A Bird's eye view of the Indian Income Tax for an individual who is not a businessman.

1. Indian Income Tax
A Birds Eye View
General Structure for Laymen
By Kamal Bhandari

2. Five Heads of Income (or Losses)
1. Salary ( Net)
2. Income from House Property (Net)
3. Income From Business / Profession (Net)
4. Capital Gains / Losses (Net)
5. Other Income (Net)
– Bank Interest, Windfall Gains etc.
• Each of the above Income heads have special
deductions / adjustments from Actual Income
By Kamal Bhandari

3. The Grand Equations
• Gross Total Income = Net Income from Salary
+ Property + Business + Capital Transactions +
Others ( after Special Deductions & B/F
Losses)
• GTI – General Deductions ( Sec 80C etc )= Net
Taxable Income
• Tax slabs are used on NTI to calculate tax
chargeable .
• Tax Chargeable – Tax Deducted at Source
(TDS) = Tax Payable / (Refundable)
By Kamal Bhandari

4. Exempt Income
• Income which do not enter the GTI calculation
– Tax Free bonds, PPF interest
– LT Gains on Equity and Equity Funds
– Life Insurance payouts
– Other specified items
By Kamal Bhandari

5. When & Who is Taxed ?
• Income is taxed for each Previous Year
(April 2013 - March 2014)
– Returns filed in Assessment Year (2014-15) by 31st
July
• Type of Residency: Non Resident, Not
Ordinarily Resident or Resident
– Non Resident are at least 182 days out of India in PY. Only
Income arising in India is taxable.
• Type of Person: Individual, HUF, Company,
Firm etc
– Different tax rates apply. Any “Person” can be non-resident
By Kamal Bhandari

6. Income from Salaries
• Basic Salary and Allowances
• Fees, Commission and Bonus
• All Perquisites or subsidized services, Loans
• Retirement Benefits
• Deduct: Exempt portion of HRA, Professional
Tax paid, LTA etc
By Kamal Bhandari

7. Income From Property
• The higher of actual rent or notional rental
value is taken as “Annual Value”.
– Only one self-occupied property is treated as zero AV
– Determination of Notional Rent is a bit tricky involving Fair
Rent, Municipal Rent, Std. Rent and Actual Rent
comparisons.
• (AV-Property tax)* (1-30% ) = Net AV
• Net AV - Interest on Property Loan ( Limits
apply) = Taxable income
By Kamal Bhandari

8. Income from Business & Prof.
• Tax code is complex and varied on this issue
with many exemptions and limitations relating
to income arising out of running a business or
profession.
• Profit / Loss from Option & Forward trading
falls under this head instead of Capital Gains
even for individuals who have no business
setup
By Kamal Bhandari

9. Income from Capital Gains
• Gain on sales of Funds, Equity, Securities,
Property, Bullion, Art, Business etc come under
this head
• Long Term Gain is usually any gain on sales after
holding an asset for 3 years (one year only for
Equity or Equity funds). There are special tax
saving strategies available.
• LT Gain on Equity & Eq funds are fully exempt.
• Short Term gain is anything which is not long
term and has no special tax treatment except
Equity & Eq funds is taxed at 15% PTO
By Kamal Bhandari

10. Income from Capital Gainscontd
• LT Gains are computed after scaling up the
actual cost by the cost inflation index ratio
• LT Gain = Sales – Indexed cost
• Indexed LT gain is taxed at 20% (NRI can opt
for Non-indexed LT gain and be taxed at 10% )
• Cost Includes Cost of Improvement too.
• Sales means Net sales Proceeds after direct
expenses incurred on selling. PTO
By Kamal Bhandari

11. Income from Capital Gainscontd
• LT Gains from Sale of House Property: There
are many different sops available for saving
tax on such gains. Mostly by investing the
proceeds in another property within a period
of couple of years from the sale or one year
prior to sale.
• By investing entire proceeds in specified Govt
Bonds, tax on LT Gain can be saved up to 100%
By Kamal Bhandari

12. Income from Other Sources
• This head is the residual section to catch all
income not defined under other specific heads
before e.g. Bank Interest, Awards, Windfall
gains, Lottery and gambling etc
– Bank Interest attracts a small exemption upto Rs
10,000
• Interest on NRE & FCNR accounts and fixed
deposits are fully exempted.
• NRO accounts and NRO deposits are fully
taxable
By Kamal Bhandari

13. General Deductions from GTI
• Some investments e.g. ELSS, PPF, EPF, NSC, 5
yr Post Office Deposit, Housing Loan Principal
payment etc upto Rs 150,000 (Section 80C)
• Medical Ins Premium upto 15,000 (80D)
• Medical Treatment Rs 40,000 (80DDB)
• Interest on Edu Loan for 8 years (80E)
• Charitable donations to recognised
Institutions – 50% / 100% (80G) PTO
By Kamal Bhandari

14. General Deductions from GTI
• Rent paid upto Rs 2000 pm max (80GG)
• Donation to Political Party (80GGC)
• Disabilities 50,000 or 100,000 (80U)
• Saving Bank Interest Rs 10,000 (80TTA)
By Kamal Bhandari

15. Tax Slab for Individual PY 2015-16
Description Tax Rate
Up to Rs 250,000 General
Up to Rs 300,000 for Age 60+
Up to Rs 500,000 for Age 80+
0%
From Rs 250,000 (or more) to Rs 500,000 10%
From Rs 500,000 to Rs 1,000,000 20%
From Rs 1,000,000 onwards 30%
Surcharge on Income Tax for income above
Rs 10,000,000
12%
Education Cess on Total Income Tax 3%
By Kamal Bhandari

16. Other Relevant Direct Taxes
• Dividend Distribution Tax (DDT)
– Company / Mutual funds are taxed on any dividend paid
out. ( 15% - 25%). TIP: Growth Funds perform better.
• Securities Transaction Tax (STT)
– On each taxable securities transaction (equity mainly)
• Double Taxation Avoidance Agreement (DTAA)
– Between countries. Tax on NRO Interest
• Fringe Benefit Tax (FBT)
– Employer has to pay for some employee benefits
By Kamal Bhandari

17. THANK YOU
END
FOR BEING PATIENT …..
By Kamal Bhandari