Assignment of Business Tax Procedure and Management Essay Sample free essay sample

As a pupil of commercialism. we are supposed to cognize that what are the assorted methods through which we can be after our revenue enhancement liability as an person. house or company. This assignment gives the overview of different ways of revenue enhancement planning harmonizing to the fortunes predominating at that context. Determination OUT THE WAYS TO MINIMIZE THE TAX LIABILITY OF INDIVIDUAL. Firm AND COMPANIES†¦ [ ASSIGNMENT OF BUSINESS TAX PROCEDURE AND MANAGEMENT ] October 23. 2012 1 ) METHODS OF REDUCING TAX LIABILITY OF INDIVIDUAL.1. Exhaust your full Section 80c tax write-off: Under Section 80C. the maximal tax write-off available is Rs 100. 000 dad which investors should seek to use. Make certain that fiscal merchandises which you are taking here are in line with your overall fiscal planning. In add-on. persons do understand that the benefits are capped. For case. puting 70. 000 in Public Provident Fund and 50. 000 in ELSS financess will give you revenue enhancement benefit of 1. We will write a custom essay sample on Assignment of Business Tax Procedure and Management Essay Sample or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page 00. 000 merely. In add-on make sure that you deduction. Make investings of over Rs 1. 00. 000 in Section 80C designated avenues but they need to maintain in head your Employee Provident Fund ( EPF ) annually amount excessively while puting for 80c Always look at the investings from the position whether it will run into your specific demands on adulthood. You should besides seek to diversify your nest eggs in different instruments. Following are some of the investments/contributions qualify for Section 80C tax write-offs. Public Provident Fund: Assured and revenue enhancement free returns have made Public Provident Fund ( PPF ) as a preferable pick for hazard inauspicious investors for old ages. It is an first-class tool for long term investing professionals or business communities non covered under Employees Provident Fund. We believe PPF should Long term ends can decidedly be realized through PPF. and is risk free as it is backed by authorities. It is even more important for freelance ideally be a really important portion of any individual’s portfolio but there can be differed sentiment on this. Employee Provident Fund: We usually hate any sort of tax write-offs in our monthly salary faux pass – its income revenue enhancement tax write-off. professional revenue enhancement tax write-off or even an EPF tax write-off. Very few of us truly know that this little EPF tax write-off each twelvemonth ca n in world make you a crorepati by the clip you retire. Encouraging fact is that this statement is applicable to even with those holding modest wages. money boulder clay retirement. There’s many if’s and but’s to accomplish that. most notably being defying the enticement to retreat Equity Linked Savings Scheme ( ELSS ) : This merchandise can assist people in all revenue enhancement brackets to salvage revenue enhancements while giving inflation-adjusted returns. The investor does non necessitate to pay any revenue enhancement on backdown excessively. ELSS has a lock-in period of three old ages. the shortest among all tax-saving instruments. Unit-linked insurance programs ( Ulips ) : These merchandises excessively can supply rising prices adjusted returns and chance to make wealth in the long term. as they invest in equities and debt documents. However. you need to maintain puting on a regular basis and wait until the adulthood. as high upfront charges eat into returns of the older merchandises ( issued before Sept. 1. 2010 ) . Even after the recent regulative alterations in Ulips. they are still expensive investing vehicle compared to common financess. Other insurance programs: Covering hazards is indispensable for your ends. Buy insurance for existent demand instead than for salvaging revenue enhancements. That’s why opt for a term program. as oppose to endowment eligible for tax write-off under Section 80C. Roll no. : 3483 and money back. as the former offers highest hazard screen for low premiums. The premiums paid are [ ASSIGNMENT OF BUSINESS TAX PROCEDURE AND MANAGEMENT ] October 23. 2012 New Pension Scheme ( NPS ) : This is the most recent entrant to the Section 80C instruments. It can be a good option for retirement planning with revenue enhancement nest eggs. The drawback is that the sum is nonexempt on backdown on adulthood. Pension Plans: Contribution in pension programs is allowed as tax write-off under Section 80CCC. Pension programs can be traditional or unit-linked. or from common fund houses. Other merchandises that are covered under Section 80C are national nest eggs certification. senior citizen nest eggs strategy. 5-year fixed sedimentations. including accumulated involvement. tuition fee for two kids for 80C. 80CCC and 80CCD is `1lakh. full clip classs. place loan chief refund. The combined bound of tax write-offs under Section 2. Long Term Infrastructure Chemical bonds: Govt. of India has allowed certain Infrastructure companies to publish Long Term Tax Saving Infrastructure Bonds. Investors of these Infra Chemical bonds can claim revenue enhancement freedom under subdivision 80 CCF of the Income Tax Act. 1961 for an sum up to Rs. 20000. This with subdivision 80CCE. Tax write-off is in add-on to Rs. 1. 00. 000 bound available under subdivisions 80C. 80CCC and 80CCD read Should you invest: It makes sense for people in the over Rs 8 hundred thousand nonexempt income slab to utilize the substructure bonds as a tax-saving instrument. For the people in the Rs 5-8 hundred thousand bracket. it would be advisable to put in substructure bonds if it would be an absolute no-no to put in Infrastructure Bonds for tax-saving intent. The period of investing is 3 old ages. but non for five old ages and for those in the Rs 1. 6-5 hundred thousand bracket. 3. HRA and Tax Benefits: Everyone who is having the HRA benefits from their employer is eligible to declare the HRA as the revenue enhancement nest eggs. Note that. if you are remaining in the rental house so merely it is applicable. If you are reside in your ain house. and so you will non be eligible to claim the revenue enhancement benefits for HRA paid by your employer. The inside informations about the HRA freedom in described under Section 10 ( 13A ) of the Income Tax act 1961. The following are the three conditions to eligible for HRA freedom: a. HRA must be included in your salary constituent b. degree Celsius. You are remaining in the rented house Your rent is more than 10 % of your wage 4. Opt for Joint Home Loan: If you are be aftering to purchase a house. choosing for joint place loan can be a better option. The principal eligible for a tax write-off of up to Rs 150. 000 per twelvemonth. Refund on a place loan is eligible for a tax write-off of up to Rs 100. 000 dad and the involvement paid is This will guarantee that both the co-owners can claim revenue enhancement tax write-offs in the proportion of their retention in the loan. The co-owner falling in the higher revenue enhancement bracket should keep a higher proportion of place loan to guarantee that the revenue enhancement benefits are maximized. 5. Medical insurance: An person who pays medical insurance premium for ego or spouse/dependent kids is allowed a tax write-off of up to Rs 15. 000 dad under subdivision 80D. An extra tax write-off of up to Rs 15. 000 dad is allowed for premium payment made for parents. In instance the parents are senior citizens. so the maximal tax write-off allowed is Rs 20. 000 per twelvemonth. 6. Other tax write-offs for salaried taxpayers: If your employer provides medical allowance. you can available an income revenue enhancement tax write-off of up to Rs 15. 000 per twelvemonth by offering cogent evidence of the relevant disbursals. If the employer gives leave travel allowance as a portion of your wage. you can avail income revenue enhancement the taxpayer ) . Leave travel allowance can be availed twice in a block of four calendar old ages. Soon. the block incurred on domestic travel. However. the travel manner can be anything ( cab. coach. train or air ) . Contributions: Subject to the stated bounds. contributions to specified funds/institutions are eligible for revenue enhancement benefits under Section Salaried persons who plan to prosecute higher instruction should avail of an instruction loan as the full involvement is eligible for tax write-off under Section 80E. The loan can be for ego. partner or kid from an approved charitable establishment or a notified fiscal establishment. 6. Turn Banal Losses into Tax Additions: 80G. You can derive from short term losingss you made in stocks harmonizing to income revenue enhancement act. If you have made long term capital additions from sale of belongings. gold or debt financess. you can put them against short term capital losingss made on stocks and convey down the revenue enhancement liability. Short term capital losingss can be set off against both short term capital additions every bit good as nonexempt long term capital additions. Income revenue enhancement act allows a taxpayer to claim a tax write-off of 40. 000 if there is a dependant who suffers from complaint specified under Section 80DDB. The tax write-off is higher at 60. 000 if patient is a senior citizen. Dependants can include partners. kids. parents and siblings. However. there is a status wherein the patient should be entirely dependent on revenue enhancement remunerator and should non hold individually claimed tax write-off for the disablement. If the sum spent is reimbursed by an employer or disbursal. the balanced can be claimed as tax write-off. 8. Claim benefits on instruction loan: an insurance company. there is no tax write-off. If the taxpayer gets partial reimbursement of the Rising cost of higher instruction is coercing people to borrow money to pay fees of their kids professional classs. The involvement paid on the instruction loan is to the full deductible from the nonexempt for the involvement paid for up to eight consecutive old ages. get downing from the twelvemonth in which twelvemonth is involvement is foremost paid. Proof required here is loan statement from the loaner. income under Section 80E. 2 ) METHODS OF REDUCING TAX LIABILITY OF HINDU UNDIVIDED FAMILY. The Income-Tax Act recognises the Hindu Undivided Family ( HUF ) as a separate revenue enhancement entity in add-on to persons who are members of such household. All Hindus. Buddhists. Sikhs and Jains governed by Hindu jurisprudence. can hold an HUF as a separate entity to claim income-tax and wealth revenue enhancement benefits. In add-on to the separate revenue enhancement freedom available to an HUF. an HUF is soon equal to what is available to an person who is non a senior citizen. Since it is a separate entity. it can have immoveable belongings and besides run its ain concern. gt ; Separate basic freedom An HUF is a separate and distinguishable entity and can claim a separate basic freedom bound independent of its members who. in their ain position as persons. can besides claim the bound in their several revenue enhancement returns. gt ; Exemptions available Since an HUF can have a house belongings and earn capital additions on the sale of such belongings ; it can besides claim freedom on the long-run capital additions on the sale. if the capital additions are invested for purchasing another house or for building a new house. In regard of capital additions from other assets. it can likewise. put the net consideration for purchase of belongings or building of a residential house and claim freedom. Since there is some inauspicious revenue enhancement impact in instance you own more than one residential house. it makes sense to purchase one house in the name of the HUF. alternatively of in your ain name. An HUF can besides take the benefit of puting its capital additions in the bonds o f NHAI or REC within six months from the day of the month of sale of an plus up to `50 hundred thousand in a fiscal twelvemonth. gt ; Deductions available An HUF can claim tax write-offs in regard of certain payments under Section 80C of the Income-Tax Act up to Rs1 hundred thousand. It can claim tax write-off for payments made for life insurance policy for any of its members. money deposited in Public Provident Fund and for investing in Ulips by any of its members. It can besides claim a tax write-off of Rs15. 000 towards payment for premium for taking wellness insurance for any of its members under Section 80D of the Income-Tax Act. In instance the member in regard of whom this wellness insurance premium is being paid is a senior citizen. the tax write-off available will travel up to Rs20. 000. As the cost of the medical insurance have gone up significantly in recent times. a separate bound for an HUF will be great alleviation for single taxpayers where the premium being paid for wellness insurance is more than the bound threshold bound. as the surplus can be claimed in the income-tax return of HUF. In the proposed DTC. the tax write-off in regard of life insurance premium. school fee for full-time instruction and premium for medical insurance will be available to persons and Roll no. : 3483 Page 6 So if you are among the taxpayers whose to hold an HUF so that you do non lose out of the Rs50. 000 tax write-off. Besides. and HUF can put up to Rs20. 000 in long-run substructure bonds and claim tax write-off from its income under Section 80CCF. This tax write-off is in add-on to the tax write-off available up to Rs1 hundred thousand discussed supra. Not merely this. an HUF can individually claim a tax write-off up to Rs50. 000 in regard of any life insurance policy for upkeep and care of a individual who is physically school fees and insurance premiums total up to the present bound of Rs1 hundred thousand. it makes sense disbursals incurred on medical intervention. rehabilitation and preparation etc or for taking out handicapped and suffers from specified disease under Section 80DD of the Income-Tax Act. It can besides claim tax write-off up to Rs40. 000 and Rs60. 000 in instance of senior citizen in regard of disbursals incurred for intervention of any of its members from specifi ed disease under Section 80DDB. From the present bill of exchange of DTC. it seems that the tax write-off in regard of saving-based part is proposed to be withdrawn for HUF as per clause 69. This anomaly needs to be brought to the notice of the lawgivers to go on the benefit. 3 ) METHODS TO REDUCE TAX LIABILITY OF INDIAN COMPANIES. Indian Companies had been given tax write-offs and freedoms to set their revenue enhancement liability topic to carry throughing certain conditions. they can understate their revenue enhancement liability: ? Puting up the freshly established concern projects in FREE TRADE ZONES u/s ? Setting up freshly established units in SPECIAL ECONOMIC ZONES u/s 10AA. ? Puting up concern endeavors in 100 % EXPORT ORIENTED UNDERTAKINGS u/s 10B. o Deductions available to the Indian companies are as given: 10A. Following are some of the freedoms available to the Indian companies through which ? Sec80-IA: Tax write-off in regard of net incomes and additions from industrial projects or endeavors engaged in substructure development. Roll no. : 3483 Page 7 80-IAB: Tax write-off in regard of net incomes and additions by an projects or endeavors engaged in development of Particular Economic zone. ? 80-IB: Tax write-offs in regard of net incomes and additions from certain industrial ? 80-IC: Tax write-offs in regard of net incomes and additions of certain industrial projects in certain particular class of provinces. ? 80-ID: Tax write-offs in regard of net incomes and additions of hotels and convention Centres in NCR. ? 80-IE: Tax write-offs in regard of net incomes and additions of certain projects in North Eastern States. ? 80JJAA: Tax write-off in regard of employment of new workingmans. ? 33-AB: Tax write-off provided to companies for holding Tea Development Account. ? 35-ABB: Tax write-offs allowed to Indian Companies if they are supplying Telecommunications Services. ? 35-AD: Outgo on specified concern. agricultural extension undertaking. ? 35CCD: Weighted tax write-off for outgo for accomplishment development for mineral oil. ? 42 and 44BB: Particular proviso for tax write-off in the instance of concern for prospecting ? 44AD: Particular commissariats for calculating net incomes and additions for a concern. ? 44AE: Particular commissariats in the instance of concern of providing. hiring or renting goods passenger cars. Tax Planning WITH REFERENCE TO FINANCIAL MANAGEMENT DECISIONS Before get downing a new undertaking a critical managerial determination sing choosing right type of capital construction has to be taken. An optimal capital construction is one which maximises the shareholder’s return. The revenue enhancement contriver should decently equilibrate hazard. cost. and control and revenue enhancement consideration. Under the revenue enhancement Torahs. dividend on portions is non deductible and ? 35CCC: Weighted tax write-off for outgo incurred on agricultural extension on projects other than substructure development projects.