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Awareness of Tax Saving Schemes among Individual Assessees: Empirical

Evidence from Twin City of Odisha

Article in Journal of Commerce and Management Thought · January 2016

DOI: 10.5958/0976-478X.2016.00036.7

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 AWARENESS OF TAX SAVING SCHEMES AMONG INDIVIDUAL ASSESSEE:
EMPIRICAL EVIDENCE FROM TWIN CITY OF ODISHA

Sanjeeb Kumar Dey*

Lecturer, Department of Commerce, Ravenshaw University, Cuttack- 753003, Odisha, India;
E-mail Id: kumarsanjeebdey@yahoo.co.in

Kamal Kumar Varma

Research Scholar in Commerce, Ravenshaw University, Cuttack- 753003, Odisha, India;
E-mail Id:lotusvarma@gmail.com

Abstract
Government has to play an important role in all round development of society and
country as a whole. Taxes constitute the main source of finance whereby government raises
revenue for public spending. In India, income-tax contributes up to 52.28% (AR 14-15 MOF)
to the total tax revenue of the central government. Because of compulsion element, each tax-
payer faces the problem of how to find golden way to minimize their tax liability. But paying
tax is always a painful task as it directly impacts on the residual income of the taxpayers. So
all individual always try to reduce tax liability by managing their financial affairs. Tax
planning is important for every assessee to reduce their tax liability and compliance with the
income tax rules. To enjoy the benefits of tax planning, the assessee must know different
provisions of tax saving schemes available in the laws. The primary objective of this paper is
to assess the awareness of tax saving schemes by individuals of twin city of odisha .i.e
Cuttack & Bhubaneswar. The study reveals the fact that only 23% respondents are having
good knowledge, followed by 42% having average knowledge and 34% of respondents have
very poor knowledge about tax saving schemes.

Key words: Tax saving schemes, Individual Assessee, Awareness, Demographic factors

INTRODUCTION:
Government has to play an important role in all round development of society and
country as a whole. Taxes constitute the main source of finance whereby government raises
revenue for public spending. Tax is a fee charged by a Government on a product, income,
service activity. Income-tax comes under the direct tax segment which has proved to be the
major source of revenue to the government of majority of the countries in the world. With
the application of progressive rate schedule, provision of exemption limit and incorporation
of a number of incentive provisions, Income Tax can be used not only to satisfy all the
canons of a sound tax system but may also go a long way in realising variety of socio
economic objectives set out by the economic system. The tax rates, rules & regulations
change according to financial bill passed by the Central Government in each year in its
budgetary session. In India, income-tax contributes up to 52.28%(AR 14-15 MOF) to the
total tax revenue of the central government. Because of compulsion element, each tax-payer
faces the problem of how to find golden way to minimize their tax liability.

IMPORTANCE OF THE STUDY:

Being a citizen of India, paying tax is one of our constitutional duties in return of
fundamental rights. But paying tax is always a painful task as it directly impacts on the
residual income of the taxpayers. So all individual always try to reduce tax liability by

1
managing their financial affairs. The total income earned by an individual may be from
salary, house property, business or profession, capital gain and other sources. Tax can be
reduced either by evasion or avoidance or planning. Tax evasion is illegal, tax avoidance is
not a crime but tax planning is ethical and legal. Tax planning is important for every assessee
to reduce their tax liability and compliance with the income tax rules. To enjoy the benefits of
tax planning, the assessee must know different provisions of tax saving schemes available in
the laws

LITERATURES REVIEW & RESEARCH GAP:

Many studies have been made covering different aspects of income tax structure
which includes personal income tax, capital gain taxation, agricultural taxation, efficiency of
income tax administration etc. A few of them have been outlined below:

Chattopadhyay Saumen and Das-Gupta Arindam (2002), in their study “The

Personal Income Tax in India: Compliance Costs and Compliance Behaviour of Taxpayers”
the impact of compliance costs on compliance is mixed. While money compliance costs, both
legal and illegal, have a negative impact on compliance, the opposite is true for time
compliance cost and third party costs through TDS. The use of tax advisors, which
contributes to money compliance costs, possibly adversely affects compliance. The major
policy suggestions emerging from this study, are, of course, reducing filer compliance costs
and reducing scope for avoidance.

Singh and Sharma (2007) made an attempt to study the perception of tax
professionals with regard to Indian Income Tax System by collecting primary data from 100
tax consultants operating in Punjab and Haryana. They tried to investigate the role of tax
consultants played in the revenue collection process by helping their clients in understanding
the complex tax system and meeting their legal obligations. Factor Analysis of data showed
that seven factors –reduction in tax evasion, extension of relief to taxpayers, incentives for
dependents and honest taxpayers, broadening the tax base, e-filing of returns, adequacy of
deductions and impact of exempt-exempt tax system played an important role in determining
the effectiveness of Indian tax system. It was observed that most of the tax consultants were
satisfied with tax rates. However, majority showed dissatisfaction with regard to price level
adjustment. It was also observed that most of the taxpayers consulted tax experts because
they found it cheap.

Kaushik Rajiv(2012), In his article “Assessment of Individual Income Tax, Tax

Planning and Saving in India, suggested that Any individual who want to assess his/her
income tax and want to do tax planning and savings, first he/she has to calculate his/her total
income then compute the income tax by deduction and adjustment in total income as per tax
table structure. If tax is paid in access then get refund from the income tax department.
Finally do the tax audit.

Chawla Chanchal, Jain Vipin , Joshi Anand and Gupta Vinayak(2013) in their
study “A Study of Satisfaction Level & Awareness of Tax-payers towards E-filling of
Income Tax Return – with Reference to Moradabad City”shows that the existing users are
satisfied with the e-filing facilities but most of the individual tax payers are not awareness of
the e-filing procedures so sufficient steps are required to create more awareness in the minds
of tax payers regarding e-filing of income tax.

2
 Patil Sonali &Nandawar Kalpana (2014) In their article “A Study on Preferred
Investment Avenues Among Salaried People With Reference To Pune, India” concluded that
Investors are aware about investment avenues available in India but still investors are
preferred to invest in bank deposit, real estate, metals(Gold).The data analysis reveals that the
safety is important factor while doing investment so remaining avenues are less considerable
while doing investment by investors.

Dey S K (2015), “Tax Planning Practices by Salaried Employees : A Case Study of

Lecturers in Odisha” concluded that Tax is compulsory payments without any direct feasible
return and hence everyone is interested to pay as minimum as admissible. Out of 150
employees, 60 employees have not claimed tax benefits to its maximum permissible limits.
Similarly, all lecturers have received interest on their saving bank account but not mentioned
the same in their return of income. Tax planning measures adopted by different class of
lecturers are almost uniform. Class of lecturers, gender, experience and length of service has
no significant relationship with the level of awareness about the tax planning measures.
However, the base education of lecturers has relationship with level of awareness of tax
planning.

Suganya, V(2015) in her study “A Study of the Awareness of Tax Planning

Measures Among Private Sector Employees in Madurai City” found that75% of the
respondents are male. The average monthly income earned by the respondents is Rs.37,000.
All the respondents work with private sector organisations in middle and upper cadre. 35% of
the respondents are aware of the existence of tax planning measures and adopt the same with
the help of investment analysts. 65% of the respondents approach auditors to file returns and
take tax planning measures without any knowledge of the same. Hence it was concluded that
awareness of tax planning measures is not significant. Tax literacy has to be imparted in
education in a practical manner such that the spending pattern of money gets reduced and the
eyes of layman may be enlightened.

As Income tax is the most debated topic which includes personal income tax, capital gain
taxation, agricultural taxation, efficiency of income tax administration, e-filling of income tax
return etc. But a very few studies have been found specifically relating to awareness of tax
saving schemes. Further, those few studies have been undertaken years back. As the
provisions of income tax act keep on changing every year. For study purpose, every year is a
fresh year, definitely having new scope of study on the same topic. Further, it is found that no
studies have been conducted in twin city of Orissa in order to assess the awareness of
individual taxpayers. With this backdrop, it is an attempt made by the researcher to fill the
existing gap by conducting this study.

OBJECTIVES OF THE STUDY

The primary objective of this study is to assess the awareness of tax saving schemes by
individuals of twin city of odisha .i.e Cuttack & Bhubaneswar. However, the paper also
covers:
1. To study the Tax Saving Schemes available under Income Tax Act, 1961.
2. To assess the awareness level of individual taxpayers about tax saving schemes.

RESEARCH METHODOLOGY:
The present study is basically an exploratory research. Primary data is collected by
survey and observation method. Total 172 samples have been selected for this study. Samples
have been selected from twin city of odisha by using random sampling technique. To judge

3
the level of knowledge of the respondents about various tax saving schemes, we have
prepared three columns against every tax saving scheme in our questionnaire .i.e good
knowledge, average knowledge & beginner’s knowledge. Respondent selecting good
knowledge for more than 60% of tax saving schemes are considered as having good
knowledge, respondent selecting good knowledge for 30%-60% of tax saving schemes are
considered as having average knowledge & respondent selecting good knowledge for less
than 30% of tax saving schemes are considered as having beginners knowledge. The primary
data was collected during August & September, 2015. The data is relating to Previous year
2014-15 (Assessment year 2015-16). In order to have an unbiased data with regard to all the
aspects of the study, we have prepared an observation schedule pertaining to each & every
aspect contained in the questionnaire.

For development of theoretical background, we have also collected some secondary

data from various sources. General taxation information is collected from various types
books, reports & journals published on the issue. Most of the secondary information have
been collected by physical verification of return documents & other documents available with
the assessees. For the presentation, study, analysis & interpretation, the collected data is
edited, classified, and tabulated by using usual statistical techniques. The graphical
representation of the data is also given wherever necessary. The classified and tabulated data
is analyzed and studied by using the techniques such as percentage, averages, ratio, Chi
Square Test, etc.

Research hypothesis is a predictive statement, capable of being tested by appropriate

scientific methods. After going through a exhaustive study of related study, the following
hypothesis has been formulated in the present research work: There is no significant
association between demographic factors like gender, age, occupation, tax bracket and
qualifications of individual and awareness about tax saving schemes.

TAX SAVING SCHEEMS:

The present chapter is an attempt to appraise the tax saving schemes available under
income tax act, 1961 on the basis of following variables:

INCENTIVES TO SALARIED EMPLOYEES:

Gratuity (Section 10(10)) :In case of government employees, the amount of gratuity is fully
exempt, whereas in case of non-government employee, it is partly exempted.

Pension (Section 10(10A) : As per income tax act pension is of two types Commuted
&Uncommuted. Uncommuted pension is fully taxable on accrual basis both in case of
government & non-government employees. Whereas Commuted pension is fully exempt in
case of government employees, but in case of non-government employees least of the
following amount is exempt: If the employee has received gratuity - 1/3 of total pension and
in other cases - ½ of total pension

Leave Salary(Section 10(10AA) : Any encashment of leave is fully taxable both in case of
government & non-government employee. But if leave is en-cashed at the time of retirement
then it is fully exempt in case of government employees, but in case of non-government
employee least of the following four amounts will only be exempted: Actual amount received
for leave encashment or Rs 3,00,000 or Sum of last 10 months salary or Salary for leave at
credit

4
House Rent Allowance(Section 10(13A) : HRA is exempt from tax to the extent of least of
the following amounts provided the employee resides in rented accommodation: Actual
HRA Received or 50% of Salary in case of metro city & 40% of Salary in case of non-metro
City or Excess of actual rent paid over 10% of salary.

Hostel Expenditure Allowance(Rule 2BB) : Hostel Expenditure Allowance is exempt to

the extent of actual amount received or Rs 300 per month per child subject to maximum two
children whichever is less.

Children Education Allowances(Rule 2BB) : It is exempt to the extent of actual amount

received or Rs 100 per month per child subject to maximum two children whichever is less.

Transport Allowance(Rule 2BB) : It is exempt to the extent of actual amount received or Rs

800 per month(1600 per month in case physically handicap employees) whichever is less.

Travelling / Conveyance / Daily / Helper / Research / Uniform Allowance(Section 10(14)

: These allowance are exempt to the extent the amount is utilized for the specified purpose for
which the allowance is received.

INCENTIVES FOR EDUCATION

Children Education Allowances(Rule 2BB) : It is exempt to the extent of actual amount
received or Rs 100 per month per child subject to maximum two children whichever is less.

Interest On Loan Taken For Higher Education(Section 80 E) : Deduction from gross

total income is allowed for full interest on loan taken from any financial institution for higher
education of the assessee himself, his/her spouse and children for the previous year in which
1st interest is paid & seven succeeding previous years without any limit.

Tution Fees of maximum two children(Section 80 C) : Any sum paid as tuition fees (not
including any payment towards development fees/donation/payment of similar nature)
whether at the time of admission or otherwise to any university/college/educational
institution in India for full time education of any two children of the assesseeis allowed as
deduction from gross total income Subject to overall ceiling of Rs. 150000 under Sec.80 C.

INCENTIVE FOR INVESTMENT IN HOUSING

Repayment of Principal of Housing Loan(Section 80C): Deduction is allowed from gross
total income for the amount repaid towards housing loan Subject to overall ceiling of Rs.
150000 under Sec.80 C.

Interest on Housing Loan(Section 24 (b): Deduction in respect of interest on loan taken for
purchase, construction or repair of the house property is allowed while calculating income
from house property. In case of let out house property or deemed to be let out house property
full interest is allowed as deduction without any limit. But in case of self occupied house
property interest subject to a maximum Rs 30,000 p.a is allowed as deduction. But if the
some conditions are fulfilled then this maximum limit is increased to Rs. 2,00,000:

Interest on Housing loan(Section 80EE): Under this Section, individual assessee can claim
additional deduction from gross total income over and above the deduction under section
24(b) in respect of interest on loan taken for residential house property provided the loan is
sanctioned by the financial institution during the period beginning on 1.4.2013 and ending on

5
31.3.2014 and The amount of loan sanctioned for acquisition of the residential house property
does not exceed Rs.25,00,000 and The value of the residential house property does not
exceed Rs 40,00,000. The deduction shall not exceed Rs 1,00,000 in the previous year 2013-
14. However, where the interest payable for the previous year relevant to the said assessment
year is less than Rs 1,00,000, the balance amount shall be allowed as deduction in the
previous year 2014-15.

RELIEF FOR MEDICAL FITNESS

Deduction in respect of medical insurance premium (Section 80D) : Individual or HUF
can claim deduction from gross total income in respect of amount paid to effect or to keep in
force an insurance on the health of the individual or the health of the familyor any payment
made on account of preventive health check-up of the assessee or his family(up to Rs.5,000
in a year for preventive health checkup) as below: Individual, spouse & dependent children -
Actual Premium paid or Rs 15,000 (20,000 in case of Senior Citizen) which ever is less.&
Parents of Individual whether dependent or not - Actual Premium paid or Rs 15,000 (20,000
in case of Senior Citizen) which ever is less.

Deduction in respect of medical treatment etc (Section 80DDB): A resident taxpayer

(being an individual/HUF) can claim deduction from gross total income towards actual
expenditure for the medical treatment of a specified disease or ailment as prescribed by the
Board Rs. Or Rs. 40,000 [Rs. 60,000 in case of a senior citizen] whichever is lower.
Expenditure should be incurred for medical treatment of the assessee himself or
wholly/mainly dependent husband/wife, children, parents, brothers and sisters of the
individual (any member of the family in the case of HUF).

INCENTIVES FOR SAVINGS

Deduction in respect of qualifying investments (Section 80C) : Individual or a Hindu
undivided family can claim deduction from gross total income for the amount invested in
qualifying investments during the previous year subject to a maximum of Rs 1,50,000

DEDUCTION FOR CHARITY / DONATIONS

Donations to certain funds, charitable institutions, etc. (Section 80G): Any assessee can
claim the deduction from gross total income for donations in cash not in kind to the
following funds subject to the % & limit fixed by the IT Act. The donations may be of three
category i.e. 100% of amount donated without any limit, 100% of amount donated but
subject to limit and 50% of amount donated but subject to limit

INCENTIVESFOR DISABILITY
Deduction in the case of a person with disability(Sec. 80U): Individual resident taxpayer
suffering from 40 per cent or more than 40 per cent of any disability (i.e., blindness, low
vision, leprosy-cured, hearing impairment, locomotor disability, mental retardation, mental
illness) is allowed a fixed deduction of Rs. 50,000 from gross total income. A higher
deduction of Rs. 1 lakh is allowed in respect of a person with severe disability ( having
disability of 80 per cent or above).

Maintenance including medical treatment of a dependent being a person with

disability(Sec 80DD): A resident taxpayer (being an individual/Hindu undivided family)
can claim deduction from gross total income if he/it has incurred an expenditure for the
medical treatment (including nursing), training and rehabilitation of a dependent related

6
(being a person with a disability). A fixed deduction of Rs. 50,000 is available. A higher
deduction of Rs. 1 lakh is available if such dependent relative is suffering from a severe
disability(Disability of 80% or more). Deduction under this section is available regardless of
actual expenditure.

OTHER INCENTIVES
Deduction in respect of rent paid (Sec. 80GG) : An individual, being a self-employed
person or a salaried person not getting house rent allowance from the employer at any time
during the previous year is allowed deduction grom gross total income being least of the
following: Rs. 2,000 per month; or 25 per cent of "total income"; or the excess of actual rent
paid over 10 per cent of "total income".

Interest from bank exempt (Sec. 80TTA) : Under this section, individual or HUF can
deduction from gross total income for interest from savings bank account with a bank, co-
operative bank or post office bank subject to a maximum of Rs.10000. This provision will
not apply to interest on fixed deposit with banks.

Royalty income of authors (Section 80QQB) : A resident Individual, being an author or

joint author can claim deduction from gross total income of actual royalty or Rs. 3 lakh
whichever is less. Moreover, for calculaling deduction under section 80QQB, if rate of
royalty is more than 15 per cent, the excess amount shall be ignored.

Royalty on patents (Sec. 80RRB) :A resident Individual, being an patentee can claim
deduction from gross total income of actual royalty or Rs. 3 lakh whichever is less.

Rebate (Section87 A):In order to bring rationalisation in taxation policy, Government has
introduced a new tax benefit for individual assessees. In case of total income of an individual
does not exceed Rs. 5, 00, 000 a rebate shall be allowed out of tax liability u/s 87 A. The will
be allowed as under: Rs. 2000 or Tax calculated on total income as per prescribed rates,
whichever is less.

Simplified Procedure for Small Taxpayers (Section 44 AD): It is difficult for small
taxpayers to bear compliance cost in respect of maintaining books of accounts and availing
services of tax professionals. Thus, a simplified procedure is there under Sec. 44AD for small
retails businessmen or professionals having turnover / gross receipt up to Rs. 1 corore. As per
section 44AD theycan calculate profits and gains of retail business / profession at 8% of
turnover / gross receipts.

Scientific Research &Development(Section 35): An assessee can claim full deduction for
revenue expenditure and capital expenditure (except land) incurred by him in relation to
scientific research related to his business. For amount donated to an approved Research
association, university, college or other institution for undertaking any scientific Research –
Deduction of 175% of amount donated is allowed while calculating business income. For
amount donated to an approved Research association, university, college or other institution
for undertaking scientific Research in social science or statistical research. - – Deduction of
125% of amount donated is allowed while calculating business income. For amount donated
to National Laboratory, University, IIT or specified person as approved by the principal,
Scientific adviser to Govt. of India with specific direction that it should be used only for
undertaking research program approved by the principal, Scientific adviser to Govt. of

7
India(Sec 35(2AA) - – Deduction of 200% of amount donated is allowed while calculating
business income

Investment Linked Tax Incentive (Section 35 AD): A new concept of investment linked
tax incentives for creating rural infrastructure and environment friendly means of
transportation. According to this scheme 100 or 150 per cent of the capital expenditure
incurred wholly and exclusively for the specific businesses would be allowed as deduction
from business income:

SEC. 80CCG:Deduction can be claimed from gross total income by an Individual who is a
resident, if he acquires listed equity shares/ listed units of an equity oriented fund/ Rajiv
Gandhi equity saving schemes in accordance with the scheme to be notified by the
Government. The assessee will be allowed deduction of 50% of the amount invested subject
to the limit of deduction of Rs.25,000 in the year of investment & subsequent two years.

SEC 115 O:In order to encourage investments in the equity shares of domestic companies,
dividend received from domestic companies has been exempted in the hands of shareholders.

SEC 112:Assessee has been provided two options for taxation of long term capital gain
arising from listed securities (other than equity shares or units in equity oriented mutual fund)
i.e. to pay tax at 20 per cent with indexation or to pay tax at 10 per cent without indexation.

SEC 10(38) :Further, in order to give incentive for investment in equity shares, long terms
capital gain arising from transfer of equity shares or units in equity oriented mutual fund,
chargeable to securities transaction tax has been exempted Moreover, short term capital gain
in this case has been taxable at a lower rate 15%.

INCENTIVE FOR CAPITAL GAIN

SEC. 54: On transfer of long term residential house property, Individual& HUF can avail
deduction being lowest of Capital gain on transfer or investment in the new residential
house property provided individual/ HUF acquires a new residential house property within
one year backward or two year forward in case of purchase or three year forward in case of
construction from the date of transfer / date of receipt of compensation in case of compulsory
acquisition. Further if new house property is not acquired within due date of filling return of
income, it is possible to avail deduction on the basis of deposit in capital gain deposit account
opened with any Nationalised bank.

SEC. 54 B:On transfer of long term/short term agricultural land in urban area, Individual&
HUF can avail deduction being lowest of Capital gain on transfer or investment in the new
agricultural land provided individual/ HUF acquires a new agricultural land in rural or urban
area within two year from the date of transfer / date of receipt of compensation in case of
compulsory acquisition. Further if new agricultural land is not acquired within due date of
filling return of income, it is possible to avail deduction on the basis of deposit in capital gain
deposit account opened with any Nationalised bank.

SEC. 54 D:On compulsory acquisition of long term/short term land and building forming
part of industrial undertaking, any assessee can avail deduction being lowest of Capital gain
on transfer or investment in the new land & building forming part of industrial undertaking
provided assessee acquires a new land & building forming part of industrial undertaking
within three year from the date of receipt of compensation. Further if new land & building

8
forming part of industrial undertaking is not acquired within due date of filling return of
income, it is possible to avail deduction on the basis of deposit in capital gain deposit account
opened with any Nationalised bank.

SEC. 54 EC: On transfer of any long term capital assets, any assessee can avail deduction
being lowest of Capital gain on transfer or investment in bond of NHAI or REC provided
assessee acquires a bond of NHAI or REC within six months from the date of transfer / date
of receipt of compensation in case of compulsory acquisition. But if bonds are not acquired
within due date of filling return of income, it is not possible to avail deduction on the basis of
deposit in capital gain deposit account opened with any Nationalised bank.

SEC. 54 F:On transfer of any long term capital assets except residential house property,
Individual& HUF can avail deduction being (Investment in the New Assets/ Net Sales
Cons.)x CG provided individual/ HUF acquires a new residential house property within one
year backward or two year forward in case of purchase or three year forward in case of
construction from the date of transfer / date of receipt of compensation in case of compulsory
acquisition. Further if new house property is not acquired within due date of filling return of
income, it is possible to avail deduction on the basis of deposit in capital gain deposit account
opened with any Nationalised bank.

SEC. 54 G:In order to shift industrial undertaking from urban to rural area, if any assessee
transfers Land, Building, Plant, Machinery forming part of industrial undertaking in urban
area then the assessee can avail deduction being lowest of Capital gain on transfer or
investment in Land, Building, Plant, Machinery forming part of industrial undertaking
provided assessee acquires a new Land, Building, Plant, Machinery forming part of
industrial undertaking in rural area within one year backward & three year forward from the
date of transfer. Further if Land, Building, Plant, Machinery forming part of industrial
undertaking in rural is not acquired within due date of filling return of income, it is possible
to avail deduction on the basis of deposit in capital gain deposit account opened with any
Nationalised bank.

ANALYSIS & INTERPRETATION:

Table No 1 explains the awareness level of various respondents towards different

tax saving schemes during the previous year 2014-15. Section 80 C is the most popular tax
saving schemes as far as awareness is concerned (83% respondents are aware of it). Whereas
House Rent Allowance (52%), Section 80 TTA(56%), Section 24(b) (48%) has shown
average awareness level. It is followed by Children Education Allowances (24%), Hostel
Expenditure Allowance (23%), Section 80 CCD(34%), Section 80(D) (33%) & Section 80(E)
(23%). Respondents in the study are least aware of Section 80(DDB) (6%), Section 80(U)
(5%), Section 87(A) (17%), Section 44 (AD) (16%), Section 54 (12%). The awareness of
Section 80(GGC) & Section 80(QQB) has been found nil among the respondents. Awareness
level about various tax saving schemes is low among respondents. Apart from Section 80(C),
other schemes are not much known among respondents. Thus poor awareness level gets
translated into poor Tax planning. Figure 1 shows a more clear picture of awareness about
different tax saving schemes.

9
 Table No 1 - Awareness of Tax Saving Schemes

Individual
Tax Saving Schemes Nos. %
Rule 2BB - Children Education Allowance 42 24
Rule 2BB - Hostel Expenditure Allowance 39 23
Rule 2BB - Transport Allowance 74 43
Section 10(13A) House Rent Allowance 89 52
Section 10(14) - Travelling/Conveyance/Daily/Helper/ Uniform/ Research
allowances 23 13
Section 24(B) - Deduction for interest on loan taken for construction or
purchasing or Repair of house property 82 48
Section 44 AD - Presumptive Incomes 27 16
Section 54 - Deduction from Capital Gain 21 12
Section 80 C - Deduction for Specified Investments 142 83
Section 80 CCC - Deduction for Pension Fund 29 17
Section 80 CCD - Deduction for Contribution to NPS 58 34
Section 80 D - Deduction in respect of medical insurance premium 57 33
Section 80 DD - Deduction for Maintenance including medical treatment of a
dependent being a person with disability 29 17
Section 80 DDB - Deduction in respect of medical treatment, etc. 11 6
Section 80 E -Interest on loan taken from any financial institution for higher
education 40 23
Section 80 G - Deduction for Donation to Specified funds 29 17
Section 80 GG - Deduction in respect of rent paid 7 4
Section 80 GGC - Deduction in respect of contribution given to political
parties 0 0
Section 80 QQB - Deduction in respect of Royalty income of authors 0 0
Section 80 TTA - Deduction in respect of Interest from Saving Bank Account 97 56
Section 80 U - Deduction in the case of a person with disability 9 5
Rebate Under Section 87A 29 17
Source: Collected & Compiled from Questionnaires
Figure No 1 - Awareness of Tax Saving Schemes

160
140
120
100
80
60
40
20
0 Series1
Children Education…
Hostel Expenditure…

Rebate Under…
Section 80 C

Section 80 QQB
Transport Allowance

Section 80 TTA
Section 10(14)
Section 24(B)

Section 80 GG
Section 80 CCC
Section 10(13A)

Section 54

Section 80 D
Section 80 CCD

Section 80 G

Section 80 GGC

Section 80 U
Section 44 AD

Section 80 E
Section 80 DD
Section 80 DDB

10
 Table No 2 - Awareness of Tax Saving Schemes Gender Wise
MALE FEMALE
Tax Saving Schemes Nos. % Nos. % Total
Rule 2BB - Children Education Allowance 33 25 9 23 42
Rule 2BB - Hostel Expenditure Allowance 32 24 7 18 39
Rule 2BB - Transport Allowance 60 45 14 35 74
Section 10(13A) House Rent Allowance 71 54 18 45 89
Section 10(14) -
Travelling/Conveyance/Daily/Helper/Uniform/
Research allowance 18 14 5 13 23
Section 24(B) - Deduction for interest on loan taken
for house property 69 52 13 33 82
Section 44 AD - Presumptive Incomes 26 20 1 3 27
Section 54 - Deduction from Capital Gain 16 12 5 13 21
Section 80 C - Deduction for Specified Investments 114 86 28 70 142
Section 80 CCC - Deduction for Pension Fund 29 22 0 0 29
Section 80 CCD - Deduction for Contribution to NPS 49 37 9 23 58
Section 80 D - Deduction in respect of medical
insurance premium 46 35 11 28 57
Section 80 DD - Deduction for Maintenance including
medical treatment of a dependent disable 24 18 5 13 29
Section 80 DDB - Deduction in respect of medical
treatment, etc. 10 8 1 3 11
Section 80 E -Interest on loan taken from any financial
institution for higher education 30 23 10 25 40
Section 80 G - Deduction for Donation to Specified
funds 23 17 6 15 29
Section 80 GG - Deduction in respect of rent paid 7 5 0 0 7
Section 80 GGC - Deduction in respect of contribution
given to political parties 0 0 0 0 0
Section 80 QQB - Deduction in respect of Royalty
income of authors 0 0 0 0 0
Section 80 TTA - Deduction in respect of Interest from
Saving Bank Account 81 61 16 40 97
Section 80 U - Deduction in the case of a person with
disability 8 6 1 3 9
Rebate Under Section 87A 21 16 8 20 29
AVERAGE 26 19
Source: Collected & Compiled from Questionnaires

Table No 2 below above explains the gender wise awareness level of various
respondents towards different tax saving schemes during the previous year 2014-15. The
table shows that on an average male respondents (26%) are more aware about tax saving
schemes than the female respondents (19%). In case of Children Education Allowance,
Section10(14), Section 54, Section 80 DD, Section 80 E, Section 80 G & Section 87 A,
awareness level is neutral among male & female respondents, whereas in all other case male
respondents are more aware than female respondents.

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 Table No 3 shows effect of age on awareness level of different tax saving schemes
during the previous year 2014-15. The table shows that age/experience has direct effect on
awareness level. Higher is the age, greater is the awareness level. On an average, respondents
from above 40 year category(27%) are more aware about tax saving schemes than respondent
from 20-30 year category(20%) and 30-40 year category(24%). But individually, mixed
awareness level has been noticed. Same awareness level has been noticed in case of Section
10(14), Section 80 DDB, Section 80 GG & Section 87A. Whereas in case of Hostel
Expenditure Allowance, 20-30 year category shown highest awareness & in case of Section
80 C, Section 80 CCD, Section 80 D, Section 80 E, Section 80 G & Section 80 TTA 30-40
year category has shown highest awareness & in case of rest schemes above 40 year category
has shown highest awareness. In case of Children Education Allowance, House Rent
Allowance same awareness level is found in 20-30 year & above 40 year category.

Table No 3 - Awareness of Tax Saving Schemes Age Wise

20-30 yrs 30-40 yrs Above 40 yrs Total
Tax Saving Schemes No % No % No %
Rule 2BB - Children Education
Allowance 9 28 17 21 16 28 42
Rule 2BB - Hostel Expenditure
Allowance 9 28 16 20 14 24 39
Rule 2BB - Transport Allowance 11 34 36 44 27 47 74
House Rent Allowance 17 53 41 50 31 53 89
Section 10(14) 6 19 9 11 8 14 23
Section 24(B) -Interest on loan taken
for house property 11 34 33 40 38 66 82
Section 44 AD - Presumptive
Incomes 4 13 9 11 14 24 27
Section 54 - Deduction from Capital
Gain 3 9 7 9 11 19 21
Section 80 C - Deduction for
Specified Investments 22 69 71 87 49 84 142
Section 80 CCC - Deduction for
Pension Fund 4 13 13 16 12 21 29
Section 80 CCD - Deduction for
Contribution to NPS 9 28 30 37 19 33 58
Section 80 D - Medical insurance
premium 7 22 29 35 21 36 57
Section 80 DD - Maintenance &
medical treatment of a dependent
disable 2 6 13 16 14 24 29
Section 80 DDB - Deduction in
respect of medical treatment, etc. 3 9 5 6 3 5 11
Section 80 E -Interest on loan
takenfor higher education 7 22 23 28 10 17 40
Section 80 G - Deduction for
Donation to Specified funds 2 6 16 20 11 19 29
Section 80 GG - Deduction in
respect of rent paid 1 3 4 5 2 3 7
Section 80 GGCContribution given 0 0 0 0 0 0 0

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to political parties
Section 80 QQB - Royalty income
of authors 0 0 0 0 0 0 0
Section 80 TTA - Interest from
Saving Bank Account 11 34 51 62 35 60 97
Section 80 U - Deduction in the case
of a person with disability 0 0 5 6 4 7 9
Rebate Under Section 87A 6 19 12 15 11 19 29
AVERAGE 20 24 27
Source: Collected & Compiled from Questionnaires

Table No 4 below shows awareness level of different tax saving schemes during the
previous year 2014-15 on the basis of occupation of different respondents. The table shows
that on an average respondents in private service(31%) has highest awareness followed by
respondents in Government service(27%) & Self employed respondents(15%). But
individually, mixed awareness level has been noticed. Respondents are indifferent in case of
Section 24(b), Section 80 C, Section 80 D & Section 80GG. Whereas in case of Section 44
AD & Section 80 DD self employed category shown highest awareness & in case of Section
54, Section 80 CCC, Section 80 DDB, Section 80 TTA, Section 80 G & Section 87A
respondents from private service has shown highest awareness & in case of rest schemes
Government Service respondents has shown highest awareness. In case of Section 10(14),
Section 80 E same awareness level is found in private & government service category.

Table No 4 - Awareness of Tax Saving Schemes Occupation Wise

Self Employed Private Job Govt. Job
Tax Saving Schemes Nos % Nos % Nos % Total
Rule 2BB - Children Education
Allowance 0 0 26 34 16 46 42
Rule 2BB - Hostel Expenditure
Allowance 0 0 24 32 15 43 39
Rule 2BB - Transport Allowance 0 0 52 68 22 63 74
House Rent Allowance 2 3 58 76 29 83 89
Section 10(14) 0 0 17 22 6 17 23
Section 24(B) - Interest on loan
taken for house property 27 44 41 54 14 40 82
Section 44 AD - Presumptive
Incomes 23 38 4 5 0 0 27
Section 54 - Deduction from
Capital Gain 6 10 12 16 3 9 21
Section 80 C - Deduction for
Specified Investments 52 85 61 80 29 83 142
Section 80 CCC - Deduction for
Pension Fund 3 5 21 28 5 14 29
Section 80 CCD - Contribution
to NPS 1 2 33 43 24 69 58
Section 80 D - Medical insurance
premium 19 31 27 36 11 31 57
Section 80 DD - Maintenance &
medical treatment of a dependent 11 18 14 18 4 11 29

13
disable
Section 80 DDB - Deduction in
respect of medical treatment, etc. 3 5 7 9 1 3 11
Section 80 E -Interest on loan
taken for higher education 6 10 23 30 11 31 40
Section 80 G - Donation to
Specified funds 6 10 17 22 6 17 29
Section 80 GG - Deduction in
respect of rent paid 2 3 4 5 1 3 7
Section 80 GGCContribution
given to political parties 0 0 0 0 0 0 0
Section 80 QQB - Royalty
income of authors 0 0 0 0 0 0 0
Section 80 TTA - Interest from
Saving Bank Account 33 54 55 72 9 26 97
Section 80 U - Deduction in the
case of a person with disability 2 3 6 8 1 3 9
Rebate Under Section 87A 11 18 15 20 3 9 29
AVERAGE 15 31 27
Source: Collected & Compiled from Questionnaires

Table No 5 below shows awareness level of different tax saving schemes during the previous
year 2014-15 on the basis of tax bracket of different respondents. The table shows that on an
average respondents in 30% tax bracket(29%) has highest awareness followed by respondents
in 20% tax bracket(25%) & Self employed respondents(20%). Individually also respondent of
30% tax bracket have shown highest awareness level in majority of tax saving schemes. This
could be due to excess burden of tax liability. It is surprising to notice that only 61%
respondents from 10% tax bracket category are aware about Section 87A, where as 100% of
the respondent in that category are eligible to claim this rebate of actual tax liability or Rs
2000 which ever is less.

Table No 5 - Awareness of Tax Saving Schemes Tax Bracket Wise

10% 20% 30%
Tax Saving Schemes Nos % Nos % Nos % Total
Rule 2BB - Children Education Allowance 7 17 21 26 14 29 42
Rule 2BB - Hostel Expenditure Allowance 4 10 21 26 14 29 39
Rule 2BB - Transport Allowance 15 37 38 46 21 43 74
House Rent Allowance 17 41 33 40 39 80 89
Section 10(14) 2 5 14 17 7 14 23
Section 24(B) - Interest on loan taken for
house property 16 39 42 51 24 49 82
Section 44 AD - Presumptive Incomes 7 17 9 11 11 22 27
Section 54 - Deduction from Capital Gain 4 10 11 13 6 12 21
Section 80 C - Deduction for Specified
Investments 32 78 67 82 43 88 142
Section 80 CCC - Deduction for Pension
Fund 8 20 12 15 9 18 29
Section 80 CCD - Deduction for Contribution
to NPS 12 29 27 33 19 39 58

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Section 80 D - Medical insurance premium 7 17 29 35 21 43 57
Section 80 DD - Maintenance & medical
treatment of a dependent disable 4 10 17 21 8 16 29
Section 80 DDB - Deduction in respect of
medical treatment, etc. 1 2 6 7 4 8 11
Section 80 E -Interest on loan taken for
higher education 4 10 21 26 15 31 40
Section 80 G - Deduction for Donation to
Specified funds 3 7 17 21 9 18 29
Section 80 GG - Deduction in respect of rent
paid 0 0 3 4 4 8 7
Section 80 GGC - Contribution given to
political parties 0 0 0 0 0 0 0
Section 80 QQB - Royalty income of authors 0 0 0 0 0 0 0
Section 80 TTA - Interest from Saving Bank
Account 14 34 47 57 36 73 97
Section 80 U - Deduction in the case of a
person with disability 0 0 5 6 4 8 9
Rebate Under Section 87A 25 61 2 2 2 4 29
AVERAGE 20 25 29
Source: Collected & Compiled from Questionnaires

Table No 6 below shows awareness level of different tax saving schemes during the previous
year 2014-15 on the basis of qualification of different respondents. The table shows that on
an average respondents in PG category(34%) has highest awareness followed by respondents
in Graduate category(23%) &UG respondents(10%). Individually respondent of PG &
graduate ategory have shown almost same awareness level in various tax saving schemes but
respondent from UG category have shown very poor awareness level. This is due the fact that
respondent having lower qualification are mostly depend on tax consultants, as they do not
have the confidence to self file their returns.

Table No 6 - Awareness of Tax Saving Schemes Qualification Wise

UG Graduate PG
Tax Saving Schemes Nos. % Nos. % Nos. % Total
Rule 2BB - Children Education Allowance 2 6 18 26 22 33 42
Rule 2BB - Hostel Expenditure Allowance 1 3 19 27 19 29 39
Rule 2BB - Transport Allowance 7 19 32 46 35 53 74
House Rent Allowance 9 25 37 53 43 65 89
Section 10(14) 2 6 9 13 12 18 23
Section 24(B) - Interest on loan taken for
house property 9 25 32 46 41 62 82
Section 44 AD - Presumptive Incomes 4 11 9 13 14 21 27
Section 54 - Deduction from Capital Gain 2 6 6 9 13 20 21
Section 80 C - Deduction for Specified
Investments 16 44 62 89 64 97 142
Section 80 CCC - Deduction for Pension
Fund 1 3 10 14 18 27 29
Section 80 CCD - Deduction for Contribution
to NPS 0 0 19 27 39 59 58

15
Section 80 D - Medical insurance premium 2 6 23 33 32 48 57
Section 80 DD - Maintenance & medical
treatment of a dependent disable 0 0 9 13 20 30 29
Section 80 DDB - Deduction in respect of
medical treatment, etc. 0 3 4 8 12 11
Section 80 E -Interest on loan taken for higher
education 9 25 13 19 18 27 40
Section 80 G - Deduction for Donation to
Specified funds 1 3 8 11 20 30 29
Section 80 GG - Deduction in respect of rent
paid 0 0 2 3 5 8 7
Section 80 GGCContribution given to
political parties 0 0 0 0 0 0 0
Section 80 QQB - Royalty income of authors 0 0 0 0 0 0 0
Section 80 TTA - Interest from Saving Bank
Account 11 31 27 39 59 89 97
Section 80 U - Deduction in the case of a
person with disability 1 3 4 6 4 6 9
Rebate Under Section 87A 4 11 17 24 8 12 29
AVERAGE 10 23 34
Source: Collected & Compiled from Questionnaires

Table No 7 below shows overall level of knowledge of the respondents about all tax saving
schemes during the previous year 2014-15. For taking the benefit of tax saving schemes, the
respondents should know the features & conditions attached to the schemes. To judge the
level of knowledge of the respondents about various tax saving schemes, we have prepared
three columns against every tax saving scheme in our questionnaire .i.e good knowledge,
average knowledge & beginner’s knowledge. Respondent selecting good knowledge for
more than 60% of tax saving schemes are considered as having good knowledge, respondent
selecting good knowledge for 30%-60% of tax saving schemes are considered as having
average knowledge & respondent selecting good knowledge for less than 30% of tax saving
schemes are considered as having beginners knowledge.The table shows that majority of
respondents are having average knowledge(42%), followed by respondents having beginner
knowledge (34%). Only 23% of the respondents are having good knowledge about various
tax saving schemes.

Table No 7 - Level of Overall Awareness about All Tax Saving Schemes

Profile of Respondents Good Average Beginner Total Chi-
Knowledge Knowledge Knowledge Square
Nos. % Nos. % Nos. %
GENDER:
Male 34 26 60 45 38 29 132 7.773
Female 6 15 13 33 21 53 40
Total 40 23 73 42 59 34 172
AGE:
20-30 Years 6 19 11 34 15 47 32 3.654
30-40 Years 18 22 36 44 28 34 82
Above 40 Year 16 28 26 45 16 28 58
Total 40 23 73 42 59 34 172

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OCCUPATION:
Self Employed 9 15 23 38 29 48 61 12.702
Private Service 18 24 33 43 25 33 76
Government Service 13 37 17 49 5 14 35
Total 40 23 73 42 59 34 172
TAX BRACKET
10% 6 15 14 34 21 51 41 12.772
20% 16 20 38 46 28 34 82
30% 18 37 21 43 10 20 49
Total 40 23 73 42 59 34 172
QUALIFICATION
Under Graduate 5 14 13 36 18 50 36 6.244
Graduate 16 23 33 47 21 30 70
Post Graduate 19 29 27 41 20 30 66
Total 40 23 73 42 59 34 172
Source: Collected & Compiled from Questionnair

TESTING OF HYPOTHESIS
Null hypothesis H0: There is no significant association between demographic factors like
gender, age, occupation, tax bracket and qualifications of individual and awareness about tax
saving schemes.

Alternative hypothesis H1: There is significant association between demographic factors

like gender, age, occupation, tax bracket and qualifications of individual and awareness about
tax saving schemes.

Test Statistics: To test this hypothesis X2 (Chi-square) has been used and the result is as
under
As calculated value of Chi-square is more than tabulated value (5.991) in case of gender,
occupation, tax bracket and qualification of individuals and hence H0 are rejected. Thus it
can be concluded that there is significant association between demographic factors like
gender, occupation, tax bracket and qualifications of individual and awareness about tax
saving schemes. But calculated value of Chi-square( 3.654) is less than tabulated value
(5.991) in case of age of individual proving no significant relationship between age of
individuals and awareness of tax saving schemes.

SUMMARY &FINDINGS:
The study reveals the fact that awareness level about tax saving schemes is not much
among investors. Poor awareness in reflected not only in the limited number of schemes they
are aware of, but also in insufficient knowledge about features and benefits of schemes they
are aware of. Only 23% respondents are having good knowledge about tax saving schemes,
followed by 42% having Average knowledge & 34% of respondents have very Poor
knowledge about tax saving schemes. Thus poor awareness level gets translated into poor
Tax planning & greater tax evasion.

Section 80 C (83%) is the most popular tax saving schemes as far as awareness is
concerned. Whereas House Rent Allowance(52%), Section 80 TTA(56%), Section 24(b)
(48%) has shown average awareness level. It is followed by Children Education Allowances
(24%), Hostel Expenditure Allowance(23%), Section 80 CCD(34%), Section 80(D) (33%) &

17
 Section 80(E) (23%). Respondents in the study are least aware of Section 80(DDB) (6%),
Section 80(U) (5%), Section 87(A) (17%), Section 44 (AD) (16%), Section 54 (12%). The
awareness of Section 80(GGC) & Section 80(QQB) has been found nil among the
respondents.

Individuals are not always aware of all the technical details about the scheme which
they chose for investment. They might choose a particular scheme for one benefit while being
ignorant about other schemes which provide same or better benefits with better terms. So
what is important here is to know all the terms related to an investment. Information is
something which is shaping business and world constantly in this century. More is the
amount and quality of information better will be the decision quality. In the absence of
critical information investors end up taking decisions which yield less than potential benefits
for them. So with information comes awareness and with awareness comes thirst for more
information and information in right format at the right time with right people ensures quality
decision making which triggers a virtuous cycle where everything turns out to be nicely
synchronized and productive.

REFERENCES:
1. ChattopadhyaySaumen and Das-Gupta Arindam, The Personal Income Tax in India:
Compliance Costs and Compliance Behaviour of Taxpayersn National Institute of
public finance & policy, New Delhi
2. Singh, Jaspal& Sharma, Poonam, “Tax Professionals Perception of the Income Tax
System of India an Empirical Evidence”, the ICFAI Journal of Public Finance,
Volume 5, No. 1, February 2007, pp. 45-56.
3. Kaushik Rajiv, “Assessment of Individual Income Tax, Tax Planning and Saving in
India, IJCEM International Journal of Computational Engineering & Management,
Vol. 15 Issue 4, July 2012 ISSN (Online): 2230-7893, pp. 97-103
4. Chawla Chanchal, Jain Vipin , Joshi Anand and Gupta Vinayak, A Study of
Satisfaction Level & Awareness of Tax-payers towards E-filling of Income Tax
Return – with Reference to Moradabad City, Abhinav, International Monthly
Refereed Journal of Research In Management & Technology Volume II,
November’13 ISSN – 2320-0073
5. Patil S & Nandawar K (2014) “A Study on Preferred Investment Avenues Among
Salaried People With Reference To Pune, India” IOSR Journal of Economics and
Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 5, Issue 2.
(Sep.-Oct. 2014), PP 09-17
6. Dey S Kumar, “Tax Planning Practices By Salaried Employees : A Case Study Of
Lecturers In Odisha”, Siddhant-A Journal of Decision Making, Vol-15, Issue-2, Apr-
Jun 2015, pp. 150-159, ISSN No. 2231-0649
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Sector Employees In Madurai City”, International Journal of Multidisciplinary
Research Review, Vol.1, Issue – 9, Nov -2015. Page – 148, E- ISSN –2395-1885,
ISSN -2395-1877
8. Singhania VK and Singhania M, 2015–2016. Students’ guide to income tax. Taxmann
Publications Pvt. Ltd.
9. www.incometaxindia.gov.in, www.caclubindia.com,www. icai.org, www.icmai.in,
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