Internship report

1. “BENEFITS OF CAPITAL GAIN
EXEMPTIONS AND TAX SAVING
INVESTMENTS TO SAVE TAXES”
Koshti Dipak Pravinkumar
227780595019
MBA (95)
(Financial Management)
Som-Lalit Institute of Business
Management (SLIBM)
Submitted To:
Prof. Reshmi Banerjee
Summer Internship Project Report
on

2. AGENDA
• Introduction
• Provisions for Capital Gains
• Calculation of Capital Gains
• Capital Gains Exemptions
• Tax Saving Investments
• Literature Review
• Research Methodology and
Objectives
• Data Analysis
• Findings
• Conclusion
• References
2

3. INTRODUCTION
• Capital gain is basically an appreciated value of a particular capital asset at the time of sale of such
capital asset.
• It takes place when a person sells an asset that they owned for more capital appreciation than they
paid for it.
• Moreover, capital gain tax means the tax imposed or applied on increased value of such capital asset.
• It comes into existence when an asset transferred between the owners.
• Any kind of asset that an individual possesses or holds is referred to as a capital asset. Some of them
might include stocks, bonds, real estate, buildings, homes, machinery, jewelry, leasehold rights, and
vehicles.
• When an individual sells his asset that they own, then capital appreciation results from deducting the
asset's face value or initial purchase price from the sale price. The differential amount is liable to tax
based on individual’s net income.
3

4. PROVISIONS FOR CAPITAL GAINS
Cost of acquisition refers to an amount at which
a capital is purchased or bought from the seller
who is selling a particular asset.
Cost of Acquisition
Cost of improvement is capital expenditure incurred by an
assessee in making any additions/improvement to the capital
asset.
Cost of Improvement
4
Full value of consideration means the price at which a capital asset is been
sold to another party or buyer.
Full Value of
Consideration

5. CALCULATION OF CAPITAL GAINS
Short Term Capital Gains Long Term Capital Gains
Full value of consideration
Less: Expenses incurred exclusively for such
transfer or sale
Less: Cost of improvement
Less: Cost of acquisition
Full value of consideration
Less: Indexed Cost of Acquisition
Less: Indexed Cost of Improvement
Less: Expenses incurred exclusively for such transfer
or sale
Less: Expenses that can deducted from Sales
Proceeds
5

6. CAPITAL GAINS EXEMPTIONS
• Any long term capital gain, arising to an individual or HUF, from the transfer of building or land
appurtenant thereto and being a residential house property, (income from which is chargeable
under the head of ‘Income from House Property’) shall be exempt to the extent such capital gain
is invested in the purchase of one residential house property in India, within one year beforehand
or 2 years afterwards the date of transfer, and/or in the construction of a residential house
property, within 3 years after the date of such transfer provided the house property, purchased or
constructed, is not transferred within a period of 3 years from the date of its acquisition.
• If the new asset is transferred within a period of 3 years from the date of its acquisition, then for
the purpose of computing the capital gain on this transfer, the cost of acquisition of this house
property shall be reduced by the amount of capital gain exempt under this section earlier.
Section 54 - Profit on transfer of house property used for residence:
6

7. CAPITAL GAINS EXEMPTIONS (CONT’D)
• Any long-term capital gain, arising to an individual or HUF, from the transfer of any capital
asset, other than residential house property, shall be exempt in full, if the entire net sales
consideration is invested in purchase of one residential house in India within one year before or 2
years after the date of transfer of such an asset or in the construction of one residential house in
India within 3 years after the date of such transfer. Where part of the net sales consideration is
invested, it will be exempt proportionately.
• The proportionate exemption shall be that amount of capital gains which bears the same
proportion which the amount invested in the new house bears to the net consideration price of
the asset transferred i.e.,
• Long-term Capital Gain * Amount Invested ÷ Net Sale Consideration
Section 54F - Capital gain on transfer of asset, other than a residential home:
7

8. TAX SAVING INVESTMENTS
8
Sr.
No.
Tax Saving Schemes
Rate of Interest per
annum
Threshold limit for
exemption
Section
1. Sukanya Samriddhi Yojana (SSY) 7.6% 100000 80C
2. Post Office Saving Scheme 4.0% 10000 80TTA
3. 5 Year Post Office Recurring Deposit
Account
5.8% 150000 80C
4. Senior Citizen Savings Scheme (SCSS) 8.0% 50000 80C
5. Public Provident Fund (PPF) 7.1% 150000 80C
6. National Pension Scheme (NPS) 9.0% 50000 80CCD (1B)

9. LITERATURE REVIEW
• (K. Venkata Rami Reddy and Prof. A. Sreeram, July – December 2020) in their research work on “A review and
future directions of open-ended tax saving mutual fund schemes in India” mentioned that in the financial literature
review, investments in the Mutual Fund have increased, as investors see it as a vital strategy for short- and long term
investments. The present study aims to conduct a widespread evaluation and fusion of the academic literature review on
Mutual Fund investments. The authors are systematically reviewed, identify, and analyze 11 pertinent articles from 11
journals. The analysis delivers essential data on pragmatic studies, sample selection, study period, and data tools &
techniques. Finally, we provide discussions and suggestions, followed by the study's limitations for further research.
• In his study "Investor's attitude towards post office saving schemes in Cumbum town, "Gayathri (2014) found that
the respondents were satisfied with the post office schemes, but he also recommended that awareness and the rate of
interest be raised and that the most recent technology be used to speed up transactions. The attitudes of post office
deposit systems were unaffected by ICS. Investors' Attitude towards saving at the Post Office, by Kumar & Kannaiah
(2014), demonstrates that age, education, and income have no bearing on how investors feel about saving in the post
office. The study discovered that post office plans were chosen to meet the needs of the spouse and children. The study
also showed that the lack of stability in income earning has an impact on investors' decisions to make investments.
9

10. RESEARCH OBJECTIVES:
1. To be aware of capital gain exemptions and tax saving investments in order to save taxes as much as
possible.
2. To get to know how, when and where these benefits are taken into account.
3. To plan your own investments in the beginning of each and every financial year.
4. To make significant investment related decisions.
RESEARCH METHODOLOGY:
10
 I have used secondary data for this study as the study is descriptive. The reason that I chose secondary
data over primary data, is to get to know the process of filling of income tax return and get to know how
capital gain exemptions and tax saving investments help individuals to save their taxes. So that I can
utilize my learning to file income tax returns of my family members by myself.
 For my research of subject, I have gone through various books, websites and blogs on income tax laws
to get better understanding of such sections applicable on such scenarios.

11. SCENARIO – 1: CAPITAL GAIN EXEMPTIONS
11
Mr. Felix Gallardo is currently working at S & P Global and his sources of income are mentioned below.
Particulars Amount (In Rs.)
Salary 650000
Savings Bank Interest 5000
Fixed Deposit Interest 55000
Dividend Income 10000
Public Provident Fund 20000
School Fees 30000
Equity Linked Saving Schemes 60000
LIC 25000
Health Insurance 15000
Medical Expenditure 4000
Residential property sold at 16/12/2022 6500000
Such property acquired at 01/04/2004 300000
New residential property purchased on 05/04/2023 8000000

12. POSSIBILTY – 1: IF BENEFITS OF SUCH EXEMPTIONS ARE TAKEN INTO THE CONSIDERATION
12
Computation of Income of Mr. Felix Gallardo for the FY 2022-23
Particulars Amount (In Rs.)
Long term capital gain:
Acquisition of a property on 01/04/2004 300000
Residential property sold on 16/12/2022 6500000
Total capital gain 6200000
New Residential property purchased on 05/04/2023 8000000
Tax on LTCG as per Section 54D 0
Net Income 516000
Tax Rate 5%
Amount liable for tax 25800

13. POSSIBILTY – 2: IF BENEFITS OF SUCH EXEMPTIONS ARE NOT TAKEN INTO THE
CONSIDERATION
13
Computation of Income of Mr. Felix Gallardo for the FY 2022-23
Particulars Amount (In Rs.)
Long term capital gain:
Acquisition of a property on 01/04/2004 300000
Residential property sold on 16/12/2022 6500000
Total capital gain 6200000
Net Income 6716000
Tax Rate 15%
Amount liable for tax 1007400

14. SCENARIO – 2: TAX SAVING INVESTMENTS
14
Mr. Yash Panchal is currently working at Tally Solutions Pvt. Ltd. And his sources of generating such income in the FY
2022-23 are mentioned below.
Particulars Amount (In Rs.)
Salary 550000
Short Term Capital Gain 25000
Savings Bank Interest 7000
Fixed Deposit Interest 25000
Dividend Income 1000
Public Provident Fund 15000
5 Years Time Deposit 10000
Interest on Post Office Recurring Deposit 5000
LIC 25000
Health Insurance 10000
Medical Expenditure 5000
Senior Citizen Savings Scheme 100000
Sukanya Samriddhi Yojana 5000

15. COMPUTATION OF INCOME OF MR. YASH PANCHAL FOR THE FY 2022-23
15
Particulars Amount (In Rs.)
Salary after deducting standard deduction and adding STCG 525000
Other Income:
Savings Bank Interest
Fixed Deposit Interest
Dividend Income
Interest on Post Office Recurring Deposit
38000
7000
25000
1000
5000
Aggregate Income 563000
Less: Deductions:
Section 80C:
LIC
Public Provident Fund
Senior Citizen Savings Scheme
Sukanya Samriddhi Yojana
160000
145000
25000
15000
100000
5000
Section 80D:
Health Insurance
Medical Expenditure
15000
10000
5000
Net Income on which there is no liability to pay any tax 403000

16. FINDINGS
• Through my research work, I have gone through various books, websites, blogs and newsletters in order to get better
understanding of the procedure of filling an individual income tax return. I chose this topic because I worked as an intern
at J. J. Sheth & Co. which is a chartered accountant firm where I learned how to file income tax returns of clients who
dealt with transactions related to capital gains and tax saving investments as well. By reading such books related to the
laws of direct taxes, I have developed better understanding of how, when and where to take benefit of such exemptions
or deductions in order to save taxes. By following the given advice by my mentor, I learnt to implement those things into
real life and got better results.
• During the tenure of my summer internship program, I got a chance to file an income tax return of a client who sold his
property in Jaipur, Rajasthan and worried about paying higher taxes because he didn’t invest such amount of capital gain
neither into another property nor into the Capital Gains Account Scheme. My mentor asked me to file his return as he
knew that I have practiced this a few times before. While I was filling his income tax return, I got confused about which
section to apply in his case. So, to find the solution, I referred to the book published by the Income Tax Department and
the IT Department official website. By doing this, not only I realized my mistake but also I found a way to reduce the
taxes as the client made other significant tax saving investments during the financial year. So, I took benefit of Section
54F for capital gains and for tax saving investments, I claimed exemptions under Section 80C, 80D, 80TTA and 80CCD
to help him to pay the minimum tax possible.
16

17. CONCLUSION
All in all, with the help of my learnings at a chartered
accountant firm, I got to know that how, when, where
and in what scenarios to claim benefit of such
exemptions in order to save taxes. As I have developed
a depth knowledge of such sections related to capital
gain taxation as well as tax saving investments. By
taking the benefit of right section at the right time will
save you a lot of taxes. And from the beginning of
next financial year, I will be able to better plan my
significant investments which automatically help me
to save a lot of amount of taxes.
17

18. REFERENCES
• Direct Taxes Ready Reckoner with Tax Planning (24th
Edition) (AY 2023-24 and 2024-25) by Dr. Girish
Ahuja and Dr. Ravi Gupta
• Direct Taxes Ready Reckoner with Alternative Tax
Regime, Break-even Tables and Faceless Tax Regime
(46th Edition) (AY 2022-23 and 2023-24) by Dr.
Vinod K. Singhania
• https://cleartax.in/s/capital-gains-income
• https://groww.in/p/capital-gains
• https://www.investopedia.com/terms/c/capitalgain.asp
#:~:text=Investopedia%20%2F%20 Mira%20Norian-
,What%20Is%20a%20Capital%20Gain%3F,own%20i
s%20a%20capital%20asset.
• https://incometaxindia.gov.in/Documents/Left%20Me
nu/COMPANY-Income-fromcapital-gains.ht
18