1. NAGINDASKHANDWALA COLLGE.

2. INCOME EXEMPTEDFROM TAX. 3. GROUP MEMBERS.NAME ROLL NO.SAMEER JADHAV 311PRIYANKA LIMBACHIYA 313KRISHNA MEHTA 314MUDRA MEHTA 315YASH MEHTA 316RICHA MODI 317GAURAV NAIR 319DEVANSHI PARIKH 320RAJ SATRA 327 4. EXEMPTION. The circumstances of a taxpayer, as age or number of dependents,that allow him or her to make certain deductions from taxableincome. Exemption, immunity, impunity imply special privilege or freedomfrom imposed requirements. Exemption implies release or privilegedfreedom from some duty, tax, etc.: exemption from military service.Immunity implies freedom from a penalty or from some liability,especially one that is disagreeable or threatening: immunity fromdisease. Impunity (limited mainly to the fixed expression withimpunity ) primarily suggests freedom from punishment: The policeforce was so inadequate that crimes could be committed withimpunity. 5. EXAMPLES 1. to free from an obligation or liability to whichothers are subject; release: to exempt a student froman examination. 2. released from, or not subject to, an obligation,liability, etc.: organizations exempt from taxes. 3. a person who is exempt from an obligation, duty,etc. 6. AGRICULTURAL INCOME. 7. STEPS. Step 1: Add agricultural with non-agriculturalincome and calculate the tax on the aggregate asif it is the total income Step 2: Compute the tax on [Exemption limit +Agricultural income] as if it is the total incomeFrom the total amount again Exemption shall begiven. Step 3: Step 1 Step 2 will be the tax payable Step 4: Add Education Cess @ 3% 8. Proportion distribution of business and agricultureincome If tea/rubber/coffee is grown andmanufactured in India Income shall be apportioned between agricultural& business income: 40%/35%/25% - taxed as business income 60%/65%/75% (remaining) agricultural income ,hence exempt. if the coffee is also grounded and roasted alongwith above 40% shall be taxed as PGBP income. 9. Partial integration method is applicable only when: Agriculture income exceeds `5,000+ Non-agricultural income exceedsexemption limit(2,00,000/2,50,000/5,00,000). 10. HINDU UNDIVIDED FAMILY Formation of HUF for tax benefit:-A Hindu Undivided Family (HUF) offers specific advantages as far as taxation is concerned.The Income Tax Act and Wealth Tax Act recognise the HUF as an independent assessable ortaxable entity. Hence, HUFs enjoy all deductions and exemptions under the IT Actindependent of the income and tax liabilities of its members. The Hindu Law defines the HUFas a family, which consists of males lineally descended from a common ancestor and includestheir wives and unmarried daughters. Receipts by members from H.U.F:- Any sum received by an assessee in his capacity as a member of a H.U.F is exempt from taxto avoid double taxation as H.U.F is also assessable separately on its income in its owncapacity. The sum should be received in the capacity as a member of an H.U.F. I the recipientis not a member of the H.U.F., he cannot claim the exemption. The sum should be receivedeither out of the income of the H.U.F or out of the income of imputable estate owned by theH.U.F under section 10(2). The ownership of impartible estate through belongs to the joint family but the incometherefrom belongs solely and absolutely to the holder of the estate. The holder of theestate is assessable as an individual in respect of the estate income. The senior most malemember succeeds to the impartible estate by law of primogeniture but the junior malemembers may have the right to maintenance out of the income from the impartible estate.Hence the exemption has been provided if any sum is received by the member of HUF out ofthe income from impartible estate. 11. CONTD.. Members: An HUF is automatically constituted after marriage. It can also beformed by partition of an existing HUF into multiple units. A suitable name needsto be given to the HUF, taking into consideration the prevalent laws and thebusiness that it intends to undertake. Corpus: An important requisite for the constitution of an HUF is its corpus orcapital. This capital is separate from the assets owned by its members. Theproperty received by way of a will in favour of the HUF can become the corpus. Deed: Though it is not mandatory to have a deed for the formation of an HUF, itis advisable to execute one from a legal and taxation perspective. It shouldinclude details of the karta, members of the HUF consisting of coparceners, andother family members, the corpus as well as the business of the HUF. PAN: An HUF has a separate PAN and the karta must apply for one. The PANneeds to be quoted while making investments and carrying out financialtransactions of the HUF. 12. PARTNERS IN PROFIT ONLY. Section 10(2A) in The Income- Tax Act, 1995 (2A) - in the case of a person being a partner of afirm which is separately assessed as such, his share inthe total income of the firm. Explanation.- For thepurposes of this clause, the share of a partner in thetotal income of a firm separately assessed as suchshall, notwithstanding anything contained in any otherlaw, be an amount which bears to the total income ofthe firm the same proportion as the amount of hisshare in the profits of the firm in accordance withthe partnership deed bears to such profits. 13. LEAVE TRAVELCONCESSION. 14. LEAVE TRAVEL CONCESSION. Section 10(5) of the Income Tax Act states, In the case of an individual, the exemption is thevalue of any travel concession or assistancereceived by or due to him, (a) from his employer for himself and his family,in connection with his proceeding on leave to anyplace in India. (b) from his employer or former employer forhimself and his family, in connection with hisproceeding to any place in India after retirementfrom service or after the termination of hisservice. 15. CONTD 2 Journeys in a block of 4 calendar years areexempt. Amount Exempt : Leave Travel ConcessionOrAmount of Expenditure Journey in India : Exempt.Journey outside India : Fully Taxable. 16. GRATUITY 17. GovernmentemployeeFully exemptPOGAEmployeescovered underpayment ofgratuity act,1972OthersLeast of month averagesalary completedyears of service10,00,000Amount received 18. SUMS ON GRATUITY. 19. 1ST SUM1. Mr. Suhas is a non government employee and is alsonot covered by POGA 1972, and retired on 30th June2012 and received RS 12,00,000 as a gratuity afterservice of 38 years 8 months the average monthlysalary during last 10years immediately preceding themonth in which he retires works out Rs.50,00,00 permonth. Determine the amount of gratuity taxableand for the A.Y 13-14? 20. Soln:-NO-1MR.SUHAS A.Y 13-141. GRATUITY 10(10) Exemption least of= x AVG SALARY x COMPLETED YEARS OFSERVICE= x 50,000 x 38= 9,50,0002. MAX AMOUNT BY GOVERNMENT = RS10,00,0003. ACTUAL GRATUITY RECEIVED =RS12,00,000EXEMPTION AMOUNT =1,50,000TAXABLE AMOUNT=12,00,000-9,50,000= 2,50,000 21. 2nd SUMMR. ABBAS WAS THE GENERAL MANGER OFP LTD AND HE RETIRED ON 31-12-12 AFTER30 YEARS AND 6 MONTHS OF SERVICESAND AVERAGE SALARY IS RS 5000 P.M. HERECEIVED RS 75,000 AS GRATUITY.HE ISNOT COVERED UNDER POGA1972.CALCULATE AMOUNT AND TAXABLEAMOUNT? 22. SOLN:- NO-22. MR ABBAS A.Y=13-14GRATUITY 10(10)EXEMPTION LEAST OF= x AVG SALARY x COMPLETED YEARS OFSERVICE= x 5000 X 30= 75,000EXEMPTION AMOUNT =75,000TAXABLE AMOUNT = NIL 23. 3RD SUM3. IT IS SAME AS QUESTION 2 BUTCOVERED IN POGA,1972 EXEMPTIONAMOUNT ISRS 55000.CALCULATE TAXABLE AMOUNT? 24. SOLN:- NO-3 MR ABBAS A.Y=13-14 GRATUITY 10(10)1) EXEMPTION LEAST OF= x AVG SALARY x COMPLETED YEARS OFSERVICE= x 5000 X 30= 75,0002. EXEMPTION AMOUNT =75,0003. TAXABLE AMOUNT =75,000-55,000=20,000. 25. PensionA pension is a contract for a fixed sum to be paidregularly to a person, typically followingretirement from service. there are manydifferent types of pensions, including definedbenefit plans, defined contribution plans, as wellas several others.The terms retirement plan and superannuationrefer to a pension granted upon retirement ofthe individual. retirement plans may be set up byemployers, insurance companies, the governmentor other institutions such as employerassociations or trade unions. Called retirementplans in the united states, they are commonlyknown as pension schemes in the united kingdomand Ireland and superannuation plans in Australiaand New Zealand. Retirement pensions aretypically in the form of a guaranteed life annuity,thus insuring against the risk of longevity. 26. There are two types of pension:Uncommuted pension:It refers to pension received periodically. Anyamount received as uncommuted pension is fullytaxable in the hands of both government & non government employees.Commuted PensionCommuted means interchange. Many employersallow the employees to forgo a portion of thepension and receive a lump-sum amount bysurrendering a portion of the pension. Suchamount received is known as commuted pension.The pension may be fully or partly commuted. 27. Uncommuted pension - Fully taxable Commuted pensiona) Govt employee - Fully exemptedb) Non - Govt employee ( received gratuity also )- 1/3 of Full value of pensionc) Non - Govt employee ( not received gratuity )- 1/2 of Full value of pension 28. NEW PENSION SCHEME.The National Pension System (NPS) is a defined contributionbased pension system launched by Government of India with effectfrom 1 January 2004. As a first step towards instituting pensionreforms, Government of India moved from a defined benefitpension to a defined contribution based pension system. Apart fromoffering wide investment options to employees, this scheme wouldhelp government of India to reduce its pension liabilities. Unlikeexisting pension fund of Government of India that offered assuredbenefits, NPS has defined contribution and individuals can decidewhere to invest their money. The scheme is structured into twotiers: Tier-I account: This NPS account does not allow prematurewithdrawal and is available to all citizens from 1 May 2009. Tier-II account: This NPS account permits withdrawal forexceptional reasons only, prior to the retirement age. 29. SUMS.1. Mr. Prashant retires from Indian Economic Service on31.10.12 and receives rs.30250/- per month as pensionon the last date of each month.Determine the amountof pension taxableSolution:- Mr. Prashant is not a government employee. He receives uncommuted pension which is fullytaxable. He retires on 31.10.12 Taxable amount=30250 *5monthns(november-march)=151250/- 30. 2.Mr Rakesh retires from private company on30/6/12 he gets pension rs.28000/- per monthupto 31/1/13 with effect from 1/2/13 he gets75% of pension commuted for 1260000/- pensionbecomes due on last day of each month.Determinetaxable amount under two circumstance:-i. If he receives gratuity.ii. If he does not receives gratuity. 31. Solution:- If he receives gratuity28000 pm(July to Jan)= 7 monthns =1960007000 pm (Feb to march)=2monthns=14000(28000*25%=7000)210000 32. Commuted pension 1260000 (-)exempt u/s 10(10(A)) (560000) 1/3 of commuted value of 700000full pension1260000 75%? 100%=1680000*1/3=560000 33. Taxable amount=210000+700000=910000 If gratuity not receivedUncommuted pension28000 pm(July to Jan)= 7 monthns =1960007000 pm (Feb to march)=2monthns=14000(28000*25%=7000)210000 34. Commuted pension 1260000 (-)exempt u/s 10(10(A)) (840000) 1/2 of commuted value of 420000 fullpension1260000 75%? 100%=1680000*1/2=840000 Taxable amount = 420000 + 210000= 630000 35. Provident Fund It is a fund built up by contributions made by theemployees during his working life and an equalcontribution by his employer @12% of his salaryat present and is payable back to him togetherwith interest on exit from employment. 36. TYPES.Statutory Provident Fund-U/S 11 (SPF)Recognized Provident Fund-U/S 12 (RPF)Unrecognized Provident Fund-U/S 13 (URPF) 37. SUM ON RPF.Q:Mr.A is a sales manager in B Ltd. During theprevious year 2012-13 he gets the followingfrom B Ltd. Basic salary=rs.50,000/-, DA=10%of salary, commission=5% of turnover which isrs.5,00,000/-, employees contribution towardsRPF @18% of basic salary rs.10,800/-, credit ofinterest in the PF a/c of A @11.5% i.e.rs.23,000/- 38. Ans. Computation of RPF taxable amountParticulars Amount AmountBasic salary 50,000(+) DA (10% of 50,000) 5000(+)Commission(5% of 5,00,000)25,00080,000RPF @ 18% 10,800(-)Exempt @12%(12% of 50,000) 9,600 1200Interest on RPF (11.5%) 23000(-)Exempt @9.5%[23,000 11.5%? 9.5%]19000 4,000 39. AMOUNT RECEIVED UNDER INSURANCE POLICY. Any sum received under a life insurance policyincluding the sum allocated by way of bonus on suchpolicy shall be to tally exempt from tax however thisexemption shall not be available in respect of: 1) Any sum received under 80DDA(3) as persection 80DD the assesses claims the deduction inrespect of maintenance including medical treatmentor deposit made for maintenance of handicappeddependent under any scheme framed by LIC or UTI ,in such case if the handicapped dependentpredeceases the assesses the amount of u/s 80 DD ,as an shall not be exempted from tax u/s 10(10). 40. 2) Under a Key man insurance policyKey man insurance policy means lifeinsurance policy taken by a life insurance policy taken bya person on the life of another person who is connectedto the business as an employee or in any other capacity .Either in the present or in the past.3) Any sum received under a insurance policy on or after1.4.03 and up to 31.03.12 in respect of each premiumpayable for any of the year during the term of policyexceeds 20% of actual capital sum assured . Howeverif any sum received under an insurance policy 1.4.12 inrespect of which premium payable during the term ofthe policy exceeds 10% of actual capital sum assured .Actual capital sum assured = minimum of thesum assured in any of the years of the policy. 41. SUM.Q.1 ) Mr.charu a C.A. took a life insurance policy of 12,00,000/- and paid apremium of 500000/- , 200000/-, 200000/- , 200000/-, 100000/-, onmaturity of the policy during the previous year , he received 13,0000/-from the insurance company 1.5.12 whether the amount the amountreceived is taxable or not?Solution:Any sum received under a life insurance policy including the sumallocated by way of bonus on such policy shall be totally exempt from tax .However premium Payable for any of the year during the term of policyexceed 10% of actual capital sum assured the entire proceeds are taxableIn the above mentioned tax exemption u/s 10(10d) is not allowed as thepremium paid in the 1st year exceed 10% of the life insurance S.A ( i.e .12,00,000 x 10% = 1,20,000/- and premium paid 500000/- ) Thereforethe entire sum of 13,00,000 is taxable.