Dr. BashirAhmad Joo. Human Resource Development Center University of Kashmir. The Business School University Of Kashmir.

Transcription

1 Management of Tax Liability for Salaried Individuals Presentation By Dr. BashirAhmad Joo Professor The Business School University Of Kashmir 0n 11 th March, 2017 Human Resource Development Center University of Kashmir

2 Commonly Used Methods By Tax Payers to Minimize Tax Liability Tax Evasion:- Concealment of Income Inflation of Expenses to Suppress Income Falsification of Accounts Conscious Violation of Rules Tax Avoidance: Finding Loopholes in The Laws. Dodging Tax Laws Without The Breaking The Law. Not a Criminal Offence

3 Methods Commonly Used By Tax Payers to Minimize Tax Liability Tax Planning: Arrangement of Financial Activities. Making Use of All Beneficial Provisions in the Tax Laws Avail Certain Exemptions, Deductions, Rebates and Reliefs Tax Management : Compliance With the Statutory Provisions It is Mandatory and May Lead to Levy of Interest, Penalty, Prosecution etc. May lead to Financial Loss

4 Objectives of Tax Planning Reduction of Tax Liability. Minimization of Litigation Productive Investment Healthy Growth of Economy Economic Stability

5 Transactions Where PAN is Required-Rule114BRule114B Sale or purchase of any immovable property exceeding Rs. 5,00,000 Sale or purchase of any vehicle (excluding two wheelers) Any FD exceeding Rs.50,000 with any Bank Any FD exceeding Rs.50,000 with post office Contract exceeding Rs.10,00,000 for sale /purchase of specified securities. Opening of a Bank Account Making an application for installation of a telephone connection Payment to Hotels and Restaurants for a payment exceeding Rs. 25,000 In case of minors, whose income is not chargeable to tax as per the income tax slabs, the PAN of the father or mother or guardian shall be quoted.

6 Submission of Form 60 / From 61 In case a person who enters into any of the aforesaid transactions does not have a PAN Card, he shall file a declaration in Form 60 /61. From 60 is required to be filed in cases where a person enters into any of the transactions mentioned above but does not have PAN card. Form 61 is required to be furnished in case a person who has agricultural income and is not in receipt of any other income chargeable to income tax.

7 Form 49A, Form 16 and Form16A Form 49A is used for obtaining the PAN card. Form 16 is issued by deduct-or of tax at source in case of salaries. Form 16A is issued by the tax deduct-or at source in case of other payments.

8 Factors on the Basis of Which Tax Planning is Done Residential Status and Citizenship of the Assessee Heads of Income /Assets to be Included in Computing Net Wealth Latest Legal Position Form and Substance

9 Computation of Total Income (Assessment Year ) 15) Heads of Income (Section 14) Salaries ( section 15 to 17) Income from House Property (section 22 to 27) Profits and Gains of Business and Profession (section 28 to 44D) Capital Gains (section 45-55) Income from Other Sources (section 56-59)

10 Computation of Salary Income Basic Rs. 45,000 p.m. Add: Grade Rs.8,000 p.m. Add: 132 % Add: RS. 120 p.m. Add: Rs. 300 p.m. Add: Taxable Part of HRA Less: Exemption Under Section 10 (13A) up to least of the following: i. Actual HRA received 1,27,200 ii. 40% of salary 2,54,400 iii. Excess of Rent Paid over 10% of salary : Rent Rs. 15,000 p.m. 1,80,000 Less: 10 % of salary 63,600 1,16,400 GROSS SALARY LESS: Deductions:- i. Entertainment Alloeance ii. Professional Tax A. NET SALARY (Rs.) 1,27,200 (Rs.) 5,40,000 96,000 8,39,520 1,440 3,600 1, ,800 14,91,360 Nil Nil 14,91,360

11 How to Compute Income From House Property Income from Let Out House Nil Add: Income from self Occupied House:- Interest on Housing Loan Maximum Rs.2,00,000 if capital is borrowed for construction and acquisition on or after 1 st April, 1999 and such construction is completed within 3 years of the end of financial year in which capital is borrowed. In case borrowed capital is for repairs or renewal or conditions mentioned above are not satisfied,it actual interest or maximum of Rs. 30,000. B) Loss from House Property Rs.2,00,000

12 How to Compute Business or Professional Income and Capital Gains C) Business or Professional Income Nil D) Capital Gains Nil E) Income from other sources:- Dividend xx Royalty xx Examination Remuneration 10,000 Interest on securities and bank deposits 50,000 Including Interest on SB A/c (Rs.10,000) Income from extension lectures 30,000 T o t a l 90,000

13 How to Compute Total Taxable Income Income from salary Rs14,91,360 Income from house property (Rs. 2,00,000) Income from business & Profession Nil Income from capital gains Nil Income from other sources 90,000 A. Gross Total Income 13,81,360

14 How to Compute Total Taxable Income Less: Deductions- 80 C- Savings and investments 1,50, TTA Interest on SB A/c 10, GG House Rent xx (Rent -10% of total income/rs. 5,000 p.m./ 25% of total income) 80CCG Rajive Gandhi Equity Saving Scheme Effective A.Y ,000 (50% of Investment or Rs. 25,000, W.E. Is Least; Total Income Rs. 12 Lakhs ) 80D- Medi- Claim (Actual or Rs. 25,000/30,000 for individual,spouse and child+ Additional 25,000/30000 for parents or both) 6,500 80DD -Maintenance & treatment of dependent person suffering from disability (1,25,000(s)/75,000) xx 80 DDB - Medical treatment (80,000 (s)/40,000 ) xx 80 E - Interest on education loan (Actual) for 8 years or till interest is paid 70, EE- Deduction on Home Loan Interest in addition to sec 24 (Value >Rs. 50 lakhs and sanctioned Loan be >35 lakhs; to ) 80 G- Donation 80 GGC- Contribution to Political Parties 80 RRB -Royalty of Authors (Rs. 3,00,000 ) 80U Personal Disability (125,000/75,000) xx Total Deductions 2,46,500 Total Taxable Income 11,34,860 xx xx xx

15 Other Deductions 80CCD (2) :Deduction in respect of employer contributions to NPS National Pension Scheme / System This deduction is available over and above the Rs. 1.5 lakh limit. Section 80CCD(1B) Deduction in respect of the deposit under a pension scheme notified by Central Government (NPS) up to Rs. 50,000/-

16 How to Compute Tax Liability Up to Rs. 2,50,000 Nil Rs. 2,50,001- Rs. Rs. 12,500 Rs. 5,00,001- Rs. Rs. 1,00,000 Above Rs. 10,00,000 Rs.40,458 Total Tax Rs. 1,52,958 Add: Education Rs. 4,589 Total Tax Liability Rs. 1,57,547 Less: TDS Rs.1,25,000 Total Tax Payable Rs. 32, 547 Less : Rebate U/S 87A (Effective from A.Y ) Rs.2,500 Note: Available only if total income is up to Rs. 3,50,000 Relief Under Section 89(1)

17 Penalty for Not Submitting Tax Return Taxpayers who do not file their returns on time will have to pay penalty of up to Rs.10,000 from Assessment Year However, if the total income of the person does not exceed Rs. 5 lakh, the fee payable under this section shall not exceed Rs. 1,000.

18 Special compensatory allowances 1. Any special allowance in the nature of composite hill compensatory allowance/high altitude allowance/uncongenial climate allowance/snow bound area allowance/avalanche allowance. Exempted up to Rs.300 p.m. to Rs.7,000 p.m. 2. Any special compensatory allowance in the nature of Border Area allowance/remote Area Allowance/Difficult Area allowance/distrurbed Area Allowance. (Exempted upto Rs.200 p.m to 1,300 p.m). 3. Compensatory Field Area Allowance (Exempted up to Rs.2,600 p.m.) 4. Compensatory Modified Field Area Allowance (Exempted up to Rs.1,000 p.m.) 5. Counter Insurgency Allowance/ Compensatory Field Area Allowance (Exempted up to Rs.3,900 p.m.) 6. Highly active field area allowance (Exemption up to Rs.4,200) 7. Transport Allowance (Exemption up to Rs. 800/ 1600 p.m.).

19 Thank you