CHAPTER - I

INTRODUCTION

Taxes are generally an involuntary fee levied on individuals or corporations that is enforced
by a government entity, whether local, regional or national in order to finance government
activities. In economics, taxes fall on whomever pays the burden of the tax, whether this is
the entity being taxed, like a business, or the end consumers of the business's goods

Tax planning is the analysis of a financial situation or plan from a tax perspective. The
purpose of tax planning is to ensure tax efficiency, with the elements of the financial plan
working together in the most tax-efficient manner possible. Tax planning is an important part
of a financial plan, as reducing tax liability and maximizing eligibility to contribute to
retirement plans are both crucial for success.
INTRODUCTION OF TAX PLANNING IN INDIA

Tax Planning in India is an application to reduce tax liability through the finest use of all
accessible allowances, exclusions, deductions, exemptions, etc to trim down income and/or
capital profits.

Tax planning is the analysis of one’s financial situation from a tax efficiency point of view so
as to plan one’s finances in the most optimized manner. Tax planning allows a taxpayer to
make the best use of the various tax exemptions, deductions and benefits to minimize their
tax liability over a financial year. Tax planning is a legal way of reducing income tax
liabilities, however caution has to be maintained to ensure that the taxpayer isn’t knowingly
indulging in tax evasion or tax avoidance.

In India, there are a number of tax saving options for all taxpayers. These options allow for a wide
range of exemptions and deductions that help in limiting the overall tax liability. The deductions are
available from Sections 80C through to 80U and can be claimed by eligible taxpayers. These
deductions are made against the quantum of tax liabilities. There are various other sections under
the Income Tax Act, 1961 that can reduce your tax liabilities such as exemptions and tax credits.

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.

Meaning of Tax Planning

The avid goal of every taxpayer is to minimize his Tax Liability. To achieve this objective
taxpayer may resort to following Three Methods :

o Tax Planning
o Tax Avoidance
o Tax Evasion

It is well said that “Taxpayer is not expected to arrange his affairs in a such manner to pay
maximum tax “So, the assessee shall arrange the affairs in a manner to reduce tax. But the
question what method he opts for? Tax Planning, Tax Avoidance, Tax Evasion!
Let us see its meaning and their difference.

Tax Planning involves planning in order to avail all exemptions, deductions and rebates
provided in Act. The Income Tax law itself provides for various methods for Tax Planning,
Generally it is provided under exemptions u/s 10, deductions u/s 80C to 80U and rebates and
relief’s. Some of the provisions are enumerated below :
  Investment in securities provided u/s 10(15) . Interest on such securities is fully
exempt from tax.
 Exemptions u/s 10A, 10B, and 10BA
 Residential Status of the person
 Choice of accounting system
 Choice of organization.

Types of Tax Planning:

 Purposive tax planning: Planning taxes with a particular objective in mind
 Permissive tax planning: Tax planning that is under the framework of law
 Long range and Short range tax planning: Planning done at the start and end of a fiscal year
respectively.

Tax Saving Objectives:

The primary objectives of your tax planning should be the following:

 Reduction in overall tax liability

 Economic stability
 Growth of economy
 Litigation minimization
 Productive investment

OBJECTIVES OF TAX PLAANING

Tax planning, in fact, is an honest and rightful approach to the attainment of

maximum benefits of the Income Tax Law within the framework. Hence, the
objective of tax planning cannot be regarded as offending any concept of the law and
subjected to reprehension or reducing the inflow of revenue to the Government’s
offers, so long as the taxplanning measures are in cdnformity wit h the statute laws
and the judicial exposition thereof. The prime objectives of tax planning are:

 (i) Reduction of tax liability : Every taxpayer wishes to retain a maximum part of the
earnings, rather than parting with it and facing the resource crunch. It would be in the
interest of assessee to _plan the tax affairs properly and avail the deductions,
exemptions and rebate admissible under the Act. Taxpayer can succeed in doing so by
keeping an awareness of the implications of the various business/other transactions as
well as updation of his knowledge about the various concessions of which assessee is
eligible.
 (ii) Minimisation of I ligation : A general visualisation of the tax administration
scenario depicts a tug-of-war that the tax payers are trying their maximum to pay the
least tax and the tax administration attempting to extract the maximum. This also
results in, sometimes, protected litigations. It is in this context that a sound tax
planning pays returns. When a proper tax planning is adopted with the provisions of
laws, the incidence of litigation is minimised. This saves the taxpayer from the
hardships and inconveniences caused by the undesire litigations, which at times even
stretches upto the High Court/ Supreme Court levels.


 (iii) Productive Investments : The taxation laws offer large avenues for the
productive investments of the earnings granting absolute of substantial relief from the
taxation. A taxpayer has to be constantly aware of such legal avenues as are designed
to open floodgates of his well-being, prosperity and happiness. When earnings
invested in the avenues recognised by law, they are not only relieved of the brunt of
taxation but they are also converted into means of furthering earnings.

 (iv) Healthy growth of economic : The growth of a nation’s economy is synonymous

with the growth and prosperity of its citizens. in this context, a saving of earnings by
legally sanctioned devices fosters the growth of both, because savings by dubious
means lead to generation of black money, the evils of which are obvious. Conversely,
tax planning measures are aimed at generating white money having a free flow and
generating without reservations for the overall progress of the nation. Tax planning
assumes a great significance in this context.

 (v) Economic stability : According to the case law of M.V. Valliapan vs. ITO, (1988)
170 1TR 238 (Mad.), “by a proper tax planning, a smooth tax flow from the tax payer
to the tax administration, without recriminations are ensured. This results in economic
stability by Away of: (a) availing avenues for productive, investment by the tax payer,
and (b) harnessing resources for national projects aimed at general prosperity of the
national economy and reaping of benefits even by those not liable to pay tax on theer
incomes. Therefore, notwithstanding the legal rulings in cases like. McDowell and its
English parallels, real and genuine transactions aimed at valid tax planning cannot be
turned down merely; on grounds of reduction of the tax burden.

 (vi) Economic development

One of the important objectives of taxation is economic development. Economic development of

any country is largely conditioned by the growth of capital formation. It is said that capital formation
is the kingpin of economic development. But LDCs usually suffer from the shortage of capital.
To overcome the scarcity of capital, governments of these countries mobilize resources so
that a rapid capital accumulation takes place. To step up both public and private investment,
government taps tax revenues. Through proper tax planning, the ratio of savings to national
income can be raised.

By raising the existing rate of taxes or by imposing new taxes, the process of capital
formation can be made smooth. One of the important elements of economic development is
the raising of savings- income ratio which can be effectively raised through taxation policy.

However, proper care has to be taken, regarding investment. If financial resources or

investments are channelized in the unproductive sectors of the economy the economic
development may be jeopardized, even if savings and investment rates are increased. Thus,
the tax policy has to be employed in such a way that investment occurs in the productive
sectors of the economy, including the infrastructural sectors.

 (vii) Full Employment:

Another objective is the full employment. Since the level of employment depends on
effective demand, a country desirous of achieving the goal of full employment must cut down
the rate of taxes. Consequently, disposable income will rise and, hence, demand for goods
and services will rise. Increased demand will stimulate investment leading to a rise in income
and employment through the multiplier mechanism.

 (viii) Price Stability:

taxation can be used to ensure price stability—a short run objective of taxation. Taxes are
regarded as an effective means of controlling inflation. By raising the rate of direct taxes,
private spending can be controlled. Naturally, the pressure on the commodity market is
reduced.

But indirect taxes imposed on commodities fuel inflationary tendencies. High commodity
prices, on the one hand, discourage consumption and, on the other hand, encourage saving.
Opposite effect will occur when taxes are lowered down during deflation.
CHAPTER -II

Tax Planning in India for Salaried Individuals

Make full use of the entire Section 80C deduction

The maximum reduction available in Section 80C is Rs.1,00,000 and salaried citizens whose
gross salary is Rs.2,50,000 or more are entitled to use the full Rs.1,00,000 limit.

Individuals who make monetary infusions of over Rs.1,00,000 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.1,00,000.

Following investments/contributions meet the criteria for Section 80C reduction:

 Public Provident Fund

 Accrued interest on National Saving Certificate
 Life Insurance Premium
 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)

Reduction of tax liability beyond Section 80C deductions

If your salary surpasses Rs.250,000 per annum and the reductions under Section 80C are not
enough to minimize the general tax liability consider the following:

 Home loan: Interest payments of upto Rs.150,000 pa are entitled for reduction under
Section 24.
 Medical insurance: A deduction of upto Rs.15,000 pa under section 80D is applicable
under this.
 Donations: Tax advantages under Section 80G entitle the donations to particular
funds/institutions.

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

Gross salary is the sum total of Basic pay + Dearness allowance + House Rent Allowance +
transport allowance + special allowance + other allowance.

Basic Salary:

Basic salary is the exact amount of salary before any deductions are made or extra
components are added to the salary. The basic salary for an employee is usually lower than
the gross salary or the take-home salary.

Gratuity:

Gratuity is a part of salary that is paid by an employer to an employee to express gratitude for
his/her services in the company. The employer may provide gratuity out of its own pocket or
can avail a gratuity group plan from an insurance provider. Gratuity is generally paid to an
employee on his/her retirement or when he/she leaves the company. However, according to
Section 10(10) of the Income Tax Act, gratuity is payable only when an employee has
completed 5 years with his/her company. The gratuity received by employees is taxable as
“income from salary”.

HRA or House Rent Allowance:

HRA or House Rent Allowance is a salary component paid by employer to employees for
meeting the accommodation expense of renting a place for residential purposes. HRA forms
an integral component of a person's salary. HRA is applicable to both salaried as well as self-
employed individuals.

Salary Arrears:

Salary Arrears refer to any amount that is paid as a result of salary hike. Generally salary
arrears come in lump-sum for more than 1 month of time. For example, if your salary was
increased in June but is applicable from the month of January. Then you are eligible to
receive arrears worth the last 6 months.

Perquisites:

Perquisites are benefits received by an employee as a result of his/her official position and are
payable in addition to the salary received by them. Perquisites or fringe benefits can be
taxable or non-taxable depending upon their nature.

These components are taxed separately from the employer’s account so as to maintain
transparency and accountability.

Pension:

Pension is defined as a specific amount paid regularly to an employee who has retired from
his job. Pension is either paid by your employer or the government in case of government
sector employees.
You can invest under the Section 80C to a maximum of Rs.1,50,000. Or if you are in a higher
tax bracket, you can save Rs.45,000 in tax.

You can make the investment in Provident Fund, Life Insurance Premium, Equity Linked
Savings Scheme, Home Loan monthly instalment, National Savings Certificate, Infrastructure
Bond, Pension Funds, Tuition fees and Unit Linked Insurance Plan.

Under Section 80D, you can claim Rs.25,000 as medical expenses and Rs.30,000 can be
claimed by senior citizens.

The deductions on House Rent Allowance is the least of the following:

 Either the actual HRA amount.

 50% of your basic pay if the employee is living in metro and 40% if the employee is
living in a non-metro area.
 Additional rent paid above 10% of his salary.

Deductions on Income from Salary

The deductions on Income from Salary falls under the Section 16 of the Income Tax Act.
The deductions are:

 Entertainment Allowance under Section 16(ii): Deduction is allowed by way of

entertainment allowance given by an employer. This deduction is available only for
the Government employees. The deduction is either the 1/5th of salary without
including the benefits or perquisites or other allowances or Rs.5,000, whichever is
lesser. The non-government employees can't avail this deduction.
 Tax on Employment under Section 16(iii): The Professional Tax is allowed as a
deduction while computing income from salaries.

Note: The Standard Deduction from gross salary income is not allowable from the Financial
Year 2005-2006.

The total taxable income is after all the deductions are being made to the all the different
heads of income.

SPECIAL ALLOWANCES

1) Transportation allowances
*3200 pm for handicapped employee
*1600 pm for normal employee

2) Children Education Allowances

*100 pm per child upto 2 children

3) Children Hostel Allowances

 *300 pm child upto 2 children

4) Conveyance Allowances
*upto actual spending

5) Leaves Travel Allowances

*upto actual spending in India

Perquisites

Perquisites are those payments which are received by an employee from the employer over
and above the salary.

Perquisites that are taxable for all the employees:

 Rent free accommodation
 Club fee payments
 Movable assets
 Concession in accommodation rent
 Interest-free loans
 Educational expenses
 Insurance premium paid on behalf of employees

Perquisites that are taxable only to specified employees:

 Free gas, electricity etc. for domestic purpose
 Concessional transport facility
 Concessional educational expenses

*Specified Employee

a) Director of company

b) 20% or more voting right

c) Annual salary more than 50000

Perquisites that are exempt from tax:

 Medical benefits
 Health Insurance Premium
 Leave travel concession
 Staff Welfare Scheme
 Car, laptop etc. for personal use.

Q Mr. A provides the following information to calculate his taxable salary

 Basic salary =40000 per month
Dearness allowance = 30000 per month
House rent allowance =20000 per month
Convenience allowance= 15000
Bonus = 40000
Leave travel allowance = 10000
He visited Hariyana with his family and spend 8000 for travelling . out of
the convenience allowance received 12000 spent for office purpose .
Solution :
Name of the assesse = Mr. A
Status = individual
Residential status = resident & ordinary resident
PY year = 2015-16
AY year = 2016-17

PARTICULARS AMT AMT AMT

Income from salary
Basic salary (40000 X 12) 480000
Dearness allowance (30000 X 12) 360000
House rent allowance (20000 X12) 240000
Convenience allowance 15000
(-) exempt 12000 3000
Bonus 40000
Leave travel allowance 10000
(-) exempt 8000 2000

TAXABLE INCOME FROM 1125000

SALARY
Income from house property

Income from House Property covers the rent earned from the House property which is
chargeable to tax. Sometimes, the owner may have to pay tax on 'deemed rent' in case the
property is not let out.

The income from house property is added/ included in a person's (the assessee)' gross total
income only if it satisfies three essential conditions:
1. The assessee is the owner of that property.
2. The property must consist of house, buildings and/or land.
3. The property may be used for any purpose except used by the owner for the purpose of
running his business or profession.

Deductions from house property before levying of tax

While computing the income earned from letting out the property, one can avail (where
eligible) various deductions available under section 24 of the Income Tax Act to arrive at the
net taxable income from house property income. These deductions include standard
deduction, the deduction of municipal taxes, deduction of Interest paid on home loan which is
allowed under this head

Brokerage or commission paid to acquire an asset is not allowed as a deduction.

Interest paid on a home loan: Any Interest paid/payable on the loan taken for acquiring,
constructing, or repairing the property is allowed as a deduction from the income from that
house property.

Interest paid /payable in the previous years i.e. prior to the year in which property was
acquired or constructed (i.e. interest paid in pre-construction period) will be aggregate and
will be allowed as a deduction in five successive financial years starting from the year in
which acquisition/construction was completed.

Municipal taxes paid: Any taxes paid to the Government during the financial year (for
which the income is being computed) on the property owned, such as house tax, are allowed
for deduction from the Gross Annual Value which is calculated on the basis of the total rent
receivable/received/deemed rent for the property for that FY

If the owner does not pay the taxes on a property then he cannot avail the deduction too.
Owner can claim deduction even for arrears of house tax in the financial year in which these
arrears are actually paid.

Standard deduction: It allows the assessee a deduction of 30% of the 'Net Annual Value'.

Gross Annual Value and Net Annual Value

Gross Annual Value of a property is the value at which the property might reasonably be
expected to be let from year to year. It is more like a notional rent which one could have
earned in case property had been let out. Even if the property is not let out, the notional rent
or deemed rent receivable is taxable.

The Annual Value is determined after taking 4 factors into consideration. These are: (i)
Actual rent received or receivable (ii) Municipal Value (iii) Fair Rent (iv) Standard rent

Net Annual Value is calculated as gross annual value less municipal taxes paid.

CALCULATION OF INCOME FROM HOUSE PROPERTY

GROSS ANNUAL VAUE *******
Less- Muncipal taxes (*******)
Net Annual Value ********
Less-Deduction Under Section 24 (*******)
Standard deduction @ 30% (*******)
Interest paid on borrowed loan (*******)

INCOME FROM HOUSE PROPERTY *******

Calculation of Income from House Property

The annual value of a house property is determined differently for different categories. House
properties are divided into 3 categories for this purpose. These are as follows:

Category A: House Property which is let out throughout the previous year
The Gross annual value of a property which was let out throughout the previous year is taken
to be higher of the following:
(a) Expected rent/Deemed Rent which is taken as the higher of the Municipal valuation or
Fair Rental Value
Or
(b) The actual rent received (or receivable) by the owner of a property which is partly or fully
let out.

This implies that in case the actual rent received is in excess of the expected rent then the
actual rent received is taken as the gross annual value. On the other hand, if actual rent
received is less than the expected rent then, expected rent is taken as gross annual value.

Expected rent or Deemed Rent is the rent which the owner is expected to receive, calculated
on notional basis from the higher of the Municipal value or Fair Rental value subject to
maximum of the standard rent, in case property is covered under the Rent Control Act.
Category B: House Property which was partly let out and partly vacant during the year.
In such cases where the house property was partly let out and partly vacant during the year,
there are two scenarios, which affect the actual rent received owing to such vacancy.

Scenario 1: When the actual rent received or receivable is more than the expected rent
despite the vacancy. In that case, the gross annual value is taken as actual rent received as it is
higher than the expected rent. Expected rent is calculated as higher of the municipal valuation
or fair rent.

Scenario 2: When the actual rent received or receivable is less than the expected rent due to
the vacancy of the property for some time during the year. The gross annual value of the
property will be actual rent received or receivable.

Category C: House Property which was let out for part of the year and rest of the year
occupied for own residence.
Since the house was let out for a part of the year and was self-occupied for the rest of the
year, the gross annual value is calculated as the rent that could have been received in case
property was let out for the whole year. The period of self-occupation is irrelevant.

The Gross annual value is taken as higher of the

a) Expected rent by letting out the property for the whole year i.e. higher of the municipal
valuation or fair rent,
b) Actual rent received or receivable only for the period it was let out.

Q) Mr. B provides following information calculate taxable income from his house property.

Municipal valuation = 80000

Standard rent= 60000

Fair rent = 100000

Actual rent = 60000 per month

Municipal tax paid by Mr. B = 20000 & by the tenant = 35000

Interest paid on loan taken= 50000

SOLUTION:

PARTICULARS AMT AMT AMT

INCOME FROM HOUSE PROPERTY

Fair rent 1000000

Municipal valuation 800000

Whichever Higher 1000000

Standard rent 600000

Whichever is lower 600000

REASONABLE LET OUT VALUE

Annual rent (60000 X 12) 720000

(-) vacancy rent --------

Actual rent 720000

GROSS ANNUAL VALUE 720000

(-) Municipal tax paid by owner (20000)

NET ANNUAL VALUE 700000

(-) DEDUCTION U/S 24

Standard deduction (30% on NAV) 210000

Interest paid 50000 (260000)

TAXABLE INCOME FROM HOUSE 440000

PROPERTY
Income from Other Sources Tax
Understanding the head of Income from Other Sources is residuary in nature. It includes
incomes which are not taxable in other heads of income.

Income from Other Sources is one of the heads of income chargeable to tax under the Income
tax Act. 1961. Any income that is not covered in the other four heads of income is taxable
under income from other sources, because of this, it is known as residuary head of income.
All the incomes excluded from salary, capital gains, house property or business & profession
(PGBP) are included in IFOS, except those which are exempt under the Income Tax Act.

Section 56- Incomes taxable only in Income from Other

Sources are
1. Dividend Income;
2. Income earned from winning lotteries, crossword puzzles, races (including horse
race), gambling or betting of any kind;
3. Money or movable/immovable property received without consideration or inadequate
consideration during previous year;
4. Interest on compensation or enhanced compensation received;
5. Advance money received or money received in negotiation for transfer of a capital
asset (only if the money is forfeited and it doesn't result in the transfer of such asset).

Incomes taxable under IFOS, only if not taxable under Profits and Gains of Business or
Profession (PGBP):

1. Any sum contributed towards provident funds, ESI, etc. by employee to the employer,
only if not deposited in the relevant fund;
2. Interest earned on Securities;
3. Income received from the letting of a plant, machinery or furniture, with or without
building.
Incomes taxable under IFOS, only if not taxable under PGBP or Salaries:

1. Keyman Insurance Policy;

2. Salary of MP/MLA.

Income Computation and Disclosure Standards: Section 145 states that Income from
Other Sources must be computed on the regular accounting methods followed by the
assessee. It can be either cash or mercantile system of accounting. The Central Government
has notified Income Computation and Disclosure Standards to be followed while computing
the income.

Section 57- Expenditures allowed as deductions

 Expenses incurred for realisation of dividend or interest income;
 Deductions to the extent amount remitted within due date are authorised in respect to
contribution towards funds for the welfare of employees;
 Family Pension- deduction is allowed to the extent of 33-1/3% of pension or Rs.
15000 whichever is less;

 Deductions for current repairs, insurance and depreciation, will be allowed for income
earned by way of lease rental;

A deduction equal to 50% will be allowed for interest received on compensation or

enhanced compensation.

Section 58- Sum not allowed as deductions while

computing taxable income
  Personal expenditure;
 Interest or salary payable outside India without TDS deduction;
 Wealth tax;
 Expenditure concerning winnings from lotteries, crossword puzzles, races, and
gambling, etc.; and
 Expenses specified in Section 40A.

INCOME FROM CAPITAL GAIN

 Capital gain is an increase in the value of a capital asset (investment or real estate)
that gives it a higher worth than the purchase price. The gain is not realized until the
asset is sold. A capital gain may be short-term (one year or less) or long-term (more
than one year) and must be claimed on income taxes.

Capital gains arise when you sell capital asset for an amount that is more than what you paid
for it. Capital assets are any investment products like mutual funds, stocks or any real estate
product like land, house etc. An increase in the value of any of these when you sell them is
termed as capital gain. Similarly, a capital loss is suffered in case there is a decrease in the
value of an asset with respect to its purchase price.

Types of Capital Gains:

Capital gains can broadly be classified into two types:

 Long-Term Capital Gains: Depending upon the type of asset, if it is held for more
than 36 months it is termed as long-term capital asset and the gain on selling it is
termed as long-term capital gains. For mutual funds and equities, this period is 12
months.
 Short-Term Capital Gains: Any asset that is sold within 36 months of purchasing it,
is termed as short-term asset and the gain on selling the same is termed as short-term
capital gain.

Tax on Capital Gains:

Calculation of tax is dependent upon the type of capital gain.

 Calculation of tax on short-term capital gains is simpler than that on long-term

gains. For short-term gains, the gain is added to the total income and then the Income
Tax is calculated based on the tax bracket that you fall in.
 Calculation of tax on long-term capital gains is a slightly trickier business. Since
long-term capital assets are held for longer periods, inflation also factors in while
computing tax on long-term capital gains.

Capital Gains Calculator

Calculating capital gains tax can be done using one of the online tools designed for the
purpose. When calculating capital gains tax using a calculator, the following information is to
be entered:

 Sale price.
 Purchase price.
 Details of the purchase such as the date, month and year of the purchase.
 Sale details such as the date, month and year of sale.
 Investment details, if any. The capital gains could have been invested in shares, debt
funds, equity funds, real estate, gold or fixed maturity plans.

 COMPUTATION OF CAPITAL GAIN

1) FOR SHORT TERM CAPITAL GAIN

PARTICULARS AMOUNT AMOUNT

Gross consideration XXXX
( eg- sales price)
Less- Incidental charges (XXXX)
( eg- brokerage commission) XXXX
NET CONSIDERATION
Less- cost of acquisition XXXX
Less- cost of improvement XXXX (XXXX)
(capital expenditure)

SHORT TERM CAPITAL GAIN XXXX

2) FOR LONG TERM CAPITAL GAIN

PRTICULAR AMOUNT AMOUNT

Gross consideration XXXX
Less- incidental charges (XXXX)
Net consideration XXXX
Less- Indexed cost of acquisition XXXX
Less- Indexed cost of improvement XXXX (XXXX)

LONG TERM CAPITAL GAIN XXXX

NOTE: INDEXATION

THE PROCESS OF CONVERTING PASSED YEAR (PASSED AMOUNT) IN

CURRENT YEAR VALUATION.

FORMULA:

1) Indexed cost of acquisition=

Cost of acquisition X CII of the year of transfer
Cost of the year of acquisition
2) Indexed cost of improvement=
Cost of improvement X CII of the year of transfer
CII of the year of improvement
CII=COST INFLATION INDEX
It is the variable which is used to convert passed year values in current year
valuation.

Once you have entered the information, the following details will be generated towards the
calculation of your capital gains payable:

 The type of investment.

 Type of gain (whether short or long-term).
 Cost inflation index of the year of purchase.
 Cost inflation index of the year of sale.
 Difference between the purchase price and sale price.
 Time between the purchase and sale.
 Purchased index cost.
 Long-term capital gain without indexation.
 Long-term capital gain with indexation.

Calculate Capital Gains Formula

Short-term Capital Gains Tax:

In the case of short term capital gains, the computation is as given below:

Short-term capital gain= full value consideration – (cost of acquisition + cost of improvement
+ cost of transfer).

Long-term Capital Gains Tax:

To calculate the long-term capital gains tax payable, the following formula is to be used:
Long-term capital gain = full value of consideration received or accruing – (indexed cost of
acquisition + indexed cost of improvement + cost of transfer), where:

Indexed cost of acquisition = cost of acquisition x cost inflation index of the year of
transfer/cost inflation index of the year of acquisition.

Indexed cost of improvement = cost of improvement x cost inflation index of the year of
transfer/cost inflation index of the year of improvement.

Capital Gains Rate

The rate at which capital gains is calculated varies from year to year. In the case of long-term
capital gains, individuals are taxed at 20.6% (including education cess). There are no
deductions that can be availed under capital gains tax.

Short-term capital gains tax is levied at the tax slab under which the individual falls under.
Q) Mr. C purchase a residential house on 6th march 1998 at Rs.500000. The house was sold
on 15th april 2015 at Rs.1000000. CII of 1997-98=223, 2015-16=1081

PATICULARS AMOUNT AMOUNT

Gross consideration 1000000
(-) incidental charges ------------
Net consideration 1000000
(-) indexed cost of acquisition 2423767
(500000/223 X 1081)
(-) indexed cost of improvement ---------- (2423767)

Long term capital gain 7576233

INCOME FROM BUSINESS/PROFESSION

Business: In brief, Business includes any trade, commerce and manufacturing of goods with
a purpose of making profit within the permissible laws of country.

Profession: It includes services provided by the professionally qualified or technically

qualified person according to their qualification.

Income from Business/Profession: means any income which is shown in profit and loss
account after considering all allowed expenditures.

Vocation: It require inbond talent.

Eg- Actor, Dancer, Singer etc…

CALCULATION OF TAXABLE INCOME FROM BUSINESS/PROFESSION
PARTICULARS AMOUNT AMOUNT
NET PROFIT XXXX
Add – expenses not allowed/ expenses allowed separately
1) Personal expenses XXXX
2) Capital expenses XXXX
3) Charity and donations XXXX
4) Income tax ,wealth ,tax pay XXXX
5) Cash expenses exceeding Rs. 20000 XXXX
6) Advertise publish in political party souvenir XXXX
7) Expenses without deducting TDS XXXX
8) Excessive payment made to relative XXXX

BONUS / SALES TAX /PAYMENT TO EMPLOYEE PAID AFTER XXXX

DUE DATES OF FILLING OF RETURN
Less – any income related to any other head of income (XXXX)

TAXABLE INCOME FROM BUSINESS / PROFESSION XXXX

TAXABLE INCOME FROM PROFESSION/VOCATION

PARTICULARS AMOUNT AMOUNT
1) Allowed income XXXX
Less- Allowed expenses (XXXX)
TAXABLE INCOME FROM PROFESSION

NOTE: When depreciation I given in only profit & loss A/C is to be ignored, if
depreciation is given in both profit & loss A/C & adjustment then the mount
given in profit & loss A/C shall be added & the amount given in adjustment
shall be deducted.

Q) Mr. D provides following information calculate his taxable income from

business / profession.
Mr. D is professional singer
Receipt from music company = 1000000
Receipt from production house = 50000
Receipt from reality show = 1000000
Receipt from tours & concerts = 5000000
Life insurance policy = 250000
Bank interest = 75000
Amount paid to accompanying = 800000
Amount paid for rehearsals = 200000
Music instrument rent = 300000
House hold expenses = 150000
Travelling expenses = (50% for concert) = 600000
House rent paid = 200000 (25% of the portion is used for office)

PARTICULAR AMOUNT AMOUNT

(+) ALLOWED EXPENSES
Received from music company 1000000
Received from production house 500000
Received from reality show 1000000
Received from tours & concerts 5000000
7500000

(-) ALLOWED INCOME

Payment to accompanying artist 800000
Amount paid for rehearsals 200000
 Music instrument rent 300000
Travelling expenses (50% on 600000) 300000
Office rent (255 on 200000) 50000
(1650000)
TAXABLE INCOME FROM BUSINESS / 5850000
PROFESSION

TAX DEDUCTION

Tax deduction helps in reducing your taxable income. It decreases your overall tax liabilities
and helps you save tax. However, depending on the type of tax deduction you claim, the
amount of deduction varies. You can claim tax deduction for amounts spent in tuition fees,
medical expenses and charitable contributions. Also, you can invest in various schemes such
as life insurance plans, retirement savings schemes, and national savings schemes etc. to get
tax deductions. The government of India offers tax exemptions for various expenses incurred
in different activities to encourage individuals and commercial institutions take part in
activities having social benefits.

A number of day-to-day expenditures qualify for deductions, with information about them
being crucial to help us save money. Tax deduction can be claimed on money spent for
education, medical expenses, charitable contributions, investments in insurance, retirement
schemes, etc. These deductions have been put in place to encourage members of the society
to participate in certain useful activities, helping everyone involved in the process.

Tax Deductions under Section 80C:

Section 80C of the Income Tax Act provides provisions for tax deductions on a number of
payments, with both individuals and Hindu Undivided Families eligible for these deductions.
Eligible taxpayers can claim deductions to the tune of Rs 1.5 lakh per year under Section
80C, with this amount being a combination of deductions available under Sections 80 C, 80
CCC and 80 CCD.

Some of the popular investments which are eligible for this tax deduction are mentioned
below.

 Payment made towards life insurance policies (for self, spouse or children)
 Payment made towards a superannuation/provident fund
 Tuition fees paid to educate a maximum of two children
 Payments made towards construction or purchase of a residential property
 Payments issued towards a fixed deposit with a minimum tenure of 5 years
 Recognized providend fund.
 National saving scheme ( Both principle and interest)
 Five year bank fixed deposit under tax saving scheme
 Sukanya samrudhi yojna
 Post office time deposit
  Pension fund

This section provides for a number of additional deductions like investment in mutual funds,
senior citizens saving schemes, purchase of NABARD bonds, etc

MAXIMUM LIMIT FOR DEDUCTION =Rs.150000

Subsections under Section 80C:

Section 80C has an exhaustive list of deductions an individual is eligible for, which have led
to the creation of suitable sub-sections to provide clarity to taxpayers.

 Section 80 CCC: Section 80 CCC of the Income Tax Act provides scope for tax deductions on
investment in pension funds. These pension funds could be from any insurer and a
maximum deduction of Rs 1.5 lakh can be claimed under it. This deduction can be claimed
only by individual taxpayers.

Maximum limit under section 80c + 80ccc = 150000

 Section 80 CCD: Section 80 CCD aims to encourage the habit of savings among individuals,
providing them an incentive for investing in pension schemes which are notified by the
Central Government. Contributions made by an individual and his/her employer, both are
eligible for tax deduction, subject to the deduction being less than 10% of the salary of the
person. Only individual taxpayers are eligible for this deduction.
 Section 80 CCF: Open to both Hindu Undivided Families and Individuals, Section 80 CCF
contains provisions for tax deductions on subscription of long-term infrastructure bonds
which have been notified by the government. One can claim a maximum deduction of Rs
20,000 under this Section.
 Section 80 CCG: Section 80 CCG of the Income Tax Act permits a maximum deduction of Rs
25,000 per year, with specified individual residents eligible for this deduction. Investments
in equity savings schemes notified by the government are permitted for deductions, subject
to the limit being 50% of the amount invested.

Tax Deductions under Section 80D:

Section 80D of the Income Tax Act permits deductions on amounts spent by an individual
towards the premium of a health insurance policy. This includes payment made on behalf of a
spouse, children, parents or self to a Central Government health plan. An amount of Rs
15,000 can be claimed as deduction when paid towards the insurance for spouse, dependent
children or self, while this amount is Rs 20,000 if the person is over the age of 60 years.

Both individuals and Hindu Undivided Families are eligible for this deduction, subject to the
in modes other than cash.in modes other than cash.

MAXIMUM LIMIT OF DEDUCTION

 1) For For self –spouse , dependent, children upto 21 year ,less than
age of 60 years = 25000
2) For self –spouse , dependent, children upto 21 year ,more than age
of 60 years = 30000
3) Parents less than 60 years of age =25000
4) Parents more than 60 year of age = 30000

Subsections under Section 80D:

Section 80D is further subdivided into two sub-sections, offering clarity on the benefits
available to taxpayers.

 Section 80DD: Section 80DD provides provisions for tax deductions in two cases, with the
permitted deduction being Rs 75,000 for normal disability and Rs 1.25 lakh if it is a severe
disability. This deduction can be claimed in case of the following expenditures.
 On payments made towards the treatment of dependants with disability
 Amount paid as premium to purchase or maintain an insurance policy for such dependant

The permitted deduction is Rs 75,000 for normal disability and Rs 1.25 lakh for a severe
disability. Both Hindu Undivided Families and resident individuals are eligible for this
deduction. The dependant, in this case can be either a spouse, sibling, parents or children.

MAXIMUM LIMIT OF DEDUCTION

1) Disability less than 40%= NIL
2) Disability more than 40% = 75000
3) Disability more than 80% = 125000

 Section 80DDB: Section 80DDB can be utilised by HUFs and resident individuals and provides
provisions for deductions on the expense incurred by an individual/family towards medical
treatment of certain diseases. The permitted deduction is limited to Rs 40,000, which can be
increased to Rs 60,000 if the treatment is for a senior citizen.

Tax Deductions under Section 80E:

Under Section 80E of the Income Tax Act has been designed to ensure that educating oneself
doesn’t become an additional tax burden. Under this provision, taxpayers are eligible for tax
deductions on the interest repayment of a loan taken to pursue higher education. This loan
can be availed either by the taxpayer himself/herself or to sponsor the education of his/her
ward/child. Only individuals are eligible for this deduction, with loans taken from approved
charitable organisations and financial institutions permitted for tax benefits.
Subsections of Section 80E:
 Section 80EE: Only individual taxpayers are eligible for deductions under Section 80EE, with
the interest repayment of a loan taken by them to buy a residential property qualifying for
deductions. The maximum deduction permitted under this section is Rs 3 lakhs.

Maximum limit of deduction

There is no limit in the amount however the deduction is applicable only for 8 year from the
date of payment of 1st installment of loan payment.

Tax Deduction under Section 80U:

Tax deductions under Section 80U can be claimed only by resident individual taxpayers who
have disabilities. Individuals who have been certified by relevant medical authorities to be a
Person With Disability can claim a maximum deduction of Rs 75,000 per year. Individuals
who have severe disabilities are entitled to a maximum deduction of Rs 1.25 lakh, subject to
them meeting certain criteria. Some of the disabilities which classify for tax benefits are
autism, mental retardation, cerebral palsy, etc.

MAXIMUM LIMIT OF DEDUCTION

1) Disability less than 40% = NIL

2) Disability more than 40% = 75000
3) Disability more than 80% = 125000

Tax Deductions under Section 80G:

Section 80G encourages taxpayers to donate to funds and charitable institutions, offering tax
benefits on monetary donations. All assessees are eligible for this deduction, subject to them
providing proof of payment, with the limit of deductions decided based on a few factors.

 100% deductions without any limit: Donations to funds like National Defence Fund, Prime
Minister’s Relief Fund, National Illness Assistance Fund, etc. qualify for 100% deduction on
the amount donated.
 100% deduction with qualifying limits: Donations to local authorities, associations or
institutes to promote family planning and development of sports qualify for 100% deduction,
subject to certain qualifying limits.
 50% deduction without qualifying limits: Donations to funds like the PMs Drought Relief
fund, Rajiv Gandhi Foundation, etc. are eligible for 50% deduction.
 50% deduction with qualifying limit: Donations to religious organisations, local authorities
for purposes apart from family planning and other charitable institutes are eligible for 50%
deduction, subject to certain qualifying limits.

The qualifying limit refers to 10% of the gross total income of a taxpayer.
Subsections of Section 80G:
Under Section 80G has been further subdivided into four sections to simplify understanding.

 Section 80GG: Individual taxpayers who do not receive house rent allowance are eligible for
this deduction on the rent paid by them, subject to a maximum deduction equivalent to 25%
of their total income or Rs 2,000 a month. The lower of these options can be claimed as
deduction.
 Section 80GGA: Tax deductions under this section can be availed by all assessees, subject to
them not having any income through profit or gain from a business or profession. Donations
by such members to enhance social/scientific/statistical research or towards the National
Urban Poverty Eradication Fund are eligible for tax benefits.
 Section 80GGB: Tax deductions under this section can be availed by Indian Companies only,
with the amount donated by them to a political party or electoral trust qualifying for
deductions.
 Section 80GGC: Under this section, funds donated/contributed by an assessee to a political
party or electoral trust are eligible for deduction. Local authorities and artificial juridical
persons are not entitled to the tax deductions available under Section 80GGC.

Tax Deductions under Section 80 IA:

Section 80 IA provides an avenue for all taxpaying assessees to claim tax deduction on the
profits generated through industrial activities. These industrial undertakings can be related to
telecommunication, power generation, industrial parks, SEZs, etc.

The following subsections are related to Section 80-IA

 Section 80 IAB: Section 80 IAB can be used by SEZ developers, who can claim tax deductions
on their profits through development of Special Economic Zones. These SEZs need to be
notified after 1/4/2005 in order for them to be eligible for tax deductions.
 Section 80-IB: Provisions of section 80-IB can be used by all assessees who have profits from
hotels, ships, multiplex theatres, cold storage plants, housing projects, scientific research
and development, convention centres, etc.
 Section 80-IC: Section 80 IC can be used by all assessees who have profits from states
categorised as special. These include Assam, Manipur, Meghalaya, Himachal Pradesh,
Uttaranchal, Arunachal Pradesh, Mizoram, Tripura and Nagaland.
 Section 80-ID: All assessees who have profits or gain from hotels and convention centres are
eligible for deduction under this section, subject to their establishments being located in
certain specified areas.
 Section 80-IE: All assessees who have undertakings in North-East India are eligible for
deductions under this Section, subject to certain conditions.

Tax Deductions under Section 80J:

Section 80J of the Income Tax Act was amended to include two subsections, 80JJA and 80
JJAA

 Section 80 JJA: Section 80 JJA relates to deductions permitted on profits and gains from
assessees who are in the business of processing/treating and collecting bio-degradable
 waste to produce biological products like bio-fertilizers, bio-pesticides, bio-gas, etc. All
assessees who deal with this are eligible for deductions under this section. Such assessees
can claim deduction equivalent to 100% of their profits for 5 successive assessment years
since the time their business started.
 Section 80 JJAA: Deductions under Section 80 JJAA can be claimed by Indian companies
which have profits from the manufacture of goods in factories. Deductions equivalent to
30% of the salary of new full time employees for a period of 3 assessment years can be
claimed. A chartered accountant should audit the accounts of such companies and submit a
report showing the returns. Employees who are taken on a contract basis for a period less
than 300 days in the preceding year or those who work in managerial or administrative posts
do not qualify for deductions.

Tax Deduction under Section 80LA:

Deductions under Section 80LA can be availed by Scheduled Banks which have offshore
banking units in Special Economic Zones, entities of International Financial Services Centres
and banks which have been established outside India, in accordance to the laws of a foreign
nation. These assessees are eligible for deductions equivalent to 100% of the income for the
first 5 years, and 50% of income generated through such transactions for the next 5 years,
subject to the rules of the land.

Such entities should have relevant permission, either under the SEBI Act, Banking
Regulation Act or registration under any other relevant law.

Tax Deduction under Section 80P:

Section 80P caters to cooperative societies, offering tax deductions on their income, subject
to certain conditions. 100% deduction is permitted to cooperative societies which have
incomes through cottage industries, fishing, banking, sale of agricultural harvest grown by
members and milk supplied by members to milk cooperative societies.

Cooperative societies which are involved in other forms of business are eligible for
deductions ranging between Rs 50,000 and Rs 1 lakh, depending on the type of work they
are involved in.

Deductions which can be claimed by all cooperative societies are listed below.

 Income which a cooperative society makes by renting out warehouses

 Income derived through interest on money lent to other societies
 Income earned through interest from securities or properties

Tax Deduction under Section 80QQB:

Section 80QQB permits tax deductions on royalty earned from sale of books. Only resident
Indian authors are eligible to claim deductions under this section, with the maximum limit set
at Rs 3 lakhs. Royalty on literary, artistic and scientific books are tax deductible, whereas
royalties from textbooks, journals, diaries, etc. do not qualify for tax benefits. In case of an
author getting royalties from abroad, the said amount should be brought into the country
within a specified time period in order to avail tax benefits.
Tax Deduction under Section 80RRB:
Section 80RRB offers tax incentives to patent holders, providing tax relief to resident
individuals who receive an income by means of royalty on their patent. Royalty to the tune of
Rs 3 lakhs can be claimed as deductions, subject to the patent being registered after
31/3/2003. Individuals who receive a royalty from foreign shores need to bring said amount
to the country within a specific time period in order to be eligible for tax deductions on such
royalty.

Tax Deduction under Section 80TTA:

Deductions under Section 80TTA can be claimed by Hindu Undivided Families and
Individual taxpayers. This section permits deductions to the tune of Rs 10,000 every year on
the interest earned on money invested in bank savings accounts in the country.
 Income Tax Slab Rates for FY 2017-18(AY 2018-19)
What is Income Tax Slab?

Income tax is that percentage of income paid to the government by the taxpayers for the
betterment of the public at large. This income is categorized into different groups on the
basis of the amount of income. Each such group is known as a Tax Slab. Tax is charged
at different rates on the range of income falling under different income tax slabs.
The Income Tax Act 1961 is the law that governs the provisions for our income tax in
India.
The income tax slab rates are usually revised every year during the budget. Various
deductions that are allowed to a taxpayer under Section 80C, Section 80D etc.

Income Tax Slab Rate Post Budget 2017

The tax is calculated according to the income tax slabs announced by the government
every year in the Budget. The finance minister has announced the changes in the tax slab
structure in union budget for 2017.
Following are the income tax slab rates and deductions in India for different categories of
tax payers:

INCOME TAX SLAB RATE FOR MEN BELOW 60 YEAR OF AGE

INCOME TAX SLAB INCOME TAX EDUCATION SECONDARY &

RATE CESS HIHER
EDUCATION
CESS

Income upto Rs.25000 NIL NIL NIL

Income between 5% of Income 2% of Income tax 1% of Income tax
Rs.250001 –Rs.500000 exceeding Rs.
250000
Income between 20% of Income 2% of Income tax 1% of Income tax
Rs.500001-Rs.1000000 exceeding
Rs.500000
Income above 30% of Income 2% of Income tax 1% of Income tax
Rs.1000000 exceeding
Rs.1000000

INCOME TAX SLAB RATE FOR WOMEN BELOW 60 YEAR OF AGE

INCOME TAX SLAB INCOME TAX EDUCATION CESS SECONDARY &

RATE HIHER
EDUCATION CESS

Income upto Rs.25000 NIL NIL NIL

Income between 5% of Income 2% of Income tax 1% of Income tax
Rs.250001 –Rs.500000 exceeding Rs.
250000
Income between 20% of Income 2% of Income tax 1% of Income tax
Rs.500001-Rs.1000000 exceeding
Rs.500000
Income above 30% of Income 2% of Income tax 1% of Income tax
Rs.1000000 exceeding
Rs.1000000

INCOME TAX SLAB RATE FOR SENIOR CITIZENS (AGE OF 60 YEARS OR MORE
BUT LESS THAN 80 YEAR)

INCOME TAX SLAB INCOME TAX EDUCATION CESS SECONDARY &

RATE HIHER
EDUCATION CESS

Income upto Rs.300000 NIL NIL NIL

Income between 5% of Income 2% of Income tax 1% of Income tax
Rs.300001 –Rs.500000 exceeding Rs.
300000
Income between 20% of Income 2% of Income tax 1% of Income tax
Rs.500001-Rs.1000000 exceeding
Rs.500000
Income above 30% of Income 2% of Income tax 1% of Income tax
Rs.1000000 exceeding
Rs.1000000

INCOME TAX SLAB RATE FOR SENIOR CITIZENS (AGE 80 YEARS OR MORE)

INCOME TAX SLAB INCOME TAX EDUCATION CESS SECONDARY &

RATE HIHER
EDUCATION CESS

Income upto Rs.500000 NIL NIL NIL

Income between 20% of Income 2% of Income tax 1% of Income tax
Rs.500001 –Rs.1000000 exceeding Rs.
500000
Income above 30% of Income 2% of Income tax 1% of Income tax
Rs.1000000 exceeding
Rs.1000000

INCOME TAX SLAB RATE HINDU UNDIVIDED FAMILIES (HUF)

INCOME TAX SLAB INCOME TAX RATE

Upto to Rs.250000 NIL

Rs.250000 to Rs.500000 10% Income exceeding Rs.250000

Rs.500000 to Rs.1000000 20% Income exceeding Rs.500000

Over Rs.1000000 30% Income exceeding Rs.1000000

INCOME TAX SLAB RATE LEGAL ENTITIES REGISTERED ASSOCIATION OF
PERSON

INCOME TAX SLAB INCOME TAX RATE

Upto to Rs.250000 NIL

Rs.250000 to Rs.500000 10% Income exceeding Rs.250000

Rs.500000 to Rs.1000000 20% Income exceeding Rs.500000

Over Rs.1000000 30% Income exceeding Rs.1000000

INCOME TAX SLAB RATE LEGAL ENTITIES REGISTERED AS BODIES OF

INDIVIDUAL

INCOME TAX SLAB INCOME TAX RATE

Upto to Rs.250000 NIL

Rs.250000 to Rs.500000 10% Income exceeding Rs.250000

Rs.500000 to Rs.1000000 20% Income exceeding Rs.500000

Over Rs.1000000 30% Income exceeding Rs.1000000

COMPARISON OF INCOME TAX SLABS FOR FY 2017-18 & FY 2016-17

INCOME TAX SLAB INCOME TAX RATE INCOME TAX RATE

FOR FY 2017-18 FOR RATE FY 2016 -17

Income upto Rs.25000 NIL NIL

Income between Rs.250001 – 5% of Income exceeding 10% of Income exceeding
Rs.500000 Rs.250000 Rs.250000

Income between Rs.500001- 20% of Income exceeding 20% of Income exceeding

Rs.1000000 Rs.500000 Rs.500000

Income above Rs.1000000 30% of Income exceeding 30% of Income exceeding

Rs.1000000 Rs.1000000

Advance Tax
Advance tax is the tax payable on total income of the year earned from different sources
including salary, business, profession, rent, etc. The tax is supposed to be paid before the end
of the financial year.

Advance tax is also known as ‘Pay as you earn’ scheme. The tax is payable if your tax
liability exceeds Rs.10,000 in a financial year.The tax should be paid in the same year in
which the income was received.

Who has to Pay Advance Tax?

Salaried individuals need not pay advance tax as they already pay tax at source, the employer
deducts the tax at source. Advance tax is applicable to individuals who earn income from
sources other than salary. If a salaried individual earns income from other sources then they
have to pay advance tax too.

Listed below are some of the income sources which attract advance tax:

 Income received via capital gains on shares

 Interest earned on fixed deposits
  Winnings earned from a lottery
 Rent or income earned from house property

How to Pay Advance Tax?

Advance tax can be paid through tax payment challans at bank branches which are authorised
by the Income Tax department. It can be deposited in authorised banks such as ICICI Bank,
Reserve bank of India, HDFC Bank, Syndicate Bank, Allahabad Bank, State Bank of India
and more.

Another way of paying advance tax is by paying it online through the Income Tax department
or the National Securities Depository.

Advance Tax Calculation:

An individual can calculate advance tax on their own and determine if they have to pay
advance tax.

Listed below are the steps to calculate advance tax:

 Determine the Income: Determine the income you receive other than your salary. It’s
important to include any ongoing agreements that might pay out later.
 Minus the Expenses: Deduct your expenses from the income. You can deduct expenses
related to your work (freelancing) such as rent of the work place, travel expense, internet
and phone costs.
 Total the Income: Add up other income that you might receive in the form of rent,interest
income, etc. Deduct the TDS deducted from your salaried income.
 Total Advance Tax: If the tax due exceeds Rs.10,000 then you’ll have to pay advance tax.

Advance Tax Benefits :

 Advance tax helps in reducing stress of taxpayers. By paying tax in advance, taxpayers do not
have to worry about money shortage or tax payments at the last moment.
 It speeds up the tax collection process.
 It increases government funds as the government can earn an interest on the collected
amount.
 Advance tax saves people from defaulting on their tax payments.
 It helps businesses in managing their finances well and provides an idea of the income they
have earned during the year.

Advance Tax Exemption :

Senior citizens (people above 60 years of age) who do not own any business are exempted
from paying advance tax. Also, taxpayers who opt for presumptive schemes are exempted
from paying advance tax. These schemes can be applied for by people whose business
turnover is more than Rs.2 crores in a financial year. In the year 2016-17, such scheme was
extended to doctors, lawyers and architects, provided their annual receipts totals to a
maximum of Rs.50 Lakhs.
Advance Tax Challan 280 :

Challan 280 allows people to pay their income tax online on the website of the Income Tax
Department of India. On the website, people have to select this challan and fill the form and
then use it to pay taxes online/office. If they want to pay the tax offline, they have to
download Challan 280 form from the Income tax welcome, fill it and submit it at the bank.

Refund of Advance Tax :

At the end of the year, if the Income Tax Department finds out that you have paid more tax
than you should have paid, then it will refund the excess amount. Taxpayers can claim refund
by filling and submitting Form 30. They have to make the claim within a period of one year
from the last year of the assessment year.

CHAPTER - III
CONCLUSION
The Government has tried to achieve the objective of social
welfare by providing various incentives for education, health,
housing, savings, pension schemes, donations, senior citizens
and women assessees, and 260 generating employment etc.
These incentives are appreciable as these are related with the
basic necessities of a common man. However, in case of some
incentives the monetary ceiling seems to be illogical or very low
as it has not been revised since a long time e.g. medical
expenses, interest on self occupied housing loan, saving
schemes.

Certain Rationalization and Simplification Measures have

been taken during the study period such as lowering income
tax rates in case of all the assesses, introducing standard
deduction at the rate of 30 per cent of net annual value in case
of let out house property, providing depreciation on intangible
assets etc
.
The Government has tried to achieve all round economic
objectives by providing incentives for infrastructure
development, balanced regional growth, scientific research and
development, capital market and exemption of agricultural
income

CHAPTER –IV
BIBLOGRAPHY
www.bankbazar.com
www.investopedia.com
https://cleartax.in
http://googleweblight.com
www.shodhganga.inflibnet.ac.in
www.hdfclife.com