UNIVERSITY OF MUMBAI

PROJECT ON

“STUDY OF INCOME TAX PLANNING IN INDIA”

SUBMITTED TO

IN PARTIAL FULLFILLMENT OF THE

REQUIREMENTS FOR THE AWARD OF THE

DEGREE OF BACHELOR OF FINANCIAL MARKETS

BY

MR. SWANAND NAVNATH KADAM

TY.BFM SEM VI

2021-2022

ROLL NO: 14

PROJECT GUIDE PROF.VIDHI HASSANI

SMT. CHANDIBAI HIMATHMAL MANSUKHANI COLLEGE

OPP.RAILWAY STATION, ULHASNAGAR- 421003.

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 SMT. CHANDIBAI HIMATHMAL

MANSUKHANI

COLLEGE ULHASNAGAR- 421003

CERTIFICATE
This is to certify that Mr. Swanand Navnath Kadam has worked and duly completed his
project work for the degree of Bachelor in Commerce (Financial Markets) under the
faculty of commerce in the subject of his project is entitled “STUDY OF INCOME TAX
PLANNING IN INDIA” under my supervision.

I further clarify that entire work has been done by learner under my guidance and that no
part of it is been submitted previously for any degree or diploma of any university.

It is his own work and facts reported by his personal findings and investigations.

PROF. VIDHI HASSANI. Prof. GIRISH BHAVNANI

(Project Guide) (HOD)

DR. MANJU LALWANI PATHAK. INTERNAL EXAMINER

(PRINCIPAL)

EXTERNAL EXAMNER

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 DECLARATION

I the undersigned Mr. SWANAND KADAM hereby, declare that the work embodied in
this project work titled “STUDY OF INCOME TAX PLANNING IN INDIA” forms
my own contribution to the research work carried out under the guidance of “Prof. Vidhi
Hassani” is a result of my own research work and has not been previously submitted to
any other University for any other Degree/Diploma to his or any other University.

Whenever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

MR. SWANAND KADAM

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 ACKNOWLEDGEMENT

To list who all have helped me in difficult because they are so numerous and the depth is
enormous.

I would like to acknowledgment the following as having idealistic channels and fresh
dimensions in the completion of this project

I, the undersigned would hereby like to thank “University of Mumbai” for giving me an
opportunity to present my skills in the form of this project which will not only prove to
be useful for my academic profile but will also prove to be fruitful for my future for
attaining jobs and also will help me to face the growing competition in the corporate
level.

I would like to thank my principal, Dr. Manju Lalwani Pathak for providing necessary
facilities required for completion of this project.

I would also like to thank, Prof. Vidhi Hassani for assisting and guiding me in every
possible way she could have to prepare for preparing this wonderful project or else
completion of this project would not be possible.

I would extend my thanks to our Coordinator Prof. Girish Bhavnani for his moral
support and guidance.

I would also like to thank “Smt. Chandibai Himathmal Mansukhani College” for
timely availability of books and use of internet which have been an important input into
completion of this project.

Lastly, I would also like to thank my parents for providing all necessary funds which
were required for making of this project.

Place: Mumbai

Date Swanand Kadam

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 Sr.No. Title Page No.
Certificate 2
Declaration 3
Acknowledgement 4
Index 5-6
Executive Summary 7

Chapter 1 Introduction 8
1.1 Objectives for Income Taxes 10
1.2 The Basic Principle of Income Taxes 10

1.3 An extract for Income Tax Act 10

1.4 Computation of Total Income 15

1.5 Deduction for Taxable Income 33

Chapter 2 Research Methodology 38

2.1 Introduction 39
2.2 Meaning of Research Methodology 40

2.3 Objectives of the study 41

2.4 Hypothesis of the study 42

2.5 Limitations of the study 44

2.6 Data collection 44

Chapter 3 Literature Review 45

3.1 Introduction to Review Literature 46
3.2 Review Literature 47
3.3 Gap Analysis 63

Chapter 4 Data Analysis and Interpretation 64

4.1 Introduction of Data Analysis 65
4.2 Data Analysis and Interpretation 65

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Chapter 5 Conclusion 84
5.1 Conclusion 85

Chapter 6 Recommendation and Suggestion 86

6.1 Recommendation 87
Income Head-wise Tax Planning 89
Suggestion

Chapter 7 Bibliography 94
7.1 Books 95
7.2 References 95

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 EXECUTIVE SUMMARY

The aim of the project "Income Tax Planning in India" is to automate College
administrative department and academic section. The requirement is to design and
developed software that will address the drawbacks of existing manual system. Project is
developed using web based technology and hence it is platform independent.

The student section module includes features like student data management, attendance,
examination, assignment, report card, Time table management, notice and reports. The
administrative module manages staff data, attendance, leaves, payroll and reports. The
system covers all aspects to attain a paperless campus.

In manual system it is always a tedious task to manage records. The overall efficiency in
the existing system is very less. There is always a time delay and lack of accuracy due to
human errors.

The proposed system is on cloud and hence can be accessed from anywhere through
internet on any platform. User wise and Form wise security permission is required to
access the software. The system stores data on a centralized database. System is flexible
to generate many combinations of reports. Overall efficiency and accuracy increased
when compared to manual system. Through administrative panel the administration can
control and monitor all the activities of users. Other than staff, students also can login to
the system to see notifications, submit assignment and view report cards.

I was involved in development of student section which includes student registration,

scheduling, attendance and reports

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 7

CHAPTER 1

INTRODUCTION

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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 2019-20.

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 statures in legal.

This project covers the basic of the Income Tax Act, 1961 and broadly presents the
nuances of prudent tax planning and tax saving options provided under these Laws. Any
other hideous means to avoid of evade tax is a cognizable offence under the Indian
constitution and all the citizens should refrain from such acts.

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1.1 Objective for Income Taxes

The objective of income tax on an accrual basis is to recognize the amount of current and
deferred taxes payable or refundable at the date of the financial statement(a) as a result of
all events that have been recognized in the financial statements and (b) as measured by
the provisions of enacted tax laws. Other events not yet recognized in the financial
statements may affect the eventual tax consequences of some events that have been
recognized in the financial statements. But that change in tax consequences would be a
result of those other later events, and the Board decided that the tax consequences of an
event should not be recognized until that event is recognized in the financial statements.

1.2 The Basic Principles Income Taxes

To implement that objective, all of the following basic principles are applied:

While tax rules vary widely, there are certain basic principles common to most income
tax systems. Tax systems in Canada, China, Germany, Singapore, the United Kingdom,
and the United States, among others; follow most of the principles outlined below. Some
tax systems, such as India, may have significant differences from the principles outlined
below. Most references below are examples; see specific articles by jurisdiction

Taxpayers and rates Residents and nonresidents

Defining income Deductions allowed

Business profits Credits

Alternative taxes Administration

State, provincial, and local Wage based taxes

1.3 AN EXTRACT FROM INCOME TAX ACT, 1961

1.3.1 Tax Regime in India

The tax regime in India is currently governed under The Income Tax, 1961as amended by
The Finance Act, 2015 notwithstanding any amendments made thereof by recently
announced Union Budget for assessment year 2015-15.

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1.3.2 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.

Basic Knowledge of Income Tax

According to Income Tax Act 1961, every person, who is an assessee and whose total
income exceeds the maximum 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)
o Association of persons (AOP)
o Body of Individual (BOI)
o Company
o Firm
o A local authority and

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 o Every artificial judicial person not falling within any of the preceding categories.
Income tax is an annual tax imposed separately for each assessment year (also called the
tax year). Assessment year commence from 1st April and ends on the next 31st March.

The total income of an individual is determined on the basis of his residential status in
India. For tax purposes, an individual may be resident, nonresident or not ordinarily
resident.

Tyoes of Residents

All Assesses

Resident Non Resident

Only Individual
& HUF

Resident & Ordinary Resident But Not

Ordinary Resident
Resident

1.3.3 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:

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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.

1. 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:

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

Concepts used in Tax Planning

2. 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 taxpayer is less than the tax payable under the law.

Example: Mr. A, having rendered service to another person Mr. B, is entitled to receive a
sum of say Rs. 50,000 /- from Mr. B. A tells B to pay him Rs. 50,000/- in cash and thus
does not account for it as his income. Mr. A has resorted to Tax Evasion.

3. 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.

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Example: Mr. A, having rendered service to another person Mr. B, is entitled to receive a
sum of say Rs. 50,000/- from Mr. B. Mr. A's other income is Rs. 200,000/-. Mr. A tells
Mr. B to pay cheque of Rs. 50,000 /- in the name of Mr. C instead of in the name of Mr.
A. Mr. C deposits the cheque in his bank account and account for it as

his income. But Mr. C has no other income and therefore pays no tax on that income of
Rs. 50,000/-. By diverting the income to Mr. C, Mr. A has resorted to Tax Avoidance.

1.3.4 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.

Example: Mr. A having other income of Rs. 200,000/ - receives income of Rs. 50,000/-
from Mr. B. Mr. A to save tax deposits Rs. 60,000/- in his PPF account and saves the tax
of Rs. 12,000/- and thereby pays no tax on income of Rs. 50.000.

1.3.5 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.

Example: Action of Mr. A depositing Rs. 60,000 in his PPF account and saving tax of Rs.
12,000/- is Tax Management. Actual action on Tax Planning provision is Tax
Management

To sum up all these four expressions, we may say that:

 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.

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  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.

1.3.6 The Income Tax Equation

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

1.4 COMPUTATION OF TOTAL INCOME

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 Ordinary Special
Sources Resource
Head 1 -Income
from Head 1
employment

Head 2 - Income
from House Head 2
Property

Head 4 - Capital
Gains

Head 5 - Income
from residuary
resources

1.4.1 Income from Salaries

Incomes termed as Salaries:

Existence of 'master-servant' or 'employer-employee' relationship is absolutely essential

for taxing income under the head "Salaries". Where such relationship does not exist
income is taxable under some other head as in the case of partner of a firm, advocates,
chartered accountants, LIC agents, small saving agents, commission agents, etc. Besides,
only those payments which have a nexus with the employment are taxable under the head
'Salaries'.

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:

Advance salary is taxable in the year it is received. It is not included in the income of
recipient again when it becomes due. However, loan taken from the employer against
salary is not taxable.

Arrears of Salary:

Salary arrears are taxable in the year in which it is received

Bonus:

Bonus is taxable in the year in which it is received.

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.

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;

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.

Allowances from Salary Incomes

Dearness Allowance / Additional Dearness (DA):
All dearness allowances are fully taxable
City Compensatory Allowance (CCA):

CCA is taxable as it is a personal allowance granted to meet expenses wholly, necessarily

and exclusively incurred in the performance of special duties unless such allowance is
related to the place of his posting or residence.

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Certain allowances prescribed under Rule 2BB, granted to the employee either to meet
his personal expenses at the place where the duties of his office of employment are
performed by him or at the place where he ordinarily resides, or to compensate him for
increased cost of living are also exempt.

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, but a deduction is allowed in certain cases.

Academic Allowance: Allowance granted for encouraging academic research and other
professional pursuits, or for the books for the purpose, shall be exempt u/s 10(14).
Similarly newspaper allowance shall also be exempt.

Conveyance Allowance:

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

1.4.2 Income from House Property

Incomes Termed as House Property Income:

The annual value of a house property is taxable as income in the hands of the owner of
the 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.

However, following incomes shall be taxable under the head Income from House
Property'.
1. Income from letting of any farm house 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.

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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. by the cultivators
Annual Value:

Income from house property is taxable on the basis of annual value. Even if the property
is not let-out, notional rent receivable is taxable as its annual value.

The annual value of any property is the sum which the property might reasonably be
expected to fetch if the property is let from year to year.

In determining reasonable rent factors such as actual rent paid by the tenant, tenant's
obligation undertaken by owner, owners' obligations undertaken by the tenant, location of
the property, annual relatable value of the property fixed by municipalities, rents of
similar properties in neighbourhood and rent which the property is likely to fetch having
regard to demand and supply are to be considered.

Annual Value of Let-out Property:

Where the property or any part thereof is let out, the annual value of such property or part
shall be the reasonable rent for that property or part or the actual rent received or
receivable, whichever is higher.
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 less 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:

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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.

Amounts not deductible from House Property Income:

Any interest chargeable under the Act payable out of India on which tax has not been
paid or deducted at source and in respect of which there is no person who may be treated
as an agent.

Expenditures not specified as specifically deductible. For instance, no deduction can be

claimed in respect of expenses on electricity, water supply, salary of liftman, etc.

Self-Occupied Properties
No deduction is allowed under section 24(1) by way of repairs, insurance premium, etc.
in respect of self-occupied property whose annual value has been taken to be nil under
section 23(2) (a) or 23(2) (b) of the act. However, a maximum deduction of Rs. 30,000 by
way of interest on borrowed capital for acquiring, constructing, repairing, renewing or
reconstructing the property is available in respect of such properties.

In case of self-occupied property acquired or constructed with capital borrowed on or

after 1.4.1999 and the acquisition or construction of the house property is made within 3
years from the end of the financial year in which capital was borrowed the maximum
deduction for interest shall be Rs. 1,50,000. For this purpose, the assessee shall furnish a
certificate from the person extending the loan that such interest was payable in respect of
loan for acquisition or construction of the house, or as refinance loan for repayment of an
earlier loan for such purpose.

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 furrowed on or after 1.4.1999 within 3 years

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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.

If buying a property for letting it out on rent, raise borrowings from other family
members or outsiders. The rental income can be safely passed off to the other family
members by way of interest. If the interest claim exceeds the annual value, loss can be set
off against other incomes too.

At the time of purchase of new house property, the same should be acquired in the
name(s) of different family members. Alternatively, each property may be acquired in
joint names. This is particularly advantageous in case of rented property for division of
rental income among various family members. However, each co-owner must invest out
of his own funds (or borrowings) in the ratio of his ownership in the property.

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;

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  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;

 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.

Year of Taxability:
Capital gains form part of the taxable income of the previous year in which the transfer
giving rise to the gains takes place. Thus, the capital gain shall be chargeable in the year
in which the sale, exchange, relinquishment, etc. takes place.

Where the transfer is by way of allowing possession of an immovable property in part

performance of an agreement to sell, capital gain shall be deemed to have arisen in the
year in which such possession is handed over. If the transferee already holds the
possession of the property under sale, before entering into the agreement to sell, the year
of taxability of capital
gains is the year in which the agreement is entered into.

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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-

 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.

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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.

Any expenditure incurred in connection with such purchase, exchange or other

transaction e.g. brokerage paid, registration charges and legal expenses, is added to price
or value of consideration for the acquisition of the asset. Interest paid on moneys
borrowed for purchasing the asset is also part of its cost of acquisition.

Where capital asset became the property of the assessee before 1.4.1981, he has an option
to adopt the fair market value of the asset as on 1.4.1981, as its cost of acquisition.

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. However, only the capital expenditure
incurred on or after 1.4.1981, is to be considered and that incurred before 1.4.1981 is to
be ignored.

Indexed cost of Acquisition/Improvement:

For computing long-term capital gains, Indexed cost of acquisition and Indexed cost of
Improvement' are required to deducted from the full value of consideration of a capital
asset. Both these costs are thus required to be indexed with respect to the cost inflation
index pertaining to the year of transfer.

24
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.
 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:

Capital Gains from Transfer of a Residential House

Any long-term capital gains arising on the transfer of a residential house, to an individual
or HUF, will be exempt from tax if the assessee has within a period of one year before or

25
two years after the date of such transfer purchased, or within a period of three years
constructed, a residential house.

Capital Gains from Transfer of Agricultural Land

Any capital gain arising from transfer of agricultural land, shall be exempt from tax, if
the assessee purchases within 2 years from the date of such transfer, any Other
agricultural land. Otherwise, the amount can be deposited under Capital Gains Accounts
Scheme, 1988 before the due date for furnishing the return.

Capital Gains from Compulsory Acquisition of Industrial Undertaking

Any capital gain arising from the transfer by way of compulsory acquisition of land or
building of an industrial undertaking, shall be exempt, if the assessee
purchases/constructs within three years from the date of compulsory acquisition, any
building or land, forming part of industrial undertaking. Otherwise, the amount can be
deposited under the 'Capital Gains Accounts Scheme, 1988' before the due date for
furnishing the return.

Capital Gains from an Asset other than Residential House

 Any long-term capital gain arising to an individual or an HUF, from the transfer
of any asset, other than a residential house, shall be exempt if the whole of the net
consideration is utilized within a period of one year before or two years after the
date of transfer for purchase, or within 3 years in construction, of a 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.
 Assesses having income below Rs. 60,000 should go for short-term capital gain
instead of long-term capital gain, since income up to Rs. 60,000 is taxable @ 10%
whereas long-term capital gains are taxable at a flat rate of 20%. Those having
income above Rs. 1,50,000 should plan their capital gains vice versa.
 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.

26
  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.
 Since the income of the minor children is to be clubbed in the hands of the parent,
it would be better if the minor children have no or lesser recurring income but
have income from capital gain because the capital gain will be taxed at the flat
rate of 20% and thus the clubbing would not increase the tax incidence for the
parent.
Profits and Gains of Business or Profession

1.4.3 Income from Business or Profession:

The following incomes shall be chargeable under this head

 Profit and gains of any business or profession carried on by the assessee at any
time during previous year.
 Any compensation or other payment due to or received by any person, in
connection with the termination of a contract of managing agency or for vesting
in the Government management of any property or business.
 Income derived by a trade, professional or similar association from specific
services performed for its members.
 Profits on sale of REP license/Exim scrip, cash assistance received or receivable
against exports, and duty drawback of customs or excise received or receivable
against exports.
 The value of any benefit or perquisite, whether convertible into money or not,
arising from business or in exercise of a profession.

27
Any interest, salary, bonus, commission or remuneration due to or received by a partner
of a firm from the firm to the extent it is allowed to be deducted from the firm's income.
Any interest salary etc. which is not allowed to be deducted

 u/s 40(b), the income of the partners shall be adjusted to the extent of the amount
so disallowed.
 Any sum received or receivable in cash or in kind under an agreement for not
carrying out activity in relation to any business, or not to share any know-how,
patent, copyright, trade-mark, license, franchise or any other business or
commercial right of, similar nature of information or technique likely to assist in
the manufacture or processing of goods or
provision for services except when such sum is taxable under the head "capital
gains' or is received as compensation from the multilateral fund of the Montreal
Protocol on Substances that Deplete the Ozone Layer.
 Any sum received under a Keyman Insurance Policy referred to u/s 10(10D).
 Any allowance or deduction allowed in an earlier year in respect of loss,
expenditure or trading liability incurred by the assessee and subsequently received
by him in cash or by way of remission or cessation of the liability during the
previous year.
 Profit made on sale of a capital asset for scientific research in respect of which a
deduction had been allowed u/s 35 in an earlier year.
 Amount recovered on account of bad debts allowed u/s 36(1) (vi) in an earlier
year.
 Any amount withdrawn from the special reserves created and maintained u/s 36
(1) (vi) shall be chargeable as income in the previous year in which the amount is
withdrawn

Expenses Deductible from Business or Profession:

Following expenses incurred in furtherance of trade or profession are admissible as

deductions.

 Rent, rates, taxes, repairs and insurance of buildings.

 Repairs and insurance of machinery, plant and furniture.

28
 Depreciation is allowed on:
Building, machinery, plant or furniture, being tangible assets, Know how, patents,
copyrights, trademarks, licenses, franchises or any other business or commercial
rights of similar nature, being intangible assets, acquired on or after 1.4.1998

 Development rebate.
 Development allowance for Tea Bushes planted before 1.4.1990.
 Amount deposited in Tea Development Account or 40% profits and gains from
business of growing and manufacturing tea in India,
 Amount deposited in Site Restoration Fund or 20% of profit, whichever is less, in
case of an assessee carrying on business of prospecting for, or extraction or
production of, petroleum or natural gas or both in India.
 The assessee shall get his accounts audited from a chartered accountant
 And furnish an audit report in Form 3 AD.
 Reserves for shipping business.
 Scientific Research
 Expenditure on scientific research related to the business of assessee, is deductible
in that previous year. One and one-fourth times any sum paid to a scientific
research association or an approved university, college or other institution for the
purpose of scientific research, or for research in social science or statistical
research.
 One and one-fourth times the sum paid to a National Laboratory or a University
or an Indian Institute of Technology or a specified person with a specific direction
that the said sum shall be used for scientific research under a programme
approved in this behalf by the prescribed authority. One and one half times, the
expenditure incurred up to 31.3.2005 on scientific research on in-house research
and development facility, by a company engaged in the business of bio-
technology or in the manufacture of any drugs, pharmaceuticals, electronic
equipments, computers telecommunication equipments, chemicals or other
notified articles.

29
 Expenditure incurred before 1.4.1998 on acquisition of patent rights or
copyrights, used for the business, allowed in 14 equal installments starting from
the year in which it was incurred.
 Expenditure incurred before 1.4.1998 on acquiring know-how for the business,
allowed in 6 equal installments. Where the know-how is developed in a
laboratory, University or institution, deduction is allowed in 3 equal installments.
 Any capital expenditure incurred and actually paid by an assessee on the
acquisition of any right to operate telecommunication services by obtaining
license will be allowed as a deduction in equal installments over the period
starting from the year in which payment of license fee is made or the year in
which business commences where license fee has been paid before
commencement and ending with the year in which the license comes to an end.
 Expenditure by way of payment to a public sector company, local authority or an
approved association or institution, for carrying out a specified project or scheme
for promoting the social and economic welfare or upliftment of the public. The
specified projects include drinking water projects in rural areas and urban slums,
construction of dwelling units or schools for the economically weaker sections,
projects of non- conventional and renewable source of energy systems, bridges,
public highways, roads promotion of sports, pollution control, etc.
 Expenditure by way of payment to association and institution for carrying out
rural development programmes or to a notified rural development fund, or the
National Urban Poverty Eradication Fund.
 Expenditure incurred on or before 31.3.2002 by way of payment to associations
and institutions for carrying out programme of conservation of natural resources
or afforestation or to an approved fund for afforestation.
 Amortisation of certain preliminary expenses, such as expenditure for preparation
of project report, feasibility report, feasibility report, market survey, etc., legal
charges for drafting and printing charges of Memorandum and Articles,
registration expenses, public issue expenses, etc. Expenditure incurred after
31.3.1988, shall be deductible up to a maximum of 5% of the cost of project or
the capital exployed, in 5 equal installments over five successive years.

30
 One-fifth of expenditure incurred on amalgamation or demerger, by an Indian
company shall be deductible in each of five successive years beginning with the
year in which amalgamation or demerger takes place.
 One-fifth of the amount paid to an employee on his voluntary retirement under a
scheme of voluntary retirement, shall be deductible in each of five successive
years beginning with the year in which the amount is paid. Deduction for
expenditure on prospecting, etc. for certain minerals.
 Insurance premium for stocks or stores.
 Insurance premium paid by a federal milk co-operative society for cattle owned
by a member.
 Insurance premium paid for the health of employees by cheque under the scheme
framed by G..C. and approved by the Central Government.
 Payment of bonus or commission to employees, irrespective of the limit under the
Payment of Bonus Act.
 Interest on borrowed capital.
 Provident and superannuation fund contribution.
 Approved gratuity fund contributions.
 Any sum received from the employees and credited to the employees account in
the relevant fund before due date.
 Loss on death or becoming permanently useless of animals in connection with the
business or profession.
 Amount of bad debt actually written off as irrecoverable in the accounts not
including provision for bad and doubtful debts.
 Provision for bad and doubtful debts made by special reserve created and
maintained by a financial corporation engaged in providing long-term finance for
industrial or agricultural development or infrastructure development in India or by
a public company carrying on the business of providing housing finance.
 Family planning expenditure by company.
 Contributions towards Exchange Risk Administration Fund.

31
 Expenditure, not being in nature of capital expenditure or personal expenditure of
the assessee, incurred in furtherance of trade. However, any expenditure incurred
for a purpose which is an offence or is prohibited by law, shall not be deductible.
 Entertainment expenditure can be claimed u/s 37(1), in full, without any limit/
restriction, provided the expenditure is not of capital or personal nature.
 Payment of salary, etc. and interest on capital to partners
 Expenses deductible on actual payment only.
 Any provision made for payment of contribution to an approved gratuity fund, or
for payment of gratuity that has become payable during the year.
 Special provisions for computing profits and gains of civil contractors.
 Special provision for computing income of truck owners.
 Special provisions for computing profits and gains of retail business.
 Special provisions for computing profits and gains of shipping business in the
case of non-residents.
 Special provisions for computing profits or gains in connection with the business
of exploration etc. of mineral oils.
 Special provisions for computing profits and gains of the business of operation of
aircraft in the case of non-residents.
 Special provisions for computing profits and gains of foreign companies engaged
in the business of civil construction, etc. in certain turnkey projects.
 Deduction of head office expenditure in the case of non-residents.
 Special provisions for computing income by way of royalties etc. in the case of
foreign companies

Expenses deductible for authors receiving income from royalties

 In case of Indian authors/writers where the amount of royalties receivable during

a previous year are less than Rs. 25,000 and where detailed accounts regarding
expenses incurred are not maintained, deduction for expenses may be allowed up
to 25% of such amount or Rs. 5,000, whichever is less. The above deduction will
be allowed without calling for any evidence in support of expenses.

32
  If the amount of royalty receivable exceeds Rs.25,000 only the actual expenses
incurred shall be allowed.

Set Off and Carry Forward of Business Loss:

If there is a loss in any business, it can be set off against profits of any other business in
the same year. The loss, if any, still remaining can be set off against income under any
other head

However, loss in a speculation business can be adjusted only against profits of another
speculation business. Losses not adjusted in the same year can be carried forward to
subsequent years.

1.4.4 Income from Other Sources

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.

However, any income by way of dividends is exempt from tax u/s10 (34) and no tax is
required to be deducted in respect of such dividends.

33
 (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;

(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.

34
  Income from royalties in general.
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, 000or 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

1.5. DEDUCTIONS FROM TAXABLE INCOME

Deduction under section 80C

This new section has been introduced from the Financial Year 2005-06. Under this
section, a deduction of up to Rs. 1,00,000 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).

80C

This section is applicable from the assessment year 2006-2007.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.70,000 a year)
 Contribution towards Employee Provident Fund/General Provident Fund
 Unit Linked Insurance Plan (ULIP).

35
  NSC VIII Issue
 Interest accrued in respect of NSC VIII Issue
 Equity Linked Savings Schemes (ELSS).
 Repayment of housing Loan (Principal).
 Tuition fees for child education
 Investment in companies engaged in infrastructural facilities.
Notes for Section 80C

1. There are no sectoral caps (except in PPF) on investment in the new section and
the assessee is free to invest Rs. 1,00,000 in any one or more of the specified
instruments.
2. Amount invested in these instruments would be allowed as deduction irrespective
of the fact whether (or not) such investment is made out of income chargeable to
tax.
3. Section 80C deduction is allowed irrespective of assessee's income level. Even
persons with taxable income above Rs. 10,00,000 can avail benefit of section
80C.
4. As the deduction is allowed from taxable income, the exact savings in tax will
depend upon the tax slab of the individual. Thus, a person in 30% tax stab can
save income tax up to Rs. 30,600 (or Rs. 33,660 if annual income exceeds Rs.
10,00,000) by investing Rs. 1,00,000 in the specified schemes u/s 80C.

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 (Jeevan Suraksha) 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:
Maximum Rs. 10,000/-

36
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, in respect of the following

In case of an individual - insurance on the health of the assessee, or wife or husband, or

dependent parents or dependent children.
In case of an HUF - insurance on the health of any member of the family
Amount of deduction: Maximum Rs. 10,000, in case the person insured is a senior citizen
(exceeding 65 years of age) the maximum deduction allowable shall be Rs. 15,000/-.

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: the deduction allowable is Rs. 50,000 (Rs. 40,000 for A.Y. 2003-
2004) in aggregate for any of or both the purposes specified above, irrespective of the
actual amount of expenditure incurred. Thus, if the total of expenditure incurred and the
deposit made in approved scheme is Rs. 45,000, the deduction allowable for A.Y. 2004-
2005, is Rs. 50,000

Deduction under section 80DDB

Deduction in respect of medical treatment

37
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.

Amount of Deduction Amount actually paid or Rs. 40,000 whichever is less (for AY.
2003-2004, a deduction of Rs. 40,000 is allowable In case of amount is paid in respect of
the assessee, or a person dependent on him, who is a senior citizen the deduction
allowable shall be Rs. 60.000.

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.

Amount of Deduction: Any amount paid by the assessee in the previous year, out of his
taxable income, by way of repayment of loan or interest thereon, subject to a maximum
of Rs. 40,000

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.

In all other cases donations made qualifies for the 50% of the donated amount for
deductions.

Deduction under section 80GG

Deduction in respect of Rent Paid:

Any assessee including an employee who is not in receipt of H..A. u/s 10(13A)

38
Amount of Deduction: Least of the following amounts are allowable:

 Rent paid minus 10% of assessee's total income

 Rs. 2,000 p.m.
 25% of total income

Deduction under section 80GGA

Donations for Scientific Research or Rural Development:

In respect of institution or fund referred to in clause (e) or (f) donations made up to

31.3.2002 shall only be deductible.

This deduction is not applicable where the gross total income of the assessee includes the
income chargeable under the head Profits and gains of business or profession. In those
cases, the deduction is allowable under the respective sections specified above.

Deduction under section 80CCE

A new Section 80CCE has been inserted from FY2005-06. As per this section, the
maximum amount of deduction that an assessee can claim under Sections 80C, 80CCC
and 80CCD will be limited to Rs 100,000.

39
 CHAPTER 2

RESEARCH METHODOLOGY

2.1 Introduction

2.2 Meaning of Research Methodology

2.2 Objectives of the study

2.4 Hypothesis of the study

2.5 Limitations of the study

2.6 Data collection

40
2.1 Introduction

 According to Kothari (2004), research methodology is a method to analytically

explain the research problem. It may be described as a science of analysis how
research is done systematically. In it we investigate the various stages that are
generally implemented by a scholar in studying his problem of research in
conjunction with the reason behind them. Additionally, “research methods are the
tools and techniques for doing research. Research is a term used liberally for any
kind of investigation that is intended to uncover interesting or new facts.”

 Research is an art of scientific investigation. In other words research is a scientific

and systematic search for pertinent information on a specific topic. The logic
behind taking research methodology into consideration is that one can have
knowledge regarding the method and procedure adopted for achievements of
objective of the project. With the adoption of this others can also evaluate the
results too. The methodology adopted for studying the objective of the Income
Tax Planning India. So keeping in view the nature of requirement of the study to
collect all the relevant information regarding the Income Tax Planning in India
opted by Secondary data has been collected through the various magazines and
newspaper and by surfing on internet and also by visiting the websites of Income
Tax.

41
2.2 Meaning of Research Methodology

 Research methodology is the specific procedures or techniques used to

identify, select, process, and analyze information about a topic. In a
research paper, the methodology section allows the reader to critically
evaluate a study's overall validity and reliability.

 In other words, the methodology chapter should justify the design choices, by
showing that the chosen methods and techniques are the best fit for the research
aims and objectives, and will provide valid and reliable results. A good research
methodology provides scientifically sound findings, whereas a poor methodology
doesn’t. We’ll look at the main design choices below.

Types of Research Methodology

42
  Quantitative Research
 Qualitative Research
 Descriptive Research
 Analytical Research
 Applied Research
 Fundamental Research
 Exploratory Research
 Conclusive Research
 Surveys Research
 Case Studies Research

2.3 Objectives of the Study

43
The following provides us with the chief objectives that have tried to achieve through the
study. The extent to which these objectives have been met could judged from the
conclusions and suggestions, which appear in the later of this study

1) To Study taxation provision of the Income Tax Act, 1961

2) To understand the current income tax system in India
3) To understand various investment avenues used by different assesse for Tax
Planning

2.4 HYPOTHESIS OF THE STUDY

A hypothesis is a formal tentative statement of the expected relationship between two or

more variables under study. A hypothesis helps to translate the research problem &
objectives into a clear explanation or prediction of the expected results or outcomes of the
research study. A clearly stated hypothesis includes the variables to be manipulated or
measured, identifies the population to be examined, & indicates the proposed outcome for
the study

Types of Hypothesis

44
 1. Simple Hypothesis:

A Simple hypothesis is also known as composite hypothesis. In simple

hypothesis all parameters of the distribution are specified. It predicts relationship
between two variables i.e. the dependent and the independent variable.

2. Complex Hypothesis :

A Complex hypothesis examines relationship between two or more

independent variables and two or more dependent variables.

3. Working or Research Hypothesis :

A research hypothesis is a specific, clear prediction about the possible

outcome of a scientific research study based on specific factors of the population.

4. Null Hypothesis :

A null hypothesis is a general statement which states no relationship between

two variables or two phenomena. It is usually denoted by H0.

5. Alternative Hypothesis :

An alternative hypothesis is a statement which states some statistical

significance between two phenomena. It is usually denoted by H1 or HA.

6. Logical Hypothesis :

A logical hypothesis is a planned explanation holding limited evidence.

7. Statistical Hypothesis :

45
 A statistical hypothesis, sometimes called confirmatory data analysis, is an
assumption about a population parameter.
2.5 Limitations of the Study

 One of the major limitations of this study is time constraint

 The Study relates to non-specific and generalized tax planning,
eliminating the need of sample analysis.
 Basic methodology implemented in this study is subjected to various
prons and cons

2.6 Data Collection

PRIMARY DATA –

Primary data is the data which is used or collected for the first time and it
is not used by anyone in the past. There are number of sources
of primary data from which the information can be collected.

Data was collected by using Secondary Data.

Secondary data
Secondary data is the data which is available in readymade form. The sources of
secondary data are newspaper, internet, websites of IBA, journals and other
published documents.

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 CHAPTER 3

LITERATURE REVIEW

3.1 Introduction of Review Literature

3.2 Review Literature

3.3 Gap Analysis

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3.1: Introduction of Review Literature

A literature review is an account of what has been published on a topic by accredited

scholars and researchers. Occasionally you will be asked to write one as a separate
assignment (sometimes in the form of an annotated bibliography—see the bottom of the
next page), but more often it is part of the introduction to an essay, research report, or
thesis. In writing the literature review, your purpose is to convey to your reader what
knowledge and ideas have been established on a topic, and what their strengths and
weaknesses are. As a piece of writing, the literature review must be defined by a guiding
concept (e.g., your research objective, the problem or issue you are discussing or your
argumentative thesis). It is not just a descriptive list of the material available, or a set of
summaries.
A literature review provides an overview and a critical evaluation of a body of literature
relating to a research topic or a research problem. It analyses a body of literature in order
to classify it by themes or categories, rather than simply discussing individual works one
after the other. A literature review often forms part of a larger research project such as
within a thesis, or it may be an independent written work, such as a synthesis written
paper.

PURPOSE OF A LITERATURE REVIEW

A literature review situates our topic in relation to previous researches and illuminates a
spot for our research. It accomplishes several goals Provides background for topic using
previous research. Shows we are familiar with previous, relevant research. It evaluates
the depth and breadth of the research with regards to our topic. It determines relating
aspects of our topic in need of research. Before embarking upon the research study the

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researcher made an attempt to review the literature on the subject. Since the research area
chosen for the study being „taxation‟, the researcher reviewed the reports of the various
committees appointed by the Government of India from time to time, Doctoral works
undertaken in the field of taxation and Contribution of tax experts by way of books and
research articles. The important of them are presented here:

3.2 Review Literature

1.Narayanan (1967)

He highlighted some important aspects of corporate taxation in India focusing super

profit tax, liberalization of investment allowance etc. Data from 1965 to 1971 are used for
the study purpose. The author opined that liberal investment allowances under corporate
tax system along with high marginal tax rates got to subsidise non profitable investment.
The established companies shall get immediate benefit of investment allowance where a
new company shall have to wait for many years. The author added that investment
allowances coupled with high and progressive tax rates would promote excessive
investment and unwarranted mechanism. The paper suggested that tax holiday can avoid
the disadvantages of investment allowances.

2.Leuthold & N’Guessan (1986)

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He have studied the buoyancies and elasticity of the major taxes of Ivory Coast. The
authors have used Ordinary Least Square (OLS) method for such research work. GDP has
been taken as regressand. Data from 1970 to 1979 is processed in this literature.

The researchers found that the overall elasticity of Ivorian taxes is .961 which describes
that one percentage increase of GDP responds .961 percentage increase of tax. They
concluded that “an elastic tax system is desirable in a developing economy because it
means that tax receipts will grow automatically with growing income without the need
for politically sensitive increases in tax rates”.

3. Mansfield (1988)

He worked out a theoretical paper on tax administration in selected developing countries

focusing tax evasion as a sole of tax reform. The author added an increase in the tax rate
would increase tax evasion. Though a high penalty rate for evasion is imposed on the
evaded tax the offender tax payer because of higher penalties may be lead to pay tax at
higher rate. The paper suggested tax evasion model as follows:

EU = (1 -p)U(y + x) + pU(y - Fx), where EU = expected utility of tax evasion U = utility

function p = probability of being audited y = taxpayer's legal after-tax income x =
undeclared taxes F = the penalty rate on undeclared taxes plus 1.

The tax reform administrators should be cautious that Strict adherence to a cost-benefit,
revenue-maximizing strategy would worsen efficiency distortions in the present tax
structure and would eventually undermine voluntary compliance.

The author quoted “tax reformer should strive to balance immediate revenue objectives
with customer (tax payer) benefit”.

4. Dahl & Mitra (1991)

He described three applications of tax policy models developed by the World Bank
during the course of its economic study in Bangladesh, China and India. The Bangladesh
model narrates upon shifting of tax burdens in influencing the relative attractions of
different options for raising revenue. The China model depicts broad uniformity of tax
rates for a large number of sectors with a dual price system.

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 The Indian model focused more upon liberalization policy for tax reform. It is also
reviewed about the cost of constructing tax policy models.

5. Sury (1993)

He made an historical analysis of the various aspects of income tax in India. The author
rivets on tax rate structure, exemptions, concessions and evasion. The author brought in,
changes the Income Tax Act 1886, Income Tax Act 1918, Income Tax Act 1922, Income
Tax Act 1939, and Income Tax Act 1961. The specifically analysed the post globalisation
effects on tax reform.

6. Gupta, Lahiri and Mookharjee (1995)

He made an empirical analysis on income tax compliance in India from 1965-55 to 1992-
93. They found that low tax rates, plethora of exemptions significantly affect the revenue
collection. The loop holes of tax structure contributed a lot for slow and low tax
compliance. They have also identified the negative effect of declining assessment
intensity. They have quoted that best practice of enforcement, assessment and tax
structure policy could have yielded at most a 90 percent revenue increase leading India’s
income tax performance below the average of countries with similar GDP per capita. This
study has been carried out by taking regression equation on compliance and income tax
revenue with variables like income base, inflation rate, vector of tax structure, vector of
enforcement variable and vector of dummy variable for other policy measures.

It is concluded that contrary to the upward trend in real income tax revenue during the
study period, tax compliance appears to be declined appreciably. In addition empirical
results shows that increased average tax rates and exemption limit appear to have reduced
compliance and revenues of the country.

7. Pillarisetti (1995)

He made a comparative study between India and Latin American countries. The author
annotates that prevalence of extreme high rate of tax over several years resulted in
institutionalised corruption and tax evasion in India in 1980s and 1990s. The author also
added Indian direct tax reform failed to neutralise non compliance and tax evasion.
India’s approximately 50% legal reportable income is untaxed. This theoretical paper also
glossed up the sectoral equity issues. India’s highly progressive tax structure can extract

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tax revenue from organised sector leaving informal sector which becomes more
vulnerable widespread tax evasion. This creates inequality in tax system across the
organised and informal sector. It is pointed out that a fundamental issue in a tax system is
“ability to pay.” The author surprised the non inclusion of this economic well being issue
of tax payer in direct tax reform measure.

8. Sarkar (1997)

He dealt with corporate income and incidence of corporate taxation. The paper critiqued
the responsiveness of corporate tax to corporate income in India with a view to assess the
justification of the imposition of minimum alternative tax. Tax buoyancy is calculated as
the percentage change in the tax revenues over the percentage change of income.
Corporate tax revenue figures are the actual tax collections.

Data from1975 to 1990 has been used. The paper concluded as “the corporate income
(using widest coverage) constitutes one-fifth of national income. The buoyancy of
corporate taxation in relation to corporate income/GDP was observed to be hovering
around unity. Value of unity in buoyancy estimates indicated that considerable
discretionary revenue measures are needed to maintain corporate tax to GDP ratio. It calls
for urgent requirement to improve the built-in flexibility of corporate taxation”.

9. Sharma (1997)

He highlighted different issues and options of corporate tax policy of India focussing
Minimum Alternative Tax (MAT) and Alternative Minimum Tax (AMT). This
theoretical paper also canvassed the revenue potential of MAT and AMT. A sample of
4352 profit making companies was taken from CMIE data base to dissect revenue raising
capacity of MAT. It is witnessed that government would collect net additional revenue of
2625 crores of rupees from this measure (MAT) from 3178 zero tax companies 839
companies having tax incidence below 12.9 percent. It is also evinced that companies
would save 54.8 crores of rupees due to reduction in surcharge from 15% to 7.5% in
1996-97 budgets. The author also compared tax rates of India with other countries.

The author concluded as “it is also equally desirable to strike a balance between the high
rates of depreciation allowed under the Income Tax Act and low rates of depreciation
admissible under the Companies Act and fix a common general rate of depreciation at 20
per cent with further harmonisation of the depreciation rates admissible in respect of
specific blocks of assets and reduction of corporate tax rate on domestic companies from

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40 percent to 35 per cent, together with reduction in tax rate on the foreign companies
from 55 per cent to 45 per cent, would not only induce better tax compliance but also
have a favourable impact on industrial activity and investment as also on the capital
market”.

10. Gupta & Gang (2000)

He proposed a method for evaluating the impact of tax structure changes on tax revenue.
They have tried to find out the gap between actual revenue and potential revenue. Three
attributable have been taken for the study purpose which are i) the tax rate structure, ii)
deductions, iii) tax evasion. They believed that revenue loss is the sum of tax rate effect,
statutory base effect and evasion effect. Authors concluded that tax reforms in Indian
Context did not have sustainable gain over time. Moreover the magnitude of the gains
from the reform were limited and failed to significantly curtail losses from tax evasion.

11. Rao (2000)

He analysed impact of tax reform in pre and post liberalisation period. The author also
studied trend of tax revenue, share of direct and indirect tax revenue in total tax revenue.
Composition of shared and non shared tax of central government is also analysed. The
author opined that “The recent approaches to reform lay emphasis on minimizing
distortions in tax policy to keep the economy competitive.

12. Islam (2001)

He opined about different principles that motivated in Tax Reforms in Asian

Development countries. The author critically mentioned whether the reduction of tax
rates necessarily increased work efforts, savings and investments? Moreover the
researcher raised the causal relationship between tax revenue and expenditure.

13. Jhaveri (2002)

In his article critically evaluated the tax force paper of direct tax reform well known as
Consultation Paper on Direct Tax (CPDT). Author opined that lower of tax rates from
high 90s to 30s with abundant incentives should have dramatically improved tax income
ratio. But it was not happened due to rampant evasion and downcast compilation. It is
argued about abolition of incentives in post reform macroeconomic era. The author

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criticised CPDT as it completely missed out Government’s credibility in regard to
consistency of tax policy. It is concluded that a nation always needs stronger commitment
and courage from the Government for its tax reform implementation. Chattopadhyay,

14. Das-Gupta (2002)

In their article “The Personal Income Tax in India: Compliance Costs and Compliance
Behaviour of Taxpayers”, empirically studied the reaction of tax payers in respect to tax
avoidance, compliance, tax planning, tax saving etc. The impact of compliance and non
compliance on tax revenue is the nidus of this research paper. Both primary and
secondary data has been used for this purpose. Questionnaire method is developed for
primary data collection. Different dependent and independent variables are derived from
the data collected on the basis of questionnaire. Regression model has been run to
replicate the results.

They have concluded that legal compliance costs effect tax collection positively and tax
evasion negatively. This arises given the greater average value of time compliance costs
compared to money compliance costs. Further they opined that non-salary earners are
less compliant. They have also concerned on how bribe costs adversely affect compliance
and possibly, taxes.

15. Bhalla (2004)

In his book “Tax rates, Tax compliance and Tax revenues: India, 1988-2004” glossed up
the impact of structure of income tax rates on compliance, and tax revenue. The author
related among consumption, distribution, per capita income, number of tax payers,
number of return filled and tax revenues from the year 1988 to 2004. The author also
studied the elasticity of compliance and revenue.

The paper concluded that the tax cuts, tax reform, reduction in tax rates and removal of
exemptions would lead to a significant increase in direct tax revenues. The author also
concerned about low levels of compliance presently existent in India

16. Rao (2005)

He canvassed the structure and operation of Indian tax system. The impact of historical
and institutional factors on shaping of tax policy and influencing tax reform are also

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discussed. The reason of relative stagnancy and deceleration in tax revenues at both
Central and State levels are pointed out. This is followed by an exploratory discussion on
the possible efficiency and equity implications of tax system and presents directions for
further reforms.

The data from 1981 to 2004 is taken for the research purpose.

The author stunningly concluded that some progressive tax reforms have helped to
enhance tax-Gdp ratio. Further reform in tax administration should be exercised
continuously. The author suggested that a large taxpayer unit should be established to not
only to compile information, collate it and match it but also should assist these taxpayers
and help them to reduce their compliance costs.

17. Bernardi and Fraschini (2005)

They theoretically studied about tax system and tax reform in India. Both direct tax and
indirect tax has been included in this working paper. The authors have taken all
components of both direct tax and indirect tax. The study has been conducted from 1990
to 2000. The paper made certain conclusive observation like direct taxes still are in an
infant state, both as weight as well as structure and large complexities prevails in indirect
taxation. Moreover, the authors compiled that tax reforms of India should reduce both tax
evasion and costs of compliance, and should eliminate most of the distorted behaviour
coming from tax avoidance.

18. Rao & Rao (2006)

They made an extensive analysis examination of tax trend and reform in India in their
research work. The dissected the tax revenue trend, its reason and economic effect. The
contribution of direct tax and indirect tax to total tax revenue has been studied over a
period of time. The share of Tax Deducted at Source (TDS) to personal income tax was
also studied.

They concluded that tax cuts immensely poured the Government revenue.

19. Pandey (2006)

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He trailed a theoretical study on policy initiative of direct tax reform based on both
primary and secondary data. Questionnaire method has been used to assess tax payer’s
perception. The author raised few vital points on direct tax reform. The study advocates
about elimination of tax incentives, widening of tax base, strengthening of tax collection
machinery, encouragement of voluntary compliance, reform in tax administration etc.

The author also emphasised on world class tax payer service and tax audit system to
enhance tax compliance. Tax audit can raise post assessment tax income by reducing tax
evasion. Further the study also focalised on corruption free tax administration and
establishment of tax culture where tax payers are happy to pay tax.

The author also concerned about the forgone tax obligations in a country like India where
poverty level is high and a overall direct participation in the formal economy is low.

20. Tsakumis, Curatola & Porcano (2007)

They opined that the nidus of deficit tax revenue is tax evasion. Further tax avoidance not
only depends upon audit failure or policy failure but also attributable to national culture.
In this paper the influence of national culture on intentional non compliance of fifty
countries are studied. The authors have used Hofstede’s (1980) cultural framework as a
basis of their hypothesis. Hofsted used four cultural dimensions i.e. uncertainty
avoidance, individualism, masculinity and power distance. Economic development is
taken as control variable. Tax evasion is dependent variable. The hypothesis is more the
four dimensions more than tax evasion.

The paper concluded that three of Hofstede’s cultural dimensions are related to
international tax evasion levels in the expected directions. Specifically, the results
indicate that higher (lower) uncertainty avoidance and power distance are associated with
higher (lower) tax evasion levels across countries while higher (lower) individualism is
associated with lower (higher) tax evasion across countries, as hypothesized.

21. Upender (2008)

He analysed tax revenue buoyancy of India in 1950 to 2005 in his article “Degree of Tax
Buoyancy in India: An Empirical Study”. The author used double-log regression model
in time series data with an interaction variable. The stationary of time series data is tasted
with Augmented - Dicky Fuller (ADF) and Phillips-Parron (PP) Tests.

The regression result of this commendable work can be summarised below.

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The gross tax buoyancy is positively significant and more than unity during pre tax
reform period. It is being stated that on the average, a one percent increase in income
accompanies with more than one percent increase in gross tax revenue all else equal
hence gross tax is elastic. But this does not happen in post reform period. The tax
buoyancy is less than unity hence relatively inelastic.

22. Singh K J (2008)

He extensively studied how evasion and corruption cause significant loss to Government
tax revenue. The author analysed the nexus between tax payer and tax auditor which
results tax evasion. The author formed three tier model consisting the three sets of players
namely tax payers, tax auditors and super auditors. The super auditor which consisting of
incompatible honest officials as compared to tax auditors. The model conclusively
approved the nexus which is an important cause for tax erosion.

23. Nidesh K. B. (2010)

He highlighted the tax reform should aim at broadening the tax base to realise more
revenues which in turn foster sustainable growth and fiscal adjustment. The article
portrays different models of tax reform and its aim and implications. The author made an
insight view on direct tax reforms process from 1970s to New Direct Tax Code and
opined that a major simplification and rationalization initiative came in 1985-86, when
the number of tax brackets was reduced from eight to four, the highest marginal tax rate
was brought down to 50 percent and wealth tax rates came down to 2.5 percent.

24. Ahmed & Mohammed (2010)

They examined tax buoyancy of 25 countries. Data collected from 1998 to 2008 and used
pooled least square method for result analysis in their article “Determinant of Tax
Buoyancy: Empirical Evidence from Developing Countries”. The authors have taken
independent variable as tax buoyancy which is calculated by using GDP as base. Seven
dependent variables are employed for the research work such as growth of manufacturing
sector, service sector, agricultural sector, import sector, monetary sector, budget deficit
growth and growth in grants.

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The regression result shows that growth in manufacturing sector, monetization, service
sector, growth of Budget deficit is positively impact of direct tax collection. But the
growth in import, agriculture sector, growth of grants is insignificant.

25. Vazquez & Timofeev (2010)

They had made a comparative study between centralised and decentralised models of tax
administration. They studied how the vertical structure of government in decentralised
system affects the identified considerations of optimal tax administration, economies of
scale and scope, compliance cost, control over tax policy, accountability of residents,
corruption and public employment. They concluded that the best approach of tax
administration should be objective oriented and it depends upon the constraints which
would arise to achieve the very objectives of tax administration. They further added that
maximisation of revenue and lowering administration cost and compliance cost be kept in
mind when tax reforms are carried on.

26. Prakash & Sindhu (2011)

They made a comparative study of direct tax reforms in India in pre and post
liberalisation period. They have taken empirical data from 1970-71 to 1990-91 and 1991-
92 to 2008-09. The authors have compared on the basis of tax- gdp ratio, cost of
collection and compliance, composition of direct tax revenue in both the periods, number
of assesses, share of direct tax and indirect tax in total tax revenue, growth rate of both
direct and indirect tax of state and centre, buoyancy direct tax, indirect tax and total tax
revenue of said periods. Tax-gdp ratio of India with other selected countries is also
compared.

They have concluded that substantial changes have taken place in the overall tax structure
and its composition in India during the post-reform period. Tax –gdp ratio of India is still
a concern as compared to other countries having similar gdp. The share of direct tax is
very less as compared to indirect tax despite several reforms made in direct tax regime.
They have quoted that the growth of direct taxes has been very volatile over the years and
tax buoyancy has also been fluctuating. The central government revenue deficit as
percentage of GDP has increased from 1.9% to 3.2% from pre-reform period (Period 1:
1980-81 to 1991-92) to postreform period (Period 2: 1992-93 to 2007-08). Slashing down
of tax rate, abundant deductions and exemptions are the sole reason for slow growth rate
of direct taxes which ultimately leads to the increased revenue deficit.

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27. Acharya (2011)

He diagnosed the tax elasticity of India for the period 1991-2010. Tax elasticity is
calculated by dividing Marginal Tax Rate to the Average Tax Rate. The author has
employed regression analysis to the time series data. Natural Log Total Direct Tax
Natural Log Total Indirect Tax and Natural Log Gross Tax is taken as regressand and
Natural Log GDP at current prices factor cost Natural Log GDP at current prices market
price are taken as regressor. The author used “Discretionary tax measures (DTMs) to
describe changes in the tax system which includes changes in statutory tax rates, tax
bases, tax allowances and of tax administrative efficiency”. ADF test has been applied to
measure stationary of data.

This research work found that direct tax elasticity is 1.62 percent, elasticity of indirect tax
is 0.89 percent and gross tax elasticity is 1.20 percent. The author opined that “Tax
Elasticity of Direct tax is high at 1.62 compared to other taxes and thus showing that
change in taxes has been higher than the changes in tax base and thus showing that more
and more people from the tax base are paying more taxes. This is a healthy sign and can
lead to lowering of effective tax rate with time”

28. Palande (2011)

He dig out different income tax problems and recommends certain suggestions for
improvement of income tax revenue, efficient compliance, administration etc. This paper
deals with different problem variants like lower tax-GDP ratio, greater reliance on
indirect taxes, exemptions of agricultural income, widening of tax base etc. The author
emphasised on the simplification of tax structure which ultimately accelerate tax
compliance, widening of tax base to increase tax revenue, improving of tax
administration to strengthen tax system, minimising compliance cost as an austerity
measure. It is accented that nullifying the distortions of economy is the key when tax
reforms took place. It is added that simplifications of tax structure can yield in win-win
way for both state and tax payer. Exemptions for both senior citizens and handicapped
should be eliminated including interest on house loan. The author argued that deduction
of interest in respect of housing loan is not a beneficial multiplier for industries like steel,
cement, brick making, tile, wood, sanitary etc. The author strictly concluded that no
government should take money from the people more than what it needs for genuine
capital and revenue generations.

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29. Lucotte (2012)

He made an empirical study on inflation targeting and tax revenue performance in 59

emerging countries. The author investigated whether adoption of inflation targeting in
emerging economies has encouraged governments to increase domestic tax revenue.
Propensity score matching tool has been used to analyse the data. The independent
variable is interest which is a binary variable, taking the value one if the country operates
within an Inflation Targeting (IT) framework. The dependent variable is the total public
revenue as share of GDP. The paper concludes that adoption of monetary policy
framework by maintaining inflation low levels encourages the government to improve
collection of domestic tax revenue. The author found most of the attributes on the level of
total public revenue are positive and highly significant and larger in magnitude.

30. Yi (2012)

He synthesized the relation of democracy in tax programmes and vice versa. It is

hypothesized that affects of taxation on democracy tend to be relatively stronger and
event history model is being used for data analysis purpose. A pooled time series dataset
from 1970 to 2000 of thirty countries is taken. The author found that taxation has
conditional impact on democratization. It is critiqued that tax-GDP ratio has less impact
than tax-EXP ratio to fit the second hypothesis which is effect of income inequality on
taxation reforms.

This article can be annotated on the ground that democracy structure and/or income
inequality are the sole variable for taxation of a country as other variants as economic
policy and fiscal condition are ignored.

31. Thomas (2012)

He published a paper which shows the elasticity taxable income with tax reform in New
Zealand from the 1986 reform. The author used Auten and Carroll (1999) model to
analyse the elasticity. It is argued in support of model that it has also been followed in
several other studies, including: Sillamaa and Veall (2001) for Canada; Hansson (2007)
for Sweden; and Auten, Carroll and Gee (2008) for the US. The author regressed the
change in the logarithm of taxable income against the change in the logarithm of the ‘net-

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of-tax rate’ (one minus the marginal tax rate) as well as a number of additional control
variables. The empirical model is as follows:

D lnYi ¼ Dg þ aXi þ bD lnð1 _ tiÞ þ Dei

These results imply a significant behavioural response to tax rate changes well in excess
of that implied by standard labour supply elasticity estimates, and suggest that the welfare
costs of taxation in New Zealand are larger than may have previously been considered.

32. Bagchi (2013)

He made a theoretical study on priorities of a tax programme, pointed that the objective
of maximising the yield of direct tax raising tax rate, widening tax base and curve
evasion. The focus of a tax reform must suggest the means for talking problems of black
money, tax evasion and tax arrears as well. The author also indicated that the corporate
taxation should be in principle oriented to promote efficiency rather equity. The paper
concluded that even with a widened base and the best of intentions, it may not be possible
to achieve the desired results merely though the income-tax or, for that matter, through
direct taxes alone.

33. Yusuf & Huq (2013)

They analysed tax buoyancy of major taxes in Bangladesh. The authors used time series
data from 1980 to 2011. The authors applied exponential smoothing method and used
dummy variable in slope. The research work employed Johansen Co-integration test for
long term relationship, Augmented Dickey Fuller test for unit presence of unit root, VEC
Residual Correlation LM Test for auto-correlation or serial correlation and Jarque-Bera
statistics to test the normality of residuals.

The above study highlights the revenue performance of the country. The author
concluded that “with an uninterrupted economic growth and changes triggered by the
discretionary measures, revenue structure of the country experience the structural shift
where the role of Income Tax and VAT has become more prominent than that of the
Customs Duties”.

34. Jenkins & Newell (2013)

They critically examined the connections between corporate social responsibility, tax and
development. This paper further focuses on tax payment and tax evasion, the role of

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taxation on development of the state. The impact of tax evasion and tax avoidance on
government is also being studied. They author opined that the law makers should provide
a CSR platform where tax strategy is key. The paper also highlights the excess reliance
on corporate tax revenue by the developing countries. The authors arrived different
conclusions which are as follows.

1. The fiscal policy of both developed and developing countries has put tax avoidance
more firmly in the recent times.

2. If the tax issues are absent in CSR agenda, companies can make tax avoidance by
unfair Means. Tax avoidance has negative relation with tax strategy in CSR.

The above conclusions can be commented in various ways. Tax avoidance is one of the
reason but not the sole reason for improving the revenue. In addition making tax strategy
in CSR agenda cannot give guarantee to mitigate tax avoidance.

35. Omondi et al. (2014)

He studied the effect of tax modernisation programme, revenue administration

programme on tax buoyancy and tax elasticity. They have taken data from 1963 to 2010.
They have used ADF, PP test for test of stationary, Jarque-Bera test for normalcy and
Granger causality test, Johansen Co integration test was also employed. They have used
OLS method to get the result.

The regression result shows that log GDP was statistically significant which illuminate if
GDP increases by 1% total tax revenue increases by more than 1%. In addition both
revenue administration reforms and modernization programme and tax modernization
programme were statistically significant.

They concluded that “tax reforms had a positive impact on the overall tax structure as
illustrated by the coefficients of slope dummies. Since buoyancy and elasticity are
measures of tax revenue productivity; the positive effects as established on the two as a
result tax reforms, implies an improvement in revenue generation capacity.....”

36. Dey (2014)

He diagnosed the components of direct tax revenue and indirect tax revenue and
examined the buoyancy coefficients of personal tax revenue and corporate tax revenue.
The author used the data from 2001 to 2013. Percentage change of income tax and
corporate tax was divided with the percentage change of GDP to calculate the buoyancy
factor.

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The author find that the buoyancy coefficients of income tax was more than 1 in all the
years except in 2001-02 in the study period which replicate income tax revenue was
buoyant in the study period.

The buoyancy coefficients of corporate tax revenue were even more than 2 in 8 years out
of 12 years of study period. It can be observed from this research work that the degree of
responsiveness of corporate tax revenue to the change of GDP was more than the degree
of responsiveness of income tax revenue.

37. Ashraf & Sarwarb (2014)

He made a panel data analysis on the tax buoyancy of 50 developing nations from the
time period 1996 to 2013. The authors have studied the impact of institutional factors
such as bureaucratic efficiency, rule of law, corruption tax collection of these countries.
Pooled Ordinary Least Squares (OLS) estimation technique has been employed in this
research work. Direct tax revenue is taken as dependent variable and Government
Effectiveness, Regulatory Quality, Rule of Law, Voice and Accountability, Control of
Corruption, Institutional autocracy and Democracy capture were taken as independent
variables.

The results of this study can be summarized as “democracies and their institutional
features are affecting more positively to the direct tax revenues as compared to
autocracies”

38. Bayu (2015)

In the article “Tax Buoyancy and its Determinants: A Co -integrated Approach” studied
about short run and long run buoyancies of direct , domestic indirect , foreign trade and
gross tax revenue in Ethiopia. Tax buoyancy is calculated by taking GDP as base. The
explanatory variables are service sector growth, value addition in manufacturing sector,
budget deficit, reliance on foreign assistance and growth in import of the country.

Time series data analysis was made with ADF and PP model is applied for test of
stationary. Ordinary Least Square (OLX) analysis was carried out get the impact of
regressors on regressand.

The author concluded as “....the gross tax receipt grows at a slightly lower rate than GDP
both in the short run and in the long run. Moreover gross tax revenue adjusts its deviation
from the long run equilibrium with a moderate speed of adjustment, about half of the
disequilibrium adjusted per annum.”

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39. Krushna (2015)

He examined the tax buoyancy of India during the period 1950 to 2010. The author
divided the total period into five decades and tax buoyancy of each decade has been
studied. Ordinary Least Square (OLS) technique has been employed to get the results.
Total tax revenue is regressed upon GDP in this model.

The results revealed that all the decades experienced with positive buoyancy. In 1950 tax
revenue increased by 1.7 percentages by 1 percentage increase of GDP. The
responsiveness of tax revenue doubled in 1960 to the change of GDP. The tax revenue
increased by 4 percentages by 1 percentage increase of tax GDP in 1970. This was 2.8,
2.1 1nd 2 percentage in 1980, 1990 ad in 2000 respectively.

The researcher concluded that “....all the five decades the tax buoyancy is higher than
national income. But the tax buoyancy is very high in 1970s and 1960s. From 1980s to
2000s the tax buoyancy is almost constant”.

40. Geetanjali & Venugopal (2016)

They cracked down the impact of direct tax contribution on GDP. The authors took time
series data from 2000-2016. The test of stationary, normality, serial correction has been
employed. The OLS method is used to interpret the results.

Regression results show the significant impact of net collection of direct taxes on GDP.
This research work suggests that “Policy makers have to therefore emphasize on tax
evasion and tax collection.”

41. Musa et al (2016)

He contemplated tax buoyancy and elasticity in Nigeria. The authors applied standard
multiple regression with vector error correction model (VECM) model. Researchers took
aggregate tax revenue as endogenous variable and national income, government
expenditure, external grant, inflation rate as exogenous variable along with a dummy
variable.

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 This paper concluded that the “aggregate revenue is relatively elastic and significantly
buoyant”.

42. Sharma (2016)

He wrote about the tax system and tax collection of ancient India. The book reflects a
detail idea about philosophy of taxation, ways and means of tax collection in ancient
India. The author opined that revenue collection was core aspects of administration and
governance in that period. Further the study concluded that systems, followed in respect
of taxation and revenue collection in ancient India, are still relevant, and if adopted, may
provide the contemporary fiscal system with a humanitarian face.

43. Sharma & Singh (2017)

He canvassed income tax responsiveness of India in post liberalisation period. Data from
1991 to 2015 has been used for the research work. Authors applied regression model for
data analysis after using unit root test. Income tax revenue and GDP was taken as
explained and explanatory variable respectively. Inflation effect was nullified on both the
variables.

It is derived from the paper that “The tax elasticity coefficient for the study period (1991-
2015) has been 0.53, thus depicting the low magnitude of automatic responsiveness for
income tax collections vis-à-vis variations in economic growth post the reforms era”

3.2 Gap Analysis

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A lot of research has been conducted by various researchers on the topic Income Tax but
hardly any research has been conducted on The Study of Income Tax Planning in
India. Therefore the following research has been conducted.

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 CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

4.1 INTRODUCTION

4.2 DATA ANALYSIS & INTERPRETATION

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4.1 INTRODUCTION

Data analysis and interpretation is the process of assigning meaning to the collected
information and determining the conclusions, significance, and implications of the
findings. The steps involved in data analysis are a function of the type of information
collected, however, returning to the purpose of the assessment and the assessment
questions will provide a structure for the organization of the data and a focus for the
analysis.

This chapter deals with data analysis, interpretation and discussion of the key finding
obtained thought the study. The social- demographic data is presented and analyzed first
after which data pertaining to research questions is also presented and analyzed in
relation to the findings obtained from the field. Generally, the researcher examined the
role of accounting information in Income Tax Planning in India.

4.2 DATA ANALYSIS & INTERPRETATION

1. To Study taxation provision of the Income Tax Act, 1961

A. Meaning of Taxation Provision

A provision for income taxes is the estimated amount that a business or individual
taxpayer expects to pay in income taxes for the current year. The amount of this
provision is derived by adjusting the firm’s reported net income with a variety of
permanent differences and temporary differences. The adjusted net income figure is then
multiplied by the applicable income tax rate to arrive at the provision for income taxes.

This provision can be altered to a considerable extent by the amount of tax planning that
a person or business engages in to defer or eliminate the income tax liability.
Consequently, the proportional size of this provision can vary significantly from
taxpayer to taxpayer, based on their tax planning abilities.

B. Taxation Provision Act, 1961

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The Income Tax Act is a comprehensive statute that focuses on the different rules and
regulations that govern taxation in the country. It provides for levying, administering,
collecting and recovering income tax for the Indian government. It was enacted in 1961.

The Income Tax Act contains a total of 23 chapters and 298 sections according to the
official website of the Income Tax Department of India[1]. These different sections deal
with various aspects of taxation in India. The various heads for which you have to pay
income tax include:

1. Salary

2. Income from house property

3. Capital gains

4. Profit and gains from business or profession

5. Income from other sources

Every year, the Indian government presents a finance budget during the month of
February. The budget brings in various amendments to the Income Tax Act. This
includes changes in tax slabs wherever applicable. For example, the Finance Minister
announced that the tax rate for individuals in the lowest tax bracket of Rs. 2.5 lakh to 5
lakh would be cut from 10% to 5% in FY2017. Similarly, tax on Long Term Capital
Gains (LTCG) was re-introduced during the FY2018 budget. As a result, all gains greater
than Rs. 1 lakh from shares and equity mutual funds held longer than one year is now
eligible for LTCG tax at 10%.

The most recent budget presented by the current Finance Minister Nirmala Sitharaman
included the introduction of a new optional system of taxation that comes with reduced
income tax rates. These new rates shall be available as an option from the financial year
2020-21.

Such amendments become a part of the Income Tax Act from the following financial year
(beginning from 1st April) following the approval from the President of India.

Income taxpayers in India

Every Indian citizen has to pay income tax if their annual income is above Rs. 2.5 lakh
(Rs. 3 lakh for senior citizens). In addition to individuals, entities such as Hindu
Undivided Family (HUF), Body of Individuals (BOI), corporate firms, companies,
Artificial Juridical Persons, local authorities and Association of Persons (AOP) also pay
income tax.

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6.84 crore people filed Income Tax Returns (ITRs) during FY2017-18. This resulted in
net direct tax collections of Rs. 9.95 lakh crore for the year. This was 17.1% higher than
the collections for the previous year according to the Central Board of Direct Taxes
(CBDT).

Income tax slab rates

The income tax you pay depends on your annual income. Budget 2020 introduced new
reduced tax rates that shall come into effect from the year 2020-21. The tax slab rates
according to the new system are categorized in the following way:

Income tax slabs Income tax rates

Less than Rs. 5 lakhs Exempt

Between Rs. 5 lakhs and 7.5 lakhs 10%

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 Between Rs. 7.5 lakhs and 10 lakhs 15%

Between Rs. 10 lakhs and 12.5 lakhs 20%

Between Rs. 12.5 lakhs and 15 lakhs 25%

Above Rs. 15 lakhs 30%

From FY 2020-21, taxpayers shall have the option to choose between the existing
taxation system and the new regime. The new system has revised the income slabs and
reduced the rates thereon. Another major change in the new scheme is that many of the
deductions and exemptions generally applicable in the old tax regime are no longer valid.
Nearly 70 of the 100 or so existing deductions and exemptions are to be scrapped in the
new regime. Taxpayers can compare their tax liabilities under the two systems and opt
for the one that’s most beneficial to them.

For the financial year 2019-20, taxpayers shall continue to be governed by the old tax
system, under which all existing deductions can be claimed.

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Existing Deductions under Income Tax Act 1961

According to the Income Tax Act 1961, you can claim deductions under the following
sections:

1. Section 80C to 80: Under Section 80C, 80CCC & 80CCD of the Income Tax Act

1961, you can reduce your taxable income by 1,50,000

2. Section 80CCD: Section 80CCD of the Income Tax Act, 1961 focuses on income

tax deductions that individual income tax assesses are eligible to avail on

contributions made towards the New Pension Scheme (NPS) and Atal Pension

Yojana (APY)

3. Section 80D: Under section 80D, you can claim income tax deduction for medical

expenses and health insurance premiums

4. Section 80DD: Tax deduction under Section 80DD of the Income Tax Act can be

claimed by individuals who are residents of India and HUFs for the medical

treatment of a dependant with disability(ies) or differently abled

5. Section 80DDB: Tax deductions under section 80DDB of Income Tax Act 1961

can be claimed for medical expenses incurred for medical treatment of specific
illnesses

6. Section 80TTA: Section 80TTA provides a deduction of Rs 10,000 on interest

income. This deduction is available to an Individual and HUF.

7. Section 80U: Under Section 80U, physically disabled persons can claim

deductions up to Rs.1,00,000.

2. To understand the current income tax system in India

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 1. Wealth Tax

Meaning

It is a type of direct tax which you are required to pay if you own any kind of property,
irrespective of whether your property is earning any sort of income. Wealth tax is levied
on individuals, companies, HUFs (Hindu Undivided Families) and the tax liability is as
per the residential status.

Primarily, wealth tax rules take the resident status of an individual into consideration. All
residents of India are subjected to pay wealth tax on the assets they own in India along
with their global assets. With the case of NRI’s and foreigners, they have to pay wealth
tax towards the assets they own in India only.
The definition of ‘assets’ has been defined by the Wealth Tax Act as:
 Any building/ land/ apartment, whether used for residential or commercial
purposes or for maintaining a guest house or otherwise. It also includes a farm
house situated within 25 kilometers from local limits of any municipality or a
Cantonment Board. But there exist a few exceptions when it comes to buildings,
land or apartments, which are not included in this category as per the law.
 Motor cars (other than those used by the taxpayer in the business of running them
on hire or held as stock-in-trade).
 Jewelry, bullion, furniture, utensils or any other article made wholly or partly of
gold, silver, platinum or any other precious metal or any alloy containing one or
more of such precious metals. This category, however, is not inclusive of any of
the above items held as stock-in-trade by the taxpayer.
 Yachts, boats and aircrafts (except for those used by the taxpayer for commercial
purposes).
 Urban land (referring to the definition as per law), other than the following:
 Land on which construction of a building is not permissible under any law for the
time being in force; or Any land on which construction is done with the approval
of the appropriate authority; or
o Any unused land held by the taxpayer for industrial purposes for a period
of two years from the date of its acquisition by him; or
o Any land held by the taxpayer as stock-in-trade for a period of ten years
from the date of its acquisition by him.
o Land classified as agricultural land in the records of the Government and
which is used for agricultural purpose.

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Wealth Tax Exemptions/Limits

This comprises of ‘assets’ which are exempted from the list:

 A particular house or part of the house or a plot of land (not exceeding 500 Sq.
meters.) in case of Individual or HUF.
 The interest of a person in the coparcenary property of any HUF of which he is a
member or the Houses as a place of business or profession.
 Any property held by the taxpayer under trust or other legal obligation for any
public purpose of a charitable or religious nature in India.
 Jewelry in possession of a former ruler of a princely State, not being his personal
property, which has been recognized by the Central Government as a heirloom
before 1-4-1957 or by the CBDT after 1-4-1957.
 Certain assets belonging to a person of Indian origin or an Indian citizen who was
residing abroad and now returning with an intention of permanently residing in
India is exempt subject to certain conditions as per the law.
 Investment in securities in the form of shares, bonds, units of mutual funds and
units of gold deposit schemes.

Calculation of Wealth Tax

All individuals and Hindu Undivided Family with net wealth above 30 lakh were
required to pay wealth tax. This means that if the total net wealth of an individual, HUF
or company exceeds 30 lakhs, on the valuation date, a tax of 1% will be levied on the
amount in excess of 30 lakhs.

Wealth Tax Rate

Let us understand this with an example:

The wealth tax is calculated at 1% on net wealth above 30 lakh. If your net wealth for the
financial year is 50 lakhs, 1% wealth tax will be charged on 20 lakhs.
(50 lakhs – 30 lakhs exemption = 20 lakhs) So, the final amount payable will be 20,000/-
as its 1% on 30 lakh.

2. Corporate Tax

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As per the IT Act of 1961, national as well as international corporate organizations are
also required to pay corporate tax. This tax is levied on domestic companies that exist as
separate entities from the shareholders. Even the foreign companies which earn or are
deemed to earn income in India are required to pay corporate tax. The corporate tax also
includes other income tax types such as FBT (Fringe Benefits Tax), MAT (Minimum
Alternative Tax), STT (Securities Transaction Tax), and more.

A corporate tax is a levy which the government imposes on the income of a company.
The money collected from corporate taxes is used as the source of revenue for a country.
Operating earnings of a company are determined by deducting costs from the cost of the
product sold (COGS) and income depreciation.

First, tax rates are applied to establish a legal duty the corporation owes to the
government. Regulations relating to corporate taxes vary widely across the world, but
they must be voted on and approved by the government of a country for enactment.

Some regions, like Jersey, are considered tax havens, and are highly coveted by
companies as such.

Understanding Corporate Tax in India

A corporation is an individual with a distinct and autonomous legal body compared with
its shareholders. According to the Income Tax Act, domestic and international
corporations are liable to pay income tax.

While a domestic corporation is taxed on its universal income, a foreign corporation is

imposed only on the income earned within India, i.e. accrued or obtained within India.

For tax calculation under the Income Tax Act, the types of companies may be described
as:

1. Domestic Company: Domestic Company is one that is listed under India's Companies
Act and also involves the foreign-owned firm that has control and management wholly
based in India. A domestic business includes both private and public companies.

2. Foreign Company: Foreign Company is one that is not listed under the Indian
Company Act and has control and management outside of India.

When it comes to the business industries, there is a lot of dealing and trading of goods
and services that takes place. Corporate tax is based on a company's taxable profit or net
income. A company's operating profit/net profits is the overall sum left with the company
after the requisite deduction of different expenditures has been made. A company incurs a
host of expenses for selling products.

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Related Terms

 Voucher

Any written documentation supporting the entries reported in the account

books, indicating the transaction's accounting accuracy, can be referred to as
a voucher.

 Novation

Novation is the act of replacing a legitimate existing contract with a new contract,
where the transfer is mutually agreed by both parties concerned.

 Competition

Competition is the combination of competition as well as cooperation between

companies.

BCG Growth-Share Matrix

The Boston Consulting Group (BCG) Growth-Share Matrix refers to a

planning tool that graphically represents a company's products and services
as a means to make it easier for the company's administration to make
informed decisions about what they must sell, keep, or invest more in.

 Inventory

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 Inventory is the term used for the goods available for sale and the raw
materials used to manufacture products for sale.

3. Capital Gains Tax

Another type of income tax in India is capital gains tax. It is a tax which is imposed on
any income that is derived from the sale of assets or investments. This includes property,
cars, machinery, businesses, art, bonds, and shares. It applies to individual taxpayers as
well as businesses. Depending on how long you held the investment or asset, you will be
required to either pay short-term capital gains (STCG) tax or long-term capital gains
(LTCG) tax.

Capital gain can be defined as any profit that is received through the sale of a capital
asset. The profit that is received falls under the income category. Therefore, a tax needs
to be paid on the income that is received. The tax that is paid is called capital gains tax
and it can either be long term or short term. The tax that is levied on long term and short
term gains starts from 10% and 15%, respectively.

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 Under the Income Tax Act, capital gains tax in India need not be paid in case the
individual inherits the property and there is no sale. However, if the person who has
inherited the property decides to sell it, tax will have to be paid on the income that has
been generated from the sale. Some of the examples of capital assets are jewelery,
machinery, leasehold rights, trademarks, patents, vehicles, house property, building, and
land.

Types of Capital Assets

The two types of capital assets are mentioned below:
1. Long Term Capital Asset:
In case individuals own an asset for a duration of more than 36 months, the asset is a
long-term capital asset. Debt-oriented mutual funds, jewelery, etc., that are held for a
duration of more than 36 months will come under this category and there is no 24-
month reduction period under such circumstances.
The below-mentioned assets are considered as long-term assets if they are held for a
duration of more than 12 months:
 Zero coupon bonds (not dependent on whether they are quoted or not)
 Unit Trust of India (UTI) units (not dependent on whether they are quoted or not)
 Equity-based mutual funds units (not dependent on whether they are quoted or not)
 Securities that are listed on a stock exchange that is recognized in India. Examples of
such securities are government securities, bonds, and debentures.
 Preference shares or equities that are held in a company that is listed on a stock
exchange that is recognized in India.

2. Short Term Capital Asset:

In case assets are held for a duration of 36 months or less, it can be defined as a short-
term capital asset. However, for immovable assets such as house property, building,
and land, the duration has been reduced from 36 months to 24 months.
Therefore, if an individual wishes to sell a land or house after holding it for a duration
of 24 months, the profit that the individual makes from it comes under long term
capital gain.
In case the property has been inherited or given as a gift, the amount of time the
property was held by the previous owner is also considered when determining whether
the property can be considered as a short-term capital asset or a long term capital asset.
The date on which the bonus shares were allotted is considered when determining the
category under which bonus shares or right shares fall.

Capital Gains

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 Depending on the amount of time that the asset has been held, the calculation of
Capital Gains will vary. Some of the important points that individuals should know
when calculating capital gains are mentioned below:
 Cost of improvement: If there are any expenses that have been incurred by the seller
because of any alterations or additions that have been made to the property.
However, any improvements made before 1 April 2001 cannot be considered.
 Acquisition cost: The amount of money that the seller paid in order to acquire the
property.
 Full value consideration: The amount of money that the seller will receive because
of the property transfer. Capital gains are charged from the year the transaction was
made even if the money was not received in that particular year.
In certain cases where the capital asset is also the property of the taxpayer, the
acquisition cost and the improvement cost of the previous owner will also be included.
Calculate Long Term Capital Gains
The procedure to calculate long term Capital Gains is mentioned below:
 First, the individual must consider the full value of the asset.
 Next, the individual must make the below-mentioned deductions:
 The costs that have been incurred due to the transfer.
 The amount of money that is spent on the acquisition.
 The amount of money that is spent on improvement.
 From the number that has been calculated by following the above steps, the
individual must subtract any exemptions that are provided under Section 54B,
Section 54F, Section 54EC, and Section 54.

Assumptions:

Price house was purchased for: Rs.35 lakh

Financial Year house was purchased: 2011-2012
Financial Year house was sold: 2019-2020
Amount house was sold for: Rs.60 lakh
Inflation adjusted cost: (289/184) x 35 = 54.97 lakh
long term Capital Gains: 60 lakh – 54.97 lakh = Rs.5,03,000 (approx)

Calculate Short Term Capital Gains

The below-mentioned procedure must be followed by individuals in order to
calculate short term capital gains:
 First, the individual must consider the full value of the property.
 Next, the below-mentioned points must be deducted:

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  Expenses that have been incurred for the improvement of the property.
 The expenses incurred for acquiring the property.
 Any expenses that have been incurred for the transfer of the property.
 The amount that is calculated after the deduction is the short term capital gain.
The formula for the calculation of short term capital gain is the full value consideration
minus the expenses that have incurred for the transfer minus the cost for improving and
acquiring the property.

Indexed Cost of Improvement and Acquisition

The cost that is incurred on improvement and acquisition is indexed with the main aim
of adjusting inflation for the number of years the property was held. This not only
reduces capital gains but also increases the cost base.
Formula for calculation of indexed tax for improvement
The expenses incurred for improvement x Cost Inflation Index (CII) for the year the
property was sold divided by the CII of the year the improvement occurred.
Formula for calculation of indexed tax for acquisition
The total expenses incurred for acquisition x CII of the year the property was sold
divided by the CII of the year the property was initially acquired by the seller

3. To understand various investment avenues used by different

assesse for Tax Planning

Introduction and Meaning of Investment Avenues

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“Learn to have money work for you rather than you work for money”, a famous quote by
Robert T Kiyosaki. This tells us how we should approach the investment routine. Take
some essential Investment avenues in our lives to save money. So what is the real
meaning behind let your money grow, and what is an Investment avenue is in India? In
India, all age groups show some keen interest in investing and boosting value in return.
Investment avenues in India comprise many investors, and avenues have various
categories providing a high profit. But there is no such case of a scenario where you can
get high profit and low risk.

It is understood that if an individual is going for a high profit, it is easily vulnerable to its
consequences. Before an individual thinks of investing, they have already wasted some of
their savings in their expanses.

But it is never too late to start. If we look at the market trends, one can easily understand
how important it is to save money. Saving leads to a better future and a financial strong
mindset.

Importance of Investment Avenues

Investment can play a huge and life-turning effect on an individual’s life. One can see
how important it becomes to invest in different investment avenues. The inflation rate
will significantly burden and significant most probably eat most of your savings. Apart
from all this, making a significant fundamental investment makes you financially
independent. Also makes you disciplined at some time when you go for a longer run.

While dealing with types of investment avenues, one should be ready to tackle the high-
risk factor associated with it. There are various Investment avenues to choose from. Let’s
go through some of the famous and traditional investment avenues in India.

Types of Investment Avenues

Financial Assets
Financial assets are known as traditional investment avenues of India. At first, they were
only available to the minimum audience. Still, later, as many alternatives came into the
picture, they made available widely available to all the people.

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Direct Equity

If you’re looking for a long-term investment, talking in the layman term, it is just referred
to as investing in stocks. You usually buy a company’s stock, and you become a partial
owner of that organization. Your profit and loss are dependent on the company’s growth
and development.

The company’s stock you want to buy depends upon the knowledge you have about the
market and its trends. Investing in direct equity is of high risk, and profit is not necessary.
When someone buys a stock, then an individual is exposed to the associated risk as well.
Stocks of the various companies are listed for the public. Any individual can buy or sell
the stock if they have a Dmat Account and KYC verification is complete.

It is a wise choice if you take advice from a professional before you put your hard-earned
money into equity. Direct Equity is one of the most used investment avenue options. It
gives a higher growth rate than other types of investment avenues. An individual can earn
on the day to day basis by using this investment option.

Mutual Funds

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Mutual funds are one of the traditional investment avenues that are subjected to a good
return. It acts as a good investment option for many people in India. Relatively people
should take advice from the consultants, experts and even the agents and distributors.
After doing so, then take the first step into this investment pool.

Mutual funds are becoming popular among the millennials, primarily as minimum
knowledge can also invest. All the fund managers take care of the portfolio funds. Mutual
funds work in a very authentic cycle manner. It starts with investors pool their money in
the respective funds and the fund manager regulates money.

The main objective of these fund manager is they invest in securities and assets to
generate optimum returns.

It is also the most favourable option. You can start and stop your investment as per your
need; it is considered the most flexible investment avenues.

The returns, profit and loss are all dependent on the market movement. These mutual
funds are of two categories, open-end fund and closed-end fund. The essential difference
between both is open-ended is available for purchase continuously from time to time. In
contrast, close-ended mutual funds are restricted and open only for a certain period of
years.

Investing also requires a decent amount of income in your hand. An individual does not
want to be cut off his/her necessary expenses for the sake of investing them into some
significant investment avenues in India.

Fixed Deposit

This is the oldest investment avenues that the people of India are using. You must have
heard from your elders about it. This fixed deposit is the most used and trusted by the
more senior society. Fixed deposits are the option that the banks provide.

The process is as straightforward; all you need to do is deposit a certain amount for a
specified period. You can earn a predetermined interest rate on that amount from the

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bank or any other financial institution. This source of investment acts as the working
capital of banks.

As the name depicts, all the deposits are for the fixed tenure, which implies that the
investor deposits a fixed amount for the specified period of time.

An individual can still withdraw these funds by two methods; they can take a loan on that
particular fixed deposit. Second, you can pay the penalty to take out all the money you
invested till now.

According to the reports, most private banks provide a great interest rate compared to the
government, but this is just data that can be fluctuated based on the market trends.

Some of the perks of choosing Fixed deposit as your following investment avenues are
reliable, and depositing in a bank is safe and secure. Any age group above 18+ can avail
of this investment just by opening a bank account.

An individual can also help with loan services based on the fixed deposit. As a coin has
two sides, the Fixed deposit also has demerits. The rate of investment is comparatively
low in comparison to other investment avenues, and Regulatory bodies and government
have a significant impact on the growth of banks.

Public Provident Fund (PPF)

Public Provident fund or PPF is a long term investment plan with a long tenure of 15
years. The Government of India governs it. It is generally a tax saving instrument cum
Investment avenue. It has an interest rate that is revised on a quarterly basis by the
government.

You can open a PPF just by visiting a designated post office all over India. And by
contacting the branches of public sector banks. When an individual extracts the sum at
the end of 15 years, it is a tax-free amount. You can also go for the partial withdrawal
system. You can avail yourself only after five years from the end of the year when you

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got your account opened. PPF is another safe option for you to choose as an investment
avenue in India as a sovereign guarantee backs it. A public provident fund is generally a
retirement plan when you don’t have any other covered insurance for the future.

Another option available focuses on the retirement-oriented investment; it is Employee

Provident Fund (EPF). Formation of Employee Provident Funds falls under Income Tax
Act, 1961, to help all the salaried professionals to get a tax break by investing in EPF.
The deduction is done from the individual’s monthly salary, and the individual makes the
same amount. But you can only avail the invested funds after maturity, which is
retirement. Evaluation and Regulation of the interest rate done by the government
quarterly. This type of Investment avenue has access only for those who meet necessary
conditions.

Real Assets
This type of investment assets is nothing but physical assets and assets in the form of
infrastructures. It is a physical attribute that is sold later and converted into cash. The
most famous real assets in India are.

Real Estate

Since there is an increase in the population of India, one can see a significant increase in
the properties and lands to live on. This, in return, has turned into a great investment idea
from the previous few decades. It comprises of investment in lands, flats, houses,
buildings, agricultural lands, and many more. Buying a property is in trend for the past
few years. Hence makes it the best alternative to the financial assets in India. Most of the
crowd is running towards buying land and other residential properties. Which leads them
to earn a significant sum after a certain period of time.

It consists of leasing, selling, and exchanging a particular property as per the investor’s
need. Real Estate is one of the profitable options, but it requires a viable funding option.
It is difficult or impossible to start from the lower funds. Real assets give a higher rate of
return in a short period of time. This also makes it comparatively good to other
Investment avenues in India. When the property requirement goes high, and the supply or
options are limited, the profit acquired can skyrocket.

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It mainly depends upon the many factors that decide how much an investor can earn
profit. Some of them are location and the price of that location which usually goes as
circle rate of the area.

Gold and Silver

To this date, Investing in Gold and Silver is still a traditional investment avenue. Since
ancient times there isn’t any dip in the interest of investors to buy gold and silver. They
use it as an investment for future needs. We all are aware of the fact that gold and silver
prices are increasing day by day. But processing gold in any jewellery is not cost-
effective as making charges and other taxes come into play.

You can buy golds in the form of gold coins or the state of gold ETF. Gold ETF’s in
India is in use since March 2007. Exchange-traded funds or ETF have various benefits
over physical forms of gold. Whichever is the form, the risk factor with it is still
moderate as the price of gold keeps fluctuating.

With the best option in diversification for the investors, they are also present in electronic
form. That makes it easy for everyone to trade online from anywhere.

Commodities

Commodities are simply raw materials that we use to make some of the essential products
we employ daily. Talking about India, almost 60% of the people are constantly engaging
in agriculture. It is one of the most diversified options to get potential returns.

When you choose this as your investment avenue, then you can enjoy some of the
essential returns. People generally sell these commodities in various markets. These
things play a significant role in shaping the economic growth of our country.

An individual can estimate the commodity price and the fluctuation by the trends in
export and import.

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 CHAPTER 5

CONCLUSION

5.1 Conclusion

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5.1 Conclusion
As we have discussed many tax incentives under the provision of law which focus and
help in the reduction of tax liabilities. An individual or a corporate, who are taxable under
the present tax regime can avail the benefits that arise out of these incentives. The income
tax regime in India has evolved over time and has made it easier to plan and save their
capital accordingly. It is suggested that one should avail of these benefits within the
framework of the law.

The Indian government reduced the tax rate for people earning between Rs. 2.5 lakhs to
Rs. 5 lakhs, from 10% to 5%, during the FY2017 Union budget. Furthermore, budget
2020 also reduced the tax rates for other income slabs. This was aimed at reducing the tax
liability for a large percentage of the Indian population as well as at encouraging a greater
number of income earners to pay tax. So, if you are eligible to pay tax, ensure you pay
your taxes and file returns in time to avoid any penalties.

The concept of a permanent establishment has taken on a wide ranging form in Indian tax
treaties with various kinds of physical presences (concrete offices, services, dependent
agents) recognised as a territorial connection adequate for the assertion of tax jurisdiction
by the host country. However, the PE rules have also created opportunities for
multinationals to undertake tax planning designed to take advantage of the host country
resources while at the same time avoiding PE status. Usually this is accomplished
through an adroit use of subsidiaries in the host country. The foreign parent will
outsource some of its business functions to its Indian subsidiary and achieve significant
cost reductions and efficiency because of the lower costs of skilled manpower in India.
The subsidiary is usually trained in the business processes through a limited time
deputation in India of the foreign parent’s employees. PE rules in Indian tax treaties,
following the OECD model, specify explicitly that subsidiaries will not form PEs of their
parent companies, merely by virtue of their status as subsidiaries. Further, the PE rules
make it clear that only core business activities performed in India will count towards PE
status; ancillary or fringe business activities will not count. These two features of Indian
PE rules have come together to sanctify outsourcing arrangements of the sort described
above.

At the end of this study, we can say that given the rising standards of Indian individuals
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, the mix of tax saving instruments,
planning horizon would depend on an individual’s total taxable income and age in the
particular financial year.

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 CHAPTER 6

RECOMMENDATIONS AND SUGGESTIONS

6.1 Recommendations

6.2 Income Head-wise Tax Planning Suggestion

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6.1 Recommendations
Tax Planning

Proper tax planning is a basic duty of every person which should be carried out
religiously. Basically, there are three steps in tax planning exercise.

These three steps in tax planning are:

 Calculate your taxable income under all heads i.e., Income from Salary, House
Property, Business & Profession, Capital Gains and Income from Other Sources.
 Calculate tax payable on gross taxable income for whole financial year (i.e. from
1st April to 31st March) using a simple tax rate table, given on next page.
 After you have calculated the amount of your tax liability. You have two options
to choose from:

1. Pay your tax (No tax planning required)

2. Minimise your tax through prudent tax planning.

Most people rightly choose Option 'B'. Here you have to compare the advantages of
several tax-saving schemes and depending upon your age, social liabilities, tax slabs and
personal preferences, decide upon a right mix of investments, which shall reduce your tax
liability to zero or the minimum possible.

Every citizen has a fundamental right to avail all the tax incentives provided by the
Government. Therefore, through prudent tax planning not only income-tax liability is
reduced but also a better future is ensured due to compulsory savings in highly safe.
Government Schemes. We should plan our investments in such a way, that the post-tax
yield is the highest possible keeping in view the basic parameters of safety and liquidity.

For most individuals, financial planning and tax planning are two mutually exclusive
exercises. While planning our investments we spend considerable amount of time
evaluating various options and determining which suits us best. But when it comes to
planning our investments from a tax-saving perspective, more often than not, we simply
go the traditional way and do the exact same thing that we did in the earlier years. Well in
case you were not aware the guidelines governing such investments are a lot different this
year. And lethargv on your part to rework your investment plan could cost you dear.

Why are the stakes higher this year? Until the previous year, tax benefit was provided as
a rebate on the investment amount, which could not exceed Rs 100.000; of this Rs 30.000
was exclusively reserved for Infrastructure Bonds.

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Also, the rebate reduced with every rise in the income slab; individuals earning over Re
500,000 per year were not eligible to claim any rebate. For the current financial year, the
R 100,000 limit has been retained; however internal caps have been done away with.
Individuals have a much greater degree of flexibility in deciding how much to invest in
the eligible instruments. The other significant changes are:

 The rebate has been replaced by a deduction from gross total income, effectively.
The higher your income slab, the greater is the tax benefit.
 All individuals irrespective of the income bracket are eligible for this investment.
These developments will result in higher tax-savings.

We should use this Rs 100,000 contribution as an integral part of your overall financial
planning and not just for the purpose of saving tax. We should understand which
instruments and in what proportion suit the requirement best. In this note we recommend
a broad asset allocation for tax saving instruments for different investor profiles.

For persons below 30 years of age:

In this age bracket, you probably have a high appetite for risk. Your disposable surplus
maybe small (as you could be paying your home loan installments), but the savings that
you have can be set aside for a long period of time. Your children, if any, still have many
years before they go to college; or retirement is still further away. You therefore should
invest a large chunk of your surplus in tax-saving funds (equity funds). The employee
provident fund deduction happens from your salary and therefore you have little control
over it. Regarding life insurance, go in for pure term insurance to start with. Such policies
are very affordable and can extend for up to 30 years. The rest of your funds (net of the
home loan principal repayment) can be parked in NSC/PPF.

For persons between 30 - 45 years of age:

Your appetite for risk will gradually decline over this age bracket as a result of which
your exposure to the stock markets will need to be adjusted accordingly. As your
compensation increases, so will your contribution to the EPF. The life insurance
component can be maintained at the same level; assuming that you would have already
taken adequate life insurance and there is no need to add to it. In keeping with your
reducing risk appetite, your contribution to PPF/NSC increases. One benefit of the higher
contribution to PPF will be that your account will be maturing (you probably opened an
account when you started to earn) and will yield you tax free income (this can help you
fund your children's college education).

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For persons over 55 years of age:

You are to retire in a few years; then you will have to depend on your investments for
meeting your expenses. Therefore the money that you have to invest under Section 80C
must be allocated in a manner that serves both near term income requirements as well as
long-term growth needs. Most of the funds are therefore allocated to NSC. Your PPF
account probably will mature early into your retirement (if you started another account at
about age 40 years). You continue to allocate some money to equity to provide for the
later part of your retired life. Once you are retired however, since you will not have
income there is no need to worry about Section 80C. You should consider investing in the
Senior Citizens Savings Scheme, which offers an assured return of 9% pa; interest is
payable quarterly. Another investment you should consider is Post Office Monthly
Income Scheme.

Investing the Rs 100,000 in a manner that saves both taxes as well as helps you achieve
your long-term financial objectives is not a difficult exercise. All it requires is for you to
give it some thought, draw up a plan that suits you best and then be disciplined in
executing the same.

6.2 Income Head-wise Tax Planning Suggestion

Salaries Head: Following propositions should be borne in mind:

1. It should be ensured that, under the terms of employment, dearness allowance and
dearness pay form part of basic salary. This will minimize the tax incidence on
house rent allowance, gratuity and commuted pension. Likewise, incidence of tax
on employer's contribution to recognized provident fund will be lesser if dearness
allowance forms a part of basic salary.
2. The Supreme Court has held in Gestetner Duplicators (p) Ltd. Vs. CIT that
commission payable as per the terms of contract of employment at a fixed
percentage of turnover achieved by an employee, falls within the expression
"salary" as defined in rule 2(h) of part A of the fourth schedule. Consequently, tax
incidence on house rent allowance, entertainment allowance, gratuity and
commuted pension will be lesser if commission is paid at a fixed percentage of
turnover achieved by the employee.
3. An uncommitted pension is always taxable; employees should get their pension
commuted. Commuted pension is fully exempt from tax in the case of
Government employees and partly exempt from tax in the case of government

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 employees and partly exempt from tax in the case of non government employees
who can claim relief under section 89.
4. An employee being the member of recognized provident fund, who resigns before
5 years of continuous service, should ensure that he joins the firm which
maintains a recognized fund for the simple reason that the accumulated balance of
the provident fund with the former employer will be exempt from tax, provided
the same is transferred to the new employer who also maintains a recognized
provident fund.
5. Since employers' contribution towards recognized provident fund is exempt from
tax up to 12 percent of salary, employer may give extra benefit to their employees
by raising their contribution to 12 percent of salary without increasing any tax
liability.
6. While medical allowance payable in cash is taxable, provision of ordinary
medical facilities is no taxable if some conditions are satisfied. Therefore,
employees should go in for free medical facilities instead of fixed medical
allowance.
7. Since the incidence of tax on retirement benefits like gratuity, commuted pension,
accumulated unrecognized provident fund is lower if they are paid in the
beginning of the financial year, employer and employees should mutually plan
their affairs in such a way that retirement, termination or resignation, as the case
may be, takes place in the beginning of the financial year.
8. An employee should take the benefit of relief available section 89 wherever
possible. Relief can be claimed even in the case of a sum received from URPF so
far as it is attributable to employer's contribution and interest there on. Although
gratuity received during the employment is not exempt u/s 10(10), relief u/s 89
can be claimed. It should, however, be ensured that the relief is claimed only
when it is beneficial.
9. Pension received in India by a non-resident assessee from abroad is taxable in
India. If however, such pension is received by or on behalf of the employee in a
foreign country and later on remitted to India, it will be exempt from tax.
10. As the perquisite in respect of leave travel concession is not taxable in the hands
of the employees if certain conditions are satisfied, it should be ensured that the
travel concession should be claimed to the maximum possible extent without
attracting any incidence of tax.
11. As the perquisites in respect of free residential telephone, providing use of
computer/laptop, gift of movable assets(other than computer, electronic items,
car) by employer after using for 10 years or more are not taxable, employees can
claim these benefits without adding to their tax bill.
12. Since the term "salary" includes basic salary, bonus, commission, fees and all
other taxable allowances for the purpose of valuation of perquisite in respect of

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 rent free house, it would be advantageous if an employee goes in for perquisites
rather than for taxable allowances. This will reduce valuation of rent free house,
on one hand, and, on the other hand, the employee may not fall in the category of
specified employee. The effect of this ingenuity will be that all the perquisites
specified u/s 17(2)(ti) will not be taxable.

House Property Head: The following propositions should be borne in mind:

1. If a person has occupied more than one house for his own residence, only one
house of his own choice is treated as self-occupied and all the other houses are
deemed to be let out. The tax exemption applies only in the case of on self-
occupied house and not in the case of deemed to be let out properties. Care
should, therefore, be taken while selecting the house( One which is having higher
GAV normally after looking into further details ) to be treated as self- occupied in
order to minimize the tax liability.
2. As interest payable out of India is not deductible if tax is not deducted at source
(and in respect of which there is no person who may be treated as an agent u/s
163), care should be taken to deduct tax at source in order to avail exemption u/s
24(b).
3. As amount of municipal tax is deductible on "payment" basis and not on "due" or
"accrual" basis, it should be ensured that municipal tax is actually paid during the
previous year if the assessee wants to claim the deduction.
4. As a member of co-operative society to whom a building or part thereof is allotted
or leased under a house building scheme is deemed owner of the property, it
should be ensured that interest payable (even it is not paid) by the assessee, on
outstanding installments of the cost of the building, is claimed as deduction u/s
24.
5. If an individual makes cash a cash gift to his wife who purchases a house property
with the gifted money, the individual will not be deemed as fictional owner of the
property under section 27 (i) K.D.Thakar vs. CIT. Taxable income of the wife
from the property is, however, includible in the income of individual in terms of
section 64(1)(iv), such income is computed u/s 23(2), if she uses house property
for her residential purposes. It can, therefore, be advised that if an individual
transfers an asset, other than house property, even without adequate consideration,
he can escape the deeming provision of section 27(i) and the consequent hardship.

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 6. Under section 27(), if a person transfers a house property without consideration to
his/her spouse(not being a transfer in connection with an agreement to live apart),
or to his minor child(not being a married daughter), the transferor is deemed to be
the owner of the house property. This deeming provision was found necessary in
order to bring this situation in line with the provision of section 64. But when the
scope of section 64 was extended to cover transfer of assets without adequate
consideration to son's wife or minor grandchild by the taxation laws(Amendment)
Act 1975, w.e.f. A.Y. 1975-76 onwards the scope of section 27(i) was not
similarly extended. Consequently, if a person transfers house property to his son's
wife without adequate consideration, he will not be deemed to be the owner of the
property u/s 27(i), but income earned from the property by the transferee will be
included in the income of the transferor u/s 64. For the purpose of sections 22 to
27, the transferee will, thus, be treated as an owner of the house property and
income computed in his/her hands is included in the income of the transferor u/s
64.

Such income is to be computed under section 23(2), if the transferee uses that property
for self-occupation. Therefore, in some cases, it is beneficial to transfer the house
property without adequate consideration to son's wife or son's minor child.

Capital Gains Head: The following propositions should be borne in mind

1. Since long-term capital gains bear lower tax, taxpayers should so plan as to
transfer their capital assets normally only 36 months after acquisition. It is
pertinent to note that if capital asset is one which became the property of the
taxpayer in any manner specified in section 49(1), the period for which it was
held by the previous owner is also to be counted in computing 36 months.
2. The assessee should take advantage of exemption u/s 54 by investing the capital
gain arising from the sale of residential property in the purchase of another house
(even out of India) within specified period.
3. In order to claim advantage of exemption under sections 54B and 54D it should
be ensured that the investment in new asset is made only after effecting transfer of
capital assets.
4. In order to claim advantage of exemption under sections 54, 54B, 54D, 54EC,
54ED, 54EF, 54G and 54GA the tax payer should ensure that the newly acquired
asset is not transferred within 3 years from the date of acquisition. In this context,
it is interesting to note that the transfer (one year in the case of section 54EC) of a
newly acquired asset according to the modes mentioned in section 47 is not
regarded as "transfer" even for this purpose. Consequently, newly acquired assets
may be transferred even within 3 years of their acquisition according to the modes

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 mentioned in section 47 without attracting the capital tax liability. Alternatively, it
will be advisable that instead of selling or converting assets acquired under
sections 54, 54B, 54D, 54F, 54G and 54GA into money, the taxpayer should
obtain loan against the security of such asset (even by pledge) to meet the
exigency.
5. In 2 cases, surplus arising on sale or transfer of capital assets is chargeable to tax
as short-term capital gain by virtue of section 50. These cases are: (i) when WDV
of a block of assets is reduced to nil, though all the assets falling in that block are
not transferred, (ii) when a block of assets ceases to exist.
6. Tax on short-term capital gain can be avoided if Another capital asset, falling in
that block of assets is acquired at any time during the previous year; or Benefit of
section 54G is availed Tax payers desiring to avoid tax on short-term capital gains
under section 50 on sale or transfer of capital asset, can acquire another capital
asset, falling in that block of assets, at any time during the previous year.

7. If securities transaction tax is applicable, long term capital gain tax is exempt
from tax by virtue of section 10(38). Conversely, if the taxpayer has generated
long-term capital loss, it is taken as equal to zero. In other words, if the shares are
transferred, in national stock exchange, securities transaction tax is applicable and
as a consequence, the long-term capital loss is ignored. In such a case, tax liability
can be reduced, if shares are transferred to a friend or a relative outside the stock
exchange at the market price (securities transaction tax is not applicable in the
case of transactions not recorded in stack exchange, long term loss can be set-off
and the tax liability will be reduced). Later on, the friend or relative, who has
purchased shares, may transfer shares in a stock exchange.

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 CHAPTER 7

BIBLIOGRAPHY

7.1 Books
7.2 References

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7.1 Books:

 T. N. Manoharan (2007), Direct Tax Laws (7th edition), Snowwhite Publications

P.Ltd., New Delhi.
 Dr. Vinod K. Singhania (2007), Students Guide to Income Tax, Taxman
Publications, New Delhi
 Income Tax Ready Reckoner -A.Y. 2007-08, TaxMann Publications, New Delhi
 Dr. Vinod K. Singhania (2013), Students Guide to Income Tax, Taxman
Publications, New Delhi
 Income Tax Ready Reckoner -A.Y. 2014-15,TaxMann Publications, New Delhi
 Ainapure&Ainapure Direct & Indirect Taxes AY. 2014-15. Manan Prakashan
Direct & Indirect Taxes AY. 2014-15.
 Nabi's Income Tax Guidelines & Mini Ready Reckoner AY. 2013-14 & 2014-15 ,
A Nabhi Publication

7.2 Reference

 http://in.taxes.yahoo.com/taxcentre/ninstax.html
 http://in.biz.yahoo.com/taxcentre/section80.html
 http://www.bajajcapital.com/financial-planning/tax-planning
 www.Incometaxindia.gov.in
 www.taxguru.in
 www.moneycontrol.com
 www.google.com

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