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  • Easy chart of deductions u/s 80C to 80U every individual should aware of ! January 11, 2011 by taxworry 16 Comments

    The season of tax has arrived. Therefore , there is need for easy chart of all tax deduction u/s 80c to 80U for an Individual taxpayer?Under Income tax , deduction u/s 80C,80CCC, 80D, 80DD,80DDB,80G , 80GG, 80GGA, 80GGC , 80IAB , 80IB , 80IC , 80ID ,80IE , 80JJA , 80QQB ,80RRB , 80U are relevant to Individuals depending on the condition fulfillment. The following chart of deductions will give instant and fair idea about certain deductions to individual tax payers. (section 80IAB to 80IE are not discussed which are specific to business men ) . Sl No Section Details of deductions Quantum1 80C General deduction for investment in

    PPF,PF,Life Insurance, ULIP, Stamp duty on house, Fixed deposits for 5 years , bonds etc

    Maximum Rs1 ,00,000 is allowed. Investment need not be from taxable income.

    2 80CCC Deduction in case of contribution to pension fund. However, it should be noted that surrender value or employer contribution is considered income.

    Maximum is Rs 1,00,000

    3 80CCD Deduction in respect to contribution to new pension scheme. Employees of central and others are eligible.

    Maximum is sum of employers and employees contribution to the maximum : 10 % of salary.

    4 It should be noted that as per section 80CCE , the maximum amount of deduction which can be claimed in aggregate of 80C ,80CCC & 80CCD is Rs 1,00,0000

    5 80D Medical insurance on self, spouse , children or parents

    Rs 15,000 for self , spouse & children Extra Rs 15,000 for insurance on parents. IF parents are above 65 years, extra sum should be read as Rs 20,000Thus maximum is RS 35,000 per annum

    6 80DD For maintenance including treatment or 7insurance the lives of physical disable dependent relatives

    Rs50,000 . In case disability is severe , the amount is Rs 1,00,000.

  • 7 80DDB For medical treatment of self or relatives suffering from specified disease

    Acutal amount paid to the extent of Rs 40,000. In case of patient being Sr Citizen , amount is Rs 60,000

    8 80E For interest payment on loan taken for higher studies for self or education of spouse or children

    Actual amount paid as interest and start from the financial year in which he /she starts paying interest and runs till the interest is paid in full.

    9 80G Donations to charitable institution 100% or 50% of amount of donation made to 19 entities (National defense fund , Prime minister relief fund etc. )

    10 80GG For rent paid. This is only for people not getting any House Rent Allowance. Maximum is Rs 2000 per month. Rule 11B is method of computation.

    11 80GGA For donation to entities in scientific research or rural development f

    Only those tax payers who have no business income can claim this deduction .Maximum is equivalent to 100 % of donation.

    12 80GGC For contribution to political parties 100 % of donations 13 80QQB Allowed only to resident authors for

    royalty income for books other than text book

    Royalty income or Rs 3,00,000 whichever is less.

    14 80RRB For income receipt as royalty on patents of resident individuals

    Actual royalty or Rs 3,00,000 whichever is less.

    15 80U Deduction in respect of permanent physical disability including blindness to taxpayer

    RS 50,000 which goes to Rs 1,00,000 in case taxpayer is suffering from severe disability.

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    A Association of Persons (AOP)

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    B Body of Individuals (BOI)

    L Local Authority

    J Artificial Juridical Person

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    The fifth character of the PAN is the first character (a) of the surname / last name of the person, in the case of a "Personal" PAN card, where the

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    Nowadays, the DOI (Date of Issue) of PAN card is mentioned at the right (vertical) hand side of the photo

    on the PAN card.

    [edit]See also

    Fringe Benefits Tax (India) Indian Revenue Service Tax Deduction Account Number [edit]External links

    Indian Income Tax Department Website Permanent account number overview from Income Tax India Categories:

    Taxation in India Universal identifiers

  • Tax Deduction At Source (TDS)

    Nothing is as tangled and knotty as the TDS provisons. While some TDS rates are specified in the individual section which deal with the tax treatment of the particular stream of income, some rates are included as part of a separate schedule. To make matters worse, these rates get tampered and modified every year. This result in so much chaos and confusion, that sometimes those who have to apply TDS, do not have a clue about what rate to use. Imagine the plight of tax payer.

    The genasis of the problem lies in the complicated nature of the tax laws. The authorities complain that less than 2% of our population actually pays taxes. However, simpliflying the provisions is not viewed as a possible solution. On the other hand, in an effort to bring more and more people into the tax net, the lawmakers simply endup complicating the law. And the rule is simple more the complexity more the room.

    TDS is final tax payable- at the time of filling his returns, the assessee pays the balance if any or asks for refund, as the case maybe. Ergo, it behooves the Department to have a standard uniform rate -convenient both for itself as well as the taxpayers.

    The most unfortunate part is that we could have easily done away with any TDS provided the deparrtment had good infrastructure to apprehend assessees avoiding tax only through TDS.

    Types of payment, relevant provisions, person responsible for deduction of tax and type of payee.

    Rates For TDS In India.

    TDS Return.

    Tax Deduction Account Number (TAN).

    How To Deposit In TDS.

    Exemption From TDS.

    TDS Exemption For Individual.

    Certificate Of Deduction.

    No Objection Certificate In TDS.

    Special Cases In TDS.

  • Service Tax In India Dr. Manmohan Singh, the then Union Finance Minister, in his Budget speech for the year 1994-95 introduced the new concept of Service Tax and stated that '' There is no sound reason for exempting services from taxation, therefore, I propose to make a modest effort in this direction by imposing a tax on services of telephones, non-life insurance and stock brokers.''

    Service Tax has been introduced in order to explore new avenues for taxation and to bring more people into the tax net. Service Tax generated revenue of Rs 2612 crores in 2000-2001. In 2001-2002 it is estimated at 3600 crores.

    Bringing services under taxation is not simple as the services are intangible and are provided by large groups of organized as well as unorganized service providers including retailers who are scattered across the country. Further, there are several services, which are of intermediate nature. The low level of education of service providers also poses difficulties to both-tax administration and assessees.

    The Service Tax assessee is the person/firm who provides the service. Hence, the Service Tax must be paid by the person/firm providing the service.

    As stated earlier, service tax was introduced in India for the first time in 1994. Chapter V of the Finance Act, 1994 (32 of 1994) (Sections 64 to 96) deals with imposition of Service Tax interalia on-

    a. Service rendered by the telegraph authorities to the subscribers in relation to telephone connections.

    b. Service provided by the insurer to the policy-holder in relation to general insurance business. c. Service provided by a stockbroker.

    The Finance Acts of 1996, 1997, 1998, 2001, 2002 and 2003 added more services to tax net by way of amendments to Finance Act, 1994. At present total number of services on which Service Tax is levied has gone upto 58 despite withdrawal of certain Services from the tax net or grant of exemptions (Goods Transport Operators, Outdoor Caterers, Pandal and Shamiana Contractors, and Mechanized Slaughter Houses).

    Service tax Includes

    Service tax is a form of indirect tax that is applicable to the services that are taxable in nature. This tax came into existence as government wants an easy option that is transparent in nature that can generate revenue for the nation in an easy way. In past few years service tax is applied on various new services. Unlike value added tax that is applicable on goods and commodities, this tax is imposed on various services that is provided by the financial institutions such as banks, stock exchange, colleges, transaction providers, telecom providers. Banks are the first that charges service tax to its customer since inception often they termed service charges as processing fees. The responsibility of collecting the tax lies with the Central Board of Excise and Customs (CBEC) its a body under the Ministry of Finance. This body formulates the tax structure in the country.

    Service tax was imposed first in India in July 1994. The service tax is applicable all over India however due to the national interest and for the betterment of the people of Jammu and Kashmir it is waved off. In 2006- 2007 service tax was increased from 10% to 12% however it was again reduced from 12% to 10% in the Union budget of 2009. It is often noticed that there is a lack of service tax information among the

  • people. Government has gradually increased the list of taxable services to increase the revenue. Lets have a look at the major services that comes under the scanner of service tax:

    Value Added Taxes (VAT) in India

    Value Added Tax (VAT) is nothing but a general consumption tax that is assessed on the value added to goods & services. It is the indirect tax on the consumption of the goods, paid by its original producers upon the change in goods or upon the transfer of the goods to its ultimate consumers. It is based on the value of the goods, added by the transferor. It is the tax in relation to the difference of the value added by the transferor and not just a profit.

    All over the world, VAT is payable on the goods and services as they form a part of national GDP. More than130 countries worldwide have introduced VAT over the past 3 decades; India being amongst the last few to introduce it.

    It means every seller of goods and service providers charges the tax after availing the input tax credit. It is the form of collecting sales tax under which tax is collected in each stage on the value added of the goods. In practice, the dealer charges the tax on the full price of the goods, sold to the consumer and at every end of the tax period reduces the tax collected on sale and tax charged to him by the dealers from whom he purchased the goods and deposits such amount of tax in government treasury.

    VAT is a multi-stage tax, levied only on value that is added at each stage in the cycle of production of goods and services with the provision of a set-off for the tax paid at earlier stages in the cycle/chain. The aim is to avoid 'cascading', which can have a snowballing effect on the prices. It is assumed that because of cross-checking in a multi-staged tax; tax evasion would be checked, hence resulting in higher revenues to the government.

    Importance of VAT in India

    India, particularly being a trading community, has always believed in accepting and adopting loopholes in any system administered by State or Centre. If a well-administered system comes in, it will not only close options for traders and businessmen to evade paying their taxes, but also make sure that they'll be compelled to keep proper records of sales and purchases.

    Under the VAT system, no exemptions are given and a tax will be levied at every stage of manufacture of a product. At every stage of value-addition, the tax that is levied on the inputs can be claimed back from tax authorities.

    At a macro level, two issues make the introduction of VAT critical for India

    Industry watchers believe that the VAT system, if enforced properly, will form part of the fiscal consolidation strategy for the country. It could, in fact, help address issues like fiscal deficit problem. Also the revenues estimated to be collected can actually mean lowering of fiscal deficit burden for the government.

    International Monetary Fund (IMF), in the semi-annual World Economic Outlook expressed its concern for India's large fiscal deficit - at 10 per cent of GDP.

    Moreover any globally accepted tax administrative system would only help India integrate better in the World Trade Organization regime.

  • Advantages of VAT

    1. Coverage If the tax is considered on a retail level, it offers all the economic advantages of a tax of the entire retail price within its scope. The direct payment of tax spreads out over a large number of firms instead of being concentrated only on particular groups, such as wholesalers & retailers.

    2. Revenue Security - Under VAT only buyers at the final stage have an interest in undervaluing their purchases, as the deduction system ensures that buyers at earlier stages are refunded the taxes on their purchases. Therefore, tax losses due to undervaluation will be limited to the value added at the last stage.

    Secondly, under VAT, if the payment of tax is avoided at one stage nothing will be lost if it is picked up at later stage. Even if it is not picked up later, the government will at least have collected the VAT paid at previous stages. Where as if evasion takes place at the final/last stage the state will lose only tax on the value added at that particular point.

    3. Selectivity - VAT is selectively applied to specific goods & business entities. In addition, VAT does not burden capital goods because of the consumption-type. VAT gives full credit for tax included on purchases of capital goods.

    4. Co-ordination of VAT with direct taxation - Most taxpayers cheat on sales not to evade VAT but to evade their personal and corporate income taxes. Operation of VAT resembles that of the income tax and an effective VAT greatly helps in income tax administration and revenue collection.

    To know more about advantages of VAT click here: Advantages of VAT

    Disadvantages of VAT

    1. VAT is regressive 2. VAT is difficult to operate from position of both administration and business 3. VAT is inflationary 4. VAT favors capital intensive firms

    Items covered under VAT

    All business transactions that are carried on within a State by individuals/partnerships/ companies etc. will be covered under VAT.

    More than 550 items are covered under the new Indian VAT regime out of which 46 natural & unprocessed local products will be exempt from VAT

    Nearly 270 items including drugs and medicines, all industrial and agricultural inputs, capital goods as well as declared goods would attract 4 % VAT in India.

    The remaining items would attract 12.5 % VAT. Precious metals such as gold and bullion will be taxed at 1%.

    Petrol and diesel are kept out of the VAT regime in India.

    Tax implication under Value Added Tax Act

    Seller Buyer

    Selling Price

    (Excluding Tax)

    Tax Rate

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    Tax Payable

    Tax Credit

    Net TaxOutflow

  • A B 100 4% CST 104 4 0 4.00

    B C 114 12.5% VAT 128.25 14.25 0* 14.25

    C D 124 12.5% VAT 139.50 15.50 14.25 1.25

    D Consumer 134 12.5% VAT 150.75 16.75 15.50 1.25

    Total to Govt. VAT CST 16.75 4.00

    Methods Of Collecting And Charging The VAT

    Generally, there are 2 methods that are followed while charging and collecting the VAT:

    1. Invoice or tax credit method The tax is collected and charged separately on the basis of the tax that is paid on the purchase and the tax that is payable on the sale, shown separately in the invoice. Therefore, the difference between the tax paid on purchase and the tax payable on sale as per the invoice is the VAT.

    2. Subtraction Method Under this method, the tax is collected and charged on the aggregate value of the tax payable on sale and purchase by applying the rate of tax, applicable to the goods. Therefore, the difference between the sale price and purchase price would be VAT. It means VAT is the tax which consumers ultimately face. It is collected at each stage. The tax earlier paid can be allowed as set off or credit. Therefore, it is called as Last Point Tax

    TopConstitutional Framework Which Deals With The Levy Of Sale Tax

    The states are empowered to impose sale tax on the goods that are subject to purchase or sale by enacting laws. The Parliament has enacted the CST Act and the states are in the process of enacting laws. The sale of goods or purchase includes:

    a. the sale of goods, defined under the Sale of Goods Act. b. transfer of goods used as otherwise in pursuance of the contract. c. transfer of goods used otherwise in Works Contracts. d. delivery of goods in pursuance to Hire Purchase Agreement or on installment. e. transfer of right to use to goods on lease or otherwise. f. supply of food by the club or body to its members. g. supply of food articles or drinks for consumption.

    The transaction referred above from (c) to (g) are considered to be deemed sale and power can be exercised to impose tax on such sale by the states. States are also empowered to provide levy, creating a liability to pay tax and other payment assessment and certain procedural formalities like maintenance of accounts, records, appeals and issue of declaration of Tax Invoice, Input Tax Credit, etc.

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  • Contents




    o 2.1ChargetoIncometaxo 2.2ResidentialStatuso 2.3HeadsofIncomeo 2.4IndividualHeadsofIncome

    2.4.1IncomefromSalary 2.4.2IncomefromHouseproperty 2.4.3IncomefromBusinessorProfession 2.4.4IncomefromCapitalGains 2.4.5IncomefromOtherSources


    o 3.1Section80CDeductionso 3.2Section80CCF:InvestmentinInfrastructureBondso 3.3Section80D:MedicalInsurancePremiumso 3.4InterestonHousingLoansSection



    o 5.1Surchargeo 5.2TaxRatefornonIndividualso 5.3RefundStatusforSalariedtaxpayers


    o 6.1TaxPenalties7Seealso



    [edit]Income Tax Department

    The CBDT is a part of Department of Revenue in the Ministry of Finance. On one hand, CBDT provides

    essential inputs for policy and planning of direct taxes in India,at the same time it is also responsible for

    administration of direct tax laws through the Income Tax Department. The Central Board of Direct Taxes is a

  • statutory authority functioning under the Central Board of Revenue Act, 1963. The officials of the Board in their

    ex-officio capacity also function as a Division of the Ministry dealing with matters relating to levy and collection

    of direct taxes. The Central Board of Revenue as the Department apex body charged with the administration of

    taxes came into existence as a result of the Central Board of Revenue Act, 1924. Initially the Board was in

    charge of both direct and indirect taxes. However, when the administration of taxes became too unwieldy for

    one Board to handle, the Board was split up into two, namely the Central Board of Direct Taxes and Central

    Board of Excise and Customs with effect from 1.1.1964. This bifurcation was brought about by constitution of

    the two Boards u/s 3 of the Central Boards of Revenue Act, 1963. Income Tax in India was introduced by

    James Wilson.

    Organisational Structure of the Central Board of Direct Taxes : The CBDT is headed by Chairman and

    also comprises of six members, all of whom are ex-officio Special Secretary to Government of India.

    Member (Income Tax) Member (Legislation and Computerisation) Member (Revenue) Member (Personnel &

    Vigilance) Member (Investigation) Member (Audit & Judicial)

    The Chairman and Members of CBDT are selected from Indian Revenue Service (IRS), a premier civil service

    of India, whose members constitute the top management of Income Tax Department.

    Responsibilities of Chairman and Members, Central Board of Direct Taxes

    Various functions and responsibilities of CBDT are distributed amongst Chairman and six Members, with only

    fundamental issues reserved for collective decision by CBDT. In addition, the Chairman and every Member of

    CBDT are responsible for exercising supervisory control over definite areas of field offices of Income Tax

    Department, known as Zones.


    [edit]Charge to Income-tax

    Every Person whose total income exceeds the maximum amount which is not chargeable to the income tax is

    an assesse, and shall be chargeable to the income tax at the rate or rates prescribed under the finance act for

    the relevant assessment year, shall be determined on basis of his residential status.

    Income tax is a tax payable, at the rate enacted by the Union Budget (Finance Act) for every Assessment Year,

    on the Total Income earned in the Previous Year by every Person.

    The changeability is based on nature of income, i.e., whether it is revenue or capital. The principles of taxation

    of income are-:

    Income Tax Rates/Slabs Rate (%)

    for men:

  • Up to 1,80,000 = NIL ,

    1,80,001 5,00,000 = 10%,

    5,00,001 8,00,000 = 20%,

    8,00,001 upwards = 30%,

    Up to 1,90,000 (for resident women)= NIL

    Up to 2,50,000 (for resident individual of 60 years or above)= 0,

    Up to 5,00,000 (for very senior citizen of 80 years or above)= 0.

    Education cess is applicable @ 3 per cent on income tax, surcharge = NA

    [edit]Residential Status

    The three residential status, viz.,

    Resident Ordinarily Residents

    Under this category ,person must be living in India at least 182 days during previous year Or must have been in India 365 days during 4 years preceding previous year and 60 days in previous year.

    Ordinary residents are always taxable.

    Resident but not Ordinarily Residents

    Must have been a non-resident in India 9 out of 10 years preceding previous year or have been in India in total 729 or less days out of last 7 years preceding the previous year. Not Ordinarily

    residents are taxable in relation to income received in India or income accrued or deemed to be

    accrue or arise in India and income from business or profession controlled from India.

    Non Residents

    Non Residents are exempt from tax if accrue or arise or deemed to be accrue or arise outside India. Taxable if income is earned from business or profession setting in India or having their head

    office in India. [1] [2]

    [edit]Heads of Income

    The total income of a person is divided into five heads, viz., taxable[3]:

  • [edit]Individual Heads of Income [edit]Income from Salary

    All income received as salary under Employer-Employee relationship is taxed under this head.

    Employers must withhold tax compulsorily, if income exceeds minimum exemption limit, as Tax

    Deducted at Source (TDS), and provide their employees with a Form 16 which shows the tax

    deductions and net paid income. In addition, the Form 16 will contain any other deductions

    provided from salary such as:

    1. Medical reimbursement: Up to Rs. 15,000 per year is tax free if supported by bills.

    2. Conveyance allowance: Up to Rs. 800 per month (Rs. 9,600 per year) is tax free if

    provided as conveyance allowance. No bills are required for this amount.

    3. Professional taxes: Most states tax employment on a per-professional basis, usually a

    slabbed amount based on gross income. Such taxes paid are deductible from income


    4. House rent allowance: the least of the following is available as deduction

    1. Actual HRA received

    2. 50%/40%(metro/non-metro) of basic 'salary'

    3. Rent paid minus 10% of 'salary'. basic Salary for this purpose is basic+DA

    forming part+commission on sale on fixed rate.

    Income from salary is the least of all the above deductions.

    [edit]Income from House property

    Income from House property is computed by taking into account what is called Annual Value of

    the property. The annual value (in the case of a let out property) is the maximum of the following:

    Rent received Municipal Valuation Fair Rent (as determined by the I-T department)

    If a house is not let out and not self-occupied, annual value is assumed to have accrued to the

    owner. Annual value in case of a self occupied house is to be taken as NIL. (However if there is

    more than one self occupied house then the annual value of the other house/s is taxable.) From

    this, deduct Municipal Tax paid and you get the Net Annual Value. From this Net Annual Value,

    deduct :

    30% of Net value as repair cost (This is a mandatory deduction)

  • Interest paid or payable on a housing loan against this house

    In the case of a self occupied house interest paid or payable is subject to a maximum limit of

    Rs,1,50,000 (if loan is taken on or after 1 April 1999 and construction is completed within 3 years)

    and Rs.30,000 (if the loan is taken before 1 April 1999). For all non self-occupied homes, all

    interest is deductible, with no upper limits.

    The balance is added to taxable income.

    [edit]Income from Business or Profession

    carry forward of losses

    An example .. An architect works out of home and co-ordinates work for his clients. All the

    following expenses would be deductible from his professional fees.

    he uses a computer, he travels to sites in his car, he has a peon to help him collect payments He has a maid who comes in daily part of the society maintenance bills entertainment expenses incurred.. books and magazines for his professional practice.

    The income referred to in section 28, i.e, the incomes chargeable as "Income from Business or

    Profession" shall be computed in accordance with the provisions contained in sections 30 to 43D.

    However, there are few more sections under this Chapter, viz., Sections 44 to 44DA (except

    sections 44AA, 44AB & 44C), which contain the computation completely within itself. Section 44C

    is a disallowance provision in the case non-residents. Section 44AA deals with maintenance of

    books and section 44AB deals with audit of accounts.

    In summary, the sections relating to computation of business income can be grouped as under: -

    1. Deductible Expenses - Sections 30 to 38 [except 37(2)].

    2. Inadmissible Expenses - Sections 37(2), 40, 40A, 43B & 44-C.

    3. Deemed Incomes - Sections 33AB, 33ABA, 33AC, 35A, 35ABB & 41.

    4. Special Provisions - Sections 42 & 43D

  • 5. Self-Coded Computations - Sections 44, 44A, 44AD, 44AE, 44AF, 44B, 44BB, 44BBA,

    44BBB, 44-D & 44-DA.

    The computation of income under the head "Profits and Gains of Business or Profession"

    depends on the particulars and information available.[4]

    If regular books of accounts are not maintained, then the computation would be as under: -

    Income (including Deemed Incomes) chargeable as income under this head xxx Less: Expenses

    deductible (net of disallowances) under this head xxx Profits and Gains of Business or

    Profession xxx

    However, if regular books of accounts have been maintained and Profit and Loss Account has

    been prepared, then the computation would be as under: -

    Net Profit as per Profit and Loss Account xxx Add : Inadmissible Expenses debited to Profit and Loss Account xxx Deemed Incomes not credited to Profit and Loss Account xxx xxx Less: Deductible Expenses not debited to Profit and Loss Account xxx Incomes chargeable under other heads credited to Profit & Loss A/c xxx xxx Profits and Gains of Business or Profession xxx

    [edit]Income from Capital Gains

    Transfer of capital assets results in capital gains. A Capital asset is defined under section 2(14) of

    the I.T. Act, 1961 as property of any kind held by an assessee such as real estate, equity shares,

    bonds, jewellery, paintings, art etc. but does not include some items like any stock-in-trade for

    businesses and personal effects. Transfer has been defined under section 2(47) to include sale,

    exchange, relinquishment of asset, extinguishment of rights in an asset, etc. Certain transactions

    are not regarded as 'Transfer' under section 47.

    For tax purposes, there are two types of capital assets: Long term and short term. Long term

    asset are held by a person for three years except in case of shares or mutual funds which

  • becomes long term just after one year of holding. Sale of such long term assets gives rise to long

    term capital gains. There are different scheme of taxation of long term capital gains. These are:

    1. As per Section 10(38) of Income Tax Act, 1961 long term capital gains on shares or

    securities or mutual funds on which Securities Transaction Tax (STT) has been

    deducted and paid, no tax is payable. STT has been applied on all stock market

    transactions since October 2004 but does not apply to off-market transactions and

    company buybacks; therefore, the higher capital gains taxes will apply to such

    transactions where STT is not paid.

    2. In case of other shares and securities, person has an option to either index costs to

    inflation and pay 20% of indexed gains, or pay 10% of non indexed gains. The

    indexation rates are released by the I-T department each year.

    3. In case of all other long term capital gains, indexation benefit is available and tax rate is


    All capital gains that are not long term are short term capital gains, which are taxed as such:

    Under section 111A, for shares or mutual funds where STT is paid, tax rate is 10% From AsstYr 2005-06 as per Finance Act 2004. For AsstYr 2009-10 the tax rate is 15%.

    In all other cases, it is part of gross total income and normal tax rate is applicable.

    For companies abroad, the tax liability is 20% of such gains suitably indexed (since STT is not


    [edit]Income from Other Sources

    This is a residual head, under this head income which does not meet criteria to go to other heads

    is taxed. There are also some specific incomes which are to be taxed under this head.

    1. Income by way of Dividends

    2. Income from horse races

    3. Income from winning bull races

    4. Any amount received from key man insurance policy as donation.

    5. Income from shares (dividend otherthanindian company)


    While exemptions is on income some deduction in calculation of taxable income is allowed for

    certain payments.

  • [edit]Section 80C Deductions

    Section 80C of the Income Tax Act [1] allows certain investments and expenditure to be deducted

    from total income upto the maximum of 1 lac. The total limit under this section is Rs. 100,000

    (Rupees One lac) which can be any combination of the below:

    Contribution to Provident Fund or Public Provident Fund. PPF provides 8% return compounded annually. Maximum limit to contribute in it is 70,000 for each year. It is a long

    term investment with complete withdrawal not possible till 15 years though partial withdrawal

    is possible after 5 years. Besides, there is employee providend fund which is deducted from

    the salary of the person. This is about 10% to 12% of the BASIC salary component. Recent

    changes are being discussed regarding reducing the instances of withdrawal from EPF

    especially when one changes the job. EPF has the option of full settlement on leaving the

    job, taking VRS, retirement after 58. It also has options of withdrawal for certain expenses

    related to home, marriage or medical. EPF contribution includes 12% of basic salary from

    employee and employer. It is distributed in ratio of 8.33:3.67 in Pension fund and Providend


    Payment of life insurance premium Investment in pension Plans. National Pension Scheme is meant to save money for the post

    retirement which invests money in different combination of equity and debt. depending upon

    age up to 50% can go in equity. Annuity payable after retirement is dependent upon age.

    NPS has six fund managers. Individual can make minimum contribution of Rs6000/- . It has

    22 point of purchase (banks).

    Investment in Equity Linked Savings schemes (ELSS) of mutual funds. Among other investment opportunities, ELSS has the least lock-in period of 3 years. However, one should

    note that after the Direct Tax Code is in place, ELSS will no longer be an investment for 80C


    Investment in National Savings Certificates (interest of past NSCs is reinvested every year and can be added to the Section 80 limit)

    Tax saving Fixed Deposits provided by banks for a tenure of 5 years. Interest is also taxable. Payments towards principal repayment of housing loans. Also any registration fee or stamp

    duty paid.

    Payments towards tuition fees for children to any school or college or university or similar institution. (Only for 2 children)or towards coaching fee of various competitive exams.

    Post office investments

    The investment can be from any source and not necessarily from income chargeable to tax.

  • [edit]Section 80CCF: Investment in Infrastructure Bonds

    From April, 1 2010, a maximum of Rs. 20,000is deductible under section 80CCF provided that

    amount is invested in infrastructure bonds. This is in addition to the 100,000 deduction allowed

    under Section 80(C).

    [edit]Section 80D: Medical Insurance Premiums

    Health insurance, popularly known as Mediclaim Policies, provides a deduction of up to Rs.

    35,000.00 (Rs. 15,000.00 for premium payments towards policies on self, spouse and children

    and (read as in addition to) Rs. 15,000.00 for premium payment towards non-senior citizen

    dependent parents or Rs. 20,000.00 for premium payment towards senior citizen dependent).

    This deduction is in addition to Rs. 1,00,000 savings under IT deductions clause 80C. For

    consideration under a senior citizen category, the incumbent's age should be 65 years during any

    part of the current fiscal, eg. for the fiscal year 2010-11, the incumbent should already be 65 as

    on March 31, 2011), This deduction is also applicable to the cheques paid by proprietor firm..

    [edit]Interest on Housing Loans Section

    For self occupied properties, interest paid on a housing loan up to Rs 150,000 per year is exempt

    from tax.(Excluding Rs.1,00,000/p.a. u/s 80c Saving) However, this is only applicable for a

    residence constructed within three financial years after the loan is taken and also the loan if taken

    after April 1, 1999.

    If the house is not occupied due to employment, the house will be considered self occupied.

    For let out properties, the entire interest paid is deductible under section 24 of the Income Tax

    act. However, the rent is to be shown as income from such properties. 30% of rent received and

    municipal taxes paid are available for deduction of tax.

    The losses from all properties shall be allowed to be adjusted against salary income at the source

    itself. Therefore, refund claims of T.D.S. deducted in excess, on this count, will no more be


    [edit]Use of Deductions

    While the use of the above sections helps one to pay less or no money as tax if one falls in the

    tax bracket, one should look at this more as an investment-return opportunity. One should still file

    income tax return, even if one is not paying any tax. Except ELSS (Equity Linked Savings

    Scheme) and the NPS (National Pension Scheme), other schemes under 80C typically offer a

    relatively risk-free investment and guaranteed returns.

  • [edit]Tax Rates

    In India, Individual income tax is a progressive tax with three slabs. About 10 per cent of the

    population meets the minimum threshold of taxable income[6][7]

    From April 1, 2011 new tax slabs apply, which are as follows:

    No income tax is applicable on all income up to Rs. 1,80,000 per year. (Rs. 1,90,000 for women, Rs. 2,50,000 for senior citizens of 60 till 80 yrs (excluding 80) and Rs. 5,00,000 for

    very senior citizens of 80 yrs and above and must be resident of india)

    From 1,80,001 to 5,00,000 : 10% of amount greater than Rs. 1,80,000 (Lower limit changes appropriately for women and senior citizens)

    From 5,00,001 to 8,00,000 : 20% of amount greater than Rs. 5,00,000 + 32,000 ( Rs. 31,000 for women and Rs. 25,000 for senior citizens)

    Above 8,00,000 : 30% of amount greater than Rs. 8,00,000 + 92,000 ( Rs. 91,000 for women and Rs. 85,000 for senior citizens)


    Surcharge has been abolished for personal income tax in the financial year 2009-10.

    A 7.5% surcharge (tax on tax) is applicable if the taxable income (taking into consideration all the

    deductions) is above Rs. 10 lakh (Rs. 1 million). The limit of 10 lacs was increased to Rs. 10

    crore (Rs. 100 million) with effect from 1 June 2009

    All taxes in India are subject to an education cess, which is 3% of the total tax payable. With

    effect from assessment year 2009-10, Secondary and Higher Secondary Education Cess of 1% is

    applicable on the subtotal of income tax. The education cess is mainly applicable on excise duty

    and service tax

    From income tax year 2010-11, education cess would be 3% and no surcharge would be levied.

    [edit]Tax Rate for non-Individuals

    There are special rates prescribed for Firms, Corporates, Local Authorities & Co-operative


    [edit]Refund Status for Salaried tax payers

    The Income Tax Department has put on its website the list of income tax refunds of all salary tax

    payers which could not be sent to the concerned persons for want of correct address. (link to

    check refund)

  • Salary taxpayers who have not received refunds for assessment years 2003-04 to 2006-07 can

    click on the link below and query using the PAN number and assessment year whether any

    refund due to them has been returned undelivered. .[9]

    [edit]Corporate Income tax

    For companies, income is taxed at a flat rate of 30% for Indian companies, with a 5% surcharge

    applied on the tax paid by companies with gross turnover over Rs. 1 crore (10 million). Foreign

    companies pay 40%.[10] An education cess of 3% (on both the tax and the surcharge) are

    payable, yielding effective tax rates of 32.5% for domestic companies and 41.2% for foreign

    companies. [11] From 2005-06, electronic filing of company returns is mandatory.[12]

    [edit]Tax Penalties

    The major number of penalties initiated every year as a ritual by I T Authorities is under section

    271(1)(c) which is for either concealment of income or for furnishing inaccurate particulars of

    income. What is inaccurate particulars of income is not defined under Income Tax Act 1961 ,

    however recently Supreme Court in case of CIT vs Reliance Petroproducts states as under "If

    we accept the contention of the Revenue then in case of every Return where the claim made is

    not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section

    271(1)(c). That is clearly not the intendment of the Legislature."

    Read more: http://taxworry.com/landmark-judgment-by-supreme-court-on-penalty-us-2711c-in-

    favour-of-taxpayers/#ixzz1F5mJSvsn "If the Assessing Officer or the Commissioner (Appeals) or

    the Commissioner in the course of any proceedings under this Act, is satisfied that any person-

    (b) has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of

    section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, or

    (c) has concealed the particulars of his income or furnished inaccurate particulars of such


    he may direct that such person shall pay by way of penalty,-

    (ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum of ten

    thousand rupees for each such failure;

    (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall

    not be less than, but which shall not exceed three times, the amount of tax sought to be evaded

    by reason of the concealment of particulars of his income or the furnishing of inaccurate

    particulars of such income.

  • [edit]See also

    Service tax in India Central Excise (India) [edit]References

    1. ^ Determination of Residential Status

    2. ^ A Study of the Indian Tax System - Part I and II - Sunil Thacker

    3. ^ Taxable heads of income

    4. ^ Business Income

    5. ^ http://www.incometaxindia.gov.in/publications/1_Compute_Your_Salary_Income/2_Income


    6. ^ Income Tax Rates changed for 2011-12

    7. ^ Finance Act 2011 comes into effect

    8. ^ Tax Rates for Assessment Year 2008-09

    9. ^ NSDL Refund Status Check

    10. ^ Income Tax Act, Tax rates for foreign companies

    11. ^ Finance Act 2010

    12. ^ Surcharge has been revised from 10% to 7.5% w.e.f AY 2010-11.Corporate taxpayers must

    file electronically, point 4 of IT circular.

    [edit]External links

    Indian Income



    Tax on distributed profits of domestic companies. 115-O. 80[(1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2003, whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at the rate of twelve and one-half per cent.]

  • (2) Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of this Act, the tax on distributed profits under sub-section (1) shall be payable by such company. (3) The principal officer of the domestic company and the company shall be liable to pay the tax on distributed profits to the credit of the Central Government within fourteen days from the date of (a) declaration of any dividend; or (b) distribution of any dividend; or (c) payment of any dividend, whichever is earliest. (4) The tax on distributed profits so paid by the company shall be treated as the final payment of tax in respect of the amount declared, distributed or paid as dividends and no further credit therefor shall be claimed by the company or by any other person in respect of the amount of tax so paid. (5) No deduction under any other provision of this Act shall be allowed to the company or a shareholder in respect of the amount which has been charged to tax under sub-section (1) or the tax thereon. 80a[(6) Notwithstanding anything contained in this section, no tax on distributed profits shall be chargeable in respect of the total income of an undertaking or enterprise engaged in developing or developing and operating or developing, operating and maintaining a Special Economic Zone for any assessment year on any amount declared, distributed or paid by such Developer or Enterprise, by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2005 out of its current income either in the hands of the Developer or Enterprise or the person receiving such dividend not falling under clause (23G) of section 10.]

    Advance TaxAll persons including salaried employees and pensioners, in whose case tax payable during a Financial Year is Rs. 10,000/= or more after adjusting all deductions, rebates &

  • TDS are required to pay Advance Tax. The rates for payment of Advance Tax are announced in the Finance Act every year. For Companies By 15th June - 15% of Advance Tax By 15th September- 30%of Advance Tax By 15th December- 30% of Advance Tax By 15th March- 25%of Advance Tax By 31st March - Tax on Capital Gains or Casual Incomes arising after 15Th March, if any. For Non-Companies By 15th June - NIL By 15th September- 30%of Advance Tax By 15th December- 30% of Advance Tax By 15th March- 40%of Advance Tax By 31st March - Tax on Capital Gains or Casual Incomes arising after 15Th March, if any.

    Permanent account number[edit]Structure and validation[edit]See also[edit]External links

    Tax Deduction At Source (TDS)Income tax in IndiaContents[edit]Income Tax Department[edit]Overview[edit]Charge to Income-tax[edit]Residential Status[edit]Heads of Income[edit]Individual Heads of Income[edit]Income from Salary[edit]Income from House property[edit]Income from Business or Profession[edit]Income from Capital Gains[edit]Income from Other Sources

    [edit]Deduction[edit]Section 80C Deductions[edit]Section 80CCF: Investment in Infrastructure Bonds[edit]Section 80D: Medical Insurance Premiums[edit]Interest on Housing Loans Section

    [edit]Use of Deductions[edit]Tax Rates[edit]Surcharge[edit]Tax Rate for non-Individuals[edit]Refund Status for Salaried tax payers

    [edit]Corporate Income tax[edit]Tax Penalties

    [edit]See also[edit]References[edit]External links