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INDEX

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Chapter No Topics Page No
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1 WhatIntroduction
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Study of Income Tax
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2 Industry profile 3–4

3 Company profile 5-7

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4 Theoretical background 8 – 30
Taxation Planning For Individual
A Y 2014-15
5 Research methodology 31-34
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 Objective of study
 Need for study
 Scope & Limitation
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 Tools of analysis
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6 Data analysis & interpretation 35-54

7 Findings 55-56
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A Study On Taxation, Auditing


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10 Annexure 61-66
 Bibliography Document 80 pages

 References "A Study On Taxation, Auditing


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Income Tax Planning in India 1


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Tax Planing
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INTRODUCTION
Income Tax Act, 1961 governs the taxation of incomes generated within India and of incomes
generated by Indians overseas. This study aims at presenting a lucid yet simple understanding of Upload
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taxation structure of an individual‟s income in India for the assessment year2019-20
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Income Tax Act, 1961 is the guiding baseline for all the content in this report and the tax saving
tips provided herein are a result of analysis of options available in current market. Every individual
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should know that tax planning in order to avail all the incentives provided by the Government of
Tax Audit Project - Final
India under different statures is legal.
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This project covers the basics of the Income Tax Act, 1961 as amended by the Finance Act 2019,
and broadly presents the tax planning and tax saving options provided under these laws.
The finance act is responsible for laying down the tax slabs that applies to taxpayer .
1. Income from salary Document 16 pages

2. Income from house property Impact of GST On Manufacturer


Distributors and Retailers
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5. Income from other sources
These are the few important element of income tax .

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Income Tax
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INDUSTRY PROFILE
The Institute of Chartered Accountants of India (ICAI) is the national professional
accounting body of India. It was established on 1 July 1949 as a statutory body under the Upload
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followed by companies in India to National Advisory Committee on Accounting Standards
(NACAS). and sets the accounting standards to be followed by other types of organisations.
ICAI is solely responsible for setting the Standards on Auditing (SAs) to be followed in the
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audit of financial statements in India. It also issues other technical standards like Standards Taxation of e Commerce
on Internal Audit (SIA), Corporate Affairs Standards (CAS) etc. to be followed by Mahesh Chandrashekar
practicing Chartered Accountants. It works closely with the Government of India, Reserve 100% (1)
Bank of India and the Securities and Exchange Board of India in formulating and enforcing
such standards.

Members of the Institute are known as Chartered Accountants. Document 14 pages

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3.1 Profile
The Abhijeet .s. Mahale & Pankaj Mahale and Associates, CHARTERD ACCOUNTANTS
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Membership No: 136434 , 153655
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FRN139814W , FRN139204W
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CHARTERD ACCOUNTANTS

Email ID: mahale.abhijeetnsk@gmail.com

Address:101,Hill - view apartment, bachubahi furniture showroom, tidke colony, Nashik


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Tal – Nashik, Dist – Nashik

3.2Introduction work of organisation

Introduction of Abhijeet .S .Mahaleand Associates.

Chartered Accountants work in a wide range of business sectors and in a broad spectrum of
roles, from Chief Executives to Financial Controllers. Below are a few examples of the type
of positions that Chartered Accountants occupy.

• Tax Accountant

• Management Accountants

• Financial Accountants

• Budget Analysts

• Auditor

3.3Organization its founders

The Abhijeet.S. Mahale and Associates, CHARTERD ACCOUNTANTS

His Membership No: 136434 - FRN139814W. On Dated 01/12/2014

Chartered Accountants profile In Nashik Tal – Nashik ,Dist – Nashik.

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3.4 Vision& Mission

Vision Statement Upload

We will become the Tax advisor of choice through the creation of an environment where we
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want to give of our best

Mission Statement

prime objective the provision of an integrated range of client focused services

that will exceed our client's expectations and assist them to improve the and reduce and
maintain Tax Liability

We are committed to creating a client focused culture and supporting our staff to achieve the
prime objective.

Our professional and local communities are an integral part of our ability to deliver on this
mission

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CHAPTER 4

THEORETICAL BACKGRUND

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4.1Objective for Income Taxes

The objective of income taxe on an accrual basis is to recognize the amount of current and deferred Upload
taxes payable or refundable at the date of the financial statements(a) as a result of all events that
have been recognized
What isin the financial statements and (b) as measured by the provisions of enacted
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tax laws. Other events not yet recognized in the financial statements may affect the eventual tax
consequences of some events that have been recognized in the financial statements. But that change
in tax consequences would be a result of those other later events, and the Board decided that the tax
consequences of an event should not be recognized until that event is recognized in the financial
statements.

4.2 The Basic Principles Income Taxes

To implement that objective, all of the following basic principles are applied:

While tax rules vary widely, there are certain basic principles common to most income tax systems.
Tax systems in Canada, China, Germany, Singapore, the United Kingdom, and the United States,
among others; follow most of the principles outlined below. Some tax systems, such as India, may
have significant differences from the principles outlined below.

4.3AN EXTRACT FROM INCOME TAX ACT, 1961

4.3.1 Tax Regime in India

The tax regime in India is currently governed under The Income Tax, 1961 as amended by The
Finance Act, 2019 notwithstanding any amendments made thereof by recently announced Union
Budget for assessment year 2019-20.

4.3.2Chargeability of Income Tax


As per Income Tax Act, 1961, income tax is charged for any assessment year at prevailing rates in
respect of the total income of the previous year of every person. Previous year means the financial
year immediately preceding the assessment year.
Basic Knowledge of Income Tax
According to Income Tax Act 1961, every person, who is an assessee and whose total income
exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates

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prescribed in the Finance Act. Such income shall be paid on the total income of the previous year in
the relevant assessment year.
Assessee means a person by whom (any tax) or any other sum of money is payable under the Upload

Income Tax Act, and includes –


(a) What
Every is Scribd?
person in respect of whom any proceeding under the Income Tax Act has been All Documents
taken for the assessment of his income or of the income of any other person in respect of
which he is assessable, or of the loss sustained by him or by such other person in respect
of which he is assessable, or of the loss sustained by him or by such other person, or of
the amount of refund due to him or to such other person;

(b) Every person who is deemed to be an assessee under any provisions of the Income Tax
Act.

(c) Every person who is deemed to be an assessee in default under any provision of the
Income Tax Act.

Where a person includes:-


o Individual

o Hindu Undivided Family (HUF) Association of persons (AOP) Body of Individual


(BOI) Company Firm

o A local authority and

o Every artificial judicial person not falling within any of the preceding categories.

Income tax is an annual tax imposed separately for each assessment year (also called the tax year).

Assessment year commence from 1st April and ends on the next 31 st March.

The total income of an individual is determined on the basis of his residential status in India. For
tax purposes, an individual may be resident, nonresident or not ordinarily resident.

10

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Types of Residents

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All
Assessees

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Resident Non Resident

Only Individual &


HUF

Resident & Ordinary Resident But Not


Resident Ordinary Resident

Figure 1 : Types of Residents

4.3.3Scope of Total Income


Under the Income Tax Act, 1961, total income of any previous year of a person who is a resident
includes all income from whatever source derived which:

• is received or is deemed to be received in India in such year by or on behalf of such person;

• accrues or arises or is deemed to accrue or arise to him in India during such year; or

• accrues or arises to him outside India during such year:

Provided that, in the case of a person not ordinarily resident in India, the income which accrues or
arises to him outside India shall not be included unless it is derived from a business controlled in or
a profession set up in India.

1. Total Income

For the purposes of chargeability of income-tax and computation of total income, The Income Tax
Act, 1961 classifies the earning under the following heads of income:

• Income fromSalaries

• Income from house property


• Capital gains

• Profits and gains of business or profession

• Income from other sources

Concepts used in Tax Planning

11

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2. Tax Evasion

Tax Evasion means not paying taxes as per the provisions of the law or minimizing tax by Upload

illegitimate and hence illegal means. Tax Evasion can be achieved by concealment of income or

What is
inflation of expenses orScribd?
falsification of accounts or by conscious deliberate violation of law. All Documents
Tax Evasion is an act executed knowingly willfully, with the intent to deceive so that the tax
reported by the taxpayer is less than the tax payable under the law.

3. Tax Avoidance

Tax Avoidance is the art of dodging tax without breaking the law. While remaining well within the
four corners of the law, a citizen so arranges his affairs that he walks out of the clutches of the law
and pays no tax or pays minimum tax. Tax avoidance is therefore legal and frequently resorted to.
In any tax avoidance exercise, the attempt is always to exploit a loophole in the law. A transaction
is artificially made to appear as falling squarely in the loophole and thereby minimize the tax. In
India, loopholes in the law, when detected by the tax authorities, tend to be plugged by an
amendment in the law, too often retrospectively. Hence tax avoidance though legal, is not long
lasting. It lasts till the law is amended.

4.3.4Tax Planning

Tax Planning has been described as a refined form of „tax avoidance‟ and implies arrangement of a
person‟s financial affairs in such a way that it reduces the tax liability. This is achieved by taking
full advantage of all the tax exemptions, deductions, concessions, rebates, reliefs, allowances and
other benefits granted by the tax laws so that the incidence of tax is reduced. Exercise in tax
planning is based on the law itself and is therefore legal and permanent.

4.3.5 Tax Management


Tax Management is an expression which implies actual implementation of tax planning ideas.
While that tax planning is only an idea, a plan, a scheme, an arrangement, tax management is the
actual action, implementation, the reality, the final result.
To sum up all these four expressions, we may say that:

12

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• Tax Evasion is fraudulent and hence illegal. It violates the spirit and the letter of the law.

• Tax Avoidance, being based on a loophole in the law is legal since it violates only the spirit of
the law but not the letter of the law. Upload

• Tax Planning does not violate the spirit nor the letter of the law since it is entirely based on the
What isofScribd?
specific provision the law itself. All Documents

• Tax Management is actual implementation of a tax planning provision. The net result of tax
reduction by taking action of fulfilling the conditions of law is tax management.

4.3.6 The Income Tax Equation


For the understanding of any layman, the process of computation of income and tax liability can be
outlined in following five steps. This project is also designed to follow the same.

• Calculate the Gross total income deriving from all resources.

• Subtract all the deduction & exemption available.

• Applying the tax rates on the taxable income.


• Ascertain the tax liability.
• Minimize the tax liability through a perfect planning using tax saving scheme .

4.4 COMPUTATION OF TOTAL INCOME

4.4.1 Income from Salaries

Incomes termed as Salaries:


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.

13

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Advance Salary:
Advance salary is taxable in the year it is received. It is not included in the income of recipient
again when it becomes due. However, loan taken from the employer against salary is not taxable. Upload

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Arrears of Salary: All Documents
Salary arrears are taxable in the year in which it is received.

Bonus:
Bonus is taxable in the year in which it is received.

Pension:
Pension received by the employee is taxable under „Salary‟ Benefit of standard deduction is
available to pensioner also. Pension received by a widow after the death of her husband falls under
the head „Income from Other Sources.
Profits in lieu of salary:
Any compensation due to or received by an employee from his employer or former employer at or
in connection with the termination of his employment or modification of the terms and conditions
relating thereto;

Any payment due to or received by an employee from his employer or former employer or from a
provident or other fund to the extent it does not consist of contributions by the assessee or interest
on such contributions or any sum/bonus received under a Keyman Insurance Policy.

Any amount whether in lump sum or otherwise, due to or received by an assessee from his
employer, either before his joining employment or after cessation of employment.

Allowances from Salary Incomes

Dearness Allowance/Additional Dearness (DA):


All dearness allowances are fully taxable City Compensatory

14

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Allowance (CCA):
CCA is taxable as it is a personal allowance granted to meet expenses wholly, necessarily and
exclusively incurred in the performance of special duties unless such allowance is related to the Upload

place of his posting or residence.

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Certain allowances prescribed under Rule 2BB, granted to the employee either to meet his personal
expenses at the place where the duties of his office of employment are performed by him or at the
place where he ordinarily resides, or to compensate him for increased cost of living are also
exempt.

House Rent Allowance (HRA):


HRA received by an employee residing in his own house or in a house for which no rent is paid by
him is taxable. In case of other employees, HRA is exempt up to a certain limit
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Entertainment Allowance:
Entertainment allowance is fully taxable, but a deduction is allowed in certain cases.

Academic Allowance:
Allowance granted for encouraging academic research and other professional pursuits, or for the
books for the purpose, shall be exempt u/s 10(14). Similarly newspaper allowance shall also be
exempt.
Conveyance Allowance:
It is exempt to the extent it is paid and utilized for meeting expenditure on travel for official work.

4.4.2 Income from House Property


Income owner of the propert:
House property consists of any building or land, or its part or attached area, of which the assessee 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.

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