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PROJECT REPORT ON
INDIAN TAXATION SYSTEM
UNIVERSITY OF MUMBAI
BACHELOR OF COMMERCE
(FINANCIAL MARKETS)
SEMESTER V
2011-12
SUBMITTED BY
NIKET DATTANI
PROJECT GUIDE
SAIRA BANOO SHAIKH
K.P.B HINDUJA COLLEGE OF COMMERCE
315, NEW CHARNI ROAD, MUMBAI-400 004
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B.Com (Financial Markets)
5th SEMESTER
INDIAN TAXATION SYSTEM
SUBMITTED BY
NIKET DATTANI
ROLL NO.: 47
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CERTIFICATE
This is to certify that Mr. NIKET DATTANI of B.Com Financial Markets
Semester 5th [2011-2012] has successfully completed the Project on INDIANTAXATION SYSTEMunder the guidance of Ms. SAIRA BANOO SHAIKH
Project Guide ________________
Course Coordinator ________________
Internal Examiner ________________
External Examiner ________________
Principal ________________
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DECLARATION
I Mr. NIKET DATTANI student of B.Com-Financial Markets, 5
th
semester(2011-2012), hereby declare that I have completed the project on
INDIAN TAXATION SYSTEM
The information submitted is true and original copy to the best of our
knowledge.
NIKET DATTANI
(Signature)
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ACKNOWLEDGEMENTS
I feel the pleasure to have an opportunity to express my deep and sincerefeelings of gratitude towards all the personalities who have helped me to convert
my dreams into the reality.
Sincere thanks to my Project Mentor Prof. Saira Banoo Shaikh for her
guidance and support at every step while completing this project and providing me the
accurate and detailed information to complete this report as part of my curriculum.
Without her continuous help and enthusiasm the project would not have been
materialized in the present form.
I also extent my sincere thanks to our Course Co-ordinator, Prof. Khyati Vora, for
her much required coordination and support which helped me in coming up with
successful completion of this project.
I pay my sincere regards to my parents and friends who always encouraged and
helped me in the preparation of this project.
NIKET DATTANI
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INDEX
CONTENTS
1. INTRODUCTION
1.1 Introduction
1.2 Research Objective
1.3 Research Methodology
2. TAXATION IN INDIA
2.1 Income Tax in India
2.2 Service Tax in India
2.3 Wealth Tax in India
2.4 Sales Tax in India
2.5 VAT replaces Sales Tax
2.6 Gift Act in India
2.7 Securities Transaction Tax
2.8 Customs Duty
2.9 Excise Duty
2.10 Double Tax Avoidance Treaty
3. SALARY AND PERQUSITIES IN INDIAN TAXATION SYSTEM
4. CAPITAL GAIN IN INDIAN TAX SYSTEM
5.RETIREMENT BENEFITS IN INDIAN TAX SYSTEM
6. HOUSING PROPERTY TAX IN INDIA
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7. PARTNERSHIP FIRMS, CORPORATE, TRUSTS IN INDIAN TAX
SYSTEM
8. POLICIES OF TDS, TCS, TAN and PAN
9. DIRECT TAX CODE
10. BUDGET REVIEW
11. CONCLUSION
BIBLIOGRAPHY
CHAPTER 1
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INTRODUCTION
1.1 Introduction
1.2 Research Objective
Researcher objective in this project is to show the structure of Indian tax,
different tax levied, some policies, tax planning and the highlights of the budget.
1.3 Research Methodology
There are Two types of Data Collection Method of research i.e.
Primary and Secondary data.
In these project Secondary data is used.
Secondary data is one which already exists and is collected from the published
sources. The sources from which secondary data was collected are:
Books,
Newspaper, and
Internet
CHAPTER 2
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TAXATION IN INDIA
The Government ofIndiaimposes an income tax on taxable income of
Individuals, Hindu Undivided Families (HUFs), Companies, Firms, Co-operativesocieties and Trusts (identified as body of individuals and association of persons)
and any other Artificial Person.
Levy of tax is separate on each of the Persons.
India has a well developed tax structure with a three-tier federal structure,
comprising the Central Government, the State Governments and the Urban/Rural
Local Bodies. The power to levy taxes and duties is distributed among the three
tiers of Governments, in accordance with the provisions of the Indian Constitution.
The main taxes/duties that the Central Government is empowered to levy are
Income Tax (except tax on agricultural income, which the State Governments can
levy), Customs duties, Central Excise and Sales Tax and Service Tax.
The principal taxes levied by the State Governments are Sales Tax (tax on intra-
State sale of goods), Stamp Duty (duty on transfer of property), State Excise (duty
on manufacture of alcohol), Land Revenue (levy on land used for agricultural/non-
agricultural purposes), Duty on Entertainment and Tax on Professions and Callings.
The Local Bodies are empowered to levy tax on properties (buildings, etc.), Octroi
(tax on entry of goods for use/consumption within areas of the Local Bodies), Tax
on Markets and Tax/User Charges for utilities like water supply, drainage, etc.
Since 1991 tax system in India has under gone a radical change, in line with liberal
economic policy and WTO commitments of the country. Some of the changes are:
http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Income_taxhttp://en.wikipedia.org/wiki/Hindu_joint_familyhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Income_taxhttp://en.wikipedia.org/wiki/Hindu_joint_family8/3/2019 100 Project-1st 4 Pages
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Reduction in customs and excise duties
Lowering corporate Tax
Widening of the tax base and toning up the tax administration
2.1 Income Tax in India
A tax that is applicable on income that has been generated from any source is
termed as Income tax. The central board of direct tax (CBDT) is the governing body
that takes care of the Indian Income tax. Income tax is imposed by the government
on an individual, company, business, Hindu undivided families (HUFs), co-
operative organization and trusts. The tax structure is different on different
commodities and products. Indian income tax is regularized under income tax
act 1961.
2.1.1 History of Income tax
In India Income tax comes into existence in the year 1860. Initially at the
time when it was imposed it had taken almost five years to regularize and
implement the income tax however income tax act lapsed in the year 1865.
Act of 1886 was again came into force it defines the full fledged law of income tax
it includes the exemption in various agricultural professions, income tax rules on
industries and corporation.
In the year 1922 another income tax act came into existence as a result of
recommendation by the all India income tax committee. With this act a new clause
was introduced under which unlike earlier where the collection of income tax in the
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current assessment year depends on the estimated collection of income tax of
previous year.
The income tax act of 1922 existed till 1961 however government had handed over
the income tax clause to the law commission to review and recast it in a logical way
so that the tax amended in an easy way without changing the basic tax structure.
There are various industries where government offers wavers in subsidies time to
time. The present income tax act is same as of 1961 income tax act of India. As per
the constitution of India every individual is bound to pay income tax for the
progress of the nation. Any individual or an organization if earning any income inthe country has to pay income tax. Although in the present day tax structure there is
a different slab for man and women and senior citizens
2.1.2 Basis of Resident
Residential Status
Taxation of individuals is determined by their residential status. An
individual is 'resident' if he stays in India in the fiscal year (April 1 to March 31)
either:
182 days or more, or
60 days or more (182 days or more for NRIs) and has been in India in
aggregate for 365 days or more in the previous four years.
An individual who does not satisfy either of these requirements is a 'non-resident'.
A resident individual is considered to be 'ordinarily resident' in any fiscal year if he
has been resident in India
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Nine out of the previous Ten years and, in addition,
Has been in India for a total of 730 days or more in the previous seven years.
Residents who do not satisfy these conditions are called individuals 'not ordinarilyresident'.
Taxability of individuals is summarized in the table below.
-----------------------------------------------------------------------------------------------------
Status Indian Income Foreign Income
-----------------------------------------------------------------------------------------------------
Resident and Ordinarily resident Taxable Taxable
Resident but Not Ordinarily resident Taxable Not taxable
Non-Resident Taxable Not taxab
-----------------------------------------------------------------------------------------------------
Remuneration for work done in India is taxable irrespective of the place of receipt.
Remuneration includes salaries and wages, pension, fees, commissions, profits in
lieu of or in addition to salary, advance salary and perquisites. Allowances, deferred
compensation and tax equalization are also taxable. Perquisites are taxes
beneficially.
2.1.3 Income from Salary
Under this head, income received as salary under Employer-Employee
relationship is taxed. If income exceeds minimum exemption limit, then Employers
must withhold tax compulsorily as Tax Deducted at Source (TDS). The employees
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should also be provided with a Form 16 which shows the tax deductions and net
paid income.
Form 16 also contains any other deductions provided from salary as follows:
o Medical reimbursement up to Rs. 15,000 per year is tax exempt provided bills
are given
o Conveyance allowance up to 9600 per year is tax free
o Professional taxes which are usually a slab amount based on gross income are
deductible from income tax.
o House rent allowance:
The minimum of the following is available as deduction
The actual HRA received
50per cent/40 per cent (metro/non-metro) of 'salary'
Rent paid minus 10per cent of 'salary'
2.1.4 Income from House Property
Income from House property is calculated by considering the Annual Value.
The annual value (for a let out property) will be maximum of the following:
Actual Rent received
Municipal Valuation
Fair Rent (as determined by the I-T department)
However if a house is not let out and not self-occupied, then annual value is
assumed to have accrued to the owner i.e. Deemed Let Out Property
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In case of a self occupied house, annual value is to be taken as NIL.
But if there is more than one self occupied house then the annual value of the other
house/s is taxable.
From this, Municipal Tax paid is deducted to arrive at the Net Annual Value. From
this Net Annual Value, the following are deducted:
30per cent of Net value as repair cost - mandatory deduction
Interest paid or payable on a housing loan for the house
2.1.5 Income from Business or Profession:
Income arising from profits and gains of any Business or Profession;
Income derived by a Trade/ Professional/ similar Association by performing
specific services for its members; Any benefit from business whether convertible
into money or not, Incentives for Exporters; Any Salary, Interest, Bonus,
Commission or Remuneration received by Partner of a firm; Income from
Managing Agency and Speculative Transactions; are taxable.
2.1.6 Income from Capital Gains
Under section 2(14) of the I.T. Act, 1961, Capital asset is defined as property
of any kind held by an assessee such as real estate, equity shares, bonds, jewellery,
paintings, art etc. but does not consist of items like stock-in-trade for businesses or
for personal effects. Capital gains arise by transfer of such capital assets.
Long term and short term capital assets are considered for tax purposes. Long term
assets are those assets which 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.
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Sale of long term assets give rise to long term capital gains which are taxable as
below:
As per Section 10(38) of Income Tax Act, 1961 long term capital gains on
shares/securities/ mutual funds on which Securities Transaction Tax (STT)
has been deducted and paid, no tax is payable.
For all other long term capital gains, indexation benefit is available and tax
rate is 20per cent
2.1.7 Income from Other Sources
There are some specific incomes which are to be taxed under this category
such as income by way of dividends, horse races, winning of bull races, winning of
lotteries, amount received from key man insurance policy.
2.2 Service Tax in India
Dr. Manmohan Singh, the then Union Finance Minister, in his Budget speech
for the year 1994-95 introduced the new concept of Service Tax and stated that ''There is no sound reason for exempting services from taxation, therefore, I propose
to make a modest effort in this direction by imposing a tax on services of
telephones, non-life insurance and stock brokers.''
Service Tax has been introduced in order to explore new avenues for taxation and to
bring more people into the tax net. Service Tax generated revenue of Rs 2612 crores
in 2000-2001.
The Service Tax assesses is the person/firm who provides the service. Hence,
the Service Tax must be paid by the person/firm providing the service.
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Chapter V of the Finance Act, 1994 (32 of 1994) (Sections 64 to 96) deals with
imposition of Service Tax inter alia on-
a. Service rendered by the telegraph authorities to the subscribers in
relation to telephone connections.
b. Service provided by the insurer to the policy-holder in relation to
general insurance business.
c. Service provided by a stockbroker.
The Finance Acts of 1996, 1997, 1998, 2001, 2002 and 2003 added more services
to tax net by way of amendments to Finance Act, 1994. At present total number ofservices on which Service Tax is levied has gone upto 58 despite withdrawal of
certain Services from the tax net or grant of exemptions (Goods Transport
Operators, Outdoor Caterers, Pandal and Shamiana Contractors, and Mechanized
Slaughter Houses).
2.2.1 Service taxIncludes
Service tax is a form of indirect tax that is applicable to the services that are
taxable in nature. This tax came into existence as government wants an easy option
that is transparent in nature that can generate revenue for the nation in an easy way.
In past few years service tax is applied on various new services.
Unlike value added tax that is applicable on goods and commodities, this tax is
imposed on various services that is provided by the financial institutions such as
banks, stock exchange, colleges, transaction providers, telecom providers.
Banks are the first that charges service tax to its customer since inception
often they termed service charges as processing fees. The responsibility of
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collecting the tax lies with the Central Board of Excise and Customs (CBEC) it is a
body under the Ministry of Finance. This body formulates the tax structure in the
country.
Service tax was imposed first in India in July 1994. The service tax is applicable all
over India however due to the national interest and for the betterment of the people
of Jammu and Kashmir it is waved off. In 2006- 2007 service tax was increased
from 10per cent to 12per cent however it was again reduced from 12per cent to
10per cent in the Union budget of 2009. It is often noticed that there is a lack
of service tax information among the people. Government has gradually increased
the list of taxable services to increase the revenue.
Some of the major services that comes under the scanner of service tax:
-Telecommunication
-Traveling agencies (air, road and railway services)
- Universities, colleges and schools
- Broadcasting services (television and radio)
- Banking and other financial services
- Export import unit
- Cargo and shipping
- Hospitals and health care services
- Stock broker
- Real estate agents
2.3 Wealth Tax in India
Wealth tax came into existence on 1st April 1957. Wealth tax is derived from
the property owned by the proprietor. The proprietor needs to pay tax every year on
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property owned by them. The residential property that does not yield any income to
its owner is also subjected to wealth tax. Wealth tax is termed as most significant
direct tax.
As per the wealth taxact, wealth tax is applicable to the following:
An individual person
A group of people who own a property
A company or organization
A Hindu undivided family (HUF)
A representative or heir of a dead person
The chargeability of a wealth tax in India for its residence or foreign citizens are
different. Any person who is resident of India has to pay wealth tax under his/her
name. If a person owns a citizenship of a foreign country and he/she acquires a
property in India as well as in foreign country, under those circumstances the
property owned by the owner in India is taxable.
2.3.1 The following assets are subjected to wealth tax
o Guesthouse, farm-house, commercial complex, shopping mall
and residential complex are subjected to the wealth tax.
o Valuable items like jewelry and any items made up of precious metals like
gold, silver, platinum or any other precious metals.
o Aircrafts, yachts, boats that is used for non-commercial purpose
o Cash in hand that is more than 50,000, for individual and Hindu undivided
families.
o Any cash that is not recorded on the account log book is subjected to
the wealth tax.
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o Motor car that is owned by an individual.
o Any urban land situated in the jurisdiction where there is a total population of
ten thousand as per last census is subjected to the wealth tax.
2.3.2 Assets that are exempted from the list of wealth tax are:
o Air craft or boat used for business purpose provided by the company.
o Furniture, apparels and electronic items that is for personal use.
o Accommodation provided by the company or organization to its employee.
o The annual salary of the employee is less than Rs 500,000.
o Any land donated for the religious purpose or to charitable trust is not
subjected to wealth tax.
2.3.3 There are few assets that are termed as deemed assets:
o Assets transferred from one spouse to another
o Assets held by a minor child. As per the income tax act such wealth is taxed
individually and will not be termed as the net asset of the main
owner/parents/guardian.
o Assets transferred to the sons wife.
o Assets transfer to the grandchildren.
2.3.4 There are few exceptional assets that are exempted by the government:
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o The belongings such as residential building and palace belongs to rulers are
considered as national heritage and wealth tax is exempted for it.
o Former Ruler's jewellery is also excluded from the wealth tax. As per the
government is termed as national asset.
o Assets belonging to the Indian repatriate for 7 years on fulfillment of the
conditions prescribed.
2.4 Sales Tax in India
Sales tax is levied on the sale of a commodity which is produced or imported
and sold for the first time. If the product is sold subsequently without being
processed further, it is exempt from sales tax.
Sales tax can be levied by the Central or State Government, Central Sales tax
department. Also, 4 per cent tax is generally levied on all inter-State sales. State
sales tax, that apply on sales made within a State, have rates that range from 4 to 15
per cent. Sales tax is also charged on works contracts in most States and the value
of contracts subject to tax and the tax rate vary from State to State. However,
exports and services are exempt from sales tax. Sales tax is levied on the seller who
recovers it from the customer at the time of sale.
Apart from sales tax, certain states also impose extra charges such as works
contracts tax, turnover tax and purchaser tax. Thus, sales tax plays a major role in
acting as a major generator of revenue for the various State Governments.
Under the sales tax which is an indirect form of tax, it is the responsibility of seller
of the commodity to collect or recover the tax from the purchaser. Generally, the
sale of imported items as well as sale by way of export is not included in the range
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of commodities that require payment of sales tax. Moreover, luxury items (such as
cosmetics) are levied higher sales tax rates. The Central Sales Tax (CST) Act that
comes under the direction of Central Government takes into consideration all the
interstate sales of commodities.
2.5 VAT replacesSales Tax
Most of the states in India, from April 01, 2005, have supplemented the sales tax
with the new Value Added Tax (VAT).
VAT in India is classified under the following tax slabs:
0 per cent for the essential commodities
1 per cent on gold ingots as well as expensive stones
4 per cent on capital merchandise, industrial inputs, and commodities of mass
consumption
12.5 per cent on all other items
Variable rates (depending on state) are applicable for tobacco, liquor,
petroleum products, etc.
A Central Sales Tax which is at the rate of 4per cent is also levied on inter-State
sales but would be eliminated gradually.
2.5.1 Municipal/Local Taxes
Octroi/Entry tax: Certain municipal jurisdictions levy an Octroi/Entry tax on
the entry of goods
2.5.2 Other State Taxes
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Stamp duty on the transfer of assets
Property/building tax that is levied by local bodies
Agriculture income tax levied by the State Governments on the income from
plantations
Luxury tax that is levied by certain State Government on specified goods
2.6 Gift Tax in India
Financial act 1998 had deleted gift tax act w.e.f.1.10.1998 consequently, all
gifts made on or after 1.10.98 are free from gift tax. Neither the donor nor the
receiver would have to pay any tax. Financial act 2004 has revived it partially, but it
is in the form of receiver - based income tax instead gift.
The clubbing provisions in the Income Tax Act 1961 and Wealth Tax Act, 1957 are
not deleted. Therefore, income and wealth from assets transferred directly or
indirectly without adequate consideration to minor children, the spouse (otherwise
than in connection with an agreement to live apart) or daughter-in-law will continue
to be deemed income and wealth of the transferor. Same is the case when assets are
held by a person or an Association of Persons for benefit of assesses, the spouse,
daughter-in-law and minor children.
Gift tax was not applicable to gifts of movable property situated in Jammu and
Kashmir. Now, that the Gift Tax Act, 1958 is abolished, the clubbing provisions
would be applicable to gifts of movable properties in J & K also.
The Gift tax in India is regulated by Gift Tax Act that was constituted on
April 1, 1958. It came into effect in nearly all parts of the country except Jammu
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and Kashmir. As per this Act 1958, all gifts exceeding Rs. 25,000, in the form of
cash, draft, check or others, received from one who does not have blood relations
with the recipient, were taxable.
However from October1, 2009, individuals receiving shares or jewellery, valuable
artifacts, valuable drawings, paintings or sculptures or even property valued over Rs
50,000 as gifts from non-relatives, shall have to start paying tax.
2.6.1 Gifts are Taxable Only in the Case of Individuals and HUFs
U/s 56(2) (vi) certain gifts are taxable according to income tax as "income
from other sources". However, this provision applies only for individuals and Hindu
Undivided Families (HUFs). Thus, if gift is received by any Trust or A.O.P., then it
shall not be liable to income tax as "income from other sources".
2.6.2 Minors
The entire income that arises or accrues to a minor is to be included in the
income of that parent whose total income is higher. When the marriage of the parent
does not subsist, the income of the minor will be included in the income of that
parent who maintains the minor child. Income arising in the succeeding year shall
not be included in the other spouse unless the assessing officer is satisfied that it is
necessary to do so..
Where the income of the individual includes the income of his minor children,
an exemption up to Rs. 1,500 in respect of each minor child can be claimed by the
individual u/s10 (32)..
2.7 Securities Transaction Tax
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Transactions in equity shares, derivatives and units of equity-oriented funds
entered in a recognized stock exchange attract Securities Transaction Tax at the
following rate:-..
Delivery base transactions in equity shares or buyer and seller
each units of an equity-oriented fund - 0.075per cent.........................
Sale of units of an equity-oriented fund to the seller mutual fund - 0.15per cent
Non delivery base transactions in the above - 0.015per cent................................
Derivatives (futures and options) seller - 0.01per cent
2.8 Customs Duty
The levy and the rate of customs duty in India are governed by the Customs
Act 1962 and the Customs Tariff Act 1975. Imported goods in India attract basic
customs duty, additional customs duty and education cess. The rates of basiccustoms duty are specified under the Tariff Act. Customs duty is calculated on the
transaction value of the goods.
Rates of customs duty for goods imported from countries with whom India has
entered into free trade agreements such as Thailand, Sri Lanka, South Asian
countries.
Customs duties in India are administrated by Central Board of Excise and Customs
under Ministry of Finance.
2.9 Excise Duty
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Manufacture of goods in India attracts Excise Duty under the Central Excise
act 1944 and the Central Excise Tariff Act 1985. Herein, the term Manufacture
means bringing into existence a new article having a distinct name, character, use
and marketability and includes packing, labeling etc.
Most of the products attract excise duties at the rate of 16%. Some products also
attract special excise duty/and an additional duty of excise at the rate of 8% above
the 16% excise duty. 2% education cess is also applicable on the aggregate of the
duties of excise.
2.10 Double Tax Avoidance Treaty
India has entered into DTAA with 65 countries including the US. In case of
countries with which India has Double tax Avoidance Agreement, the tax rates are
determined by such agreements. Domestic corporations are granted credit onforeign tax paid by them, while calculating tax liability in India.
In the case of the US, dividends are taxed at 20%, interest income at 15% and
royalties at 15%.
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CHAPTER 3
SALARY AND PERQUISITES IN INDIAN TAX SYSTEM
Salary includes wages, fees, commissions, perquisites, profits in lieu of, or, in
respect of encashment of leave etc. It also includes the annual accretion to the
employee's account recognized provident fund in excess of 12per cent of the salary
of the employee, along with interest applicable, shall be included in the income
of the employee.
Salary can be any of the following forms:
Wages;
Any annuity or pension;
Any gratuity;
Any fees/commissions, profits/perquisites in lieu of any salary or wages;
Any salary advance;
Any payment that employee receives for a period of leave not taken by him;
Any annual accreditation to provident fund balance at the credit of an
employee
The total of all sums that are comprised in the transferred balance
3.1 Tax on Pension
U/s 9(1)(iii), the pension is taxable in India only if it is earned in India.
3.2 Tax upon bonus, fees and commissions
The bonus received in the gross salary in a year is taxable on receipt basis.
Any fees/commission received/receivable by an employee is fully taxable and it's
included in the gross salary.
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3.3 Tax on Gratuity
Employee receives gratuity at the time of retirement or his legal heir receives
gratuity incase the employee dies. The gratuity that employee receives on
retirement and legal heir receives on death of employee; both are taxable under the
heads "Salary" and "Income from other sources" respectively.
3.4 Tax on Annuity
The annual grant that an employee receives from the employer is called
annuity and comes under salary. It may be paid by the employer either voluntarily
or on contractual agreement. Deferred annuity is not taxed unless right to receive it
arises. Annuities given in a will or given by life insurance companies and annuities
arising due to a contract come under "Income from other sources" and are taxable.
3.5 Tax upon profits in lieu of or in addition to salary
This includes any compensation received by an assessee from his employer/former
employer on termination of employment or changes in terms and conditions relating
thereto.
3.6 Tax upon advance salary and perquisites
This includes value of rent free accommodation given to assessee by employer,
value of any amenity granted free of cost/at concessional rate to an employee being
the director or an employee having substantial interest in Company and value of any
other fringe benefits.
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3.7 Perquisites for Salaried will be taxed From April 2009
Perquisites given by employer like residential accommodation, conveyance facility
as well as other benefits for employee's family could soon be added to the salary for
income tax purposes and the Government may give a notification soon on valuation
of such perks.
Initially, tax on such perks was paid by employer in the form of the Fringe Benefit
Tax (FBT) which was done away with in the Budget 2009-10 by Pranab Mukherjee,
the Finance Minister.
The perquisites that are included in taxable salary include residential
accommodation given by the employer, motor car expenses for official/personal
use, driver's salaries, salaries of gardener and sweeper if paid by employer and
concessional education given to the employee's children.
Under the FBT regime, tax burden of perquisites that was on the employer, will
now be on the employee.
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CHAPTER 4
CAPITAL GAIN IN INDIAN TAX SYSTEM
Income-tax act, 1961 deal with the Capital Gains under Section 45 to 55A.Section 45 of the Act, provides that any profits or gains arising from the transfer of
a capital asset effected in the previous year shall, save otherwise provided in section
54, 54B, 54D, 54EA, 54EB, 54F 54G and 54H [with effect from 1-4-1991] be
chargeable to income-tax under the head ''Capital Gains'' and shall be deemed to be
the income of the previous year in which the transfer took place. Section 2(24) of
the Income-tax Act specifically provides that ''income'' includes 'any capital
gains chargeable under section 45'.
The requisites of a charge to income tax, of capital gains under section 45 are :-
o There must be a capital asset.
o The capital asset must have been transferred.
o The transfer must have been effected in the previous year.
o There must be a gain arising on such transfer of a capital asset.
4.1 Capital Gain
An income that is derived from the sale of an investment is known as Capital
gain. Capital investment can be in the form of a home, a farm, a ranch, a family
business, or a work of art. When any kind of property is purchased at a lower price
and then sold at a higher price, the seller makes a gain. Then this sale of a capital
asset is known as capital gain.
This type of gain is a one-time gain and not a regular income such as salary
or house rent. Hence we can say that capital gain is is not recurring.
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4.2 Capital Asset
Any kind of property (movable, immovable, tangible, intangible) held by an
assessee, whether or not connected with his business or profession, is nothing but a
"Capital Asset".
The following assets are excluded from the definition of capital Asset:-
Stock-in-trade, consumable stores, raw materials held for the purpose of
business/profession
Items of personal effects, that is, personal use excluding jewellery, costly
stones, silver, and gold
Agricultural land in India
Specified Gold Bonds and special Bearer Bonds
Gold Deposit Bonds
4.3 Types of Capital Assets:
Two types of Capital Assets are present as follows:
4.3.1Short Term Capital Assets [STCA]:
An asset which is held by an assessee for less than 36 months, immediately
before its transfer, is called Short Term Capital Asset. In other words, an asset,
which is transferred within 36 months of its acquisition by assessee, is called Short
Term Capital Asset. However, if the investment is in the form of mutual
funds/company shares, the allowed time duration is one year
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4.3.2 Long Term Capital Assets [LTCA]:
An asset, which is held by an assessee for 36 months or more, immediately
before its transfer, is called Long Term Capital Asset. In other words, an asset
which is transferred on or after 36 months of its acquisition by assessee, is Long
Term Capital Asset. Selling mutual funds and company shares after one year also
constitutes a long-term capital gain.
4.4 Transferof capital assets
Transfer of capital assets includes the following:-
Sale of asset
Exchange of asset
Relinquishment of asset (that is surrender of asset)
Extinguishments of any right on asset
Compulsory acquisition of asset
4.5 Capital gaintax rates
In case of short-term capital gains, you will be taxed depending on the tax
slab relevant to you after you have added the capital gain to your annual income.
However if the transaction was levied with Securities Transaction Tax (STT), your
gain will be taxed 10per cent.
In case of long term capital gains, you will be taxed 20per cent. When the
transaction is levied with STT, you don't need to pay any tax on your gain. In this
case, you can either calculate your capital gain using an indexed acquisition cost, or
choose not to opt for indexing.
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4.6 Calculation/Computation of Capital Gains
Capital gain can be calculated as follows:
Full Value of Consideration
Less:
Cost of Acquisition
Cost of Improvement
Expenditure of Transfer
Capital gains
Less:
Exemption u/s 54
Taxable Capital Gains
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CHAPTER 5
RETIREMENT BENEFITS IN INDIAN TAX SYSTEM
Every employee must know the quantum of the various retirement benefits hewould be getting, as well as its tax implications. The employee may get more
benefits if he chooses a good employer but he has no choice in respect of taxes.
Retirement benefits received by an employee are taxable under the head Salary.
Thus, the employer must take these benefits into account while computing the
time of retirement of an employee. Some retirement benefits are fully or
partially exempt from tax.
Some of the retirement benefits are:
5.1 Pension
Pension is the income received by an employee after his retirement. It is a
periodical allowance, on account of past service, given by a former employer
after the retirement of an employee. When a lump-sum payment is made in lieu of a
periodical pension, it is termed as commuted pension. Pension of an employee is
taxable under the head salary. Taxability of pension depends on whether it is
periodic or lump-sum. Periodic payment is fully taxable in case of both government
and non-government employees. Lump-sum Payment (commuted pension) is tax-
free in case of government employees. In case of other employees, if that employee
is also receiving gratuity, then 1/3rd of the commuted pension would be exempt
from tax. If gratuity is not received by an employee, half of the commuted pension
will be exempt from tax.
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5.2 Gratuity
Gratuity is a lump-sum payment made by an employer as a mark of gratitude
for the services rendered by his employee. It is an important form of social security
benefit. Gratuity is payable at the end of the employment (by way of retirement,
death, termination or resignation). Every employer who has more than 10 salaried
workers is allowed to grant gratuity to workers. The law which governs gratuity in
India is the Payment of Gratuity Act, 1972.
To receive gratuity, the employee should at least have completed 5 years of service.
The payment of gratuity is made to the employee based on the duration of his totalservice to that employer. The benefit is payable by taking the last drawn salary as
the basis for calculation.
For the purpose of Income Tax, gratuity received by an employee of the central
government, state government or any local authority is completely exempt from tax.
For other employees, the least of the following is exempt from tax
Rs. 10,00,000 (as per amendment from march 2010)
Gratuity actually received, or
Half month's average salary (average of last 10 months salary) for each
completed year of service.
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5.3 Leave Encashment
Leave encashment is the encashment of unused leave of an employee. The
employee surrenders the leave at the time of retirement and is paid for the same.
Taxability of leave encashment received at the time of retirement is as follows
In case of government employees, it is fully exempt from tax.
In case of non-government employees, the least of the following is exempt
o Rs. 3,00,000/-
o 10 months average salary
o Leave encashment actually receivedo Cash equivalent to the leaves surrendered
5.4 Voluntary Retirement Compensation
Many companies today provide its employee with the option of taking
voluntary retirement under the Voluntary Retirement Scheme (VRS). This scheme
is drawn to right-size the existing strength of employees within a company. The
benefits derived by an employee by opting VRS can also be considered as
retirement benefit.
VRS is applicable to only those employees who have completed 10 years of service
or are of the age of 40 years. Under VRS, the employees are offered a onetime
lump-sum amount.
For income tax purposes, this compensation amount received is exempt up to Rs.
5,00,000/- if all the conditions under the scheme are fulfilled.
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CHAPTER 6
HOUSING PROPERTY TAX IN INDIA
Income Tax Act deals with taxability of income in respect of house property
under Section 22 to 27. The following basic conditions must be satisfied for income
to be taxed under this head:-
The property consists of buildings or land adjacent thereto.
The assessee must own property.
The property must not be used for the purpose of business or profession of
the assessee. It must be used only for renting out so as to derive rental
income.
Therefore any income from a property which is not owned by the assessee will not
be treated as ''income from house property'' but as other income and other
provisions of the Income Tax Act will apply in this connection.
6.1 Income from House Property
The property for which the annual value consists of buildings/lands
appurtenant thereto of which the assessee is the owner shall be chargeable to
income tax under the head "Income from House Property". A person may occupy
the property for the purpose of business or profession, the profits of which are
taxable.
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Annual value of any property shall deem to be:
The sum for which the property might reasonably be able to let/give from
year to year
Where any part of the property is let and the rent received by the owner is in
excess of the sum
Where any part of the property is let and was vacant during the whole or any
part of the previous year and the actual rent received by the owner in respect
thereof is less than the sum
6.2 Deductions Permitted
Deductions from income from house property are:
A sum equal to 30 per cent of the Net Annual Value towards repairs and
maintenance
In case the property is acquired/constructed/repaired/renewed or even
reconstructed with borrowed capital, then the amount of any interest
payable on such capital.
6.3 Self Occupied House Property:
A property becomes a self occupied house property when it consists of a
house or part of a house which:
Is in the owner's occupation as purpose of his own residence
The amount of deduction towards interest payable on borrowed capital will
not exceed Rs. 1,50,000/-
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CHAPTER 7
PARTNERSHIP FIRMS, CORPORATE, TRUSTS IN
INDIAN TAX SYSTEM
7.1 Partnership Firms
A partnership is a common vehicle in India for carrying on business
activities on a small or medium scale. A profession is generally carried on through
a partnership. There is no restriction on a company's participation in a partnership,
but this is rate in practice.
Under the general law a partnership is not a separate entity distinct from the
partners, but for tax purposes a partnership is an entity.
Partnership firm arises from a contract between two or more persons who contribute
some tangible and some intangible assets together with an objective of earning
profit there from which will be shared between them in predefined portion.
7.1.1 Income Tax Rates for Partnership Firms
Assessment Year 2010-11
Rate of tax is 30 per cent on the total income of the firm.
Surcharge: Nil
Education Cess: 2 per cent of the amount of Income Tax
Secondary and Higher Education Cess: 1 per cent on the amount of Income Tax
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7.2 Corporate Tax
Corporate tax rate in India is at par with the tax rates of other nations of the
world. The corporate tax rate in India is based on the origin of the company.
If the company is domicile to India, then the tax rate is flat at 30 per cent. But for a
foreign company, then the tax rate depends on several other factors and
considerations. For companies that are domicile to India, tax is charged on the
global income whereas for the foreign companies present in India, tax is charged on
their income within Indian Territory. Incomes that are taxable for foreign
companies include income from the capital assets in India, interest gained, incomefrom sale of equity shares of the company, royalties, dividends earned, etc.
7.2.1 Domestic Corporate Income Taxes Rates:
Incase of Domestic Corporations the effective tax rate as well the tax
rate with surcharge as is 30 per cent. It should be noted that if the taxable income is
greater than Rs. 10,00,000 then a surcharge of 10 per cent of the tax on income is
also levied.
7.2.2 Foreign Companies income Tax Rates
For dividends: - 20 per cent for non-treaty foreign companies
For interest gains: - 20per cent for non-treaty foreign companies
For royalties: - 30per cent for non-treaty foreign companies
For the technology based services in case of non-treaty foreign companies is
30per cent
For all other kinds of income and gains: - 55per cent in case of non-treaty
foreign companies
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7.2.3 Some of the tax rebates undercorporate taxrate in India:
Gains pertaining to long term capital are subject to low tax incidence
Venture capital funds and venture capital companies have special tax
provisions
Specula tax provisions are applicable for non resident Indians involved in
activities in India
Under the Finance Bill 1996, the minimum alternative tax (MAT) is levied
on the corporate sector
7.3 Religious and Charitable Trusts
Social welfare is the basic responsibility of government. Charitable and
Religious Trusts lessen this burden. Therefore, tax concessions are offered. Income
applied for predefined and declared charitable object is exempt from income
tax. Wealth tax is also not charged on properties held. If eligible, donors are alsogiven deduction from income tax u/s 80G or section 80GGA. Skillful and
Intelligent tax planner tends to use trust for evasion of taxes.
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CHAPTER 8
POLICIES OF TDS, TCS, TAN and PAN
8.1 Tax Deduction at Source (TDS)
Tax deduction at source means the tax required to be paid by assesses, is
deducted by the person paying the income to him. Thus, the tax is deducted at the
source of income itself. The income tax act enjoins on the payer of such income to
deduct the given percentage of income as income tax and pay the balance amount to
the recipient of such income. The tax so deducted at source by the payer is to be
deposited in the income tax department account. The tax so deducted from the
income of the recipient is deemed to be payment of income tax by the recipient at
the time of his assessment.
For example, person responsible for paying any income which is chargeable to tax
under the head 'Salaries' is required to compute the tax liability in respect of such
income and deduct tax at source at the time of payment.
Similarly, person responsible for paying any income by way of 'interest on
securities' or any other interests are required to deduct tax at source at the
prescribed rates at the time of credit of such income to the account of the payee or
at the time of payment, whichever is earlier.
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8.1.1 The income from the following sources is subjected to
tax deduction at source
Salary and all other positive incomes under any head on income
( Section 192)
Interest on securities ( Section 193)
Interest other than interest on securities( Section 194A)
Winnings from Lottery or crossword puzzles( Section 194B)
Winnings from horse races( Section 194BB)
Payments to contractors and sub-contractors( Section 194C) Payment to non-resident sportsman including athlete or sports
association/institution. ( Section 194E)
Payment on account of repurchase of Units by Mutual Fund or UTI ( Section
194F)
Payment for Commission or brokerage( Section 194H)
Payment of rent ( Section 194I)
Payment of fees for professional or technical services( Section 194J)
Any interest other than interest on securities payable to non-residents not
being a company or to a foreign company( Section 195)
Income from Units purchased in foreign currency or long-term capital gain
arising from the transfer of such Units purchased in foreign currency
( Section196B)
Payment of any income to non-residents in respect of interest or dividend on
bonds and shares ( Section 196C) and so on.
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8.2 Tax Collection at Source (TCS)
Tax collection at source arises on the part of the seller of goods. Here, tax is
collected at the source of income itself. It is to be collected at source from the
buyer, by the seller at the point of sale. Such tax collection is to be made by the
seller at the time of debiting the amount payable to the buyer to the account of the
buyer or at the time of receipt of such amount from the buyer, whichever is earlier.
A person collecting tax shall furnish a certificate specifying whether tax has been
collected or not, what sum has been collected, the rate of tax applied on it and other
such particulars as may be prescribed. It shall be furnished within 10 days from thedate of debit or receipt of the amount furnished to the buyer to whose account such
amount is debited or from whom such payment is received. The taxes collected
must be remitted into the income tax department's account. Every person collecting
tax shall, within such time as may be prescribed, apply to the Assessing Officer for
the allotment of a tax-collection account number.
The following goods when sold must be subjected to tax collection at source :-
Alcoholic liquor for human consumption (other than Indian made foreign
liquor).
Timber obtained under a forest lease.
Timber obtained by any mode other than under a forest lease.
Any other forest produce not being timber.
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8.3 Tax Deduction and Collection Account Number (TAN)
Tax Deduction and Collection Account Number is a 10 digit alpha numeric
number required to be obtained by all persons who are responsible for deducting or
collecting tax. All those persons who are required to deduct tax at source or collect
tax at source on behalf of Income Tax Department are required to apply for and
obtain TAN. TAN is allotted by the Income Tax Department on the basis of the
application submitted to TIN Facilitation Centre managed by National Securities
Depository Limited (NSDL). NSDL will intimate the TAN which will be required
to be mentioned in all future correspondence relating to TDS/TCS. An applicationfor allotment of TAN is to be filled in Form 49Band submitted at any of the TIN
Facilitation Centre meant for receipt of e-TDS returns. The income tax act makes it
mandatory for TAN to be quoted in all TDS/TCS returns, all TDS/TCS payment
challans and all TDS/TCS certificates to be issued. Failure to apply for TAN or
comply with any of the other provisions of the Act attracts a penalty.
8.4 Permanent Account Number (PAN)
PAN is an all India, unique ten-digit alphanumeric number, issued in the
form of a laminated card by the Income Tax Department.
For obtaining PAN related information the Income Tax department has authorized:
(i) UTI Technology Services Ltd (UTITSL) to set up and manage IT PAN Service
Centers in all those cities or towns where there is an Income Tax office and
(ii) National Securities Depository Limited (NSDL) to dispense PAN services from
Tax Information Network (TIN) Facilitation Centers.
http://business.gov.in/outerwin.php?id=http://tin.nsdl.comhttp://business.gov.in/outerwin.php?id=http://tin.nsdl.comhttp://business.gov.in/outerwin.php?id=http://incometaxindia.gov.in/Forms/49B.pdfhttp://business.gov.in/outerwin.php?id=http://incometaxindia.gov.in/Forms/49B.pdfhttp://business.gov.in/outerwin.php?id=http://www.utiisl.co.inhttp://business.gov.in/outerwin.php?id=http://tin.nsdl.comhttp://business.gov.in/outerwin.php?id=http://tin.nsdl.com/TINFaciliCenter.asphttp://business.gov.in/outerwin.php?id=http://tin.nsdl.comhttp://business.gov.in/outerwin.php?id=http://incometaxindia.gov.in/Forms/49B.pdfhttp://business.gov.in/outerwin.php?id=http://www.utiisl.co.inhttp://business.gov.in/outerwin.php?id=http://tin.nsdl.comhttp://business.gov.in/outerwin.php?id=http://tin.nsdl.com/TINFaciliCenter.asp8/3/2019 100 Project-1st 4 Pages
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8.4.1 Person who can apply for PAN :-
Income Tax Act provides that every person whose total income exceeds the
maximum amount not chargeable to tax or every person who carries on any
business or profession whose total turnover or gross receipts exceed Rs. 5 lakhs in
any previous year or any person required to a file a return of income shall apply for
PAN. Besides, any person not fulfilling the above conditions may also apply for
allotment of PAN. With effect from 01.04.2006 a person liable to furnish a return of
fringe benefits is also required to apply for allotment of PAN. Since income of any
financial year is taxed in the subsequent year called as the assessment year,application for PAN must be made on or before the 30th of June of the relevant
assessment year.
Application for PAN :-
Application for allotment of PAN is to be made in Form 49A.
Transactions in which quoting of PAN is mandatory :-
Purchase and sale of immovable property.
Purchase and sale of motor vehicles.
Transaction in shares exceeding Rs. 50,000.
Opening of new bank accounts.
Fixed deposits of more than Rs. 50,000.
Application for allotment of telephone connections.
Payment to hotels exceeding Rs. 25,000.
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CHAPTER 9
DIRECT TAX CODE
The direct tax code seeks to consolidate and amend the law relating to all
direct taxes, namely, income-tax, dividend distribution tax, fringe benefit tax and
wealth-tax so as to establish an economically efficient, effective and equitable
direct tax system which will facilitate voluntary compliance and help increase the
Tax-GDP ratio. Another objective is to reduce the scope for disputes and minimize
litigation.
It is designed to provide stability in the tax regime as it is based on well accepted
principles of taxation and best international practices. It will eventually pave the
way for a single unified taxpayer reporting system.
The salient features of the code are:
Single Code for direct taxes: All the direct taxes have been brought under a
single Code and compliance procedures unified. This will eventually pave the
way for a single unified taxpayer reporting system.
Elimination of regulatory functions: Traditionally, the taxing statute has
also been used as a regulatory tool. However, with regulatory authorities
being established in various sectors of the economy, the regulatory functionof the taxing statute has been withdrawn. This has significantly contributed to
the simplification exercise.
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Use of simple language: With the expansion of the economy, the number of
taxpayers can be expected to increase significantly. The bulk of these
taxpayers will be small, paying moderate amounts of tax. Therefore, it is
necessary to keep the cost of compliance low by facilitating voluntary
compliance by them. This is sought to be achieved, inter alia, by using simple
language in drafting so as to convey, with clarity, the intent, scope and
amplitude of the provision of law. Each sub-section is a short sentence
intended to convey only one point. All directions and mandates, to the extent
possible, have been conveyed in active voice.
Reducing the scope for litigation: Possibly, an attempt has been made to
avoid ambiguity in the provisions that invariably give rise to rival
interpretations. The objective is that the tax administrator and the tax payer
are ad idem on the provisions of the law and the assessment results in a
finality to the tax liability of the tax payer. To further this objective, power
has also been delegated to the Central Government/Board to avoid protracted
litigation on procedural issues.
Flexibility: The structure of the statute has been developed in a manner
which is capable of accommodating the changes in the structure of a growing
economy without resorting to frequent amendments. Therefore, to the extent
possible, the essential and general principles have been reflected in the statute
and the matters of detail are contained in the rules/schedules.
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Ensure that the law can be reflected in a Form: For most taxpayers,
particularly the small and marginal category, the tax law is what is reflected
in the Form. Therefore, the structure of the tax law has been designed so that
it is capable of being logically reproduced in a Form.
Consolidation of provisions: In order to enable a better understanding of tax
legislation, provisions relating to definitions, incentives, procedure and rates
of taxes have been consolidated. Further, the various provisions have also
been rearranged to make it consistent with the general scheme of the Act.
Providing stability: At present, the rates of taxes are stipulated in the
Finance Act of the relevant year. Therefore, there is a certain degree of
uncertainty and instability in the prevailing rates of taxes. Under the Code, all
rates of taxes are proposed to be prescribed in the First to the Fourth
Schedule to the Code itself thereby obviating the need for an annual Finance
Bill. The changes in the rates, if any, will be done through appropriate
amendments to the Schedule brought before Parliament in the form of an
Amendment Bill.
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CHAPTER 10
Tax Planning for Year 2010-11
10.1 Deduction
While exemption is on income some deduction in calculation of taxable
income is allowed for certain payments.
10.2 Use of Deductions
While the use of the above sections helps one to pay less or no money as tax
if one falls in the tax bracket, one should look at this more as an investment-return
opportunity. One should still file income tax return, even if one is not paying any
tax. Except ELSS (Equity Linked Savings Scheme) and the NPS (National Pension
Scheme), other schemes under 80C typically offer a relatively risk-free investment
and guaranteed returns.
10.3 Following are some of the best tax saving investment options for the
current assessment year [AY 2011-2012]
It is generally observed that during the last few months of a financial year
people make last moment impulsive decisions to invest in tax saving instruments. In
the process they may end up buying products that are actually not right for
them. Tax planning is something that needs to be done a few months in advance so
that one has ample time to understand & evaluate different options available to suit
his/her financial situation.
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Following are a few simple tips for planning your taxes for this financial year:
10.3.1 Utilize the Income Tax exemptions
10.3.1.a Section 80C
Under this section one can claim up to Rs. 1 lakh in deductions. The options
in this section include
Employee Provident Fund (EPF),
Public Provident Fund (PPF) - up to Rs.70, 000 per annum,
National Savings Certificate (NSC),
5-year bank fixed deposits,
Life insurance policies,
Equity-Linked Savings Schemes (ELSS),
Unit Linked Insurance Plans (ULIPs),
School fees, and
Home loan principal repayment.
In order to make investments in this section one needs to decide on the ideal debt
vs. equity mix which is right based on factors like age, risk-return profile & goals.
10.3.1.b Section 80D
One can claim deductions up to Rs 15,000 incase you have taken a medical
insurance plan for yourself or your spouse or dependant parents or children (and an
additional Rs.15, 000 for your parents' medical insurance) under Section 80D for
premiums paid. This limit has now been enhanced to Rs 20,000 for senior citizens
on the condition that the premiums are paid via cheque.
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10.3.1.c Section 80DD
Under Section 80DD, expenses related to the medical treatment of a
dependent having disability qualifies for tax benefits. This section allows
deductions up to Rs. 50,000 or 75, 000 to be claimed depending on the severity.
10.4 Interest on home loan
Interest component of a home loan is allowed as a deduction under the head
income from house property' U/s 24(b) up to a limit of Rs 1.5 lakhs a year for a
self-occupied house. The claim can also be made on loans taken for
repair, renewal or reconstruction of an existing property.
10.5 Shuffle and switch strategy
Shuffling is a popular strategy that is used by ELSS [Equity Linked Savings
Scheme] investors. They have a mandatory lock-in period of 3 years. Incase you
have been investing an amount Rs 50,000 for last few years but don't have cash to
invest this year, then you can easily redeem the investments made 3 years ago and
re-invest that amount this year so as to claim the benefits. You need not pay any
long term capital gains as you will be redeeming after more than one year. Hence
you will be enjoying tax benefits without making any fresh investments. The only
risk here is the NAV that can go up or down in the shuffle process which may lead
to a small profit or loss. Some fund houses also allow switch option for tax benefits.
Suppose an investor with previous ELSS investments doesn't have the money to
make further investment in current financial year. In such a case, he can consider
switching it to a liquid fund and then back into the ELSS fund within a short period
of time like 10-15 days to avail the tax benefits.
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10.6 Tax Deduction on Charitable Donations
You can get a tax relief if you donate to institutions that are approved U/s
80G of the Income Tax Act. The rate of deduction is either 50 or 100 %, depending
upon the type of the charity fund. There is no upper limit on the amount given to a
charity. However, donations should be made only to the specified trusts and only
donations of up to 10 per cent of the total income qualify for such deduction.
10.7 Division of Income
Generally, if you invest either in your wife's or child's name, then the income
generated from these investments will be clubbed with your income & taxed
accordingly. But, if you transfer money by way of a deed to a child who is a major
i.e. over 18 years of age and invest in his name, then the income generated from this
investment will not be clubbed with your income. Instead, it will be clubbed with
the income of your child/wife and will be taxed accordingly. Cash gifts that are
received from specified relatives are tax exempt and there is no upper limit. Also,
cash gifts of any amount from anyone received during child birth, marriage or any
other specified event are totally tax-exempt. But, any cash that is received from a
non-relative where the value of gift is in excess of Rs 50,000 in a particular year
will be considered as income and taxed accordingly.
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CHAPTER 10
BUDGET REVIEW
10.1 Indias Budget 2009-2010
The Acting Finance Minister, Pranab Mukherjee presented
the budget revealing spending plans for year 2009-10 from April to July, taking
care of essential spending during and in immediate after month of the general
elections.
10.1.1 HighlightsofBudget2009-2010:
Commodities Transaction Tax (CTT) to be scrapped
10per cent surcharge on personal Income tax scrapped
Fringe Benefit Tax (FBT) to be scrapped
IT exemption limit for Women hiked to Rs 190,000
IT exemption limit for Senior Citizens hiked to Rs 240,000
Service Tax to be now applicable on law firms
Bio-diesel custom duty lowered
Customs Duty on import of Gold and Silver increased
Unique Identification (UID) project under Nandan M. Nilekani to be out in
12-18 months
Saral 2 forms to simply tax filing process
Small scale businesses to be exempted from advance tax 50per cent reduction in the Custom Duty on LCD panels
Goods and Services Tax (GST) to be in effect from April, 2010
Textile units to enjoy continued tax holidays
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The fuel prices are likely to rise very soon. Finance minister Pranab
Mukherjee announced in the parliament that excise duty on petrol and diesel will be
increased to Rs 1/litre.
An announcement was also made to restore 5per cent duty on crude petroleum and
7.5per cent duty on petrol and diesel.
With this announcement there was uproar in the parliament and the opposition
walkout in Lok Sabha
10.2.3 Income Tax Slabs Relaxations and Slab Restructured
Mr. Pranab Mukherjee announced the restructuring of Income tax slabs while
presenting the budget for 2010-11. The new slabs include 30per cent tax on income
over Rs 8 lacs, 20per cent tax on income between Rs 5 to 8 lacs and 10per cent tax
on income between Rs1.6 to 5 lacs. Also, the surcharge has been withdrawn.
Current surcharge on companies has been reduced to 7.5per cent.
The presumptive tax limit has been raised to Rs 60 lacs.
An announcement was also made for a deduction of Rs 20000 on investment in
infra bonds.
10.2.4 Direct Tax Code from April 1, 2012
Finance minister Pranab Mukherjee made an important announcement while
presenting the budget 2010-11 that the Direct Tax Code will be implemented from
April 1, 2012.
10.3 BUDGET 2011-2012
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NEW DELHI: Finance ministerPranab Mukherjee presented to Parliament India's
budget for the coming financial year beginning in April.
Following are the highlights of the budget:
10.3.1 TAXES
Standard rate of excise duty held at 10 percent; no change in CENVAT
rate
Personal income tax exemption limit raised to Rs 180,000 from Rs
160,000 for individual tax payers
For senior citizens, the qualifying age reduced to 60 years and
exemption limit raised to Rs 2.50 lakh
Citizens over 80 years to have exemption limit of Rs 5 lakh.
To reduce surcharge on domestic companies to 5 percent from 7.5
percent.
A new revised income tax return form 'Sugam' to be introduced for
small tax payers.
To raise minimum alternate tax to 18.5 percent from 18 percent
Direct tax proposals to cause 115 billion rupees in revenue loss
Service tax rate kept at 10 percent
Customs and excise proposals to result in net revenue gain of 73
billion rupees
Iron ore export duty raised to 20 percent
Nominal one per cent central excise duty on 130 items entering the tax
net. Basic food and fuel and precious stones, gold and silver jewellery will be
exempted.
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Peak rate of customs duty maintained at 10 per cent in view of the
global economic situation.
Basic customs duty on agricultural machinery reduced to 4.5 per cent
from 5 per cent.
Service tax on air travel increased by Rs 50 for domestic travel and Rs
250 for international travel in economy class. On higher classes, it will be ten
per cent flat.
Electronic filing of TDS returns at source stabilized; simplified forms
to be introduced for small taxpayers.
Works of art exempt from customs when imported for exhibition in
state-run institutions; this now extended to private institutions.
CHAPTER 11
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CONCLUSION
BIBLOGRAPHY
BOOKS
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Richard Kohan, Mark Nash, and Brittney Saks in book
PriceWaterhouseCoopers 2008 Guide to Tax and Financial Planning, Published
by John Wiley & Sons on November 2008..............................
A.D.Mascarrenhas & P.A.Johnson in book Business Economics III Published
by Manan Prakashan
WEBSITES
http://220.227.161.86/16791tsibf.pdf
http://www.indianembassy.org/taxation-system-in-india.php
http://www.tax4india.com/
http://en.wikipedia.org/wiki/Income_tax_in_India
http://www.incometaxindia.gov.in/
http://www.cbec.gov.in/
http://220.227.161.86/16791tsibf.pdfhttp://www.indianembassy.org/taxation-system-in-india.phphttp://www.tax4india.com/http://en.wikipedia.org/wiki/Income_tax_in_Indiahttp://www.incometaxindia.gov.in/http://www.cbec.gov.in/http://220.227.161.86/16791tsibf.pdfhttp://www.indianembassy.org/taxation-system-in-india.phphttp://www.tax4india.com/http://en.wikipedia.org/wiki/Income_tax_in_Indiahttp://www.incometaxindia.gov.in/http://www.cbec.gov.in/