A Summer Training Report

On

TAX PLANNING AND ITR FILLING

at

Darpn and company

Submitted in partial fulfilment of the requirements of

Bachelors in business administration (BBA)

Amity University, Gurgaon (Manesar)

Under the Guidance of: Submitted By:

Name: Pankaj Gupta Nidhi Malik

Designation: Partner BBA: 5th Semester

A50057921011

Amity Business School

Amity University

Gurgaon (Manesar)

SESSION 2021 – 2024

 Date; ________

TO WHOMSOEVER IT MAY CONCERN

This is to certify that Mr. / Ms. …………………………………… of Master of Business

Administration Final Year has successfully completed eight weeks Summer Training on
the

topic ……………………………………………………………………... with this

organization /name of organization from…………………………. to

………………………………. (Exact Date has to be mentioned)

As per our assessment and reporting structure, we found him/ her hard working and
excellent performer during the training programme.

We wish him/ her all the success for his/ her future.

Signature

(Name of Concerned Person)

Designation

(With seal of the company)

 DECLARATION

I, Nidhi malik Roll No. A50057921011 BBA (5 th Semester) of Amity Business School,

Amity University Gurgaon hereby declare that the Project Report entitled

“TAX PLANNING” is my original work and the same has not been submitted to

any other institute for the award of any other degree.

The feasible suggestion has been duly incorporated in consultation with supervisor.

Countersigned

Signature of the Supervisor Signature of Candidate

Forwarded by:

Director of the Institute

 ACKNOWLEDGEMENT
I express my gratitude to Darpn and company for giving the opportunity to work with such an
esteemed organization for a summer internship. This internship has a great chance of learning
and professional development for me.

I would like to thank the management and employees of Darpn and company for taking out
time from their busy schedule and providing guidance during the course of internship. I
would like to thank CA Pankaj Kumar Agarwal, CA Ram Gupta, CA Pankaj Gupta, CA Sunil
Rassewat, without her guidance project, wouldn’t have been successful.

I sincerely thank Ms Vani Agarwal faculty at Amity business school, for her support and
guidance all through this study and his valuable feedback and add-ons.

I extend my heartfelt gratitude to my college, Amity business school and the Director Dr
Vikas Madhukar for providing his valuable inputs and showing faith in my abilities.

Last but not least, I thank each and every one who were directly or indirectly associated with
this project.

Your contributions have been immensely helpful.

It was a great learning experience!!

Ms Vani Agarwal

Nidhi Malik

(Faculty Guide)
(Student)

CHAPTER 1-
 INTRODUCTION

1.1 INTODUCTION
Tax planning is the analysis of a financial situation or plan to ensure that all elements
work together to allow you to pay the lowest taxes possible. A plan that minimizes how
much you pay in taxes is referred to as tax efficient. Tax planning should be an essential
part of an individual investor's financial plan. Reduction of tax liability is crucial for
success.
Tax planning plays an important role in the financial growth story of every individual as
tax payments are compulsory for all individuals who fall under the IT bracket. With tax
planning, one will be able to streamline his/her tax payments such that he or she will
receive considerable returns over a specific period of time involving minimum risk.
Also, effective tax planning will help in reducing a person's tax liability.
The Central Government has been empowered by Entry 82 of the Union List of
Schedule 7 of the Constitution of India to levy a tax on all Income other than
Agricultural Income [Subject to Section 10(1)]. The Income Tax Law Comprises the
Income Tax Act 1961, Income Tax Rules 1962, Notifications and Circulars issued by
Central Board of Direct Taxes (CBDT), Annual Finance Acts and Judicial
pronouncements by Supreme Court and High Courts.
The Government of India on Taxable Income of all persons including individuals, Hindu
Undivided Families (HUF’s), Companies, Firms, Association of Persons, Body of
Individuals, Local Authority and any other Artificial Judicial Persons. Levy of Tax is
separate on each of the persons. The levy is governed by The Indian Income Tax Act,
1961.The Indian Income Tax Department is governed by CBDT and is part of the
Department of Revenue under the Ministry of Finance, Govt. of India. Income Tax is a
key source of funds that the government uses to fund its activities and serve the public.
When tax planning is done inside the frameworks defined by the respective authorities,
it is fully legal and in fact a smart decision. However, using shady techniques to avoid
tax payments is illegal and you may get into trouble for doing so. Tax saving practices
include tax avoidance, tax evasion and tax planning. Out of these tax planning is the
only legal manner of reducing your tax liabilities. The government offers the different
opportunities to save on taxes with the intention of reducing tax burden on a taxpayer
 through legal income tax planning methods. Tax Planning involves planning in order to
avail all exemptions, deductions and rebates provided in Act
The Income Tax law itself provides for various methods for Tax Planning, generally it is
provided under exemptions under section 10, deductions under section 80C to 80U and
rebates and reliefs. Some of the provisions are given below:
 Investment in securities provided under section 10(15). Interest on such
securities is fully exempt from tax.
 Exemptions under section 10A, 10B, and 10BA
 Residential Status of the person
 Choice of accounting system
 Choice of organization.
For availing benefits, one should resort to bonafide means by complying with the
provisions of law in letter and in spirit.
Where a person buys a machinery instead of hiring it, he is availing the benefit of
depreciation. It’s his exclusive right either to buy or lease it. In the same manner to
choose the form of organization, capital structure, buy or make products are the assesses
exclusive right. One may look for various tax incentives in the above said transactions
provided in this Act, for reduction of tax liability. All this transaction involves tax
planning.
1.2 TYPES OF TAX PLANNING
 Purposive tax planning: It means making plans with specific purpose to ensure the
availability of maximum benefits to the assesses through correct selection of investment,
making suitable programme for replacement of assets, varying the residential status and
diversifying business activities and income etc.
 Permissive tax planning: Permissive Tax Planning means making plans which are
permissible under different provisions of the law, such as planning of earning income
covered by Sec.10, specially by Sec. 10(1), Planning of taking advantage of different
incentives and deductions, planning for availing different tax concessions etc.
 Long range and short-range tax planning: long range tax planning means a plan chalked
out at the beginning or the income year to be followed around the year. This type of
planning does not help immediately as in the case of short-range planning but is likely to
help in the long run; Short range Tax Planning means the planning and execution at the
end of the income year to reduce taxable income in a legal way.
1.3 OBJECTIVES AND SCOPE
 Objectives
 To study the tax planning of individual assessee
 The primary goal of tax planning is to reduce the amount of taxes payable
to the government.
 tax planning strategies can also help protect assets from excessive
taxation
 To study the provision for taxation required for filing of the income tax
return for clients of Darpn and company.
 To study the importance of long-term capital investments to save excess
tax payments.
 To explore and simplify the tax planning procedure from a
layman’s perspective
 Scope
 To learn the basics of Tax Planning of salaried income people.
 To learn the extent of awareness of clients on tax laws and tax planning
measures.
 To learn the tax rates, insurance plans and premiums for Financial Year.
 Study of the rules and regulations given by the Income Tax Dept. for
paying the taxes for the Assessment Year.
 To study the tax liabilities of salaried employees.
 To study the tax liabilities of businesses
1.4 INTRODUCTION TO TAXATION
1.4.1 Some terms associated with filling of income tax return

 Financial Year (FY)

It is a year in which you earn your income. In India, the financial year runs from 1 April
to 31 March. For Example, 1 April 20120 to 31 March 2021.

 Assessment year (AY)

It is the year when that income is assessed. For example, if you are earning income in
FY 2020-21 than on that income your income tax will be assessed in the AY 2021-22.

 Due Date
Due date is the last date of Income-tax filing. The due date for tax-filing: -
•For Individual- 31st July
•For company- 31stSeptember

 ITR-V is the acknowledgment received from the Income Tax Department (ITD)

 Form 16
It is the form which is issued to the employees from his employer which contains four
parts.
 Part A- is details of the TDS that been deducted on his salary
 Part B- contains the entire salary component,
 Annexure to Form 16-which is also called a salary certificate. This certificate
gives you the break-up of your salary
 Form 12BA -which gives the details of your perquisites.
These all parts are the components which are included in your Form 16.

 Form 26AS
It is the consolidated data of the TDS been deducted on the income earned in the F.Y
apart from the salary.
 1.4.2 TYPES OF ASSESSEES
An income tax assesses is a person who pays tax or any sum of money under the
provisions of the Income Tax Act, 1961.
Furthermore, Section 2(7) of the act defines an income tax assesses as anyone who is
required to pay taxes on any earned income or incurred loss in a single assessment year.

 Normal Assessee- An individual who is liable to pay taxes for the income earned
during a financial year is known as a normal assessee. Every individual who has
earned any income earned or losses incurred during the previous financial years is
liable to pay taxes to the government in the current financial year.
 Representative Assessee- Many times, it so happens that an individual is liable to pay
taxes for income or losses incurred not only by him, but also for income or losses
incurred by a third party. Such an individual is known as Representative Assessee.
Basically, he acts as a representative for people who themselves are not in a position
to file and pay their taxes themselves. Generally, the people who need representatives
are non-residents, minors or lunatics. And the people representing them are either
their agents or guardians.
 Deemed Assessee- Deemed Assessee is an individual who is put in a position to pay taxes
for some other person by the legal authorities. Generally, the individuals who are treated as
Deemed Assesses are:
 The executors or the legal heir of the property of a deceased person, who in written
has passed on his property to the executor, is treated as a Deemed Assessee.
 The eldest son or any other legal heir of a deceased individual (who has expired
without writing his will) is treated as a Deemed Assessee.
 The guardian of a minor, a lunatic or an idiot is treated as a Deemed Assessee.
 The agent of a Non-Resident Indian (having Income Sources in India) is treated as a
deemed Assessee
 Assessee in default- When individuals fail to meet their responsibilities of paying tax,
then they become assessee in default. For example, an employer should deduct tax
from the salary of his employees before giving the salary. Moreover, employer has to
pay deducted taxes to the government as per the due date. However, If the employer
fails to deposit this tax, he is an assessee in default.
 1.4.3 WHY STUDY OF RESIDENTIAL STATUS IS IMPORTANT?

The provision relating to the Residential Status in India is governed by Section 6 of the
Income Tax Act, 1961. The necessity to determine the residential status is significant to
determine the total income of taxpayers in India. Generally, taxpayers are classified as
Residents or Non-Residents. Residents are taxed on their global income whereas Non-
Residents are taxed only on the income sourced or deemed to be sourced from India.
The test to determine the residential status has to be applied with respect to each relevant
previous year i.e, the status of residence is computed for each year into consideration.
An individual is said to be resident in India if he/she meets either of the following
conditions:
 Stay in India for 182 days or more in that year
 ii. Stay in India for 60 days or more in that year and 365 days or more in 4 years
preceding the previous year. If an individual fulfils any one of the above
conditions, he/she becomes a resident in India. Likewise, if none of the
conditions are meet, he/she would become a non-resident in India.

Section 6(1):

 He/she should stay in India for a period or periods amounting in all to 182
days or more during the previous
OR
He/she should stay in India for a period or periods amounting in all to 60 Days
or more during the previous year
And
 He/she should stay in India for a period or periods amounting in all to
365Days or more during four preceding previous years
Exceptions: (the First condition is used under certain conditions only when)
 1.Indian Citizen leaving India for Employment purpose
 2.Indian Citizen leaving India as a Crew member of Indian Ship
 3.Person of Indian Origin comes to India for visit purpose.
In the above scenario, if He/she satisfies any of the one condition than he will be
considered as a Resident of India. If he fails to satisfy any one of these
conditions, then he will be treated as Non-Resident
Section 6(6):

 He/she should be Resident in India for at least 2 out of 10 years preceding to

that previous year.
And
 He/she should stay in India for period or periods amounting in all to 730
days or more during 7 preceding previous years
If both of the additional conditions are satisfied, then he/she will be Resident
and an Ordinary Resident. If anyone of the conditions is satisfied, then they will
be treated as Resident but not Ordinarily Resident.

1.4.4 TAX SLABS FOR AY 2023-24

Individuals and HUFs can opt for the Old Tax Regime or the New Tax Regime
with lower rate of taxation (u/s 115 BAC of the Income Tax Act)
The taxpayer opting for concessional rates in the New Tax Regime will not be
allowed certain Exemptions and Deductions (like 80C, 80D, 80TTB, HRA)
available in the Old Tax Regime. However, the deductions under section 80CCD
(2), 80CCH (2) and 80JJAA shall be available in the New Tax Regime
1)
For Individual (resident or non-resident) less than 60 years of age anytime during the
previous year:

Old Tax Regime New Tax Regime u/s 115BAC

Income Tax Slab Income Tax Rate Income Tax Slab Income Tax Rate

Up to ₹ 2,50,000 Nil Up to ₹ 2,50,000 Nil

₹ 2,50,001 - ₹ 5% above ₹ ₹ 2,50,001 - ₹

5% above ₹ 2,50,000
5,00,000 2,50,000 5,00,000

₹ 5,00,001 - ₹ ₹ 12,500 + 20% ₹ 5,00,001 - ₹ ₹ 12,500 + 10% above

10,00,000 above ₹ 5,00,000 7,50,000 ₹ 5,00,000

₹ 1,12,500 + 30% ₹ 7,50,001 - ₹ ₹ 37,500 + 15% above

Above ₹ 10,00,000
above ₹ 10,00,000 10,00,000 ₹ 7,50,000

₹ 10,00,001 - ₹ ₹ 75,000 + 20% above

12,50,000 ₹ 10,00,000

₹ 12,50,001 - ₹ ₹ 1,25,000 + 25%

15,00,000 above ₹ 12,50,000

₹ 1,87,500 + 30%
Above ₹ 15,00,000
above ₹ 15,00,000

Figure 1
 2)

For Individual (resident or non-resident), 60 years or more but less than 80 years of age
anytime during the previous year:

Old Tax Regime New Tax Regime u/s 115BAC

Income Tax Slab Income Tax Rate Income Tax Slab Income Tax Rate

Up to ₹ 3,00,000 Nil Up to ₹ 2,50,000 Nil

5% above ₹
₹ 3,00,001 - ₹ ₹ 2,50,001 - ₹
3,00,000 5% above ₹ 2,50,000
5,00,000 5,00,000

₹ 5,00,001 - ₹ ₹ 10,000 + 20% ₹ 5,00,001 - ₹ ₹ 12,500 + 10% above

10,00,000 above ₹ 5,00,000 7,50,000 ₹ 5,00,000

₹ 1,10,000 + 30% ₹ 7,50,001 - ₹ ₹ 37,500 + 15% above

Above ₹ 10,00,000
above ₹ 10,00,000 10,00,000 ₹ 7,50,000

₹ 10,00,001 - ₹ ₹ 75,000 + 20% above

12,50,000 ₹ 10,00,000

₹ 12,50,001 - ₹ ₹ 1,25,000 + 25%

15,00,000 above ₹ 12,50,000

₹ 1,87,500 + 30%
Above ₹ 15,00,000
above ₹ 15,00,000

Figure 2
3)
For Individual (resident or non-resident) 80 years of age or more anytime during the previous
year:

Old Tax Regime New Tax Regime u/s 115BAC

Income Tax Slab Income Tax Rate Income Tax Slab Income Tax Rate

Up to ₹ 5,00,000 Nil Up to ₹ 2,50,000 Nil

₹ 5,00,001 - ₹ 20% above ₹ ₹ 2,50,001 - ₹ 5% above ₹

10,00,000 5,00,000 5,00,000 2,50,000

₹ 1,00,000 +
₹ 5,00,001 - ₹ ₹ 12,500 + 10%
Above ₹ 10,00,000 30% above ₹
7,50,000 above ₹ 5,00,000
10,00,000

₹ 7,50,001 - ₹ ₹ 37,500 + 15%

10,00,000 above ₹ 7,50,000

₹ 10,00,001 - ₹ ₹ 75,000 + 20%

12,50,000 above ₹ 10,00,000

₹ 12,50,001 - ₹ ₹ 1,25,000 + 25%

15,00,000 above ₹ 12,50,000

₹ 1,87,500 + 30%
Above ₹ 15,00,000
above ₹ 15,00,000

Figure 3
1.4.5 WHICH ITR FORM SHOULD BE USED WHILE FILLING ITR?
Income Tax Return (ITR) is a form in which the taxpayers file information about their
income earned and tax applicable, to the income tax department. The department has
notified 7 various forms i.e., ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6 & ITR-7 to
date. Every taxpayer should file his ITR on or before the specified due date. The
applicability of ITR forms varies depending on the sources of income of the taxpayer,
the amount of the income earned and the category of the taxpayer like individuals, HUF,
company, etc.
 ITR-1
Who can file ITR-1
 Income earned from salary or Pension.
 Income from other sources excluding income from winning a lottery
or income from owning and maintaining race horses
 Income from One House Property, but the loss brought forward from
previous years or carried forward of losses are not eligible.
 Income from agriculture activities up to Rs 5000.
 The total income of the individual should not exceed 50 Lakhs.

Who cannot file ITR-1

 Non-Resident
 Not Ordinarily Resident
 Person having business or profession
 If you own more than one house property
 An individual who is holding the position of a director in a
company, etc

 ITR-2

Who can file ITR-2

ITR-2 is for the use of an individual or a Hindu Undivided Family (HUF)

whose total income for the AY 2023-24 includes:
  Income from Salary/Pension
 Income from House Property
 Income from Other Sources (including Winnings from Lottery and
Income from Race Horses)
 If you are an Individual Director in a company
 If you have had investments in unlisted equity shares at any time
during the financial year
 Being a resident not ordinarily resident (RNOR) and non-resident
 Income from Capital Gains
 Having any foreign income
 Agricultural income more than Rs 5,000, etc

Who cannot file ITR-2

 Individual or HUF whose accruing income is from business or

profession
 Partner of a partnership firm having income from partnership

 ITR-3
Who can file ITR-3

This form is to be used by either an individual or a Hindu Undivided Family

who are carrying on profession or a business.

The following persons are eligible to fill this form:

 The residential status can be either Non-resident or Resident

(ROR/RNOR)
 If a person is the director of the company.
 Persons who had investments in unlisted equity shares at any
time during the entire financial year.
 Income from other sources
 Income of a person who is a partner in a firm.
 Income from salary or Pension
 Income from House Property (one or more)
  Total income can exceed 50 lakhs in this case.
 Income earned from capital gains or foreign assets/foreign
income.
 who is having income under the head profits or gains of business
or profession and who is not eligible to file Form ITR-1 (Sahaj),
ITR-2 or ITR-4 (Sugam).
 In short, individuals or HUFs who are not eligible to file ITR-1,
ITR-2, and ITR-4, should file ITR-3.

Who cannot file ITR-3

 Companies
 Trusts
 Co-operative Society
 Local Authority
 Artificial Juridical Person
 Firm including LLP
 AOP, BOI
 ITR-4
Who can file ITR-4
The current ITR-4 applies to individuals and HUFs, Partnership
firms (other than LLPs), which are residents and whose total
income includes:
 Business income according to the presumptive income scheme
under section 44AD or 44AE
 Professional income according to presumptive income scheme
under section 44ADA
 Income from salary or pension up to Rs 50 lakh
 Income from one house property, not more than Rs 50 lakh
(excluding the amount of brought forward loss or loss to be
carried forward)
 Income from other sources having income not more than Rs 50
Lakh (excluding income from lottery and race-horses)

Who cannot file ITR-4

  If your total income exceeds Rs 50 lakh
 Having income from more than one house property
 Owning any foreign asset
 If you have signing authority in any account located outside India
 Having income from any source outside India
 If you are a director in a company
 If you have had investments in unlisted equity shares at any time
during the financial year
 Being a resident not ordinarily resident (RNOR) and non-resident
 Having foreign income, etc
 ITR-5
Who can file ITR-5
The following should choose ITR-5 form :
 Investment funds
 Business trusts
 Estate of insolvent, Estate of deceased
 Artificial Juridical Person (AJP)
 Body of individuals (BOIs)
 LLPs
 Associations of Persons (AOPs) and Firms

Who cannot file ITR-5

 Individuals
 HUF
 Company
 Person requires to file Form ITR-7 i.e., Trusts etc claiming the
exemption of Section 11.
 ITR-6
Who can file ITR-6
 This form can be used by companies which are not claiming any
exemptions under Section 11(Income from property held for
charitable or religious purposes) and by a person which is
required to file the return in Form ITR-7.
 Who cannot file ITR-6

 Section 11 companies being companies formed with charitable or

religious purpose
 Person on which Form ITR-7 is applicable
 ITR-7
Who can file ITR-7
Persons including companies that are required to file returns under Section
139(4A), Section 139(4B), Section 139(4C), Section 139(4D), Section
139(4E) or Section 139(4F) should choose ITR-7 form
 Section 139(4A)- The return to be filed in respect of Income
from a property, of which the true owner is a trust or such
property is held under any other legal obligation. In this case,
the income generated should be used only for charitable or
religious purposes.
 Section 139(4B)- The return to be filed in respect of total
Income derived by a Political party
 Section 139(4C)- The below mentioned entities should file
returns under this section:
 Scientific Research Association.
 Educational institutions, hospitals, and other medical
institutions.
 Associations and institutions covered under section
10(23A) and Section 10(23B).
 News agencies.
 Others as may be prescribed.
 Section 139(4D): The returns by colleges, universities or any
other institutions which are not required to furnish return of
income or loss under any other provision under this section.

Who cannot file ITR-7

 Any other person from those specified above cannot report using
ITR 7 Form. From A.Y.2022-23 onwards ITR 7 will not be
 applicable to the persons whose income is unconditionally
exempt.
Figure 4

ITR Form Description

Number

ITR 1 For individuals who are a resident other than Not ordinarily Resident, who have a total income
up to Rs. 50 lakhs. Having income from salaries, one house property, other sources and
agricultural Income up to Rs. 5 thousand (not for any individual who is holding the position of a
director in a company or invested in unlisted equity shares)

ITR 2 Income of both individuals and HUFs from salaries, multiple house property, capital gains,
foreign investments and agricultural Income Rs. 5 thousand or more. The total annual income
can exceed Rs. 50 Lakhs. The individual should not have gains and profits of a business or
profession.

ITR 3 The individual and HUF having all income applicable for FORM ITR 2 and gains and profits of
business or profession. Partners of a firm can file this ITR FORM.

ITR 4 For individuals, HUFs and firms other than LLP, a resident having total income of up to 50 lakhs
and having income from business and profession which is computed under section 44AD,
44ADA and 44AE. (Not for any individual who is holding the position of a director in a
company or invested in unlisted equity shares)

ITR 5 For persons other than Individual, HUFs, company and person filing for ITR-7. This form is
applicable for Firms, LLP, AOI, BOP.

ITR 6 For all the companies other than the ones claiming exemption under Section-11

ITR 7 Persons/Companies who are required to furnish returns under sections 139(4A), 139(4B), 139
(4C) and 139 (4D).

1.4.6 HEADS OF INCOME OF AN INDIVIDUAL

 Income from salary-
Existence of „master- servant‟ or „employer -employee‟ relationship is absolutely
essential for taxing income under the head “Salaries”. Where such relationship does
not exist, income is taxable under some other head as in the case of partner of a firm,
advocates, chartered accountants, LIC agents, small saving agents, commission
agents, etc. Besides, only those payments which have a nexus with the employment
are taxable under the head „Salaries‟. Salary is chargeable to income-tax on due or
paid basis, whichever is earlier. Any arrears of salary paid in the previous year, if not
taxed in any earlier previous year, shall be taxable in the year of payment.
 Income from house property-
House property consists of any building or land, or its part or attached area, of which
the assesses is the owner. The part or attached area may be in the form of a courtyard
or compound forming part of the building. But such land is to be distinguished from
an open plot of land, which is not charged under this head but under the head „Income
from Other Sources‟ or „Business Income‟, as the case may be. Besides, house
property includes flats, shops, office space, factory sheds, agricultural land and farm
houses.
 Income from business-
The following incomes shall be chargeable under this head
 Profit and gains of any business or profession carried on by the assesses at any
time during previous year.
 Any compensation or other payment due to or received by any person, in
connection with the termination of a contract of managing agency or for
vesting in the Government management of any property or business.
 Income derived by a trade, professional or similar association from specific
services performed for its members.
 Profits on sale of REP licence/Exim scrip, cash assistance received or
receivable against exports, and duty drawback of customs or excise received
or receivable against exports.
 The value of any benefit or perquisite, whether convertible into money or not,
arising from business or in exercise of a profession
 Any sum received under a Keyman Insurance Policy referred to u/s 10(10D).
 Any allowance or deduction allowed in an earlier year in respect of loss,
expenditure or trading liability incurred by the assesses and subsequently
 received by him in cash or by way of remission or cessation of the liability
during the previous year.
 Income from capital gains-
Any profits or gains arising from the transfer of capital assets effected during the
previous year is chargeable to income-tax under the head “Capital gains” and shall be
deemed to be the income of that previous year in which the transfer takes place.
Taxation of capital gains, thus, depends on two aspects -capital assets and transfer
 Income from other sources-
This is the last and residual head of charge of income. Income of every kind which is
not to be excluded from the total income under the Income Tax Act shall be charge to
tax under the head Income from Other Sources, if it is not chargeable under any of the
other four heads-Income from Salaries, Income from House Property, Profits and
Gains from Business and Profession and Capital Gains. In other words, it can be said
that the residuary head of income can be resorted to only if none of the specific heads
is applicable to the income in question and that it comes into operation only if the
preceding heads are excluded

1.4.7 TAX EXEMPTIONS

 Agricultural income – Sec 10(1):

 Pure agricultural income i.e., which includes no trading and only agricultural activities is
exempted from tax.

 Interest on Non-resident external account – Sec 10(4):

Interest on FCNR (Foreign Currency Non-Resident) and RFC (Resident Foreign Currency)
are tax-exempt in the hands of Non-Resident and Non-Ordinary Resident. In Layman’s term,
NRE (Non-Resident External) accounts are Exempt and NRO (Non-Resident Ordinary)
accounts are Taxable

 Scholarships granted to meet the cost of education– Sec 10(16):

If an Assessee is granted a scholarship to meet his cost of education than it will be fully
exempt from the tax.

 Awards – Sec 10(17A):

Rewards received from the Government is fully exempt from taxes.

 Income of Minor – Sec 10(32):

The income of Minor is exempt of up to Rs. 1,500 per child and that income are clubbed
under the parent whose income is higher. Minor’s income is not clubbed if he gets income
through his Skill, Knowledge, Activity than the taxes will be paid by his parents on his
behalf.

 Dividend – Sec 10(34):

Dividend from Domestic Company is exempt up to Rs. 10,00,000 and if it exceeds, then the
excess amount above Rs. 10 Lakhs will be taxable at the rate of 10 percent. If the same
dividend is from the Foreign Company, then the whole amount will be taxable as per the slab
rates.

1.4.8 DEDUCTION UNDER CHAPTER VI-A

Deductions can be claimed for the investments and expenditure occurred in the F.Y, these all
are called deductions under chapter VI A.
 Deductions on investment under section 80C

 Payment of Life Insurance Premium: If the amount of Premium is more than 10% of
the basic sum assured, then the deduction would be restricted to 10% of the basic sum
assured
In case of single premium policy, if the policy is terminated within two years from the
commencement of insurance under that policy the deduction claimed in the earlier
year would be added to the taxable income of the year in which such termination is
made.
 The contribution made to PPF (Public Provident Fund): Contributions made in the
name of Self, Spouse and Children under PPF he can claim to benefit up to Rs.
1,50,000/-
 National Saving Certificate (NSC): Investment done toward NSC can be claimed up
to Rs. 1,50,000/- If both principals, as well as interest, is less than 1.5 Lakhs than he
can claim benefit for both the amount. For example, he invested Rs. 1,00,000 in NSC
and on that he gets interested of Rs.20,000 then he can claim both Rs. 1,20,000 under
80C benefit.
 ELSS (Equity Linked Saving Scheme): An Assessee is eligible to get the benefit of
ELSS up to Rs. 1,50,000 because it has a lock-in period of 3 years and more than 60
percent of your investments are done inequity.
 Repayment of Housing Loan: Under some circumstances, he cannot claim this benefit
if – If the property is under construction, he cannot claim benefit.
The deduction is not available on repayment of loan taken to repay the original
housing loan. No deduction for the principal amount of the loan is taken from
Relatives.
 Payment of Stamp Duty/ Registration Fees: Deduction under section 80C is available
in respect of stamp duty/ registration fees paid for purchase/ construction of
residential house property. The deduction cannot be claimed if the property was under
construction as at the year-end. If the property is sold within 5 years all the deduction
amount will get taxable.
 Payment towards children’s tuition fees: The deduction is available in respect of
tuition fees of any two children. The fees should have been paid in respect of full-time
education. The deduction is available only in respect of tuition fees.
  Contribution to certain pension funds under section 80CCC

 Premium amount paid towards annuity plan of LIC for receiving a pension from the
funds can be claimed for deduction under 80CCC.

 Interest on Educational Loan under section 80E

 The amount of interest paid towards the educational loan is considered for deduction.

 Interest on Loan is taken for residential house property under section 80EE

An additional amount of Rs. 50,000 can be claimed as a deduction for House Property if the
following conditions are satisfied:

 Purchaser should be first-time buyer i.e.; he has never purchased any house and now
he is going to purchase a house.
 Value of house should be more than 50,000
 A loan taken by the individual for the purpose of buying a house should not be more
than Rs. 35,00,000
 Loan for this purpose taken by an individual should be from the financial institution
or housing finance company

 Maintenance and medical treatment of a dependent who a person with a disability

under section 80DD is

 Dependent such as spouse, children, parents, brother or sister suffering from

disabilities flat deduction of Rs. 75,000 is given under section 80DD, but if the
condition is severe disability (i.e., more than 80%) then Rs. 1,25,000 can be
considered.
 In order to the deduction certificate from a government, the hospital is required on
form 101A.
  Deduction in respect of medical treatment for certain diseases and ailments only under
section 80DDB

 Deduction of Rs. 40,000 for the normal individual, Rs.1,00,000 for senior citizen aged
above 60 years can be claimed if suffering from any particular diseases and
expenditure occurred on the same can be claimed by the assessee
 In order to the deduction certificate from a government, the hospital is required form
101.

 Rent paid by a person who is not in receipt of house rent allowance under section
80GG

The deduction is available to those who doesn’t have HRA component in their form
16. The assessee can claim the benefit to the extend of least of the following:
 Rs. 5,000 per month
 25% of adjusted total income
 Rent paid minus 10% of total income

 Donation for scientific research of rural development under section 80GGA

Institute who carries out scientific research on rural development, the donation made
to such institute is fully exempted

 Deduction in respect of totally blind or mentally retarded or physically handicapped

person under section 80U

If the tax payer is disabled a flat deduction of Rs. 75,000 can be claimed and if the
condition is severe disability Rs. 1,25,000 can be claimed
The individual should have form 101 in order to claim the same

1.4.9 TAX RELIEFS

 RELIEF UNDER SECTION 87A

A new section 87A by finance bill 2013, has introduced a rebate of Rs 2500 for those whose
taxable income is less than 3,50,000

Relief under section 89

 Relief u/s 89(1) is available to an employee when he receives a salary in advance or in

arrear or when in one financial year, he receives salary of more than 12 months.
 Relief u/s 89(1) is also admissible on family pension, as the same has been
followed by Finance Act.
 To claim this Relief assessee is mandatory to file Form 10E on the Income Tax
website.
 Relief under section 90
 Relief under section 90 is for those who have earned foreign income. For them,
Form67 is mandatory to fill to claim the benefit of Double Taxation Avoidance
(DTAA).
 If there is a Double Taxation Avoidance Agreement (DTAA) between both the
countries than he can claim benefit under section 90A.
 If there is no Double Taxation Avoidance Agreement (DTAA) between both the
countries than he can claim benefit under section 90(1).