A PROJECT REPORT ON

“TAXATION IN INDIA”
Submitted By

Yash . S . Bhagat

With Reference To

R.R.MAMIDWAR & CO.

CHARTERED ACCOUNTANTS

SARAFA LINE, GANDHI CHOWK, CHANDRAPUR,442402 .

In Partial Fulfillment for the Award Of

MASTER IN BUSINESS ADMINISTRATION

2020-2022

Submitted To:

SINHGAD INSTITUTE OF MANAGEMENT

VADGAON (BK), PUNE
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DECLARATION

I, Yash.S.Bhagat , hereby declare that the project report entitle

“TAXATION” is original of mine, done from “ R.R. MAMIDWAR & CO

.” submitted in partial fulfillment for the Award of Master’s in Business

Administration of Pune University is my original work and does any Part of

previously carried / conducted project.

(Yash .S. Bhagat)

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ACKNOWLEDGEMENT

I am sincerely thankful to my Faculty supervisor Prof. Dnyanesh

Bandgar, SINHGAD INSTITUTE OF MANAGEMENT, VADGAON (BK),

PUNE who spared his Valuable time and effort to guide me in the completion

of project report.

Last but not least I would like to thank all my friends who stood by my

Side through times and helped me tide over many obstacles during the

Completion of this project.

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CONTENTS

Sr. Particulars Page

No. No.
1 Need for the study

2 Scope of the study

3 Objectives of the study

4 Company Profile

5 My job profile

6 Introduction To Taxation In India

7 Direct and Indirect Tax Collection

8 Direct Taxes
 Income Tax
 Form 16(A)
 TDS (Tax Deduction At Source)
 Wealth Tax
 Corporate Tax
 Professional Tax

9 Indirect Taxes
 GST
 Custom Duty
 Central Excise Duty

10 Conclusion & suggestions

 Bibliography
 Webliography

EXECUTIVE SUMMARY
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For any research assignment, a proper planning is required and the

same holds true in case of present study. This project is titled as
“TAXATION IN INDIA”. The reasons behind choosing this project is that I
find there is very interesting topic because it is the biggest source of the
finance for the government and also I have done my summer internship in the
company which is related to the taxation that is R.R . MAMIDWAR & CO.

NEED FOR THE STUDY

 The purpose of the study is to get detailed knowledge about Service

Tax & Excise Duty in India.
 The purpose of the study is help to Service Provider to briefly
understand the need for charging Tax and the benefits out of that.
 Need to understand how Government raises their fund to run
government and provide services to the public.

SCOPE OF THE STUDY

This particular study about Work Stress Management is restricted

within the organization. The study is conducted on the employees of the
organization. This is not because of non-availability of resources but the
nature of the study itself restricts it. It studies the existence or non – existence
of stress among the employees in the organization and identifies the factors
which are contributing for stress (If any). It also provides the various steps
adopted by the organization for managing the work stress of the employees,
which can be used as future reference for decision-making and policy making
with regard to the employees. This study reveals the morale of the
employees.

OBJECTIVE OF THE STUDY

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 The objective of the study is to identify the existence of work stress

in the organization.
 If YES, then to study the factors causing stress among the employees
 To study the impact and usefulness of Work Stress Management and
also to suggest measures for coping with stress.

COMPANY PROFILE
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R R Mamidwar & Company

R. R. MAMIDWAR & CO. , is into Tax practice, catering to Income

Tax, FBT, sales tax, VAT, statutory audits , service tax and internal
audits for a large number of small, medium and large scale
organizations.
We provide a range of specialist management consultancy services in
various sectors. With consulting experience of about more than 40
years, we are one of the leading firms in consultancy services in Central
India.
Our professional approach blended with personal attention has resulted
in our clients reposing their faith and trust which is reflected in the long
standing relationship that we enjoy with them.
We believe that each business problem is different, and that best advice
is possible only if the problem is analyzed in the right business
perspective. We believe in building long term relationship and lasting
associations is directly proportional to client satisfaction rate.
Our offices of the firm are internet enabled facilitating direct client
contact and better service. Our firm’s high quality of services is the
outcome of hands–on involvement of seniors in all important tasks,
regular internal reviews, respect for client’s knowledge, skills and
feedback and preparedness to respond to client queries at the earliest.
R.R. MAMIDWAR & Co. would not be a successful organization
without great people and strong teamwork. We believe that integrity and
professional competence are the corner stones of our organization. We
believe in building enduring business partnerships by making effective
contribution to our clients through innovative business solutions and
supportive implementation.

Nature of Business Service Provider

Company CEO Ramesh Ramchandra Mamidwar

Total Number of
Upto 10 People
Employees

Legal Status of Firm Partnership Firm

Annual Turnover Upto Rs. 50 Lakh

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MY JOB PROFILE

I had joined R.R. MAMIDWAR & CO as a Accounts & Audit Trainee for
the period 11th of Oct, 2021 to 11th Dec, 2021. (For two months). There was my
work as
1) Vouching of expenses for sales person and Checking to Proof of
Dispatch (POD)
2) They showed me how to prepare Receipts & Payments sheet in excel for
the clients.
3) And how to do GST Registration and open new shop act license for new
ventures.
4) I understand the process of audit like checking balance sheets from the
data they provided
5) And also posting , banking , vouching the process used in audit

After some days they allotted as well showed me some and work on Service tax
Credits.
6) How to passed entry Account Receivable and Account Payable at SAP
with Transit Code.
7) They gave me the task to Internal Audit of credit tax liability for Service
Tax Set Off payment and which was useful for Service Tax Return filing
on time.
8) Prepare the summary of Agreements in excel.

So when I joined they allotted me lots of work.

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INTRODUCTION ON TAXTION IN INIDA

Taxation is the imposition of financial charges or other levies, upon a

taxpayer (an individual or legal entity) by Central and a state such that failure
to pay is punishable by law. It is the most pervasive and the strongest of all the
powers of the government. Taxes are the lifeblood of the government, without
which, it cannot subsist.
Taxes in India are levied by the Central Government and the state
governments. Some minor taxes are also levied by the local authorities such as the
Municipality.
Central Government levies taxes on income (except tax on agricultural
income), customs duties, central excise and service tax. Value Added Tax (VAT),
(Sales tax in States where VAT is not yet in force), stamp duty, State Excise, land
revenue and tax on professions are levied by the State Governments. Local bodies
are empowered to levy tax on properties, octroi and for utilities like water supply,
drainage etc.
Since April 01, 2005, most of the State Governments in India have replaced
sales tax with VAT.
The main purpose of taxation is to accumulate funds for the functioning of
the government machineries. No government in the world can run its
administrative office without funds and it has no such system incorporated in itself
to generate profit from its functioning. The government’s ability to serve the
people depends upon the taxes that are collected. Taxes are indispensable in the
government operation and without it, the government will be paralyzed.
Taxation has four main purposes or effects:
1. Revenue 2. Redistribution
3. Repricing 4. Representation
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Revenue: - The taxes raise money to spend on armies, roads, schools and
hospitals, and on more indirect government functions like market regulation
or legal systems.
Redistribution: - This refers to the transferring wealth from the richer
sections of society to poorer sections.
Repricing: - Taxes are levied to address externalities; for example, tobacco is
taxed to discourage smoking, and a carbon tax discourages use of carbon-
based fuels.
Representation: - As what goes with the slogan "no taxation without
representation”, it implies that: ruler’s tax citizens and citizens demand
accountability from their rulers as the other part of this bargain.

TAXATION IN INDIA

DIRECT TAX INDIRECT TAX

Income Tax GST

Wealth Tax Customs Duty

Corporate Tax Central Excise Duty

Professional Tax

DIRECT TAX
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Direct tax is referred to as the tax, which is paid by the person to the
government to whom it is levied and charged on the income and wealth of
persons and any levy that is both imposed and collected on a specific group of
people or organizations. The person on whom it is levied bears its burden i.e.
it increases with an increase in income or wealth and vice versa. It levies
according to the paying capacity of the person, i.e. the tax is collected more
from the rich and less from the poor. The burden of tax cannot be shifted.
Direct tax helps in reducing inflation. The tax progressive in nature. Tax
evasion is possible.
Direct taxation would be income taxes that are collected from the people who
actually earn their income.The tax is levied and collected either by the Central
government or State government or local bodies. The plans and policies of the
Direct Taxes are being recommended by the Central Board of Direct Taxes
(CBDT) which is under the Ministry of Finance, Government of India.

Corporation Tax or Corporate Tax is a direct tax levied on the net income
or profit of a corporate entity from their business, foreign or domestic. The
rate at which the tax is imposed as per the provisions of the Income Tax Act,
1961 is known as the Corporate Tax Rate

Income Tax Rate (excluding

Condition
surcharge and cess)

Turnover or Gross Receipt in previous year

25%
2018-19 not exceed ₹ 400 crores

If opted for Section 115BA 25%

If opted for Section 115BAA 22%

If opted for Section 115BAB 15%

Any other Domestic Company 30%

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For existing companies

Under the new tax slab announced by the Finance Ministry, corporations with
annual turnover up to Rs 400 crore and not seeking any incentives or
exemptions need to pay 22 per cent tax along with applicable cess and
surcharge. This takes the effective corporate tax rate to 25.17%. However,
with the introduction of the new guidelines, companies don't have to pay any
minimum alternate tax or MAT.

For new firms

The government, in order to attract fresh investment in manufacturing and
provide a boost to its flagship ‘Make-in-India’ initiative, another new
provision has been inserted in the Income-tax Act with effect from FY 2019-
20 which allows any new domestic company incorporated on or after 1st
October 2019 making fresh investment in manufacturing, an option to pay
income-tax at the rate of 15%. This benefit is available to firms which do not
avail any exemption/incentive and commences their production on or before
31st March, 2023. The effective tax rate for these companies shall be 17.01%
inclusive of surcharge & cess and such companies shall not be required to
pay Minimum Alternate Tax.

However, firms which do not opt for the concessional tax regime and avail
the tax exemption/incentive shall continue to pay tax at the pre-amended rate,
that is 30%. Further, in order to provide relief to companies which continue
to avail exemptions/incentives, the rate of Minimum Alternate Tax has been
reduced from existing 18.5% to 15%.
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INCOME TAX

The government of India imposes an income tax on taxable income of

individuals, Hindu Undivided Families (HUFs), companies, firms, co-operative
societies and trusts (identified as body of individuals and association of persons)
and any other artificial person. Levy of tax is separate on each of the persons. The
levy is governed by the Indian Income Tax Act, 1961. The Departments governed
by the Central Board for Direct Taxes (CBDT) and is part of the Department of
Revenue under the Ministry of Finance, Govt. of India.
An income tax is a tax levied on the income of individuals or businesses
(corporations or other legal entities). Various income tax systems exist, with
varying degrees of tax incidence. Income taxation can be progressive,
proportional, or regressive. When the tax is levied on the income of companies, it
is often called corporate, corporate income tax, or profit tax. Individual income
taxes often tax the total income of the individual (with some deductions permitted),
while corporate income taxes often tax net income (the difference between gross
receipts, expenses, and additional write-offs). Various systems define income
differently, and often allow notional reductions of income (such as a reduction
based on number of children supported).

Charge to Income-tax:
Every Person whose total income exceeds the maximum amount which is not
chargeable to the income tax is an assesse, and shall be chargeable to the income
tax at the rate or rates prescribed under the finance act for the relevant assessment
year, shall be determined on basis of his residential status.
TAXATION

Income tax is a tax payable, at the rate enacted by the Union Budget (Finance Act)
for every Assessment Year, on the Total Income earned in the Previous Year by
every Person.

The changeability is based on nature of income, i.e., whether it is revenue or

capital. The principles of taxation of income are:-

Some people have lots of confusion in mind about income tax

rates/slabs like which income tax slab applicable to this assessment year, financial
year etc. Majority of peoples are confused to applicable income tax rates/slabs on
particular assessment year. So this is the static page of income tax slab/rates
applicable in India for current and last 3 years.

(A) Income Tax Rates for Individual, HUF, AOP, BOI

A.Y 2021-2022 (OLD REGIME)

Income slabs Genera Senior Citizen Super Senior Citizen

(Non-Senior Citizen) (60 Years & above) (80 Years & above)

Upto 2,50,000 NIL NIL NIL

2,50,001 to 3,00,000 5% NIL NIL
3,00,001 to 5,00,000 5% 5% NIL.
5,00,001 to 10,00,000 20% 20% 20%
Above 10,00,000 30% 30% 30%

A.Y 2021-2022 (NEW REGIME)

INCOME SLABS INCOME TAX RATES

Upto 2,50,000 NIL
2,50,001 to 5,00,000 5% (with tax rates rebate u/s 87a )
5,00,001 to 7,50,000 10%
7,50,001 to 10,00,000 15%
10,00,001 to 12,50,000 20%
12,50,001 to 15,00,000 25%
Above 15,00,000 30%
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TDS
Tax Deducted at Source or TDS was introduced to collect tax from the source
of income. According to the Income Tax Act, anyone making a payment is
required to deduct tax if the payment is crossing certain limits. The limits or
the rates are prescribed by the Income Tax department. TDS is managed by
the Central Board of Direct Taxes (CBDT), which comes under the
Department of Revenue.

The company or the person deducting the tax is called a deductor and the
company or the person receiving the deducted payment if the deductee. The
deductor is required to remit the tax into the account of the Union
government and the deductee would be entitled to get credit of the amount
taxed on the basis of Form 26AS.

TDS is deducted on various types of payments. It is deducted on salaries,

interest payments by banks, commission payments, rent payments,
consultation fees, and professional fees. TDS is not required to be paid on
rent payments or on fees paid to professionals like doctors, lawyers.

TDS returns

TDS return contains the details of the deductions and has to be filed by the
deductor.

TDS rates

Different TDS rates are applicable on the payments depending on the nature
of the payments.

Section of the Income Tax Act makes it compulsory for every employer to
deduct tax at source from the salary of employees. As per the tax laws in
India, the rate of deduction depends on the income tax slab under which the
employee’s salary falls.

However, TDS is applicable only when the amount crosses a certain limit
which is prescribed by the Income Tax department. TDS will not be deducted
if the payment amount does not cross the specified limit.
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Residential Status:

RESIDENCE IN INIDA

RESIDENT AND RESIDENT BUT NOT NON - RESIDENT

ORDINARILY ORDINARILY
RESIDENT RESIDENT

Basic Conditions:

1) Person must be living in India at least 182 days during previous year.
2) Must be present in India for period of 60 days or more during the
previous year and 365 days or more during the 4 years immediately
preceding to that financial year.

Additional Conditions:

1) The person is resident in at least 2 out of 10 previous years preceding the

relevant previous year,
2) His stay in India in the last 7 years preceding the relevant previous year is
730 days or more.

Resident and Ordinarily Resident but not ordinarily Non-resident

resident
Must satisfy at least one of the
basic conditions and both the
additional conditions.
resident
Must satisfy at least one of the Must not satisfy either of the
basic conditions and one or basic conditions.
none of the additional
conditions.
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HEAD OF INCOMES

Income tax is payable by an assessee on his total income from all the source
of income. Each source has its own unique features and requires specific treatment
for correct computation of income from that particular source. Naturally, rules and
method for computation of income from each such source are different according
to the nature of the source

.
CLASSIFICATION OF INCOMES

Section 14 of the Income Tax Act, 1961 deals with the classification of
income under five heads of income. The five heads of income listed in S 14 are:
1) Income under the head salaries (Section 15 – 17)
2) Income from house property (Section 22 – 27)
3) Profits and gains from business or profession (Section 28 – 44)
4) Capital gains (Section 45 – 55)
5) Income from other sources (Section 56 – 59)

1) INCOME FROM SALARY

Among the five heads of income listed by S.14, “Salaries” is the first and
most important head of income. The concept of “Salaries” is very wide and
includes not only the salary in common parlance but also various other receipts,
gifts, perquisites and benefits.
The lesson is divided into various sections dealing with the concept of salary
income and its characteristics, which define as to what constitutes “salaries”
followed by the incomes falling under this head the computation of basic salary,
types of allowances and perquisites, valuation of the perquisites, various income
tax provisions for computing taxable value of allowances etc. and their detailed
descriptions along with the applicable legal provisions of income tax.
Meaning

Salary, in simple words, means remuneration of a person in any form, which

he has received from his employer for rendering personal services to him under an
expressed or implied contract of employment or service.
But receipts for all kinds of services rendered cannot be taxed as salary. The
remuneration received by professionals like doctors, architects, lawyers etc. cannot
TAXATION

be covered under salary since it is not received from their employers but from their
clients. So, it is taxed under business or profession head. This implies the presence
of the following norms or essential characteristics to determine whether any
particular income is to be taxed under the head ‘’Salaries’’ or not.

Essential Characteristics of Salaries

 Employer-Employee Relationship:
Assessee should receive the income from his employer only. Any income
which is received by assessee (employee) from his employer should be taxable
under section. If income not received from his employer then such employer is not
taxable under this head.
 Salary to partner by firm:
If partner received salary from the firm this salary is not taxable under this
head but taxable head from business.
 Received salary form two or more employer:
If an assessee received salary from two or more employer then income
received from all employer is taxable under this head.
 Real intention to pay:
Salary income must be real and not fictitious. There must exist an intention/
obligation to pay and receive salary.
 Salary or Bonus to Director:
If Director received any salary / bonus / commission as an employee is
taxable under this head.
 Salary received by individuals only:
Salary is a compensation for personalized services, which can obviously be
rendered by a normal human being and not a body corporate. Salary income is
taxable in the hands of individuals only. No other type of person such as a firm or
HUF, companies can earn salary income.
 Salary:
The salary earned of current year or arrear salary of last year or salary
received in advance are taxable but the salary on which tax is paid in previous year
such salary should not be added in current year Because he cannot paid tax twice
on same income.
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Key Points

 Basic Salary:

Basic salary is fixed as per their respective terms of employment. But some
employee received their salary on graded system. Under the graded system, apart
from starting basic, salary annual increments are pre-fixed. Increment is given
thereafter till next date of increment or the date when he is promoted and placed in
other grade.
 Fees, Commission and Bonus :
Any fees, commission or bonus or incentive paid or payable to an employee
by an employer is fully taxable and is included in salary.
 Arrears of salary:
Arrears of salary are taxed on receipt basis, if the same has not been taxed
earlier. However, relief u/s 89 will be allowed in respect of such arrears.
 Advance Salary:
Advance Salary is taxable on receipt basis in the year of receipt; however
there will be no tax in the year of actual accrual of such salary again. Further
assessee shall be entitled to relief u/s 89 in respect of advance salary. Loan to
employee is not treated as advance of salary and the same is not taxable.
 Gratuity - Section 10(10):
Gratuity is a lump-sum payment to reward an employee for his past services,
on his retirement or termination. Sec .10 gives tax of treatment of gratuity as
under-
1. Amount received as gratuity on termination as per service rules is Fully
EXEMPT in case of employees of Central or State governments or local
authorities.

2. In case of employees covered by the Payment of Gratuity Act, 1972.

EXEMPTED amount would be lowest of the following:
a) Amount of gratuity received,
b) Rs 10,00,000/-
c) 15 days’ salary for every completed or part thereof in excess of six
month year of service computed on the basis of last salary drawn and
denominator 26. i.e.

15 X Completed year of service X Last Drawn Salary

26
3. In case of employees not covered by the Payment of Gratuity Act, 1972.
EXEMPTED amount would be lowest of the following:
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a) Amount of gratuity received,

b) Rs 10,00,000/-
c) Half month’s salary for every completed year of service in excess of six
months (ignoring the fraction) computed on the basis of average salary of last 10
months preceding the retirement. i.e.

1/2 X Average Salary for last 10 months X Completed year of service.

 Pension - Section 10(10A) :

On retirement of an employer, the employer makes a regular payment to the
employee as a reward for his past services. The regular payment so made at
monthly or annual intervals is called pension. Some employers allow an employee
to forgo a portion of pension in lieu of lump sum amount. This is known as
commutation of pension.

Tax treatment of these two kinds of pension is as under:

A. Uncommuted Pension : -
Uncommuted pension is monthly / Quarterly / some other interval
periodical pension. This pension for taxable all employees therefore whether
is Govt. employee of Non-Govt. employee it is not material. Such pension
directly added in salary.

B. Commuted Pension : -
This amount paid by assessee in Lump sum. It depends upon type of
assessee.
a) If he is Government employee full amount of commuted pension
exempted from tax hence no amount of commuted pension is added in
income from salary.
b) Non-Government employee part of commuted pension is exempted and
part is taxable.
i) If he received Gratuity then 1/3 of full pension is exempted
= 1/3 X Full Pension.
ii) If he is not received Gratuity then ½ of full pension is exempted.
= ½ X Full Pension.
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Pension 10(10A)

Commuted Uncommuted

Govt. Employee Other Employee Taxable for all

Full Exempted Gratuity Gratuity

Yes No

1/3 of the Total ½ of the Total

Value of Pension value of Pension
Exempted Exempted

 Encashment of Leave Salary - Section 10(10AA):

When an employee, instead of enjoying leave at his credit, gets the same
encashed following tax treatment will be given:-
a) Amount received on encashment of leave during the continuity of
employment by all the employees, will be taxable in the year of receipt. However,
the employee will be entitled to relief u/s 89.
b) Amount received on encashment of leave at the time of retirement by way
of superannuation or otherwise, by
1. An employee of the Central or State Government will be fully exempt.
2. Any other employees including employees of a local authority or a
statutory corporation would be exempt at the lowest of the following and only the
balance will be taxable:-
i) Actual amount received.
ii) Notified Amount currently Rs 3,00,000/-
iii) 10 months average salary.
iv) Cash equivalent of leave to be encashed.
i.e. (Leave Entitlement - Leave Availed) X Average Salary

 House Rent Allowance (Section 10-13A)

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House Rent Allowance or HRA paid by the employer to the employee to

meet the housing expenses of the employee, is exempt from tax U/s 10(13A) being
the least of the following:
i) HRA actually received.
ii) Rent paid by employee in excess of 10 per cent of salary during the
previous year.
iii) 50% of salary, if employee is residing in the Four metro cities of Mumbai,
Delhi, Chennai or Kolkata and 40% of salary, if the employee is residing at
any other place.

 Wholly or partly tax-free Allowances:

Following allowance are wholly or partly tax -free. Some of the exemptions
are conditional. Most of the conditions and monetary limits, though prescribed in
rules are incorporated in brief to make the subject comprehensive. Brief
description of these allowances is as follows:
a) Fixed Medical Allowances
Fixed Medical Expenses are taxable but reimbursement of medical expenses
is however exempt upto Rs 25,000
b) Transport Allowance- Sec. 10(14)
Any allowance or benefit given to meet the expense wholly and necessarily
in the course of employment is fully exempt u/10(14) subject to the assessee
presenting the proof in this regard.
Under Rule 2BB, Transport or conveyance allowance paid to meet
conveyance expenses of the employee from place of residence to place of work and
back is exempt upto Rs 1600 per month.
c) Education Allowance:
Education Allowance given to meet the education expenses of the
employee’s is taxable in hands of employee. However, under rule 2BB a sum of
Rs100 per month per child subject to maximum of 2 children is allowed as
exemption from total education allowance received by the employee in a given
year. If the children of the employee are residing in a hostel, an additional
exemption of Rs 300 per month per child subject to maximum of 2children is made
available to the employee. Therefore if the employee has 2 children and who are
residing in a hostel and the employee is giving total education allowance of Rs
1000 per month, the taxable amount will be (1000-800) i.e. Rs 200 per month only.
e) Other allowances for official purposes-S 10(14)
f) Tiffin / Lunch Allowance
g) Out station allowance
TAXATION

 Perquisites (Section 17)

A) Meaning of Perquisites:
Section 17(2), Any benefits given by employer to employee in addition to
his salary. E.g. free accommodation facility, Lunch and Diner facility
B) Taxable perquisites in case of all tax:
1) Value of Rent free accommodation
2) Value of concession in Rent.
3) Provident fund paid by employer on behalf of employee.
C) Perquisites taxable in case of specified employee:
i) Meaning:
Specified employee means a director who is an employee of a
company, an employee having substantial interest in the company by
share more than 20% paid up capital.
ii) For him following perquisites are taxable
- Free domestic servant (Sleeper, Watchman, and Gardner)
- Free education facility for his family
- Gas, electricity and water supply free of cost
D) Valuation of Perquisites:
a. Accommodation & Furniture
b. Transport
c. Domestic servant
d. Gas, water or electricity
e. Educational facilities
f. Medical facilities

 Profits in Lieu of Salary – Sec. 17(3)

1. Payment from Employer from PF or Other Fund
2. Keyman Insurance Policy
3. Sums Received from Future or Former Employer
4. Payment of Employee’s Obligation Employer
5. Payments from Certain Funds
6. Treatment of Annual Accretion to Provident Fund
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- The funds are of three types

a) Statutory Provident Fund set up or established and administered by
the Government.
b) Recognized Provident Fund set up by others but recognized by the
Commissioner of Income Tax
c) Unrecognized Provident Fund set up by others but not recognized by
the Commissioner of Income Tax due to non-compliance with the
guidelines laid down for recognition.

7. Transferred Balance.
 Deductions from Salaries Sec.-16
Aggregate of taxable amount in respect of salary, various allowances and
perquisites is called the Gross Salary. From the Gross Salary so arrived,
Deductions are allowed u/s 16. Other than that, no further deductions are
allowed under this head. The following are the deduction available to the
employee U/s 16:
1. Entertainment Allowance- Sec. 16(ii)

Entertainment allowance as per Section 16(ii) is first included in salary

income under the head “Salaries” and thereafter a deduction is given on the
basis enumerated in the following points:
In the case of a Government employee deduct least amount of the following
a) Rs. 5,000
b) 20% of basic salary(including D.A)
c) Actual allowance received
Deduction in respect of entertainment allowance is allowed only to the
Government Servants. Employees working in private institutions are not
entitled to this deduction.

2. Profession Tax- Sec. 16(iii)

The Profession Tax, paid by an employee in a given previous year,
will be deducted from the gross salary in order to get the taxable amount of
salary. Profession Tax is levied by state government on employment.

(II) INCOME FROM HOUSE PROPERTIES

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Income from house Property” is significantly different than the other heads
of income unlike the other heads as it covers not only the actual income but also
the notional income.
 Basis of Charges – (Sec. 22)
The owner of the house property is taxed on the income from the house
property. Income from the house property is ascertained on the basis of annual
value. According to section 22, the annual value of property consisting of any
buildings or lands appurtenant thereto, of which assessee is the owner, other than
such portions of such property as he may occupy for the purpose of any nosiness or
profession, shall be chargeable to tax under this head, following conditions are
satisfied namely –
(a) Income chargeable to tax is ascertained on the basis of annual value of
property consisting of Buildings and Lands attached thereto of which
assessee is the owner. This means any income from vacant land or open
plot is not to be charges under the head Income form House Property.
(b) The legal owner of the house property is charged to tax in respect of
income from House Property.
(c) Property may be either let out or occupied by the assessee himself i.e.
Self-occupied. Property may be partly self-occupied or partly let out. In
both the circumstance, income is ascertaining on the basis of annual
value. However, the mode of ascertaining the income from house
property is different in case of property which is either let out or self-
occupied.
(d) Certain deductions, as discussed hereinafter under this topic, are allowed
form annual value in order to arrive at the taxable income under this
head. If such deductions are in excess of the annual value, the resultant
figure is termed as loss from house property. Such loss can be set off
against the income under other heads.
Building Defined:
The word “Building” id not defined under the Act. Many courts have
given judicial interpretation of the word, building as follows:
 Building is an enclosure of the brick or stone work covered by roof.
 Building is an enclosure which may even consist of mud walls.
Building may be occupied or intended for residence, Office use,
storage, warehousing etc.
Land Appartenant There To:
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It is the land occupied along with a building. It includes approach

roads, compounds, courtyards Kitchen garden, Car parking space, Play
grounds. Cattle Shed etc.
 Annual Value of House Property( Sec. 23)
Since, there is no definitive meaning of the term annual value defined in Sec
2(22) “as the annual value determined under Sec. 23, meaning of annual value has
to be seen in common parlance.
‘Annual value’ may be defined as the inherent capacity of a property to earn
income or the amount for which the property may reasonably be expected to be let
out from year to year. It is not the actual rent but the capacity to fetch rent that is
important. It implies that a property need not necessarily be let out.
The annual value of a property will, therefore, depend upon the use of the
property- self occupied, let out or partly vacant etc. The provisions of section 23
for determination of annual value are given below:
A) The sum for which is property might reasonably be expected to let our from
year to year; i.e. Reasonable Letting Value. It can be ascertained having
regards to Fair Rent Municipal Rateable Value of the house property.
The Fair Rent can be ascertained by taking the following factors into
consideration:
a) Locality in which property is situated:
b) Rent Payable for similar property in the same or similar locality:
c) Owner’s obligations discharged by the tenant:
d) Tenant’s obligations discharged by the owner:
e) If Rent Control Act is applicable, the standard rent as fixed by the Rent
Controller.
After taking into consideration the above factors relating to the house
property the fair rent is determined.
The Municipal Rateable Value is one of the important tests to be taken
into consideration for determining the annual value. Municipal Rateable
Value is being ascertained by the local authorities such as Municipal
Corporation or Municipal Council or Grampanchayat. On the basis of the
Municipal rateable value, local taxes are levied by the existing local
authorities. In big city like Bombay, local taxes are levied at a specified
percentage after arriving at net reteable value. This net rateable value is
determined after allowing 10 % of Gross Rateable value, as deduction. We
are required to take gross reteable value into consideration for determining
Annual Value.
Thus, Fair Rent or Municipal rateable value which is greater is taken
as Reasonable Letting Value (Gross Annual Value) u/s 23(1)(a)
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B) If the property or part of the property is let out and actual rent received after
excluding unrealised rent and rent pertaining to vacancy period, is more than
Reasonable Letting Value as above, the rent actually received after
excluding unrealised rent and vacancy period is taken as Gross Annual
Value u/s 24(1) (b).
C) If the property or part of the property is let out and actual rent received after
excluding unrealised rent and realized rent and rent pertaining to vacancy
period, is less than the reasonable letting value as above and such a decline
is caused only due to vacancy and not by any other factor (such as property
let out at less than expected rent) such rent received after excluding
unrealised rent and rent pertaining to vacancy period is taken as Gross
Annual Value u/s 23(1) (c).
However if the rent received is lower than reasonable letting value
due to factors other than vacancy, Gross annual value would be Reasonable
letting value as determined u/s 24 (1) (a).
Property may be let out or may be let out or may be occupied by the
assessee himself, i.e. self-occupied. It may also happen that the property is
partly self-occupied and partly let out. In both cases, income is required to
be ascertained on the basis of annual value. However, the mode of
ascertaining the income from house property is different in case of house
property which is either let out or self-occupied. Therefore, we can divide
the computation of taxable income into two groups, i.e.:

A) Income from House Property Let Out and

B) Income from self-occupied House Property

Terms:
1) F.V. - Face value
2) M.V.- Municipal value
3) R.L.V. – Reasonable letting value
4) A.R.R. - Actual rent received
5) U.R. – Unrealised rent
6) V.P.R. – Vacancy period rent
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Steps for Determining Annual Value Sec. 23

Compare F.R. with M.V.

(Whichever is higher is considered as R.L.V.)

Compare R.L.V. with A.R.

A.R.R. > R.L.V. A.R.R < R.L.V.

(A.R.R. does not include

V.P.R.& U.R.)
.

A.R.R < R.L.V. A.R.R < R.L.V

Because of Because of any
V.P.R. & U.R. other factors
A.R.R. is Annual
Value

A.R.R. is Annual R.L.V. is Annual

Value Value

A) Income from House Property Let Out :

1. Income from house property is to be ascertained on the basis of annual

value as discussed above. Thus, the annual value which is being
ascertained we will be calling it as Grass Annual Value (GAV) for the
sake of convenience.
2. From the gross annual value determined in the manner indicated above,
a deduction is to be made under the first proviso to section 23(1), on
account of local taxes actually paid and borne by the owner during the
previous year. After deducting such amount of local taxes actually paid
during the previous year from the gross annual value, we will be arriving
at Net Annual Value.
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Computation of Income from House Property Let Out

1. Gross Annual Value xxx
Less: Municipal Taxes actually paid by the
assessee during previous year [Sec. 23(1)] xxx
2. Net Annual Value xxx
Less: Deduction U/s. 24
i) 30% of Net Annual Value xxx
ii) Interest on loan borrowed from construction xxx xxx
Income from Late out Property xxx

B) Income from Self-occupied Property:

1. When a property is occupied by the owner himself that property is called
Self-occupied house property. Where the property consists of only one
house or a part of house which is occupied by the owner for his own
residence, the annual value of such a house shall be taken as NIL.
However, the following two conditions must be satisfied:
a) The property or part thereof is not let out actually during any part of
the previous year, and
b) No other benefit is derived from such property.
2. The limit for deduction is Rs. 2,00,000/- (w.e.f. 01.04.2015. Earlier Rs.
150,000/-) or Rs. 30,000/- as the case may be.
If the all following conditions are satisfied, then the limit in respect of
Interest on borrowed capital will be Rs. 2,00,000/-
a) Capital is borrowed on or after 1st April 1999
b) Capital is borrowed for the purpose of acquisition or construction (i.e.
not for repair, renewal, reconstruction)
c) Acquisition or construction is complete within 3 years from the end of
the financial year in which capital was borrowed.
If any of the above condition not satisfied, then limit will be reduced Rs.
30,000/-
Computation of Income from House Property Self-Occupied
Net Annual Value NIL
Less: Deduction U/s. 24
iii) 30% of Net Annual Value xxx
iv) Interest on loan borrowed from construction xxx xxx
Loss from Self-Occupied Property xxx
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(III) INCOME FROM BUSINESS AND PROFESSION

This is one of the most important heads of Income. Under this head we are
required to take into consideration the profits and gains of a business or profession
including vocation carried on by the assessee.
The term business is defined in section 2 (13) “includes ay trade, commerce
or manufacture or any adventure in the nature of trade, commerce or manufacture.”
Though the definition is not exhaustive, it covers all types of occupation carried on
by a person with a view to earn profit. Production of goods from raw material,
buying and selling of goods with the intention to make profit and providing
services to others are different forms of business. The profit earned from these is
chargeable to tax under the head. “Profits and Gains of Business or Profession”. In
simple words, any activity carried on with a view to earn profit is called as
business. It is not necessary to carry on business continuously. Even a single
transaction conducted during the year, with a view to earn profit is business.
Profession means an occupation requiring using intellectual skill or manual
skill or both, e.g. a chartered accountant, a lawyer, an engineer, a doctor. It may be
noted that if these persons are employed by any association and they receive
monthly remuneration by way of salary. It is taxed under the head ‘Income from
salary’ and not as income from business or profession.
Vocation is an activity in which an assessee has developed a special skill
and makes use of such skill for earing income, for example, a singer, a dancer, a
painter, a magician. It may be noted that the persons who are practicing vocation
are generally not liable to any action from any organized association. It is not so in
case of a professional person, for example, a doctor is subject to disciplinary action
by the Medical Council of India.
INCOME CHARGEABLE UNDER BUSINESS/PROFESSION
The following are few examples of incomes which are chargeable under this head:-
1. Normal Profit from general activities as per profit and loss account of
business entity.
2. Profit from speculation business should be kept separate from business
income and shown separately.
3. Any profit other than regular activities of a business should be shown as
casual income and will be shown under “income from other sources” head.
4. Profit earned on sale of REP License/Exim scrip, cash assistance against
export or duty drawback of custom or excise.
5. The value of any benefits whether convertible into money or no from
business/profession activities.
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6. Any interest, salary, commission etc. received by the partner of a firm will
be treated as business/professional income in hand of partner. However, the
share of profit from partnership firm is exempt in hand of partner.
7. Amount recovered on account of bad debts which were already adjusted in
profit in earlier years etc.
EXPENSES DEDUCTIBLE FROM INCOME FROM BUSINESS /
PROFESSION
All the expenses relating to business and profession are allowed against income.
Following are few examples of expenditures which are allowed against income:-
 Rent rates and insurance of building.
 Payment for know-how, patents, copy rights, trade mark, licenses.
 Depreciation on fixed assets.
 Payment for professional services.
 Expenditures on scientific research for business purposes.
 Preliminary Expenses in case of Limited companies.
 Salary, bonus, commission to employees.
 Salary, interest and remuneration to working partners subject to certain
conditions.
 Communication expenses.
 Traveling and conveyance expenses.
 Membership fees etc.
 Advertisement expenses in respect of promotion of business products.
 Discount allowed to customers.
 Interest on loans (Whether Private of Institutional).
 Bank Charges/Bank Commission expenses.
 Entertainment/Business Promotion expenses
 Staff Welfare expenses.
 Festival Expenses.
 Printing and stationery expenses
 Postage expenses.
 All other expenses relating to business/profession
Note: The above expenditures are allowed on the basis of actual payment as well
as on accrual basis at the date of finalization accounts.
EXPENSES WHICH ARE DEDUCTIBLE ON ACTUAL PAYMENT ONLY
Following expenses will be allowed if these expenses have been paid before or on
due date or before filing of income tax return:-
1. Any tax, duty, cess or fees by whatever name called.
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2. Contribution to provident fund, ESI premium, gratuity fund or other funds

for welfare of employees.
3. Bonus or commission or leave encashment payable to employees.
4. Interest on loan from public financial institutions, state financial corporation
or from scheduled bank.
EXPENSES NOT DEDUCTIBLE FROM BUSINESS/PROFESSION
INCOME
1. Expenditure on any type of advertisement of political party.
2. Any interest, royalty, fees for technical services or other sums chargeable
under this act, which is payable outside India or in India to non-resident or a
foreign company on which tax has not been deducted or after deduction, not
deposited in prescribed time.
3. Any interest, commission, rent, royalty, professional or technical fees paid
or payable to any resident of India or payment to contractor or sub-
contractor on which TDS is not deducted, or if deducted then not deposited
before the due date of filing the return.
4. Any tax calculated on the basis of profit of business.
5. Any amount of Wealth Tax paid.
6. Any payment of salaries payable outside India or to a non-resident on which
tax is not deducted.
7. Any tax actually paid by an employer on any income by way of perquisites,
on behalf of the employee.
8. Any remuneration paid to non-working partner.
9. Any remuneration paid to working partner other than specified in agreement
or as per the specified limits by income tax act.
10.Any interest to partner if not specified in agreement and not more than 12%.
11.Any payment in cash exceeding Rs.20000/=. (Rs.35000/= in case of
payment made for plying, hiring or leasing goods carriages) except when
payments are made under circumstance specified in Rule 6DD of Indian
income tax act.
12.Where a deduction has been claimed on accrual basis during an assessment
year and the payment is made in a subsequent year, and the payment or
aggregate of payments made to a person in a day otherwise than by way of
an account payee cheque/DD, exceeds Rs.20000/= (Rs.35000/= in case of
goods carriages), such payments shall be deemed as profit of the assessee for
the year in which the payment is made.
13.Any provision for the payment of gratuity to the employees.
14.Any personal expenditure.
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15.Expenses on defending in any proceedings for breach of any law relating to

sales tax etc.
Notes:
 Restriction on acceptance of loans or accept a deposits of Rs.20000/= or
more from any other person except by an account payee cheque/draft. This
restriction shall not apply if the loan or deposit is taken or accepted from
government, bank, post office, co-operative bank, government undertaking
etc.
 Restriction on repayment of loans or deposits: No person can repay loan
along with interest except by way of account payee cheque/draft if the
amount is Rs.20000/= or more.
COMPULSORY AUDIT OF ACCOUNTS
During Finance Year 2014-15 (Assessment Year 2015-16) and financial year
2015-16(Assessment year 2016-17), if the gross turnover of business exceeds Rs.
One Crore or receipts of a profession exceeds Rs.25 laces then audit of accounts is
compulsory under section 44AB of Indian income tax act.
The audit report by a chartered accountant, along with a statement of particulars,
should be furnished in the prescribed form as under:
Category Form for Form for
Audit Statement of
Report Particulars
Where accounts have been audited under any 3CA 3CD
other law
Where accounts have been audited under Income 3CB 3CD
Tax Act
Note:
1. Failure to get the accounts audited or to furnish audit report, in time attracts
penalty u/s 271B up to ½% of turnover or gross receipts or Rs.1,50,000/=
whichever is less.
2. From Assessment Year 2007-08 (Financial Year 2006-07), with the
introduction of annexure less return forms, the audit report is neither
required to be attached with the return nor furnished separately before or
after the due date and no penalty u/s 271B shall be imposed for this.
However, an audit report must be obtained by the assessee before the due
date of furnishing the return and the relevant columns in the return should be
filled in based on such report.
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(IV) INCOME FROM CAPITAL GAIN

Capital Gain is a part of the Taxable income. It is not an income in general
sense as Capital Gains is the profit earned on sale of capital asset or an investment.
Capital Gain in fact is brought to tax net by the deeming fiction created u/s
2(24)(vi) while defining the term Income. Thus in order to invoke the provisions of
Capital Gains the following ingredients should be present
1. The existence of Capital Asset
2. The transfer of such asset and
3. Profit and Gains from Transfer of such asset.
Capital asset is property of any kind held by an assessee, whether fixed or
circulating, movable or immovable, tangible or intangible. Following assets are
excluded from the definition of capital assets and hence, these are not to be
considered as capital assets.
1. Any stock in trade consumable stores or raw materials held for the
purposes of business or profession.
2. Personal effects of the assessee. It includes movable property including
wearing apparel and furniture held by the assessee, for personal use of
the assessee and for the members of his family dependent on him.
However, jewellery, drawings, paintings, sculptures of any work of
art if held for personal use then, it is treated as a capital asset and
not personal effect.

3. Agriculture land in India provided it is not situated within the specified

are.

Short Term Capital Assets

Kinds of Capital
Assets
Long Term Capital Assets

A) Short Term Capital Assets

i) Capital Assets in terms of share in company listed security / units of
UTI / Zero coupon Bonds etc.
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If such assets head by assessee for the period of not more than 12
months then such capital assets is called short term capital assets.
Eg. Equity or Preference share of company, Debentures, Govt.
Security, Unit of UTI, Units of mutual fund, Zero coupon bonds etc.
ii) Capital Assets other than share in company
If such assets held by assessee for the period not more than 36 months
it shall be treated as short term capital assets.
B) Long Term Capital Assets
An Asset other than short term capital assets are called long term
capital assets. It means share, debenture, units of UTI held by assessee
for more than 12 months and other capital assets are held for more than
36 months is called long term capital assets.

CALCULATION THE PERIOD OF HOLDING OF CAPITAL ASSET.

This period short from date of acquisition to date of transfer but
following rule should be considered.
1) Share held in a company liquidation
The period subsequent to the date on which the company goes
into liquidation should be excluded from a period of holding.
2) Capital Assets becomes a property of assessee in the circumstances
mention under section 49(1)
If the assessee become owner of Capital assets in case of gift,
Will, inheritance then the period of which the previous assessee
owner should be included.
3) Capital assets being share an Indian company in case of
amalgamation.
In this case period of holding of share in amalgamating
company also included.
4) Share in case of renounced
The date which right to subscribe the share is renounce. This
period should be excluded means ignore.

I) How to compute to short term capital gain

following steps are to be taken
1) Compute full value of consideration (S.P)
2) Deduct expenditure in respect transfer of such property i.e. transfer
expenses
3) Deduct cost of acquisition or purchase
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4) Deduct cost of improvement

COMPUTATION OF SHORT TERM CAPITAL GAIN

Full Value of consideration (S.P) xx

Less: 1) Expenditure of transfer property xx
2) Cost of acquisition xx
3) Cost of improvement xx xx
Short Term Capital Gain xx

II) How to compute to long term capital gain

following steps are to be taken
1) Compute full value of consideration
2) Deduct transfer expenses
3) Deduct Indirect cost of acquisition
4) Deduct Index cost of improvement

COMPUTATION OF LONG TERM CAPITAL GAIN

Full Value of consideration (S.P) xx

Less: 1) Transfer Expenses xx
2) Index Cost of acquisition xx
3) Index Cost of improvement xx xx
Long Term Capital Gain xx

A) FULL VALUE OF CONSIDERATION

Full value consideration means what the transferor receives as
consideration of sale of property / Asset. This value may be in cash or in
kind i.e. in exchange for an asset.
In case of exchange for an asset, the full value of computation of
capital gains shall be the Fair Market Value of the property (Assets) granted
in exchange. Fair Market Value in relation to capital gains means the price
which the property would normally fetch if sold in the open market on the
relevant date.
In case, the full value of consideration is received in installments in
different years, the entire value of consideration shall be the Market value of
property / asset granted in exchange.
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B) EXPENSES ON TRANSFER
Expenses on transfer include any expenditure incurred, whether
directly or indirectly for the purpose of transfer like Advertisement
Expenses, Brokerage Expenses, Stamp duty, Registration Fees and Legal
Expenses etc. However, any expense which has been claimed deduction
under any other provision of the Income Tax Act cannot be claimed as a
deduction under this Clouse.
C) COST OF ACQUISITION
Cost of acquisition is the price which the assessee had paid, or the
amount which the assessee as incurred, for acquiring the property / assets.
The expenses incurred at the time of completing the title are a part of the
cost of acquisition.
In cases where the capital assets become the property of assessee in
any of the manners mention below the cost of acquisition shall be deemed to
the cost for which previous owner of the property acquired it :
1) On the Distribution of Assets / Total Partition of HUF
2) Under a Gift or Will
3) By Succession, Inheritance or Devolution
4) On Distribution of Assets on Liquidation of a Company
Where the cost for which the previous owner of the capital asset
acquired the property cannot be ascertained, the cost of acquisition to the
previous owner shall be the fair market value of the asset on the date on
which the asset became the property of the previous owner. The Interest on
money borrowed for acquiring the capital asset will also form a part of the
cost of Asset.
D) COST OF IMPROVEMENT
All Capital Expenditures incurred in making any additions or
alterations to the Capital Asset by the Assessee after it became his property
or alterations to the capital asset by the assessee after it became his property
shall be deductible as the Cost of Improvement. If the Asset was transferred
to the assessee under the cases specified immediately above, the capital
expenditure incurred by the previous owner shall also be treated as cost of
improvement. However, the Cost of Improvement does not include any
capital asset which is deductible in computing the chargeable under head-
“Income from House Property”, Profits or Gains of Business or Profession”,
or “Income from Other Sources”. Only the Capital Expenses are considered
as a cost of Improvement and routine expenses on Repairs and Maintenance
do not form part of cost of improvement.
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For the purpose of Computation of Long Term Capital Gain,

Indexation using the Cost Inflation Index shall be done to the Cost of
Acquisition &amp; Cost of Improvement and the resultant figure shall be the
Indexed Cost of Acquisition &amp; Indexed Cost of Improvement for the
purpose of computation of LTCG

Cost Inflation Index of the Year of Sale

Indexed Cost = Actual Cost X
Cost Inflation Index of the Year of Purchase

The Assessee also has the option of not opting for Indexation and the
Long Term Capital Gain Tax Rate in this case shall be 10%

(V) INCOME FROM OTHER SOURCE

Where any income, profit or gains includible in the total income of an

assessee, cannot be included under any of the other heads, it would be chargeable
under the head Income from other sources. Hence, this head is the residuary head
of income [Section 56(1)]

The nature of income earned will decide whether income has to be shown
under this head. However, there are some standard inclusions as outlined below.

1. Dividends: Income by way of dividend is shown under this head. Deemed

dividend as under section 2(22)(e) is fully taxable as is dividend from co-
operative societies and foreign companies. Dividend not chargeable to tax
includes dividends exempt U/S 10(34) i.e. dividend from Indian companies,
dividend liable to corporate dividend tax, income on mutual fund units or
income from UTI unit holder.
2. Winnings: This includes winnings over Rs.10,000 from lotteries, puzzles,
races, games and all forms of gambling and betting. E.g. card games, horse
races, game shows etc.
3. Interest received: All interest income earned in the previous year (on
compensation/enhanced compensation) is taxable. However, 50% of this
income can be claimed as deduction.
4. Incomes not declared under the head ‘Profits and Gains of Business or
Profession’: This includes contributions made to an employer’s employee
welfare fund, interest earned on securities, rental income from furniture,
plant and machinery (including building where it cannot be let out
separately), keyman insurance policy proceeds.
5. Gifts: Taxable gifts are declared under this head by individuals and HUFs.
This includes monetary or non-monetary items received without any
consideration or without adequate consideration. Non-monetary gifts include
all immovable property and certain movable property.
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Gifts are taxed only if the total amount received during the previous year is more
than Rs.50,000 and applies only to those gifts individuals or HUFs received after
Oct.1st 2009. This doesn’t apply if the assessee receives money

 from relatives or a local authority or a trust, fund, educational/medical

institution, body or any such institution outlined under section 10(23C) and
section 12AA
 as a wedding gift
 by way of being named in a Will or as inheritance
 from a dying donor

Gifts include monetary gifts, immovable property and specified property.

Monetary gifts - sums of money received without any consideration or without

adequate consideration.

Immovable property as gifts - Property value will be the stamp duty value.
Inadequate consideration will be if the property value is lower than stamp duty
value.

Specific movable property - Property here are shares, jewellery, securities,

paintings, archaeological collections, sculptures and drawings and other artwork.
As of 1st June 2010, bullion also forms a part of this list. Property value will be the
fair market value. Inadequate consideration is when property value is below fair
market value.

Gifts from relatives means gifts from the assessee’s

 parents, parents’ brothers or sisters (i.e. aunts, uncles)

 any lineal predecessor/successor
 brother, sister; brothers’ or sisters’ spouses (i.e. brothers or sisters- in-law)
 Spouse, spouse’s parents (i.e. in-laws), spouse’s brothers or sisters (i.e.
brothers or sisters- in-law), spouse’s lineal predecessor/successor and their
brothers or sisters.

CLUBBING INCOME
Generally an assessee is tax in respect of his own income. But as per section
64 the income legally belonging to other person. Spouse or minor child alos
including in the income of assessee it is called as clubbing income.
These following incomes are clubbed.
1) Remuneration of spouse-
An individual is chargeable to tax in respect of any surgery, fees,
commission or remuneration received by spouse from the business in which
he has substantial Interest
2) Income from asset gifted to spouse.
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3) Income from asset gifted to son’s wife.

4) Income from assets transfer for the benefit of spouse
5) Income from asset transfer for the benefit of son’s wife.
6) Income of Minor child.
7) Income from own property converted into property of H.U.F

DEDUCTION FROM GROSS TOTAL INCOME

The Aggregate income from all the heads of income is known as Gross Total
Income. In computing the total taxable income on an assessee, certain deductions
under section 80C to 80 U are allowed from his Gross Total Income. It means,
firstly that the income of the assessee shall be calculated under 5 specific Heads of
income and incomes from all heads are put together and then from this total,
certain deductions are made and after making deductions whatever remains shall
be the total income or total taxable income.

The following essential rules have to be kept in mind while calculating deductions
under sec. 80C to 80U. :

1. The aggregate amount of the deductions under this Chapter shall not, in
any case, exceed the gross total income of the assessee.
2. No such deduction shall be allowed to him unless he furnishes a return of
his income for such assessment year on or before the due date
These Deductions are divided into 3 categories:
1. Deductions in respect of certain PAYMENTS.
2. Deductions in respect of certain INCOMES.
3. Other Deductions.

A) DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS :

 Deduction In Respect Of Life Insurance Premia, Deferred Annuity,

Contributions To Provident Fund, Subscription To Certain Equity
Shares Or Debentures, Etc. [SEC. 80 C ]
 Deduction available under section 80c of the Inome tax act 1961
 The maximum amount of deduction that can be claimed under section 80c is
Rs 1.5 lakhs for the current financial year
 The section offers various investment options to the taxpayer which not only
generate returns for him but can also be claimed as deduction while
calculating total taxable income.
1.Employers Provident Fund (EPF) & Voluntary Provident Fund(VPF)
2. Public Provident Fund (PPF)
3. Life Insurance Premiums
4.Home Loan Principal Repayment
5.Payment Of Kids Tution Fees.
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8.1.2. Deduction In Respect Of Contribution to Certain Pension Funds. [Sec.

80 CCC]

1. Where an assessee paid or deposited any amount out of his income chargeable to
tax for any annuity plan of Life Insurance Corporation of India or any other
Insurance Company for receiving pension from the fund, he shall be allowed a
deduction in the computation of his total income, of the whole of the amount paid
or deposited (excluding interest or bonus accrued or credited to the assessor’s
account, if any) as does not exceed the amount of (Rs. 1,00,000) one lakh rupees in
the previous year.

2. Where any amount received by the assessee or his nominee

(a) on account of the surrender of the annuity plan whether in whole or in part, in
any previous year, or

(b) as pension received from the annuity plan,

the whole of the amount shall be the income of the assessee or his nominee in that
previous year in which such withdrawal is made shall be chargeable to tax as
income of that previous year.

8.1.3. Deduction In Respect Of Contribution to Pension Scheme Of

Central Government Or Any Other Employers [Sec. 80 CCD]

(1) Where an assessee on or after the 1st day of January, 2004, has in the
previous year paid or deposited any amount in his account under a pension scheme
notified by the Central Government, he shall be allowed a deduction in the
computation of his total income, of the whole of the amount so paid or deposited as
does not exceed ten per cent (10%) of his salary in the previous year.

(2) If the Central Government or any other employer makes any contribution to
his account the assessee shall be allowed a deduction in the computation of his
total income, of the whole of the amount contributed by the Central Government
or any other employer as does not exceed ten per cent (10%) of his salary in the
previous year.

(3) Where any amount standing to the credit of the assessee in his account , in
respect of which a deduction has been allowed in whole or in part, in any previous
year,—

(a) on account of closure or his opting out of the pension scheme; or

(b) as pension received from the annuity plan purchased or taken on such closure
or opting out,
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the whole of the amount shall be deemed to be the income of the assessee or his
nominee, and shall accordingly be charged to tax as income of that previous year.

8.1.4. Deduction In Respect Of Health Or Medical Insurance Premium [Sec.

80
D]

8.1.5. Deduction In Respect Of Maintenance Including Medical Treatment

Of A Dependent Who Is A Person With Disability [Sec. 80 DD]

(1) Where an assessee, being an individual or a Hindu undivided family, who

is a resident in India, has, during the previous year,

(a) Incurred any expenditure for the medical treatment (including nursing),
training and rehabilitation of a dependent, being a person with disability; or

(b) paid or deposited any amount under a scheme framed in this behalf by the
Life Insurance Corporation or any other insurer or the Administrator or the
specified and approved by the Board in this behalf for the maintenance of a
dependent, being a person with disability.

The assessee shall be allowed a deduction of a sum of fifty thousand rupees

(Rs.50,000) from his gross total income in respect of the previous year:
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Rs.1, 00,000 where such dependent is a person with severe disability exceeding
80%

8.1.6. Deduction In Respect Of Medical Treatment, Etc. [Sec. 80 DDB ]

Where an assessee who is resident in India has, during the previous year, actually
paid any amount for the medical treatment of such disease or ailment

(a) for himself or a dependent, in case the assessee is an individual: or

(b) for any member of a Hindu undivided family (HUF) , in case the assessee is a
Hindu undivided family (HUF),
the assessee shall be allowed a deduction of the amount actually paid or a sum of
forty thousand rupees (Rs.40,000), [ Rs. 60,000 for Senior Citizen]

whichever is less

Provided that no such deduction shall be allowed unless the assessee furnishes with
the return of income

8.1.7. Deduction In Respect Of Interest Of Loan Taken For Higher

Education [Sec. 80 E ]

Any amount paid in the previous year, out of the income chargeable to tax, by way
of interest on loan taken by him from any financial institution or any approved
charitable institution for the purpose of pursuing his higher education shall be
allowed in computing the total income

1. in respect of the initial assessment year and seven assessment years

immediately succeeding the initial assessment year or

2. Until the interest is paid by the assessee in full, whichever is earlier?

8.1.8. Deduction In Respect Of Donations To Certain Funds, Charitable

Institutions, Etc. [Sec. 80 G ]

The Claim in respect of such Donation to the Prime Minister’s National Relief
Fund, the Chief Minister’s Relief Fund, or the Lieutenant Governor’s Relief Fund
will be admissible u/s 80G of the Income Tax Act,1961 on the basis of the
certificate issued by the Drawing and Disbursing Officer (DDO) / Employer in this
behalf.
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Amount of Deduction: 50% of Donation. Income some cases Donation is

restricted to 10% of Gross Total Income. 100% in some cases like National
Defence Fund.

Applicable to All Assessee.

Deduction is allowed only if made in Cheque / Draft.

8.1.9. Deductions In Respect Of Rents Paid. [Sec. 80 GG]

a) The Tax Deduction amount under 80GG is Rs.60,000 per annum

b) Section 80GG is applicable for all those individuals who do not own a
residential house & do not receive a HRA ( House Rent Allowance)

c)The extent of tax deduction will be limited to the least amount of the
following:

 Rent paid minus 10% the adjusted total income

 Rs.5000 per month.
 25% of the total Income
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INDRECT TAX
Indirect Tax is referred to as the tax, which is paid by the taxpayer to the
government indirectly, charged on goods and services. Indirect taxes are collected
from someone or some organization other than the person or entity that would
normally be responsible for the taxes. The burden of tax can be shifted to another
person. Indirect tax regressive in nature. Tax evasion is hardly possible because it
is included in the price of goods and services.

Indirect Tax is referred to as a tax which is paid by the taxpayer indirectly to

the government, the burden of which can be easily shifted to another person. The
tax is regressive in nature, i.e. as the amount of tax increases the demand for the
goods and services decreases and vice versa. It levies on every person equally
whether he is rich or poor. The administration of tax is done either by the Central
government or State government.

GST
What is GST in India?
GST ( goods and services tax) is an Indirect Tax which replaced many
Indirect Taxes in India. The good and services tax act was passed in 2017 and
has been implemented since then. GST is an indirect tax for the whole nation,
which makes India one unified common market. It is a single tax on the
supply of goods and services. It is the biggest indirect tax reform in India.

Before GST, taxes such as service taxes, state vats, entry taxes, luxury taxes
were applied on goods. These taxes have been absorbed under GST.
Similarly, Service tax, entertainment tax were levied on services. Now there
is only a single tax, that is, GST. Under GST, tax is levied directly at every
point of sale.

The Journey of GST in India

So exactly what is GST in India? The journey of GST began in 2000 when a
committee was set up to draft the law. It took 17 years after that for the law to
evolve into what it is today. In 2017, the GST bill was passed in the Lok
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Sabha and the Rajya Sabha. On 1st July 2017, the GST law was
implemented.

What Taxes Will Be Levied Under GST?

India is a federal country, so the central government and the state government
both have the power to levy taxes. Under the GST bill, both central and state
government has the power to levy GST. Therefore, GST in India is divided
into two parts:

1. Central GST (CGST)

2. State GST (SGDT)

CGST is levied by the Central government and SGST is levied by the State
government. Another type of GST is Integrated GST ( IGST). IGST is levied
on inter-state transactions. It can be confusing in case of transactions between
two people from different states and this, IGST will be levied only by the
Central government. The central government distributes the state’s portion of
GST from the IGST to the relevant state.

Advantages Of GST
Introduction of GST would be a very significant step in the field of indirect
tax reforms in India. Previously, many taxes were levied on the same product
that increased the price of the product. Due to GST, these taxes have been
eliminated. GST has mainly removed the tax on tax or the cascading effect on
goods and services. This decreases the cost of goods. GST is also mainly
driven by technology. All the registrations, return filings and application for
refunds needs to be done online on the GST portal making these processes
faster.

Introduction of GST had made our products competitive in the domestic and
international markets. Under the previous setup, the classification of products
into different categories caused confusion and was a big issue. GST solves
this problem by using an eight-digit code to identify products according to
international standards.

What Is The Scope Of Composition Scheme Under GST?

Small taxpayers with a total turnover in a financial year up to ₹50 Lakhs are
eligible for composition levy. Under this scheme, a taxpayer pays tax as a
percentage of his turnover during the year without the benefits of ITC. Under
a normal scenario, a taxpayer under GST has to file a minimum of 3 returns
monthly and one annual return. For small suppliers, it is difficult to maintain
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such a detailed book of accounts on a daily basis. Therefore, only quarterly

returns have to be filed for small taxpayers.

However, the minimum rate of tax for CGST and SGST cant be less than 1%.
In this scheme, the taxpayer is not allowed to collect any tax from his
customers. This is an optional scheme available to small business owners.

How to register for GST?

The GST registration process can be done online throughout the country.
Therefore if you want to do GST registration in Pune, GST registration in
Mumbai or GST registration in any city all over India, you can access the
online registration link – https://www.gst.gov.in/

Applicability & Eligibility Of GST

Now that you know what is GST in India, learn more about its applicability
and eligibility. Under the GST bill, tax is payable by a person on the supply
of goods and services. Responsibility to pay these taxes comes up when a
taxable person crosses the threshold of exemption of GST, i.e, ₹10 lakh. The
CGST and SGST need to paid by the person on all supply of goods and
services within the state. IGST is payable on all interstate transactions.

Individuals who have registered under the Pre GST law, that is, VAT, service
tax and excise are eligible for GST. The agents of the suppliers of goods and
input distributors can register for GST. Furthermore, people who supply
goods online, and takes part in e-commerce are required to be registered
under GST.

Is your business GST ready? Every business must comply with GST. GST
rules apply to invoices, receipts, delivery challans and other transactions. It
is important to register under GST for small business owners. While the GST
registration process is all done online, understanding the GST registration
documents can seem daunting but if you check off each document, you can
register your business with ease
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CUSTOMS DUTY
What is Custom Duty?
Custom duty is a type of indirect tax that is levied on all the goods that are
imported to the country as well as some goods exported from the country.
The duty levied on the former is referred to as import duty while that on the
latter is referred to as the export duty. To simplify it, any tariff that is
introduced on goods across national borders is referred to as custom duty.
The duty levied depends on the value of the goods, its dimensions and weight
along with a lot of other criteria. While value-based duties are called valorem
duties, quantity-based duties are called specific duties. On the other hand,
duties on values plus other factors are called compound duties

Custom Duty in India

Custom Duty in the country falls under the Customs Act, 1962. As per this
act, the government levies duties on both import and export of goods along
with their procedures, prohibitions, penalties etc. Matters pertaining to this
duty fall under the CBEC (Central Board of Excise and Customs), a division
of the Department of Revenue of the Ministry of Finance.
The CBEC helps in formulating policies w.r.t. the collection and imposition
of custom duties including custom duty evasions, prevention of smuggling
etc. It oversees the tax administration of inland and foreign travel. It has
different divisions to take care of field work such as the Commissionerate of
Customs, Central Revenues Laboratory and Directorates etc.

Types of Custom Duty

Custom duties are levied on nearly all goods that are imported into the nation.
While export duties are levied on goods as specified by the Second Schedule,
import duties are not levied on certain items like fertilizers, food grains,
lifesaving drugs etc. Custom duty can be classified into the following types:
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 Basic Customs Duty: This duty is imposed on the value of goods at a

specified rate as it is fixed on an ad-valorem basis. After being
amended time and again, it is currently regulated by the Customs Tariff
Act, 1975. The Central Government, however, holds the rights to
exempt specific goods from this tax.
 Countervailing Duty: CVD or Additional Customs Duty is levied on
imported goods that fall under Section 3 of the Customs Tariff Act of
1975. It is the same as the Central Excise Duty which is levied on
similar goods that are produced in India.
 Education Cess: The cess used to be levied at 2% and an additional
1% of the aggregate of customs duties.
 Protective Duty: This duty is imposed in order to shield the domestic
industry against the imports at rates that are recommended by the Tariff
Commissioner.
 Safeguard Duty: As the name suggests, this duty serves as a means of
safeguarding the rise in exports. Sometimes, if the government feels
that a rise in exports can damage the existing domestic industry, it may
levy this duty.
 Anti-Dumping Duty: This duty is based on the dumping margin, i.e.
the difference between the export price and the normal price. It is only
imposed when the goods that are imported are below the fair market
price.

Payment of Custom Duty

In the world of the internet, payment of custom duty hasn’t been left far
behind. It can easily be paid online with a few simple steps:
 First, access the e-payment portal of ICEGATE
 Then, enter the import or export code or simply key in the login
credentials given by ICEGATE
 Finally, click on e-payment
 You will be able to check all the e-challans that are in your name
 You can then select the challan which you have to pay and choose the
payment method or select the bank
 You will be redirected to the payment gateway of the bank
 Initiate the payment
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 Once it is done, you will be redirected to the ICEGATE portal

 The last step would be to click on the print button and save the payment
copy.

STAMP DUTY
Stamp duty in Maharashtra is levied on property transactions across the
State. Stamp duty in Maharashtra is charged under the Maharashtra Stamp
duty Act.

To ease homeownership and provide a boost to the real estate sector amid the
economic crises caused by the Coronavirus pandemic, the Government of
Maharashtra has reduced the Stamp Duty in Maharashtra to 2-3% of the
property value. However, from April 2021, the stamp duty in
Maharashtra has been reinstated.
Stamp Duty in Maharashtra- Charges and levies covered (Rural and
urban)
Total Stamp Duty in Maharashtra includes Stamp Duty, and additional
taxes as follows:

In urban areas falling under Municipal Corporation or Municipal Council

limits, there is a cess/ transport surcharge/ local body tax payable. This is 1%
of the property value, and is intended to be used for funding transport
infrastructure projects in the cities such as Metros, bridges, flyovers, etc.

In rural areas which fall under Gram Panchayat and not under the jurisdiction
of any Municipal Corporation or Municipal Council, this cess/ surcharge is
replaced by Zilla Parishad cess. This cess is also payable at 1% of the
property consideration value.

An additional surcharge of 0.5% is applicable on areas falling under the

Nagpur Municipal Corporation (NMC) and Nagpur Improvement Trust (NIT)
jurisdictions. This is over and above the 1% cess/ surcharge payable.
 TAXATION

Stamp Duty in Maharashtra in 2021

After 31st March 2021, as the economy has started to stabilize, the Stamp
Duty in Maharashtra has been reinstated to 5% of the of the property value
for Mumbai and 6 percent for the rest of the State, as applicable until 31st
August 2020.

Stamp duty and registration charges Maharashtra 2021

Stamp Duty in Maharashtra from 1st April 2021
Region
onwards
Mumbai and its suburbs 5 percent
Other urban areas of
6 percent
Maharashtra
Rural Maharashtra 4 percent
Source: Government of Maharashtra
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LIMITATION OF THE STUDY:

The opinions, behavior and attitudes of the respondents reflected

in this study are restricted to the duration of the research and are subject

to change with the passage of time.

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CHAPTER-5
Conclusion and Suggestions

CONCLUSIONS

 The employees of APIL are selected in a step by step procedure, only the best
are selected and the rest are screened out, the usual working hours are 8 to 10
hours a day, depending upon the work load. The work is assigned on equitable
basis. On achieving the targets, monetary incentives and perks are given.

 No medical camps are held, but medical reimbursement is given. The employees
are satisfied with the working environment; a friendly environment usually
prevails in the organization. The management maintains both formal and informal
relationship with the employees. There is low particicpation of employees in the
management decisions. The promotion policy and transfer policy is favorable to
the employees. If an employee is unable to complete the job he is given constant
back up’s.

 The management understands the various reasons for stress and plans different
techniques and implements it to reduce stress and increase employee moral.
The cost incurred on implementing the work stress management techniques is
considered to be cost effective. APIL considers work stress as a management
process.

 The different techniques are adopted to boost of the moral the employee and it is
achieved. Work stress management is considered to be profitable to the
organization. The employees have job satisfaction. The techniques adopted are
usually preplanned but in unavoidable cases they are instant. While planning and
implementing the different techniques the opinions of team leaders are also
considered. The work stress management techniques have also proved to be
effective in appraising the employee performance. The H.R department is
Responsible for planning and implementing work stress management.

 APIL the work stress management is being implemented from the past 3-4 yrs
and is successful in enhancing the employee morale. This can be seen in the
employee performance; the employee avoids absenteeism and is satisfied with
his job. The techniques so implemented have proved to be positive in nature.
The employees are surely benefited from work stress management. The more
the employee morale, the less the chances of leaving the organization, so this
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reduces chances of leaving the organization. Yes, the different techniques

adopted boost up confidence of employee. The quality of performance is not
considered for vertical up graduation. The different techniques used are
innovative plans; they are not based on any set standards. The employees are
satisfied with the remuneration what they are paid.

SUGGESTIONS

 It has recommended to the company that if stress management techniques are

initiative then the average health of the employees will be better and he will be able
to better cope with stress, then by the level and degree of performance of the
employee will improve.
 It is recommended that the company should give one task at a time and give
sufficient time in meeting the targets so that the employee performs his best without
any stress.
 It is recommended that it should focus more in giving stress management
techniques to the age group of 20-29 probably due to inexperience.
 It is recommended to the company to take appropriate measures in identifying and
arresting the psychological problems, then the health related problems would also
come down. As psychological has a direct impact on health, the performance of
employee will improve.
 It is recommended to the company that it should conduct frequent health check ups
gauges the health level of employees from time to time. If the health of the employee
is fine then it can inferred that the degree of stress in the organizations less or
negligible.
 It is recommended to the company to conduct frequent recreational programs like
get together in departments concerned, parties on occasions like the birthdays of the
employees, on the achievements of any particular department, cultural activites,
sports pleasure trips etc.
 It is recommended to the company that bit should improve interpersonal
relationships among the employees of different departments by bridging the gap
between superiors and subordinates. These can a long way in reducing the degree
stress to some extent.
TAXATION

 It is recommended to the company to initiate a few changes at the work place

such as timely targets, distributed workload, flexible work hours and periodic
relaxation.
 It is recommended to the company to provide frequent counseling to the
employees who are under stress. The counseling should be more focused on the
employees in the age group between 20-29 they should also not ignore those
with 10 plus years of experience as they are more vulnerable to stress.
 It is recommended to the company to employee job rotation since doing the
same job again and again causes monotony therefore job rotation can be used
as an effective tool to reduce stress by creating more interest in the work which
will lead to better employee performance.
 It is recommended to the company to instantly recognize any good wok done by
the employees however small it may be. They should regard then suitably and
provide them constant encouragement and support. This will stand in good stead
in the long run in sustaining the high morale of the employees and also
enhancing it future.
 It is recommended that since psychological problem have a direct impact on
health it also affect the interpersonal relationships and the quality of work
performance among the employees. It is therefore recommended to the company
that they try to reduce or eliminate the psychological problems by engaging or
hiring well-trained psychiatrist.
 It is recommended that the more experienced employee should be given more
work load than the in experienced employee shouldn’t be burdened with
workload but initially they should be given distributed work and gradually the
amount of workload can be increased with the passage of time as they gain more
experience.
 It is recommended that the company should create a balance between timely
targets and distributed workload by allotting a piece of work to be competed in a

specified time. The time limit be proportionate with the work given i.e. time limit should
be neither too short not too long.
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 It is recommended to the company to organize frequent camps or programs on

meditation, yoga, transcendental meditation and stress management.
 It is recommended to the company that it compulsorily insist on the employees to
mediate for 15 minutes after coming to the office and before starting their work. They
should also similarly mediate for 10-15 minutes after their lunch break and once at
the end of the day before they leave the office. This will help the employees to take
the work on the next day with a fresh mind.
 It is recommended to the company to arrange for a special and separate room from
noise and disturbance and which is quite and peaceful for meditation purposes.

FINDINGS

 It has been found that 58% of the employees among the total employees in the
organization are undergoing stress and these are officers and asst. Managers.
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 It has been found that the employees in the age group of 20-29 are facing more
health problems than the higher age headache. This is because the employees of
this age are undergoing more stress compare to higher age group due to factors like
work load, meeting targets and performance anxiety.
 It is observed that though the employees in the age group of 30-39 are facing stress
than the employees in the age group 40-49. Still they are able to maintain better
inter personal relationship with their peers, subordinates and superiors.
 It has been found that employees in the age group of 30-39 wanted a few changes
at work place to reduce the stress like timely targets, distributed work load and
periodic relaxation because they feel that it is too concentrated and the time to meet
these targets is highly insufficient.
 It is observed that 95% of the employees are comfortable with the working
environment in which they are working.
 It is observed that the 99% of employees agree that the work stress management
techniques will improve the morale of the employees.

 It has been found that most of the organization has the opinion to take into
consideration the employees while implementing the stress management techniques
taken by the HR dept.

Bibliography
www.incometaxindia.com
http://taxprintindia.com