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T.Z.A.S.P MANDAL‟S
PRAGATI COLLEGE Of
ARTS & COMMERCE
A Project Report on
Salaried Person
Submitted To
University Of Mumbai
For Semester 3 of
Master of Commerce ( Advanced Accountancy)
By
DHANASHREE BALLE - Roll No- 06
UNDER THE GUIDANCE OF
PROF. Dr. AVINASH SHENDRE.
Year 2017-18

T.Z.A.S.P Mandal’s
Pragati college of Arts & commerce Dombivli (E)
Certificate
This is to certify that Ms / Mr has worked & duly completed her/his project work for
the degree of Master in commerce under the faculty of commerce in the subject of
Direct Tax & her/his project is entitled , “ Salary :- Salaries of an Individual person”
Under my supervision . I further certify that the entire work has been done by the
learner under my guidance & that no part of its has been submitted previously for any
Degree or Diploma of any university.
It is her/his own work & facts reported by his / her personal findings & investigations.
Seal of the college
Name & Signature of Guiding
Teacher
Date Of Submission :-

T.Z.A.S.P Mandal
Pragati college of Arts & commerce, Dombivli ( E )
Re-Accredited by NAAC with „B+‟ Grade
Declaration by learner
I the undersigned miss Dhanashree . D. Balle here by, declare that the work embodied
in this project work titled “ Salary :- Salaries of an Individual persons.” Forms my
own contribution to the research work carried out under the guidance of Dr. Avinash
Shendre. Is a result of my own research work & has not been previously submitted to
any other university for any other Degree/ Diploma to this or any other university.
Wherever reference has been made to previous works of others, it has been clearly
indicate as such & included in the bibliography.
I here by further declare that all information of this documents has been obtained &
presented in accordance with academic rules & ethical conduct.
Dhanashree . D. Balle
Name & Signature of the learner
Certified by,
Name & signature of the Guiding Teacher

Acknowledgment
To list who all have helped because they are so numerous & the depth is so enormous.
I would like to acknowledge the following as being idealistic channels & fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.
I would like to thank my Principal , A. P . Mahajan for providing the necessary facilities
required for completion of this project.
I take this opportunity to thank our coordinator Dr. Avinash . Shendre. For her moral
support & guidance.
I would also like to express my sincere gratitude towards my project guide Dr Avinash
Shendre whose guidance & care made the project successful.
I would like to thank my college library, for having provided references books &
magazines related to my projects.
Lastly, I would to thank each & every person who directly or indirectly helped me in the
completion of the project especially my parents & peers who supported me throughout
my project.

Index :-
Chapter
Numbers
LIST OF THE CONTENT Page
Numbers
Chapter No. 1 Introductions 1 to 33
1.1 Meaning 1
1.2 Direct Tax 2
1.3 Definitions 3
1.4 Brief profile Study area 4
1.5 History 5
1.6 Classifications 6
1.7 Purpose & Effects 7
1.8 Significances 8
1.9 Importances 9
1.10 Basic Types Of Income Taxes 9
1.11 Types of Taxes 10
1.12 Types of Direct Taxes 11-12
1.13 Direct Tax code 13
1.14 Advantage of Direct Tax 14
1.15 Disadvantage of Direct Tax 15
1.16 List of exempted income 16
1.17 Difference between direct tax & Indirect Tax 17
1.18 Who are liable for tax 18
1.19 Heads of Income 19
1.20 Service tax 20
1.21 Income slabs 21-22
1.22 Tax collections from last 5 years 23
1.23 Tax policy reforms Financial Regulations 24-25
1.24 Indias tax reforms 26
1.25 The GST Guide 27
1.26 Tax penalties 28
1.27 Experts opinion online tax for Individuals 28
1.28 Income From salary 29
1.29 Residental status & taxability of income 30
1.30 Basis of charges 31-32
1.31 Deduction from salary 33
Chapter No. 2 Research Methodology 34-37
Chapter No.3 Review of literature 38-55
Chapter No.4 Data Analysis 56-83
Chapter NO.5 Conclusions & Suggestions 84-86

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1.1. Introduction
The finance minister recently announced the proposed Direct Tax code effective April
2011. The code aims at a comprehensive reform in the sphere of personal & corporate
taxation. We would however discuss the impact of the code on common people. To
safe the guard the interest of business , industry & workmen there are numbers of
chambers of commerce & trade unions but for common self employed people &
retired people there are none. The code is open for public discourse hence it should be
debated , discussed & recommendation need to be sent to finance ministry.
There is a great difference between “Code” & the “Act”. The government is trying to
bring in Direct Tax code instead of present system of “Tax under Finance Act”. The
code would be permanent affairs like “Cr P C” or “I PC”. Once tax act is converted in
to a code it would generally not be necessary to introduce change every year along
with budget. This is a reform which the government wants to bring in for the good of
the people. The code has proposed no change in the exemption limit of the personal
tax. It remains 160000for men, 190000 for women & 240000 for senior citizens. Yet
percentage of taxation has been reduced up to income of Rs. Ten lakh.
Prima facie, the tax liability will reduce significantly as the draft code proposes to tax
income up to Rs 10 lakh at 10%, that between Rs 10 lakh & Rs 25lakh at 20% & sum
in excess of that at 30%. Now people pay 10%tax only if his income is less than Rs
three lakh . A person drawing Rs 10 lakh now pays Rs 2.11 lakh as tax. If code is
implemented he would pay tax amounting to Rs84,000/-only. Is it not really good?
But all deduction now under 80c will vanish as it is available now except for a few
like new pension schemes, LIC etc! This means death nails on small saving schemes .
However deduction under 80c will be enhanced from Rs one lakh to three lakh. This
allowances would surely help generations next. But the exemption on retirement
benefits would vanish. The retirement savings will become taxable on with drawl , as
the draft code has proposed to usher in exempt – exempt-tax (EET) regime . The PPF
& PF will loose all its glamour & tax benefits.

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1.2. Direct Tax
A tax ( from the latin taxo) is a mandatory financial charge or some other type of levy
imposed upon a taxpayer ( an individual or other legal entity ) by a governmental
organization in order to fund various public expenditure. A failure to pay , or evasion of
or resistance to taxation , is punishable by law. Taxes consist of direct or indirect taxes &
may be paid in money or as its labour equivalent. Most countries have a tax systems in
place to pay for public / common / agreed national needs & government functions : some
levy a flat percentage rate of taxation on personal annual income , some on a scale based
on annual income amounts & some countries charged a tax both on corporate income &
dividends this is an often referred to as double taxation as the individual shareholders
receiving this payments from the company will also be levied some tax on that personal
income.
A direct tax is paid by directly by an individual or organization to an imposing entity . A
Tax Payer , For example , pays direct tax to the government for different purposes ,
including real property tax, income tax or taxes on assets . Direct tax are different from
indirect taxes , where the tax is levied on one entity , such as a seller & paid by another ,
such as a sales tax , paid by the buyer in a retail selling.
A government levy on the income , property , or wealth of people or companies. A direct
tax is borne entirely by the entity that pays it, & cannot be passed on to another entity.
Examples include corporation tax , income tax & social security contributions. Unlike
consumption taxes , direct taxes are based on the ability to pay principles but they
sometimes work as a disincentives to work harder & earn more because that would mean
paying more tax. See also progressive tax.

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1.3. Definitions
Taxation refers to compulsory or coercive money collection by a levying authority,
usually a government . The term taxations applies to all types of involuntary levies, from
income to capital gains to estate taxes . Though taxations can be a noun or verb , it is
usually referred to as an act , the resulting revenue is usually called “ Taxes”.
A government levy on the income , property or wealth of people or companies. A direct
tax is borne entirely by the entity that pay it , & cannot be passed on to another entity.
Examples:- Include corporation tax , income tax , & social security contributions. Unlike
contribution taxes ( see Indirect Tax ) , direct tax are based only ability to pay principles
but they sometimes work as a disincentives to work harder & earn more because that
would mean paying more tax . see also progressive tax.
A direct tax is referred to as a tax levied on person‟s income and wealth and is paid
directly to the government, the burden of such tax cannot be shifted. The tax is
progressive in nature i.e. it increases with an increase in the income or wealth and vice
versa. It levies according to the paying capacity of the person, i.e. the tax is collected
more from the rich and less from the poor people. The tax is levied and collected either
by the Central government or State government or the local bodies.
The plans and policies of the Direct Taxes are being recommended by the Central Board
of Direct Taxes (CBDT) which is under the Ministry of Finance, Government of India.
There are several types of Direct Taxes, such as:
 Income Tax
 Wealth Tax
 Property Tax
 Corporate Tax
 Import and Export Duties

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1.4. Brief Profile Study Area
Dombivli is a city in the Thane District of Maharashtra state in konkan division. It is
also known for being the Mumbai region‟s exist station to North India & south India.
Kalyan Dombivli is a twin city & a Muncipal corporation with its headquarters
located in kalyan in thane district in the Indian state of Maharashtra . It was formed in
1982 to administer the twin townships of kalyan & Dombivli.
Government of India Recently Announced Five cities of Maharashtra state for small
city project. Kalyan-Dombivli is one of Them. The other four cities are Aurangabad ,
Nashik, Nagapur & Thane.
Demographics. As of 2011 India census , kalyan Dombivli had a population of
1,246,381. Males constitute 52% of the population & Female 48% . Kalyan Dombivli
has an average literacy rate of 93.06% , Higher than the national average of 74.04%
Male literacy is 96.11% & Female literacy is 89.73%.
To study an Impact of Direct Tax on salaried person , Iam considering Dombivli West
area is a good platform because of high population as well as high income. Iam
considering Diferent wards Like Ward A , Ward B , Ward C , ETC.

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1.5. History
The modern distinction between direct taxes & Indirect taxes came about with the
passing of the 16th
Amendment in 1913. Prior to the 16th
Amendment , tax law in the
united state was written so that any direct tax were required to be directly apportioned to
the population , for example a state with 75% of the population in relation to another state
would only be required to pay direct taxes equal to 75% of the larger state.
This antiquated verbiage made it so many direct tax , such as personal income tax , could
not be imposed by the federal government due to apportionment requirements . However
, the passing of the 16th
Amendment changed the tax code & allowed for the levying of
numerous direct & indirect taxes.
"Most of the taxes of Ancient India were highly productive. The admixture of direct
taxes with indirect Taxes secured elasticity in the tax system, although more emphasis
was laid on direct tax. ... Salt tax was an important source of revenue and it was
collected at the place of its extraction.

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1.6 . Classification:-
Tax can be classified in to two types
Direct Tax Indirect Tax
Direct Tax :-
A direct tax is that tax whose burden is borne by the same person on whom it is levied .
the ultimate limits burden of taxation falls on the persons on whom the tax is levied . it is
based on the income & Property of a person .
The example of Direct tax are :- Corporation tax ,
Income Tax ,
Wealth Tax ,
Gift Tax ,
Property Tax.
Indirect Tax :-
An indirect Tax is that the tax which is initially paid by one individual , but the burden
which is passed over to some other individuals who ultimate bears it . it is levied on the
expenditure of a person .
Example of indirect Tax are :- Excise Duty , Sales Tax , Custom Duties ,Value Added
Tax ( VAT ).

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1.7 . Purposes & Effects
The levying of taxes aims to raise revenue to fund governing & / or to alter prices in
order to affect demand. State & their functional equivalents throughout history have used
money provided by taxation to carry out many functions. Some of these includes
expenditures on economic infrastructure (roads , public transportation , sanitation , legal
systems , public safety , education, health care systems ), military , scientific research ,
culture & the arts , public work , distribution, data collection & dissemination , & the
operation of government itself. A government‟s ability to raise taxes is called its fiscal
capacity.
When expenditure exceeds tax revenue , a government accumulate debt . A portion of
taxes may be used to services past debts . Governments also uses taxes to fund welfare &
public services . These services can include education systems , pensions for the elderly ,
unemployment benefits & public transportation, energy water & water management
systems are also common public utilities.
A tax effective changes relative prices of products . therefore , most economist ,
especially neoclassical economists argue that taxation creates market distortion & results
in economic inefficiency unless there are ( positive or negative ) externalities associated
with the activities that are taxed that need to be internalized to reach an efficient market
outcome. They have therefore sought to identify the kind of tax systems that would
minimize that distortion recent scholarship suggests that in the united state of America ,
the federal government effectively taxes investments in higher education more heavily
than it subsidizes higher education , thereby contributing to a shortage of skilled workers
& unusually high differences in pre tax earnings between highly educated & less
educated workers.
Governments use different kinds of taxes & vary the tax rates. They do this in order to
distribute that tax burden among individuals or classes of population involved in taxable
activities, such as the business sector , or to redistribute resources between individuals or
classes in the population Historically, taxes on the poor supported the nobility, modern
social security systems aim to poor support the nobility modern social security systems
aim to support the poor the disabled or retired by tax on those who are still working . In
addition taxes are applied to fund foreign aid & military ventures to influences the
macroeconomic performances of the economy or to modify patters of consumptions or
unemployment with an economy , by making some classes of transactions more or less
attractive.

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1.8. Significance :-
The following reasons may be listed in support of the gradual increases in direct tax in
the developing countries :-
1) Reduction of inequalities in the distribution of income & wealth :- Direct Tax on
account of their progressiveness will serve as a means to reduce inequalities of incomes
& wealth which is an important egalitarian goal of any welfare state .
2) Restriction of conspicuous consumption :- Direct tax by causing a reduction in the
disposable income of the rich section will tend to check their high marginal propensity to
import & restrict their conspicuous consumption.
3) Mobilisation of Resources :- Direct Tax will mop up economic surplus from the
community & make it available to the government to carry on its capital forrmation
process under planning.
4) Reducing Inflationary Pressure :- Direct tax will help in arresting inflation by mopping
up the excessive purchasing power of the community .
5) Equity In Tax Burden :- Direct tax will lead to equity in tax burden , as they conform
to the ability – to –pay – principle .
6) Built – in – Flexibility :- Direct tax can be made income elastic within an appropriate
tax structure so that they can serve as an instrument of built in flexibility in the budget .
Thus, as an economic stabilizer , their role should not be underestimated in a developing
economic .

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1.9. Importance
A direct Tax is imposed directly on the tax payer & paid directly to the government by
the ones on whom it is imposed . it cannot be shifted by the tax payer to someone .
Some important direct tax imposed in India are as under :-
1) Income Tax – It is levied on & paid by the same person according to the different tax
brackets as defined by the income tax department . it is imposed by the government on all
the income i.e generated by various entities within their jurisdiction . All individuals &
Businesses have to file an income tax return every year to determine whether they owe
any taxes or are eligible for any tax refund.
2) Corporate Tax – It is also known as corporation tax . It is the tax on all the incomes or
gains generated by corporations . It is generally levied on the profits earned . The
companies & business organization are tax on the income under the provisions on income
tax rules.
3) Inheritance ( Estate ) Tax – An inheritance tax which is also known as estate tax or
death duty is a tax which arises on death of an individuals . It is the tax on the estate , or
total value of money & property , of a person who has died.
4) Gift Tax – It is the tax that an individual receiving the taxable gift pays to the
governments.
1.10. Basic types of Income taxes :-
Personal income tax , levied on income of Individuals , Households , partnership & sole-
proprietorships. 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.

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1.11. Types of Taxes
Prevelance of various kinds of taxes is found in India . Taxes in India can be either direct
or indirect . However , the types of taxes even depends on whether a particular tax is
being levied by the central or the state governments or any other municipalities .
following are the some of the major types :-
Direct Taxes :- It is names so because it is directly paid to the union government of India
. As per a survey , the republic of India has witnessed a consistent rise in the collection of
such taxes over a period of past years . The visible growth in these tax collections as well
as the rate of taxes reflect a healthy economical growth of India. Besides that , it even
portrays the compliances of high tax along with better administration of taxation. To
name a few of the direct taxes , which are imposed by the Indian Governments are :-
* Banking Cash Transaction Tax , * Corporate tax , * capital gains tax , * Double tax
avoidance treaty , * Fridge benefits Tax , * securities transaction tax , * personal income
tax , * Tax incentives.
InDirect Taxes :- As opposed to the direct tax , such a tax in the nation is generally
levied on some specified services or some particulars goods . An indirect tax is not levied
on any particular organization or an individuals. Almost all activities which falls within
the periphery of the indirect taxation are included in the range starting from
manufacturing goods & delivery of services to those they are meant for consumptions . A
part from these the varied activities & services which are related to import , trading ect.
Are even included within this range . This wide range results in the involvement as well
as implementations of some or other indirect tax in all lines of business.
Usually , the indirect taxation in the Indian republic is a complex procedure that involves
laws & regulations which are interconnected to each others . These taxations regulations
even include some laws that are specified to some of the states of the country.

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1.12. Types of Direct Taxes :-
1.10. Income Tax
 Introduced by James Wilson.
 Income tax act was passed in 1886 , which was amended in 1922 , 1939 & 1947.
 Income tax in India levied & collected on the basis of finance act passed every
year under central budget & the income tax act 1961 , aided by the income tax
rules , 1962.
 Payable by individuals , HUF , AOP , BOI , AJP , Cooperative societies ,
partnership firms , companies etc.
Corporation Tax
Income tax paid by limited companies is called corporation tax.
It is levied on profits made by the companies as per the rates given in the finance
act passed by parliament annually .
All profits companies are required to make advance payment annually .
Corporation tax forms the major chunk of income tax in India .
Dividend Tax
 Limited companies in India are required to pay dividend tax at 10 % on
the dividend paid by them to their shareholders.
 The tax is in addition to the corporation income tax
Capital Gain Tax
Capital gain tax was introduced in 1947 by finance minister liquat ali khan.
It was abolished in 1950 & Reintroduced in 1956.
The tax is applicable to individual as well as companies.
It is payable on gain realized from capital assets .

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Wealth Tax
 It was introduced by Prof. Kaldor in 1957.
 Wealth tax is imposed on wealth or assets by individuals.
 It is levied every year on the total value of a person‟s property or wealth or gains
 It is payable on 1 % on the net wealth exceeding rupees 15 lakh.
Wealth tax is applicable on individuals, HUFs or companies on the value of their
assets in a given financial year on the date of valuations.
„ Net Wealth ‟ here includes, unproductive assets like cash in hands above Rs.
50000, second residential property not rented out , cars , gold jewellery or bullion,
boats , yachts, aircrafts or urban land . it does not include productive assets like
commercial property , stocks , bonds , fixed deposits , mutual funds etc.
Gift Tax
It was introduced in 1956.
With effect from 1 november 1988 gift tax was abolished due to its low yield to the union
government.
To complement estate duty & also to prevent large scale avoidance of estate duty

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1.13 Direct Tax Code
The direct tax code seeks to consolidate & amend the law relating to all direct taxes,
namely , income tax , dividend distribution tax , fridge benefits tax & wealth tax so as to
establish an economically efficient , effective & equitable direct tax systems which will
facilitate voluntary compliances & help increase the GDP ratio. Another objectives is to
reduce the scope for disputes & minimize litigation.
DTC to be implemented from 1st
April 2012 : pranab finance ministers Pranab Mukherjee
on Monday said the direct tax code which will replace the income tax act is proposed to
be implemented from 1st
April 2012.
It is designed to provide stability in the tax regime as it is based on well accepted
principles of taxations & best international practices It will eventually pave the way for a
single unified taxpayer reporting systems.
The salient features of the code are :-
 Single code for the direct taxes : all the direct taxes have been bought under a
single code & compliances procedure unified . This will eventually pave the way
for a single unified taxpayer systems.
 Use of simple language: with the expansion of the economy the number of
taxpayer can be expected to increase significantly . The bulk of the tax payer will
be small , paying under moderate amount of tax . Therefore, it is necessary to
keep the cost of compliances low by facilitating voluntary compliances by them.
This is sought to be achieved inter alia , by using simple language in drafting so
as to convey with clarity the intent scope & amplitude of the provisions of law.
Each subsection is short sentences intended to convey only one point. All
directions & mandates to the extent possible have been conveyed in active voice .
similarly the provisions & explanations have been eliminated since they are
incomprehensible to non experts. The various conditions embedded in a
provisions have also been nested. More importantly keeping in view the fact that a
tax is essentially a commercial law extensive use of formulae & table has been
made.
 Reducing the scope for litigation: whichever possible an attempt has been made to
avoid ambiguity in the provisions that invariably give rise to rival interpretations.
The objective is that the tax administrator & the tax payer are ad idem on
provisions of the law & the assessment results in a finality to the tax liability of
the tax payer.

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1.14.Advantages of Direct Taxes:
1. Social and economic equity -
This form of taxation indicates social justice as it is based on the ability to pay. The
economic situation of persons determines the rate at which they are taxed. Also the
progressive nature of direct taxation can help reduce income inequalities. This is well
depicted by the slabs and exemption limits for different sections like women, individuals
and senior citizens.
2. Certainty of tax to be paid -
The tax payer is certain as to how much tax is to be paid, as the tax rates are decided in
advance. The same implies for the government where it can estimate the tax revenue
from direct taxes.
3. Economical and lower cost mechanism -
Collection of direct taxes is generally economical. Like in the case of personal income
tax, the tax can be deducted at source (TDS) from the income or salaries of the
individuals. So, the government does not have to spend much in tax collection as far as
personal income tax is concerned.
4. Relatively Elastic -
Increase in the income of individuals and companies, leads to increase in the yield from
direct taxes also. An increase in tax rates would increase the tax revenues. Thereby, direct
taxes are relatively elastic.
5. Controls inflation -
Direct taxes can help control inflation. When the inflation is on the uptrend, the
government may increase the tax rate. With an increase in tax rate, the consumption
demand may decline, which in turn may help reduce inflation.

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1.15. Disadvantages of Direct Taxes
1. Tax Evasion -
We have higher tax evasion in our country due to high tax rates, poor documentation and
corrupt tax administration. This helps in suppressing the correct information about
incomes easily and thereby with manipulating accounts, evasion on tax is encouraged.
2. Impacts capital formation -
Direct taxes can affect savings and investments. Due to tax implications, the net income
of individuals reduces, in turn reducing their savings. Reduction in savings results in low
investment, affecting the capital formation in the country.
3. Arbitrary rate of taxation -
The direct taxes are arbitrary. There is no objective defined for determining the tax rates
of direct taxes. Also, the exemption limits in personal income tax, wealth tax, etc., are
also determined in an arbitrary manner. Therefore, direct taxes may not always fulfill the
requirement of equity.
4. Inconvenient -
Direct taxes are inconvenient owing to the lengthy procedure of filing returns. For most
people payment of direct tax is a task to convince oneself to pay a part of their income as
tax to the state. This is a boost to evade tax further. It is also inconvenient in terms of
maintaining accounts in a proper form.
5. Imbalance in Sectoral taxation -
In India, there is sectoral imbalance as far as direct taxes are concerned. Certain sectors
like the corporate sector is heavily taxed, whereas, the agriculture sector is 100% tax free.

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1.16. List of Exempted Income :-
As stated in section 4.2 exempted incomes are divided in to three categories . fully
exempted incomes , partially exempted incomes & income of sure organizations. It
necessity though be mentioned that in sure cases a limit to the quantum of ERA is fixed
to prevent misuse of the provisions . e.g casual income is exempted up to Rs. 5000 only .
let us now list the income under these categories :-
The following is the list of income exempted under section 10.
 Sure that income in the hands of individuals
Agricultural income Sec. 10(1)
Sums received from HUF sec 10(2)
Casual & non recurring income sec 10(3)
Travel concessions or assistances sec 10(5)
Allowances & perquisites for foreign services to citizens of India sec 10(7)
Death cum retirement gratuity sec. 10(10)
Commuted value of pension sec. 10(10A)
Encashments of earned leave sec. 10(10AA)
Retrenchment compensation to worker sec.10 ( 10B)

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1.17. Difference between Direct Tax & Indirect Tax
Basic For comparison Direct Tax Indirect Tax
Meaning Direct tax is referred to as
the tax , levied on persons
income & wealth & is paid
directly to the government
Indirect Tax is referred to as
the tax , levied on person
who consumes on goods &
services & is paid indirectly
to the government
Nature Progressive Regressive
Incidence & Impact Falls on the same persons Falls on different persons
Types Wealth tax , Income tax
,Property Tax , corporate
tax , Import & Export
Duties
Central sales tax , VAT ,
Service Tax , STT ( security
transaction tax ) , Excise
duty , custom duty
Evasion Tax evasion is possible Tax evasion is hardly
possible because it is
included in the price of
goods & services
Inflation Direct tax helps in reducing
the inflation
Indirect Tax promotes the
inflation
Imposition &
collection
Imposed & collected from
assesses i.e Individual ,
HUF , Company , Firms,
etc.
Imposed on & collected
from consumers of goods &
services paid & deposited
by the assesse
Burden Cannot be shifted Can be shifted
Event Taxable income or wealth
of the assesse .
Purchases / sales /
manufactures of goods &
provisions of services.

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1.18. Who are Liable for Tax ?
 Individuals
 Hindu undivided families ( HUF )
 Companies
 Firms ( Partnerships )
 Association of persons or bodies of individuals
 Local authorities ( Municipal Bodies )
 Artificial Juridical persons.
Structure of Indian Tax System
Central Government State Government Local Bodies
Income Tax Sales Tax Tax on Properties
Service Tax Stamp Duty Octroi
Customs Duties State Excise Tax on markets
Central Excise Land Revenue Use charges for utilities
like water supply ,
Drainage , etc.
Sales Tax Duty on Entertainment.
Tax on professions &
callings
Importance Of Tax
 Economic Growth
 Government Revenue
 Private Savings
 Restraining the consumers demand.

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1.19. Heads of Income
The total income of a person is segregated in to five Heads :-
 Income from Salaries
 Income from House Property
 Profits & Gains of Business Professions
 Capital Gains &
 Income from Other Sources.
Sales Tax on Intellectual Property
Sales tax was charged on sales of goods under the sales of goods act,1930. Central sales
tax is payable on the sales of all goods by a dealer in the course of
 Inter - state trade or commerce ;
 Outside a trade or ;
 In the case of import into or export from India.
Sales tax is levied on the sales of moveable goods . The levy of sales tax on intangible
has been marred by controversy.
Theory & Basis of Taxation
Theory :-
1) The Existence of the government is a necessity
2) The government cannot continues without a mean to pay its expenses
3) the government has the right to compel its citizens & property within its limits to
contribute.
Basis :-
1) Taxation is based on the reciprocal duties of protection & support between the
government & its people
2) Government receives taxes from the people which is used to perform functions of
government & other Benefits
3) Benefits Received Theory.

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1.20. Service Tax
 It is a tax which is payable on service provided by the service provider
 The tax came in to effect in 1994 & was introduced by the then finance minister
Dr. Manmohan . Singh
 119 services are taxable services in India . These taxable services are specified in
section 65(105) of the finance act , 1994. Section 64 of the Finance act , 1994.
Current Service Tax Rate
 The current service tax rate is 12%
 (+) Education cess @ 2% = 0.2%
 Senior & higher education cess @ 1% = 0.1%
 Effective service tax rate = 12.36%
Services on which Tax is imposed
 In Relation to Telecom services.
 In Relation to General Insurance Business.
 In Relation to insurance auxiliary services by an insurance agent.
 In Relation to transport of goods by road in a goods carriage,
where the consignor or consignee of goods.
 In Relation to business auxiliary service of distribution of mutual
fund by a mutual fund distributer or an agent
 In Relationship to sponsorship service provided to any body
corporate or firm located in India.

21
1.21. Income Tax Slabs | Income Tax Rate for 2017-2018 and 2016-2017 :-
Income Tax Slab Rates for FY 2017-18(AY 2018-19)
PART I: Income Tax Slab for Individual Tax Payers & HUF (Less Than 60 Years
Old) (Both Men & Women)
Income Slab Tax Rate
Income up to Rs 2,50,000 No Tax
Income from Rs 2,50,000 – Rs 5,00,000 5%
Income from Rs 5,00,000 – 10,00,000 20%
Income more than Rs 10,00,000 30%
Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.
Cess: 3% on total of income tax + surcharge.
PART II: Income Tax Slab for Senior Citizens (60 Years Old Or More but Less
than 80 Years Old)(Both Men & Women)
Income from Rs 3,00,000 – Rs 5,00,000 5%
Income from Rs 5,00,000 – 10,00,000 20%
Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.
Cess: 3% on total of income tax + surcharge.

22
PART III: Income Tax Slab for Senior Citizens(80 Years Old Or More) (Both Men
& Women)
Income from Rs 2,50,000 – Rs 5,00,000 No Tax
Income from Rs 5,00,000 – 10,00,000 20%
Surcharge: 15% of income tax, where total income exceeds Rs.1 crore.
Cess: 3% on total of income tax +surcharge.
How to Calculate Income Tax from Income Tax Slabs?
Income Slab Tax Rate Tax Calculation
Income from Rs 2,50,000 –
Rs 5,00,000
10% (Rs.5,00,000-2,50,000)
Rs 25,000
Income from Rs 5,00,000 –
10,00,000
20% (Rs.8,00,000-5,00,000)
Rs 60,000
Income more than Rs
10,00,000
30%
nil
Tax Rs 85,000
Cess 30% of Rs.85000 Rs 2,550
Total tax in FY 2016-17
(AY 2017-18)
Rs 87,550

23
1.22. Tax collected from last 5 years :-
The government on April 29 released its first dump of income tax data since 2000,
which is when the Indian Income Tax statistics publications was discontinued. This
Data transparency has been called for by a number of academic & think-tanks around
the world, the most prominent of which is French economists Thomas Piketty.
Piketty, who in his trip to India in January , public debated with chief economists
adviser Arvind Subramanian on the need for data transperancy & the need to increase
tax revenues.
The greatest amount of details in these documents of details is on direct tax
collection – a combination of personal & corporate income collection – which doesn‟t
paint a very strong picture. For instance , which direct tax collected nearly doubled
from 3.7crores rupees in 2009-10 to 7.4lakh crore rupees in 2015-16 , its shares as a
percentage of total taxes has dropped by 10percentage points over the same time
frame.
Financial Year Corporate Tax Income Tax Other Direct
Tax
Total
2009-2010 244725 132833 505 378063
2010-2011 298688 146258 1049 445995
2011-2012 322816 170181 990 493987
2012-2013 356326 201840 823 558989
2013-2014 394678 242888 1030 638596
2014-2015 428925 265772 1095 695792
2015-2016 454419 286801 1075 742295

24
1.23. Tax policy , Reforms , Financial Regulations :-
Economic indicator suggest that India is on the threshold of becoming one of the most
consistently vibrant economies of the world. The transformation in the global
economics environment in the last 2 decades has been accompanied by significant
reforms in tax policies & systems by various countries. India was no exception. India
tax policy has witnessed a significant & comprehensive reforms since the early
nineties when market based economies reforms were initiated. Guided by tax
neutrality , broadening of tax base, rationalization of tax & a more effective tax
administration & policy reforms India with no exceptions. This paper assesses the
reform in India‟s tax policy. This paper further breaks down the advancement of tax
framework in India in the recent years. The paper portrays & surveys the presentation
of New types of Immediate also circuitous taxes, their income & value suggestions &
the victories accomplished in their usage. The paper reasons that after eight years long
time of change enhancing the tax framework remains a real test in India. In this paper,
an attempt has been made to an encapsulated tax policy initiatives & ongoing reforms
, financial regulatory framework & opportunities in India.
There have been significant changes in expense frameworks of nations with a wide
assortments of monetary frameworks & levels of improvements & the most recent
two decades. The inspiration of these changes has differed starting with one nations
then on to the next & the push of changes has varied occasionally relying upon the
improvement method also reasoning of the times. In numerous creating nations , the
quick explanation behind assessments changes has been the need to upgraded incomes
to meet approaching financial emergencies. While the portion of assessment income
to GDP in India is low by worldwide principles, peripheral rates are high. Financial
hypothesis recommends that high assessments rates may discourage business , venture
& development . The observational confirmation is blended . cross country
concentrates on for the most part affirm the negative effect of a high taxation rates on
a monetary movements , yet there results are not vigorous. Firm level proof & re-
enactment results are more convincing , supporting the see that high expenses rate
have an antagonistic impact on development & multistate financing & speculations
choice high duty rates might likewise help the development of the “Shadow
economy”, convey cost as far as inescapable duty receipts & lower benefits
development. A standout amongst the most critical explanations behind late
assessments changes in numerous creating also transitional has been to advance an
assessment framework to meet the necessity of worldwide rivalry. The from a
dominatingly halfway arranged advanced method to market based asset portion has
changed the point of view of the part of the state being developed. The move from an
open segment based, substantial industry ruled import substituting industrialization
methodology to one of apportioning assets as indicated by business sector signals has
required systematic changes in the assessment framework.

25
In a fare headed open economy, the expense framework ought not just raise the
fundamental incomes to give the social & physical base yet additionally minimize
brands . consequently , the duty frameworks need to conform the necessities of a
market economy to guarantee worldwide intensity.
To enhance the duty admission & reserve funds & ventures rates , which are low by
provincial standards an arrangements of duty changes have been considered in India.
Their primary purpose is to join lower statutory rates with base increasing to
acknowledge more incomes while bringing down the minor taxation rates &
evacuating contortions. This thus ought to encourage development , heading to an
“expansionary” monetary change.
As in different nations , the systematic changes in the expense framework in India in
the 1990s where the result of emergency however the change were adjusted on the
premises of point by point dissection . The target of this paper is to investigate the
development of the India charge framework with unique references to the systematic
changes in the outline & usage of the structure & operation of the assessments in
Indian government common wealth . In area, the advancement of assessment
framework changes, elective standards utilized in change practices in diverse nations
& the best practice methodologies to change are portrayed to give a skeleton to
investigating the Indian expense change activities embraces until the exhaustive
expenses change activity was taken up in 1991. The notable gimmicks of extensive
assessments change since 1991 & its effects on incomes are broke down in segment
III. The last segment brings out the significant inadequacies even now persevering in
the assessment framework & records the difficulties confronted by the administration
in creating a coordinated assessments framework in the Indian government country.

26
1.24. India’s Tax Reforms :
Some of the tax reforms in India are as follows:-
1.24.1. Direct Taxes :
Income tax :
In 1973-74 , there were 11 income tax pieces running from 10 for every penny to 85
for every penny. Figuring in a 15 for every penny extra charge, those gaining over ₹
200000would pay a minimal tax rate of 97.5for every penny ; including riches tax this
would climb to 107 for every penny. Subsequently there were expensive disincentives
to proclaim one‟s genuine income & this helped make a deceptive society. Significant
changes in 1985-86 lessened the quantity of tax rates from 8 to 4 , 7 brought the
peripheral tax rate down from 60 for every penny to 50 for every penny . Further, the
riches tax rates were lessened. Additional changes occurred in 1991-92 & 1996-97 &
today there are only 3 tax rates with a 10 for every penny surcharge for those
procuring above Rs 1 million for every annum. Still , such issues as the incidental
advantages tax & certain exclusions , stay to be determined.
Corporation Tax :
Until around a decade prior, there were a few distinctive rates for diverse sorts of
organizations (e.g. nearly held & generally held ) – going from 45 for every penny to
65 for every penny - & broad tax preference existed . Tax rates were steadily
diminished to 40 for every penny,& further to 35 for every penny in 1997-78. Besides
, the refinement between generally held & nearly held organizations was dropped &
the rates brought together. Despites these changes in any case there has been much
over & over again on the profit tax , & the arrangements of least option tax (MAT)
keeps on being Questionable.

27
1.25. The GST Guide :-
A standout amongst the most pressing region for further changes is the indirect tax
framework. In particular the present government has focused on implementing a
national merchandise & administrations tax ( GST ) by 2010. It remains an open
questions concerning whether this due date will be met , yet – once set up the GST
will be of tremendous centrality. This is evidence from India‟s involvement with the
state level VAT which albeit still inadequate has as of now had an unmistakable effect
on the indirect tax framework.
Going ahead it ought to be remembered that India‟s tax „Task Framework‟ will
remain the center of tax policymaking & is key to the eventual fate of the GST. The
seventh timetable of the constitutions divides the ability to tax between the middle &
the states & wherever conceivable keeps away from simultaneously taxes. This
standard of partition infers that the cores taxes are not to be given to the state , & the
other way round. For example, while extract is gathered by the focal point deals tax is
gathered by the states. Also taxes on farming income must be forced by the states &
those on non rural incomes must be gathered by the inside. On the other hand , given
that the tax bases are interdependent , this makes various escape clause & leaves
abundant spaces for tax shirking & avoidance . For the GST to be effectively
actualized there is accordingly a requirements for it to be a simultaneous , yet blended
, framework as in such nations.

28
1.26. Tax Penalties :-
The major number of penalties initiated every year as a ritual by I-T authorities under
section 27(1)( c ) which is for either concealment or for furnishing inaccurate
particulars of income.
If the assessing officer or the commissioner(appeals) of the commissioner in the
course of any proceeding under this act is satisfied that any person .
(b) has failed to comply with a notice under subsection (1) of section 142 or
subsection (2) of section 143 or fails to comply with a directions issued under sub
section (2A) of section 142 or , ( C ) has concealed the particulars of his income or
furnished inaccurate particulars of such income, 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 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.
1.27. Experts opinion online tax for Individuals:-
 Import form – 16 & populate forms.
 Use guided interview or skip around.
 Verify your returns by tax expert with small fee.
 We keep 100% confidentially of your information.
 Submission of your signed ITR V to CPC Vengaluru.
 Your round email support
 Accuracy guaranteed.
 File return from across the globe.( Best for persons on the move)
 Reliability – Guaranteed 99.9% uptime using AWS.
 Track your return & processing by the IT Departments.
 Expert team consist of chartered accountants, law attorney & qualified tax
professionals to make sure you get maximum tax benefits.
 Dedicated tax experts to analyze every deduction you are entitled to &
guarantee the accuracy.

29
1.28. Income From Salary
The meaning of term salary for purpose of income tax is much wider that what is
normally understood . every payment made by employer to his employees for services
rendered would be chargeable to tax as income from salaries . The term salary for the
purposes of income tax act 1961 will include both monetary payments ( e.g. Basic
salary , bonus , commission , allowances , etc.) as well as non monetary facilities are (
e.g. housing accommodation , medical facility , interest fees loans etc. )
Salary means & include remuneration in any form due for personal services as per the
contract of employment or services . This necessarily means , that remuneration will
be treated as salary which is received out of the relationship of employer & employee.
If the payer is employer & payee is employee , then whatever the remuneration in any
form paid by the employer to the employee will be treated as salaries.
The remuneration will be termed as salary on Wages . There is no difference between
the salary paid to the general manager & wages paid to a helper in a factory. In both
the cases it is compensation for either service rendered or work done . This
compensation will be treated as income chargeable to tax under the head salaries in
both the cases . It is possible that an individual might have received salary from more
than one numbers.
In such cases , each sources of salary is taxable under the head salaries .whatever
payments received by an employees in the form of salary , perquisites , allowances ,
gifts etc. is required to be taken in to consideration while computing taxable income
under the head salaries . the employer may be any persons such as individuals , HUF ,
a firm , a company , a local authorithy etc. Now we will discuss the provisions of
income tax u/s 15 to17 in details to understand how the taxable income is ascertained
under the Heads of Income , Salaries.

30
1.29. Residential status & Taxability of Income
Nature of
Income
Resident &
ordinary
Resident
Resident But
not ordinary
Resident
Non Resident
Income
Received in
India .
Taxable Taxable Taxable
Income which
accrues or
arises in India .
Income deemed
to be received
in India .
Income deemed
to be accrues in
India.
Income which
accrues &
arises outside
India from a
business
controlled from
India /
profession setup
in India.
Taxable Taxable Not taxable
Any other
income which
accrues or
arises outside in
India.
Taxable Not taxable Not taxable
Note :-
1) Indian income is taxable in all cases , whether of an ordinary resident , or a not
ordinary resident , or a non resident . India includes income received or accruing or
arising in India , or deemed to be received in India.
2) Foreign income of an ordinary resident is wholly taxable.
3) Foreign income of a not ordinary resident is taxable only if derived from a business
controlled or professions setup in India.

31
1.30. Basis of Charge
1. Section 15 deals with the basis of charge. Salary is chargeable to tax either on
„Due‟ basis or on „ Receipt‟ basis , whichever is earlier.
2. However , where any salary , paid in advance , is assessed in the year of
payment , it cannot be subsequently brought to tax in the year in which it
becomes due.
3. If the salary paid in arrears has already been assessed on due basis , the same
cannot be taxed again when it is paid .
Examples :-
1. If a draws his salary in advance for the month of April 2014 in the month of
march 2014 itself the same becomes chargeable on receipt basis & is to be
assessed as income of the P.Y. 2013-14. i.e., A.Y. 2014-15. However the
salary for the A.Y.2015-16 will not include that of April 2014
2. If the salary due for march 2014 is received by a later in the month of April
2014. It is still chargeable as income of the P.Y. 2013-14. i.e .,A.Y. 2014-15
on due basis. Obviously , salary for the A.Y.2015-16 will not include that of
March 2014.
Advance Salary
Advance salary is taxable when it is received by employee irrespective of the
fact whether it is due or not . It may so happen that when advance salary is
included & charged in a particular previous years , the rate of tax at which the
employee is assessed may be higher than the normal rate of tax to which he
would have been assessed . section 89(1) provides for reliefs in these types of
cases.

32
Loans or Advance against salary
Loan is different from salary. When an employee takes a loans from his employer ,
which is repayable in certain specified installments , the loans amount cannot be
brought to tax as salary of the employee.
Similarly , advance against salary is difference from advance salary. It is advance
taken by the employee from his employer . This advance is generally adjusted with
his salary over a specified time period . It cannot be taxed as salary.
Arrears of salary
Normally speaking , salary arrears must be charged on due basis. However there are
circumstances when it may not be possible to bring the same to charge on due basis .
for example if the pay commission is appointed by central governments &
recommends revision of salaries of employees , the arrears received in that connection
will be charged on receipt basis. Here, also relief basis under section 89(1) is
available.
Provident Fund
Provident fund scheme is a scheme intended to give substantial benefits to an
employee at the time of his retirement. Under this scheme , a specified sum is
deducted from salary of the employee as his contribution towards the funds . The
employer also generally contributes the same amount out of this pocket to his fund
The contribution of the employer & the employee are invested in approved Securities
, Interest earned there on is also credited to the account of the employee. Thus the
credit balance in a provident fund account of an employer consist of the following :-
1. Employees Contribution
2. Interest on employee‟s contribution
3. Employers contribution
4. Interest on employer‟s contribution.

33
1.31. Deduction From Salary
The income chargeable under the head salaries is computed after making the
following deduction
i) Entertainment Allowances ( section 16 (ii) )
ii) Professional Tax ( section 16 ( iii ) )
1) Entertainment Allowances – Entertainment allowances received is fully taxable
& is first to be included in the salary & thereafter the following deduction is to be
made ; However deduction in respect of entertainment allowances is available incase
of government employees . The amount of deduction will be lower of :-
a) one-fifth of his basic salary or
b) 5000 or
c) Entertainment Allowance received
Deduction is permissible even if the amount is received as entertainment allowances
is not proved to have spent.
2) Professional Tax on Employment - Professional tax or taxes on employment
levied by a state under article 276 of the constitution is allowed as deduction only
when it is actually paid by the employee during the previous year . If professional tax
is reimbursed or directly paid by employer on behalf of the employee. The amount so
paid is first included as salary income & then allowed as a deduction under section 16.
-----------------

34
Research Methodology
Due to the various reasons mention in the Review of Literature chapter. The learner
decided to collect the data by using both sources i.e. primary source and secondary
source as
given below
1) Primary Source/ Primary Data:
The primary data will be collected by preparing interview schedule, questionnaire and
pilot visit to study area,
2) Secondary Source/ Secondary Data: Secondary data which have already been
collected by some other persons for their purposes , secondary data are usually in
shaped of finished products. For study purposes the required secondary data is
collected by using various published sources. Some government publications are also
used for national and state level information. General taxation information is collected
from various types of office records, committee reports and articles and books
published on the issue.
To supplement and corroborate the information and findings generated through the
primary data researcher also collected information from secondary sources. For this
purpose researcher made extensive use of books, journals, magazines, research
articles, periodicals, newspapers, government publications, government reports,
Society of Indian Automobile Manufactures (SIOM), websites, Google search,
internet, published and unpublished theses and research work etc.
External Data – Was generated from Internet , websites etc.

35
Data Collection :-
1) In our project we have made use of both primary as well as secondary Data.
2) Primary Data was collected through a questionnaire . A questionnaire was prepared
consisting of 30 questions & 30 respondents filled the questionnaire. During this process ,
contact was made with the respondents ,Questionnaire administered & data recorded.
3) The Questionnaire were administered through direct surveys . Therefore information
collected was authentic & validated.
4)secondary data has been collected mostly from the Internet. Relevant Newspaper &
Magazines articles have been referred to.
Sampling:-
Random samples were chosen from different age groups. We used online ( Google docs )
as the medium for collection of secondary data. A total of 30 questionnaires were filled in
order to come at an outcome.
During the research the contact was administered using online forms & thus no area
based.
Sampling was done , also the nature of project did not require any extensive area
sampling.

36
Objectives :-
The concept of tax was initiated with a view to generate government revenue in its
very beginning stage. In course of time it has been utilized for various purposes.
 To Raise government revenue for development & welfare programmes in the
country.
 To maintain economies equalities by imposing tax to the income earners &
improving the economic conditions of the general people.
 To encourage the production & distribution of the products of basic needs &
discourage the production & harmful ones.
 To discourage import trade & protect the national industries.
The primary purpose of taxation is to raise revenue to meet huge public expenditure.
Most governmental activities must be financed by taxation. But it is not the only goal.
In other words, taxation policy has some non-revenue objectives. Truly speaking, in
the modern world, taxation is used as an instrument of economic policy. It affects the
total volume of production, consumption, investment, choice of industrial location
and techniques, balance of payments, distribution of income, etc.
Scope of the study
There are seven types of person prescribed in the Act viz. individual, partnership firm.
Company, association of persons, local authority, and artificial judicial person. Any
person can be assesses, if he fulfills the terms and conditions as mentioned in the Act.
The scope of the study is limited to the income-tax services provided by the income-
tax consultants to the individual, firm and company assesses only.
Limitations of the study:
Under the Income-Tax Act, all types of incomes are covered for tax purpose.
Much care has been taken for inclusion of all types of legal income under its
fold. Illegal income if it is detected is also taxed under the Income-Tax Act,
1961. There is variety of economic activities that leads to income. It is very
difficult to classify them but for study purpose Researcher has classified these
activities under 4 categories viz.
Business , profession , employment , vocation

37
Hypothesis
The following hypothesis were framed for the present study :
Hypothesis 1 :
Ho1: The tax consultants face problems while providing consultancy services to their
clients due to unawareness of tax-payers regarding tax laws and procedures.
H 11: The tax-payers are aware about tax laws and procedures.
Hypothesis 2 :
Ho2 : The tax consultants face problems while providing consultancy services to their
clients due to improper book-keeping and documentation by the tax-payers.
H12 : There is proper book-keeping and documentation by the tax-payers.
Hypothesis 3 :
H03: The tax consultants face problems while providing consultancy services to their
clients regarding electronically filing of returns.
H13: There is no problem regarding electronically filing of returns

38
Literature Of Review :-
To prepare this chapter , the researcher has taken the reviews of various books ,
research articles , government reports & publications of eminent personalities &
author as well as the review of reputed websites also taken.
In recent year , India has been viewed as an attractive & dynamic investment
destinations , & has witnessed an increase presence of multinational enterprises (
MNEs) & a consequential increase in cross border trade. This has created many
opportunities to the government for improving tax system of the country . In India
since the inception of New Economic Policy ( NEP ) in 1991 , many economic
reforms have been announced & introduced. One major reform undertaken is
“Taxation Reforms ”. Government of India has initiated a host of taxation measures
after the ushering of economics globalization in India. The effects of taxation reforms
on business community , in making the Indian products & service competitive at
global level.
In this backdrop the present research study makes at attempt to evaluates the reforms
& restructuring that have taken place in the Indian taxation system , during post
globalization & liberalization of the economy based on the reactions of the corporate
undertaking representing different industry sector & individual tax experts across the
country.
Taxation Policy has been a widely debated issue all over the world. A large number of
studies have been conducted covering different aspects of income tax structure such
as personal income tax, capital gains taxation, agricultural taxation, efficiency of
income tax administration etc. over the years. In this chapter, the available literature
was studied to get an insight into the main objectives of the study. The review of
literature is confined to India only as income tax legal frame work varies from country
to country. Moreover, reports of important committees constituted by Government of
India have also been reviewed.

39
Grant Richardson (2008) (1)journal of international accounting , auditing &
taxation 17(2008)67-78.
This study builds on the work of cultural dimensions & tax evasion across countries
using multiple measures of tax evasion to gain additional evidence on the subject.
Moreover , this study extends the preliminary international tax evasion model the
relation between national cultural dimensions & tax evasions . To examine , along
with culture the impact of legal , political ,& religious variables on tax evasion across
countries . Based on data from 47countries , & after controlling for economic
development , the regression results indicates that the higher the level of uncertainty
avoidance & the lower the level of individualism , legal enforcement , trust in
government & religiosity , the higher is the level of tax evasion across countries .
These findings remains robust to multiple measures of tax evasion. Governments
policymakers should find the result of this study useful in assessing the likelihood of
tax evasion from cultural , legal , political & religious perspectives & in developing
tax reform policies to reduce tax evasion
Grant Richardson (1)
The relationship between culture & tax evasion across countries : Additional
Evidence & Extensions.
VANITA RANI
Vanita rani 2010 had undertaken research on Taxation Of Income in India – A
study of post liberalization in Punjabi University , Patiala. The researcher
examine the taxation of income in India during post – liberalization period & policy
perspective . The study analyses the growth of income tax revenue performances of
Income tax department & perception of tax professionals regarding income tax system
in India . The study finds that :
a) The government has tried to achieve the objectives of social welfare by providing
various incentives for Education , Health , savings , pension schemes etc. At the same
time the government has adopted certain measures for widening tax based such as
introduction of PAN , e-filing of income tax returns , online tax accounting systems
etc.
b) The shares of Direct Taxes in total tax revenue of central government , no. of
income tax assesses &income tax GDP ratio showed an upward trend ,
c) Maharashtra & Delhi remained best performing states in terms of shares in the
total income tax revenue.

40
Arora R.S. & Kumar (2005) attempted to study performance of Income tax
performance on the basis of secondary data collected from various reports of
comptroller Auditor general of India during the period of 10 years from 1991 – 92 to
2001 – 02. The study revealed that number of assesses & tax revenue increased ,
whereas cost of collection declined during the study period. Further number of
pending assessments , outstanding refunds claims & number of mistakes in
assessments increased considerably . the study emphasized on improving the
efficiency of Income tax department & suggested the recruitment of tax officers , their
proper training outsourcing of routine activities , simplification of tax procedures &
adoption of computer based technology for achieving the same.
Torgler (2006) tried to examine the citizen's outlook towards tax compliance in India.
The study observed the impact of non-economic factors on three tax compliance
variables namely justification of tax evasion, corruption and claiming government
benefits without justification. The author applied regression technique on micro data
taken from the 4th wave of World Values survey ( 1991- 2001 ). The results indicated
the education , national pride , religiosity & age had a positive impact on compliance.
Women & self employed had a higher willingness to comply tax rules. It was also
observed that lower middle class had the lowest willingness to comply tax rules .
Agarwal S. P. (Dr)(2001) in his article “Public Provident Fund Account – A
Matchless Investment Scheme.” Published in SOUTHERN ECONOMIST, Feb 15,
2001 concluded that Public Provident Fund (PPF) account is most beneficial
investment for all categories i.e. salaried class, retired persons or businessmen either
tax-payers or non taxpayers.

41
Kumar (2006) Attempted to evaluate income tax revenue efficiency of 17 major
states of India for the period 1989-90 to 2000-01 by using Stochastic Frontier
Approach. The study found that the state of Karnataka showed maximum revenue
efficiency followed by Punjab , Bihar and Uttar Pradesh were at the bottom with least
efficiency preceded by the state of Arunachal Pradesh. It was also found that ranks of
different states with regard to their revenue efficiency remained stable over the period
of study, indicating that poor performing states showed no improvement over the
years. He highlighted that high income tax rates and exemption limit had a negative
effect on income tax revenue. However, personal income and tax base had a positive
effect on tax revenue. Author opined that intensive audit for richer section of society,
simplification of tax rules, introduction of pragmatic tax rates and good governance
were needed for increasing revenue efficiency.
Kumar, Nagar & Samanta (2007) Tried to examine the effectiveness of direct tax
administration in India by applying econometric model. They took in to account
collection of personal income tax & corporation Tax at pre-assessments & post
assessments stage . Tax enforcement index was constructed by applying principal
component analysis for the period 1986- 87 to 2003-04 .the study found that TDS &
advance tax , considered as voluntary compliances contributed 33.88 % & 45.45% of
the total collection in personal income tax & corporation tax respectively. The
remaining revenue was collected through regular assessment , levy of penalty &
interest recovery . The author opined that perceived inequity of tax systems ,
complexity of tax laws , lack of fairness in penalty systems & weak taxpayer
educations programmes were main reason for poor voluntary compliance. The study
further highlighted that there was a need to build a proper information systems . &
database for improving effectiveness of income tax administration. In , the end the
researcher suggested for maintaining a proper balance between the services to
taxpayer & enforcement of the tax laws to promote voluntary compliances.

42
Singh & Sharma ( 2007 ) made an attempt to study the perception of tax
professionals with regard to Indian Income Tax System by collecting primary data
from 100 tax consultants operating in Punjab and Haryana. They tried to investigate
the role of tax consultants played in the revenue collection process by helping their
clients in understanding the complex tax system and meeting their legal obligations.
Factor Analysis of data showed that seven factors –reduction in tax evasion, extension
of relief to taxpayers, incentives for dependents and honest taxpayers, broadening the
tax base, e-filing of returns, adequacy of deductions and impact of exempt-exempt tax
system played an important role in determining the effectiveness of Indian tax system.
It was observed that most of the tax consultants were satisfied with tax rates.
However, majority showed dissatisfaction with regard to price level adjustment. It
was also observed that most of the taxpayers consulted tax experts because they found
it cheap. While concluding the authors suggested for adjustments of Income tax rates
according to price level changes , broadening of tax base , strict measures against tax
evaders , extensive use of TDS , consideration to number of dependents for tax rates
purpose & establishments of good relationship with tax payers .
Datar (2010) in his article entitled "Why the Code must be shelved" expressed
his views about proposed Direct Taxes Code. He opined that people would have to
waste a lot of time in understanding the new provisions of income tax law and CBDT
would have to issue numerous circulars and frame several rules all over again. He
expressed his apprehension that proposed Code would neither improve efficiency nor
tax collection due to deep rooted corruption. He felt that fault is not with existing
Income Tax Act, but the manner in which it is administered. In the end, he concluded
that there is no ground for wholesale replacement of the existing Act rather
amendments could be carried out. Empirical studies related to Income Tax System
have highlighted certain weaknesses of Income Tax System such as inadequate
structure of Income Tax Department to meet the challenges posed and responsibilities
cast on it, overburdened income tax officials, unhealthy service conditions in the
department, lack of systematic plan for computerisation and increase in number of
pending assessments and outstanding refunds.

43
Bezborah & Singh (2005) pointed out the weaknesses of sales tax structure which
included lack of uniformity in tax rates, multiplicity of rates, cascading nature,
pyramiding effect and revenue loss due to incentives. While reporting essentials of
good sales tax structure, they opined that VAT was a good alternative for sales tax.
However, VAT also has some black spots. Further, they brought out implementation
problems of VAT in India. They also discussed the issues of uniformity of rates,
removal of CST, making service tax VAT able, unification of taxes, threshold limit
and refund mechanism; and concluded that implementation of VAT in India should
not be delayed further.
Empowered Committee (2005) laid down the roadmap of state-level VAT in
India in the White Paper, which consisted of three parts. In Part-I, justification of
VAT and background were discussed. Problems of double taxation and multiplicity of
taxes were cited as the major drawbacks of sales tax structure. The merits of VAT
were reported to be input tax credit, abolition of other than VAT taxes, rationalization
of overall tax burden, self assessment by dealers, transparency and higher growth in
revenue. These points included: input tax credit, its coverage and carrying over;
treatment of opening stock; compulsory issue of tax invoice, cash memo or bill;
registration; small dealers and composition scheme; tax payer‟s identification
number; return; procedure of self-assessment of VAT liability; audit; declaration
form; incentives; other taxes; penal provisions; coverage of goods under VAT; VAT
rates and classification of commodities. Implementation of VAT to the extent of 100
per cent of loss in the first year, 75 per cent in the second year and 50 per cent of the
loss in the third year of introduction of VAT. Other related issues discussed were:
phasing out of Central Sales Tax (CST), need for including imports under VAT chain,
decision on collection and appropriation of service tax, need for close interaction with
trade and industry, and comprehensive campaign at state level to communicate the
benefits of VAT to common people, traders and industrialists in simple and
transparent manner.

44
M. Govinda Rao (2005) Indian tax system has come a long way from the narrow
based, complicated and confiscatory to the one that is far more efficient. Over the
years, the thrust and direction of reforms have been to improve revenue productivity
while minimising distortions. The reform to convert the state level sales tax into VAT
this year is a major initiative. The recent focus on tax administration promises rich
dividends. Despite reforms since 1991, much remains to be done to make the tax
system broad-based, productive and efficient. In corporate tax, excise, customs and
sales taxes, revenue concentration on diesel and petrol has high efficiency costs. The
personal income tax continues to be narrow based. The reforms in tax administration
promise increased revenues and, hopefully, that will provide the elbow room
necessary for calibrating future reforms.
Grant Richardson (2008) This study builds on the work of cultural dimensions
and tax evasion across countries using multiple measures of tax evasion to gain
additional evidence on the subject. Moreover, this study extends the preliminary
international tax evasion model The relation between national cultural dimensions and
tax evasion. To examine, along with culture, the impact of legal, political, and
religious variables on tax evasion across countries. Based on data from 47 countries,
and after controlling for economic development, the regression results indicate that
the higher the level of uncertainty avoidance and the lower the level of individualism,
legal enforcement, trust in government, and religiosity, the higher is the level of tax
evasion across countries. These findings remain robust to multiple measures of tax
evasion. Government policymakers should find the results of this study useful in
assessing the likelihood of tax evasion from cultural, legal, political, and religious
perspectives, and in developing tax reform policies to reduce tax evasion.
Krithika Babu (2008) Value added tax which has come into force in almost all
Indian states and union territories, is a multiple system of tax on sale of goods. The
scope of the study is limited to Madurai district. The target respondents are the users
of pharmaceutical products irrespective of the gender. The sample size for this study
is restricted to 30 respondents. The sampling method that is adopted for this study is
convenience sampling structured questionnaire was administered on the respondents.
The study finds that the respondents are aware about the concept of Value Added Tax
this shows that the awareness level is very high among teaching and the non teaching
community. Among the respondents most of them have found changes in the prices of
the pharmaceutical products which they say have been increased to a certain extent

45
A. Krishnamoorthy (2011) To accelerate the pace of economic development it is
necessary that the state Government should raise increasingly larger resources. One of
the thorniest problems facing State financial system today in its inability to generate
adequate resources for carrying a expanding activities. In the Indian federal set up, the
states play an important role in accelerating and sustaining growth. The Indian
constitution assigns important responsibilities to state in many sectors such as
agricultural development, infrastructure, poverty alleviation, water supply and
irrigation, public order, public health and sanitation. In addition, they have concurrent
jurisdiction in several areas like education, electricity, economic and social planning
and family planning. The composition of receipts and expenditure of the government
sector in India reveals that while the state government collect about one-third of the
total government sector receipts, they incur more than three-fourth of the total
expenditure on social service and more than half of the total expenditure on economic
services. The states ability to undertake and perform the development functions
adequately and effectively in critically determined by their fiscal position.
Om Prakash & A.S. Sidhu (2011) State that developing economy like India , tax
occupies a strategically important position in the overall development of the country ,
due to its significant contribution to the national exchequer , which is ultimately spent
on the overall development of different sectors of the economy . The study analyzes
the impact of direct tax reforms on direct tax reforms of Indian economy in terms of
various economic indicators & compares it with the pre-reform period. The study
reveal that tax reforms introduced during the post –liberalization period could not
generate the result as desired. The reduction in direct tax rates could not lead to better
tax compliance in a much desired manner. The researchers opine that , the tax
reforms has increased the numbers of assesses but the resultant increase in the tax
revenue has not been sufficient. The major shares of taxes comes from low income
groups. This in effectiveness will widen the gap between rich & poor & will lead to
further inequality in the society. The study also argues that , there is again a very
strong to review the tax reforms polices being followed in the post – liberalization
period.

46
SARKAR ( 2004 ) examined various issues related to tax incentives in India by
comparing same with other countries viz. United kingdom , united states of America,
Japan , Singapore, Malaysia & Bangladesh. It was observed that all these economies
adopted some form of tax incentives & exemptions for economic development in
desired direction . However , in India tax incentives provisions where more in
numbers & had been provided for a long time as compared to other economies.
Author opined that data available on tax incentives in India was less effectives for
analytical interpretation. In the lights of constraints , study conclude that tax
incentives schemes had been successful in mobilizing savings & capital formation in
India during the post independence era. The main suggestions of the study were to
make tax policy more realistic , to keep tax machinery free from politics & to spread
tax awareness among common people.
Holger Strulik and Timo Triborn (2010) say, macroeconomic studies of tax policies
in dynamic general equilibrium usually assume that reforms hit the economy
unexpectedly and last forever. The study explores how previous result change when
we allow policy changes to be pre-announced and of finite duration and when these
facts are anticipated by households and firms. Quantitatively the author demonstrates
a head start advantage from pre-announcement that is never caught up by a surprising
reform. The study shows that, impulse responses of important variables like firm
value, dividends, and investment differ qualitatively depending on whether the reform
comes expected or not. It was also able to demonstrate a genuine welfare gain from
temporary tax cuts.
Reference: Holger Strulik and Timo Triborn (2010), “Anticipate Tax Reforms
And Temporary Tax Cuts : A General Equilibrium Analysis”, Journal of
Economic Dynamics & Control, Vol. 34, No. 10 pp 2141-2158.

47
Dheenadhayalan (2011) in his article “No Cheer for Salary Class Tax Payers”.
Published in Southern Economist , March 15, 2011. Concluded that the savings
which will be generated from the relaxation in the income tax slabs will not prove to
be substantial for the common main in order to counter raising inflation. Therefore the
2011-12 Budget has failed to bring cheer to the Indian individual salary class. Tax
payer as finance minister Pranab Mukherjee did not make any major announcements
to impress the segment.
Gopal Nathani (2011) in his article “Good news for portfolio management
scheme (PMS) investors” published in TAXMAN’S corporate professionals.
Today, Analytical studies , Direct tax laws , may 1to 15, 2011 concluded that the
taxation of income from share transaction is a vexed issue. The author opines that the
portfolio investments route is not just profit making , but it is a mean to a secured
maximized return. The very object to undertake investments through portfolio
manager within defined parameters is itself a sufficient pointer to hold that he profit
made on sale of such investments would be capital in nature being chargeable under
the head „Capital Gains‟.
Pawan. K. Agarwal (1991) This study focused on estimating the responsiveness of
personal income tax as a result of a change in inequality in the distribution of income.
He concluded that an increase in tax inequality in the distribution of income among
the tax payer increases yield of personal income tax in India. The estimated elasticity
1.17 will vary with the rise & fall of inequality during 1966-67 to 1983-84.

48
Task Force on Direct Taxes (2002) constituted under the chairmanship of Mr.
VijayKelkar by Ministry of Finance, Government of India submitted its report
in 2002. It was asked to suggest measures to rationalize and simplify direct taxes,
improvement in taxpayers service and redesign procedures for strengthening
enforcement so as to improve complianceof direct tax laws. It recommended the
following measures:
The income tax department must increase expenditure on tax payers services.
The Permanent Account Number should be extended to cover all citizens and
therefore serve as a Citizen Identification Number.
The department should set up a structure for Electronic Data Interchange(EDI) with
some of the major departments.
The Government should establish national tax information network (TIN) on a build,
operate and transfer basis [BOT].
The basic exemption limit must be raised to Rs. 1.00 Lac for individuals and HUFs.
Standard deduction under the head salary should be eliminated.
The number of tax slabs should be reduced.
Maximum marginal rate of tax should be moderate.
Personal income tax base should be broadened by eliminating some tax incentives.
Corporate tax rate should be reduced.
Dividend should be exempted from tax in the hands of shareholders.
Minimum alternate tax under section 115 JB and tax exemptions under section 10A
and 10B of income tax Act should be omitted.
(Rao, 2005) In his research paper on Tax system reforms in India achievement
andchallenges ahead focuses on the union and state level reforms. He state that the
reforms arejust the beginning and considerable distance in reforming the tax system is
yet to be covered.

49
Hagaragi, S.B. (1998) Journal “University News” and Shodhganga INFLIBNET
Centre, had undertaken research on “Rationalisation of Personal Taxation: A
Study of Tax on Salary Income” in Gulbarga University, Gulbarga. The researcher in
the study discusses the various components of salary under the provisions of Income
Tax Act. The study is mainly primary data based and a sizeable number of
respondents have been consulted by administering questionnaire. The researcher
highlights the disparities and redundancies existing in salary taxation of the
employees. The researcher makes a long list of suggestions to simplify and rationalize
the tax structure for the benefit of tax payers as well as tax collector. The limitation of
the study is it relates to one head of income and the suggestions are relate to that head
only.
(Kumat, 2014) In his research paper on Taxation laws of India- overview and
fiscalanalysis focuses on the overview of Indian tax system and challenges ahead. He
thinks that there should be a coordinated consumption tax system. He also states that
improving the productivity of Indian tax system continues to be a major challenge in
India.
(Jha, 2013) In his research paper on Tax structure in India& its effect on corporate
and individual in India suggests that high dependence on indirect taxes should be
reduced and direct taxes should be in increased on super rich to compensate the
losses. He also states that corporate tax evasion techniques like transfer pricing should
be checked.

50
Committee Reports
Standing Committee on Direct Tax Code Bill - 2010: Income tax in India is
governed by the income tax act , 1961 & this act has become very old. It has been
amended & modified many times since 1961. This has made the Act complicated &
difficult to interpret, leading to many disputes & court cases. The government wished
to have a modern tax code in consonance with the needs of modern economy. The
direct taxes code ( DTC) bill , when passed will replace the existing income tax act
1961 & the wealth tax act 1957. The first draft of the direct taxes code came up for
public discussions in august 2009. It proposed some significant changes like removal
of most of the tax exemptions putting most of retirement products like PF, PPF & new
pension systems (NPS)in Exempt-Exempt- Tax Category and a substantial widening
of the income tax slabs applicable to individuals. Based on the responses and
suggestions to the first draft of DTC the Government came with the second draft in
2010, with several modifications. The same was reviewed by the Parliamentary
Standing Committee and it is yet to be decided in the Parliament.
Expert Committee on General Anti-Avoidance Rules (GAAR) (2012) : In July
2012,The then Prime Minister Dr. Manmohan Singh constituted an expert committee
under the chairmanship of Dr. Parthasarathi Shome. The terms of reference of the
committee were toreceive comments from stakeholders and general public on the
draft of GAAR guidelineswhich have been published by the Government on its
websites and finalise the GAAR guidelines.
Kelkar Committee (2002)13 C.S.Prasad, Vibha Mathur, Anup Chaterjee
(2007),“Sixty Years of Indian Economy 1947 to 2007”, New Delhi, New Century
Publications , p. 1049 : The Direct and Indirect Tax Reforms Committee was set up
by the Government ofIndia in July 2002 under the chairmanship of Dr. Vijay L.
Kelkar. The major objectives of the committee were to recommend measures for
simplification and rationalization of direct and indirect taxes. Consequently two task
forces were set up. The committee suggested various measures under direct taxes like,
expansion of tax payer services both qalitatively and quantitatively. Easy access to tax
payers through internet and e-mail and extension of facilities such as Tele-filing and
Tele-refunds and in case of indirect taxes the task force recommended customs
clearance to be based on trust and to be uniformly applied to all importers and
exporters, multiplicity of levies to be reduced. On service tax the task force suggested,
the implementation of service tax on comprehensive basis.

51
Research Articles
Research papers pertaining to the topic, published in recent years, in researchjournals,
have been reviewed and some of them are briefly presented below.
Peter J. Lambert (1993) Peter J., Lambert, (1993), “Evaluating Impact Effects of
Tax Reforms”, Journal of Economic Survey, Vol.7, No.3, pp 205-242. In his
survey provides coverage of the inputs from the theory side which go into the
empirical analysis of impact effects of tax reforms. Inequality. Social welfare,
progressivity and horizontal inequity effects are considered. The value judgments
inherent in selecting the target group for analysis, specifying welfare through
household utility, equivalizing incomes and otherwise incorporating differences in
household needs into utilitarian analysis, are all explained.
Draft Notification of amendment of Rule 17A and Form 10A of the Income-tax Rules,
1962 –comments and suggestions thereof.
Vide Finance Act, 2017, a new clause (ab) was inserted in sub-section (1) of
section12A of the Income-tax Act, 1961 („the Act‟) w.e.f 01.04.2018 to the effect that
where a trustor an institution, which has been granted registration under sections 12A
or 12AA of the Acthas subsequently adopted or undertaken modification of the
objects and such modification does not conform to the conditions of such registration,
then such trust or institution shall be required to obtain registration again by making
an application within a period of thirty days from the date of such adoption or
modification of the objects.
As per the Memorandum related to Delegated Legislation laid on the floor of the
Parliament along with the Finance Bill, 2017, the form and manner in which an
application of registration u/s 12(1)(ab) shall be made to the Principal Commissioner
or Commissioner for registration of the trust or institution subsequent to modification
of its objects, is required to be prescribed. The rules for making an application for
registration of charitable or religious trusts under section 12A of the Act are laid down
under Rule 17A of the Income-tax Rules, 1962 („the Rules‟). As per the Rules, the
application, for registration of charitable or religious trusts under section 12A of the
Act, is to be made in Form 10A. Accordingly, subsequent to the aforesaid amendment
to the Act, Rule 17A and Form 10A are proposed to be amended. In this regard, draft
notification providing for the amendment of Rule 17A and Form 10A has been
framed and uploaded on the website of the Income Tax Department
www.incometaxindia.gov.in for comments from stakeholders and general public.

52
Sushil Chandra , ( 2016-17) , Financial Express.
Income taxpayer base moved up substantially to 6.26 crore at the end of the last fiscal,
from nearly 4 crore earlier, CBDT Chairman Sushil Chandra said today.
Income taxpayer base moved up substantially to 6.26 crore at the end of the last fiscal,
from nearly 4 crore earlier, CBDT Chairman Sushil Chandra said today. Clearing the air
on disclosure of bank account details of non-resident Indians (NRIs), expats, as well as
foreigners with investments in private equity in India, Chandra also said that such
accounts need to be disclosed only when a refund is due to the assessee. The chairman of
the Central Board of Direct Taxes (CBDT) said that post demonetisation the department
has taken a host of measures to increase tax base and the statement of financial
transaction (SFT) report filed by banks shows widening of taxpayer base. “As on date, we
have got 6.26 crore assessees. It is a myth that we have 3-4 crore… (These) assessees
who have filed returns, paid advance tax or tax has been deducted at source. This is a
large jump from earlier years,” he said speaking at the Income Tax Day celebrations
here.
The challenge before the taxmen now remains how to widen the tax net and officials are
working towards it, he said. Chandra said that with the enactment of the amended Benami
law, the tax officials have found out clusters and persons who have invested money in
real estate without filing tax returns. The department has also taken enforcement action
and under the law, 233 properties has been attached. With regard to reports on NRIs
having to disclose overseas bank account details in tax returns, Chandra said “providing
bank account detail is optional and only has to be provided for claiming refunds”.

53
Income Tax Return (ITR) Filing: How to save tax on salary; Pay no tax on
income of over
Rs 10 lakh. ( Financial Express)
Even though the I-T Act allows various tax-saving exemptions and deductions, rarely
a person is
able to use them.
Paying taxes is not a pleasant experience for anyone. It becomes more and more
painful as your income rises because your tax liability also rises with your income. If
you are a salaried individual earning more than Rs 10 lakh in a year, the current
income tax rates might scare you. It‟s because your income enters the slab with the
highest tax rate. Even though the I-T Act allows various tax-saving exemptions and
deductions, rarely a person is able to use them optimally.
“Broadly speaking, there are two major ways to reduce your tax liability. Firstly, you
can get your salary restructured in such a way that you can avail maximum tax
benefits of all the allowances and perquisites which are part of your salary. Secondly,
you make use of all the tax-saving investment options offered by the I-T Act. In fact,
if you carefully plan your taxes well in advance, you can efficiently minimise your tax
liability or even bring it down to zero even if your income exceeds Rs 10 lakh,” says
Chetan Chandak, Head of Tax Research, H&R Block India.
Tax saving through salary restructuring
The easiest way to save your taxes is to get your salary restructured from your
employer so that you have to pay as less TDS as possible. Let‟s have a look at various
components of the salary of a typical individual to understand how each component
can help you reduce your tax outgo.
House Rent Allowance: Rs 1.2 – Rs 1.5 lakh
If you are working at a place where you do not own any house and are staying in a
rented house, you can include HRA as a part of your salary. Assuming you fall in the
Rs 12-lakh tax bracket, you can easily get HRA tax exemption in the range of Rs 1.2
to Rs 1.5 lakh.

54
Case studies related to Income From Salaries.
1. can notional interest on security deposits given to the landlord in respect of
residential premises taken on rent by the employer & provided to the employee,
be included in the perquisite value of rent-free accommodation given to the
employee? CIT v. Shankar Krishnan (2012)349ITR0685(Bom.)
Facts of the case:- The assesse , a salaried employee was provided with rent free
accommodation being a flat in Mumbai, by his employer company . The monthly rent
paid by employer in respect of the said flat was 10000 per month. The employer had
given an interest free refundable security deposit of 30lacs to the landlord for renting
out the said premises. The assesse employed computed the perquisite value on the
basis of rent of 10000 paid by his employer to the landlord, since the same was lower
than 10% (now 15%) of salary.
Assessing officer‟s contention :- The assessing officers, however, contended that
since the employer had given interest free deposit of 3000000 to the landlord interest
@12% on the said deposits is required to be taken in to consideration for estimating
the fair rental value of the flat given to the assesse & accordingly he enhanced the
perquisite value of the residential accommodations provided to the employee by such
notional interest. The commissioner upheld the decisions of the assessing officer.
Tribunal‟s observations :- The tribunals observed that, as per rule 3 of the income tax
rules 1962, the perquisite value of the residential accommodation provided by the
employer shall be the actual amount of lease rent paid or payable by the employer or
10%(now 15%) of salary, whichever is lower as reduced by rent if any actually paid
by the employee. The tribunal therefore held there is no concept of determination of
the fair rental value for the purpose of ascertaining the perquisite value of the rent free
accommodation provided to employees.
High Court‟s Decisions : -On appeal by the revenue the Bombay high court held that
the assessing officer is not right in adding the national interest on the security deposit
given by the employer to the landlord in valuing the perquisites of rent free
accommodation since the perquisites value has to be computed as per rule 3 & does
not require addition of such national interest. Thus the perquisites value of the
residential accommodation provided by the employer would be the actual amount of
lease rental paid or payable by the employee, Since the same was lower than 10%
(now 15%) of salary.

55
2. Can the limit of 1000 per months per child be allowed as standard deduction
while computing the perquisites value of free or concessional educational facility
provided to the employee by the employer?
CIT(TDS)v. Directors, Delhi Public school(2011) 202 Taxman 318( Punj.& Har.)
As per the provisions of rule 3 (5) of the income tax rules 1962, in case an educational
institutions is maintained &owned by the employer & free or concessional education
facility is provided to the employees household in such institutions, then, the cost of
education in a similar institution in or near the locality shall be taken to be the value
of perquisites in the hands of the employees. In case the cost of such education or the
value of benefits does not exceeds 1000 per months per child the perquisite value
shall be taken to be Nil.
Assesses contention :
In the present case , the cost of education was more than 1000 per month per child
therefore while determine the perquisite value of the above basis the assessee claimed
a deduction of 1000 per month per child .
High Court‟s Decisions :
The Punjab & Haryana high court in the above case held that on a plain reading of
Rules 3(5) , its flows that in case the value of perquisites for free concessional
educational facility arising to an employee exceeds 1000 per months per child. The
whole perquisites shall be taxable in the hands of the employer & no standard
deduction of 1000 per months per child can be provided from the same. It is only in
the case the perquisites value is less than 1000 per month per child , the perquisites
value shall be nil. Therefore 1000 per month per child is not a standard deduction to
be provided while calculating such perquisites.

84
Conclusion & Suggestions :-
5.1. Background :-
This present study was taken up by the researcher as a Minor research project. The field
work was carried out in Dombivli ( west ) of Thane district. In the state of Maharashtra .
The main objective of the study was to assess the Imact of Salaied of an Individual
Persons. The Researcher interviewed 30 beneficiaries of Salaried based person who
were basically from Dombivli Tribals. Analysis & Interpretations of data revealed
following conclusions .
5.2. Conclusions :-
The Indian taxation structure has been reformed over the years in response to
globalization, fiscal adjustment strategies etc yet there is a room for further
improvement in the taxation structure in terms of awareness and perceptions of the
masses, interpretation of tax laws and the much-debated implementation of Goods
and Services Tax(GST) and Direct Taxes Code(DTC).Also, Tax Evasion and
Avoidance have become issues of major concern for the government as only 2-3 %
of India‟s population pays Income Tax and a revenue leakage of Rs.2158 crores have
been reported by the Finance Ministry.
From our primary and secondary research, we could draw the following conclusions:
More than half of the respondents were not aware of the information related to taxes such
as Income Tax, Entertainment Tax that they pay in their daily life. Also, a major set of
the respondents wanted to update themselves regarding tax laws but find them too
complicated to understand. There is a weak correlation between willingness to update
regarding tax laws and tax awareness score and also awareness in males in slightly higher
than that in females.
Newspapers and Magazines remain the primary source of information regarding taxes
even though use of Internet has increased drastically over the years.
More than half of the respondents were in favor of implementation of GST as it would
not only benefit the common man but also make tax laws easier to interpret and
understand

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