The document provides an overview of the Indian income tax system. It outlines the five heads of income (or losses) including salary, house property, business/profession, capital gains, and other income. It explains how gross total income is calculated by adding the net income from each head and then subtracting various deductions. General deductions that can be claimed include investments under section 80C up to Rs. 150,000 and interest on education loans. Tax is then calculated based on slabs and surcharges may apply for higher incomes. The document also covers topics like capital gains taxation, exempt income sources, tax rates for individuals, and other relevant direct taxes.

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