Deliberation On Tax planning, Wealth planning & Creativity in work area
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Transcript of Deliberation On Tax planning, Wealth planning & Creativity in work area
DELIBERATION ON TAX PLANNING, WEALTH PLANNING & CREATIVITY IN WORK AREA
26th August, 2014 TuesdayJacobs Engineering Pvt. Ltd.
CA Nitin PathakF.C.A ,CISA, CISM,CIA, CISSP(USA)DISA(ICAI) ,DIRM(ICAI) ,SAP(FICO) Certification course on International taxation( ICAI) Certification course on IFRS ( ICAI)
Thanks to Ms Vartika for calling on me for deliberation on the subject of IT, Wealth creation and creativity in work area
The diplomatic and the invitation deliberation has overwhelmed me about young generation, how they are effective in the communication skill
The young generation is not only powerful but they are speedy and effective
They are caring for their parent, siblings, relatives, colleagues, and seniors
They are fast, clear and unambiguous, so someone may feel arrogant, but they are not so
Income Slabs Tax Rates
i. Less than Rs. 2,50,000/-
NIL
ii. Rs 250000 to 500000 10% of amount by which the total income exceeds Rs. 2,50,000/-.
iii. Rs 500000 to 1000000 Rs. 25,000/- + 20% of the amount by which the total income exceeds Rs. 5,00,000/-.
iv. Above Rs. 10,00,000/- Rs. 125,000/- + 30% of the amount by which the total income exceeds Rs. 10,00,000/-.
3% cess also levy on tax amount
EXEMPT INCOME1. Interest on PPF/GPF/EPF.2. Interest on GOI/other approved tax free
bonds.3. Dividends on Shares and on Mutual Funds.4. Any sum received under a life insurance
policy 5. Long term capital gain on sale of share
and equity mutual funds if the security transaction tax is paid/imposed on such transactions.
6. Saving bank interest of bank upto Rs 10,000 u/s 80TTA
GIFT TAXGift received above Rs.50,000/- is
taxable, except from specified persons. 1. Spouse . 2. Brother or sister 3. Brother
or sister of the spouse 4. Brother or sister of either of the parents of the individual 5.Any lineal ascendant or descendant of the individual 6. Any lineal ascendant or descendant of the spouse of the individual 7. Spouse of the person referred to in (2) or (6)
Also, gifts received on the occasion of marriage or under a will by way of inheritance are also tax free
Tax PlanningFilling income tax return of wife, sons, daughters, etc.
Creating HUF/Company/Firm/LLP.Invest/Income flow in such a manner that creates minimum tax liability
Transferring the fund directly in the name of spouse, daughter-in-law or minor child will lead to deem income in the hand of transferor
COMPUTATION OF GROSS TAXABLE INCOME
Five heads of income1. Income from Salaries2. Income from House Properties3. Profit & Gains of Business & Profession
4. Capital Gains5. Income from Other Sources
INCOME FROM HOUSE PROPERTY
Self occupied :- Up to Rs200000 for HBA interest: No other rebate . Before possession interest 5 years
Other than self occupied:A. Determine Annual Rental Income
B Municipal taxC Deduct 30 % : Statutory deduction:
D HBA interest
PROFIT FROM BUSINESS / PROFESSION
Income derived from business and profession
The expenses which are incurred to earn the income is allowable as business expenditure
Capital expenditure not allowedPersonal expenditure not allowed
INCOME FROM OTHER SOURCES
Interest Income:Company depositsDebentures/bondsSavings / Fixed deposits with banks
Post office savings schemes like MIS, NSC, Time Deposit etc.
Private loans given to relatives, friends or any other entity.
Government securities.
15G AND 15H
The above form one can not submit if income of the assessee is higher than basic exemption limit.
If you still submit the form you are liable for penal action
CAPITAL GAINS
Any sale of a personal asset ( Certain assets exempt), capital gain is taxable between sale price and purchase price
Capital gain tax is a levy on sale of immovable property, FMV, Shares & Mutual funds, etc.
Certain deduction is available to reduce tax liability.
WHAT IS SHORT TERM ASSET ?
If holding period is less than 3 years in case of immovable property, FMV, Debt mutual fund .
Less than one 1 year in case of shares listed in a stock exchange & on which STT is paid.
Tax rate- 15% on gain on which STT is paid
LONG TERM CAPITAL GAIN
In case of long term asset:- Tax rate -20% on gain with indexation or - 10% on gain without indexation
DEDUCTION 80C
Under this section, a deduction of up to Rs. 1,50,000 is allowed from taxable Income in respect of investments made in some specified schemes.
1. Life Insurance Premiums2. Employee’s Contributions to Employees Provident Fund/GPF
3. PPF(Maximum Rs.1,50,000/-)
DEDUCTION 80C4. NSC (National Savings Certificates)5. Unit Linked Insurance Plan (ULIP)6. Repayment of Housing Loan (Principal)7. Equity Linked Savings Scheme (ELSS)
of Mutual Funds8. Tuition Fees including admission fees or
college fees paid for full-time education ofany two children of the assessee (Any
development fees or donation or payment of a
similar nature shall not be eligible for deduction).
DEDUCTION 80C 9. Interest accrued in respect of NSC VIII issue. 10. Pension scheme of LIC of India or any other
insurance company. 11. Fixed Deposit with Banks having a lock-in
period of 5 Years 12. Amount deposited under Post Office Senior
Citizens Scheme. (Current Rate of interest is 9% P.A.) 13. Amount deposited in Five Year Time Deposit
Scheme in Post Office 14. Amount deposited in the NABARD (Rural
Development Bonds of NABARD)
80DOn whose life healthInsurance Policy is taken
Self & spouse, dependent Children
Parents
Total
Premium paid + preventive health check up expenses of self, family, Dependent
15000 15000
30000
Additional Deduction if oneof the Insured is SeniorCitizen (60 year of Age)
5000 5000 10000
Total 20000 20000
40000
HOUSE RENT ALLOWANCE 50% of salary (Mumbai, Kolkata, Delhi or Chennai) and 40% of salary where residential house is situated at any other place;
HRA paid Actual rent paid over 10% of salary Where Salary = B+A+B+C
LEAVE ENCASHMENT Encashment of earned leave while in service will be treated as income
Exempt at the time of retirement:10 months salary * last 10 months average salary or
` Rs.3,00,000/- whichever is less Entitlement to earned leave not to exceed 30 days for every year of actual service.
Limits aggregate n of employers.
LEAVE TRAVEL CONCESSION For himself/spouse/children/dependent
parents/siblingsAmount actually spent for travellingIn India onlyTwice in a block of four calendar years.
(Block year 2014-17)Two surviving childRoad travel on vehicle, second class train
fairAir fare of a economy class/Air condition
first class rail fare/1st class or deluxe class public transport fare
For C/f entitlement one is allowed
Situations Amount of exemption
Where journey is performed by air
Amount of economy class air fare of the national carrier by shortest route or amount spent whichever is less
Where journey is performed by rail
Amount of air-conditioned first class rail fare by the shortest route or amount spent whichever is less
Where the place of origin of journey-destination are connected by rail and journey is performed by any other mode of transport
Amount of air-conditioned first class rail fare by the shortest route or amount spent whichever is less
Situations Amount of exemption
Where the place of origin of journey and destination are not connected by raila. where a recognised public transport exists
First class or deluxe class fair by the shortest route or the amount spent whichever is less
b .where no recognized public transport exists
Air conditioned first class rail fare by shortest route or the amount spent whichever is less.
MEDICAL BENEFITS a. Medical treatment for self &
family( Spouse, dependent children, siblings) in:
Hospital maintained by an employerHospital approved by GovernmentHospital approved by the Chief
Commissioner for specific ailmentsb.Medical insurance by employer paid to
GICRe-reimbursement of medical expenses
in aggregate 15,000/- in F.Y. other than a and b
SPECIAL ALLOWANCES EXEMPTAny allowance, not in the nature of perquisite, granted to meet expenses wholly, necessarily and exclusively incurred in the performance of duties, to the extent to which actually incurred.
Allowance granted to meet personal expense at the place where duties of his office are ordinarily performed or at the place where he ordinarily resides or to compensate for increased cost of living as may be prescribed in Rule 2BB.
SPECIAL ALLOWANCES EXEMPTTravel expenses on tour or transfer,Ordinary daily charges on account of absence from normal place of duty on tour or journey in connection with transfer
For conveyance in performance of duties where it is not provided
For expenditure on helper engaged for performance of office duties
SPECIAL ALLOWANCES EXEMPT
For encouraging academic, research and training pursuits in educational and research institutions
For purchase or maintenance of uniform,
Special Compensatory Allowance in specified areas to extent specified
1 City Compensatory Allowance
2 Fixed Medical Allowance
3 Tiffin/Lunch/Dinner/Refreshment Allowance
4 Servant Allowance
5 Dearness Allowance
6 Project Allowance
7 Overtime Allowance
8 Interim Allowance
9 Any Other Cash Allowance
Sr Allowances Exemption limits
1 Children Education allowance ₹ 100 p.m per child maximum 2 children
2 Children hostel exp. allowance ₹ 300 p.m per child maximum 2 children
3 Tribal area allowance ₹ 200 p.m
4 Transport allowance (between residence & office)
₹ 800 p.m & ₹ 1600 p.m for blind/handicapped
5 Transport allowance for transport employee (During the course of transport)
Least of 70% of allowance or ₹ 10,000 p.m
6 Underground allowance ₹ 800 p.m
Sr Allowances Exemption limits
7 Compensatory field area allowance
Maximum ₹ 2600 p.m.
8 Compensatory modified hill area allowance
Maximum up to ₹ 1000 p.m.
9 Special Compensatory hill area or high altitude
₹ 300 p.m to ₹ 7000 p.m allowance, etc.
10 Border area, Remote area, Disturbed area allowance
₹ 200 p.m to ₹ 1300 p.m.
11 High altitude allowances (Non-congenial climate)
₹ 1,060 p.m. (Altitude for 9,000 ft. to 15,000 ft.), ₹ 1,600 p.m. (Above 15000 ft.)
12 Special compensatory for highly active field area allowance to member of armed force
Limit is ₹ 4,200 p.m.allowance
13 Island allowance to member of armed force
Limit is ₹ 3,250 p.m.
14 Counter Insurgency Allowance
Limit is ₹ 3,900 p.m.
PERQUISITES
Value of rent-free accommodation/value of concession in rent. 15 % of Salary or rent paid whichever is lower
Value of any security or sweat equity shares allotted or transferred by employer/former employer as free or concessional cost.
Contribution to an approved superannuation fund by the employer, up to Rs.1,00,000/-
Any sum payable either directly or through a fund by employer (other than recognized PF, approved superannuation fund, etc.) to effect an assurance on the life of the employee or to effect a contract for an annuity.
LOAN TO EMPLOYEE
Any loan given by an employer is taxable at the rate of for the same purpose, if given by SBI, on maximum monthly balance
Reduced by any amount charged by an employer
Assets given Value of benefits
a) Use of laptops and computers
Nil
b) Movable asset other than Laptops and computers
i. 10% p.a. of the actual cost of such asset, or
ii. the amount of rent paid, or payable by the employer
iii. Less: amount recovered from employee.
Assets transferred Value of perquisites
Computers & electronics
Depreciated value of asset [depreciation is computed @50% on WDV for each completed year of usage] less: amount recovered from employee.
Motor cars Depreciated value of asset [depreciation is computed @20% on WDV for each completed year of usage] less: amount recovered from employee.
Any other asset Depreciated value of asset [depreciation is computed @10% on SLM for each completed year of usage] less: amount recovered from employee.
MISCELLANEOUS
Free meals during office hours
Actual cost to the employer in excess of ₹ 50 per meal or tea or snacks
(Free meal in remote area or offshore installation area is not taxable perquisite)
less: amount recovered from the employee. (Tea or non-alcoholic beverages and snacks during working hours is not taxable)
Value of any gift or voucher or taken other than gifts made in cash or convertible into money (e.g. gift cheques) on ceremonial occasion
Value of gift. In case the aggregate value of gift during the previous year is less than ₹ 5,000, then it is not a taxable perquisite
MISCELLANEOUS
Expenditure incurred on credit card or add on card including membership fee and annual fees
Actual expenditure to employer is taxableLess: amount recovered Less spent for official purpose
Expenditure on club other than health club or sports club or similar facilities provided uniformly to all employees
Actual expenditure incurred by the employerLess: amount recovered Less spent for official purpose (Initial fee of corporate membership of a club is not a taxable perquisite)
Any other benefit or amenities or service or right or privilege provided by employer other than telephone or mobile phone
Cost to the employerLess: amount recovered from employee
Specified employee Section 17(2)(iii)Director of the company or
Employee having 20% or more voting power in the employer company or
Employee having salary* more than ₹ 50,000*Salary means all taxable monetary benefit after deduction u/s 16
WHAT IS THE DEFINITION OF SALARY FOR CALCULATION ?Salary = basic salary + DA + bonus (current year) + commission + taxable portion of all allowances + monetary payment from employer other than PF (not include perquisites)
TAX FREE PERQUISITES
Employer’s contribution to staff group insurance scheme
Actual traveling expenses paid/reimbursed for journeys undertaken for business purposes
Payment of annual premium on personal accident policy, if such policy is taken to safeguard the employer’s interest
Statutory Provident Fund
Recognised Provident Fund
Employers contribution to provident fund
Not taxable Not taxable up to 12 per cent* of salary
Employee’s contribution
Available deduction u/s 80C
Available deduction u/s 80C
Interest credited
Fully exempt Exempt up to 9.5%
Lump sum payment received at the time of retirement/ termination/ withdrawn
Exempt u/s 10(11)
Exempt from tax u/s10(12)Subject to conditions: not taxable if employee retires after 5 years of service or due to inability of work. Otherwise treated as URPF
Unrecognised Provident Fund
Public Provident Fund
Employers contribution to provident fund
Not taxable Employer does not contribute
Employee’s contribution
Not available U/s 80C Available deduction u/s 80C
Interest credited
Not taxable at the time of credit
Exempt from tax
Lump sum payment received at the time of retirement or termination of service or withdrawn
Employee’s contribution exempt from tax & Interest thereon is taxable under the head of Income from other sources.Employer s contribution and interest thereon is taxable as Profits in lieu of Salary, under Salaries )
Exempt from tax u/s
How to Invest?
Investment in FD
Investment in FMP
Investment is shares
Investment in Mutual fund
Investment in IPO
Debt fund
Investment in immovable property
CRITERIA OF SELECTING A MUTUAL FUND
A) Management of the fundB) Brand image of the fundC) Type of Scheme
(Debt/Equity/Mix)D) Expenditure RatioE) Quantum of fundF) Average returnG) Risk InvolvedH) Perception of individual
INVESTMENT TOOLScheme Rate of Interest Time period Risk
PPF 8.7 15 Low
NSC 8.5 5 Low
NSC 8.8 10 Low
Time saving post office
8.4 1 Low
Time saving post office
8.5 5 Low
MIS 8.4 5 Low
RD 8.4 5 Low
Mutual Fund Market Linked NA Medium
ULIP Market Linked 5 Medium
Shares Market Linked NA High
ANALYSIS OF SHARE MARKET:-Particulars 5 Years 10 Years 15 Years 20 Years
Return as per BSE Sensex at 31st March
10.94% 12.08% 12.36% 11.57%
Return in Bank (After tax ) 6.75% 6.75% 6.75% 6.75%
Cumulative investment of Rs 100 in Market
168.05 312.81 574.35 893.20
Cumulative investment of Rs 100 in Bank
138.62 192.17 266.39 369.28
Additional benefit 21% 63% 116% 142%
Wealth TaxAssessee is also required to file return annually of an asset held on 31st march
Certain movable and immovable properties are exempt
Assets transfer to spouse, daughter in-law and minor child will be the wealth of transferor
Valuation of assets is as per valuation rule provided in the Act.
WEALTH TAXWT is applicable to manyWT is chargeable on net wealth of the assessee (Individual, HUF, Company) as on 31st March, at the rate of 1% exceeding Rs 30,00,000/-. We need to file separate return for the same.
HOUSEAny building or land appurtenant thereto, residential or
commercial (including a farmhouse within 25 kilometers of municipal limits and a guest house) is liable for WT
1. One house is non taxable wealth for individual, HUF 2.In case of a Company, a house
a. meant exclusively for residential purposeb. allotted to an employee, for the purpose of own business
3.Residential property let out for at least 300 days in the previous year
4. Commercial establishments or complexes in non taxable
Motor cars- held for business is tax free
Jewellery, bullion and furniture, utensils or any other article made of gold, silver, etc. is taxable wealth
Urban Land except certain specified area and specified population as per last census
Cash in excess of Rs.50000 for individual and HUF, for rest as per books
CEO OF PEPSICO :- INDIRA NOOYI She passed BA from Madras But she acquired all basic skills later on Communication skill, digital use for interaction, EQ Marketing her company by talking about it Family/Daughter CSR V/s capitalism with integrity of stake holder Digital savvy: Facebook history,use blogs, whattsapp,
use it,Do not waste your time and not allow any one to nag you
She focuses on “Performance with purpose” & “ Capitalism with conscience”, “You cannot get everything”
She believes in “Creating a backup from your group including staff.”
WHAT IS COVERED TILL NOW ?What are the heads of income ?What is the perquisites ?What is allowable as deduction in details like a professional tax consultant to take advantage of legitimate CTC planning ?
What are the option of tax planning ?What is the investment opportunity ?How you can be brand ambassador of your own , department , company ?
In the end prayer ?
PrayerOh god give me a courage,To change the things which I can,Oh God give me a serenity to accept the things,Which I cannot change,Give me a wisdom to know,What I can change and what I can’t change.
Thanks once againGod bless us all
Thanks you all for being with me
To much regards for listening to me & in particular to Ms Vartika for trusting me and allowing me to share with you
QUESTIONS IF [email protected]