A Project report on

“A Study of Income Tax Planning and Filling with respect to Individual Assessee”
Submitted in partial fulfillment of the requirement for the degree of
Master of Business Administration

(Affiliated to Savitribai Phule Pune University)

By

Neha P.Sathaye
Roll No. 133
Under the guidance of
Prof. Dr.Devyani Ingale

Sinhgad Technical Education Society’s

RMD Sinhgad Technical Institutes Campus
RMD Sinhgad School of Management Studies, Warje, Pune
Batch 2020-2022
Guide feedback
 DECLARATION

I hereby declare that the project titled “Income Tax Planning in India with respect to
Individual Assessee” is an original piece of research work carried out by me under the
guidance of Prof. Dr.Devyani Ingale the information has been collected form genuine and
authentic sources. The work has been submitted in practical fulfillment of the requirement of
degree of Master of Business Administration to university of pune.

Date: /02/2022 Neha Prashant Sathaye

Place: Pune
Guide’s certificate
COMPANY CERTIFICATE
 INDEX

Chapter No. Topics Page No

1 Introduction 1
 Theoretical background
 Objective of study
 Need for study
 Scope & Limitation

2 Organization Profile 34

3 Research Methodology 36
 Sources of Data Collection
 Limitations of Study
4 Suggestion and Recommendations 38

5 40
Bibliography

6 Questionaire 41
 ACKNOWLEDGEMENT

I am overwhelmed in all humbleness and gratefulness to acknowledge all those

who have helped me to put the ideas, well above the level of simplicity and into something
concrete. I owe a great debt to my guide Prof. Dr. Devyani Ingale who provided wholesome
direction and support to me at every stage of this work. Her wisdom, knowledge and
commitment to the highest standards inspired and motivated me.

Neha Prashant Sathaye

 INTRODUCTION
Income Tax Act, 1961 governs the taxation of incomes generated within India and of incomes
generated by Indians overseas. This study aims at presenting a lucid yet simple understanding of
taxation structure of an individual’s income in India for the assessment year 2022-23.

Income Tax Act, 1961 is the guiding baseline for all the content in this report and the tax saving
tips provided herein are a result of analysis of options available in current market. Every individual
should know that tax planning in order to avail all the incentives provided by the Government of
India under different states is legal.

This project covers the basics of the Income Tax Act, 1961 as amended by the Finance Act 2021,
and broadly presents the tax planning and tax saving options provided under these laws.
The finance act is responsible for laying down the tax slabs that applies to taxpayer.
1. Income from salary
2. Income from house property
3. Income from business/profession
4. Capital gain
5. Income from other sources
These are the few important element of income tax.

Income tax is a tax charged on the annual income earned by an individual. The amount of tax paid
will depend on how much money you earn as income over a financial year. One can proceed
with Income tax payment, TDS/TCS payment, and Non-TDS/TCS payments online. All
taxpayers must fill in the relevant details to make these payments. The entire process becomes
simple and quick.
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 History
TAXATION IN INDIA IN ANCIENT TIME :

• In India, the system of direct taxation as it is known today, has been in force in one form or
another even from ancient times. There are references both in Manu Smriti and Arthasastra to a variety
of tax measures.
• Manu, the ancient sage and law-giver stated that the king could levy taxes, according to Sastras.
The wise sage advised that taxes should be related to the income and expenditure of the subject.
He, however, cautioned the king against excessive taxation and stated that both extremes should
be avoided namely either complete absence of taxes or exorbitant taxation. According to him, the
king should arrange the collection of taxes in such a manner that the subjects did not feel the pinch
of paying taxes.
• He laid down that traders and artisans should pay 1/5th of their profits in silver and gold, while the
agriculturists were to pay 1/6th, 1/8th and 1/10th of their produce depending upon their
circumstances.
• The detailed analysis given by Manu Smriti and Arthasastra on the subject clearly shows the
existence of a well-planned taxation system, even in ancient times.
• Taxes were paid in the shape of gold-coins, cattle, grains, raw-materials and also by rendering
personal service.
• Most of the taxes of Ancient India were highly productive.
• The mixture of direct taxes with indirect taxes secured elasticity in the tax system, although more
emphasis was laid on direct tax.
• The tax-structure was a broad based one and covered most people within its fold.
• The taxes were varied and the large variety of taxes reflected the life of a large and composite
population”.

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 THEORETICAL BACKGROUND

Objective for Income Taxes

The objectives of income tax may be summarized as follows:
 To reduce inequalities in the distribution of income and wealth.

 To bring out a greater measures of equity between different classes of tax payers.

 To achieve the twin objectives of higher yields with reduction in inequalities.

 To accelerate the temp of economic growth and development of the country.

 To maintain reasonable economic stability in the force of long run inflationary pressure and short run
international price movements.

 To make available of funds for economic development.

 To reduce extreme inequalities in wealth, income and consumptions standards with undetermined
productive efficiency, offence, justice and political stability.

 To encourage investment in new capital goods.

 To channelize investment into those sectors which contribute the most of economic growth.

AN EXTRACT FROM INCOME TAX ACT, 1961

Tax Regime in India

The tax regime in India is currently governed under The Income Tax Act, 1961 as amended by The
Finance Act, 2021 notwithstanding any amendments made thereof by recently announced Union
Budget for assessment year 2022-23.

Chargeability of Income Tax

As per Income Tax Act, 1961, income tax is charged for any assessment year at prevailing rates in
respect of the total income of the previous year of every person. Previous year means the financial
year immediately preceding the assessment year.

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 Basic Concepts of Income Tax :
 Assessee :
According to Income Tax Act 1961, every person, who is an assessee and whose total income
exceeds the basic exemption limit, shall be chargeable to the income tax at the rate or rates
prescribed in the Finance Act. Such income shall be paid on the total income of the previous year in
the relevant assessment year.
Assessee means a person by whom (any tax) or any other sum of money is payable under the
Income Tax Act, and includes –
(a) Every person in respect of whom any proceeding under the Income Tax Act has been
taken for the assessment of his income or of the income of any other person in respect of which
he is assessable, or of the loss sustained by him or by such other person in respect of which he is
assessable, or of the loss sustained by him or by such other person, or of the amount of refund
due to him or to such other person;
(b) Every person who is deemed to be an assessee under any provisions of the Income Tax
Act.
(c) Every person who is deemed to be an assessee in default under any provision of the
Income Tax Act.
Where a person includes:-
o Individual
o Hindu Undivided Family (HUF), Association of persons (AOP), Body of
Individual(BOI) Company Firm

o A local authority and

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

 Assessment Year :
i. "Assessment year" means the period starting from April 1 and ending on March 31 of the next
year.
ii. Income of previous year on an assessee is taxed during the next following assessment year at the
rates prescribed by the relevant Finance Act

 Previous Year :
i. Income earned in a year is taxable in the next year.
ii. The year in which income is earned is known as previous year and the next year in which income
is taxable is known as assessment year.
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 Residential Status :
Residential status of an assessee determines the scope of chargeability of his income.
Whether a person will be charged to a particular income or not, depends on his residential status.
Sec. 6 provides the test for residential status for the persons which can be categorized as under-

Residential Status of an Individual [Sec. 6] :

RESIDENT IN INDIA- SECTION 6(1) - An individual will be 'resident' in any previous year, if he
satisfies any one or both of the following two basic conditions.
i. He is in India in the previous year for a period of 182 days or more OR
ii. He is in India for a period of 60 days or more during the previous year and 365 days or more
during the four years immediately preceding the previous year.

Exceptions: As per Explanation to section 6(1)

1) The period of 60 days given in ii above is substituted by 182 days in case of an
Individual.
I. Being an Indian citizen, leaves India during the relevant previous year as a member of the crew
of an Indian ship.
II. Being an Indian citizen leaves India during PY for purposes of employment outside India, or
III. Indian citizen or person of Indian origin who, being outside India comes on a visit to India
during the relevant previous year.

2) The period of 60 days given in ii above is substituted by 120 days in case of an Individual being
an INDIAN CITIZEN or a PERSON OF INDIA ORIGIN, who being outside India comes on a visit
to India in the previous year, having total income, other than the income from foreign sources
exceeding 15 lakhs during the previous year.
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POINT TO BE NOTED-
Income from foreign sources [i.e., income which accrues or arises outside India]
(except income from a business controlled from or profession set up in India)
and which is not deemed to accrue or arise in India.

 Scope of Total Income

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

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

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

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

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

Total Income

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

• Income from Salaries

• Income from house property
• Capital gains
• Profits and gains of business or profession
• Income from other sources

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  Tax Evasion

Tax Evasion means not paying taxes as per the provisions of the law or minimizing tax by
illegitimate and hence illegal means. Tax Evasion can be achieved by concealment of income or
inflation of expenses or falsification of accounts or by conscious deliberate violation of law.
Tax Evasion is an act executed knowingly willfully, with the intent to deceive so that the tax
reported by the tax payer is less than the tax payable under the law.

 Tax Avoidance

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

 Tax Planning

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

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

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

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

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

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

How to calculated tax liability?

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

• Calculate the Gross total income deriving from all resources.

• Subtract all the deduction & exemption available.
• Applying the tax rates on the taxable income.
• Ascertain the tax liability.

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

COMPUTATION OF TOTAL INCOME

1. Income from Salaries

• Every payment made by an Employer to his Employee for service rendered, would be chargeable
to tax as Income from Salaries.

• Salary includes both Monetary and Non-Monetary facilities –

(a) Monetary Facilities – Basic Salary, Bonus, Commissions, Allowances, etc.
(b) Non-Monetary Facilities – Housing Accommodation, Medical Facility, Perquisites, etc.

• Employer-Employee Relationship: To be taxable under “Salaries” -

(a) There should be an Employer – Employee relationship or Master- servant
(b) The Employment may be part-time or full-time employment.

• Salary is chargeable to income-tax on due or paid basis, whichever is earlier.

• Any arrears of salary paid in the previous year, if not taxed in any earlier previous year, shall be
taxable in the year of payment.

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Advance Salary:
Salary for a future period is taken in advance by the employee.
Advance salary is taxable on receipt basis in the assessment year relevant to the previous year in
which it is received, irrespective of incidence of tax in the hands of the employee.

However, loan taken from the employer against salary is not taxable.
Arrears of Salary:
It is taxable on receipt basis, if the same has not been subjected to tax earlier on due basis.

Bonus:
It is taxable in the year of receipt if it has not been taxed earlier on the basis.

Pension:
Pension received by the employee is taxable under „Salary‟ Benefit of standard deduction is
available to pensioner also. Pension received by a widow after the death of her husband falls under
the head „Income from Other Sources.”

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Profits in lieu of salary:

Any compensation due to or received by an employee from his employer or former employer at or
in connection with the termination of his employment or modification of the terms and conditions
relating thereto is termed as Profit in lieu of salary.

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

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

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Allowances from Salary Incomes

Dearness Allowance/ Additional Dearness (DA):

All dearness allowances are fully taxable.

City Compensatory Allowance (CCA):

CCA is an allowance provided by companies, to its employees to compensate for the higher cost of
living in metropolitan or Tier-1 cities. In some cases, CCA is also offered for employees working
in Tier-2 cities as well.

House Rent Allowance (HRA):

HRA received by an employee residing in his own house or in a house for which no rent is paid by
him is taxable. In case of other employees, HRA is exempt up to a certain limit.

Entertainment Allowance:
Entertainment allowance is fully taxable.

Conveyance Allowance:
It is exempt to the extent it is paid and utilized for meeting expenditure on travel for official work.

Travelling Allowance :
It is exempt to the extent

2. Income from House Property

House property consists of any building or land, or its part or attached area, of which the assessee is
the owner. The part or attached area may be in the form of a courtyard or compound forming part of
the building. But such land is to be distinguished from an open plot of land, which is not charged
under this head but under the head „Income from Other Sources‟ or „Business Income‟, as the case
may be. Besides, house property includes flats, shops, office space, factory sheds, agricultural land
and farm houses.

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However, following incomes shall be taxable under the head „Income from House Property”.
1. Income from letting of any farmhouse agricultural land appurtenant thereto for any purpose
other than agriculture shall not be deemed as agricultural income, but taxable as income from house
property.
2. Any arrears of rent, not taxed u/s 23, received in a subsequent year, shall be taxable in the
year.
Even if the house property is situated outside India it is taxable in India if the owner-assessee is
resident in India.

Incomes Excluded from House Property Income:

The following incomes are excluded from the charge of income tax under this head:

• Annual value of house property used for business purposes, income of rent received
from vacant land.
• Income from house property in the immediate vicinity of agricultural land and used
as a store house, dwelling house etc.

Deductions from House Property Income:

Deduction of House Tax/Local Taxes paid:

In case of a let-out property, the local taxes such as municipal tax, water and sewage tax, fire tax,
and education cess levied by a local authority are deductible while computing the annual value of
the year in which such taxes are actually paid by the owner.
Other than self-occupied properties ;
Repairs and collection charges: Standard deduction of 30% of the net annual value of the
property.

Interest on Borrowed Capital:

Interest payable in India on borrowed capital, where the property has been acquired constructed,
repaired, renovated or reconstructed with such borrowed capital, is allowable (without any limit) as
a deduction (on accrual basis). Furthermore, interest payable for the period prior to the previous
year in which such property has been acquired or constructed shall be deducted in five equal annual
installments commencing from the previous year in which the house was acquired or constructed.

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The deduction for interest u/s 24(1) is allowable as under:

i. Self-occupied property: Deduction is restricted to a maximum of Rs. 1,50,000 for property

acquired or constructed with funds borrowed on or after 1.4.1999 within 3 years from the end of the
financial year in which the funds are borrowed. In other cases, the deduction is allowable up to
Rs.30,000.

ii. Let out property or part there of: All eligible interests are allowed.
It is, therefore, suggested that a property for self, residence may be acquired with borrowed funds,
so that the annual interest accrual on borrowings remains less than Rs. 1,50,000. The net loss on
this account can be set off against income from other properties and even against other incomes.

3. Capital Gains
Any profits or gains arising from the transfer of capital assets effected during the previous year is
chargeable to income-tax under the head “Capital gains” and shall be deemed to be the income of
that previous year in which the transfer takes place. Taxation of capital gains, thus, depends on two
aspects – „capital assets‟ and ,,transfer‟.

Capital Asset:
„Capital Asset” means property of any kind held by an assessee including property of his business
or profession, but excludes non-capital assets.

Transfers Resulting in Capital Gains

• Sale or exchange of assets;

• Relinquishment of assets;
• Extinguishment of any rights in assets;
• Compulsory acquisition of assets under any law;
• Conversion of assets into stock-in-trade of a business carried on by the owner of asset;

• Handing over the possession of an immovable property in part performance of a contract for the
transfer of that property;

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• Transactions involving transfer of membership of a group housing society, company, etc..,
which have the effect of transferring or enabling enjoyment of any immovable property or any
rights therein ;

• Distribution of assets on the dissolution of a firm, body of individuals or association of persons;

• Transfer of a capital asset by a partner or member to the firm or AOP, whether by way of
capital contribution or otherwise; and

• Transfer under a gift or an irrevocable trust of shares, debentures or warrants allotted by a

company directly or indirectly to its employees under the Employees‟ Stock Option Plan or
Scheme of the company as per Central Govt. guidelines.

Classification of Capital Gains:

Short Term Capital Gain:

Gains on transfer of capital assets held by the assessee for not more than 36 months (12 months in
case of a share held in a company or any other security listed in a recognized stock exchange in
India, or a unit of the UTI or of a mutual fund specified u/s 10(23D) immediately preceding the
date of its transfer.

Long Term Capital Gain:

The capital gains on transfer of capital assets held by the assessee for more than 36 months (12
months in case of shares held in a company or any other listed security or a unit of the UTI or of a
specified mutual fund).

Period of Holding a Capital Asset:

Generally speaking, period of holding a capital asset is the duration for the date of its acquisition to
the date of its transfer. However, in respect of following assets, the period of holding shall exclude
or include certain other periods.

Computation of Capital Gains:

1. As certain the full value of consideration received or accruing as a result of the transfer.

2. Deduct from the full value of consideration-

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• Transfer expenditure like brokerage, legal expenses, etc.,
• Cost of acquisition of the capital asset/indexed cost of acquisition in case of long-term capital
asset and Cost of improvement to the capital asset/indexed cost of improvement in case of long
term capital asset. The balance left-over is the gross capital gain/loss.

• Deduct the amount of permissible exemptions u/s 54, 54B, 54D, 54EC, 54ED, 54F, 54G and
54H.

Full Value of Consideration:

This is the amount for which a capital asset is transferred. It may be in money or money’s worth or
combination of both. For instance, in case of a sale, the full value of consideration is the full sale
price actually paid by the transferee to the transferor. Where the transfer is by way of exchange of
one asset for another or when the consideration for the transfer is partly in cash and partly in kind,
the fair market value of the asset received as consideration and cash consideration, if any, together
constitute full value of consideration.

In case of damage or destruction of an asset in fire flood, riot etc., the amount of money or the fair
market value of the asset received by way of insurance claim, shall be deemed as full value of
consideration.

1. Fair value of consideration in case land and/ or building; and

2. Transfer Expenses.

Cost of Acquisition:

Cost of acquisition is the amount for which the capital asset was originally purchased by the
assessee.

Cost of acquisition of an asset is the sum total of amount spent for acquiring the asset. Where the
asset is purchased, the cost of acquisition is the price paid. Where the asset is acquired by way of
exchange for another asset, the cost of acquisition is the fair market value of that other asset as on
the date of exchange.

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Cost of Improvement:

Cost of improvement means all capital expenditure incurred in making additions or alterations to
the capital assets, by the assessee. Betterment charges levied by municipal authorities also
constitute cost of improvement.

Rates of Tax on Capital Gains:

Short-term Capital Gains

Short-term Capital Gains are included in the gross total income of the assessee and after allowing
permissible deductions under Chapter VI-A. Rebate under Sections 88, 88B and 88C is also
available against the tax payable on short-term capital gains.

Long-term Capital Gains

Long-term Capital Gains are subject to a flat rate of tax @ 20% However, in respect of long term
capital gains arising from transfer of listed securities or units of mutual fund/UTI, tax shall be
payable @ 20% of the capital gain computed after allowing indexation benefit or @ 10% of the
capital gain computed without giving the benefit of indexation, whichever is less.

Capital Loss:

The amount, by which the value of consideration for transfer of an asset falls short of its cost of
acquisition and improvement /indexed cost of acquisition and improvement, and the expenditure on
transfer, represents the capital loss. Capital Loss‟ may be short-term or long-term, as in case of
capital gains, depending upon the period of holding of the asset.

Set Off and Carry Forward of Capital Loss

• Any short-term capital loss can be set off against any capital gain (both long-term and short
term) and against no other income.

• Any long-term capital loss can be set off only against long-term capital gain and against no
other income.

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• Any short-term capital loss can be carried forward to the next eight assessment years and set off
against „capital gains‟ in those years.

• Any long-term capital loss can be carried forward to the next eight assessment year and set off
only against long-term capital gain in those years.

Capital Gains Exempt from Tax:

1. Capital Gains from Transfer of a Residential House

2. Capital Gains from Transfer of Agricultural Land
3. Capital Gains from Compulsory Acquisition of Industrial Undertaking
4. Capital Gains from an Asset other than Residential House

Tax Planning for Capital Gains

• An assessee should plan transfer of his capital assets at such a time that capital gains arise in the
year in which his other recurring incomes are below taxable limits.

• Since long-term capital gains enjoy a concessional treatment, the assessee should so arrange the
transfers of capital assets that they fall in the category of long-term capital assets.
An assessee may go for a short-term capital gain, in the year when there is already a short-term
capital loss or loss under any other head that can be set off against such income.

• The assessee should take the maximum benefit of exemptions available u/s 54, 54B, 54D,
54ED, 54EC, 54F, 54G and 54H.

• Avoid claiming short-term capital loss against long-term capital gains. Instead claim it against
short-term capital gain and if possible, either create some short-term capital gain in that year or,
defer long-term capital gains to next year.

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 4. Income from Other Sources

This is the last and residual head of charge of income. Income of every kind which is not to be
excluded from the total income under the Income Tax Act shall be charge to tax under the head
Income From Other Sources, if it is not chargeable under any of the other four heads- Income from
Salaries, Income From House Property, Profits and Gains from Business and Profession and Capital
Gains. In other words, it can be said that the residuary head of income can be resorted to only if none
of the specific heads is applicable to the income in question and that it comes into operation only if the
preceding heads are excluded.

Illustrative List
Following is the illustrative list of incomes chargeable to tax under the head Income from Other
Sources:
(i) Dividends

Any dividend declared, distributed or paid by the company to its shareholders is chargeable
to tax under the head „Income from Other Sources”, irrespective of the fact whether shares
are held by the assessee as investment or stock in trade. Dividend is deemed to be the income
of the previous year in which it is declared, distributed or paid. However interim dividend is
deemed to be the income of the year in which the amount of such dividends unconditionally
made available by the company to its shareholders.

(ii) Income from machinery, plant or furniture belonging to the assessee and let on hire, if
the income is not chargeable to tax under the head Profits and gains of business or
profession;

(iii) Where an assessee lets on hire machinery, plant or furniture belonging to him and also
buildings, and the letting of the buildings is inseparable from the letting of the said
machinery, plant or furniture, the income from such letting, if it is not chargeable to tax
under the head Profits and gains of business or profession;

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(iv) Any sum received under a Keyman insurance policy including the sum allocated by
way of bonus on such policy if such income is not chargeable to tax under the head Profits
and gains of business or profession or under the head Salaries.

(v) Where any sum of money exceeding twenty-five thousand rupees is received without
consideration by an individual or a Hindu undivided family from any person on or after
the 1st day of September, 2004, the whole of such sum, provided that this clause shall not
apply to any sum of money received.
a) From any relative or
b) On the occasion of the marriage of the individual or
c) Under a will or by way of inheritance or
d) In contemplation of death of the payer.

(vi) Any sum received by the assessee from his employees as contributions to any provident
fund or superannuation fund or any fund set up under the provisions of the Employees‟
State Insurance Act. If such income is not chargeable to tax under the head Profits and
gains of business or profession

(vii) Income by way of interest on securities, if the income is not chargeable to tax under the
head Profits and gains of business or profession. If books of account in respect of such
income are maintained on cash basis then interest is taxable on receipt basis. If
however, books of account are maintained on mercantile system of accounting then
interest on securities is taxable on accrual basis.

(viii) Other receipts falling under the head “Income from Other Sources‟:

• Director’s fees from a company, director‟s commission for standing as a guarantor to bankers
for allowing overdraft to the company and director‟s commission for underwriting shares of a
new company.

• Income from ground rents.

• Income from royalties in general.

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Deductions from Income from Other Sources:
The income chargeable to tax under this head is computed after making the following deductions:

1. In the case of dividend income and interest on securities: any reasonable sum paid by way of
remuneration or commission for the purpose of realizing dividend or interest.

2. In case of income in the nature of family pension: Rs.15, 000 or 33.5% of such income,
whichever is low.
3. In the case of income from machinery, plant or furniture let on hire:
(a) Repairs to building
(b) Current repairs to machinery, plant or furniture (c) Depreciation on building,
machinery, plant or furniture (d) Unabsorbed Depreciation.

4. Any other expenditure (not being a capital expenditure) expended wholly and exclusively
for the purpose of earning of such income .

5. Deductions From Taxable Income

Deduction under section 80C :

Under this section, a deduction of up to Rs. 1,50,000 is allowed from Taxable Income in
respect of investments made in some specified schemes. The specified schemes are the same
which were there in section 88 but without any sectoral caps (except in PPF).

Under this section, 100% deduction would be available from Gross Total Income subject to
maximum ceiling given u/s 80CCE. Following investments are included in this section:

• Contribution towards premium on life insurance

• Contribution towards Public Provident Fund.(Max.1,50,000 a year)

• Contribution towards Employee Provident Fund/General Provident Fund

• Unit Linked Insurance Plan (ULIP).

• Investment in NSC
• Interest accrued in respect of NSC VIII Issue, Equity Linked Savings Schemes (ELSS).

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 • Repayment of housing Loan (Principal).
• Tuition fees for child education.
Investment in companies engaged in infrastructural facilities.

Deduction under section 80CCC

Deduction in respect of contribution to certain Pension Funds:

Deduction is allowed for the amount paid or deposited by the assessee during the previous
year out of his taxable income to the annuity plan (JeevanSuraksha) of Life Insurance
Corporation of India or annuity plan of other insurance companies for receiving pension
from the fund referred to in section 10(23AAB).
Amount of Deduction:
Amount of paid/deposited or Rs 1,50,000, whichever is less.

Deduction under section 80D

Deduction in respect of Medical Insurance Premium

Deduction is allowed for any medical insurance premium under an approved scheme of General
Insurance Corporation of India popularly known as MEDICLAIM) or of any other insurance
company, paid by cheque, out of assessee’s taxable income during the previous year.

Amount of Deduction:- For A.Y 2021-22, the limit of Rs 50,000 and for senior and super senior
citizenswas Rs 30,000.

Deduction under section 80DD

Deduction in respect of maintenance including medical treatment of handicapped dependent:

Deduction is allowed in respect of – any expenditure incurred by an assessee, during the

previous year, for the medical treatment training and rehabilitation of one or more dependent
persons with disability; and Amount deposited, under an approved scheme of the Life
Insurance Corporation or other insurance company or the Unit Trust of India, for the benefit
of a dependent person with disability.
Amount of Deduction: -
Rs .75,000 fixed in case the dependent has 40% or more disability but less than 80%.
Rs.1,25,000 fixed , in case the dependent has 80% or more disability.

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Deduction under section 80DDB
Deduction in respect of medical treatment : A resident individual or Hindu Undivided family
deduction is allowed in respect of during a year for the medical treatment of specified disease or
ailment for himself or a dependent or a member of a Hindu Undivided Family.

Deduction under section 80E

Deduction in respect of Repayment of Loan taken for Higher Education

An individual assessee who has taken a loan from any financial institution or any approved
charitable institution for the purpose of pursuing his higher education i.e. full time studies for
any graduate or post graduate course in engineering medicine, management or for post
graduate course in applied sciences or pure sciences including mathematics and statistics.

Deduction under section 80G: Donations

100 % deduction is allowed in respect of donations to: National Defence

Fund, Prime Minister’s National Relief Fund, Armenia Earthquake Relief Fund, Africa Fund,
National Foundation of Communal Harmony, an approved University or educational institution of
national eminence, Chief Minister’s earthquake Relief Fund etc.

Deduction under section 80GGA

Donations for Scientific Research or Rural Development:
Deduction is allowed to all assessee not having any chargeable under the head “profits and gains of
business or profession “Donation made to research associations
Amount Of Deduction – 100% of the amount paid.

Deduction under section 80U:

Deduction in case of a person with Disability
If an individual , is certified by the medical authority or a government doctor to be a person with
disability ,then he is allowed deduction Rs 75,000 under this section . In case the person is certified
by the medical authority to be a person with severe disability , then the quantum of deduction
allowed under this section will be Rs 1,25,000. Sec 80U deduction for AY 2020-21 is a fixed
deduction and not based on actual expenses.

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Income Tax Slabs
Income Tax Rate AY 2021-22 | FY 2020-21 – Individuals less than 60 years
Taxable income Tax Rate

Up to Rs. 2,50,000 Nil

Rs. 2,50,001 to Rs. 5,00,000 5%

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

Above Rs. 10,00,000 30%

Income Tax Rate AY 2021-22 | FY 2020-21 – Individuals between 60 years and 80 years

Taxable income Tax Rate

Up to Rs. 3,00,000 Nil

Rs. 3,00,001 to Rs. 5,00,000 5%

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

Above Rs. 10,00,000 30%

Income Tax Rate AY 2021-22 | FY 2020-21 – Individuals above 80 years

Taxable income Tax Rate

Up to Rs. 5,00,000 Nil

Rs. 5,00,001 – Rs. 10,00,000 20%

Above Rs. 10,00,000 30%

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Objective of Study:
 To study in depth understanding of ITR1
 To study all important sections under the head income from salary, income from other sources
and income from house property under Income Tax act
 To know the detail process of filling of ITR1
 To understand issues, queries that could be faced while filling ITR1
 To know the ways that could save tax payable by clients
 To take overview of concept of income tax return and understand benefits of filling the same
 To understand current tax system

Need for Study

In last some years of my career and education, I have seen my colleagues and faculties
grappling with the taxation issue and complaining against the tax deducted by their
employers from monthly remuneration. Not equipped with proper knowledge of taxation and
tax saving avenues available to them, they were at mercy of the HR/Admin departments
which never bothered to do even as little as take advise from some good tax consultant.

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Need for computerization:

 Reliable & efficient services to student.

 To reduce the paperwork & manual mistakes.
 To reduce the labour cost.
 To manage the tax records efficiently & accurately.

Scope of Project

• This project studies the tax planning for individuals assessed to Income Tax.

• The study relates to non-specific and generalized tax planning, eliminating the need of
sample/population analysis.
• This study may include comparative and analytical study of more than one tax saving plans
and instruments.

• This study covers individual income tax assessees only and does not hold good for
corporatetaxpayers.

• The tax rates, insurance plans, and premium are all subject to FY 2020-21.

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 ORGANISATION PROFILE

Egram Solutions Pvt. Ltd.

Egram Solutions Pvt. Ltd. is headquartered in Pune and Promoted by eminent Professionals with
track record of consistent performance.
The team has worked with renowned advisory firms like EY, PwC, KPMG, Deloitte, Citibank,
BDO, BNP Paribus, Haribhakti & Co., Kirtane & Pandit etc., across various services including
Corporate Finance, Direct and Indirect Taxation, Transaction, Internal Audit, Transfer Pricing, Risk
Management and Assurance Services.

Services :-
Income Tax, TDS, GST services and return filling of the same, other financial services Outsourcing,
and also Provide Tax Deduction Account Number (TAN) of Grampanchayat & Permanent Account
Number (PAN) of Grampanchayat Digital Signature for E-tendering.

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Vision, Mission and Values :

34
 RESEARCH METHODOLOGY

A research methodology or involves specific techniques that are adopted in research process to
collect , assemble and evaluate data .it defines those tools that are used to gather relevant
information in a specific research study surveys , questionnaires and interviews are the common
tools of research.

Data Collection

Primary Data :- Primary research entails the use of immediate data in determining the for stable all
tax system. Primary data is more accommodating as it shows latest information. The site ministry of
finance was referred. In the process of conducting the study, primary data was collected directly from
25 clients/taxpayers. Documents required for filling returns are personally collected.

Secondary Data :- Whereas Secondary research is means to reprocess and reuse collected
information as an indication for betterment of service or product. For conducting the project,
secondary data is necessary. Theoretical knowledge was required which is collected from relevant
books regarding income tax which has been used for analyzing primary data and filling ITR. Data
is collected from past record that means history.

Tools of Analysis

Tax Planning Tools

Following are the tax planning tools that simultaneously help the assessees maximize their wealth
too.
Here are some guidelines to help you wade through the various options and ensure the following:
1. Tax is saved and that you claim the full benefit of your section 80C benefits
2. Product are chosen based on their long term merit and not like fire fighting options
undertaken just to reach that Rs 1 lakh investment mark Products are chosen in such a
manner that multiple life goals can be fulfilled and that they are in line with your future
goals and expectations
3. Products that you choose help you optimise returns while you save tax in the immediate
future.
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Limitation of Project

1) The project studies the tax planning for individual assessed to income Tax.
2) The Study relates to non-specific and generalized tax planning, eliminating the need of
sample/population analysis.
3) Basic Methodology implemented in this study is subjected to various pros & cons and
diverse insurance plans.
4) This study may include comparative and analytical study of more than one tax
saving plans and instruments.
5) This study covers individual income tax assessees only and does not hold good for
corporate tax payers.
6) The tax rates, insurance plans, and premium are all subjected to FY 2019-2020.

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SUGGESTIONS AND RECOMMENDATIONS

1. Every citizen of india who is liable to pay tax must regularly pay income tax so
that government can take initiatives for infrastructure and various schemes for
girls and senior citizens .

2. Majority of people should have tax awareness and they should be also aware
about tax saving schemes and instruments .people should invest and save their
money for future benefits .

3. Maximum people should discuss union budget with their tax consultant for
financial and tax awareness .

Conclusions

At the end of this study , we can say that that given the rising standards of Indian
individual and upward economy of the country , prudent tax planning before hand is must
for all the citizens to make the most of their incomes . However ,them is of tax savings
instruments planning horizon would depend on an individual‟s total taxable income and
age in the particular financial year.
Tax evasion is a serious crime , in general ,assesses show lethargic attitude towards tax
planning , this is likely to land the assesses in financial trouble . Tax planning is not just a
strategy to reduce tax burden .Infact ,it helps to say by encouraging investment in
government securities .Tax planning reduces not only the tax hurdle but also gives
mental satisfaction . If salaried assesses adopt tax planning measures it will help them to
save a considerable amount of their hard earned money in a legal way . When the
government has given a wide chance of interesting money according to the assesses
financial condition and taste , it is prime duty of every salaried assesses to utilize his/her
chances and reaps the harvest .
Saving reduces extravagance , correspondingly inflation tax saving is permitted only for
investment made in government securities and bonds of priority sectors ,which ultimately
helps the whole nation . Therefore, the assesses saving in tax help central and state
government to mobilize funds. Saving and investment are interconnected . To make

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 investment there should be savings . To make savings there should be surplus . To make
surplus there should be proper tax planning . To make proper tax planning there should
be knowledge in tax laws and opportunities in the country . More often many assesses
prefer paying tax rather than taking an additional steps towards tax planning as they feel
it very complicated .actually this is far from the truth . What is required is knowledge of
a few sections of the income tax act .Thus , tax planning is not at all complicated and
could be done with a certain degree of awareness and application .
As such, tax planning of salaried assesses is not satisfactory. It needs great
improvement . In this respect it is duty of the scholars in this field to create awareness
about tax planning in the minds of the assesse . The current study is a humble step
towards this objective by proper tax planning; both the assesse and the government shall
equally be benefited .

Example of ITR :

 Mr. A(Resident of India) joins Tata Consultancy Services on 1 June, 2020 on monthly salary of Rs. 25000
per month (he was not in employment prior to June 1, 2020). He doesn’t have any investments or policies.
Determine the amount of salary chargeable to tax for Assessment year 2021-22.Also compute the amount of tax
payable by him.
Ans:
Mr. A joins job in TCS on 1 June, 2021. Hence, salary while filling ITR1 will be taken from form no.16. Form
no.16 is provided by employer. In the given case, Mr.A has paid LIC premium for which he got a deduction of
80C. Other than that he doesn’t have any investment for which he can get deduction u/s 80C to 80U. Thus, this is
a simple case of salaried individual.
Following is the ITR and computation sheet of Mr. A.

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Sample ITR 1

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42
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 Computation sheet of client A

A AY 2021-2022
Address: S/O Arvind Gadewar Near Vitthal Mandir Digras
Yavatmal, MAHARASHTRA - 445203
Mobile: 91-9503610350
E-Mail: [email protected]

Computation of Income (ITR1)

PAN: BSKPG7541P Status: Individual

Date of Birth 24/05/1997 Residential Status: Resident
Father's Name: K Gender: Male
Bank A/C no.: 50100361954920 IFSC code: HDFC0005684
E-Filing Status: Not E-Filed Aadhaar Card Number: 586758461052
Selected tax regime Old Regime
Tax Summary (Amount in 'Rs')
Salary 70,483
Gross Total Income 70,483
Less: Total Deductions 0
Rounded off from 70,483 as per
Total Income (Taxable) Section 288A
70,480

Taxes are applicable as per normal provision

Please refer Annexure for details

Salary Income
TATA CONSULTANCY SERVICES LIMITED
Salary u/s 17(1) 1,21,483
73,425
29,372
6,119
Others 12,567
Net Salary 1,21,483

Less: Deduction u/s 16 51,000

Standard Deduction u/s 16(ia) 50,000
Professional Tax u/s 16(iii) 1,000
Total Taxable Salary 70,483

Income Tax
Total Income 70,480
Basic Exemption 2,50,000
Income Tax 0
Payable 0
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 Taxes Paid
(TDS on Salary)
TDS on Salary
Tan Name Income Chargeable Tax Deducted
MUMT11446B TATA CONSULTANCY SERVICES LIMITED 70,483 0
Bank Account Details
SI No. IFSC Code Name of the Bank Account No.
1 HDFC0005684 HDFC BANK 50100361954920

Signature Prepared by

For Akshay Arvind Gadewar Jayesh Padmawar

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BIBLIOGRAPHY

References
Books
 T.N .Manoharan (2018) Direct tax Laws 7th edition .
 Dr Vinod K.Singhania (2018) Students guide to Income Tax .

Website
 http://Incometaxindia.gov.in
 www.taxguru.in
 www.google.com

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