1 PUNJAB TECHNICAL UNIVERSITY Jalandhar A PROJECT REPORT ON TAX AND FINANCIAL PLANNING FOR SALARIED INDIVIDUALS AT MONEY PLANT CONSULTING Pune SUBMITTED TO PUNJAB TECHNICAL UNIVERSITY (PTU) BY ANAND PRATAP SINGH Roll No: 11213310198 IN PARTIAL FULFILLMENT OF MASTER OF BUSINESS ADMINISTRATION PUNJAB TECHNICAL UNIVERSITY 2011-2013
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PUNJAB TECHNICAL UNIVERSITY
Jalandhar
A PROJECT REPORT
ON
TAX AND FINANCIAL PLANNING FOR SALARIED
INDIVIDUALS AT
MONEY PLANT CONSULTING
Pune
SUBMITTED
TO
PUNJAB TECHNICAL UNIVERSITY (PTU) BY
ANAND PRATAP SINGH
Roll No: 11213310198
IN PARTIAL FULFILLMENT OF
MASTER OF BUSINESS ADMINISTRATION
PUNJAB TECHNICAL UNIVERSITY
2011-2013
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DECLARATION
I, the undersigned, hereby declare that the Project Report entitle “Tax and
Financial Planning For Salaried Individuals” in Money Plant Consulting, written
and submitted by me to the MIT College of Management (MITCOM), Pune, in partial
fulfillment of the requirement for the award of degree of Post Graduate Programme
under the project guidance of Prof. Bijur in my original work and the conclusions
drawn therein are based on the material collected by myself.
Place: Pune
Date: Signature of Students
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4
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CERTIFICATE
This is to certify that Mr. ANAND PRATAP SINGH of MAEER’s MIT
College of Management (MITCOM) has successfully completed the
project work titled “TAX AND FINANCIAL PLANNING FOR SALARIED
INDIVIDUALS” in partial fulfillment requirement for completion of PGP
course as prescribed by the MAEER’s MIT College of Management
(MITCOM).This project is the record of authentic work carried out by
him/her during the period from May to June.
He /she have worked under my guidance.
Signature-
Name- Prof. Bijur
Project guide (internal)
Date-
Counter signed by __
Signature-
Name-
Director
Date:
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Acknowledgement
First of all I would like to place on record my gratitude to all concerned respectable
Director of Money Plant Consulting (CA Rishabh Parakh) for giving me this
opportunity of internship which has been a pure learning experience and which have
enlightened my knowledge and skills about the Finance and Marketing [livestock]
industry.
I would also like to express my gratitude toward MIT College of Management for
giving me the opportunity to undergo summer internship at Money Plant Consulting.
I am specially thankful to my mentors Sir and money plant consulting director CA
Rishabh Parakh for guidance and cooperation during this internship and in fact without
their navigational assistance life would have been very difficult as far as structuring the
projects are concerned. I would always greateful to them for their help and support.
Lastly but not the least I would like to thank MBA department for inducting the module
of internship programme at Money Plant Consulting without which I shouldn’t have
ever learnt.
Place: Pune ANAND PRATAP SINGH
Date :
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TABLE OF CONTENT
CHAPTER No. TITLE PAGE.NO
Declaration form student
Certificate from company /organization
Certificate from guide
Acknowledgement
List of tables
List of Charts
Executive summary
I INTRODUCTION
1.1 Background of the study
1.2 Company profile
1.4 Need of study
1.5 Scope of study
1.6 Objectives of study
1.7 Introduction To Tax
1.8 Tax Planning
II RESEARCH METHODOLOGY
2.1 Research methodology
2.2 Data Collection
2.3 Primary data
2.4 Secondary data
Testing of Questionnaire
Limitations
III DATA PROCESSING AND ANAYSIS
IV FINDINGS
V CONCLUSIONS
VI RECOMMENDATIONS
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BIBLIOGRAPHY
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INDEX OF CHART
Chart No. Page No.
Analysis 1 32
Analysis 2 33
Analysis 3 34
Analysis 4 35
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EXECUTIVE SUMMARY
DESK MANAGEMENT
I use to visit various company’s like cognizant, TCS, SunGard, Syntel, etc and
arrange desk at their company for investment purpose.
PORTFOLIO MANAGEMENT
After arranging the desk at the company clients use to come and I use to prepare
portfolio.
INSURANCE AGENTS
I was also dealing with various insurance products and according to the needs of
the customer I give him advice.
MUTUAL FUNDS ADVISOR
I also give advises of mutual funds regarding their correct investments.
TAX PLANNING
While preparing their portfolio I was taking into consideration of tax planning
and help them to make proper tax planning and increase their wealth by correct
investments products.
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CHAPTER -1
INTRODUCTION
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INTRODUCTION
BACKGROUND OF STUDY
A salaried person is required to pay some portion of his income as tax to the
government. This portion depends on the tax slab of the concerned financial year’s
slabs which may change at the end of the financial year.
To enhance the investment habits of the individual’s government has given some areas
of investment as tax free investments (which are discussed in detail in this project) i.e.
by investing in these sections an assesses is barred from paying tax. That means he/she
can save tax.
But every salaried individual was not aware of these tax saving investment avenues by
investing in which he can save the tax.
This problem laid down the need of tax planner to guide the assesses about the various
tax saving avenues.
Hence above said problem laid down the importance of the study.
OBJECTIVES OF STUDY
To understand the importance of tax and financial planning
To understand the importance of tax and financial consultant
To gain knowledge about outsource of tax and financial services
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SCOPE OF STUDY
This study is conducted as internship training at “Money Plant Consulting”, a leading
Chartered Accountant Firm in Pune from “May 2012 to June 2012”. Salaried
Individual employees are taken as sample for the study. It includes:
a. Male employees
b. Female employees and
c. Senior Citizens
For the survey a sample of 1000 people are considered, out of which around 400
individuals responded properly. Analysis is made based on the actual response.
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COMPANY PROFILE
1) ABOUT MONEY PLANT CONSULTING
Moneyplant Consulting Group facilitates outsourcing the non-core activities and
provides knowledge-driven financial services. Moneyplant Consulting Group is a
premier outsourcing & a financial services provider which aims to offer solutions for
financial needs and queries of individuals. They are a leading wealth management,
capital markets and advisory company with over 100 man years of consulting &
investing experience.
Moneyplant Consulting Group was promoted by Mr. Rishabh Parakh (Director). He
holds a professional degree of CA from the Institute of Chartered Accountants of India.
He started Money Plant Consulting with an aim to outsource the non-core activities of
corporate clients and to offer personal income tax/ financial market related services to
individual clients.
Since its Inception they have been successful in providing seamless service and
significant advantage for clients with their extremely competent team of qualified
professionals comprising CA's and MBA's & in house Knowledge pool of financial
markets, instruments and products. Their aim is to ensure that clients benefit from the
professional expertise, technical knowledge and experience. They have been recognized
for expertise in the financial arena by highly reputed institutions and clients. They strive
to provide transparent, ethical and research-based investments and wealth management
services.
2) Organization Hierarchy
The organization is headed by Rishabh Parakh who is the founder and director.
The organization has 3 departmental heads vis-à-vis HR & Admin
Operations and Products & Services.
The Finance department is headed by the director himself.
The organization is 50 employee strong
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Employees are from diverse backgrounds like CAs, MBAs and Software
professionals
3) CORE FUNCTIONS OF MONEY PLANT CONSULTING GROUP
a) Fund management
1. Loan syndication & project Appraisal
2. Deployment of surplus funds
3. Decision on short/long term investment planning
b) Insurance:
The firm has experience in Life & General Insurance advisory, which covers
following types of risks:
a. Online Health & Marine insurance
b. Commercial & Liability insurance, etc
c. Group gratuity & group term insurance
c) Taxation
1. Consultation on income tax & fringe benefit tax
2. Assessment and Appellate proceedings
3. Transfer pricing
d) Employees’ Taxation and Investments
a. Conducting seminar, orientation and induction program for the
employees
b. Preparation & Submission of income tax returns for corporate
employees
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c. Tax & Financial planning
e) Investment Advisory services:
The firm has rich experience in advising clients in:-
1. Mutual fund investments / Financial planning
2. Deployment of surplus funds
3. Decision on short/long term investments
f) Taxation
1 Expert advice on tax planning and salary structuring
2. Assessment and appellate cases
3. Preparation & submission of Tax returns
g) Loans
Home loans / Personal loans / Car loans / Credit cards
h) Insurance (Life & General)
1. Health, travel & Car insurance
2. Term insurance / Traditional plans/ ULIP / Pension Plans
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4) Some of the Corporate Clients with whom Money Plant Shares Professional
Relationships with!!!
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INTRODUCTION TO TAX
1) HISTORY OF TAX
The Income-Tax was introduced in India for the first time in 1860 by British
rulers following the mutiny of 1857.The period between 1860-1886 was period
of experiments in the context of Income-Tax. This period ended in 1886 when
first income tax act came into existence. The pattern laid down in it for levying
of tax continues to operate even to-day though in some changed form. In 1918
another Act-Income Tax act was, 1918 was passed but it was short lived and
was replaced by income-tax Act, 1922 and remained in existence and operations
till 31st March 1961.
2) PRESENT ACT
On the recommendation of the law commission and direct tax enquiry
committee and in consultation with Law Ministry a bill was framed. This bill
was referred to a select committee and finally passed in sep. 1961. This act came
into force from 1st April 1962 in whole of the country. Income tax Act 1961 is a
comprehensive Act and consists of 298 section, sub-section running into
thousands, schedules, rules, etc. and is supported by other acts and rules. This
act has been amended acts since 1961. The annual finance bill represented to
Parliament along with budget make far-reaching amendments in this acts every
year.
3) IMPORTANCE OF TAX
The taxes levied by government from the pool of resources to be used for the
collective benefit of the public. The Taxation is an exercise in the collective
solution of individual problems. The state takes upon itself the duty of solving
the problem of the underprivileged and needs finances for this purpose. The
government can mobilize resources by imposing taxes on the privileged ones.
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The taxation structure of the country can play a very important role in the
working of our economy. Some time back the emphasis was on higher rates of
tax and more incentives. But recently the emphasis has shifted to the decrease in
the rates of tax and withdrawal of incentives. While designing the taxation
structure it has to be seen that it is in conformity with our economic and social
objectives. it should not impair the incentives to personal savings and
investment flow and on the other hand it should not result into decrease in
revenue to states.
In our present day economic structure income tax plays a vital role as a source
of Revenue and a measure of economic disparity. Our taxation structure
provides for two types of taxes-direct and indirect: the income tax, wealth tax
and gift tax are direct taxes whereas sales tax and excise tax are indirect taxes.
According to section 14 of Income-Tax Act 1961 provides for the
computation of total income of an assessee which is divided into five heads
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of income. Each head of the income has its own method of computation.
These five heads are:
1) Income From SALARIES;
2) Income from HOUSE PROPERTY;
3) Income From PROFITS AND GAINS OF BUSINESS AND PROFESSION;
4) Income from PROFITS AND GAINS; and
5) Income from OTHER SOURCES.
THE CONCERNED HEAD OF THIS PROJECT IS “INCOME FROM
SALARY”
To understand the study the most important question is:
Ques .1 what is salary?
Ans: u/s 15 the following incomes are chargeable under the head salaries:
(a) Any salary due from an employer or a former employer to an assessee in the
previous year or whether paid or unpaid
(b) Any salary paid or allowed to him by or on behalf of an employer or a former
employer though not due or before it become due to him
(c) Any arrear of salary paid or allowed to him in the previous year by or on behalf
of an employer if not charged to Income Tax for any earlier previous year.
4) COMPUTATION OF SALARY INCOME
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+=+ + + +
Less
+
5) INCOME TAX SLABS FOR THE FINANCIAL YEAR 2012-2013 FOR
SALARIED INDIVIDUALS
Tax Computation Table
Salary
Section 15, 16&17
Salary
[17(1)]
Allowances
[17(3)(ii)]
[17(1)]
Perquisites
[17(2)]
Profit in lieu of
salary
[17(3)]
Tax on employment
[16(iii)]
Entertainment allowances
[16(ii)]
Income under the head salary
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1. In case of individuals (other than women and individuals who are of the age of 65 years
of more at any time during the Financial year 2012-13),
INCOME (in Rs) TAX LIABILITY (in Rs.)
Up to Rs 200000 Nil
Between Rs. 200000 – 5,00,000 10% of income in excess of Rs.200000
Between Rs. 5,00,001 – 10,00,000 Rs.30,000 + 20% of income in excess of
Rs.5,00,000
Above Rs. 10,00,000 Rs.100000 + 30% of income in excess of
Rs.10,00,000
2. In case of women (other than women who are of the age of 65 years of more at any
time during the Financial year 2010-11)
INCOME (in Rs) TAX LIABILITY (in Rs.)
Up to Rs 200000 Nil
Between Rs. 200,001 – 5,00,000 10% of income in excess of Rs.1,90,000
Between Rs. 5,00,001 – 10,00,000 Rs.30,000 + 20% of income in excess of
Rs.5,00,000
Above Rs. 10,00,000 Rs.10,00,000 + 30% of income in excess
of Rs.10,00,000
3. In case of Individuals who are of the age of 65 years or more at any during the time
Financial year 2012 – 13.
INCOME (in Rs) TAX LIABILITY (in Rs.)
Up to Rs 2,40,000 Nil
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Between Rs. 2,40,001 – 5,00,000 10% of income in excess of Rs.2,40,000
Between Rs. 5,00,001 – 8,00,000 Rs.24,000 + 20% of income in excess of
Rs.5,00,000
Above Rs. 8,00,000 Rs.86,000 + 30% of income in excess of
Rs.8,00,000
A surcharge of 10 per cent of the total tax liability is applicable where the total income
exceeds Rs. 1,000,000.
Income Tax Returns Filing Process
To comprehend the business model, it is necessary to understand
According to Income Tax Laws, all salaried individuals have to file their IT
returns for the financial year just ended by the 31st Day of July of every Year.
Now, it is the responsibility of the Individual to file his returns on or before the
due date and ensure that he has no tax liability and that all his taxes have been
paid on time to the Central Government
Now, the Central Government has authorized all employers to deduct the taxes
before giving salaries to its employees and credit the same to the treasury on
behalf of the individual employee
This is called Tax Deducted at Source or TDS
In accordance to the laws, every employer has to issue a Form 16, which shows
the net income and tax payable by the individual
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In most cases, the tax payable is equal to the Tax cut i.e. the individual has paid
all his taxes and does not owe the Central Government anything but there are
situations wherein, there may be a case of Refund or Tax Payable.
For filing, various forms are available namely ITR 1, 2….all the way up to ITR
9
But most salaried individuals have to contend with only ITR 1, ITR 2, ITR 4 or
ITR V
These forms are easily available over the internet as well as House of Forms.
Then each individual must fill in the details accordingly and submit the same to
the IT Department
Once this is done, the Assessing Officer must acknowledge the Form with a
stamp containing the date and range of the officer and had it over to the
individual
This is entire process of Filing IT returns
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Need to file IT returns
Now, one may wonder that if an individual has paid all the taxes on time and he/she
doesn’t owe the Central Government any money, then what is the purpose of filing
returns as the Form 16 has all the details there is pertaining to the income received
during the Financial Year, but then filing of returns indicates that all the income earned
during the financial year has been completely accounted for and the taxes on them has
been paid duly to the Central Government
But apart from that, the stamped acknowledgement is a very strong proof and is a must
for: -
1. Visa Processing for Professionals
2. Application for House Loans
3. Work Permits in foreign Countries
4. As seen above, that entire process of filing returns is a simple one for people
who have some basic knowledge of taxation.
5. But it does require time on behalf of the individual to personally go to the IT
office and file his returns.
6. E-filing is an option for individuals who have a digital signature
7. Else even e-filing is partial online and partially manual
8. Also one needs to take a day off work to file returns as the IT office is closed on
weekends
9. Also organizations find it convenient to outsource this non core activity of tax
filing and financial planning
10. And hence herein lays the fundamentals of Money Plant Consulting, which
takes care of filing returns on behalf of Individuals and also providing
customized comprehensive, unique portfolio design based on individual clients,
his needs, his income and liabilities.
11. The concept of NEED BASED SELLING is the mantra followed at Money
Plant Consulting.
12. Clients needs to submit their Form 16s and other documents if necessary and
our team of CAs, ICWAs and MBAs in turn not only help filling up of ITRs and
filing but also help in assessment of the financial health of individuals and help
them plan their finances better all for absolutely free of cost.
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13. Being a Service provider, customer satisfaction and strict adherence to Service
Level Agreements is a foundation to our successful business model.
6) Documents needed to file IT return
(1) Annexure to Form 16, viz. Form 16 A and Form 12
(2) PAN
(3) ITR FORMS;
ITR-1
ITR-2
ITR-4
ITR-V
To be well versed with the project, one has to be aware of Form 16, various
sections under IT ACT 1961 and investment avenues
Form 16
1. The Form 16 is Certificate under section 203 of the Income-tax Act,
1961 for tax deducted at source from income chargeable under the head
“Salaries”
2. Every salaried individual at the end of the financial year (April – March),
gets a consolidated document called The Form 16
3. It has details regarding name and address of the employer and employee,
their TAN and PAN nos.
4. It also has the assessment year as well as the Financial Year
5. If Financial Year is April 2010 – March 2011 then Assessment Year is
2011-12
6. For all other details please refer to the annexure
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The following cases will help in understanding the difference between ITR
forms:
Case 1 (ITR-1)
When no additional income is reported by the employee like rent received
from any housing property or EMIs on housing loans or capital gains both
short and long term qualify an individual to file ITR 1
Case 2 (ITR-2)
In case an individual is repaying his housing loan or is receiving rent from
his/her housing property or has some sort of short term capital gain, then
accordingly ITR 2 is to used
Case 3 (ITR-IV)
Individuals, who are on a contract basis with the employer and not on the
payroll, he/she receives Form 16 A, then in that case ITR 4 is to used
Case 4 (ITR-V)
Now individuals who have filed their return online using the Income Tax
website are given ITR V
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TAX PLANNING
1) What is Tax Planning?
The goal of tax planning is to arrange your financial affairs so as to minimize your
taxes. There are three basic ways to reduce your taxes, and each basic method might
have several variations. You can reduce your income, increase your deductions, and
take advantage of tax credits.
(a) Reducing Income
Adjusted Gross Income (AGI) is a key element in determining your taxes. Lots of other
things depend on your AGI (or modifications to your AGI)-- such as your tax rate and
various tax credits. AGI even impacts your financial life outside of taxes: banks,
mortgage lenders, and college financial aid programs all routinely ask for your adjusted
gross income. This is a key measure of your finances.
Because your adjusted gross income is so important, you may want to begin your tax
planning here. What goes into your adjusted gross income? AGI is your income from all
sources minus any adjustments to your income. The higher your total income, the
higher your adjusted gross income. As you can guess, the more money you make, the
more taxes you will pay. Conversely, the less money you make, the less taxes you will
pay. The number one way to reduce taxes is to reduce your income. And the best way to
reduce your income is to contribute money to a 401(k) or similar retirement plan at
work. Your contribution reduces your wages, and lowers your tax bill.
You can also reduce your Adjusted Gross Income through various adjustments to
income. Adjustments are deductions, but you don't have to itemize them on the
Schedule A. Instead, you take them on page 1 of your 1040 and they reduce your
Adjusted Gross Income. Adjustments include contributions to a traditional IRA, student
loan interest paid, alimony paid, and classroom related expenses. A full list of
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adjustments are found on Form 1040, page 1, lines 23 through 34. The best way to
boost your adjustments is to contribute to a traditional IRA.
As you can see, two of the best ways to reduce your taxes is to save for retirement,
either through a 401(k) at work or through a traditional IRA plan. Contributions to these
retirement plans will lower your taxable income, and lower your taxes.
b) Increase Your Tax Deductions
Taxable income is another key element in your overall tax situation. Taxable income is
what's left over after you have reduced your AGI by your deductions and exemptions.
Almost everyone can take a standard deduction, and some people are able to itemize
their deductions.
Itemized deductions include expenses for health care, state and local taxes, personal
property taxes (such as car registration fees), mortgage interest, gifts to charity, job-
related expenses, tax preparation fees, and investment-related expenses. One key tax
planning strategy is to keep track of your itemized expenses throughout the year using a
spreadsheet or personal finance program. You can then quickly compare your itemized
expenses with your standard deduction. You should always take the higher of your
standard deduction or your itemized deduction.
c)Take Advantage of Tax Credits
Once we've tweaked our taxable income, we are ready to focus our attention on various
tax credits. Tax credits reduce your tax. There are tax credits for college expenses, for
saving for retirement, and for adopting children.
The best tax credits are for adoption and college expenses. Not everyone is in a position
to adopt a child, but everyone could take some college classes. There are two education-
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related tax credits. The Hope Credit is for students in their first two years of college.
The Lifetime Learning Credit is for anyone taking college classes. The classes do not
have to be related to your career.
You may also want to avoid additional taxes. If at all possible, avoid early withdrawals
from an IRA or 401(k) retirement plan. The amount you withdraw will become part of
your taxable income, and on top of that there will be additional taxes to pay on the early
withdrawal.
One of the best, and most abused, tax credits is the Earned Income Credit (EIC). Unlike
other tax credits, the EIC is credited to your account as a payment. And that means the
EIC often results in a tax refund even if the total tax has been reduced to zero. You may
be eligible to claim the earned income credit if you earn less than a certain amount
THE MOST COMMONLY USED METHOD OF TAX PLANNING IS
INCREASING THE TAX DEDCUTIONS.
In tax these deductions are commonly known as deductions under chapter VI-A. They
categorized in different heads. These heads are:
Deductions in respect of certain payments
80C
Deduction in respect of life insurance premium, deferred annuity,
contributions to provident fund, subscription to certain equity shares
or debentures, etc.
80CCA
Deduction in respect of deposites under National Savings Scheme or
payment to a deferred annuity plan.
80CCB
Deduction in respect of investment made under Equity Linked
Savings Scheme.
80CCC Deduction in respect of contribution to certain pension funds.
80CCD
Deduction in respect of contribution to pension scheme of Central
Govt.
80D Deduction in respect of Medical Insurance Premium.
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80DD
Deduction in respect of maintenance including Medical Treatment of
a dependent who is a person with disability.
80DDB Deduction in respect of Medical Treatment, etc.
80E Deduction in respect of intrest on loan taken for higher education.
80G
Deduction in respect of donations to certain funds, charitable
institutions etc.
80GG Deductions in respect of rents paid.
80GGA
Deduction in respect of certain donations for scientific research or
rural development.
80GGB
Deduction in respect of contributions given by companies to political
parties.
80GGC
Deductions in respect of Remuneration from certain foreign sources
in the case of professors, teachers, etc.
80RR
Deduction in respect of Professional income from foreign sources in
certain cases.
80RRA
Deduction in respect of Remuneration received for services rendered
outside India.
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OUT OF THE ABOVE MENTIONED SECTIONS THE MOST COMMONLY
USED SECTION IS SECTION 80C. ALONG WITH SECTION 80CCC AND
SECTION 80CCD. THEY ARE DISCUSSED IN DETAIL BELOW.
2) Section 80C. - Section 80C was inserted from assessment year 2006-
2007 It provides deductions from gross (total) income for qualified
amounts paid or deposited by the assessee in the previous year.