A Project Report on”Understanding Income Tax in India”Carried out atH & R Block Pvt.
LtdSubmitted byAshwini Yewale(Roll No. 17140)In partial fulfilment for the award of the degree of MASTER OF BUSINESS ADMINISTRATIONInFinanceName of the guideDr. Shilpa BhideDEPARTMENT OF MANAGEMENT SCIENCESSAVITRIBAI PHULE PUNE UNIVERSITY2017-18SAVITRIBAI PHULE PUNE UNIVERSITYCERTIFICATEThis is to certify that the Final Project entitled “Understanding Income Tax in India” has been submitted by Miss Ashwini Yewale, 2nd year MBA++(Finance) student of The Department of Management Sciences (PUMBA), Savitribai Phule Pune University, has successfully finished her internship at H & R Block India Pvt. Ltd., Pune from June 7th 2018 till Aug 10th 2018 towards the partial fulfilment of the requirement for the award of Masters in Business Administration (MBA++) and the same has been satisfactorily carried out under the guidance of Dr. Shilpa Bhide during the academic year 2017- 2018.
To the best of my knowledge she has been found Hardworking, Sincere and Honest throughout her internship. We wish her every success in her future career.Dr.Shilpa Bhide Prof.
Dr. P.A. PawarInternal Guide External Examiner Head of DepartmentDMS (PUMBA)DECLARATIONI, hereby, declare that all the tasks assigned to me by ‘H ; R Block India Pvt. Ltd.’, Pune have been carried out by me and to the best of my knowledge a similar work has not been submitted earlier in partial fulfilment of the requirement for the course of study.
Place: PuneName: Ashwini YewaleDate: Roll No: 17140ACKNOWLEDGEMENTI am really thankful towards all those people who have helped me in this venture. It would not have been possible without the kind support and help of these individuals and organizations. I would like to extend my sincere thanks to all of them.I would like to express my gratitude towards Mr. Vishal Sankhla (Manager OA), Miss Aishwarya Pardeshi (HR and Head of QA) of H & R Block India Pvt.
Ltd for giving me the opportunity to undertake this project in their prestigious organization and providing an excellent environment along with the necessary guidance. For the kind co-operation and encouragement which helped me in completion of this project, I would like to express my gratitude for my faculty guide Dr. Shilpa Bhide.I am and will always be thankful to my family for their all-time support and for putting up with all the disruptions in my life caused by my involvement in this venture. My thanks and appreciations also go to my colleagues for their encouragement; and to all those people who have altruistically helped me out with their abilities.I would not have succeeded in this endeavour without their help and support.
Place: PuneEXECUTIVE SUMMARYAmong the tax saving options, some options may be suitable for assesses who are young and at the beginning of their career. Some options may be suitable for assesses who are at the middle of their career. Some options may be suitable who are very near their retirement.
Among the features of various tax saving schemes, one can choose a suitable scheme or schemes for reducing a considerable amount of tax. The various tax saving options such as contribution to tax saving schemes and investment in Tax-free Return-schemes, Tax-free maturity-schemes and No Tax Deduction at source- schemes are reviewed in this report.CHAPTER 1INDUSTRY OVERVIEWIncome tax refers to the tax levied by the government for the purpose of financing its various operations. There are two types of taxes, direct taxes and indirect taxes. While Income Tax is a direct tax, VAT, service tax, excise duty and the latest one to subsume all these taxes, Goods and Services Tax (GST) are all indirect taxes. Apart from funding the activities of the government, taxes also act as a fiscal stabiliser that aid in distributing wealth evenly among the population. Furthermore, taxes are instrumental in cushioning the effects of economic cycles.
The payment of Income Tax in India is made according to the provisions made under the Income Tax Act.Types of Income TaxWe can divide Income Tax into three categories depending upon who pays it and when it’s paid.TDSAdvance TaxSelf-assessment TaxTax Deducted at SourceAny Income Tax deducted and paid on behalf of the taxpayer by any other person (who is a source of income for the taxpayer) liable to do so as per the I-T laws is called HYPERLINK “https://www.
hrblock.in/guides/tds-tax-deducted-at-source/?utm_source=guide&utm_medium=contextual&utm_campaign=main_tax_guide_page”TDS. It is a measure by the Income Tax Department for ensuring timely payment of Income Tax.TDS – Deduction Rules ; Payment MethodsTDS DeductionIn case the TDS deduction exceeds the liable tax amount then, the deductee can file a claim for a refund of the excess amount. A portion of the overall payment is withheld by the deductor while making payment to a person. Here, the person or the organization that deducts TDS is called the ‘deductor’ and the person, whose payment is being deducted is known as the ‘deductee.’TDS CalculationTDS is applicable for salaries, interest payment by banks, payment of commission, payment of rent, payments made to consultants, fees to lawyers or freelancers.
In case of a salaried individual, the employer deducts TDS based on income tax slab rates. For interest earned on money in bank account, the banks will deduct TDS @10% and if the bank does not have PAN information of the customer then it will deduct TDS @20%.As TDS is collected at the source of income, therefore tax deduction of an individual is not taken into account. So, the individual can, later on, declare and submit his/her investment proof to file a return and then claim for the TDS refund.TDS on SalaryIf you want to calculate TDS on salary, then, first of all, you need to arrive at the gross income from salary plus from other income sources. Then calculate investments ; exemptions. After, you arrive at the total sum, then deduct investments ; exemptions from your salary, doing so you will arrive at your annual income that will be taxed based on the income tax slab rates.Modes of TDS PaymentThere are two modes of payment of TDS.
Electronic Mode: e-TDS PaymentThe IT department provides an option for online payment of taxes. E-payment is compulsory for all corporate assesses and every assessee (other than a company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.Physical Mode: Challan 281 for TDS PaymentChallan ITNS (Income Tax National Security) 281 is the form for making payment of TDS and TCS.
This form is applicable for TDS/TCS from corporates and non-corporates.Challan no. 281 is useful for depositing TDS/TCS. For depositing tax through this form, you will have to provide the 10-digit Tax Deduction Account Number (TAN), name along with the address of the deductor on every challan. A taxpayer is supposed to use separate challans in order to deposit tax deducted under each section and specify the exact nature of payment code in the appropriate column in the challan.TDS ReturnTDS return is necessary for maintaining the financial record.
Also, a person must file TDS return to receive TDS refunds. TDS return can be filed through the government website. Make sure that you file TDS return within the due date. You should fill the form based on the income category you fall in and then furnish the documents for kick-starting the refund process. After registration and subsequent submission of the return, you will have to authenticate the TDS Return File. File Your TDS Return Online TDS Return Due DateTDS last dates/due dates of FY 2017-18 are mentioned in the table below:Quarter Quarter Period Last Date of Filing1st Quarter 1st April to 30th June 31st July 20172nd Quarter 1st July to 30th September 31st October 20173rd Quarter 1st October to 31st December 31st January 20184th Quarter 1st January to 31st March 31st May 2018TCS Return Due DateTCS last dates of FY 2017-18 are mentioned in the table below:Quarter Quarter Period Last Date of Filing1st Quarter 1st April to 30th June 15th July 20172nd Quarter 1st July to 30th September 15th October 20173rd Quarter 1st October to 31st December 15th January 20184th Quarter 1st January to 31st March 15th May 2018Penalty for Late Filing of TDS ReturnIf you fail to file the TDS return within the due date, then you will be liable to pay a penalty of Rs.
200/day till you file the return. This fine is applicable each day until the fine amount equals the total liable TDS amount.In case the taxpayer crosses 1-year time limit to file the return or provides wrong details of PAN, TDS sum, then the taxpayer will be required to pay a fine of minimum Rs.10,000 to maximum Rs.1 lakh.TDS CertificateTDS certificate is a certificate of deduction of tax at source. According to section 203 of the Income Tax Act, the deductor is required to provide a certificate to the deductee, wherein the details are provided regarding TDS/TCS for several transactions between the deductor and the deductee.
Banks, too issue this certificate for deductions made on pension payments. The certificate is issued on deductor’s own letterhead. The issue of TDS certificates to taxpayers is mandatory.Benefit of TDSResponsibility is shared between the deductor and the tax collection organizations.Avoids tax evasion.Broadens the base of tax collection.
A stable source of revenue for the central government.The deductee is tension free as the tax is collected automatically and subsequently deposited with the central government.Understanding Advance Tax under Income Tax Act 1961Advance TaxMaking your money work for you is smart financial planning. Earning extra income by way of investing in FD’S, property rental income, or even business income carries tax repercussions. A salaried individual does not need to worry about paying taxes to the government as the employer takes care of it by deducting it from his/her salary. For individuals earning income from other sources, taxes must be paid to the government in advance on a quarterly basis, known as advance tax, which will be discussed in this guide.Advance Income Tax is a mechanism for the government to collect Income Tax revenue on a regular (quarterly) basis. The other widely known mechanism is TDS.
Though TDS is very effective mechanism, it is used in combination with Advance Tax as certain incomes are not subject to TDS and further in many cases the rate of TDS is less than the rate at which the income is taxed in the hands of a taxpayer.Businessmen and professionals need to pay Income Tax on their own in four instalments throughout the financial year in which they earn income. The taxpayers need to pay Advance Tax as per the following table:Due Date Advance tax PayableOn or before 15th June 15% of estimated Advance TaxOn or before 15th September 45% of estimated Advance TaxOn or before 15th December 75% of estimated Advance TaxOn or before 15th March 100% of estimated Advance TaxWho should pay Advance Tax?You need to pay Advance Tax when your additional Income Tax liability (i.
e. Income Tax liability in addition to the tax deducted at source by employers/others) for the Financial Year is estimated to be more than INR 10,000. Typically, you have to pay Advance Income Tax if you have additional income in the form of interest, rental, capital gains, Income from business or profession, income earned abroad, etc.
Advance Income Tax is not payable if:i. You are a senior citizen and do not have income from business or self-employment, orii. The additional Income Tax liability (in addition to the TDS) for the year does not exceed INR 10,000.What happens if I do not pay Advance Income Tax?In case you do not pay Advance Income Tax, you would be required to pay interest under section 234Band under section 234C of the Income Tax Act, 1961. However, sometimes there can be exceptions. Let’s look at a scenario:My additional Income Tax liability is more than INR 10,000 and I am not a senior citizen. Paying Advance Tax is a hassle for me. And I don’t even want to pay penal interest for non-payment of Advance Tax.
Is there any way I can avoid paying Advance Income Tax?You can avoid paying Advance Income Tax if you report the additional income to the payroll department of your employer organization in which case, the Income Tax on additional income would be deducted by the employer from your salary. However, while reporting the additional income with the employer, ensure that the amount reported is adjusted for the TDS on such income. For example, if you have an additional income of INR 1,00,000 in the form of interest on fixed deposit. The bank deducts 10% Income Tax on the amount of interest. However, if you are in 30% tax bracket, you have to pay only balance 20% Income Tax. If you decide to report this income with the employer organization, it would deduct Income Tax @ 30.9%.
This would result in total TDS of 40.9% on the interest income which may result in, you have to claim a refund at the time of tax filing. To avoid this, you may report additional income of only INR 67,640 (instead of INR 1,00,000) so that the total TDS on the income of INR 1,00,000 equals the amount of Income Tax thereon. Many individuals prefer not to declare other sources of income with the employer organization for many reasons and therefore opt to pay the Advance Tax.How much Advance Tax am I required to pay by December 15, 2018?You are required to pay 75% of the Income Tax as Advance Tax by December 15, 2018. For example, you are in 30% tax bracket.
Income Tax on your salary income is deducted at source by the employer. You have additional income in the form of interest on fixed deposits to the tune of INR 1,00,000. Bank would be deducting Income Tax thereon @ 10%. The total additional Income Tax, net of TDS, would be INR 20,900, (including education cess) approximately. 75% of this amount needs to be paid by December 15, 2018.How to Calculate Advance Tax with an ExampleMy additional income tax liability is more than INR 10,000 and I am not a senior citizen. Paying advance tax is a hassle for me.
I don’t even want to pay penal interest for non-payment of Advance Tax. Is there any way I can avoid paying Advance Income Tax?You can avoid paying Advance Income Tax if you report the additional income to the payroll department of your employer organisation in which case, the income tax on additional income would be deducted by the employer from your salary. However, while reporting the additional income with the employer, ensure that the amount reported is adjusted for the TDS on such income. Additional Income (in the form of interest on fixed deposit) Tax Rate as per Highest Tax Slab Tax if already deductedRs.1,00,000 35.
54% 10% (Bank TDS) Now, Total payable tax on Additional income of Rs.1,00,000 = Rs.35,540TDS deducted by Bank = Rs.10,000Net payable tax = Rs.25,540If you decide to report this additional income with the employer organisation, it would deduct income tax @ 35.54%. This would result in total TDS of 45.54% on the interest income.
Hence, you will have to claim a refund at the time of tax filing. To avoid this, you may report additional income of only Rs.71,863 (instead of Rs.
1,00,000) so that the total TDS on the income of Rs.1,00,000 equals the amount of income tax thereon.Amount to be declared with the employer organisation as an additional income =1,00,000 *25.54/35.54 = 71,863 (rounded off)If you declare this income, your taxes will be deducted by your employer as 71,863 x 35.54% = Rs 25,540. How much Advance Tax am I required to pay by 15 September, 2018?You are required to pay 45% of the Income Tax as Advance Tax by 15 September, 2018.For example: Additional Income (Interest from Fixed Deposit) is Rs.
1,00,000You fall under the tax slab of 30%Total tax payable on additional income is (Rs.1,00,000 *35.54%) = Rs.35,540TDS deducted by bank @ 10% is Rs.
10,000Net payable tax is total tax less TDS i.e. Rs.35,540 – Rs.10,000 = Rs.25,540 This net payable tax is supposed to be paid in 4 Quarters as mentioned in the below table:Quarters Due Date Tax Percentage Total Tax Due Tax to be paid in each Quarter1st Quarter 15 June 2018 15% 3,831 3,8312nd Quarter 15 September 2018 45% 11,493 7,6623rd Quarter 15 December 2018 75% 19,155 7,6624th Quarter 15 March 2019 100% 25,540 6,385 Hence, by 15 September, 2018 you are required to pay Rs.7,662.What will happen if I fail to pay Advance Tax?In case you fail to pay Advance Tax or pay less tax than required, then you will have to pay interest and penalty under section 234C & 234B respectively of the Income Tax Act, 1961.
How can I know that I have already paid the Advance Tax?If you have already paid the Advance Tax then it will reflect on your form 26AS within 2 to 3 days of making the payment.If I am a resident senior citizen, will I be liable to pay advance tax?According to section 208, a taxpayer, whose taxation liability exceeds Rs.10,000 for the previous year is liable to pay Advance Tax. However, according to section 207, a taxpayer is not liable to pay Advance Tax if such person satisfies the following conditions:The person is an individualThe person is resident in India as per the Income Tax ActThe person is of the age of 60 years or aboveThe person is not having any income chargeable to tax under the head ‘Profit and gains of business and profession’Is exemption from payment of advance tax for resident senior citizens under section 207 applicable to Hindu Undivided Families (HUFs)?Only individual senior citizens can enjoy exemption from the payment of advance tax under section 207. Hence, HUFs are liable to pay Advance Tax.Self-assessment TaxSelf-assessment Tax means any balance tax paid by the taxpayer on the assessed income after taking Advance Tax and TDS into account.Sources of IncomeAccording to the Indian Income Tax laws, income from the following sources is deemed taxable:SalariesIncome from house propertyProfits and gains of business or professionCapital gainsIncome from other sources The sum of income from all the sources above is calculated according to the provisions of Income Tax Act. The tax rates in India vary according to the earnings of an individual and are referred to as Income Tax slab rates.
These Income Tax rates are revised every year during the budget.Income tax in India is calculated on an annual basis. It is levied on the income earned in the previous year which is also known as the Assessment Year. In the eyes of the law, the Financial Year begins on the 1st of April in a given year and ends on the 31st of March of the following year.Meaning of Salary Income for Salaried Individuals and It’s ComponentsIncome tax returns differ for various people with a different source of income. Salary income, income from business, freelance, etc., are the different source of income basis on which an individual has to file his taxes. This guide is for people who are salaried and want to understand the components of their salary along with learning some ways to save tax on the same.
What is Salary Income?”Salary” is a fixed regular payment or remuneration, usually paid on a monthly basis by an employer to its employee, especially a professional or a white-collar worker. Salary paid to an employee is determined by comparing the market pay rates of people who are performing similar kind of work in similar regions and industries. Salary is most often used to mean net salary that a person takes home.Difference between Gross Salary, Net Salary and CTCWhat is CTC?CTC, as Cost to Company is most commonly called, is a term that tells the total cost a company incurs when hiring an employee for a year. CTC includes the cost of many other benefits provided by the company to an employee, also known as perquisites, which is a cost that the company has to bear and hence the name. Simply put, CTC is the amount that the company spends on hiring and sustaining the services of an employee.CTC is considered as a variable pay that is based on different factors. Therefore, when an employee’s CTC differs, his net or take home salary varies automatically.
The cost to company is, hence, never equal to the amount of money that an employee gets to take home. Read: Tax Friendly CTC What is Gross Salary?Gross salary is the salary of an employee calculated after adding all the benefits and before any deductions are made. Basic salary, house rent allowance, leave travel allowance, conveyance allowance, medical allowance, performance bonus, etc.
are some of the most prominent components of gross salary.What is Net SalaryNet salary or take home salary is the salary that an employee actually takes home, after tax and other deductions are done with. The net salary amount includes the gross salary minus TDS (Tax Deducted at Source), Profession Tax, Employee’s contribution to PF and other deductions as per the company’s policy.To make things simpler let’s put it this way:Net Salary = Basic Salary + Other Benefits – Deductions (PF, TDS, etc.)Basic Components of Salary Slip in IndiaEarnings and PerksBasic SalaryBasic salary is the most important component of the salary slip. Apart from being the biggest portion of the salary, it is also a fixed amount. Basic salary comprises of around 40-50% of the total 100% of the CTC proposed. This, however, varies from company to company.
HRA – House Rent AllowanceThis allowance is a common component of the salary structure of people who live in India. HRA comprises of 40% to 50% of the basic salary, depending upon the location of the work. Employees who pay rent for the accommodation of a house or an apartment can claim HRA exemption to lower their taxes.
Medical Reimbursement or AllowanceMedical reimbursement is paid to an employee on a monthly basis, irrespective of whether they submit medical bills or not. Medical allowance is not an allowance that bears exemption, under the IT Act 1961. This allowance is, thus, fully taxable.
What is exempt is medical reimbursement for which you should be submitting the related bill to your employer. Watch Video: Medical Expenses Reimbursement Conveyance AllowanceConveyance allowance is a type of allowance given to an employee to compensate for their travel to and from home and office. This allowance is paid by an employer only when the company doesn’t provide their very own transportation to employees. Conveyance allowance will not be provided to employees who travel via office transport.
This allowance can be claimed as tax-exempt up to Rs. 1600 pm in normal case and Rs. 3200 pm in case of a disabled person.
Leave Travel AllowanceLeave travel allowance is extended to an employee when he is travelling on leave with his family or alone. It is one of the best tax saving tools as an employee can claim tax exemption for the expenses incurred on travelling. This exemption is available twice in a block of 4 years. LTA only covers the expenses made on travelling, as the name suggests and not on boarding and food.
Read: LTA Exemption Rules Special Allowance and Performance BonusThis is generally given as a reward to the employees to encourage them to give their best performance. The special allowance is given above basic salary and the amount is fully taxable. Performance bonus depends on an employee’s past performance and is given once or twice a year, as per the company policy.DeductionsProvident FundAny company that has more than 20 employees must comply with the Provident Fund requirements.
Both employer and employee should contribute minimum 12% of the basic salary of the latter to his Provident Fund account. The employee has an option to voluntarily contribute more to his provident fund account up to 100% of his basic salary. It is run by the government to benefit the citizens of the country and has main motive to provide a healthy corpus for to an employee on his retirement. The statutory contribution to Provident Fund should be made on a monthly basis. Employer’s contribution to an employee’s provident fund up to 12% of his basic salary is tax exempt. Beyond this Provident Fund earns tax-free interest of 8.65% and employee’s own contribution to Provident Fund also qualifies for tax deduction u/s 80C up to Rs.
1.5 lakh. So for that employee who is looking for a secured investment option with good returns, VPF-Voluntary Provident Fund could be a great option.Tax Deductible at SourceAs per the provisions of Income Tax Act, every employer is required to calculate the tax payable by an employee on his total estimated income from salary for the financial year and deduct it over the year. At the start of the year, the employee provides the declaration of his tax saving investment and expenses to his employer in form 12BB and based on the declaration received employer deduct the taxes on a monthly basis. At the end of the year, the employee needs to submit the proof of the investment and expenses declared at the start of the year. Based on the proof submitted by the employee, the employer will recalculate the tax payable.
Any shortfall will be deducted over the remaining months of the financial year. The employer is under the statutory obligation to deduct and deposit TDS to the government account on regular basis. Read: TDS Payment and Due Dates Professional TaxProfessional tax is a tax for the privilege of carrying out certain profession. Rather than being imposed by the central government, it is imposed by the state government. The employer will first deduct tax and then deposit it with the state government. The amount is just a few hundred and is only imposed by certain states. Professional tax is allowed as a deduction from your salary income in the income tax return.
Retirement BenefitsExemption from Leave SalaryThere are different leave encashment policies in different companies. Some employers allow employees to carry forward the number of leave days to the next financial year while some of them allow you to encash them. Some employers even urge the employees to use the leaves as they won’t be providing additional benefits for the number of leaves remaining.The amount that is paid as a compensation for the remaining leave days is known as leave encashment.
Any leave encashment received during the continuance of employment is fully taxable. On the other hand, if you receive leave encashment on the retirement of termination it can be claimed exempt up to Rs. 3 lakh.Relief under Section 89(1)If an employee has received any portion of salary in arrears or in advance or if he has received a family pension in arrears he is allowed to get some tax relief under section 89(1) read along with Rule 21A.Exemption on Receipts at the Time of Voluntary RetirementAny payment received by an employee in case of voluntary retirement or termination of services is exempted from tax under section 10(10C).
It should be noted that if the exemption has been allowed in an assessment year it will not be allowed for any other assessment year.The tax will be exempted on the fulfilment of the following conditionsMaximum compensation should not exceed Rs. 5,00,000Compensation received should be towards voluntary retirement or separationThe receipts must comply with Rule 2BAThe employee should be working with an authority that is established under the State or Central Act, university, local authority, state or central government, IIT, notified institute of management, or notified institute of importance throughout India, state, company, PSU or a co-operative society.
An employee cannot get an exemption if he has taken relief under section 89. Also, the exemption can be claimed in the assessment year in which the employee has received compensation.PensionThe pension is fully taxable as salary and paid periodically, on a monthly basis, after retirement. An employee can, however, choose to take a pension in a lump sum amount, known as the Commuted Pension. Commuted pension can be claimed as exempt u/s 10 (10A). He can even choose to get a certain amount of pension at the time of retirement.
GratuityGratuity is a gratuitous retirement benefit that is provided to an employee by his employer. An employee is entitled to receive gratuity if he has completed 5 years of service with the company. Gratuity is paid after resignation or retirement.Is Gratuity Taxable?Gratuity is fully exempt from tax for a government employee or his family. For non-government employees, the tax treatment of gratuity is different and depends on whether the employer is covered by the Payment of Gratuity Act.
Tax Exemption for gratuity will be the least of the following three, depending on whether the employer is covered or not covered under the Payment of Gratuity Act.If the employer is covered under the Payment of Gratuity Act If the employer is not covered under the Payment of Gratuity ActRs. 10,00,000 Rs. 10,00,000Amount of Gratuity actually received Amount of Gratuity actually received15 days of salary for each completed year of service or part in excess of 6 months Half month’s salary for each completed year of serviceMost Frequently Asked Questions about Taxable Income from SalaryWhat is a salaried individual taxed for?Income tax is not only confined to salary but it also includes income that you have earned from all the other sources. These other sources may be anything and everything from house property, interests earned from fixed deposits/ savings account, profit or loss from selling stocks, property, etc. The income earned from these sources by an individual will be considered to be their gross income and hence, is taxable. Read: Income from Other Sources How much tax does he have to pay?Tax is levied on the total income that is calculated from all the sources. A person can avail deductions on his taxable income under section 80.
These taxes are levied as per the defined tax slabs for that respective Financial Year.When does an employer deduct tax and pays it to the I-T Department on the employee’s behalf?The tax that is deducted by the employer is known as Tax Deducted at Source or TDS which they pay to the Income Tax Department on behalf of their employees. The TDS amount is deducted from the salary after calculating it on the basis of the total income and the investments made by the employee. The employer provides a TDS Certificate to the employees known as Form 16, around May and June, which shows all the calculations of the deductions made monthly.What is Form 16?Form 16 is typically a TDS Certificate that shows the calculation of the amount of TDS deducted by the employer during that whole financial year.
Read: Form 16 for Income Tax Return Filing How to view and download Form 26AS?Form 26AS shows the summary of taxes that are deducted on the employee’s behalf and the taxes paid by him. It is provided by the Income Tax department and can be accessed from the department’s official website. It also shows tax refund received by the employee in the financial year.An individual can easily download the Form, from the official website by following some quick steps.Avail deductions and reduce the taxable incomeEmployees should remember to claim all the tax benefits and deductions that apply to them while e-filing their tax return. Section 80C of the Income Tax Act allows deductions of Rs.
1,50,000 in many ways of investment. Also, there are many other options through which an individual can avail deductions under section 80C to 80U.House Property Income and TaxesThis is a comprehensive guide for those who own a residential property. It will help you in understanding how your income derived from house property is taxed and the tax benefits you can avail to minimize your tax liability. We will talk about tax deductions and calculation of income in 2 different sections.
First section will help you understand how your income from house property is calculated and taxed.Second section will give you detailed information on the tax benefits available for those who buy property with home loans.Income from House PropertyWhen an assessee earns any income from a house property, it is taxed under the head ‘Income from house property’ as per the Income Tax Act.
Tax calculation on such income varies depending on the type of house property ; several other factors.Computation of Income from House PropertyThe table given below shows how you can calculate Income from House Property:Particulars Amount (Rs.)Gross Annual Value xxxLess: Municipal taxes (xxx)Net Annual Value xxxLess: Deductions u/s 24Standard deductionDeduction on interest paid (xxx)(xxx)Taxable income from house property xxxTotal of income thus obtained from all the house properties owned by you will be treated as income from house property and added to your total income. If the income under the head house property is negative (loss) you can offset that loss against your other taxable income including salary. But Budget 2017 has put a cap of Rs.
2 lakh on the house property loss which can be adjusted against income from other heads in a financial year. So it means that starting 2017-18 you will be able to offset maximum Rs. 2 lakh house property loss against your other income and balance can be carried forward to next 8 assessment years to be adjusted against income under the same head.To understand how income on house property ; subsequent tax on such income is calculated, one needs to gain some knowledge about the following related terms.Annual value: It is the capacity of the property to earn income.Municipal value: It is the value of the property as derived by municipal authorities.
Fair Rental Value: It is an assumed rental value of the property which is calculated by comparing it with a similar property having similar features.Standard rent: It is a fair amount of rent prescribed by Rent control Act which ensures that tenants are not exploited while owners receive a fair amount of rent.Actual rent received/receivable: It is the actual amount of rent received by the owners from the tenants.Gross Annual Value (GAV):The one which has highest value among the below three terms is considered Gross Annual Value:a) Rent received or receivableb) Fair Market Valuec) Municipal ValuationIf the Rent Control Act is applicable, then the one which has highest value among the below two items is considered Gross Annual Value:a) Standard Rentb) Rent ReceivedNet Annual Value (NAV) is calculated as:NAV = GAV – Municipal Taxes PaidDeductions: To calculate the actual taxable income from house property, the following two deductions are allowed under section 24 of the Income Tax Act.a) Standard Deduction which is 30% of the NAV, is allowed as a deduction towards repairs, rent collection, etc. irrespective of the actual expenditure incurred. This deduction is not allowed if the Gross Annual Value is nil.b) Interest on home loan is allowed as a deduction under section 24.
Annual Value: Annual Value = NAV Deductions.Owner/deemed owner:The person who is entitled to receive the income is called owner of the property, while the person who receives financial benefits from the property but is not registered as its owner is called deemed owner of the property. Income from house property is taxable for the person who actually receives monetary benefits from the property but may or may not be the registered owner of the property.Home Loan Tax BenefitsTax Benefit on Interest Paid on Home Loan u/s 24 of Income Tax ActTax Benefit on payment of interest on housing loan is allowed as a deduction under section 24 of the Income Tax Act.
Section 24 of the Income Tax Act states that the amount of interest on housing loan whether accrued or paid, shall be deducted from the income from house property. Here, the loan must have been taken for the purpose of purchase or construction or repair or renewal or reconstruction of a residential house property.Two types of deductions are available u/s 241) Standard deduction of 30% of annual value2) Interest paid on home loanStandard deduction:A tax deduction of 30% of net annual value of the property is allowed to the taxpayer. Net annual value is calculated as gross annual value minus municipal taxes Paid.
This deduction is allowed irrespective of the amount spent on insurance, repairs, water and electricity supply, etc.Calculation of Net Annual Value of Properties:Let out property Deemed to be let out property Self-occupied propertyNAV = Rent received – Municipal taxes paid NAV = Reasonable rent of a similar place – Municipal taxes paid NAV = NILNote: Since annual value of a self-occupied property is zero or nil, therefore standard deduction allowed is also zero or nil.Tax Deduction for Home Loan InterestThe maximum tax deduction that you can get here on interest payment of home loan taken for a self-occupied property is Rs. 2 lakhs.In case the property for which the home loan has been taken is not self-occupied ie. rented or deemed to be rented, no maximum limit for tax deduction has been prescribed and the taxpayer can take deduction of the whole interest amount u/s 24.
However, if the owner has not occupied the property himself due to his employment, business or profession carried on at any other place, which has forced him to reside at any other place, then the amount of tax deduction available u/s 24 stays limited to Rs 2 lakhs only.It is also important to note that this tax deduction of interest on home loan u/s 24 is deductible on payable basis, i.e. on accrual basis. Hence, deduction u/s 24 should be claimed on yearly basis even if no payment has been made during the year as compared to section 80C (deduction on principal repayment) where deduction is allowed only on payment basis.The tax benefit under section 24 is reduced from Rs 2 lakhs to Rs 30,000, if the property is not acquired or construction is not completed within 3 years from the end of Financial Year in which the loan was taken. However, the limit of 3 years has been increased to 5 years from Financial Year 2016-17 and onwards.
Pre-construction interestDeduction on pre-construction interest is allowed when you have taken a loan for purchase or construction of a house property. However, if the loan is taken for repairs or reconstruction then deduction is not allowed. The deduction for this interest is allowed in 5 equal instalments starting from the year in which the house is purchased or the construction is completed.Though pre-construction interest is allowed to be claimed as tax deducted in 5 equal yearly instalments, which can be claimed beginning the year in which the construction of property is completed, the total amount that can be claimed in a year is subject to a threshold of Rs 2,00,000 in case of a self-occupied house property.Tax Benefit on Home Loan Principal Repayment u/s 80CThe amount paid as repayment of principal amount of home loan taken for the construction or purchase of a new house property by an individual/HUF is allowed as tax deduction u/s 80C of the Income Tax Act.Amount of Deduction AvailableThe maximum tax deduction allowed u/s 80C is Rs 1,50,000. The tax deduction on principal repayment is also a part of the various deductions allowed u/s 80C, which includes amount invested in PPF Account, Tax Saving Fixed Deposits, Equity Oriented Mutual funds, National Savings Certificate, Senior Citizens Saving Scheme, etc.
The deduction limit of section 80C is inclusive of all these options. This tax deduction is available on payment basis and does not depend on the year for which the payment has been made by the assessee.Deduction on Stamp Duty ; Registration FeeThe amount paid as stamp duty ; registration fee is also allowed as a tax deduction u/s 80C. This deduction can be claimed whether the assessee has taken a loan or not. You can claim the deduction in the year you incur these expenses.Conditions for Claiming DeductionCertain conditions must be satisfied to claim deduction u/s 80C for principal repayment of home loan:You can claim deduction only if the construction of property is complete and you have received a completion certificate for the same.No deduction would be allowed under this section for repayment of principal for those years during which the property was under construction.
Deduction is also available whether the property is self-occupied or let out.The benefit can also be claimed for more than 1 house property.Reversal of Tax BenefitsIf you have claimed the deduction u/s 80C, then you should avoid selling the house property in less than five years from the end of financial year in which you received its possession. If you sell the property within this time limit then you will not be eligible to claim any deduction for the principal repaid during the current F.Y. and the total amount of tax deduction already claimed in respect of earlier years shall be deemed to be your income of such year in which you sold the property and you will be liable to pay tax on that income.
Section 80EE: Deduction for First Time Home BuyersJust like the deduction u/s 24, deductions under section 80EE is also available on the interest paid on home loan by taxpayer or assessee. However, unlike section 24, this deduction is only available to first time home buyers. It was first introduced in the Union Budget for Financial Year 2013-14 as a means to help home buyers in the lower income group through tax reliefs.At that time, the amount of tax benefit given by this section was Rs 1 lakh, which was available to be claimed only once by the first time home buyer.Revised Deduction LimitThe government reintroduced section 80EE in the Union Budget 2016-17. The quantum of deduction has been changed to Rs 50,000 for interest paid on home loan. This deduction is available over and above the deduction of section 24 and section 80C which are Rs 2,00,000 and Rs 1,50,000 respectively.
Conditions Necessary for Claiming Deduction u/s 80EE:The deduction would be available to be claimed from Financial Year 2016 onwards.The deduction can be availed on home loans sanctioned between 1st April 2016 and 31st March 2017 onlyThe value of property for which the loan has been taken should be less than Rs 50 lakhThe home loan amount should not exceed Rs 35 lakhThe tax benefit here can be claimed till the time repayment of loan continuesDeduction is only applicable on home loan paid for first house propertyThe property in question can be either self-occupied or non-self-occupiedIf you claim deduction under this section then you will not be eligible to claim the deduction u/s 24 again for the same amount of interestEligibility for Claiming Section 80EE Deductions:The eligibility of the home loan borrower depends on the following points:The deductions under this section can be claimed only by individual taxpayers on properties purchased either singly or jointly.There are a few types of assessees which are not allowed to claim this deduction like Hindu Undivided Families (HUFs), companies, trusts, Association of Persons (AOP) etc.Section 80EE is applicable on a per person basis instead of a per property basis. So, suppose you have purchased property jointly with your spouse and you both are paying the instalments of loan, then you both can individually claim this deductionIt is not necessary to reside in the property for which you want to claim this deduction. So, borrowers staying in a rented accommodation can also claim this deductionHow to Claim Section 80EE Tax Deductions:You can claim this deduction for the Financial Year 2016-17 while filing return by filing the applicable I-T return form and specifying the amount of interest paid in appropriate place. You will also need a document from the lender specifying the interest and principal amount paid that you paid. In addition, you will have to furnish a document from the lender stating the interest and principal amounts on your home loan as well as the amount paid till date.
Income Tax Slab Rate for A.Y. 2018-19: For Individuals Below 60 Years of Age Income Tax Slab Income Tax RateIncome up to Rs. 2,50,000 NilIncome between Rs. 2,50,001 – Rs.
5,00,000 5%Income between Rs. 5,00,001 – Rs. 10,00,000 20%Income above Rs. 10,00,000 30%Less: Rebate u/s 87A – It is only applicable to resident individuals with income up to Rs 3,50,000. Rebate under section 87A is allowed up to a maximum of Rs 2,500. It means the amount of rebate will be lower of either Rs 2,500 or 100% of the income-tax liability.Add: Surcharge @ 10% of tax is applicable if income exceeds Rs 50 lakhs and surcharge @ 15% is applicable if income exceeds Rs 1 crore.
However, surcharge is subject to marginal relief as stated:• If income exceeds Rs 50 lakhs or Rs 1 crore, the applicable tax plus surcharge should not exceed the part of income which is in excess to Rs 50 lakhs or Rs 1 crore respectively.Add: Health and education cess shall be levied @ 4% on the amount of tax plus surcharge computed. For Resident Senior Citizens (age 60 years or more but less than 80 years) Income Tax Slab Income Tax RateIncome up to Rs. 3,00,000 NilIncome between Rs. 3,00,001 – Rs. 5,00,000 5%Income between Rs.
5,00,001 – Rs. 10,00,000 20%Income above Rs. 10,00,000 30%Less: Rebate u/s 87A – It is only applicable to resident individuals with income up to Rs 3,50,000. Rebate under section 87A is allowed up to a maximum of Rs 2,500. It means the amount of rebate will be lower of either Rs 2,500 or 100% of the income-tax liability.Add: Surcharge @ 10% of tax is applicable if income exceeds Rs 50 lakhs and surcharge @ 15% is applicable if income exceeds Rs 1 crore. However, surcharge is subject to marginal relief as stated:• If income exceeds Rs 50 lakhs or Rs 1 crore, the applicable tax plus surcharge should not exceed the part of income which is in excess to Rs 50 lakhs or Rs 1 crore respectively.
Add: Health and education cess shall be levied @ 4% on the amount of tax plus surcharge computed. For Resident Super Senior Citizens (age 80 years or more) Income Tax Slab Income Tax RateIncome up to Rs. 5,00,000 NilIncome between Rs. 5,00,001 – Rs. 10,00,000 20%Income above Rs. 10,00,000 30%Add: Surcharge @ 10% of tax is applicable if income exceeds Rs 50 lakhs and surcharge @ 15% is applicable if income exceeds Rs 1 crore. However, surcharge is subject to marginal relief as stated:• If income exceeds Rs 50 lakhs or Rs 1 crore, the applicable tax plus surcharge should not exceed the part of income which is in excess to Rs 50 lakhs or Rs 1 crore respectively.Add: Health and education cess shall be levied @ 4% on the amount of tax plus surcharge computed.
How to calculate TDS amount? In order to calculate the amount of TDS per month we need to calculate the salary for the year and deduct all the amounts that are exempt from taxes and other deductions that reduce the taxable income. In order to calculate this amount the accounts department asks for some tax declarations that need to be given based on the amount of investments that you will make during the year. Apart from this you may also estimate the amount of certain expenses like travel and rent for the year. Rent amount can be calculated based of the rent agreement. Other expenses like medical, travel expenses and others that may give you some tax exemptions, can be estimated basis past year expenses. Once all these figures are given, the accounts department calculates your tax liability.
Here is an example explaining the computation of Income Tax. Calculating Income Tax to be Deducted from Salary: Mr. Girish, aged 45 years, submitted the details of his income and investment for Financial Year 2017-18, as under: Particulars Amount (in Rs.)Basic Salary 8,40,000House Rent Allowance 4,20,000Transport Allowance 24,000Employer’s contribution towards PF @ 12% of basic pay 1,00,800Leave Travel Allowance 75,000Deposit in Public Provident Fund Account (PPF) 1,50,000Mediclaim Premium paid (for self) 24,000 Mr.
Girish pays rent of Rs. 20,000 p.m. in Pune. He travelled to Kerala with his family on a holiday trip. Tickets for which cost him Rs. 40,000. Calculation of taxable income: Particulars Amount(in Rs.
) Amount(in Rs.)Basic pay 8,40,000+ Transport Allowance(-) Exemption 24,000(19,200) 4,800+ House Rent Allowance(-) Amount of HRA exempted(Lower of below 3 figures)1. Actual HRA received – Rs. 1,80,0003,36,0002. Rent paid in excess of 10% of Basic (Rs.
2,40,000 – Rs. 84,000)3. 40% of Basic1,56,0003,36,000 3,36,000(1,56,000) 1,80,000+ Leave Travel Allowance(-) Amount exempted on Leave Travel Allowance 75,000(40,000) 35,000Gross Salary 10,59,800Less: Deductions under chapter VI-AUnder section 80C (capped at Rs. 1,50,000 )1. PF contribution2. Deposit in PPF account 1,00,8001,50,000 (1,50,000)Mediclaim premium paid (Under section 80D) (24,000)Taxable income under salaries 8,85,800Tax on salary (for the year) 1,05,220TDS amount per month = (Tax for the year/12) 8,768 Calculation of tax liability: The taxable income of Mr.
Girish is Rs. 8,85,800. The tax he is required to pay on this income will be calculated as follows: Up to Rs. 2,50,000 Exempt from tax Amount(in Rs.)Up to Rs. 2,50,000 Exempt from tax 0Rs.
2,50,000 – Rs. 5,00,000 10% (10% of Rs. 5,00,000 (-) Rs. 2,50,000) 25,000Rs. 5,00,000 – Rs. 10,00,000 20% ( 20% of Rs.
8,85,800 less Rs. 5,00,000) 77,160More than Rs. 10,00,000 30% 0Education Cess 3% of total tax (3% of Rs. 25,000 + Rs. 77,160) 3,065Total Income Tax Rs. 25,000 + Rs. 77,160 + Rs.
3,065(Rounded off to nearest 10 rupees multiple) 1,05,220 Hence, the total Income Tax liability for Mr. Girish is Rs. 1,05,220 for the F.Y. 2017-18.
What is an Assessment Year? What is the difference between an Assessment Year and Previous Year? A.Y. is the year in which you file returns.
It is the year in which the income that you have earned in the Financial Year that just ended will be evaluated. For instance, if you have had an income between 1 April 2017 and 31 March 2018, 2018-19 will be the A.Y.
As the word ‘previous’ means ‘coming before’, hence it can be simply said that the Previous Year is the Financial Year preceding the Assessment Year. e.g., for Assessment Year 2018-2019 the Previous Year should be the Financial Year ending 31st March 2018. Who is a resident of India? If you have spent more than 182 days in India for that F.Y.
then you are considered as a resident irrespective of your citizenship or;If you were in India for 60 days or more during that Financial Year and have been in India for 365 days or more during 4 previous years immediately preceding the relevant Financial Year. What is considered as income? If you are a salaried person, your salary from your employer will be treated as income.On the other hand for a businessman, the net profit will be considered as income.In all there are five heads for income as follows:1) Salary2) Income from house property3) Income from business/profession: This applies for entrepreneurs and small business people who don’t get a regular salary income. Some examples are doctors, lawyers, etc.4) Capital gains such as profit from sale of house, land, gold, etc.
5) Income from other sources such as interest received on bank deposits, winnings from lotteries or game shows, etc. Why should I pay Income Tax? When your income exceeds the threshold limit set by the Income Tax department that is exempt from taxes, you will have to pay tax on the excess income you earn. It is calculated for the period from April 1 to March 31.
This period is referred to as a Financial or Previous year. The tax money garnered is used for the country’s development. Do I need to pay tax on gifts received? Gift received in cash, which exceed Rs. 50,000, are taxable. However, gift tax is not applicable in the following situations:1) Gifts in cash or kind whose value is less than Rs. 50,0002) Gifts received on marriage day from friends or relatives3) Gifts received from relatives as defined under the act What are Capital Gains? Capital gains are gains made by selling capital assets, such as equities, property, land, gold, etc. UnderIndian Income Tax laws, you need to pay Income Tax on capital gains.
The tax calculation is dependenton whether you have held the asset for a long term or short term as defined by tax laws. What are receipts? Are all receipts considered as income? A receipt is your entire income before tax deductions. Not all receipts are considered as income. Basically, they are of two kinds:1. Capital receipt: This is the income earned by selling the source or asset. For example, income earned from selling a property, gold, etc.2. Revenue receipt: Income from source such as salary, interest accrued on deposits, rent from property is termed as revenue receipt.
What are the fines/penalties if I file Income Tax Returns after the due date? You may have to pay a penalty up to Rs. 10,000 and interest on tax due @1% per month of default. If I have paid more tax when filing my returns, will it be refunded? Yes, the excess amount will be refunded by cheque or direct credit into your bank account. What are donations? If you make any donations to certain qualified institutions or causes, you can claim a tax benefit on the donated amounts. Depending on the receiver of the donation, your donation would qualify either for 100% deduction or 50% deduction.
Section 57 – Deduction on Income from other SourcesIncome tax is the government’s way of generating revenue for the whole year. There are some components that you are required to pay taxes on. However, deductions are also introduced by the government so that the taxpayers can get some relief on the tax liabilities that they are required to bear.In this guide, we are going to discuss deduction under Section 57 of the Income Tax Act for ‘income from other sources’.What is Income from Other SourcesAny income which is not chargeable under other heads of income is taxable as residuary income under the head ‘Income from Other Sources’The nature of income earned will decide whether income is to be shown under this head.Standard Inclusions in Income from other SourcesThere are some standard inclusions are outlined belowDividendsIncome by way of dividend is shown under this head. Deemed dividend under section 2(22)(e) is fully taxable as is a dividend from co-operative societies and foreign companies.Dividend not chargeable to tax includes dividends exempt u/s 10(34), i.
e. dividend from Indian companies, dividend liable to corporate dividend tax, income on mutual fund units or income from UTI unitholder.However, as per budget 2016, dividend received more than Rs 10,00,000 will be taxable at the rate of 10% in the case of resident individual / HUF / firm.WinningsThis includes winnings over Rs 10,000 from lotteries, puzzles, races, games and all forms of gambling and betting. E.g. card games, horse races, game shows etc.Interest ReceivedAll interest income earned in the previous year (on compensation/enhanced compensation) is taxable.
However, 50% of this income can be claimed as deduction u/s 57 of Income Tax Act, 1961.Any sum received by an employer from his employees as a contribution towards PF/ESI/ Superannuation Fund etc.If employees’ contribution is credited to their account in the relevant fund on or before the due date.Note: If same is not deposited in the relevant fund and it is not taxable under the head ‘Profits and Gains from Business or Profession’.Incomes not declared under the head ‘Profits and Gains of Business or Profession’This includescontributions made to an employer’s employee welfare fund,interest earned on securities,rental income from furniture, plant and machinery (including the building where it cannot be let out separately),keyman insurance policy proceeds.GiftsThis includes monetary or non-monetary items received without any consideration or without adequate consideration. Non-monetary gifts include all immovable property and certain movable property.Gifts are taxed only if the total amount received during the previous year is more than Rs 50,000 and applies only to those gifts received after 01/10/2009.
This doesn’t apply if the assessee receives money fromrelatives or a local authority or a trust, fund, educational/medical institution, body or any such institution outlined under section 10(23C) and section 12AAas a wedding giftby way of being named in a Will or an inheritancefrom a dying donorGifts from relatives mean gifts from the assessee’ sparents, parents’ brothers or sisters (i.e. aunts, uncles)any lineal predecessor/successorbrother, sister; brothers’ or sisters’ spouses (i.e. brothers or sisters- in-law)spouse, spouse’s parents (i.e. in-laws),spouse’s brothers or sisters (i.e.
brothers or sisters- in-law),spouse’s lineal predecessor/successor and their brothers or sisters.Gifts include monetary gifts, immovable property and specified property.Monetary gifts – Sums of money received without any consideration or without adequate consideration.Immovable property as gifts – Property value will be the stamp duty value. It will be considered as inadequate consideration if the property value is lower than stamp duty value.
Specific movable property – Property here are shares, jewellery, securities, paintings, archaeological collections, sculptures and drawings and other artwork. As of 01/06/2016, bullion also forms a part of this list. Property value will be the fair market value. Inadequate consideration is when the property value is below fair market value. Read: Gift Tax India Consideration for Calculating Tax under ‘Income from Other Sources’The income chargeable to tax under the head ‘Income from Other Sources’ is computed after considering the deductions available u/s 57 of Income Tax Act as given below:Dividend or Interest Income on SecuritiesAny reasonable sum paid by way of commission or remuneration to a banker or any other person for realising such dividend or interest on behalf of the assesseeNote: It does not include the dividend on which the domestic company has paid dividend distribution tax.Further, Dividend shall be taxable at 10% if the aggregate amount received is exceeding Rs 10,00,000 during a financial year.
Income from letting of machinery, plant or furniture with or without buildingRent, rates, taxes, repairs, insurance and depreciation etc. relating to such machinery, plant furniture or building.Income from Family Pension33.
5% of actual pension received or Rs 15,000 whichever is less.Any other Expenses for Earning IncomeAny other expenditure (not being capital expenditure) laid out or expended wholly and exclusively for making or earning such income.However, following conditions to be satisfied for claiming deduction u/s 57(iv)The expenditure should be incurred for earning such income only.It should not be capital expenditure.It should not be a personal expenditure.It should be incurred in the relevant financial year only.Income Tax Return Filing Due DatesFor the Financial Year 2017-18 (AY 18-19), the Income Tax Return Filing due dates are as follows:-31st July – Last Date of Return filing for non-audit cases30th September – Last Date of Return filing for audit casesIncome Tax Filing for Salaried IndividualsSalaried individuals can file their income tax returns basis their Form 16. Most of their income details are mentioned in their Form 16 issued by their employers.
Our guide on Form 16 will help you understand all about the importance and filing with the help of Form 16.Documents required for Income Tax FilingThere are different documents required for income tax filing that need to be kept ready before you file your taxes. These include Form 16, Form 16A, investment receipts and proofs. Read our guide on document checklist that will help you be ready to file taxes.What is Form 26AS A salaried individual generally pays tax in the form of Tax Deducted at Source or TDS. This is deducted by his/her employer from his/her monthly salary.
The Income Tax Department maintains the database of the total tax paid by the taxpayer. Form 26AS (Tax Credit Statement) is the annual statement in which the details of tax credits are maintained for each taxpayer as per the database of Income-tax Department. Form 26 AS will reflect the tax credit against the PAN of the tax payer.What is Form 26AS Used For?It facilitates view of all financial transactions involving TDS/ TCS during the relevant Financial Year at one place.
Your Form 26 AS gives you details of no/ low deductions claimed by you.It helps you locate any TDS defaults relating to all TANs associated with your PAN.You can find any tax demand created by Income Tax Department and thus do proper follow up.
It helps in seamless processing of Income Tax Return and speedy issue of refunds.It helps in verification of CIN (Corporate Identity Number) in non-TDS payments.It helps in verification of refunds encashed during the year.It helps in claim of other taxes paid by you and computation of income at the time of filing of return. Income Tax SlabIndian Income tax laws, tax individuals per different slab rates of income. The basic exemption limit is Rs 2,50,000.
Income tax department charges different tax slabs at the rates ranging from 10% up to 30%. Our guide on income tax slab will explain these in detail. You can easily estimate your tax liability by using our tax calculator and know how much taxes you owe to the government.Exceptions to the Income Tax SlabsCapital gains are not taxed as per the Income Tax slab mentioned above:Type of capital asset Holding period Tax rateEquity mutual funds ; 12 months = LTCG Exempt; 12 months = STCG 15%Debt mutual funds ; 36 months = LTCG 20%; 36 months = STCG As per slab rateShares (STT paid) ; 12 months = LTCG Exempt; 12 months = STCG 15%Shares (STT unpaid) ; 12 months = LTCG 20%; 12 months = STCG As per slab rateFMPs ; 36 months = LTCG 20%; 36 months = STCG As per slab rateHouse property ; 24 months = LTCG 20%; 24 months = STCG As per slab rateAccording to the latest Finance Act 2018, any capital gains from equity shares exceeding Rs 1 lakh will be charged to a LTCG tax of 10%. To read all such budget changes please refer our detailed blog on Changes in Income Tax laws – AY 2019-20.Income Tax Returns (ITR)There are a lot of people out there who think filing income tax returns is not mandatory and cut it off their to-do list as they find it unnecessary and time-consuming. However, it is very important for you to file your taxes. Filing your taxes is just not a statutory duty but it is one of those moral and social duties that every citizen of a country should take care of rather as a responsibility. Tax returns are a statement of your earnings from various sources of income that include the tax liability, details of tax paid, and other refunds that are eligible to receive from the government. Our guide on Which ITR to File will help you choose the correct ITR form for tax filing.What is Income Tax Return?Tax return is a form that you are required to file and contains information about your income as well as tax liability thereon. You are required to file these tax return forms with the Income Tax Department. The Income Tax Act, 1961, obligates the citizens of India to file their tax returns, at the end of every Financial Year, with the I-T Department. However, it is not mandatory for every citizen. There are different types of ITR form and each form is applicable to a certain section of assessee. These forms need to be filed on a specified due date. Income Tax Department will process only those tax returns which are filed in proper forms and within the due date.Which ITR Form to FileBudget 2017 has made several changes to push taxpayers to file their tax returns within time. Tax department is also doing its best to avoid any delays in tax preparation and filing. Following its path breaking trend from 2016 where CBDT has preponed the release of ITR forms to the month of March from traditional practice of releasing it in May-June, CBDT once again notified all the ITR forms for A.Y. 2017-18 in the month of March, 2017 itself.The Finance Minister has promised to the individual tax payer that he will make tax filing simpler for them, fulfilling this promise CBDT has now introduced a simplified ITR 1 Form applicable only for individuals having income up to Rs. 50 lakh. But taxpayers having dividend income above Rs. 10 lakh or unexplained credit can’t opt for ITR-1. The ITR-2A introduced in 2016 has now been withdrawn and even the old ITR-3 is merged with ITR-2. As such all the individual taxpayers (except those who are eligible to use ITR-1 or those earning business income) would be required to file ITR-2 only.Old ITR-4 is now replaced by ITR-3 as such the individual taxpayer earning income from business or profession are now required to use ITR-3. Till A.Y. 2016-17 taxpayer opting for presumptive taxation were required to file ITR-4S but now they are required to file ‘ITR-4 SUGAM’ for presumptive income.Who can use Form ITR 1?ITR 1 can be used by an individual taxpayer, having income from:Salary or pensionHouse property (except brought forward loss under this head)Income from other sources (except winnings from lotteries or income from horse races or losses under this head)Who can’t use Form ITR 1?Return in ITR 1 cannot be used by an individual if he:Is resident and ordinarily resident of India and has, –Any asset (including financial interest in any entity) located outside India; orSigning authority in any account located outside India; orIncome from any source outside India.Has earned income from capital gains or business or professionHas income from more than one house propertyHas losses under the head income from other sourcesHas total income above Rs 50 lakhsHas dividend income above Rs 10 lakhs taxable under Section 115BBDAHas unexplained credit or investment taxable at 60% under Section 115BBE.Has agricultural income exceeding Rs 5000Has income from winning from lottery or horse raceHas claimed any relief u/s. 90 or 90A or 91AForm ITR-1ITR 1 is to be filed by individuals with income less than Rs 50 lakh from:Salary/ pension; orIncome from one house property (excluding cases where there is brought forward loss or loss to be carried forward from previous year); orIncome from other sources (excluding winning from lottery and income from race horses, income taxable under section 115BBDA or Income of the nature referred to in section 115BBE).Form ITR-2ITR 2 is to be filed by an individual or a Hindu Undivided Family (HUF)who is not eligible to file Sahaj (ITR-1) andwho is not having any income under the head “profits or gains of business or profession”.ITR-2Who can use Form ITR 2?ITR-2 can be used by all individuals and HUFs not carrying out Proprietary business or profession.Who can’t use Form ITR 2?ITR 2 cannot be used by an individual and HUF having income chargeable to tax under the head ‘Proprietary business or profession’ Important information required to file ITRPAN card is mandatory for all the assesseesAadhaar card has now been made mandatory for individual tax filers. In case of non-individual tax payers, the Aadhaar card of the authorized person is required to be providedIncome from salary, agriculture, other sources, house property, profession, capital gainsPersonal details like name, mobile number, address, type of employmentDeductions under chapter 10, chapter VI-A and many other sections like Section 80U, 80C, 80DComplete bank account details including branch, IFSC number along with account numberSelf-assessment tax paid, advance tax paid, TCS and TDS will be updated automaticallyDetails of cash deposited of the old, demonetized notes made between 9th November to 31st December 2016 and exceeding Rs. 2 lakh Claiming Refund of Taxes PaidYou are eligible for refunds to be claimed from the tax department in case you have paid excess taxes. These can be claimed on filing your tax returns. Once you have claimed a refund, you need to keep checking the status of your refund to make sure that your refunds are credited to your account in time. Our guide on tax refund will help you understand different statuses of refund and know your refund status.Late Filing of Income Tax ReturnsIt is necessary to file the income tax returns before the deadline to avoid a penalty for non-filing of tax returns. Our guide on penalties and late filing fees will help you understand the different charges levied by the government.Income Tax Filing ProcedureWith the introduction of e-Filing, Income Tax Returns have become simpler and convenient. You can e-File Income Tax Returns from the comfort of your home or office at any hour of the day. You can follow these simple steps to e-File Income Tax Returns online. You can read the entire procedure in our guide to ‘e-filing income tax returns on incometaxindiaefiling.gov.in’.Income Tax DeductionsThe government provides tax benefits in the form of tax deductions which are designed in a way to encourage investment habits and ease financial burden. Therefore, one can get tax deduction on various education, health and house related expenses as well as through investment in various tax saving investment options.EducationTwo types of educational expenses can also help you save taxes:Tuition fees Section 80CInterest paid on education loan Section 80E Home ownershipBuying a house is a big financial expense for most of us. Therefore, we depend upon home loan from financial institutions to support this expenditure. However, there are various tax benefits provided to the home buyers by the government:Principal repayment of home loan Section 80CInterest paid on home loan Section 24Additional tax benefit for first time home buyers Section 80EE Home rentingNot everyone can afford to own a house so it is common for people to opt for a rented accommodation. You can get tax benefit on this basic expense.Tax deduction on HRA Section 10Tax deduction on rent paid in the absence of HRA Section 80GG HRA House Rent Allowance Exemption RulesHRA or House Rent Allowance is a component of the salary provided by the employer to his/her employee. If you receive HRA as part of your salary and you live in a rented accommodation, then you can claim full or partial HRA exemption u/s 10. However, HRA is fully taxable if you don’t live in a rented accommodation.How to Calculate HRA?Your HRA calculation depends on four factors. These factors are as follows:SalaryHRA component of salaryRent paidLocation of your rented residenceHRA Exemption Rules Tax exemption on HRA is least of the following:1) Actual HRA received2) Actual rent paid reduced by 10% of salary3) 50% of basic salary if the taxpayer is living in a metro city4) 40% of basic salary if the taxpayer is living in a non-metro citySince the least of the above is exempt from tax, you can ask your employer to restructure your salary to get maximum tax benefit.If all the factors mentioned above remain constant then tax exemption on HRA can be calculated annually but if any factor changes within the relevant Financial Year then calculation needs to be done on a monthly basis.HealthHealth and medical expenses are a necessity of life. We often spend money on medicines while health and medical insurance have become a necessity. Therefore, keeping this financial burden in mind, the government has designed a number of tax benefits for the taxpayers:Medical insurance premium Section 80DPreventive health check-up and other medical expenses Section 80DMedical expenses on your disability Section 80UMedical expenses on a disabled dependent Section 80DDMedical expenses on specified diseases Section 80DDBTax Saving InstrumentsSaving and growing your money through investment is a good habit. The Income Tax Department promotes this by providing lucrative deductions on many investment instruments that are used for tax exemptions under the various sections of the Income Tax Act. Investing in tax saving instruments is an apt way to boost your wealth and save taxes concurrently.List of tax saving instruments eligible for tax deduction u/s 80C: Public Provident FundEPF – Employee Provident FundNational Savings CertificateEquity Linked Savings SchemeSukanyaSamriddhiYojanaSenior Citizens Savings SchemeBank Fixed DepositPost Office Time DepositUnit Linked insurance Plan List of other tax saving investments: Certain pension funds Section 80C, 80CCC, 80CCDNational Pension Scheme Section 80CCDInterest from banks and post offices Section 80TTA, 80TTBDonations and CharityMany of us like to donate money for one or the other noble cause. Many such donations qualify for tax deductions.Charitable Institutions Section 80GScientific Research and Rural Development Section 80GGAPolitical parties and Electoral Trust Section 80GGB, 80GGCTax Saving Opportunities for BusinessesGovernment also provides a number of Income Tax benefits to the businesses on the basis of nature of business, location, etc.Industrial activities Section 80-IA, 80-IABHotels, shops, multiplex theatres, cold storage plants, housing project, scientific research and development Section 80-IBBusinesses operating in special states Section 80-ICHotels and convention centres in specified areas Section 80-IDEstablishments in the North-East India Section 80-IEBusinesses of processing / treating and collecting bio-degradable wastes to produce biological products like bio-fertilisers, bio-pesticides, biogas, etc. Section 80JJAFactories Section 80JJAAScheduled banks having offshore banking units in SEZs, entities of International Financial Services Centres and banks which have been established outside India Section 80LACooperative societies Section 80PCommon Tax Saving Expenses1) Tuition fees:We often spend a considerable amount of our income to provide best education to our kids. I-T laws provide you opportunity to compensate the expenses you incur on their tuition fees by reducing your taxes. You can claim this deduction u/s 80C of I-T Act. Read: Claim Tuition Fees as Tax Deduction 2) Deduction on rent paid (without HRA):Don’ t worry if you don’ t get HRA in your salary as you can still get tax benefit as per the provisions of section 80GG of I-T Act.3) Repayment of home loan:You will be glad to know that the burden of your home loan EMIs can reduce the burden of taxes. You can get the benefit on both principal ; interest component of your instalments. If you are paying for your first house then you can save even greater amount of tax. All these deductions are covered under section 24, section 80C and section 80EE.4) Repayment of education loan:Due to rising costs of educational courses, people often go for education loans when it comes to higher education. Just like deduction available on tuition fees, your education loan EMIs also bring tax benefits to you. Income Tax Act has separate provision under section 80E to provide you this tax benefit for interest paid on your education loan. Read: Tax Deduction on Education Loans under Section 80E 5) Pension funds:Ideally, the day you start earning money should be the day you start planning your retirement.One of the best ways to do this is to start investing in pension funds. Fortunately, you can also reduce your taxes when you contribute to certain pension funds. Provisions regarding tax benefits in this case are covered under section 80C / 80CCC / 80CCD(1) / 80CCD(1B) / 80CCD(2).6) Medical insurance ; health check-up:These expenses are a regular part of every person’s life. Much to your relief, tax laws let you make some tax gains if you spend any money towards medical insurance & preventive health check-up. You can get deduction up to Rs. 60,000 under section 80D of the I-T Act. Just make sure not to pay your premiums in cash.Other than these common expenses, there are some uncommon and less known expenses which can help you further reduce your tax liability.Less Known Tax Saving Expenses7) Medical expenses of disabled dependent:If you have a dependent person in your family who is suffering from a disability, then you can avail tax benefit under section 80DD. This deduction is offered to help you take care of your disabled family member who is dependent on you. It can help you save up to Rs 1,25,000 from your taxable income.8) Medical expenses of disabled individual:Similar to deduction under section 80DD, an individual suffering from disability himself gets tax benefit under section 80U. The maximum deduction limit under this section is Rs 1,25,000.9) Treatment of specified diseases:For certain specific diseases, Income Tax Department offers tax benefits to the individual u/s 80DDB on the basis of expenses incurred by him for the treatment of such diseases or ailment. Treatment of diseases like cancer and AIDS is very expensive and this section offers much needed financial relief to the person suffering from such ailment and his family members.If you love doing charity, I-T department is also ready to help you in return for your charitable deeds. There are several types of donations which are exempt under Income Tax Act.10) Charitable donations:There is another reason to rejoice when you make donations. You not only boost your karma & achieve inner peace but also earn right to claim another tax exemption which is covered under section 80G. There is an upper limit on cash donations. Such donations are capped at Rs 2,000.11) Donations for scientific research or rural development:Any donation made for scientific research or rural development is eligible for deduction under section 80GGA of the Income Tax Act.Other than these expenses, there are several avenues which can help you save taxes voluntarily. If you have surplus money which you want to invest, then why not invest in options which can fetch you dual benefits, i.e. lucrative return as well as tax exemption.Best Tax Saving Investments under Section 80C12) EPF:If your employer has opened an EPF account for you, then you are already investing in a very lucrative investment option. The contribution that you make to your EPF or PF account can be claimed as deduction under section 80C. The interest income & maturity amount that you get as a result is also exempt from tax if you have completed 5 years of service.13) VPF:12% of your basic salary goes as a mandatory investment in your EPF. However, you can choose to invest more (up to 100%) of your basic salary + DA through voluntary contributions. In case you choose to invest more, your EPF becomes your VPF. VPF earns you tax-free interest of 8.4%. Therefore, you can increase your contributions in VPF to get the most out of your deductions under section 80C.14) PPF:Other than PF, you can also invest in PPF. It is a good option if you looking for long-term investment opportunity. Just like PF, you can get tax deduction on your contributions while resulting interest income & maturity amount stays exempt from tax.15) Sukanya Samriddhi Scheme:This is arguably one of the best tax saving investment options available today. Its tax benefits are also covered under section 80C. It offers higher rate of return on investment when compared to PF & PPF. However, this scheme is only available to parents or guardians of a girl child. Read: Details of Sukanya Samriddhi Scheme 16) NPS:It is a saving scheme offered by postal department. It is considered a highly secure option having almost zero risk. Your contribution to this scheme makes you eligible for section 80C deduction. Though interest earned is taxable, it also qualifies for deduction under section 80C17) 5 years post office time deposit account:Five years fixed deposits can be opened with any branch of Indian Post Office. These deposit accounts work like any other fixed deposit account except that they have a lock-in period of five years and offer the double benefit of return on investment and tax deduction.If you are a salaried taxpayer, the below-mentioned tips will be very helpful in saving taxes.Tax Saving Tips for Salaried Individuals18) HRA Deduction for Rent Paid:If you look at your salary carefully you will find that it has a component called HRA. This allowance can be claimed as a tax deduction, if you live in a rented place. Read: HRA Exemption Rules 19) LTA Deduction for Travel Expenses:LTA is another component of your salary which can fetch you tax benefits. LTA concession can be claimed for two journeys in a block of 4 years. Expenses incurred by you & your family on travel for which your employer gives LTA can be claimed as deduction. Read: Leave Travel Allowance Rules 20) Donations to Political Parties:You may not know this but supporting politics can also reduce the burden of your taxes. Any donation made to political parties is exempt from tax if it satisfies certain conditions under section 80GGC.21) Tax Benefit on Gratuity:Gratuity received on retirement or on becoming incapacitated or on termination or any gratuity received by the widow of the deceased employee, children or dependents is exempt up to Rs 10,00,000 (proposed to be enhanced to Rs 20,00,000) subject to certain conditions.22) Meal Coupons:Some employers provide meal coupons like Sodexo to their employees. These aren’t taxable up to Rs 2,600 p.m.23) Medical Bills:It is beneficial to keep the receipts of medical expenses safely to save tax. You can gain tax benefit of up to Rs 15,000 on medical expenses for yourself and your dependents. This exemption is proposed to be replaced with the standard deduction from FY 2018-19.24) Daily Travel Allowance:Employees can also get tax benefits on conveyance up to Rs 1,600 per month from their employer. One can save as much as Rs 19,200 per annum on tax through conveyance allowance. Moreover, to claim this benefit one does not need to submit any bills or proofs.Some companies have the policy of daily travel allowance if an employee is commuting by car or bike. Employees can claim the benefit by submitting original fuel bills. The limit of tax benefit depends upon the type and capacity of vehicle.25) Car Leased by Employer:If someone is making use of car lease policy offered by his employer, he can drive a car leased by his employer and therefore save tax on car EMI since he may not require buying a car. In this case, he cannot take the benefit of Daily Travel Allowance.26) Expenses Related to Internet or Phone:Employees often get mobile phones and internet devices from their employer to do their jobs effectively. Expenses incurred in using these devices are either pre-paid by the employers or can be reimbursed by the employees. Tax benefits can be claimed on these expenses.27) Money under VRS:Public sector employees working under the Central government or State government can get this additional tax benefit. When such employees take voluntary retirement, the money they receive as a result of VRS is non-taxable up to Rs 5 lakh.Now, let’s have a look at some tips for business persons to save taxes.Tax Saving Tips for Business Persons28) Distributed Profit to Partners in Partnership Firms:There is no tax in the hand on partners if their partnership firm is making profits and partners decide to distribute profits among themselves. Partners get tax benefit because their partnership firm has already paid taxes on the profits.29) Travel or Hotel Expenses:Business owners have to often travel a lot to run and grow their business. They never pay for such expenses from compensation they draw for themselves. If they pay for such expenses from their own pocket, they can show them as business expenses and claim tax deduction.30) Food Expenses in Business:Business owners often meet a number of persons on a daily basis for the purpose of their business like vendors, customers, clients etc. During such meetings, often money is spent on food or snacks. Such expenses can be shown as business expenses to claim tax deduction on them.There are several other ways in which you can further reduce your tax liability like setting off your capital gains and asking your employer to restructure your salary.Other Tax Saving Tips31) Setting off capital gain:When you make capital gains on your investments, you attract taxes. However, if you make a loss then Income Tax Department allows you to carry forward your capital loss up to 8 years. Note that you can set off capital losses only against capital gains and not against any other income. Also, long-term capital losses can be set off only against long-term capital gains. Read: How to Report Capital Gains under ITR 32) Salary restructuring:When switching jobs we only focus on higher CTC. However, a higher remuneration will also result in higher taxes. Therefore, it is equally important to ask your prospective employer to structure your salary in such a way that your take-home pay is maximised & tax outgo is minimised.Frequently Asked Questions on Tax DeductionHow to claim tax deductions?Easiest way for the salaried taxpayers to claim tax deduction is through declaring their investments & expenses to the employer. You need to inform your employer about your planned investments at the beginning of the financial year to save taxes. Then you need to submit proofs of investment 2-3 months before the end of the financial year. You can ask your employer for the exact time period for submitting proofs. Which investment option to choose under section 80c?Under section 80c, you will find several tax saving investment options. Each investment comes with a different tax impact, ROI, lock-in period etc. Hence, you must choose the investment plan which best suits your financial goals based on above mentioned factors. How to save tax beyond section 80C?Other than section 80C, there are various other tax saving opportunities. By buying medical insurance and making charitable donations, you can easily save taxes. You also get tax deduction on education loan and home loan repayment.Section 80C to Section 80U DeductionsTax deductions help you save your tax liabilities. Deductions can be claimed on certain expenses like investments made in government schemes, fees for education, charitable contributions, insurance schemes, retirement plans, etc. The government of India has provided such deductions to inculcate the habit of saving and investing in the individual and institutional tax payers. Most of these tax saving provisions are covered from section 80C to section 80U of the Income Tax Act 1961.Deductions under Section 80CTax deductions under section 80C allow you to claim a deduction of maximum Rs 1.5 lakhs. This amount is a combination of deductions available under Section 80C, 80CCC, 80CCD(1). These deductions are available for individuals and Hindu Undivided Families. Investments eligible under this section 80C areEmployee Provident Fund (EPF)Voluntary Provident Fund (VPF)Public Provident Fund (PPF)National Savings Certificate (NSC)5 Year Post Office Time Deposit5 Year Tax Saving Bank Fix DepositEquity Linked Saving Schemes (ELSS)Unit Linked Insurance Plans (ULIP)Senior Citizens Saving SchemesSukanya Samridhhi Scheme Read: Deductions under Section 80C Deduction under Section 80CCCSection 80CCC provides deductions for contributions in certain pension schemes. Only individuals are eligible under this section. It works in concurrence with section 80C and 80CCD(1) so that the maximum deduction amount available under all the three sections is Rs 1.5 Lakhs.Deduction under Section 80CCDSection 80CCD provides deductions for investment in pension schemes notified by the Central Government. The schemes are divided into three parts 80CCD(1), 80CCD(1B) and 80CCD(2).Section 80CCD(1) applies to all the employees who voluntarily make contributions to NPS. The deduction is restricted to maximum 10% of the Salary (Basic + DA)Section 80CCD(1B) Under this section all the employees who are voluntarily contributing to NPS can claim additional deduction up to Rs 50,000 subject to 10% of salary (Basic+DA). But if any deduction is allowed under section 80CCD(1), then no deduction will be allowable under this section for the same contribution.Section 80CCD(2) applies to all the employees whose employer contributes to employees’ NPS account. The deduction is again restricted to maximum 10% of the Salary (Basic + DA). The schemes eligible are National Pension Scheme and Atal Pension Yojana.Deduction under Section 80CCFSection 80CCF was available for Individuals and Hindu Undivided Family and provides tax deductions on subscription of long-term infrastructure bonds notified by the government. Maximum deduction under this section is Rs 20,000. This benefit has been discontinued From A.Y. 2013-14.Deductions under Section 80DThis section provides a deduction for expenses incurred towards medical insurance, preventive health checkup, and other medical expenses. The maximum amount available under section 80D is Rs 1,00,000 (according to union budget 2018). The deduction is available for the taxpayer, spouse, dependent children, parent (dependent or independent).Deduction under Section 80DDSection 80DD provides a deduction for medical expenses are taken on to take care a differently abled family member dependent on the taxpayer. The deduction amount varies with the severity of the disabled member. Disabilities like Blindness, Low Vision, Leprosy-cured, Mental Retardation, Autism, Cerebral Palsy, etc. The permitted deduction is Rs 75,000 under normal disability and Rs 1,25,000 under severe disability.Deduction under Section 80DDBSection 80DDB is available for treatment of certain specified diseases with a limited amount of Rs 40,000 for people below 60 years of age and Rs 1,00,000, if the person treated, is a senior citizen.Deductions under Section 80EIf a taxpayer has taken a loan for pursuing higher education of self or sponsoring the education of his or her child / ward then section 80E provides a deduction on the interest repayments of the loan. Loans that are taken from approved charitable organisations and financial institutions only are eligible under this section. The deduction can be claimed maxim for 8 years. The benefit can be availed only by individuals.Deduction under Section 80EEIndividuals can avail section 80EE deduction for the interest repayments of a loan taken to buy a residential house property for the first time, i.e. the taxpayer is a first-time home buyer. This section allows you a deduction of up to Rs. 50,000 per year till the time loan is repaid subject to the satisfaction of certain conditions. Section 80EE along with section 80C can help you minimise your tax liabilities.Deductions under Section 80GSection 80G provides a deduction on contributions made towards an approved charitable institution. Mode of donation plays a role in deciding the deduction limit. The donations specified in section 80G are eligible for deduction up to either 100% or 50% with or without restriction as provided in section 80G. For claiming the deduction three documents are required such as stamped receipt, the photocopy of the 80G certificate. The adjusted gross total income is to be calculated on which the qualifying limit is calculated at 10%.Deduction under Section 80GGSection 80GG is a provision which allows a deduction on the rent paid by an individual who is not receiving HRA from his employer in any form or who is a self-employed person. Documents like the rent receipt, rent agreement, form 10BA, and the landlord’s PAN details in case the rent paid annually is more than 1 lakh. Amount of deduction is lower of the followingRs 5000 per monthAn amount equal to total rent paid less 10% of total income25% of the adjusted total income of the employeeDeduction under Section 80GGASection 80GGA provides a deduction of 100% on the contributions made to scientific research or rural development only when the contributor is an individual without any profits or gains from business and profession. Individuals with income from business and professions can claim the same under section 35. Contributions are to be made in the form of cash, cheque or draft. However, cash donations made more than Rs 10,000 are not eligible.Deduction under Section 80GGBSection 80GGB Here deductions are allowed to Indian companies on funds donated to political parties or an electoral trust qualifying for such deductions. Deductions can be claimed for amounts contributed in any way other than cash.Deduction under Section 80GGCSection 80GGC is a deduction available for contributions made by individuals to political parties or electoral trust to the extent of 100% of the amount contributed. The individual should not be an artificial judicial person or a local authority.Deduction under Section 80IAAssessees can claim deductions on profit generated through industrial activities relating to telecommunication, power generation, industrial parks, SEZs, etc.Deduction under Section 80-IABSection 80 IAB is for SEZ developers on profits made by them through the development of SEZs.Deduction under Section 80-IBSection 80-IB Assessees who have earned profits from hotels, shops, multiplex theatres, cold storage plants, housing project, scientific research and development, etc. can claim this deduction.Deduction under Section 80-ICSection 80-IC deduction is available for assessees who have earned profits from states qualified as special states. These include Assam, Meghalaya, Manipur, Himachal Pradesh, Mizoram, Arunachal Pradesh, Uttaranchal, Tripura and Nagaland.Deduction under Section 80-IDSection 80-ID Assessees who have earned profits from hotels and convention centres provided their establishments located in certain specified areas, can claim deduction under this section.Deduction under Section 80-IESection 80-IE Assessees who have establishments in the North-East India area are eligible for this deduction.Deductions under Section 80JSection 80 JJA provides deductions on profits and gains from businesses of processing/treating and collecting bio-degradable wastes to produce biological products like bio-fertilisers, bio-pesticides, biogas, etc. deduction can be claimed up to 100% of their profits for 5 successive years from the time their business started.Section 80 JJAA Indian companies which have gained profits from the manufacture of goods in factories. Deduction up to 30% of the salary of new full-time employees can be claimed for 3 assessment years can be claimed. The Chartered Accountants should audit the accounts of these companies and produce a report reflecting the returns. Employees working on contract basis for a period less than 300 days in the preceding year or those working in managerial or administrative posts do not qualify. Read: Deductions under Section 80J Deduction under Section 80LAThis deduction can be availed by scheduled banks having offshore banking units in SEZs, entities of International Financial Services Centres and banks which have been established outside India. The deduction is available at 100% of income for first 5 years, 50% of income generated through such transactions for next 5 years.Deduction under Section 80PCooperative societies are eligible for this deduction up to 100% on their incomes from cottage industries, fishing, banking, the sale of agricultural harvest grown by members and milk supplied by milk members to cooperative societies. Those involved in other forms of business other than mentioned above are eligible for deduction ranging between Rs 50,000 and Rs 1,00,000 depending on the type of work they are involved in.Deduction under Section 80QQBResident Indian authors are eligible to claim deductions under section 80 QQB on royalty earned from the sale of books. The maximum limit being Rs 3 lakhs. The deduction can be claimed for royalty on literary, artistic and scientific books.Deduction under Section 80RRBDeduction available for income earned by the way royalty for a patent registered on or after 01.04.2003 up to Rs 3 lakhs or income received whichever is less. The tax payer must produce a certificate in the prescribed form duly signed by the concerned authority. Read: Deduction under Section 80RRB Deduction under Section 80TTAUnder section 80TTA offers a tax deduction on interest income earned from deposits held in savings accounts of some financial institutions. Individuals (less than 60 years) and HUFs are eligible for a deduction up to Rs 10,000 under this section. Saving accounts in banks or banking companies, post offices and co-operative societies involved in banking companies’ statements are required to be submitted.Deduction under Section 80TTBInterest income of senior citizens up to Rs 50,000 on deposits with banks and post offices will be exempt, and no TDS will be calculated on such income under section 194A. The person claiming deduction under this section will not be allowed any deduction under section 80TTA.Deduction under Section 80UAn individual suffering from disabilities himself is eligible for tax deductions under section 80U. A person with disability meaning suffering from at least 40% of the disability is eligible for a deduction for Rs 75,000 and person with severe disability meaning suffering from at least 80% of the disability is eligible for Rs 1,25,000. A certain medical authority to certifies the level of disability in a person.Hence, you can see that there are several tax deductions available for the taxpayers under various sections of the Income Tax Act mentioned above. If you plan your taxes carefully, you can easily maximise your tax savings.COMPANY PROFILEAbout the company: H;R Block forayed into India in January of 2012 and today we are the Largest Consumer Tax Filing Company in India. H;R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition. Each H;R Block Tax Expert provides personal advisory services to each client with the goal being to give the most accurate advice and to prepare and e-file individual tax returns with complete accuracy. Our Tax Experts work hard to ensure that each client pays the lowest income tax liability each year.Philosophy:Mission: Help clients achieve their financial objectives by serving as a tax and financial partner. Vision: To be the preferred tax and financial partner for each of their customer in every market they serve. SWOT Analysis: Strengths: High level of customer satisfaction Good Returns on Capital Expenditure Superb Performance in New Markets Strong distribution networkStrong Free Cash FlowSuccessful track record of integrating complimentary firmsWeakness:Days inventory is high compare to the competitors Need more investment in new technologiesFinancial planning is not done properly and efficientlyHigh attrition rate in work forceOrganization structure is only compatible with present business modeOpportunities:New customers from online channel Opening up of new markets because of government agreementOrganization’s core competencies The new taxation policy New trends in the consumer behaviour The new technologyThreats:Intense competitionNo regular supply of innovative productsRising raw material The company can face lawsuits in various markets givenShortage of skilled workforce in certain global marketLiability laws in different countries are differentCHAPTER 2PROJECT PROBLEM AND OBJECTIVESSTATEMENT OF THE PROBLEM :The planning is the arrangement of one’s financial affairs in such a way that without violating in any way thelegal provisions, full advantage is taken to allow tax exemptions, deductions, concessions, rebates, allowancesand other reliefs or benefits permitted under the Income Tax Act.”Tax planning is not a post time of a few but it is necessity for all honest tax payer Rs. A wrong decisioncan mean an unbearable burden while a right step in the right direction after proper tax planning can mean a lotof tax saving”- S.P.Metha.Tax planning is nothing but tax avoiding formulates, it is a great art, which does not break law, yetit’sbonafide. It helps in saving the tax, the salient aspect to so call good tax planning is,i) Bonafide nature of arrangementsii) Provision that laws are not violatedEffective tax planning requires one to loan one’s income and affairs even prior to actually earnings theincome. It is better to plan before than latter. A salariedperson should be aware of the income- tax laws as itrelated to income, the deduction and reliefs that are available. It is intended that on becoming conversant withthe details the people would be able to plan the affairs in the manner whereby it maximize to take home pay.Tax constitutes the greater percentage of internally generated revenue in Enugu State and as well the major source of fund for the government financingits activities. Tax however has its fundamental problems in the area of administration and management.There is deficit in planning, control and adequate information flow of Tax collection generally. Since the government financial policy and objectives is toensure adequate fund and conducive environment for the people’s satisfaction through progressive taxation and other fiscal measures designed to endthe rapid growth and development of the society for the benefit of the citizenry.It is therefore necessary that these avenues of fund are solidified. But on the other way round the implementation of the government taxation policyand the realization of the taxation goal most a times run at variance with the policy outlined in the annual budget as well as the tax laws provisions.Many individuals as well as organization see taxation policy as being harsh and unfavourable. They argue that while few enterprises especially largecompany continues to benefit from the government support through grants, Subsidies and other tax incentives. Others find the policies unbearable as aresult any little opportunity by such people to evade or avoid tax is highly utilized.The results of all these tax evasion and avoidance are that less revenue that envisage is collected through tax by the government and thereby less socialamentias than proposed are carried out.These problems will be solved as soon as an efficient machinery is set in motion for effective administration and review of state tax laws if made oramended.Tax planning is a sensible decision taken by the income tax assessees to reduce their tax liability while investing their hard earned money in various investment and tax saving schemes. Before making an investment one has to plan where, when and how to invest his/her money. The investment option that suits one may not suit others. One has to choose an investment option that is highly suitable to him. To select a suitable investment option the assessees should know the various tax planning measures available. OBJECTIVES:The objectives of the study is finding way of making the tax system effective and putting up measure that will help the government realize adequatefund for its developmental activities.To find out from different segments the reactions of the assessee about the Income Tax Act. To study the comparative rates of Indian Income Tax and to find out whether the income tax rates are reasonable or high. To find out the reasons behind the high rates of income tax. To present a bird’s eye view of the Indian Income Tax laws and it’s various provisions, so that maximum number of individuals will come under the tax bracket and to find the general awareness amongst individual tax payers. To find out general awareness about entire tax system and position of tax evasion and tax avoidance.To provide certain guidelines and suggest the remedies wherever necessary so as to overcome the problems faced by the assessee.To identify the problems faced by the assessees in understanding the provisions of Income Tax Act and filing the returns. The main objective of the research study is to find out difficulties and problems of individual Income Tax payers.To find out ways, means and to formulate new and effective strategy for changing the mindset of the people so as to achieve the objective.An attempt has been made to find out whether al assesses invariably seek the assistance of a Chartered Accountant or Tax Consultant or not.To find out the percentage of tax payers who file return themselves or through tax consultants.The objective of present topic is that paying taxes is mandatory to individual however they cannot file their return without the help of experts. They consult experts because of various complications and calculations are required for computations of income and tax liability. Whereby people can complete formalities even without consulting the experts. Hence, it is necessary to suggest some easy and simple procedure for filing the tax returns. This procedure is also useful to save oneself from any penalty or punishment.Other objectives are1. To discuss and analyze the taxes being administered and Eungu state.2. To ascertain the total value of taxes collected during the period year by year.3. To determine other sources from which the Enugu State Government can generate more tax revenue.4. To ascertain other sources of the government revenue improve on them.5. To make suggestions on ways of increasing the total revenue of the state government both tax and other sources of revenue to the Government.To really achieve these objectives efforts will be made to:1. Identify all the problems militating against effective tax assessment activities.2. Analyze the problems and execute the suggested solutions3. Suggest implementation strategies with a view to assisting the management in carrying out government policies and programmes.4. Bring the problem to the focal eyes of the department and government.5. Sensitizes the government and create the awareness on the people with abysmal attitude towards tax payment and its consequence on theeconomic and social development of the state.HYPOTHESIS: The current technique of Income Tax System is not so useful as percentage of tax payers is less due to high rate of income tax or any other reason. Many individual Income Tax payers are facing problems and difficulties due to which there is fear in the minds of assesses. Hence, they have no option only to consult to the experts for their tax planning and filing the Income Tax returns.With the system passing of a time the Income Tax system is still complex and complicated. No serious efforts have been made to simplify at Government level.System is not Assessee Friendly due to which there is fear in the minds of assesses results into creating negative approach in making compliance under the Act.METHODOLOGY:The Indian Income tax law is a highly complicated and confusing piece of document. For the common man the task of understanding the procedure and provisions is daunting. Not only the process calculation is very difficult but its practical implementation is also tedious and cumbersome. However, under the law, the tax payer is legitimately entitled to plan his taxes in such manner that his tax liability is minimal. As long as you are within the framework of law, you can plan your financial affairs. But the framework of law with related to individual tax payers is difficult at least for common people. Hence, selected topic is more important to the society as well as to the Government. From the commercial and Economic point of view the procedure of Income Tax is equally important to Government also. It is quite clear that within the framework of law one can plan his/her financial affairs, however under the pretext of tax planning, one cannot indulge in Tax Avoidance or Tax Evasion. MAJOR FINDINGSThe Chi-square analysis suggests that sex have influence over the amount of tax paid ,whereas the age ofrespondents has low influence over the amount of tax paid. It is evident from the study that experiencedemployees are willing to pay tax because of several personal factors. Further, the level of awareness of therespondents is significantly higher over the different tax savings scheme. To eradicate that the government,agencyshould come forward to highlight the features of tax savings schemes. It can also be concluded that the senioremployees are diverting a portion of their income to other non-governmental schemes, which give very highreturns.a) The correlation analysis has revealed that there is a moderate high degree of correlation existingbetween income of the respondents and savings, amount of tax paid, savings on tax savings scheme. It can beconcluded that, the respondents are diverting a portion of their income to some other non-government schemeswhich give them high returns and hence they are willing to pay high tax.CONCLUSIONIt is found that on overwhelming majority of the salaried employee’s opinion regarding direct tax imposed ishigh and very high. It is concluded that the salaried employees are reducing the tax liability.Any individual who want to assess his/her income tax and want to do tax planning and savings, first he/she has to calculate his/her total income then compute the income tax by deduction and adjustment in total income as per tax table structure. If tax is paid in access then get refund from the income tax department. Finally do the tax audit.RECOMMENDATIONSMost of the professionals like Doctors, Lawyers and Business men earn more than the other employees. But, their payment of tax is very less or completely nil when compared to other employees. This is because there isno material evidence for the receipt of their income and their employers cannot deduct tax payment from theirincome.Since the tax is the main source of income for the govt., and the salaried class paying their taxregularly (tax deduct at source), the government can come forward to implement some of the welfare scheme byway of:1. Housing loans2. Loans for purchasing domestic appliance3. Loan for marriage etc., with moderate rate of interest4. Loan for the educationIn the tax calculation, the amount of DD and CCA can excluded from the net taxable income.LIMITATIONSSome circumstance beyond human control has brought some distraction research work, some of these inevitable circumstance are:1. Limitation of Time: The limited number of months given for this research to done is less than 3 three months and normally this is to be donemore than this time. The research work is combined with other academic activities in school. All these limiting factors had not allowed a thorough research work to be carried on effectively.2. Financial Problem: Another problem the researcher faced was financial constraints and this limited the work. The high expenses incurred ingathering these materials, photocopying of essential material, typing of document etc. visitation where applicable.3. Lack of Cooperation: Finally, is lack of cooperation with the researcher encountered by the Board not being very active in the release of adequate information while some states were not willing to give out necessary data (Figures) either by ignorance or fear of exposure of such vital information.REFERENCES:H.C. METHOTORA and S.P. GOYAL, Income Tax Law and Practice 2011-2012Dr. VINOTH. K. SINGHANIA Tax Mann’s Direct Taxes Law and Practice 2011-2012.V.P. GAUR and D.B. NARANG, Income Tax Law and Practice.Dr. H.C. METHOTORA and S.P. GOYAL, Income Tax Law and Practice with Tax Planning Sathiys Bhavan Publications, AgraThe IISTE is a pioneer in the Open-Access hosting service and academic event management.The aim of the firm is Accelerating Global Knowledge Sharing.? Income Tax : Theory Law And Practice: Pongianna, K.J.V.Pub,2009, ISBN: 8188818410 ? Income Tax Act : Taxmann,2010, 54th Edition, ISBN : 9788171947263 ? 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Guide to Tax and Corporate Laws :V.S.Datey, SrinivasanAnand G and BhaveshN.Chandarana, Taxmann, 2010, ISBN : 9788171947584 ? Guide to Tax Audit : C.A. Srinivasananand, Taxmann,2011, 6th Edition, ISBN:9788171947348 ? How to Save Income Tax Through Tax Planning :R.N.Lakhotia and SubhashLakhotia, Vision Books, ISBN : 8170947758 ? How to Save Tax on Capital Gains :R.N.Lakhotia, Vision Books, Sixteenth Edition, 168p, ISBN : 8170947561 ? How to Save Tax on Hour Salary and Perquisites :R.N.Lakhotia, Vision Books, ISBN:8170947545