF (Hindu undivided Family may be resident or non resident) :- In case a HUF is taking the deduction, the medical insurance policy can be taken in the name of any member of the family. Note
Dependent Children (i.e. legitimate or legally adopted children). Children above 18years, if employed, can not be covered. Male children, if not employed, but a bonafide student can be covered upto age of 25 years. Female children, if not employed, can be covered until the time she is married. Parents need both to be dependent on the Assessee. Parents of Individual or Spouse both are covered. 3. Entry Age: This insurance is available to a person between the age of 18 to 59 years 16
However, the Policy can be renewed upto the age of 80 years. a) Children above the age of 3 months can be covered provided parents are covered concurrently and suitable premium is paid. If the child a bove 18 years is employed or if the girl child is married, he or she shall cease to be covered under the policy. However male child can be covered upto the age of 25 years if he is a bonafide regular student and fully dependent on primary insured. Female child can be covered upto the time, she is unmarried. b) If the insured has taken continuous Mediclaim insurance policy with us for at least 5 years prior to attaining the age of 80 years the policy can be renewed beyond the age of 80 upto the age of 90 years as a special case with the approval of Regional Incharge on case to case basis. The premium chargeable shall be 10% of the premium for 75-80 years age slabs for proposers above 85 and 20% of the premium for 75-80 age slabs for proposers above 90. c) No inclusion of family member during currency of policy is permissible except for a new bo rn child between the ages of 3 months to 6 months and newly married spouse within 60 days of marriage. Otherwise inclusion of family member shall be allowed only at the time of renewal. Prorata premium shall be charged for such inclusion during the currency of the po licy for the unexpired period. 4. Sum Insured: Minimum sum insured shall be Rs 50,000/- and can be increased in multiples of Rs 25,000/-upto Rs 5 lacs. The sum insured must be identical for primary insured and the dependents. However, the children may be covered for 50% Sum Insured as per 4 above. 5. Payment of Mediclaim Premium out of taxable Income:- The amount must have been paid using the taxpayer¶s income chargeable to tax. 6. In addition to deduction u/s, 80C, 80CC and 80CCD,:- This is an additional deduction available which do not include deduction u/s 80C, 80CCC and 80CCDfor which overall limit is is Rs. 1,00,000. 7. Partly contribution: If part payment is done by you and part payment by the parent, both can claim deduction to the extent of their contribution subject to maximum allowed but a mount should be paid directly to insurance company and paid through mode other than by cash. 8. Mode of payment: The premium may be paid by any mode of payment other than cash. Note prior to 1st April 2009, premium payment was required to be done only by cheque. Credit card or other online payment mechanism where not allowed. Now all payment modes except cash payment are accepted. 9. Which Mediclaim Premium is allowed?
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Mediclaim premium paid under Medicalinsurance scheme o f General Insurance Corporation approved by the Central Government, or anyother insurer approved by the Insurance Regulatory & Development Authority (IRDA). 10. What is the amount of the deduction? For Individual Basic deduction: Mediclaim premium paid for Self, Spouse or dependent children. Maximum deduction Rs 15,000. In case any of the persons specified above is a senior citizen(i.e. 65 years or more as of end of the year) and Mediclaim Insurance premium is paid for suchsenior citizen, deduction amount is enhanced to Rs. 20,000. Additional deduction: Mediclaim premium paid for parents. Maximum deduction Rs15,000. In case any of the parents covered by the Mediclaim policy is a seniorcitizen, deduction amount is enhanced to Rs. 20,000. For HUF Mediclaim premium paid for any member of the HUF. Maximum deduction Rs15,000. In case any member of the HUF covered by the Mediclaim policy is a seniorcitizen, deduction amount is enhanced to Rs. 20,000.Senior citizen: means who is at least of 65 year of age or more at any time during the previousyear. EXAMPLE1. An individual assesse pays (through any mode other than cash) during the previous year medical insurance premia, out of his taxable income, as under: (i) Rs 12,000/- to keep in force an insurance policy on his health and on the health of his wife and dependent children; (ii) Rs 17,000/- to keep in force an insurance policy on the health of his parents. Under the new provisions he will be allowed a deduction of Rs 27,000/- (Rs. 12,000/- + Rs.15,000/-) if neither of his parents is a senior citizen. However, if any of his parents is a senior citizen, he will be allowed a deduction of Rs 29,000/- (Rs.12,000/- + Rs.17,000/). Whether the parents are dependent or not, is not a consideration for deciding the deduction under the new provisions. Further, in the above example, if cost of insurance on the health of the parents is Rs 30,000/-, out of which Rs 17,000/- is paid (by any non-cash mode) by the son and Rs 13,000/- by the father( who is a senior citizen), out of their respective taxable income, the son will get a deduction of Rs 17,000/- ( in addition to the deduction of Rs 12,000/- for the medical insurance on self andfamily) and the father will get deduction of Rs 13,000/-.
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EXAMPLE 2 An individual assesse pays through credit card during the previous year health insurance premium as under: 1. Rs. 12,000 to keep in force an insurance policy on his health and on the health of his wife and children 2. Rs. 17,000 to keep in force an insurance policy on the health of his parents. Under the proposed new provisions, he will be allowed a deduction of Rs. 27,000 (Rs. 12,000 +Rs. 15,000) if neither of his parents is a senior citizen. However, if any of his parents is a senior citizen, he will be allowed a deduction of Rs. 29,000 (Rs. 12,000 + Rs. 17,000). Whether the parents are dependent or not, is not a consideration for deciding the deduction under Section 80D.
Section 80D of the Income Tax Act: Deduction In respect of medical insurance premium.80D. (1) In computing the total income of an assessee, 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, other than cash, in the previous year out of his income chargeable to tax. (2) Where the assessee 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 assesse 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 assesse as does not exceed in the aggregate fifteen thousand rupees. Explanation. For the purposes of clause (a), family means the spouse and dependent children of the assesse. (3) Where the assesse 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 .For the purposes of this
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sub-section, senior citizen means an individual resident in India who is of the age of sixty-five 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 scheme 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 appro ved 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 o f the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).] Decuction of tax from payments in respect of National savings Scheme {Sec 194EE} The person responsible for paying any amount (principal and interest) out of National savings scheme . 1987 should deduct tax at source at the rate of 20 per cent is deductible at the time of payment out of National saving scheme 1992 Tax is not deductible made in the following cases. Where the amount of payments or the aggregate amount payment is a financial year is less than rs 2,500 tax is not deductible under section 194 EE.
Deduction of tax at sourse on payments on account of repurchase of units by Mutual Funds or UTI (sec 194F) The person responsible for paying to any amount referred to in section 80CCB shall, at the time payment thereof, deduct income tax thereon the rate of 20 per cent It may be noted that section 80CCB is applicable if investment was made during the previous year in the notified units of Equity Linked Saving Scheme of UTI or a mutual fund.
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CHAPTER 3 ANALYSIS AND DATA INTERPRETATION
1.According to the data obtained from the survey most of the employees are aware of the tax planning 2. most of the employees have felt that the tax planning knowledge is required to every individual 3.through the survey conducted we came to know the highest utilized financial instruments for tax planning 4.Most of the employees have utilized the maximum deduction while filing the IT returns 5.Through the survey conducted came to know that the employees are aware of the advantages obtained through tax planning
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3.1 GRAPHICAL REPRESENTATION
Q.1
AWARENESS OF TAX 0%
AWARENESS OF TAX a AWARENESS OF TAX B
100%
Q.3
INDIVIDUAL FEEL ABT TAX
INDIVI DUAL FEEL ABOUT TAX VERY IMPORTANT INDIVI DUAL FEEL ABOUT TAX IMPORTANT INDIVI DUAL FEEL ABOUT TAX NOT SO IMP
100%
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INDIVI DUAL FEEL ABOUT TAX NOT REQ
Q.4
DO YOU FILE IT RETURN 0%
DO YOUFILE IT RETURN A DO YOUFILE IT RETURN B
100%
Q.7
DEDUCTIONS ELIGIBLE 0% 0%
0% 0%
DEDUCTIONS ELEGIBLE A DEDUCTIONS ELEGIBLE B 32% 40%
DEDUCTIONS ELEGIBLE C DEDUCTIONS ELEGIBLE D DEDUCTIONS ELEGIBLE E DEDUCTIONS ELEGIBLE F
0%
DEDUCTIONS ELEGIBLE G 28%
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DEDUCTIONS ELEGIBLE H
Q.8
INSTRUMENTS FOR TAX
INSTRUMENTS A
4% 20%
15%
INSTRUMENTS B INSTRUMENTS C INSTRUMENTS D
8% 4%
20%
INSTRUMENTS E INSTRUMENTS F
15%
INSTRUMENTS G 14%
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INSTRUMENTS H
Q.9
FINANCIAL INSTRUMENTS INVESTED IN
1% 12%
20% FINANCIAL INSTRUMENTS A FINANCIAL INSTRUMENTS B 16%
FINANCIAL INSTRUMENTS C FINANCIAL INSTRUMENTS D FINANCIAL INSTRUMENTS E
10%
FINANCIAL INSTRUMENTS F FINANCIAL INSTRUMENTS G
7% 9%
FINANCIAL INSTRUMENTS I
6%
25
FINANCIAL INSTRUMENTS H
19%
Q.10
MAXIMUM DEDUCTIONS
10%
DEDUCTION U/S 80C A DEDUCTION U/S 80C B
90%
Q.12
KNOWLDGE OF TAX PLANNING
7% 7% KNWOLEDGE OF TAX A
40%
KNWOLEDGE OF TAX B KNWOLEDGE OF TAX C KNWOLEDGE OF TAX D
46%
26
Q.13
LEVEL OF KNOWLWDGE IN TAX 0%
LEVEL OF KNOWDLEDGE A
15%
LEVEL OF KNOWDLEDGE B
40%
LEVEL OF KNOWDLEDGE C 45%
LEVEL OF KNOWDLEDGE D
Q.14
ADVANTAGE OF TAX PLANNING
19%
ADVANTAGE A ADVANTAGE B
15%
ADVANTAGE C 66%
27
FINDINGS: About 90% of the customers f all in the age group between 50- 60 years. About 85- 90% of the income group lies between Rs.3,00,000- 5,00,000. 100% people are aware of tax planning. 100% people feel that tax planning is very important. 100% of the people do f ile their returns. 70% of the people in claim deduct ions in NSC, 40% in PPF, 35% in LIC, 10% in mutual
funds. Almost 20 to 25% of the people invested in Life in surance followed by f ixed deposit with
18% and PPF with 20%. We could also see that the maximum knowledge was obtained either by taking help
from the tax consultant or through analyzing different f inancial assets. It was also observed that people considered tax planning as a savings in tax.
CONCLUSION: From the project it can be concluded that the customers from general insurance are
fully aware of the tax planning and the benef its deriving out of f iling the income-tax return. The employees keep themselves updated either by consulting the tax consultant or
product study. The study also shows that the people have divested their investment in various
instruments in order to mitigate their risks.
28
QUESTIONNARE
Dear Sir/Madam Iam doing a project work on ³A study on the Awareness and knowledge of Tax planning among the Tax Payers in Hubli-Dharwad´. I therefore request you to spend your few valuable minutes in providing me some valuable information through this questionnaire. I assure you that information provided will be confidential and will be used for academic purpose only.
A. Name : _____________________________________________________________ B. Age : a) 20 ± 30 years ( ) d) 50 ± 60 years ( )
b) 30 ± 40 years ( )
Male ( )
C.
Gender :
Female ( )
D.
Phone No. / Mobile No.: ____________________________
E.
Designation
F.
Organization : _____________________________________________________
G.
Annual Income :
: ____________________________
a. Rs. 1,00,000 ± 2,00,000 ( ) b. Rs. 2,00,000 ± 3,00,000 ( ) c. 3,00,000 ± 4, 00,000 ( )
1. Are you aware of Tax Planning? a. Yes ( )
b. No.
( )
If your answer to question 1 is Yes, ignore next question. If your answer to question 1 is No. then go to question no. 2
29
c) 40 ± 50 years ( )
2. What is the reason for being unaware of Tax Planning? a. Too Technical to understand
( )
b. Return will be filed by Tax consultant no not aware of Tax Planning.
( )
c. No surplus income to invest in tax planning financial instruments
(
)
d. Lack of time
(
)
3. As an Individual Do you feel Tax planning is «««.. a. Very important
( )
b. Important
( )
c. Not So Important
( )
d. Not required
( )
4. Do you file IT Return? a. Yes ( )
b. No. ( )
5. Mention any 3 Deductions under Sec 80C? a. ______________________ b. _______________________ c. _____________________
6. What is the maximum limit of Deduction under Sec 80C? a. Rs. 50000 ( )
30
b. Rs. 1,00,000 ( )
c. 2,00,000 ( )
7. Which of the following are the deductions eligible for Individual under Income Tax Act? a. 80C
( )
b. 80CC ( )
c. 80 CCD ( )
d. 80 D ( )
e. 80 DD ( )
f. 80 E ( )
g. 80 GG
h. 80 U ( )
( )
8. Which of following are the instruments for Tax Planning? a. Health Insurance Policy
(
b. Life Insurance Policy
) (
c. Fixed Deposit
(
)
d. Public Provident Fund
(
)
e. ELSS
(
)
f. NSC, KVP
(
)
g. Gold
(
)
h. Shares
(
)
)
9. In which Financial Instruments have you invested in? a. Shares
31
(
)
b. Fixed Deposit
(
c. Gold
(
)
d. Life Insurance
(
)
e. Health Insurance
(
)
f. Mutual Fund
(
)
g. NSC, KVP
(
)
h. Public Provident Fund
(
)
i. Real Estate.
(
)
)
10. Have you utilized the maximum deduction u/s 80C of Rs. 100000 while filing IT returns? Yes (
)
No (
)
11. If your answer to the question 10. is NO. State the reason for under utilization of Max. Deduction u/s 80C. a. No adequate investment in tax saving instruments.
(
b. Invested in non- tax benefit financial instruments
)
(
c. Low Saving Rate
(
) )
d. Unaware of various heads of investment available for investment in 80C. ( e. Any other please specify______________________________
12. How do you enrich your knowledge of Tax Planning? a. Reading Newspaper
(
b. By Taking Advise from Friends and Relatives
) (
)
c. By taking help from tax consultant
(
)
d. Through analyzing different financial assets
(
)
13. Rate your level of knowledge in Tax Planning? a. Very Good (
32
)
b. Good (
)
c. Average (
)
d. Poor ( )
)
