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  1. 1. IN COME TAX <ul><li>Presented by- </li></ul><ul><li>Swati R. Bari </li></ul>
  2. 2. <ul><li>Introduction </li></ul><ul><li>Tax Free income </li></ul><ul><li>Gift Tax </li></ul><ul><li>Computation of gross Taxable income </li></ul><ul><li>Tax saving scheme </li></ul>Contents
  3. 3. The direct tax which is paid by individual to the Central Government of India is known as Income Tax. It is imposed on our income and plays a vital role in the economic growth &stability of our country. The Government is generating revenue through this tax-system. The word 'Tax' originated from the 'Taxation.' which mean 'Estimate.' Hence, 'Income Tax' mean 'Income Estimate,' which helps the government to know the actual economic strength of a person. It helps the Government to know the distribution of money among country's people. Introduction
  4. 4. The following incomes are completely exempt from Income Tax Without any upper limit.   1. Interest on PPF. 2. Interest on GOI Tax Free Bonds. 3. Dividends on Shares and on Mutual Funds. 4. Any Capital Receipt from Life Insurance Policies. i.e. sums received either on death of the insured or on Maturity of Life Insurance Plans. However, in case of Life Insurance Policies issued after March 31, 2004, exemption on Maturity payment u/s.10(10)D is available only if premium paid on any year does not exceeds 20% of the Sum Assured. Tax Free Incomes :
  5. 5. 5. Interest on Saving Bank Account in Post Office. 6. Long term Capital Gain on sale of shares and equity MF Dividend Income :   Dividend income from companies / equity – oriented Mutual Funds is Completely Exempt in the hands of investors. Dividend is also Tax Free in the hands of investors in case of debt – oriented Mutual Funds Schemes Tax Free Incomes…….
  6. 6. Gift Tax was abolished with effect from October 1, 1998. The gifts are no longer taxable in the hands of donor or donee. However, with effect from September 1, 2004, any gift received by an individual or HUF will be included in taxable income, provided the amount of gift exceeds Rs.50000/-. Gift Tax
  7. 7. <ul><li>Spouse </li></ul><ul><li>Brother or Sister. </li></ul><ul><li>Brother or Sister of Spouse. </li></ul><ul><li>Brother or Sister of either of parents of the individual. </li></ul><ul><li>Any lineal ascendant or descendant of the individual. </li></ul><ul><li>Any lineal ascendant or descendant of the spouse of the individual. </li></ul><ul><li>Spouse of the persons referred to in (2) or (6) </li></ul><ul><li>Gifts received on the occasion of marriage </li></ul><ul><li>Gift received under a WILL by way of inheritance are also tax free. </li></ul>Gifts received from following is Tax Free.
  8. 8. Income is Computed under the following. 5 Heads 1. Income from salaries 2. Income from House Properties 3. Profit & Gains of Business & Profession 4. Capital Gains 5. Income from Other Sources Computation of Gross Taxable Income
  9. 9. Salary or Pension Income <ul><li>Income under heads of salary is defined as remuneration received by an individual for services rendered by him to undertake a contract whether it is expressed or implied </li></ul><ul><li>The pay which you get has many components , like HRA . </li></ul><ul><li>Out of this income some things are deductible and after deducting the amount called Taxable income , on which you have to pay tax. </li></ul>
  10. 10. Income from House Property <ul><li>If the property is self occupied then the Income from House Property is treated as NIL. </li></ul><ul><li>If any loan is taken for the purchase of the property then the amount paid towards interest up to a maximum of Rs. 1,50,000/- is deducted from taxable income. </li></ul>
  11. 11. Income from House Property………… <ul><li>In case Property is given on rent, then we have to find out the : </li></ul><ul><li>Annual Rental Income </li></ul><ul><li>From this deduct Property Tax paid if any </li></ul><ul><li>From balance amount-deduct30% towards repairs & maintenance </li></ul><ul><li>From the residual figure- deduct the amount of interest paid on loan taken for the purchase of the property. </li></ul><ul><li>The resultant figure is the Income from House Property </li></ul>
  12. 12. Profit from Business / profession <ul><li>Income as arrived on the basis of Profit & Loss A/c </li></ul>
  13. 13. Income from Interest <ul><li>Interest Income from the following sources to be included in Gross Taxable Income </li></ul><ul><li>Interest on company deposits. </li></ul><ul><li>Interest on debentures/bonds. </li></ul><ul><li>Interest on savings bank account/ fixed deposits with banks. </li></ul>
  14. 14. Income from Interest…………. <ul><li>Interest on post office savings schemes like MIS, NSC, KVP etc. </li></ul><ul><li>Interest on private loans given to relatives, friends or any other entity. </li></ul><ul><li>Interest on government securities. </li></ul><ul><li>Note: Deduction u/s 80 L has been omitted now and accordingly, interest income from the above sources is Fully Taxable now. </li></ul>
  15. 15. Capital Gains <ul><li>Capital gain arises when certain assets like property (plot or a built up commercial / residential unit) or shares / mutual fund units / bonds etc are sold for a profit. </li></ul><ul><li>The treatment of capital gains is slightly different. </li></ul><ul><li>It mainly depends upon whether the capital gain (profit on sale) is Short Term or Long Term. </li></ul>
  16. 16. Short Term Capital Gain <ul><li>Capital gain is considered to be short term if immovable property is sold / transferred within THREE years of acquisition. </li></ul><ul><li>Similarly, if shares or other financial securities such as mutual fund units are sold within ONE year of purchase, the profit earned is treated as short term capital gain. </li></ul>
  17. 17. Tax Treatment on Short Term Capital Gain <ul><li>It is included in the gross taxable income like other sources of income and normal rates of tax apply, which depend on the gross taxable income from all sources including short term capital gains. </li></ul>
  18. 18. Tax Treatment on Short Term Capital Gain <ul><li>In case of Sale of equity shares or units of equity oriented Mutual Fund schemes, short term capital gains are taxed at a Flat Rate of 15%, irrespective of the tax slab on other sources of income, provided securities Transaction Tax is paid on such sale. </li></ul>
  19. 19. Long Term Capital Gain <ul><li>If Immovable Property is sold after THREE years of purchase, Or </li></ul><ul><li>Financial securities such as shares, discount bonds, units of open - ended or close – ended schemes of mutual funds are sold/redeemed/transferred after holding the same for more than Twelve Months, then the gain is considered to be long term capital gain. </li></ul>
  20. 20. Tax Treatment on Long Term Capital Gain <ul><li>With effect from October 1, 2004, long term capital gain on transfer of listed shares/units of equity oriented mutual funds schemes has been exempted from tax, provided securities transaction tax has been paid on such sale. </li></ul>
  21. 21. Long Term Capital Gain <ul><li>Non listed shares/units of equity oriented mutual fund schemes, tax is payable in respect of long term capital gains at a flat rate 20% and the amount of gain has to be adjusted for inflation. This inflation adjustment is known as indexation benefit. </li></ul>
  22. 22. Tax Saving Schemes: <ul><li>Life Insurance Premium. </li></ul><ul><li>Contributions to Employees Provident Fund/ GPF </li></ul><ul><li>Unit-Linked Insurance Plan </li></ul><ul><li>Contribution to Public Provident Fund Scheme (Max. Rs.70,000). </li></ul><ul><li>National Savings Certificates VIII </li></ul><ul><li>Tuition Fees Up-to Two Children. </li></ul><ul><li>Repayment of Housing Loan ( Principal) </li></ul>
  23. 23. <ul><li>Pension scheme of LIC of India or any other insurance company. </li></ul><ul><li>Subscription to eligible issue of units of Mutual Fund (ELSS). </li></ul><ul><li>Interest accrued in respect of NSC VIII issue. </li></ul><ul><li>Fixed Deposit with Banks having a lock – in period of 5 Years </li></ul><ul><li>Premium on Mediclaim Policy. </li></ul>
  24. 24. Life insurance Premium: <ul><li>Life insurance is a Very Good Investment. It gives Risk Cover, Tax Saving and Good returns. </li></ul><ul><li>It is a contract that pledges payment of an amount to the person assured (or his nominee) on the death of insured person. </li></ul>
  25. 25. <ul><li>Savings through life insurance guarantee full protection against risk of death of the saver. </li></ul><ul><li>Also, in case of demise, life insurance assures payment of the entire amount assured (with bonuses wherever applicable) </li></ul>
  26. 26. National Savings Certificates (NSC) : <ul><li>National Saving Schemes (NSC) is used to be one of the popular Income Tax Saving schemes. But nowadays it is not so lucrative. </li></ul><ul><li>This scheme is available throughout the year. </li></ul><ul><li>It can be operated singly, jointly, or by a minor with his/her parent or guardian. </li></ul><ul><li>Return on this scheme at interest rate of 8%. </li></ul>
  27. 27. <ul><li>The minimum investment limitation of the scheme is Rs.100/- and with no upper limit. </li></ul><ul><li>This scheme has a maturity period of 6 years. </li></ul><ul><li>There is a provision of loan on the basis of this scheme. </li></ul>
  28. 28. Public Provident Fund (PPF) : <ul><li>Under this scheme, there is a return at the interest rate of 8% p.a. </li></ul><ul><li>The minimum investment limit is Rs. 500/- and maximum limitation is Rs. 70,000/-. </li></ul><ul><li>It can be opened any time throughout the year. It can be operated either singly or jointly. In case of minor, with parent / guardian. </li></ul>
  29. 29. <ul><li>This scheme has a maturity period of 15 years. </li></ul><ul><li>Loan Facility is available. </li></ul><ul><li>Loan amount can be returned in maximum of 36 installments. </li></ul><ul><li>A person can withdraw an amount (not more than 50% of the balance). </li></ul>
  30. 30. <ul><li>Tax Benefit Under Section 80C of Income Tax Act, 1961 is available. </li></ul><ul><li>Interest on this scheme is tax free. </li></ul>
  31. 31. Mutual Fund (ELSS) / ULIP PLANS <ul><li>An ELSS (Equity Linked Savings Scheme) is a mutual fund scheme that invests in equity & equity-related securities. </li></ul><ul><li>ULIP Plans ( Unit Linked Insurance Plan) is a Plan that offers Tripple Benefit </li></ul><ul><ul><li>Tax Benefit </li></ul></ul><ul><ul><li>Insurance Cover </li></ul></ul><ul><ul><li>Benefit from the long term growth potential of equities. </li></ul></ul>
  32. 32. <ul><li>ULIP & ELSS are also eligible investments under section 80C of Income Tax Act 1961. </li></ul><ul><li>ELSS have a lock-in period of three years. This allows the investors to benefit from the long term growth potential of equities. </li></ul>
  33. 33. You Thank