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A

Project Report

on

A STUDY ON COMPUTATION OF INCOME TAX OF AN

INDIVIDUAL

A project report submitted to ICFAI University in partial

fulfillment of the requirement for the award of PGDBA (SEM III)

Submitted by:

Group F

Submitted to:

Prof. Sukhalata J

Faculty

INC, Bidar

INC, BIDAR 2006-2008


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GROUP F

Ambika Badiger

Priyadarshini Y

Umadevi

Venkatesh Joshi

Jagadish Kumar

Kishan Kumar

CERTIFICATE


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This is to certify that GROUP F students of MBA/PGDBA Sem-III have

successfully completed a project entitled A STUDY ON COMPUTATION OF

INCOME TAX OF AN INDIVIDUAL as a requirement in Post Graduate

Diploma in Business Administration asprescribed byINC, Bidar for the academic

Year 2006-2008.

Date: Centre Head

Place: Bidar Prof. Shastry N Manthaw

INC, Bidar

CERTIFICATE


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This is to certify that GROUP F students of MBA/PGDBA Sem-III have

successfully completed a project entitled A STUDY ON COMPUTATION OF

INCOME TAX OF AN INDIVIDUAL as a requirement in Post Graduate

Diploma in Business Administration asprescribed byINC, Bidar for the academic

Year 2006-2008.

Date:

Faculty

Place: Bidar Prof. Sukhalata J

INC, Bidar

DECLARATION


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I here by declare that this project work entitled A STUDY ON

COMPUTATION OF INCOME TAX OF AN INDIVIDUAL is an

original and bonafide work undertaken by us. The project work and the

report presentation have been done entirely by us. This project report has

not been submitted to any other university or institution.

Date: GROUP F

Place: Bidar

ACKNOWLEDGMENT

It is been a great privilege to carry out the project

work on A STUDY ON COMPUTATION OF INCOME TAX OF AN

INDIVIDUAL. I take this opportunity to express my deep sense of gratitude to


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our beloved principal Prof. Shastry N Manthaw and guide Prof.Sukhalata.J for

giving me an opportunity to do this project & for the constant encouragement,

rendering valuable advice and guidance in bringing this project work. Last but not

least I express my thanks to all others who have directly or indirectly help in this

venture.

GROUP F

TABLE OF CONTENTS:

Chapter 1:

Introduction

Scope of the study

Objectives

Limitations

Chapter 2:


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Theoretical background

Chapter 3:

Research methodology

Chapter 4:

Analysis

Findings

Conclusion

Bibliography

CHAPTER 1:

Introduction:

The origin of the word Tax is derived from the phrase Taxation which means

an estimate. The word tax refers to the required payments of money made to

governments that are used to provide public goods and services for the benefit of thecommunity as a whole. Taxes on income in some form or the other were levied even in

primitive and ancient communities, which were levied either on the sale and purchase of

merchandise or livestock and were collected in a haphazard manner from time to time.

Reiterating history it was nearly 2000 years ago when Ceaser Augustus sent out a decree


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that the entire world should be taxed. In Greece, Germany and Roman Empires, taxes

were also levied sometime on the basis of turnover and sometimes on occupations.

For many centuries, revenue from taxes went to the Monarch. In Northern

England, taxes were levied on land and on moveable property such as the Saladin title in

1188. Later on these were supplemented by introduction of poll taxes, and indirect taxes

known as Ancient Customer which were duties on wool, leather and hides. These

levies and taxes in various forms and on various commodities and professions were

imposed to meet the needs of the Governments to meet their military and civil

expenditure and not only to ensure safety to the subjects but also to meet the common

needs of the citizens like maintenance of roads, administration of justice and such other

functions of the State.

Scope of the study:

As the study is conducted on computation of Income Tax of an Individual, the

scope of the study is limited to the extent of the Deductions and Exemptions of an

Individual. The main aim of this study is to know what are the Deductions and

Exemptions while calculating the Income Tax of an Individual.

Objectives of the study:

To know the deductions and exemptions of Income Tax.

To know what the different types of Income tax are is available to calculate the

Income Tax.

To know the system of Tax.


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Limitations of the study:

1. It was very difficult to analyze the data.

CHAPTER 2:

Theoretical Background:

INCOME TAX:

Income Tax is a species of direct tax and is governed by Income Tax Act, 1961.

By virtue of the power conferred on the Central Government by the Constitution of India,

the former enacted the Income Tax Act, 1961 The Act extends to whole of India and

came into force on the first day of April 1962. Part B of the Finance Act contains

detailed tax proposals. Once it is approved by the Parliament and acquires the assent of

INCOME

TAX

WEALTH

TAX

DIRECT TAX INDIRECT TAX

EXCISE

DUTIES

CUSTOM

DUTIES

SALES TAX

SYSTEM OF TAX


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the President, the income shall be charged according to the rates of tax prescribed in

Schedule I of the Finance Act. The Act is administered by Central Board of Direct

Taxes (CBDT), which is empowered to frame rules to achieve the purpose of the

enactment and ensure proper governance of the Act. The CBDT issues circulars from

time to time:

1. To clarify the any doubts regarding the scope and meaning of the Act

2. To Act as a guide for officers and assesses.

However, the circulars ofCentral Board of Direct Taxes (CBDT), an executive

authority, are binding on Assessing officers but not on assesses and Court. The Central

Government is empowered to constitute an independent authority settlement commission

a quasi-judicial body to the subordinate the CBDT.

The following basic concepts need to be understood before undertaking a

detailed study of law of Income Tax.

Previous Year (P.Y) and Assessment Year (A.Y)

Rate of Taxation

Person

Assessee

Charge of Income Tax

Income

Gross Total Income (GTI)

Total Income

Submission of Return

Assessment


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Classification of Heads of Income under Income Tax-Section 14:

I Income from Salaries:

Wages

Any annuity or pension,

Any gratuity,

Any fees, commission, perquisite or profits in lieu

Any payment received in respect of any period of leave not availed

by the employee.

Allowances :

1. Dearness Allowance (DA)

2. City Compensatory Allowances (CCA)

3. House Rent Allowance (HRA)

4. Social Allowance

Perquisites :

Deductions Sec 16.

Standard Deduction Sec 16(i).

Entertainment Allowance Sec (ii).

Professional Tax (iii).

Tax Rebate U/S 88.


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II Income from House Property:

1. Basis of Charge.

2. Property Exempt from Tax.

3. Municipal Taxes.

III Income from the Head Profits or Gains from Business or Profession:

1. Meaning of Profession or Vocation.

2. Losses that are allowed as Deduction from Business Income.

3. Expressly Allowed Deductions.

4. Expenditures.

5. Deemed Profits.

6. Deemed Income.

IV Capital Gains:

1. Capital Asset.

2. Kinds of Capital Assets.

3. Kinds of Capital Gains.

V Income from other Sources:


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1. Dividends.

2. Any winnings from Lotteries, Horse races, Card games, gambling betting.

3. Received by the assessee from his employees as contributions to any staff welfare.

4. Let on hire on machinery, plant or furniture.

5. A key man insurance policy, including bonus.

In modern India, the system of taxation is divided into Direct tax system and

Indirect Tax system Direct Tax is a tax that cannot be shifted to others, such as theincome tax, wealth tax etc. indirect tax, on the other hand is a tax that can be shifted to

others, such as sales tax excise duty, custom duty etc.

CHAPTER 3:

Research methodology:

For this study the technique used for data collection is primary data.

Primary data: Primary data are the fresh data collected directly from the field. They are

first hand data.


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Since primary data are collected specially foe the purpose in hand, extra care is

taken to collect all the required data with appropriate degree of accuracy. Primary data

are reliable, complete and fresh.

Primary data are costly. Their collection consumes more time and labor than

the collection of secondary data, especially when the population in vast.

If an investigator collects information regarding births and deaths directly from

the people, the data are primary data.

Secondary data: Secondary data are the data collected from other available resources.

Large volumes of data are available within every organization in the form of

financial statements, sales reports, cash flow data, production schedules, budgets etc.

Managers can make decisions based on this data in the light of data relating to theindustry and economy as a whole.

CHAPTER 4

Analysis and interpretation of the data:

Calculation of Income Tax for the Assessment for the year

2006-2007 (financial year ending 31st March 2006)

1. Name of the officer Smt. Sunita

2. Designation and office Assistant Teacher in govt. H.P.S Shah Gunj

Bidar.

3. Total Salary (per annum) 1,40,460/-

4. Deduction on A/c of HRA least of the


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following:

Actual HRA Received

House Rent paid in excess of 10%

of pay

-- 7,200/-

--------

1,33,260/-

5. Less:

Std Deduction Rs. 20,000 U/s 16(i)

Professional Tax u/s 16(iii)

20,000/-

+1,200/-

----------- -- 21,200/-

6. Net Salary Income 1,12,060/-7. Other Income :

a) Interest on Bank FD in SB A/c.

b) Interest on post office savings A/c.

c) Accured interest on N.S.C VII issue

Purchased during previous yr.

1,000/-

+10,412/-

------------- 11,412/-

8. Total Income (6-7) 1,23,472/-

9. Deduction U/s 80L as per Item 7 above

(to be limited to Rs. 10,000)

-- 10,000/-

10. Taxable Income (8-9) 1,13,472/-

11. Tax on above 1,13,472/-

12. Relief u/s 88 of the IT act 1961

Savings on a/c. of:

a) GPF A/c. No

b) KGID A/c. No

c) PPF

d) NSC VIII issue purchased

e) Accured Interest on NSC

-------

1,320/-

-------

30,000/-

6,936/-


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VIII issue

f) LIC Policy Paid

g) HBA loan installment

restricted to Rs. 11,000

h) Interest on FD with Bank

i) Tax rebate u/s 88(a) 20%

16,728/-

11,284/-

2,000/-

------

-------------- 68,268/-

13. Net Tax payable (11-12)

45,204/-

14. Additional Surcharge @ 10% on

income tax Payable

Not applicable (NA)

15. Less Tax already paid 2,000/-

16. Tax to be paid (in Rs.) 43,000/-

Findings:

1. Total annual salary of the officer is Rs. 1, 40,460/-

2. Net income from salary is Rs. 1,12,060/-

3. Other Income is Rs. 11,412/-

4. Deduction u/s 80L is Rs. 10,000/-

5. Relief u/s 88 of the IT act 1961 is Rs. 68,268/-

6. Net tax payable is Rs. 45,204/-

7. All ready paid tax is Rs. 2,000/-

8. Tax to be paid is Rs. 43,000/-


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Conclusion:

From this study we conclude that the computation of income tax is very difficult.The Income Tax generates revenue for the Govt. and this revenue is utilized to develop

the country. From this study we come to know what are the deductions and exemptions

available to the individual to reduce his income tax.

Bibliography:

1. ICFAI text book of Business law for Managers.

2. Help from faculty guide and friends regarding calculation of Income Tax.

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