RESEARCH PROJECT REPORT

ON
“ TAX PLANNING FOR SALARIED INDIVIDUALS ”

PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

AWARD OF
MASTER OF BUSINESS ADMINISTRATION
(AFFILIATED TO AKTU)

Submitted By: Under The Guidance of:

Dr. Vinay K Srivastava Mohit Geol
MBA-IV Sem.
Roll No. 2000380700109
(2020-2022)

INSTITUTE OF TECHNOLOGY AND SCIENCE

GHAZIABAD

1
 INSTITUTE OF TECHNOLOGY AND SCIENCE
(Approved by AICTE & Affiliated to Dr. A.P.J. Abdul Kalam Technical University, Lucknow)
Grand Trunk Road Mohan Nagar, Ghaziabad
[Link]

CERTIFICATE

This is to certify that Mr. Mohit Goel MBA (2020-2022 Batch) ,a student of Institute of
Technology and Science has undertaken the project on “Tax planning for salaried
individuals”. The project has been carried out by the student in partial fulfillment of the
requirements for the award of MBA, under my guidance and supervision.

I am satisfied with the work of Mr. Mohit Goel.

Faculty Mentor‟s Name

Dr. Vinay K Srivastava

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 DECLARATION

I, Mohit Goel , hereby declare that the project work entitled “Tax Planning For Salaried

Individuals” submitted towards partial fulfillment of requirements for the award of Masters in

Business Administration is my original work and the dissertation has not formed the basis for

award of any degree, associate ship, fellowship or any similar title to the best of my knowledge.

Date: (Signature of Student)

Mohit Goel

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 ACKNOWLEDGEMENT

Primarily I would like to thank God for being able to complete this project with success. Then I

hereby express my profound gratitude to all those respected people who supported me in the

completion of this project.

I would like to express special thanks to my academic mentor Dr. Vinay K Srivastava, whose

valuable guidance has been the ones that helped me patch this project and her instructions has

served as the major contributor towards the completion of the project.

Then I would also like to extend my gratitude to Director Management, [Link] Sekheri

for providing me all the facilities that was required.

Last but not the least I would like to thank my Parents and Friends who have helped me

with their valuable suggestions in various phases of the project.

Mohit Goel
MBA-IV Sem
Roll No.2000380700109

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 CONTENTS

[Link]. Title Page

No.

1. EXECUTIVE SUMMARY 7

3. CHAPTER-2 INTRODUCTION TO THE TOPIC 8-56

2.1 BASIC INFORMATION ABOUT TAX
2.2 INCOME TAX RETURN
2.3 RESIDENCE RULES
2.4 PERSONAL TAX RATES
2.5 TAX DEDUCTED AT SOURCE
2.6 ADVANCE TAX
2.7 TAXABLE HEADS OF INCOME TAX
2.8 INCOME EXEMPT FROM INCOME TAX
2.9TAX BENEFITS:
a) Deductions
b) Donations
c) Rebates
2.10 INCOME TAX E-FILING
2.11 BENEFITS OF EFILING
2.12 TYPES OF E-FILING
2.13 PROCESS OF EFILING
2.14 TYPES AND USES OF ITR FORMS
2.15 SOME IMPORTANT QUESTIONS

4. CHAPTER-3 OBJECTIVES OF THE STUDY 57

5. CHAPTER-4 RESEARCH METHODOLOGY 58

6. CHAPTER-5 ANALYSIS AND INTERPERATATION 59-66

7. CHAPTER-6 MY FINDINGS AND OBSERVATION 67

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8. CONCLUSION 68

9. MY LEARNINGS 69

10. BIBLIOGRAPHY 70

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 EXECUTIVE SUMMARY

This report emphasis on the tax planning for salaried individuals. The main
purpose of this report is to give every information about the financial planning for
a salaried individual. In this report we are going through the heads of income, i.e.
the five heads of income:

 Income from salary

 Income from house property
 Income from capital gains
 Income from professions and business
 Income from other sources

Apart from this the report states various sections like section 80C, section 80D,
section 80DD and various other deductions.

After all the heads of income and various sections, we will get to know about the
process of filing the income tax return, that how an individual files the return.
Along with this we will get to know different ways for a salaried individual to get
tax benefit through a proper tax planning or financial planning

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 BASIC INFORMATION ABOUT TAX

Taxes in India are of two types, Direct Tax and Indirect Tax.

 Direct Tax, like income tax, wealth tax, etc. are those whose burden falls directly on the
taxpayer.

 The burden of indirect taxes, like service tax, VAT, etc. can be passed on to a third party.

Income Tax is all income other than agricultural income levied and collected by the central
government and shared with the states.

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
prescribed in the finance act. Such income tax shall be paid on the total income of the relevant
previous year in the assessment year.

The total income of an individual is determined on the basis of his residential status in India.

INCOME TAX RETURN

• “Income Tax Return” is a term which is often used when we talk about income tax. It is a
way by which we pay the tax. When total annual income of a person ( including all
sources ) is more than maximum limitation ( At present it is Rs. 2,50,000/-) then that
person is liable to pay income tax.

• According to Income Tax Act 1961, every person, who is an assesse and whose total
income exceeds the maximum exemption limit, shall be chargeable to the income tax at
the rate or rates prescribed in the finance act.

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Residence Rules

An individual is treated as resident in a year if present in India

I. for 182 days or more during the relevant previous year or

II. for 60 days during the relevant previous year and 365 days during the preceding four
years. Individuals fulfilling neither of these conditions are nonresidents. (The rules are
slightly more liberal for Indian citizens residing abroad or leaving India for employment
abroad.)

A resident who was not present in India for 730 days during the preceding seven years or who
was nonresident in nine out of ten preceding yeas I treated as not ordinarily resident. In effect, a
newcomer to India remains not ordinarily resident.

For tax purposes, an individual may be resident, nonresident or not ordinarily resident.

Non-Residents and Non-Resident Indians

Residents are on worldwide income. Nonresidents are taxed only on income that is received in
India or arises or is deemed to arise in India. A person not ordinarily resident is taxed like a
nonresident but is also liable to tax on income accruing abroad if it is from a business controlled
in or a profession set up in India.

Capital gains on transfer of assets acquired in foreign exchange is not taxable in certain cases.

Non-resident Indians are not required to file a tax return if their income consists of only interest
and dividends, provided taxes due on such income are deducted at source.

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 Taxability of individuals is summarized in the table below

Status Indian Income Foreign Income

Resident and ordinarily resident Taxable Taxable

Resident but not ordinary resident Taxable Not Taxable

Non-Resident Taxable Not Taxable

Know how of Income Tax

 Income tax is levied on the 'total income' of the assessee.

 Income of the 'previous year' is taxed in the 'assessment year.'
 Income is classified and computed under five categories called 'heads of income.'
 The scheme of income tax is based on the principle 'pay as you earn.'
 One must pay his taxes in advance and by the due dates, in the prescribed percentages.
 Deferment in the payment of advance tax would result in the payment of interest.

The income tax basic scheme is explained in brief as:

 Income tax is levied on the 'total income' of the assessable entity which is computed
under the provisions of the Income tax Act, 1961.
 The income which are pertaining to the 'previous year' is taxed, but in the „assessment
year‟.
 Income tax is charged at the rates determined for the year in the Finance Act. But the
liability to pay ( tax ) is based on the principle 'pay as you earn.'

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 PERSONAL TAX RATES

 Resident Individual whose age was of less than 60 years in the relevant
previous year:

Taxable income Tax Rate

Up to Rs. 2,50,000 Nil

Rs. 2,50,000 to Rs. 5,00,000 5%

Rs. 5,00,001 to Rs. 10,00,000 20%

Above Rs. 10,00,000 30%

 Resident senior citizen whose age was of 60 years or more but less than
80 years at any time during the previous year:

4Taxable income Tax Rate

Up to Rs. 3,00,000 Nil

Rs. 3,00,000 - Rs. 5,00,000 5%

Rs. 5,00,001 - Rs. 10,00,000 20%

Above Rs. 10,00,000 30%

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  Resident super senior citizen, i.e., every individual, being a resident in
India, who is of the age of 80 years or more at any time during the
previous year:

Taxable income Tax Rate

Up to Rs. 5,00,000 Nil

Rs. 5,00,001 - Rs. 10,00,000 20%

Above Rs. 10,00,000 30%

Note : -
*An additional 4% Health & education cess is applicable on the tax amount calculated as above.

*A surcharge of 10 per cent of income tax is charged, where the total income exceeds Rs.50 lakh
up to Rs. 1 crore.

* A surcharge of 15 percent of income tax is charged, where the total income exceeds Rs 1 crore.

*Agricultural income is exempt from income-tax.

* A surcharge of 7% is charged, where taxable income is more than 1 crore But less than 10
crore.

* Asurcharge is charged , where taxable income is more than 10 crore.

TDS (Tax deducted at source):

This tax is deducted at the source of income, by the employer or the payer and paid to the
government. It includes salary, interest, commission and contract fees, rent, professional fees,
etc. This type of deduction is popularly known as TDS. Such tax is subject to certain limits and
certain conditions. For example if the earning up on fixed deposit is Rs. 5,000 in a bank, TDS at
10% and education cess at 4% i.e. a total of 10.4% will be deducted at the time of credit or at the
time of payment, whichever is earlier.

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Advance Tax:
Advance Tax is paid by the income earner during the previous year. The computing of the
liability of advance tax is done by estimating the 'total income' for the year, calculating the
surcharge and taking into consideration the rebate that will be available. The advance tax is
required to be paid in three installments.

Schedule of Advance Tax:

A On or before 15 june Not less than 15% of the advance tax.

On or before 15
B Not less than 45% of advance tax.
September

On or before 15 Not less than 75% of advance tax as reduced by amount paid
C
December earlier.

On of before 15 Full advance tax as reduced by the amount or amounts if any,

D
March paid in earlier installments.

If the assessee does not pays the advance tax as described above, an interest of 1% is charged per
month for 3 months for the deferment of advance tax installment. If the total amount of advance
tax is not paid on or before 15 March, an interest of 1% is charged for one month.

Further, if the total advance tax paid is less than 90% of the advance tax payable, the interest at
1% per month is charged for the shortfall in the advance tax paid for the period commencing
from 1 April of the assessment year and ending on the date of payment or assessment whichever
is earlier.

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Income Tax Rates Across the World

Country Personal Income Tax Rate

Australia 0% - 47%

Canada 19% - 54%

Estonia 20% - 20%

Denmark 39.85% - 55.85%

Hong Kong 0% - 15%

India 0% - 42.7%

Israel 11.5% - 50%

Malaysia 0% - 29%

Mexico 1.92% - 35%

Russia 13% - 47%

TAXABLE HEADS OF INCOME TAX

The total income of a person is divided into five heads, viz., taxable. Which is shown in given
diagram.

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 • Salary Income:-
In certain cases, an employee can claim both HRA (house rent allowances) as
well as interest on housing loan.

•House property Income :-

if interest paid for property given on rent is less than taxable rent (after standard
deduction -30%). Such loss can be set off against income from other heads including income
from salary.

• Income from capital gain:-

surplus from derivative contracts is non- speculation. Archaeological collection,
Drawings, Painting, Sculptures, Any other work of Art. Thus, now any surplus received from
sale of these articles would be liable to tax under the head capital gain.

• Business income :-
Any type of income received from business.

•Income from other sources:-

Dividend, Commission, lotteries, crossword puzzles, races including horse races,
card games, any sort or from gambling or betting.

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Individual Heads of Income:

Income from Salary:

COMPONENTS OF SALARY:

1 Basic salary.

2 Dearness allowance/ City allowance(portion or some percent).

3 Shift allowances.

4 Bonus/incentive.

All income received as salary under Employer-Employee relationship is taxed under this head.
Employers must withhold tax compulsorily, if income exceeds minimum exemption limit, as Tax
Deducted at Source (TDS), and provide their employees with a Form 16 which shows the tax
deductions and net paid income. In addition, the Form 16 will contain any other deductions
provided from salary such as:

1. Medical reimbursement: Up to Rs. 15,000 per year is tax free if supported by bills.
(Company pays Fringe Benefit Tax on this amount)
2. Conveyance allowance: Up to Rs. 1600 per month is tax free if provided as conveyance
allowance. No bills are required for this amount.
3. Professional taxes: Most states tax employment on a per-professional basis, usually a
scabbed amount based on gross income. Such taxes paid are deductible from income tax.
4. House rent allowance: the least of the following is available as deduction
1. actual HRA received
2. 50%/40%(metro/non-metro) of 'salary'
3. rent paid minus 10% of 'salary'. Salary for this purpose is basic+DA forming
part+commission on sale on fixed rate.

Income from salary is net of all the above deductions.

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Income From House property:

 Income from House property is computed by taking what is called Annual Value. The
annual value (in the case of a let out property) is the maximum of the following:

 Rent received
 Municipal Valuation
 Fair Rent (as determined by the I-T department)

If a house is not let out and not self-occupied, annual value is assumed to have accrued to the
owner. Annual value in case of a self occupied house is to be taken as NIL. (However if there is
more than one self occupied house then the annual value of the other house/s is taxable.) From
this, deduct Municipal Tax paid and you get the Net Annual Value. From this Net Annual Value,
deduct :

 30% of Net value as repair cost (This is a mandatory deduction)

 Interest paid or payable on a housing loan against this house

In the case of a self occupied house interest paid or payable is subject to a maximum limit of
Rs2,00,000 . For all non self-occupied homes, all interest is deductible, with no upper limits.

The balance is added to taxable income.

 Vacant plot is not considered as house property.

 The property which is registered on your name you have to claim deduction only on that
property.

House property is considered as self occupied when:

1 The person itself stayed in that house.

2 It remains vacant.

3 If the property is not given on rent( deemed let out).

Income from Business or Profession

o carry forward of losses

An example .. An architect works out of home and co-ordinates work for his clients. All the
following expenses would be deductible from his professional fees.

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  he uses a computer,
 he travels to sites in his car,
 he has a peon to help him collect payments
 He has a maid who comes in daily
 part of the society maintenance bills
 entertainment expenses incurred..
 books and magazines for his professional practice.

The income referred to in section 28, i.e, the incomes chargeable as "Income from Business or
Profession" shall be computed in accordance with the provisions contained in sections 30 to 43D.

The computation of income under the head "Profits and Gains of Business or Profession"
depends on the particulars and information available.

Classifying Income Under Profits and Gains of Business or Profession:

In case you weren‟t able to find a types of income under the list above, the following conditions
can be used to verify if an income would fall under Profits and gains of business or profession.
According to Section 28, the following are the main clause that requires an income tot be
charged under profits and gains of business or profession:

1. There should be a business or profession.

2. The business or profession should have been carried on by the assessee.
3. The business or profession should be carried on for sometime during the previous year.
4. The charge is in respect of the profits and gains of the previous year of the business or
profession.
5. The charge extends to any business or profession carried on.

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 EXPENSES NOT DEDUCTIBLE FROM
BUSINESS/PROFESSIONINCOME

1. Expenditure on any type of advertisement of political party.

2. Any interest, royalty, fees for technical services or other sums chargeable under this act, which
is payable out side India or in India to non-resident or a foreign company on which tax has not
been deducted or after deduction, not deposited in prescribed time.
3. Any interest, commission, rent, royalty, professional or technical fees paid or payable to any
resident of India or payment to contractor or sub-contractor on which TDS is not deducted, or if
deducted then not deposited before the due date of filing the return.
4. Any tax calculated on the basis of profit of business.
5. Any amount of Wealth Tax paid.
6. Any payment of salaries payable outside India or to a non-resident on which tax is not deducted.
7. Any tax actually paid by an employer on any income by way of perquisites, on behalf of the
employee.
8. Any remuneration paid to non working partner.
9. Any provision for the payment of gratuity to the employees.

EXPENSES WHICH ARE DEDUCTIBLE ON ACTUAL PAYMENT ONLY

Following expenses will be allowed if these expenses have been paid before or on due date or
before filing of income tax return:-

1. Any tax, duty, cess or fees by whatever name called.

2. Contribution to provident fund, ESI premium, gratuity fund or other funds for welfare of
employees.
3. Bonus or commission or leave encashment payable to employees.
4. Interest on loan from public financial institutions, state financial corporation or from scheduled
bank.

Income from Capital Gains

Transfer of capital assets results in capital gains. A Capital asset is defined under section 2(14) of
the I.T. Act, 1961 as property of any kind held by an assessee such as real estate, equity shares,
bonds, jewellery, paintings, art etc. but does not include some items like any stock-in-trade for
businesses and personal effects. Transfer has been defined under section 2(47) to include sale,
exchange, relinquishment of asset, extinguishment of rights in an asset, etc. Certain transactions
are not regarded as 'Transfer' under section 47.

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 For tax purposes, there are two types of capital assets: Long term and short term. Long term asset
are held by a person for three years except in case of shares or mutual funds which becomes long
term just after one year of holding. Sale of such long term assets gives rise to long term capital
gains

Income from Other Sources:

This is a residual head, under this head income which does not meet criteria to go to other heads
is taxed. Also there are also some specific incomes which are to be taxed under this head.

1. Income by way of Dividends

2. Income from horse races
3. Income from winning of lotteries
4. Income from winning bull races
5. Any amount received from key man insurance policy.
6. Any sort or from gambling or betting
7. Income from commission
8. Income from crossword puzzles

FEW EXAMPLES OF INCOME WHICH ARE TREATED AS INCOME

FROM OTHER SOURCES AS PER INDIAN INCOME TAX ACT:

1. Any amount received as rent from plant, machinery, furniture let on hire.
2. Any income from crossword puzzles, horse races, game, card games, television game, shows and
other entertainment programmes in which people win prizes and lottery etc.
3. Rent from sub-letting.
4. Dividend except which is exempt u/s 10 of Indian income tax act.`
5. Any contributions received by the employer from his employee and if that amount is not shown
as business income then it will be treated as income from other sources.
6. Interest received from banks on saving bank accounts.
7. Interest from Post Office Saving Accounts.
8. Interest from Monthly Income Scheme from Post Office.
9. Pension received from Life Insurance Corporation under LIC pension scheme.
10. Interest from recurring deposit accounts from bank or post offices.
11. Interest received from banks on fixed deposits.
12. Interest received from banks on accounts other than saving bank accounts and fixed deposit
accounts.

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13. Interest received against personal loans.
Consideration for Calculating Tax under „Income from Other Sources‟

The income chargeable to tax under the head „Income from Other Sources‟ is computed after
considering the deductions available u/s 57 of Income Tax Act as given below:

Dividend or Interest Income on Securities:

Any reasonable sum paid by way of commission or remuneration to a banker or any other person
for realising such dividend or interest on behalf of the assessee

Note: It does not include the dividend on which the domestic company has paid dividend
distribution tax.
Further, Dividend shall be taxable at 10% if the aggregate amount received is exceeding Rs
10,00,000 during a financial year.

Income from letting of machinery, plant or furniture with or without building:

Rent, rates, taxes, repairs, insurance and depreciation etc. relating to such machinery, plant
furniture or building.

Income from Family Pension:

33.5% of actual pension received or Rs 15,000 whichever is less.

Any other Expenses for Earning Income:

Any other expenditure (not being capital expenditure) laid out or expended wholly and
exclusively for making or earning such income.

However, following conditions to be satisfied for claiming deduction u/s 57(iv)

 The expenditure should be incurred for earning such income only.
 It should not be capital expenditure.
 It should not be a personal expenditure.
 It should be incurred in the relevant financial year only.

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Income Exempt from Tax:

Sections 10,10A, 10AA, 10B, 10BA, and 13A deal with income which does not form part of an
assessee's total income. While section 10 provides a list of income absolutely exempt from tax,
sections 10A, 10AA, 10B, 10BA, and 13A deal with specific exemptions available to newly
established industrial undertakings in free trade zones, and political parties. These exemptions
are provided from social, political, Constitutional considerations, for avoiding double taxation,
on the basis of casual and non-recurring nature ,on the basis of non-residents and non-citizens
status, on the basis of Certain specific securities, bonds, certificates, funds and the like, on the
basis of Education, science, research, achievements, rewards, sports, charity, on the basis of
certain types of bodies, funds and institutions, Subsidies to promote business, and international,
economic, and other considerations. Sikkim is the only state of India where citizens do not pay
income tax. Residents of Sikkim are eligible for this exemption but excluding the non-Sikkimese
spouse of a Sikkimese.

Agricultural Income [Section 10(1)] Eligible Assesses :- All assesses Exempt income :-
Agricultural income Other points :- Agricultural income means as it is defined in Section 2(1A)
In case of individual, HUF, AOP, BOI, unregistered firms and artificial juridical persons,
agricultural income is to be aggregated for the purpose of determining the rate of tax on Non-
Agricultural income and they would get tax rebate or relief.

Dividends

Dividend income (as referred u/s 115-O of the [Link] Act) paid by Companies and Mutual Funds
are exempt from tax. A 15% dividend distribution tax and surcharge of 3% is paid by companies
before distribution. Equity mutual funds (with more than 65% of assets invested in equities) do
not pay a dividend distribution tax, though other funds do. Liquid and Money Market funds pay
25% dividend distribution tax.

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Other Exempt Income

The Indian Income tax act specifically exempts certain income from tax:

 Money received from an Insurance company as proceeds of an insurance policy (by way
of an insurance claim, or by maturity) is generally exempt. However there are three types
of payments under life insurance policy that are not tax free . These are :

 any sum received under sub-section (3) of section 80DD or sub-section (3) of
section 80DDA - this refers to specific policies for disabled dependants; or
 any sum received under a Keyman insurance policy; or
 any sum received under policies issued on or after 1 April 2018 where premium
paid is greater than 1/5th the sum assured

Maturity proceeds of a Public Provident Fund (PPF) account

Tax Benefits - Deductions, Rebates & Donations:

Rebates:

Section 80C

Section 80L used to allow deduction of interest earned on, say, a National Savings Certificate or
a bank deposit up to a limit of Rs 12,000. But now all these are gone .In their place has come
Section 80C -- "u/s 80CCC, & u/s 80CCD", as the Finance Bill puts it. Thus, the new Section
80C of the Income Tax Act proposed in Union Budget gives you a bigger tax break than what the
current regime offers.

 Deduction in respect of Life Insurance Premium, Contribution to Provident Fund, etc.

 Rs 1 lakh can be invested under this section without any individual sub-limits except in
the case of Rs 10,000 in pension funds.
 Sections 88, 80CCC and 80CCD is clubbed in.

Schemes eligible for Section 80C benefits

 PPF
 ELSS - Mutual Funds
 NSC
 KVP
 Life Insurance
 Senior Citizen Saving Scheme 2004
 Post Office Time Deposit Account

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Note : - Section 80CCC is for deduction in respect of contribution to certain
Pension Funds. Section 80L is for deductions in respect to Interest on certain
Securities, Dividends, etc

Following benefits will continue irrespective of changes

 Interest paid on housing loan for self-occupied house property.

 Medical insurance premium. (Additional deduction of Rs 15000 u/s 80D to an individual
paying medical insurance premium for his/her parent(s)
 Specified expenditure on disabled dependant.
 Expenses for medical treatment for self or dependant or member of an HUF.
 Deduction in respect of interest on loans for pursuing higher studies - Section 80E.
 Deduction to person with disability

Section 10(33)

Dividends from mutual funds are fully exempt from income tax under Section 10(33). Equity
funds (schemes that invest 50 per cent of their funds in equity) are also exempt from dividend
tax. This means that unlike companies, they do not have to pay tax at the rate of 10.2 per cent on
the dividend that they distribute.

Section 88
Upto 31 March 2005, rebates were available on the tax payable under three sections.

According to the section, 30 per cent or 20 per cent or 15 per cent of the amount invested in
certain schemes (schemes referred in Section 80C) was available as a rebate on the tax payable.

 30 per cent of the amount invested was available as rebate only if the salary income of
the individual was less than Rs. 1 lakh and if it constituted 90 per cent or more of the
assessee's gross total income.
 20 per cent of the amount invested was available as rebate if the gross total income of the
individual was less than Rs 1.5 lakh and the case did not fall under the above mentioned
case.
 If gross total income was more than Rs. 1.5 lakh but less than Rs 5 lakh of the individual,
a rebate of 15 per cent of the amount invested was available.
 If gross total income was more than Rs 5 lakh of the individual, then there is no rebate.

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Section 88B:

88B. Rebate of income-tax in case of individuals of sixty-five years and above.—An assessee,
being an individual resident in India, who is of the age of sixty-five years or more at any time
during the previous year and whose gross total income does not exceed fifty thousand rupees,
shall be entitled to a deduction from the amount of income-tax (as computed before allowing the
deductions under this Chapter) on his total income with which he is chargeable for any
assessment year, of an amount equal to ten per cent, of such income-tax.

Section 89 (1) :
This is available to an employee when he receives salary in advance or in arrear or when in one
financial year, he receives salary of more than 12 months or receives 'profits in lieu of salary'
W.e.f. 1.6.89, relief u/s 89(1) can be granted at the time of TDS by employees of all companies
co-operative societies, universities or institutions as well as govt./public sector undertakings. The
relief should be claimed by the employee in Form No. 10E and should be worked out as
explained in Rule 21A of the Income Tax Rules.

Deductions:

Section 80CCD

The deduction for contributions to a pension scheme of the Central Government is available only
to those individual who have been employed by the central government on or after 1st January
2004, and will be allowed for any amount deposited in such a pension scheme. But, in this case,
deduction of more than 10 per cent of the employee's salary shall not be allowed.

The contributions to the fund are also made by the Central Government. Deduction will be
available for any contribution which is made by the Central Government or 10 per cent of the
employee's salary, whichever is less.

When the individual or his nominee receives any amount out of the scheme which meets the
following descriptions, it shall be taxed in the hands of the recipient.

 On closure/ opting out of the pension scheme; or

 As pension received from the annuity plan.

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The term 'salary' here includes Dearness Allowance (if considered for retirement benefits), but it
excludes other allowances and perquisites.

The aggregate deduction under the Sections 80C, 80CCC and 80CCD cannot exceed Rs 1,50,000
lakh as whole.

Section 80D

You can avail the tax deduction under section 80D if you have paid any premium on mediclaim
policy under section 80D taken for:
 Yourself
 Your spouse
 Dependent children
 Your parents (parents need not be dependent on you)

Maximum Deduction Limit u/s 80D for AY 2018-19

You can also claim tax deduction maximum up to Rs. 5,000 for your expenses on preventive
health check-up within the overall limit of Rs. 60,000.

26
 Summary of Deductions u/s 80D for Assessment Year 2018-19 (FY18-20)

Deductions under section 80D

Eligible deduction limits (up to Rs.)

Total eligible
deduction limit
Medical Insurance Premium paid in
under section 80D
respect of
Situations based on age (up to Rs.)
(including Rs. 5,000
Medical Insurance on preventive health
Parents (whether
Premium paid in checkup)
dependent or not)
respect of

No one has attained age of 60

25,000 25,000 50,000
Years

You and your family is less than

60 years & Parents are above 60 25,000 30,000 55,000
years of age

You and your parents have

attained the age of 60 years and 30,000 30,000 60,000
above

Note:
To claim deduction under this section health insurance premium should always be paid by any
mode other than cash but medical or preventive health check-up expenses can be paid in cash.
Section 80E

Under this section, deduction is available for payment of interest on a loan taken for higher
education from any financial institution or an approved charitable institution. The loan should be
taken for either pursuing a full-time graduate or post-graduate course in engineering, medicine or
management, or a post-graduate course in applied science or pure science.

Eligible candidates for deduction under section 80E

 Only individuals who pay interest on education loan can claim the benefit. The tax benefit
is not available to HUF.

27
  The benefit can be claimed by the parent as well as the child, which means that the person
who pays the education loan whether parent or child can start claiming this deduction.
 Deduction is available on education loan taken for self, spouse and children or someone for
whom the individual is a legal guardian.

Qualifying loan
 In order to get tax deduction, loan must be taken from a financial institution or charitable
institution recognized by central government.
 Loan taken from family, friends and relatives does not qualify.
 Tax benefit can be claimed on a loan taken for education anywhere in the world. It means
that education loan taken to pursue higher education in India as well as abroad qualifies for
deduction.
 Loan should be taken for higher studies which means any full time graduate or post
graduate course. Full time courses which can be pursued after 10+2 are eligible for it.

Deduction amount under section 80E

 The deduction amount is only the interest paid on the loan taken for higher studies and there
is no upper limit. You can get tax benefit on entire amount of interest paid but not the
Principal amount.
 Deduction is only available if interest is paid out of income chargeable to tax (i.e.,
deduction under this section cannot exceed the taxable income).

Deduction period

 The maximum period allowed to claim deduction is up to 8 years starting the year in which
you start repaying the interest on the loan or till the time interest is paid fully, whichever is
less.
Section 80U
It is deduction in the case of a person with a disability. An individual who is suffering from a
permanent disability or mental retardation as specified in the persons with disabilities (Equal
Opportunities, Protection of Rights and Full Participation) Act, 1995 or the National Trust for
Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
Act,

28
The assessee should furnish a certificate from a medical board constituted by either the Central
or the State Government, along with the return of income for the year for which the deduction is
claimed.

For deduction under section 80U, individuals or persons with disability are
categorized into two types:
 Person with disability:
 A person with disability means the person is suffering from at least 40% of a disability. If
an individual has at least 40% of a disability then he is eligible for a deduction of Rs.
75,000.

 Person with severe disability:

A person with disability means the person who is suffering from at least 80% of a disability. If
an individual has severe disability (i.e., 80% or more of a disability) then he is eligible for a
deduction of Rs. 1,25,000.

For deduction under section 80U, individuals or persons with disability are
categorized into two types:
 Person with disability
 A person with disability means the person is suffering from at least 40% of a disability. If
an individual has at least 40% of a disability then he is eligible for a deduction of Rs.
75,000.
 Person with severe disability:
 A person with disability means the person who is suffering from at least 80% of a
disability. If an individual has severe disability (i.e., 80% or more of a disability) then he is
eligible for a deduction of Rs. 1,25,000.

Deduction
Category
allowed

Disabled person (40% disability) Rs. 75,000

Severely disabled person (80% disability) Rs. 1,25,000

29
Section 80GG
Under this section a non-salaried person or a salaried person, if, not getting house rent allowance,
he/she can claim to the deduction for the rent he pays for a residential accommodation. The
deduction available is least of the following:

 Rent paid in excess of 10 per cent of total income.

 25 per cent of total income.
 Rs 5,000 per month.

The total income of the individual is computed after reducing the amount deductible under other
sections, receipts exempt from tax, and long-term & short-term capital gains taxable at
concessional rates.

To claim benefits under this section, one must satisfy the following conditions:

 The individual, who is an employee, should not receive HRA or any equivalent allowance
from his employer as salary.
 The employee, his wife or his minor child should not have the ownership of the property
where he resides.
 If the employee is part of a HUF, he or his family should not own the place of his residence.
 In case the employee owns a place other than his rented place of accommodation then he
should not be claiming tax benefit on such property as self-occupied property. Such
property would be deemed to be let-out.

Section 80GGA
Any donation made for scientific research or rural development is eligible for deduction under
section 80GGA of the Income Tax Act.

Eligibility
 Deduction u/s 80GGA can be claimed by all individuals except those with income from
business/profession.

 Individuals with income from business or profession can claim deduction for the same u/s
35.

30
Mode of donation

 Contributions can be made in the form of cash, cheque or draft. However, cash donations
made in excess of Rs. 10,000 are not eligible for deduction.

The following institutions can get you 100% deduction on the amount donated
to them by you:

 Donation made to an approved Scientific Research Association, university, college, or other

institution to be used for scientific research.
 Donation made to an approved university, college or other institution for statistical research
or research in social science.
 Donation made to an association or institution engaged in any approved programme for
rural development, or which is engaged in training of persons for implementation of rural
development programmes, or to a notified rural development fund or to the notified urban
poverty eradication fund.
 Donation made to a public sector company or a local authority, or to an association or
institution approved by the National Committee, for carrying out any eligible project.
Section 80GGC
Under section 80GGC, any donation made to political parties is exempt from tax if it satisfies
certain conditions.

Eligibility

 Deduction u/s 80GGC is only available to an assessee (including individuals), being any
person other than local authority and artificial juridical person under section 80GGC. (i.e.,
non-corporate assessees). Assessee should not be an Artificial Juridical Person who
receives funds from the government.
 Corporates cannot avail deduction under this section, they can claim similar deduction u/s.
80GGB

Deduction limit
 Maximum deduction allowed under section 80GGC is 100%. It means that your whole
contribution is fully eligible for tax deduction.

31
Mode of contribution
 To be eligible for tax deduction, the contribution should not be made in the form of cash.
Donation made in any other form is eligible for deduction.

Donation made to following entities is eligible for deduction

Donations made to the following two types of entities qualifies for 100%
deduction:
 Donation made to an electoral trust.

 Donation made to a political party registered under section 29A of the Representation of the
People Act, 1951 (43 of 1951).
INCOME TAX E-FILING

E-filing of Tax Returns

• The process of electronically filing Income tax returns through the internet is known as e-
Filing.
• It is mandatory for Companies and Firms requiring statutory audit u/s 44AB to submit the
Income tax returns electronically for AY 2018-19.
– Any Company/Firm requiring statutory audit u/s 44AB return submitted without a
e-Filing receipt will not be accepted.
• e-filing is possible with or without digital signature.

The Income Tax Department is keen to encourage efiling of IT returns by all taxpayers in view
of the following benefits to taxpayers.

 Anywhere-Anytime Filing
 No long queues
 No Personnel Interface
 Quick Processing
 Accurate data in return

Paid taxes, made your tax saving investments... now get geared up for filing income tax returns
as the month of July is on the horizon and the time has come when one is supposed to file IT
returns.

32
In the year 2007 the Income Tax Department of India took many initiatives such as training
TRPS, launching saral forms in a new avatar and so on for making tax filing convenient and
handy for the citizens.

In this e-age when ICT is successfully intervening in so many fields and providing services from
online banking to online news, online mutual fund investments to online buying and selling, the
Income Tax Department of India launched the Electronic Filing of income tax returns.

Yes, using the e-filing process one can file in tax returns just within a few clicks at any time of
the day and that too without any hassles. Using this technology all you have to do is fill the form
and submit it, online or offline.

MORE ABOUT THE E-FILING PROCESS WORK

The e-filing process is really easy and takes a very little time and all you have to do is fill up
your tax return form online provided and the other required information about income,
expenditure and savings. Filing tax returns online is the easiest and the simplest method and all
one needs is to log on and follow the simple instructions.

For e- filing process one needs to have a software application that generates the income tax form,
which is available at the Income Tax Department website.

Benefits of e-Filing:

One of the foremost benefits of electronic filing is the facility of anywhere / anytime filing, and
one can just file returns anytime of the day or night. Other than this, online tax returns are
processed much faster than paper returns and the tax is worked out automatically as the payee
completes the form. With this the payee also gets the acknowledgement slip immediately. Also
online filing is a safe and secure mode.

33
 TYPES OF E-FILING

 There are three ways to file returns electronically.

34
  Option 1: Use digital signature, in which case no further action is required.

 Option 2: File without digital signature, in which case ITR-V form is to be filed with the
department. This is a single page receipt cum verification form.

Option 3: File through an e-return intermediary who would do eFilingand also assist the
Assessee file the ITR -V Form.

35
36
Documents required for e-filing

• Form No. 16 (for Tax deducted by employers)

• Form No. 16A

• Account statements of bank accounts

• Property details

• Sale and purchase of investments / assets

• Details of tax payments made

• PAN card photo copy

• Birth date

• TAN number

• Bank A/c no

• Bank details – MICR code, Type of A/c.

37
PROCESS OF E-FILING

38
12 Step Process for Filing Tax Returns

Whether you wish to go in for the quick e-filing process or manually file your income tax
returns, here is a helpful guide to assist you in completing and submitting this vital document by
yourself.

1) Go to the website [Link]

39
2) Click the link eFile Income Tax Return at the top left corner of the home
page

3) Select the Correct Form –

There are two income tax forms for salaried individuals. ITR-1 is for those who derive their
income from salary, pension or interest while ITR-2 is for income from capital gains, house
property and other sources. Those who wish to submit their tax returns manually may download
the pdf forms - External website that opens in a new window from here. These forms need to be
printed, filled by hand and signed before submitting to your local income tax office.

For Individuals, HUF (Hindu Undivided Families)

Select appropriate Income Tax Return ITR-1 ITR-2 ITR-3 ITR-4

(ITR) Preparation Software
Individual Individual Individual Individual

& HUF & HUF & HUF

1 Income from
Salary/Pension ▪ ▪ ▪ ▪

2 Income from Other

Sources (only Interest
income or Family ▪ ▪ ▪ ▪
Pension)

3 Income/Loss from
Other Sources ▪ ▪ ▪

4 Income/Loss from
House Property ▪ ▪ ▪

5 Capital Gains/Loss on
sale of ▪ ▪ ▪
investments/property

40
 6 Partner in a partnership
Firm ▪ ▪

7 Income from
Proprietary ▪
Business/Profession

For Association of Persons (AoP), Body of Individuals (BoI), Local Authority,

Companies, Trusts, Fringe Benefit Tax (FBT) Return
Select appropriate Income Tax Return ITR-5 ITR-6 ITR-7 ITR-8
(ITR) Preparation Software
Firms, AoP, Companies Trusts Only
BoI, LA FBT

1 Income/Loss from Other

▪ ▪ ▪
Sources
2 Income/Loss from House
Property
▪ ▪ ▪

3 Capital Gains/Loss on
sale of ▪ ▪ ▪
investments/property
4 Income/Loss from
Business ▪ ▪ ▪

5 Fringe Benefit Tax

▪ ▪ ▪ ▪

ITR-7 will not be available for e-Filing

41
WHO CAN USE WHICH FORM

ITR-1
This Form can be used by an individual whose total income during the previous year i.e.,
financial year 2008-09 includes income chargeable to income-tax under the head “salaries” or
income in the nature of family pension as defined in the Explanation to clause (iia) of section 57
but does not include any other income except income by way of interest chargeable to income-
tax under the head “income from other sources”. There should not be any exempt income other
than agriculture income and interest income. It may please be noted that a person who is entitled
to use this form shall not use Form ITR-2. Further, a person in whose income the income of other
person like his/ her spouse, minor child, etc. is to be clubbed is also not entitled to use this form.

ITR-2
This Form can be used by an individual or a Hindu Undivided family whose total income does
not include any income chargeable to income-tax under he head “Profits or gains of business or
profession”. It may please be noted that a person who is entitled to use Form ITR-1 shall not use
this form. Further, a person who is partner in a firm is required to use Form ITR-3. In case a
partner in the firm does not have any income from the firm by way of interest, salary, etc. and
has only exempt income by way of share in the profit of the firm shall not use Form ITR-2.

ITR-3
This Form can be used a person being an individual or a Hindu Undivided family who is a
partner in a firm and where income chargeable to income-tax under the head “Profits or gains of
business or profession” does not include any income except the income by way of any interest,
salary, bonus, commission or remuneration, by whatever name called, due to, or received by him
from such firm. In case a partner in the firm does not have any income from the firm by way of
interest, salary, etc. and has only exempt income by way of share in the profit of the firm shall
use this form only and not Form ITR-2.

ITR-4
This Form can be used by a person being an individual or a Hindu Undivided family who is
carrying out a proprietary business or profession.

ITR-5

42
This Form can be used a person being a firm, AOP, BOI, artificial juridical person referred to in
section 2(31)(vii), cooperative society and local authority. However, a person who is required to
file the return of income under section 139(4)(a) or 139(4)(a) or 139(4)(b) or 139(4)(c) or
139(4)(d) shall not use this form.

ITR-6
This Form can be used by a company, other than a company claiming exemption under section
11

ITR-7
This Form can be used by persons including companies who are required to furnish return under
section 139(4A) or under section 139(4B) or under section 139(4C) or under section 139(4D).

ITR-8
This Form is applicable in case of a person who is not required to furnish the return of income
but is required to furnish the return of fringe benefits

4) Use of Return Preparation Software –

Those citizens who wish to avail the e-filing system need to download the Return Preparation
Software - External website that opens in a new window for each ITR form. This software is an
excel file that requires one to type in personal details as well as financial information from TDS
certificates, bank statements, deductions made and interest statements.

5) Generating an XML file –

After keying in the details, check once for accuracy. After you are satisfied, click the 'Generate'
button to create your tax return in XML format. This format helps in sharing of structured data
across different information systems. Save this XML file on your computer.

43
6) Register –

The next step requires you to Register at the Income Tax website - External website that opens
in a new window. Your registered Permanent Account Number (PAN card) has to be entered as
your username.

7) Login –

After registering, enter your user id and password to login. Click on the relevant form on the left
panel and select 'Submit Return'.

8) Upload XML –

Browse to select the XML file, which you had generated and saved in Step 3. Click on the
'Upload' button to upload the file.

9) Acknowledgement –

After the file is successfully uploaded, acknowledgement details or the ITR-V Form will be
displayed. Take a printout of this acknowledgement for your records.

44
10) Digital Signature –
If your income tax return was digitally signed, then no further paperwork or visit to the income
tax office is needed. Here is some information about how to get a digital signature - External
website that opens in a new window

Instructions for filling up FORM ITR-V

1. Rule 12(3)(iii) of the Income-tax Rules, 1962 provides that any assessee can file a return of
income electronically without the use of a digital signature. In such cases only an
acknowledgement needs to be filed with the Department physically by the assessee.

45
 2. Once a return of income is filed electronically on successful transmission of the data, Form
ITR-V duly filled shall be generated by the Income-tax Department‟s server to the assessee. This
ITR-V will also contain the acknowledgement number of electronic transmission and the date of
the transmission as an evidence of filing for the benefit of the assessee. Please down load a copy
of such duly filled Form and verify under your signature in the space provided. In case the return
was prepared by a Tax Return Preparer (TRP), the particulars of TRP be also filled and this
verification form be countersigned by the TRP.

3. This acknowledgement in Form ITR-V duly signed by the assessee needs to be filed
physically (in duplicate) with the concerned Assessing Officer. One copy of this
acknowledgement would be returned back to the assessee for his record.

4. The codes for the form number and the status of the assessee shall be generated electronically
by the Department‟s server.

11) Verification –

If your return is not digitally signed, then you need to print and fill up the verification part of the
acknowledgement cum verification form (ITR-V). This has to be signed and submitted to the
local Income Tax Office within 15 days to complete the e-filing process.

12) Additional Assistance –

In case you require any more help in filing the paper copy of the return, please contact the Public
Relations Officer at your local Income Tax Office. One may also phone the AayakarSampark
Kendra (ASK) call centre at 124-2438000 or email at ask@[Link].

Frequently Asked Questions

1 Who is liable to file the income-tax return ?

2 What is the assessment year ?

3 What are the due dates for filing of income tax returns where primary source of income & 'salary' ?

46
4 Which is the prescribed form for filing of income tax returns for assesses having income from salary ?

5 What are various heads of income ?

6 How to pay the tax under the income tax act ?

7 What are the rates of income tax?

8 How is the penal interest calculated?

9 How is interest calculated for late or non-furnishing of return ?

10 If the tax payer fails to pay 90% tax plus applicable interest(s), then how is interest for short payment
of such advance-tax calculated?

11 How is interest for deferment of advance-tax calculated?

12 What are the important points to remember while filing the income tax return?

13 Why is father's name even in the case of married lady accesses to be given in the verification portion
of the return?

14 Who can verify and sign the income-tax return?

15 If the return is not signed by the proper person or if it is unsigned, what is the legal implication?

16 Where to file the income tax return?

17 Where to deliver the income-tax return?

Who is liable to file the income-tax return?

When the total income from all sources of income of any person exceeds the maximum amount
which is not chargeable to income-tax in any previous year ending on 31st March then that
person is liable to file the Income Tax Return.

Section 139(1) of the Income-tax Act has been amended w.e.f. AY 97-98 with a view to bring
larger number of persons in the tax net. In order to increase the tax-base now any person who

47
satisfies any one of the six conditions viz. is owner of a vehicle, or, occupies specified floor area
of an immovable property or incurs expenditure for himself or any other person on foreign-travel
or subscribes to a telephone or Credit Card or is a Club member, then he is required to file a
return.

Besides such persons, any other person who is to claim a refund, or carry forward losses (for
example loss under the head 'Income from property') or who seeks any other benefit (for
example, a deduction income of a blind individual) may also file the Income-Tax Return. It is
important to note that from the Assessment Year 1993-94 onwards, the return of income has to
be compulsorily filed if the income of an individual exceeds the basic exemption limit.

What is the assessment year?

Assessment year is the period of 12 months succeeding the relevant previous year (i.e. the
accounting year) ending on 31 st march. for example, a. y. 2018-2019 is for the period of twelve
months starting from 1-4-2017 and ending with 31-3-2002.

What are the due dates for filing of income tax returns where primary source
of income & „salary‟?

In the case of an assesses earning income from Salary primarily, the due date for filing the
Income Tax return is 30th June of the assessment year. For example, the due date for A.Y. 2018-
2019 would be 30 th June 2018.

Which is the prescribed form for filing of Income Tax returns for assesses
having Income from salary?

The assesses enjoying salary income, and whose total income does not include income under the
head 'Profits and Gains of Business or Professional has to file his income-tax Return in Form
No. 3. He can also file the Return in Form No. 2A if his net taxable income is Rs.2.50 lakhs or
less and if following conditions are satisfied :-

48
a) There is no income from business or profession;

b) There is no brought forward or carried forward loss/allowance under any head of income
except from house property.

Accesses fulfilling the above conditions, have the option , of using even the existing Form No. 3
in place of Form No. 2A. They can also file their returns in 'Salary'form. 5

What are various heads of income?

the various heads of income are:

a) Salaries;

b) Income from House Property;

c) Profits & Gains of Business or Profession;

d) Capital Gains, and

e) Income from other sources.

While computing income from the above mentioned different heads, the procedure is:-

First, the taxable income from each source is to be computed under each head of income by
allowing deductions, and then they are aggregated. For example, in the case of an assesses
deriving income from salary, house property, and Interest income from Fixed Deposit in a Bank,
firstly, the taxable income under the head 'salaries', then 'Income from House Property, and lastly
the taxable income under the head 'Income from other sources' for Bank interest etc. will be
computed.

Thereafter, all the three incomes under the three heads would be aggregated. From this amount,
certain eligible deductions would then be deducted to arrive at the net taxable income on which
tax is chargeable.

How to pay the Tax under the Income Tax Act?

The employer or his representative making payment to an assesses earning income from 'salary'
is under obligation to deduct, certain amount of 'tax, from such payment(s) made during the
financial year. Such deduction from the payment is called 'Tax Deducted at Source' i.e. TDS.

49
The person making this TDS is obliged to pay such tax to Central Government within the
prescribed time limits.

This payment of TDS to the Central Government is treated as payment of tax on behalf of the
assesses.

The assesses may furnish to his employer particulars of his income under any head other than
"salary", and of any tax deducted at source thereon in the prescribed Form No. 12C. The
employer shall take such other income and tax, if any, deducted at source from such income, into
account for the purpose of computing the TDS from his salary income. However, this
aggregation is not permitted in case such income under any other head (except loss from house-
property) is a loss. This loss (except loss from house-property) is not permissible to be adjusted
by the person paying salary but can be claimed as deduction at the time of filing of return and a
refund sought.

In order to remove any difficulty in obtaining such refund, the assesses may make an application
in Form No. 13 to his Assessing Officer, and, if the Assessing Officer is satisfied that the total
income of the tax payer justifies a lower rate of deduction or no deduction at all he may then
issue an appropriate certificate to that effect which should be taken into account by the person
making the payment of salary while deducting tax at Source.

In case the assessesdoes not wish to furnish particulars of his income under other heads to his
employer then he has to estimate his total taxable income under the different heads of income
during the previous year, and pay tax thereon during the financial year itself, (after excluding the
tax deductible at source), by the due dates specified under the Income-tax Act. These payments
are called "Advance Tax Payments".

The due dates and the percentage of installment of Advance Tax for individuals are mentioned
herein below :-

Schedule of Advance Tax:

On or before 15
Not less than 45% of advance tax.
September

On or before 15 Not less than 75% of advance tax as reduced by amount paid
December earlier.

On of before 15 Full advance tax as reduced by the amount or amounts if any,

50
March paid in earlier installments.

However, the liability for payment of advance tax arises only where the amount of such tax
payable by the assesses during that year is Rs.5,000 or more.

Also, any amount paid by way of Advance Tax on or before the 31st March of that year, is
treated as Advance Tax Paid during that Financial Year.

After the return is prepared, and the net taxable income finally determined, it may so happen
that, after taking into account the amount of TDS and AdvanceTax, if any, already deducted/paid
still some tax or interest (payable for delay in furnishing the return or delay in payment of
advance tax) remains to be paid.

This amount should be paid as 'self-assessment tax 1' before furnishing the r eturn.

It is, therefore, important to note that before furnishing the return, the assessee has to pay the
entire .taxand interest, if payable, and the proof of such payment of taxes has to be attached with
the return.

It is also to be noted that 'tax' includes applicable Interest' chargeable under various provisions of
the LTV, Act, 1961.

How is the penal interest calculated?

Where the assessee has defaulted in timely furnishing of his return of income or where he has to
pay advance tax, then penal interest is chargeable for Non/Late filing of return or Non-
payment/short payment/deferment in payment of such advance tax.

51
How is interest calculated for late or non-furnishing of return?

NTEREST U/8. 234-A FOR LATE OR NON-FURNISHING OF INCOME TAX RETURN

For defaults in furnishing 'Return of income': Simple interest @ 1% for every month or part of a
month from the due date of filing of the return to the date of furnishing of the return. The interest
is calculated on the amount of the tax on the total assessed income as determined under
subsection (1) of section 143 or on regular assessment u/s 143(3) as reduced by the Advance
Tax, if any, paid and any tax deducted or collected at source.

If the tax payer fails to pay 90% tax plus applicable interest(s), then how is
interest for short payment of suuch advance-tax calculated?

INTEREST U/S. 234-B FOR SHORT PAYMENT OF ADVANCE TAX

Shortfall in payment of Simple interest @ 1% for month or part there

Advance tax of more than of is chargeable w. e. f. 1st April of the Assessment
10% Year to the date of determination of income u/s.
143(1) or regular assessment u/s 143(3) on the
assessed tax.

"Assessed tax" means the tax on the total income

determined undersubsection (1) of section 143 or on
regular assessmen t u/s 143(3), a reduced by the
amount of tax deducted or collected at source.

52
 How is interest for deferment of advance-tax calculated ?

(A) INTEREST U/S. 234-C FOR DEFERMENT OF ADVANCE TAX (Non Corporateassessees)
1 If no advance tax is paid or the advance tax paid in Simple interest @ 1% p.m. is chargeable on the amount
1st installment on or before 15th September is less of shortfall for a period of 3 months.
than 30% of the tax payable on the returned income Simple interest @ 1% p.m. is chargeable on the amount
as reduced by taxes deducted at source. of shortfall for a period of 3 months.
2. If no advance tax is paid or if the advance tax paid Simple interest @ 1% is chargeable on the amount of
in 2nd installment on or before 15th December is shortfall from the tax due on the returned income.
less than 60% inclusive of 1st installment of the tax
payable on the returned income as reduced by taxes
deducted at source.
3. If the advance tax paid on the current income on
or before the 15th day of March is less than the tax
due on the returned income
B. INTEREST U/S 234C FOR THE CORPORATE ASSESSEES
1. If advance tax paid on or before June 15th is less Simple interest @ 1% p.m. is chargeable on the amount
than 12%. of shortfall for a period of three months.
2. If advance tax paid on or before Sept. 15th is less Simple interest @ 1% p.m. is chargeable on the amount
than 36%. of shortfall for a period of three months.
3. If advance tax paid on or before Dec., 15th is less Simple interest @ 1% p.m. is chargeable on the amount
than 75%. of shortfall for a period of three months.
4. If advance tax paid on or before March 15th is Simple interest @ 1% is chargeable on the amount of
less than tax due on returned income (100%). shortfall from the tax due on the returned income.
However, no interest is leviable if the short fall in payment of advance-tax is on account of under
estimation or failure to estimate the amount of capital gains or any income from winnings from
lotteries, crossword puzzles, races, and other games including an entertainment program on
television or electronic mode, in which people compete to win prizes etc., and the assessee has
paid the tax on such income as part of the remaining instalments of advance tax which are due or
if no instalment is due, by 31st March, of the Financial Year.

What are the important points to remember while filing the income tax
return?

Income Tax Return is a legal document and it should be filled in by the assesseewith due care
and caution. There should be no corrections or overwriting and it should be properly signed and
verified by the person who is authorised to do so under the provisions of I.T. Act, The following
important points may be taken care of while filling up the Income Tax Return:-

a) Name &Address :-

The name and address must be written in block letters and while filling up the same in the cages
meant for the same, one cage may be left blank after each word. As the Income-tax Returns are

53
to be generally filed on the basis of territorial jurisdiction, any mistake in the address may
dislocate the return which will cause undue delay in finalisation of the assessment.

b) Assessment Year:

The Assessment Year is to be correctly filled in as the Financial Year succeeding the year for
which the income is accounted.

c) Revised Return :

Proper particulars of the original return are to be mentioned in case the I.T. return is a revised
return.

d) P.A.N/GIR Number :

The assessee's PAN/GIR Number should be correctly filled so that the return reaches the
concerned Assessing Officer.

e) Status :

Correct code numbers of the assessee's status i.e. individual, H.U.F., Firm, Company, B.O.I.,
A.O.P. etc. and residential status i.e. Resident in x India or Not Ordinarily Resident in India (
complete details of stay in India ought to be attached) must be filled in as per the Notes attached
to the Income Tax Return.

f) Evidence(s) for Pre-paid Taxes :

The original T.D.S. certificates and challans for payments of advance tax and self assessmenttax
should be attached to the I.T. return and proper details are to be furnished under the head
Statement of Taxes. These documents may be listed under the head: List of
Documents/Statements attached.

g) Document(s)/Annexure(s) Attached :

The other document(s)/Annexure(s) may be properly listed under the head List of
Document(s)/Statement(s) attached and the total number of documents must be properly filled in
the relevant column of the Acknowledgement Form.

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h) Income Claimed Exempt :

The particulars of income which is not included under any head of income and claimed as
exempt from tax must be mentioned in the relevant part of the I.T. Return under the head
'Income Claimed Exempt',

i) Verification :

The verification must be signed by the authorised person and other particulars viz. Name,
Father's Name (not husband's name), Assessment Year, Capacity, Place and Date should be
correctly filled therein. Please note that any person making a false statement is liable to be
prosecuted under Section 277 of the Income-Tax Act.

Why is Father's name even in the case of married lady assessees to be given in
the verification portion of the return?

This is required for proper identification, as in the PAN Forms, the requirement is to fill up the
father's name, to ensure a PAN for life

Who can verify and sign the income-tax return?

The individual filing his Income Tax return has to sign the return. In case the individual is
mentally incapable, then the return may be signed by his Guardian or by any other person
competent to sign on his behalf.

In case the individual is absent from India or because of any other reason he is not able to sign
and verify his return of income, then any person duly empowered by him through valid Power of
Attorney may sign on his behalf. In such case, a certified copy of the Power of Attorney must
accompany the return.

If the return is not signed by the proper person or if it is unsigned, what is the
legal implication?

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It is then an invalid return.

Where to file the income tax return?

An existing assessee must file his Income Tax return with the Assessing Officer who had
previously assessed him or with the Assessing Officer where his case stands transferred.

Normally, there are separate wards for the assessees earning income from salary. These
wards/circles, have been assigned separate jurisdiction for separate classes of assessees, like
assessees deriving salary income from Government or from- private employers. Similarly, the
assessees deriving Income less than Rs.10 lacs may be assessed in a 'Ward' whereas the assessees
deriving income above Rs.10 lacs may be assessed in a 'Circle 1 .

A new assessee should file his Income-tax Return with the Assessing Officer having territorial
jurisdiction over the area where he resides, or the Assessing Officer having special jurisdiction
over the specific assessee or class of assessees or class of income.

In case of any doubt, the I.T.O. (Public Relations) or the I.T.O. (Headquarters) may be contacted
to know the jurisdiction for filing the Income-Tax Return.

Where to deliver the Income-Tax return?

The Income-Tax Return may be delivered either at the Dak Receipt Counter in the
Range/Ward/Circle having jurisdiction over the assessee or the return may be sent through
registered post

When the return is delivered at the Dak Counter, the official manning the counter returns one
copy of the acknowledgement form attached with the return after signing, stamping, and
numbering it. The date of filing the return is also prominently displayed on the acknowledgement
handed over to the assessee.

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 OBJECTIVE

 To study the concepts of income tax.

 To know the documents requiredfrom the clients for the purpose of filing the income
tax return.

 To understand the unique situations of different clients.

 To understand the tax planning so that best solutions could be provided to the clients.

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 RESEARCH METHODOLOGY

The research undertaken was descriptive and exploratory research in nature. The
emphasis was made to understand the nature and the expectations of the clients.

TYPES OF DATA

 Primary data:

 Form No.16 (for tax deducted by employee)

 Form No.16A
 Statements of bank accounts
 Property details
 Bank details

 Secondary data:

Secondary data is already been collected by someone else. This data is not especially
collected to solve present or specific problem. This information can be relevant and can be used
for us purpose. Information was drawn from published journals on insurance, mutual funds, tax
savings, bank schemes etc.

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 DATA ANALYSIS

The form 16 Part A&B of Galaxy Private Limited. Mr. X (Age 26 year).

 Company deducted INR.8620.00 as TDS (Tax Deducted at Source)from his salary INR.
450000.00. Employer has not provide any perquisites to him. But, he has received HRA
& Conveyance Allowances of INR.33250 and INR.19200 respectively. He paid
INR.1800 as Tax on employment to Government that is also exempt from his salary.

1) Gross Total Income is INR.395750.00.

2) Total investment of Mr. X
3) Provident fund 32388 RS.
4) LIC 10257 RS.
5) Total investment 42645RS.

6) Gross total income 395750 RS.

7) Less total investment 45645 RS.
8) Total income 350105 RS.
9) Tax payable 5005 RS.
10) TDS deducted 8620 RS.
11) Refund 3614 RS

12) Increase his investments in section 80/C like:

13) 1) take medical policy u/s 80D
14) 2) Can claim donation if made any u/s 80G
15) 3) Claim Interest on Saving Account up to 10,000

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 • The form 16 Part A&B of Pune Cantonment Board. Mr. Sunil (Age 61 year).
• Company deducted INR.10000 as TDS (Tax Deducted at Source) from his salary
INR.620231. The employer has not provide any perquisites to him. He has received
Conveyance Allowances of INR.4800. He paid INR.2500 as Tax on employment to
Government that is also exempt from her salary.
• Gross Total Income is INR.612931.
• Total investment of Mr. Sunil
• PF 19440 RS.
• Housing loan principal 94000 RS.
• Children tuition fees 25000 RS.
• Total investment 138440 RS.

• Gross total income 612931 RS.

• less total investment 138440 RS.
• Total income 474491 RS.
• Income exempt upto 300000 RS.
• Remaining income 174491 RS.
• TDS deducted 10000 RS.

Refund 10000 RS

Also Can Invest in NPS u/s 80CCD (1B)

Can take medical policy u/s 80D

Can claim donation if made any u/s 80G

Can utilize the full 150000 under section 80C

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 • 3) The form 16 Part A&B of Delloite Limited of Mrs. Ankita (Age 82 year).
• Company deducted INR.177077 as TDS (Tax Deducted at Source) from her salary
INR.1500000. The employer has not provide any perquisites to him. She has received
Conveyance Allowances of INR.19200. She paid INR.2400 as Tax on employment to
Government that is also exempt from her salary. She has one handicapped member in
family who is dependent.
• Gross Total Income is INR.1478400.
• Total investment of MRS. ankita
• Housing loan principal 50000 RS.
• Insurance premium 30000 RS.
• Pf 60000 RS.
• Mutual fund 10000 RS.
• Total investment 150000 RS.

Gross total income 1478400 RS.

• less total investment 150000 RS.

• Total income 1328400 RS.
• Exempt income 500000 RS.
• Remaining income 828400 RS.

Tax payable 165680 RS.

Also claim int. on HP up to 2 Lakh (Self Occupied)

Can claim donation if made any u/s 80G

Can invest in NPS to get additional deduction of 50000 RS.

Can take deduction under section 80 DD for dependent person in family

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 normal comparision of 3 cases
200000

150000

100000

50000

0
tds total investment tax payable
-50000

26 61 82

This particular graph shown about the data of that three persons which are given below:

1)The person whose age is 26

2)The person whose age is 61

3)The person whose age is 82

The total investment ,tds , tax payable of the particular individuals is depend on their gross total
income. Whose income is more automatically its tds is more deducted as shown in this particular
graph.

The person whose age is 82yrs its income is 14,78,400 so as you seen in this particular graph its
tds is more deducted as comparison to the persons whose age is 26yrs and 61 yrs.

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 26 mr x 61 sunil 82 ankita

195680
165680
150000
138440
42645

15645
7287
-10000
-3614

total investment tax with total investment tax if no investment

This particular graph shows about the total investment of three persons that how much amount
they invested in particular schemes.

The various schemes where they invest that schemes are given in their specific data which is
given above.

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FORM 16(PART A)

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FORM 16(PART B)

65
FORM 26AS:

66
 OBSERVATIONS AND FINDINGS:

 Lack of awareness of tax planning.

 Lacking fundamental knowledge of Income Taxes.

 Unawareness about the tax calculations.

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 CONCLUSION

At the end of this study, I can say that mostly people are not aware about the tax planning .It is
found that majority of the salaried employee‟s want to reduce their tax liability butdoesn‟t really
know that through a proper tax planning they can channelize their money with the help of which
they can get tax benefit and other benefits as well.

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 MY LEARNING'S

 Enhancement intax knowledge.

 Learnt the importance of income tax.

 Learnt about the tax planning.

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 BIBLOGRAPHY

Websites:

[Link]

[Link]

[Link]

[Link]

[Link]

Reference books:

1. BASIC PRINCIPLES OF INCOME TAX LOWS

2. HOW TO SAVE YOUR TAX

3. BASIC INCOME TAX TIPS

4. DIRECT TAX

5. INCOME TAX ACT

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