Introduction.docx Direct Taxes

8/11/2019 Introduction.docx Direct Taxes

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Introduction

The direct tax which is paid by individual to the Central Government of India is known as

Income Tax. It is imposed on our income and plays a vital role in the economic growth &stability of our country. For years the Government is generating revenue through this tax system.

The word 'Tax' originated from the 'Taxation.' which mean 'Estimate.' Hence, 'Income Tax' mean

'Income Estimate,' which helps the government to know the actual economic strength of aperson. It is also a way to set up an economic standard for general people. It helps the

Government to know the distribution of money among country's people.

Income Tax has been in force in different forms since years. If we go through the history of

India, we get relevant information regarding the taxation system of India. In ancient history, it is

mentioned about such system which was imposed on the income, expenditure and other subject.Even information of the same is given in Manu Smriti and Arthasatra which confirms its

existence at that time.

In modern India, Income Tax came into existence in 1860 with the implementation of first

Income Tax Act. After implementation of this Act, people became aware of the actual meaning

of Income Tax. This act was in force for first five years. After this, in 1865, second Act cameinto force. There were major changes in this Act relative to the first. It proved itself as a good

factor for the growth of our economy. With this Act a new concept of Agriculture Income came

into existence.

After this, different new Act was also implemented. The most important of them is the Income

Tax Act, 1961. According to ruling of Income Tax Act, 1961, any person whose salary from any

source of income is more than the maximum limit of unchangeable amount will be liable to payIncome Tax. There is also a provision of deduction and exemptions in Income Tax, depending

upon the type of assessee, source of income, residential status and investment in saving schemes.

Income tax rates are a matter of change, which is declared by Ministry of Finance, Governmentof India regularly, usually on annual basis.

Income Tax RefundIndian Tax payers can now heave a sigh of relief as tracking down their refund status has become

easy. The tax authorities have simplified the process of tracking your refund cheque status. Ifyou are a taxpayer looking for some information on your tax refund status you can simply track

the exact status of your refund online.


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Defination

TaxIs afeecharged ("levied") by agovernment on aproduct,income,oractivity.If tax is levieddirectly on personal orcorporate income, then it is adirect tax.If tax is levied on theprice of a

good orservice,then it is called anindirect tax.The purpose oftaxation is tofinancegovernment

expenditure.One of the most importantuses oftaxes is to financepublic goods and services, suchas street lighting and street cleaning. Sincepublicgoods and services do not allow a non-payer tobe excluded, or allowexclusionby aconsumer,there cannot be amarket in the good or service,

and so theyneed to be provided by the government or a quasi-governmentagency,which tend to

finance themselves largely through taxes Income is the consumption and savings opportunitygained by an entity within a specified time frame, which is generally expressed in monetary

terms. However, for households and individuals, "income is the sum of all the wages, salaries,

profits, interests payments, rents and other forms of earnings received... in a given period of

time." For firms, income generally refers to net-profit: what remains of revenue after expenseshave been subtracted. In the field of public economics,it may refer to the accumulation of both

monetary and non-monetary consumption ability, the former being used as a proxy for total

income. Income tax is Annualtax levied by theFederalgovernment, moststates, andsomelocalgovernments,on an individual's orcorporation'snet profit.

Heads of Income

Under chapter 4 of Income Tax Act, 1961 (Section 14), income of a person is calculated undervarious defined heads of income. The total income is first assessed under heads of income and

then it is charged for Income Tax as under rules of Income Tax Act. According to Section 14 of

Income Tax Act, 1961, there are following heads of income under which total income of aperson is calculated:

Heads of Income: Salary

Heads of Income: House PropertyHeads of Income: Profit In Business/ Profession

Heads of Income: Capital Gains

Heads of Income: Other Sources
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Salary

What is Salary?

Income under heads of salary is defined as remuneration received by an individual for servicesrendered by him to undertake a contract whether it is expressed or implied. According to Income

Tax Act there are following conditions where all such remuneration are chargeable to income

tax:

When due from the former employer or present employer in the previous year, whetherpaid or not

When paid or allowed in the previous year, by or on behalf of a former employer or

present employer, though not due or before it becomes due.

When arrears of salary is paid in the previous year by or on behalf of a former employer

or present employer, if not charged to tax in the period to which it relates.

What Income Comes Under Head of Salary?

Under section 17 of the Income Tax Act, 1961 there are following incomes which comes underhead of salary:

1. Salary (including advance salary)2. Wages

3. Fees

4. Commissions

5.

Pensions6. Annuity

7. Perquisite

8. Gratuity9. Annual Bonus

10.Income From Provident Fund

11.Leave Encashment12.Allowance

13.Awards

What is Leave Encashment?

Leave encashment is the salary received by an individual for leave period. It is a chargeable

income whether he is a government employee or not. Under section 10(10AA) (i) there is also a

provision of exemption in case of leave encashment depending upon whether he is a government

employee or other employees.


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What is Annuity?

It is an annual income received by the employee from his employer. It may be paid by the

employer as voluntarily or on account of contractual agreement. It is not taxable until the right to

receive the same arises. Under section 56, Income Tax Act, 1961 other annuities come under awill or granted by a life insurance company or accruing as a result of contract which comes as

income under from other sources.

What is Gratuity?

It is salary received by an individual paid by the employee at the time of his retirement or by his

legal heir in the case of death of the employee.

What is Allowance?

It is the amount received by an individual paid by his/her employer in addition to salary. Undersection 15 of the Income Tax Act, 1961 these allowance are taxable excluding few condition

where they are entitled of deduction/ exemptions.

Under Income Tax Act following types of allowance are defined

House Rent Allowance:

Under sections 10(13A) of Income Tax Act, 1961 allowance is defined as an amount received byan employee paid by his/ her employer as a rent of his/her house. It is a taxable income. There is

no exemption in tax if he is living in his own house or house for which he is not paying rent.

There are following types of amount which are exempted from tax:

Actual house rent paid by that individual

Rent paid for the accommodation over 10% of the salary

50% of the salary if house is placed at Delhi, Mumbai, Kolkata, Chennai or 40% of the

salary in it is placed in any other city

Entertainment Allowance:

It is the amount paid by employer for availing entertainment services. Under section 16(ii) ofIncome Tax Act, 1961 it is entitled to deduction in tax from is salary. But in this case deduction

is given to his gross salary which also includes entertainment allowance. Deduction in tax

against this allowance can be divided into two parts :In case of Government employee entitled to minimum deduction of

Entertainment allowance received

20% of basic salary excluding any other allowance Rs. 5000

In case of other employee entitled to minimum deduction of

(a) Entertainment allowance received

20% of basic salary excluding any other allowance

Rs. 7500


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Other Special Allowances

Children Education Allowance

Tribal Area Allowance

Hostel Expenditure Allowance

Remote Area Allowance Compensatory Field Area Allowance

Counter Insurgency Allowance

Border Area Allowance

Hilly Area Allowance

Allowances for there is a provision of exempt in income tax are:

Allowance given to a citizen of India, who is a government employee, for rendering

services outside India

Allowances given to Judges of High Courts

Allowance given Judges of Supreme Court Allowances received by an employee of UNO

What is Perquisite?

Under section 17(2) of Income Tax Act, 1961 perquisite is defined as:

Amount paid for the rent-free accommodation provided to the assessee by his employer Any concession in the matter of rent respecting any accommodation provided to the

assessee by his employer

Any benefit or amenity granted or provided free of cost or at concessional rate in any of

the following cases:

1.

By a company to an employee, who is a director thereof2. By a company to an employee being a person who has a substantial interest in the

company

3. By any employer to an employee whose income under the head 'Salaries' exceeds

Rs.24000 excluding the value of non monetary benefits or amenities4. Any sum paid by the employer in respect of any obligation which, but for such

payment, would have been payable by the assessee

5. Any sum payable by the employer whether directly or through a fund, other than arecognised provident fund or EPF, to effect an assurance on the life of the

assessee or to effect a contract for an annuity

There are following perquisites which are tax free:

Medical facility Medical reimbursement

Refreshments

Subsidised Lunch/ Dinner provided by employer

Facilities For Recreation

Telephone Bills


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Products at concessional rate to employee sold by his/ her employer

Insurance premium paid by employer

Loans to employees by given by employer

Transportation

Training

House without rent Residence Facility to member of Parliament, judges of High Court/ Supreme Court

Conveyance to member of Parliament, judges of High Court/ Supreme Court

Contribution of employers to employee's pension, annuity schemes and group insurance

House Property

What Is Heads of House Property?

According to Chapter 4, Section 22 - 27 of Income Tax Act, 1961 there is a provision of income

under head of house property. In every section from 22-27 there are detail specification of house

property income. It is defined as income earned by a person through his house or land.

What Income Comes Under Head of House Property?

Annual value of building or land owned by assessee. There is a charge on the potential ofproperty to generate income not on the rent received. But if property is used for making profit in

business then it will be taxable not under this head but will be taxable under head of profit in

business/ profession.

How to calculate annual value of property?

According to annual value, house property is calculated as

1. Annual value of a house is zero if property is in the occupation of the owner for his

residence for the whole year & if no other benefit is availed by owner from his property.There will be no deductions as given under section 24 except deduction interest on

borrowed capital

2. If the owner lets out the house or a part thereof for any period of time during the previous

year the annual value of the property or part has to be calculated for the whole year andthe proportionate annual value of the period for which the house or any part thereof was

in the occupation of the owner for his own residence shall be deducted from the gross

annual value. The assessee in such cases cannot claim deduction under section 24 inexcess of the annual value so determined

3. The assessee occupies more than one house for his residence, the above exemption is

applicable only to one such house at the option of the assessee. The annual value of the

other house or houses shall be computed as if the house or houses are let4. In case where the assessee has only one residential house but it cannot be occupied by the

owner by reason of that owing to his employment, business or profession carried out on

at any other place, he has to reside at that other place in a building not belonging to him,the annual value of such house shall be taken to be nil if the house is not actually let and

no other benefit is derived by the owner from such house.

Profit in Business/ Profession


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According to Income Tax Act, 1961 income under this head is defined as the income earned by

assessee as a profit or gain in his business or profession. Income under this head must followthese conditions:

There must be a business/ profession Business/ profession is being carried by assessee

Business/ profession have been carried out by assessee in assessment year for which

income tax is filling

What Income Comes Under Head of Profit in Business?

Profits and gains of assessee from any business or profession during assessment year

Any payment or compensation due or received by a person for his services to

organization as a part of his business

Making profit in trade Income of professional or organization against services provided

by that professional/ organization Profits on sale of a license granted under the Imports (Control) Order, 1955, (EXIM

control Act, 1947)

Cash received or due by any person against exports under government schemes

Any benefit whether it is not in cash coming from business/ profession

Any profit, salary, bonus or commission received by company partners

Capital Gains

What is Capital Gain?

According to Income Tax Act,1961 heads of capital gain is defined as gains derived on transfer

of capital asset. Capital Gain is the profit or gain of an assessee coming from the transfer of acapital asset effected during the previous year or assessment year. "Capital Asset" and transfer

are predefined in income tax act.

What is Capital Asse?:

Under section 2(14) of the Income Tax Act,1961 Capital Asset is defined as property of any kind

held by assesse including property held for his business or profession.It includes all type real property as well as all rights in property. It is also defined as gains on

transfer of assets in which there in no cost of acquisition like:

Goodwill of business generated by assessee

Tenacy rights Stage carriage permits

Loom hours

Right to manufacture

Processing & production of any article or things

Assets Which Don't Come Under Heads of Capital Assets?


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According to Income Tax Act,1961 there are few assets which don't form a part of Capital

Assets, which are as follows:

Stock of goods and raw materials used by assessee for his business or profession

Those property which are movable like wearing apparel, furniture, automobile, phone,

household goods etc. Held by assessee. But Jewelry which is also an movable assetscomes under heads of Capital Assets

Agricultural property in India. But agriculture land coming under municipal limits (in

area having population ore than 10,000) comes under Capital Assets. Agriculture landswithin 8 Km from municipal limit also comes under Capital Assets if it is notified by the

central government of India

Few Gold Bonds issued by government

Few special bonds issued by central government like Special Bearer Bonds, 1991

Transfer of Capital Assets

Under Section 2(47) of The Income Tax Act,1961 transfer of capital assets is defined as:

Sale, exchange and relinquishment of assets

Extinguishment of any rights in capital assets

Acquisition of capital assets or rights

Conversion of capital asset by its owner as stock in trade of his business, it may also be a

term of transfer

Transfer of immovable property under Section 53A of Transfer of Property Act, 1882

Any transaction by which an assessee become enable to act as a member of cooperative

society

Any transaction by which an assessee acquire shares in cooperative society

Other Sources

Every type of income comes under a specified heads. But there are few incomes, which don't

come under any of following heads:

Salary

House Property

Profit In Business/ Profession

Capital Gains

So under Section 56(2) of Income Tax Act,1962 all such income comes in this heads of income.

There are following incomes which are taxed under this heads

Income coming as a dividend paid by a company to an assessee

Income coming from winning in lottery, crossword puzzles, races, card games, gambling

or other such sports

Income coming as an amount received by assessee from his employer as a fund forwelfare of employee


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Income Tax Return

Income Tax Return is an important part of Income Tax. It is the way by which an assessee

process for paying his tax to Income Tax Department. As per the provisions of Income Tax Act,

1961, filing of Income Tax return is a legal obligation of every Individual whose income exceeds

the maximum limit of non-taxable income for the full financial year i.e. from 01 April to March31 of the following year, for example for the year 2007-2008 (which is also called the

Assessment Year) the period is 01 April 2007 to 31 March 2008. In case of salaried class

assessee the information about the income in the particular financial year supported with theform 16 (the certificate for tax deducted at source), which is issued by the employer at the end of

the financial year.

Transforming itself with the changing times, the Income Tax Department of India has launched

an easy to use online facility for filing Income Tax Returns using the Internet. The filing of

Income Tax Returns Online offers great convenience, fast in processing and hassle-free option tothe assessees. Income Tax Return has several part or phases which we follow for paying tax. To

know Income Tax Return in an easy way, it is divided into the following sub sections:

What Is Income Tax Return

Income Tax Return Form

Authorised Signatory

Income Tax Return Filing

Income Tax Return

"Income Tax Return" is a term which is often used when we talk about income tax. It is a way by

which we pay this tax. When total annual income of a person, including all sources, is more thanmaximum unchargeable limitation ( At present it is Rs. 1,50,000/-) then that person is liable to

pay income tax.

Late Return

Any person not filing the return within the time mentioned is allowed to file a late return at any

time before the expiry of one year from the end of the relevant assessment year or before thecompletion of the assessment year, whichever is earlier.

PenaltyPenalty for delay filing of return is calculated as a percentage of the shortfall of tax. In case

where tax has been deducted at source, or advance tax has been duly paid, no penalty is leviable.
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Defective Return

If the return of income furnished by the assessee is defective according to assessing officer, it isintimated to the assessee and given an opportunity to rectify the defect within 15 days from the

date of such intimation or within such further period as may be allowed by the assessing officer

on the request of the assessee. If this is not rectified by the assessee within the aforesaid periodthen the return shall be deemed invalid and further it shall be deemed that the assessee had failed

to furnish the return. Under section 139(1) of the Income Tax Act, there are additional six

conditions, which forces a person to file his income tax return. These condition are:-

1. Owner of a Motor vehicle

2. Owner of immovable property3. Person who does foreign-travel

4. Subscribers of a telephone

5. Holder of a credit card

6. Incurs expenses on himself


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Income Tax Return Filing

There are fol lowing steps that must be fol lowed for income tax return f il ing: -

See the Heads of Income and decide which type of assessee you are

Select return form according to the type of assessee from the list

Before filing form pls. read the form carefully

Use black ball pen or other as instructed in form

There should not be any overwriting on the form

Fill name, father's name, date of birth as mentioned in your educational certificates

Put signature of authorized person (pls. see the list of authorised signatory) on the form atright place

Use your own PAN/TAN/GIR number for filing the income tax return

Use correct options/code to show your status in the income tax return form

Assessment year must be mentioned on return form clearly. Assessment year is the lastfinancial year for which tax has to pay

Mention your all source of income with income amount clearly and correctly

Calculate your taxable amount including surcharges and deducting rebate from yourincome

Attached all required documents for getting deduction/ rebate or exemption in tax

After filling form pls. recheck that all the information given by you is correct and onproper place

Don't give any wrong information in the form

Go to income tax department and submit the form to concerning income tax assessing

officer

File your income tax return before the last date of return filing. Last date for an individualhaving only salary income is 30th June as well as last date for individual having business

income (if auditing not required) is 31st august.


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Income Tax Deductions

In Case of Donations For CharityUnder section 80-G of the Income Tax Act, there are following relief in case of Donations:

Donation to certain funds, approved education institutions of national importance,charitable institutions.

The deduction will be 50% of the amount.

Deduction may be 100% if donation is given to Prime Minister Relief Funds, National

Foundation for Communal Harmony, Blood Transfusion Council, The Africa Fund,Earth-quake Relief Fund.

In Case of Physically Handicapped Persons

A person who is suffering from permanent physical disability or mental retardation isentitled to deduction upto Rs. 40,000.

Handicapped must be certified by a physician, surgeon or a psychiatrist, working in a

government hospital.

Under section 80DD and 80U of Income Tax Act, physical disability must be one of the

following:

1. Permanent or more than 50% disability in limb

2. Permanent or more than 60% disability in 2 or more limb3.

Permanent loss of voice

4.

Permanent blindness5. Mental Retardation in which mental intelligence is less than 50% of normal required

intelligence

In Case of Treatment of Handicapped DependentsAll the persons who are dependent on physically handicapped person comes under this category.

There is provision of deduction in tax against expenditure on medical treatment, training &

rehabilitation of handicapped dependents or amount paid in an approved scheme of LIC or UTI.

In Case of Repayment of Loan Taken For Higher Education

There is deduction in income tax in respect of repayment of loan taken by a student from a bankor any other financial institutions for higher education in India or worldwide.

In Case of Contribution To Pension FundUnder section 80CCC there is a provision of deduction to an individual for any amount paid tokeep in force annuity plan of the LIC for receiving pension from a fund set up by that

corporation, as per section 10(23AAB) of Income Tax Act,1961. The amount received by

assessee or his nominee will be taxable. There will be no rebate under section 88 to the persons


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whose deduction under this section has been approved.

In Case of Amount Paid as House RentUnder section 80GG of the Income Tax Act there is a provision of deduction in tax on amount

paid by a person (not a salaried person getting housing allowance) for residential

accommodation. Deduction in tax will be measured under following parameters :-

The excess of actual rent paid over 10% of the total income (excluding long term capital

gain & income, as per section 115A or 115D of Income Tax Act, 1961)

Deduction will not be allowed to an assessee who owns an residential accommodation at

a place where he is temporarily residing

Deduction will not be allowed to an assessee who owns an residential accommodation at

any place and has also claimed for deduction in respect of self occupied property

In Case of Remuneration Received in Foreign Currency by Employer

Under section 80RR an individual resident of India who is an author or writer or photographer orTV/ film cameraman or TV/ film director or musician or actor or sport person or other such artist

whose source of income is foreign income and brings income to India according to foreignexchange regulation, then he is entitled to get a deduction of amount equal to 75% of such

income as it is brought in India in convertible foreign exchange. This amount will be deducted

from his taxable income within the period 6 months or period allowed by Chief Commissioner of

Income Tax Department. It is necessary to show the documents in favor of your claim.

In Case of Remuneration Received For Services Rendered Outside IndiaUnder section 80RRA of the income tax act, an individual who is getting remuneration in aforeign currency from an employer for his service in outside of India, will get a deduction of

75% of such income brought into India. This amount will be deducted from his taxable income

within the period of 6 months or period allowed by Chief Commissioner of Income Tax

Department. It is necessary to show the documents in favor of your claim.

In Case of Certain InvestmentUnder section of 80L of the Income Tax Act, there are few investments which are a matter ofdeduction in taxable amount. Here an assessee will get a deduction of amount upto Rs.12,000 -

15,000 from income on certain specified investments in government securities, UTI mutual

funds, bonds and other tax saving schemes. An assessee will be entitled for deduction from histaxable income if he is getting interest or dividend on certain investment which are as follows :

Investment in Securities of central or state government

Investment in National Saving Schemes

Investment in Debentures or Bonds of an institution/ authority/ public sector company/

cooperative society or other such organization notified by central government.

Investment in under National Deposit Schemes as notified by Central Government

Investment in under other schemes which are notified by central government like national

saving schemes, time deposit schemes, recurring deposit schemes.

Investment in under monthly income scheme of the post office


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Investment in units of UTI and Mutual Funds (under Section 10(23D) of the Income Tax

Act)

Investment in with banking institutions

Investment in financial institution working for Industrial Development of India

Investment in a public company limited working for providing long term financing of

housing accommodation Investment in such authorities which are working for planning & development of cities

and villages

Investment in co-operative societies


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Non Taxable Income

According to Chapter III of the Income Tax Act, 1961 there is a provision of exemptions in

income tax. There are few types of specified income on which a person can get exemption. It

means that at the time of calculating annual income, this type of income will not be added. Forclaiming any of these exemptions, it is necessary to furnish documents which shows that your

income comes under this list. If a person doesn't furnish required documents then he/ she will not

be entitled for this

Income Type Under Section

Agriculture Income 10(1)

Receipts from a Hindu Undivided Family being paid out of family's

income or in the case of an impartible estate belonging to family being

paid out of such estate's income

10(2)

Share of partner in total income of a firm which is assessed separately assuch.

10(2A)

Receipts being in the nature of casual and non-recurring nature not

exceeding Rs. 5,000/- (Rs. 2500/- in the case of winnings from horseraces, etc).

10(3)

Interest on securities and bonds including premium on redemption of

bonds by Non Resident as notified by Central Government.

10(4)(i)

Interests on amounts in Non-resident (External) Account in any bank inIndia being maintained as per FERA, 1973 and rules thereunder by an

individual..

10(4)(ii)

Interest on specified Central Government's Savings Certificates which

were subscribed to, in convertible foreign exchange remitted from acountry outside India as per FERA and rules thereunder by an individual

citizen or a person of Indian Origin..

10(4B)

Value of Leave Travel Concession or assistance not exceeding theamount actually spent.

10(5)

Specified remuneration to a foreigner and non-resident individual for

shooting of film in India who comes solely for such purpose.

10(5A)

Income-tax paid by the employer carrying on scientific research inrespect of the salary income of certain technicians from abroad

commencing from 1.4.93 subject to conditions stated therin.

10(5B)

Incomes of foreigners as passage money. 10(6)(i)


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Remuneration received by an ambassador, diplomats, etc. as specified. 10(6)(ii)

Remuneration received by employees of foreign companies in respect of

services rendered during stay in India subject to conditions as specified.

10(6)(vi)

Remuneration received from foreign philanthropic institutions etc. in

respect of services rendered in India subject to both the institutions andthe purposes thereof being approved by the Central Govt.

10(6)(via)

Income-tax paid by the employer carrying on scientific research in

respect of the salary income of certain technicians from abroad

commencing from 1.4.88 till 31.3.93 subject to conditions stated therein.

10(6)(viia)

Salaries to non-resident employed on a foreign ship subject to aggregatestay of not more than 90 days in the previous year.

10(6)(viii)

Salaries to non-resident professors or teachers. 10(6)(ix)

Income of individuals engaged in research work in India under duly

approved research schemes.

10(6)(x)

Remuneration received from foreign government for training in a

government office or undertaking as employee.

10(6)(xi)

Death-cum-retirement gratuity payable to specified members of civil or

defence services.

10(10)(i)

Gratuity not exceeding Rs.3 Lakhs payable under the Payment of

Gratuity Act, 1972

10(10)(ii)

Any other gratuity not exceeding Rs. 2 Lakhs received by employee

on retirement or termination of his services or by legal heirs on death ofemployee limited to 15 days salary for each completed year of service.

10(10)(iii)

Receipt in respect of commutation of pension as per specified limits. 10(10A)

Leave encashment not exceeding 8 months salary and subject tospecified conditions & limits.

10(10AA)

Compensation paid to employees on account of retrenchment under

Industrial Disputes Act, 1947: Ascertainment of amount to be either

minimum Rs. 50,000 or as per the said Act whichever is less.

10(10B)

Payments made under Bhopal Gas Leak Disaster Act, 1985. 10(10BB)

Receipt of amount on voluntary retirement upto Rs. 5,00,000 subject to

specified scheme and guidelines and necessary approval.

10(10c)

Payment on a Life Insurance Policy, including bonus thereon butexcluding therefrom amounts received u/s 80DDA(3).

10(10D)

Receipt of Payment from Public Provident Fund or Statutory Provident

Fund.

10(11)


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Receipt of interest from public company having been formed andregistered in India to provide long-term finances forconstruction/purchase of houses in respect of moneys lent to it in foreign

currency from sources outside India.

10 (15)(iv)(g)

Receipt of interest from public sector company in respect of bonds anddebentures as notified. 10 (15)(iv)(h)

Receipt of interest from Government in respect of deposits made in its

specified schemes from funds due on retirement.

10 (15)(iv)(i)

Receipt of interest on securities held by Welfare Commissioner, BhopalGas Victims as also on deposits made with RBI or Public Bank from 1-

4-1994 for the benefit of such victims.

10 (15)(v)

Receipt of payment from an Indian company carrying on business of

operation of aircraft, to acquire an aircraft or aircraft engine excluding

spares etc., on lease from foreign Govt. or enterprise under an

agreement entered into before 1-4-1997 and being duly approved.

10(15A)

Scholarships granted to meet the cost of education 10(16)

Daily allowances received by MPs, MLAs and MLCs. 10(17)(ii)

Receipt of allowances by MPs under the Member of Parliament

[Constituency Allowance] Rules, 1986.

10(17)(ii)

Receipt of allowances by MLAs under the limit of Rs. 2,000/- per

month

10(17)(iii)

Receipt of any amount in connection with an award, including award in

kind, for literary, scientific or artistic work etc. instituted byGovernment etc.

10(17A)(i)

Receipt of amount in connection with a reward including award in kindfrom Government in respect of public interest purposes.

10 (17A)(ii)

Receipt of ex-gratia payments from Government to ex-rulers in respect

of abolition of their privy purses.

10(18A)

Amount calculated as annual value being the notional value in respect ofany one palace to be treated for the purpose as residence by ex-ruler.

10(19A)

Income of a local authority as specified. 10(20)

Income of a development or housing improvement authority in a city

and/or village.

10(20A)

Income of approved scientific and research association. 10(21)

Income of a university or other educational institution. 10(22)

Income of a hospital or other such institution working exclusively for 10(22A)


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philanthropic purposes and not for profit.

Income of news agency having been set up in India for the sole purpose

of collection & distribution of news provided its income in any way isnot distributed to its members.

10(22B)

Income of associations for promotion of sports, etc. as specified. 10(23)

Any income of associations or institutions for controlling professions oflaw, medicine, engineering, accountancy, architecture, etc., except

incomes derived from house property or for rendering any specified

services or interest on/dividends from its investments.

10(23A)

Income of regiment Fund or Nonpublic fund of armed forces establishedfor welfare of past and present members

10(23AA)

Income of a fund established for welfare of employees or their

dependents, the employees being members thereof subject to fulfillment

of conditions as to approval and otherwise.

10 (23AAA)

Income of fund set up by LIC from 1-4-1996 in respect of pension

scheme subject to conditions as specified.

10 (23AAB)

Income of a charitable trust or registered society, etc. workingexclusively for development of khadi & village industries and not for

profit as per conditions specified.

10(23B)

Income of Khadi & Village Board, etc.. 10(23BB)

Income received by a statutory public religious or charitable trust orendowment.

10 (23BBA)

Income of European Economic Community derived in India in the shape

of interest, dividends or capital gains arising out of investments from its

funds under such schemes as notified.

10 (23BBB)

Any income of SAARC Fund having been established under ColomboDeclaration dt. 21-12-91 by Heads of State or Government of member

countries for the purposes of development of regional projects.

10 (23BBC)

Income on behalf of Prime Minister's National Relief Fund. 10 (23C)(i)

Income on behalf of Prime Minister's Fund (Promotion of Folk Art.) 10 (23C)(ii)

Income on behalf of Prime Minister's Aid to Students Fund. 10 (23C)(iii)

Income of National Foundation for Communal Harmony. 10 (23C) (iii)(a)

Income of any fund or institution established for charitable cause. 10 (23c)(iv)

Income of any trust or institution established wholly for public religious

and/or charitable purposes subject to specified conditions.

10 (23c)(v)


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Income of specified Mutual Funds registered and/or set up under /bySEBI Act, 1992; public-sector bank/financial institution or RBIfulfilling such conditions as specified.

10(23D)

Income of Exchange Risk Administration Fund having been set up by

public financial institutions either jointly or separately as per specifiedconditions.

10(23E)

Income in the shape of dividends or long-term capital gains derived by a

venture capital fund/company from its investments in the equity of a

venture capital undertaking

10(23F)

Income in the shape of dividends, interest or long-term capital gains

derived by a infrastructure capital fund/company from its investments in

the equity or long-term finance of any infrastructure facility oriented

enterprise fulfilling such conditions as specified.

10(23G)

Income of registered trade-union relating to "income from house

property" and "income from other sources" as specified.

10(24)

income received by trustees of Provident, Superannuation & Gratuity

Funds relating to interest on securities and capital gains resulting fromsale or exchange of such securities as specified.

10(25)

Income of Employees State Insurance Fund as specified. 10(25A)

Income of member of Scheduled tribes as specified. 10(26)

Income accruing to any person from any source of income in the districtof Ladakh or outside India subject to the person being resident in the

said district in the relevant previous year and satisfying other conditionsas specified.

10(26A)

Income from winnings from lottery, agreement for draw in respect ofwhich having been entered into upto 28-2-89 between Sikkim Govt. and

organising agents of such lottery subject to fulfilling of such condition

as specified. {to be omitted from 1-4-1998}

10(26AA)

Income of any statutory corporation formed for promoting the interests

of Scheduled Castes or Scheduled tribes, etc., as specified.

10(26B)

Income of any statutory corporation formed for promoting the interests

of the members of any minority community.

10(26BB)

income of any cooperative society formed for promoting the interests ofmembers of Scheduled Caste & Tribes.

10(27)

Any amount adjusted or paid relating to Tax Credit Certificates. {To be

omitted from 1-4-1998}

10(28)

Income of an authority from letting of godowns/warehouses for storage, 10(29)


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processing or facilitating marketing of goods as specified.

Receipt by way of subsidy received from Tea Board as specified.10(30)

Receipt by way of subsidy received from the concerned Board by an

assessee growing or manufacturing rubber, coffee, cardamom and othernotified commodities.

10(31)

Income relating to minor child if clubbed u/s 64(1A) in the hands of theassessee not exceeding Rs.1,500 in respect of each minor chid.

10(32)

Any income by way of dividends (whether interim or otherwise)

declared, distributed or paid by a Domestic Company on or after 1-6-1997 as referred to in section 115-O.

10(33)

Any profits and gains of newly established industrial undertakings in

free trade zones, electronic hardware/software technology parks for anyfive consecutive assessment years within a block of eight years from the

assessment year corresponding to previous year in which production

started subject to fulfilling all the conditions as specified.

10A

Any profits and gains of newly established 100% export-oriented units

for any five consecutive assessment year within a block of eight years

from the assessment year corresponding to previous year in which

production started subject to fulfilling all the conditions as specified.

10B

Income of any person from the property held under trust wholly or inpart for charitable or religious purposes as specified in detail and subject

to the provisions of sections 60 to 63.

11

Receipt of any voluntary contributions by a trust/institution created/

established wholly for charitable or religious purposes excluding the

contributions made to it with specific direction to form part of corpus:

Such voluntary contributions be deemed to be income from property interms of section 11.

12

Income of political party chargeable as income from house property or

other sources or by way of voluntary contributions received by it fromany person subject to conditions as specified.

13A


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Income Tax Saving Schemes

National Savings Certificates (NSC)

Public Provident Fund (PPF)

Kisan Vikas Patra (KVP)

Post Office Scheme (POS)

Special Schemes For Retiring Person

Postal Life Insurance

Dividend

National Savings Certificates (NSC)National Saving Schemes (NSC) is one of the popular Income Tax Saving schemes which is

available throughout the year. It can be operated singly, jointly, or by a minor with his/her parentor guardian. There is a return on this scheme at interest rate of 8%. The minimum investment

limitation of the scheme is Rs.100/- and with no upper limit. Other investments can be done in

multiple of Rs. 100/-. This scheme has a maturity period of 6 years. It is transferable and also

there is a provision of loan on the basis of this scheme. Under section 88 of the Income Tax Act,1961 any person can take benefit in income tax on amount invested in this scheme and under

section 80L of Income Tax Act, 1961 there is a provision of benefit on interests coming from

scheme.

Public Provident Fund (PPF)Under this scheme, there is a return at the interest rate of 8% p.a. The minimum investment limitis Rs. 500/- and maximum limitation is Rs. 70,000/-. It can be opened any time throughout the

year. It can be operated either singly or jointly. In case of minor, with parent/guardian. There is

also a facility of nomination in this scheme. This scheme has a maturity period of 15 years. Thefirst loan can be taken in the third financial year from the date of opening of the account, or upto

25% of the amount at credit at the end of the first financial year. Loan amount can be returned in

maximum of 36 installments. A person can withdraw an amount (not more than 50% of the

balance) every year. Under Section 88 of Income Tax Act, 1961 there is a provision of taxbenefit by investing in this scheme. Interest on this scheme is tax free.

Kisan Vikas Patra (KVP)Money invested in this scheme doubles in 8 years. There is a minimum investment limitation of

Rs.100/- with no upper limit. This scheme is available throughout the year. It can be operated

either singly or jointly. In case of minor, with parent/ guardian. Facility for nomination is alsoavailable under this scheme. Currently there is no tax benefit on investment under this scheme.
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Post Office Scheme (POS)

It is one of the best Income Tax Saving Scheme. It can be operated by either singly or jointly. In

case of minor, with parent/ guardian. It is available throughout the year. There are several typesof post office schemes depending upon the type of investment and maturity period. Post office

schemes can be divided into following catagories:

Monthly Deposit

Saving Deposit

Time Deposit

Recurring Deposit

Special Schemes For Retiring Person

Government Employees : There is a return at the rate of 8% per annum. The minimuminvestment is Rs.1000/- and maximum amount equal to the total retirement benefit. Maturity

period of this scheme is 3 years. According to Income Tax Act, 1961 interest on this scheme istax free.

Public Sector Employees: Under this scheme there is a return of 9.5% payable half-yearly on

30th June and 31st December respectively. There is a minimum investment limitation of

Rs.1000/- and the maximum limitation is the amount equal to total retirement benefit. It can beoperated by retired PSU employees in his/her own name or with the spouse, jointly. In this

scheme, there is a facility of premature encashment. Entire balance or part thereof can be

withdrawn after the expiry of three years from the date of deposit. Maturity period of this scheme

is 3 years. According to Income Tax Act, 1961 interest on this scheme is tax free.

Postal Life Insurance ForThis scheme is in operation for the last 117 years. This scheme started in 1884 as a welfare

measure for the employees of Postoffices & Telegraphs Department under Government of India

to the Secretary of State (having dispatch No. 299 dated 18-10-1882). But after few years,various departments of Central and State Governments were extended its benefits. Now it is open

for employees of all departments of Central as well as State Government, Nationalized Banks,

Public Sector Undertakings, Financial Institutions, Local Bodies like Municipalities and Zila

Parisads, Educational Institutions aided by the Government. According to Income Tax Act thereis also a provision of special relaxation in income tax on the basis of investment done in urban or

rural areas.

DividendAccording to Income Tax Act,1961 there is a provision benefit in Income Tax if assessee has an

income as a dividend on investment in any of the following:

Shares

Mutual Funds

Unit of UTI


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Other Savings

1. Infrastructure Bonds,

Infrastructure bonds are available through issues of ICICI and IDBI, brought out in the name of

ICICI Safety Bonds and IDBI Flexibonds. These provide tax-saving benefits under Section 88 oftheIncome Tax Act, 1961, for the investor. You can reduce your tax liability by upto Rs 16,000

per annum

2. Company Fixed Deposits

Fixed deposits in companies that earn a fixed rate of return over a period of time are calledCompany Fixed Deposits. Financial institutions and Non-Banking Finance Companies (NBFCs)also accept such deposits.

3. Life Insurance:

Life insurance saving schemes for government ownedLife Insurance Corporation of Indiaandother private life insurance companies like Bajaj Allianz, Birla Sun Life Insurance, HDFC Life

Insurance, ICICI Prudential

Tax Rebates under Indian Income Tax Act

Specified Investment Schemes u/s 80C

Life insurancepremium payments

Contributions to Employees Provident Fund/GPF

Public Provident Fund (maximum Rs 70,000 in a year) Nattional Saving Certificates. [NSC]

Unit Linked Insurance Plan (ULIP)

Repayment of Housing Loan (Principal)

Equity Linked Savings Scheme (ELSS)

Tuition Fees including admission fees or college fees paid for Full-time education of any

two children of the assessee (Any Development fees or donation or payment of similar

nature shall not be eligible for deduction).

Infrastructure Bonds issued by Institutions/ Banks such as IDBI, ICICI, REC, PFC etc.

Interest accrued in respect of NSC VIII issue.

Deduction under section 80 CCC(1)

This section allows a deduction of up to Rs. 10,000 to an individual in respect of contribution toPension scheme of LIC of India or any other Insurance Co.

Tax saving Pension plans available in market areLICs Jeevan Suraksha, ICICI Pru Life Time

Pension, Aviva Life Pension Plus, Max Easy Life policy, Tata AIGs Nirvana Plus etc.
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Section 80 CCE

Aggregate deduction u/s 80 C, u/s 80 CCC and 80 CCD can not exceed Rs. 1,00,000. ( One Lac)

Deduction under section 80D.

Under This section, a deduction up to Rs 10,000 (Rs 15,000 in case of senior citizens) is allowedin respect of premium paid by cheque towards health insurance policy, like Mediclaim. Suchpremium can be paid towards health insurance of spouse, dependent parents as well as dependent

children.

Deduction under section 24(b)

Under this section, Interest on borrowed capital for the purpose of house purchase or

construction is deductible from taxable income up to Rs. 1,50,000 with some conditions to be

fulfilled.

Documents

Introduction.docx Direct Taxes