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PUNJAB TECHNICAL UNIVERSITY Jalandhar

A PROJECT REPORT ON

TAX AND FINANCIAL PLANNING FOR SALARIED INDIVIDUALS


AT

MONEY PLANT CONSULTING


Pune
SUBMITTED TO

PUNJAB TECHNICAL UNIVERSITY (PTU)


BY

ANAND PRATAP SINGH


Roll No: 11213310198
IN PARTIAL FULFILLMENT OF MASTER OF BUSINESS ADMINISTRATION PUNJAB TECHNICAL UNIVERSITY 2011-2013

DECLARATION

I, the undersigned, hereby declare that the Project Report entitle Tax and Financial Planning For Salaried Individuals in Money Plant Consulting, written and submitted by me to the MIT College of Management (MITCOM), Pune, in partial fulfillment of the requirement for the award of degree of Post Graduate Programme under the project guidance of Prof. Bijur in my original work and the conclusions drawn therein are based on the material collected by myself.

Place: Pune Date: Signature of Students

CERTIFICATE

This is to certify that Mr. ANAND PRATAP SINGH of MAEERs MIT College of Management (MITCOM) has successfully completed the project work titled TAX AND FINANCIAL PLANNING FOR SALARIED
INDIVIDUALS in partial fulfillment requirement for completion of PGP

course as prescribed by the MAEERs MIT College of Management (MITCOM).This project is the record of authentic work carried out by him/her during the period from May to June. He /she have worked under my guidance.

SignatureName- Prof. Bijur Project guide (internal) Date-

Counter signed by __ SignatureNameDirector Date:

Acknowledgement
First of all I would like to place on record my gratitude to all concerned respectable Director of Money Plant Consulting (CA Rishabh Parakh) for giving me this opportunity of internship which has been a pure learning experience and which have enlightened my knowledge and skills about the Finance and Marketing [livestock] industry. I would also like to express my gratitude toward MIT College of Management for giving me the opportunity to undergo summer internship at Money Plant Consulting. I am specially thankful to my mentors Sir and money plant consulting director CA Rishabh Parakh for guidance and cooperation during this internship and in fact without their navigational assistance life would have been very difficult as far as structuring the projects are concerned. I would always greateful to them for their help and support. Lastly but not the least I would like to thank MBA department for inducting the module of internship programme at Money Plant Consulting without which I shouldnt have ever learnt.

Place: Pune Date :

ANAND PRATAP SINGH

TABLE OF CONTENT

CHAPTER No.

TITLE
Declaration form student Certificate from company /organization Certificate from guide Acknowledgement List of tables List of Charts Executive summary

PAGE.NO

I 1.1 1.2 1.4 1.5 1.6 1.7 1.8 II 2.1 2.2

INTRODUCTION Background of the study Company profile Need of study Scope of study Objectives of study Introduction To Tax Tax Planning RESEARCH METHODOLOGY Research methodology Data Collection Primary data Secondary data Testing of Questionnaire

2.3 2.4

Limitations III IV V VI DATA PROCESSING AND ANAYSIS FINDINGS CONCLUSIONS RECOMMENDATIONS

BIBLIOGRAPHY

INDEX OF CHART

Chart No. Analysis 1 Analysis 2 Analysis 3 Analysis 4

Page No. 32 33 34 35

EXECUTIVE SUMMARY
DESK MANAGEMENT I use to visit various companys like cognizant, TCS, SunGard, Syntel, etc and arrange desk at their company for investment purpose.

PORTFOLIO MANAGEMENT After arranging the desk at the company clients use to come and I use to prepare portfolio.

INSURANCE AGENTS I was also dealing with various insurance products and according to the needs of the customer I give him advice.

MUTUAL FUNDS ADVISOR I also give advises of mutual funds regarding their correct investments.

TAX PLANNING While preparing their portfolio I was taking into consideration of tax planning and help them to make proper tax planning and increase their wealth by correct investments products.

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CHAPTER -1

INTRODUCTION

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INTRODUCTION

BACKGROUND OF STUDY

A salaried person is required to pay some portion of his income as tax to the government. This portion depends on the tax slab of the concerned financial years slabs which may change at the end of the financial year. To enhance the investment habits of the individuals government has given some areas of investment as tax free investments (which are discussed in detail in this project) i.e. by investing in these sections an assesses is barred from paying tax. That means he/she can save tax.

But every salaried individual was not aware of these tax saving investment avenues by investing in which he can save the tax. This problem laid down the need of tax planner to guide the assesses about the various tax saving avenues. Hence above said problem laid down the importance of the study.

OBJECTIVES OF STUDY

To understand the importance of tax and financial planning To understand the importance of tax and financial consultant To gain knowledge about outsource of tax and financial services

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SCOPE OF STUDY
This study is conducted as internship training at Money Plant Consulting, a leading Chartered Accountant Firm in Pune from May 2012 to June 2012. Individual employees are taken as sample for the study. It includes: a. Male employees b. Female employees and c. Senior Citizens For the survey a sample of 1000 people are considered, out of which around 400 individuals responded properly. Analysis is made based on the actual response. Salaried

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COMPANY PROFILE
1) ABOUT MONEY PLANT CONSULTING Moneyplant Consulting Group facilitates outsourcing the non-core activities and provides knowledge-driven financial services. Moneyplant Consulting Group is a premier outsourcing & a financial services provider which aims to offer solutions for financial needs and queries of individuals. They are a leading wealth management, capital markets and advisory company with over 100 man years of consulting & investing experience. Moneyplant Consulting Group was promoted by Mr. Rishabh Parakh (Director). He holds a professional degree of CA from the Institute of Chartered Accountants of India. He started Money Plant Consulting with an aim to outsource the non-core activities of corporate clients and to offer personal income tax/ financial market related services to individual clients. Since its Inception they have been successful in providing seamless service and significant advantage for clients with their extremely competent team of qualified professionals comprising CA's and MBA's & in house Knowledge pool of financial markets, instruments and products. Their aim is to ensure that clients benefit from the professional expertise, technical knowledge and experience. They have been recognized for expertise in the financial arena by highly reputed institutions and clients. They strive to provide transparent, ethical and research-based investments and wealth management services.

2) Organization Hierarchy
The organization is headed by Rishabh Parakh who is the founder and director.

The organization has 3 departmental heads vis--vis HR & Admin

Operations and Products & Services.

The Finance department is headed by the director himself. The organization is 50 employee strong
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Employees are from diverse backgrounds like CAs, MBAs and Software professionals

3) CORE FUNCTIONS OF MONEY PLANT CONSULTING GROUP

a) Fund management

1. Loan syndication & project Appraisal 2. Deployment of surplus funds 3. Decision on short/long term investment planning

b) Insurance: The firm has experience in Life & General Insurance advisory, which covers following types of risks:

a. Online Health & Marine insurance b. Commercial & Liability insurance, etc c. Group gratuity & group term insurance

c) Taxation

1. Consultation on income tax & fringe benefit tax 2. Assessment and Appellate proceedings 3. Transfer pricing d) Employees Taxation and Investments

a. Conducting seminar, orientation and induction program for the employees b. Preparation & Submission of income tax returns for corporate employees
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c. Tax & Financial planning

e) Investment Advisory services:

The firm has rich experience in advising clients in:1. Mutual fund investments / Financial planning 2. Deployment of surplus funds 3. Decision on short/long term investments

f) Taxation

1 Expert advice on tax planning and salary structuring 2. Assessment and appellate cases 3. Preparation & submission of Tax returns

g) Loans

Home loans / Personal loans / Car loans / Credit cards h) Insurance (Life & General)

1. Health, travel & Car insurance 2. Term insurance / Traditional plans/ ULIP / Pension Plans

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4) Some of the Corporate Clients with whom Money Plant Shares Professional Relationships with!!!

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INTRODUCTION TO TAX
1) HISTORY OF TAX

The Income-Tax was introduced in India for the first time in 1860 by British rulers following the mutiny of 1857.The period between 1860-1886 was period of experiments in the context of Income-Tax. This period ended in 1886 when first income tax act came into existence. The pattern laid down in it for levying of tax continues to operate even to-day though in some changed form. In 1918 another Act-Income Tax act was, 1918 was passed but it was short lived and was replaced by income-tax Act, 1922 and remained in existence and operations till 31st March 1961.

2) PRESENT ACT

On the recommendation of the law commission and direct tax enquiry committee and in consultation with Law Ministry a bill was framed. This bill was referred to a select committee and finally passed in sep. 1961. This act came into force from 1st April 1962 in whole of the country. Income tax Act 1961 is a comprehensive Act and consists of 298 section, sub-section running into thousands, schedules, rules, etc. and is supported by other acts and rules. This act has been amended acts since 1961. The annual finance bill represented to Parliament along with budget make far-reaching amendments in this acts every year.

3) IMPORTANCE OF TAX

The taxes levied by government from the pool of resources to be used for the collective benefit of the public. The Taxation is an exercise in the collective solution of individual problems. The state takes upon itself the duty of solving the problem of the underprivileged and needs finances for this purpose. The government can mobilize resources by imposing taxes on the privileged ones.
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The taxation structure of the country can play a very important role in the working of our economy. Some time back the emphasis was on higher rates of tax and more incentives. But recently the emphasis has shifted to the decrease in the rates of tax and withdrawal of incentives. While designing the taxation structure it has to be seen that it is in conformity with our economic and social objectives. it should not impair the incentives to personal savings and investment flow and on the other hand it should not result into decrease in revenue to states.

In our present day economic structure income tax plays a vital role as a source of Revenue and a measure of economic disparity. Our taxation structure provides for two types of taxes-direct and indirect: the income tax, wealth tax and gift tax are direct taxes whereas sales tax and excise tax are indirect taxes.

According to section 14 of Income-Tax Act 1961 provides for the computation of total income of an assessee which is divided into five heads
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of income. Each head of the income has its own method of computation. These five heads are:

1) Income From SALARIES; 2) Income from HOUSE PROPERTY; 3) Income From PROFITS AND GAINS OF BUSINESS AND PROFESSION; 4) Income from PROFITS AND GAINS; and 5) Income from OTHER SOURCES.

THE CONCERNED HEAD OF THIS PROJECT IS INCOME FROM SALARY To understand the study the most important question is: Ques .1 what is salary? Ans: u/s 15 the following incomes are chargeable under the head salaries: (a) Any salary due from an employer or a former employer to an assessee in the
previous year or whether paid or unpaid

(b) Any salary paid or allowed to him by or on behalf of an employer or a former


employer though not due or before it become due to him

(c) Any arrear of salary paid or allowed to him in the previous year by or on behalf
of an employer if not charged to Income Tax for any earlier previous year.

4) COMPUTATION OF SALARY INCOME

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Salary
Section 15, 16&17

Salary

Allowances

Perquisites

+=+ [17(1)]

[17(3)(ii)]

[17(2)]

Profit in lieu of salary


[17(3)]

[17(1)]

Less

Entertainment allowances [16(ii)]

Tax on employment

[16(iii)]

Income under the head salary

5) INCOME TAX SLABS FOR THE FINANCIAL YEAR 2012-2013 FOR SALARIED INDIVIDUALS

Tax Computation Table

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1. In case of individuals (other than women and individuals who are of the age of 65 years of more at any time during the Financial year 2012-13),

INCOME (in Rs) Up to Rs 200000 Between Rs. 200000 5,00,000 Between Rs. 5,00,001 10,00,000

TAX LIABILITY (in Rs.) Nil 10% of income in excess of Rs.200000 Rs.30,000 + 20% of income in excess of Rs.5,00,000

Above Rs. 10,00,000

Rs.100000 + 30% of income in excess of Rs.10,00,000

2. In case of women (other than women who are of the age of 65 years of more at any time during the Financial year 2010-11)

INCOME (in Rs) Up to Rs 200000 Between Rs. 200,001 5,00,000 Between Rs. 5,00,001 10,00,000

TAX LIABILITY (in Rs.) Nil 10% of income in excess of Rs.1,90,000 Rs.30,000 + 20% of income in excess of Rs.5,00,000

Above Rs. 10,00,000

Rs.10,00,000 + 30% of income in excess of Rs.10,00,000

3. In case of Individuals who are of the age of 65 years or more at any during the time Financial year 2012 13.

INCOME (in Rs) Up to Rs 2,40,000

TAX LIABILITY (in Rs.) Nil

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Between Rs. 2,40,001 5,00,000 Between Rs. 5,00,001 8,00,000

10% of income in excess of Rs.2,40,000 Rs.24,000 + 20% of income in excess of Rs.5,00,000

Above Rs. 8,00,000

Rs.86,000 + 30% of income in excess of Rs.8,00,000

A surcharge of 10 per cent of the total tax liability is applicable where the total income exceeds Rs. 1,000,000.

Income Tax Returns Filing Process


To comprehend the business model, it is necessary to understand According to Income Tax Laws, all salaried individuals have to file their IT returns for the financial year just ended by the 31st Day of July of every Year.

Now, it is the responsibility of the Individual to file his returns on or before the due date and ensure that he has no tax liability and that all his taxes have been paid on time to the Central Government

Now, the Central Government has authorized all employers to deduct the taxes before giving salaries to its employees and credit the same to the treasury on behalf of the individual employee

This is called Tax Deducted at Source or TDS

In accordance to the laws, every employer has to issue a Form 16, which shows the net income and tax payable by the individual

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In most cases, the tax payable is equal to the Tax cut i.e. the individual has paid all his taxes and does not owe the Central Government anything situations wherein, there may be a case of Refund or Tax Payable. but there are

For filing, various forms are available namely ITR 1, 2.all the way up to ITR 9

But most salaried individuals have to contend with only ITR 1, ITR 2, ITR 4 or ITR V

These forms are easily available over the internet as well as House of Forms.

Then each individual must fill in the details accordingly and submit the same to the IT Department

Once this is done, the Assessing Officer must acknowledge the Form with a stamp containing the date and range of the officer and had it over to the individual

This is entire process of Filing IT returns

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Need to file IT returns Now, one may wonder that if an individual has paid all the taxes on time and he/she doesnt owe the Central Government any money, then what is the purpose of filing returns as the Form 16 has all the details there is pertaining to the income received during the Financial Year, but then filing of returns indicates that all the income earned during the financial year has been completely accounted for and the taxes on them has been paid duly to the Central Government But apart from that, the stamped acknowledgement is a very strong proof and is a must for: 1. Visa Processing for Professionals 2. Application for House Loans 3. Work Permits in foreign Countries 4. As seen above, that entire process of filing returns is a simple one for people who have some basic knowledge of taxation. 5. But it does require time on behalf of the individual to personally go to the IT office and file his returns. 6. E-filing is an option for individuals who have a digital signature 7. Else even e-filing is partial online and partially manual 8. Also one needs to take a day off work to file returns as the IT office is closed on weekends 9. Also organizations find it convenient to outsource this non core activity of tax filing and financial planning 10. And hence herein lays the fundamentals of Money Plant Consulting, which takes care of filing returns on behalf of Individuals and also providing customized comprehensive, unique portfolio design based on individual clients, his needs, his income and liabilities. 11. The concept of NEED BASED SELLING is the mantra followed at Money Plant Consulting. 12. Clients needs to submit their Form 16s and other documents if necessary and our team of CAs, ICWAs and MBAs in turn not only help filling up of ITRs and filing but also help in assessment of the financial health of individuals and help them plan their finances better all for absolutely free of cost.
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13. Being a Service provider, customer satisfaction and strict adherence to Service Level Agreements is a foundation to our successful business model.

6) Documents needed to file IT return (1) Annexure to Form 16, viz. Form 16 A and Form 12 (2) PAN (3) ITR FORMS; ITR-1 ITR-2 ITR-4 ITR-V To be well versed with the project, one has to be aware of Form 16, various sections under IT ACT 1961 and investment avenues Form 16

1. The Form 16 is Certificate under section 203 of the Income-tax Act, 1961 for tax deducted at source from income chargeable under the head Salaries 2. Every salaried individual at the end of the financial year (April March), gets a consolidated document called The Form 16 3. It has details regarding name and address of the employer and employee, their TAN and PAN nos. 4. It also has the assessment year as well as the Financial Year 5. If Financial Year is April 2010 March 2011 then Assessment Year is 2011-12 6. For all other details please refer to the annexure

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The following cases will help in understanding the difference between ITR forms: Case 1 (ITR-1)

When no additional income is reported by the employee like rent received from any housing property or EMIs on housing loans or capital gains both short and long term qualify an individual to file ITR 1

Case 2 (ITR-2)

In case an individual is repaying his housing loan or is receiving rent from his/her housing property or has some sort of short term capital gain, then accordingly ITR 2 is to used

Case 3 (ITR-IV)

Individuals, who are on a contract basis with the employer and not on the payroll, he/she receives Form 16 A, then in that case ITR 4 is to used

Case 4 (ITR-V)

Now individuals who have filed their return online using the Income Tax website are given ITR V

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TAX PLANNING 1) What is Tax Planning?


The goal of tax planning is to arrange your financial affairs so as to minimize your taxes. There are three basic ways to reduce your taxes, and each basic method might have several variations. You can reduce your income, increase your deductions, and take advantage of tax credits.

(a) Reducing Income


Adjusted Gross Income (AGI) is a key element in determining your taxes. Lots of other things depend on your AGI (or modifications to your AGI)-- such as your tax rate and various tax credits. AGI even impacts your financial life outside of taxes: banks, mortgage lenders, and college financial aid programs all routinely ask for your adjusted gross income. This is a key measure of your finances. Because your adjusted gross income is so important, you may want to begin your tax planning here. What goes into your adjusted gross income? AGI is your income from all sources minus any adjustments to your income. The higher your total income, the higher your adjusted gross income. As you can guess, the more money you make, the more taxes you will pay. Conversely, the less money you make, the less taxes you will pay. The number one way to reduce taxes is to reduce your income. And the best way to reduce your income is to contribute money to a 401(k) or similar retirement plan at work. Your contribution reduces your wages, and lowers your tax bill.

You can also reduce your Adjusted Gross Income through various adjustments to income. Adjustments are deductions, but you don't have to itemize them on the Schedule A. Instead, you take them on page 1 of your 1040 and they reduce your Adjusted Gross Income. Adjustments include contributions to a traditional IRA, student loan interest paid, alimony paid, and classroom related expenses. A full list of

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adjustments are found on Form 1040, page 1, lines 23 through 34. The best way to boost your adjustments is to contribute to a traditional IRA. As you can see, two of the best ways to reduce your taxes is to save for retirement, either through a 401(k) at work or through a traditional IRA plan. Contributions to these retirement plans will lower your taxable income, and lower your taxes.

b) Increase Your Tax Deductions


Taxable income is another key element in your overall tax situation. Taxable income is what's left over after you have reduced your AGI by your deductions and exemptions. Almost everyone can take a standard deduction, and some people are able to itemize their deductions. Itemized deductions include expenses for health care, state and local taxes, personal property taxes (such as car registration fees), mortgage interest, gifts to charity, jobrelated expenses, tax preparation fees, and investment-related expenses. One key tax

planning strategy is to keep track of your itemized expenses throughout the year using a spreadsheet or personal finance program. You can then quickly compare your itemized expenses with your standard deduction. You should always take the higher of your standard deduction or your itemized deduction.

c)Take Advantage of Tax Credits


Once we've tweaked our taxable income, we are ready to focus our attention on various tax credits. Tax credits reduce your tax. There are tax credits for college expenses, for saving for retirement, and for adopting children. The best tax credits are for adoption and college expenses. Not everyone is in a position to adopt a child, but everyone could take some college classes. There are two education29

related tax credits. The Hope Credit is for students in their first two years of college. The Lifetime Learning Credit is for anyone taking college classes. The classes do not have to be related to your career. You may also want to avoid additional taxes. If at all possible, avoid early withdrawals from an IRA or 401(k) retirement plan. The amount you withdraw will become part of your taxable income, and on top of that there will be additional taxes to pay on the early withdrawal. One of the best, and most abused, tax credits is the Earned Income Credit (EIC). Unlike other tax credits, the EIC is credited to your account as a payment. And that means the EIC often results in a tax refund even if the total tax has been reduced to zero. You may be eligible to claim the earned income credit if you earn less than a certain amount THE MOST COMMONLY USED METHOD OF TAX PLANNING IS INCREASING THE TAX DEDCUTIONS. In tax these deductions are commonly known as deductions under chapter VI-A. They categorized in different heads. These heads are:

Deductions in respect of certain payments


Deduction in respect of life insurance premium, deferred annuity, contributions to provident fund, subscription to certain equity shares 80C or debentures, etc. Deduction in respect of deposites under National Savings Scheme or 80CCA payment to a deferred annuity plan. Deduction in respect of investment made under Equity Linked 80CCB 80CCC Savings Scheme. Deduction in respect of contribution to certain pension funds. Deduction in respect of contribution to pension scheme of Central 80CCD 80D Govt. Deduction in respect of Medical Insurance Premium.
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Deduction in respect of maintenance including Medical Treatment of 80DD 80DDB 80E a dependent who is a person with disability. Deduction in respect of Medical Treatment, etc. Deduction in respect of intrest on loan taken for higher education. Deduction in respect of donations to certain funds, charitable 80G 80GG institutions etc. Deductions in respect of rents paid. Deduction in respect of certain donations for scientific research or 80GGA rural development. Deduction in respect of contributions given by companies to political 80GGB parties. Deductions in respect of Remuneration from certain foreign sources 80GGC in the case of professors, teachers, etc. Deduction in respect of Professional income from foreign sources in 80RR certain cases. Deduction in respect of Remuneration received for services rendered 80RRA outside India.

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OUT OF THE ABOVE MENTIONED SECTIONS THE MOST COMMONLY USED SECTION IS SECTION 80C. ALONG WITH SECTION 80CCC AND SECTION 80CCD. THEY ARE DISCUSSED IN DETAIL BELOW.

2) Section 80C. - Section 80C was inserted from assessment year 20062007 It provides deductions from gross (total) income for qualified amounts paid or deposited by the assessee in the previous year.
Scheme particulars HUF Member family Life Insurance Individual Spouse, Self, Children (major minor, dependent or independent) Non Commutable deferred annuity - Individual Spouse, Self, No limit children (major minor, dependent or independent) Deferred Annuity deducted Govt by Individual Spouse, Self, 20 % of salary No limit children (major minor, dependent or independent) Statutory provident recognized and individual Individual only on his own name No limit In case of RPF 5years
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Available to

Can be for

amount cap

Holding period

of 20% of Sum Two year Assured Do

premium

or

No limit

or

or

Provident fund Public Provident Fund Individual spouse,own,c hildren (major minor, dependent or indepdent) National Saving individual Certificate /huf own name No limit No limit or 70000 6years

ULIP

of

UTI Huf

Member family

of No limit

5 years

and LIC mutual fund(Dhanraks ha) Individual

spouse,own,c hildren (major minor, dependent or indepdent) or

Do

do

Specified saving fund Payment house loan Tution fees

tax individual mutual /huf

own name

No limit

3 year

of individual /huf Individual

own name

No limit

5 year

any children

two No limit

No limit

Specified deposit

fixed individual with /huf

own name

No limit

5 year

scheduled bank

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Other points related to above: 1. Deduction for above schemes in total is available up to Rs.100000 /2. The limit of one lack as above is total limit u/s 80C for all type of savings, plus section 80CCC (pension policy) plus u/s 80CCD (Contributory Pension Plan).Means the aggregate amount of deduction under above referred sections cannot exceed Rs. 1, 00,000. 3. PPF limit of 70000 is not as per income tax act but specified under PPF scheme more over the limit is combined for individual plus minor child. 4. Accrued interest on NSC is also available for rebate for first five year.(you can download NSC interest calculator from calculator section) 5. Holding period has been either defined under income tax or under scheme qualified in for deduction u/s 80C MAIN PROVISIONS OF THE SECTION: 1. The deduction is available only to an individual or a HUF from the gross total income, 2. The deduction is allowed irrespective of whether such amount is paid or deposited by the taxpayer out of his income chargeable to tax, 3. The deduction is available on the basis of specified qualifying

investments/contributions/payments made by the taxpayer during the previous year, 4. The maximum amount deductible under section 80C is Rs. 1, 00,000. Also the total amount of deductions under sections 80C, 80CCC and 80CCD is Rs. 1, 00,000. THE COMMONLY USED INVESTMENT AVENUES OF 80/C ARE (1) LIC (2) MUTUAL FUND (3) ULIP LIC is the most common source of investment. But Mutual funds and ULIP are the recent options for investment. A brief knowledge about the both is given below: 4) MUTUAL FUNDS
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A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. The mutual fund will have a fund manager that trades the pooled money on a regular basis. Currently, the worldwide value of all mutual funds totals more than $26 trillion (1) OPEN ENDED FUNDS (2) BOND FUND (3) MONEY MARKET FUND (4) FUND OF FUNDS (5) HEDGE FUNDS (6) EQUITY FUNDS 5) UNIT LINKED INSURANCE PLAN: Unit linked insurance plan (ULIP) is life insurance solution that provides for the benefits of protection and flexibility in investment. The investment is denoted as units and is represented by the value that it has attained called as Net Asset Value (NAV). The policy value at any time varies according to the value of the underlying assets at the time.ULIP provides multiple benofots to the customers. The benefits include :

Life protection Investment and Savings Flexibility Adjustable Life Cover Investment Options Transparency Options to take additional cover against : Death due to accident Disability Critical Illness

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6) SECTION 80CCC. DEDUCTION FOR CONTRIBUTION TO PENSION


FUNDS Section 80CCC provides deductions from gross (total) income for amounts paid or deposited by the assessee to any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from the fund referred to in clause (23AAB). Main Provisions. 1. The deduction is available to an individual who is resident or non-resident, Indian citizen or foreign citizen 2. The deduction is allowed only if such amount is paid or deposited by the taxpayer out of his income chargeable to tax, 3. The maximum amount deductible under section 80C is Rs. 1, 00,000. Also the total amount of deductions under sections 80C, 80CCC and 80CCD is Rs. 1, 00,000. 4. Surrender value received is taxable in the year of receipt in the hands of the assessee or nominee.

7) SECTION 80CCD. DEDUCTION FOR CONTRIBUTION TO PENSION


SCHEME OF CENTRAL GOVERNMENT. Deduction is allowed to an individual employed by the Central Government or any other employer on or after the 1st day of January, 2004, has in the previous year paid or deposited any amount in his account under a pension scheme notified or as may be notified by the Central Government. However, the deduction is limited to 10 per cent of his salary in the previous year. Where, the Central Government or any other employer makes any contribution to the employees account, the employee shall be allowed a deduction in the computation of his total income. However, the deduction is limited to 10 per cent of his salary in the previous year.

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If after claiming the deduction, any amount together with interest or bonus accrued is received by the assessee or his nominee in whole or in part, in any previous year, is taxable of the assessee or his nominee, as the case may be, if it is received 1. On account of the closure or opting out of the pension, or 2. As pension received from the annuity plan purchased or taken on such closure or opting out. Where any amount paid or deposited by the assessee has been allowed as a deduction under section 80CCD 1. No rebate with reference to such amount shall be allowed under section 88; 2. No deduction with reference to such amount shall be allowed under section 80C. Explanation. For the purposes of 80CCD, salary includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

8) SECTION 80CCE.
The aggregate amount of deductions under section 80C, section 80CCC and section 80CCD shall not, in any case, exceed Rs. 1, 00,000.

After considering all the above deduction a proper financial plan is made for the
assesses. Which can help in minimizing his/her amount of tax for the concerned financial year.

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CHAPTER -2

RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY

Research Methodology refers to search of knowledge .one can also define research methodology as a scientific and systematic search for required information on a specific topic. The word research methodology comes from the word advance learner s

dictionary meaning of research as a careful investigation or inquiry especially through research for new facts in my branch of knowledge for example some author have define research methodology as systematized effort to gain new knowledge. In the internship I have to work in Primary data & a secondary data (both) source of data has been used. Research is defined as any systematic activity carried out in pursuit of truth The process of research is follows

Definition Of problem

Hypothesis Formulation

Organizing and Evaluation data Inferences and Conclusion

Survey Technique and collection of data


The survey conducted by me for a period of two months from 1st June 2011 to 31st July 2011, but I have made use of data for the month of May and August as well. Even through the size of the population in the survey gambit was 10000 odd , work for the collection of data was delegated to a team of 40 people who at various point of time
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during the aforementioned month visited the organizations where Money plant has tieups with and the required data was consolidated. Hence the survey is an Incomplete Census survey rather than the sample survey as only a about 50% of the people choose to participate in the survey. I led the team MBAs and CAs to various companies during the survey and had the opportunity to gauge the ground realities at a very fundamental level. At the end of each working day, the data collected was sorted and analysis was done on a weekly basis. Being a service provider, it has paramount to Money Plant consulting that they stuck to the commitments given to the client and customer satisfaction was of the highest level.

Data Collection
Once the research objective and design are through, the next and most important step is collection. Data are facts, figure and other parameters from both past and present which serves as a basis for study and analysis

Data is classified as follows-

Primary Data

Secondary Data

Data

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Primary Data Primary data is that data is collected for a specific purpose. It is customized according to the needs of the researcher and focuses exclusively on the current problem. It requires a great deal of resources and skill sets in collection of primary data. In this particular research problem, it was a paramount importance to garner primary data as there was very little available by way of previous of Secondary data.

Primary sources of data: In the primary sources of data, Money plant consulting have data of over 1, 00,000 customer. We used this data for call back and follow-up by visiting at their place. There were two methods employed for collection of primary data namely 1. Questionnaires 2. Interviews With the majority being the latter The data available before hand was that of a similar but no so extensive and exhaustive, Hence data had to be collected first hand; hence primary data.

QUSTIONNAIRE The questionnaire designed include various heads and Money plant Consulting wanted analysis regarding 1. No. of return filed compared to the last year for the same period. 2. Bifurcation of computation and simple and simple returns. 3. Trifurcation of ITR 1, ITR 2 and ITR 4. 4. Knowledge of target population about investment. 5. Willingness to invest. 6. People who have invested through money plant. 7. The various avenues of investment. 8. Customer satisfaction.

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Secondary Data

Secondary sources of data In the secondary method we get new client by conducting seminar in respected company. For the purpose of B2B we suppose to use internet as well as by personally visiting at a company. I visited around 15 companies to get the number and other details.

LIMITATIONS:
1) The respondents were not so easy to consider for sample 2) Most of the respondents were not ready to give details of the salary 3) Time was short to make a detailed study 4) Cost was a constraint.

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CHAPTER -3

DATA ANALYSIS AND INTERPRETATION

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DATA ANALYSIS AND INTERPRETATION


ANALYSIS # 1 Total performance of the MPG during the period of May 2011 of the August 2011
No of returns May June July August 2010 453 3015 5732 211 2011 900 4050 8654 350

No of returns filed during the year 2011= 13954 No of returns filed during the year 2010= 9411
10000 9000 8000 7000

6000
5000 2010 2011

4000
3000

2000
1000

0
May June July August

1. Maximum number of Tax Filing is done in the month of july. 2. The reason for this being the most companies issue the form 16 during June and July. 3. July 31st being the decline for filing returns also adds up to the voluminous growth during sad periods. 4. Performance of the last year has seen increased. 5. Word of Mouth is key to the successful growth of Money Plant. 6. Also tie ups with companies had increased four fold compares to the last year. ANALYSIS # 2
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No of computation in relation of returns filed in year 2011

Months may June July August

Computation 500 1050 4050 110

Simple 900 4050 8654 300

No. of Computation returns filed in year 2011 = 8710 No. of Simple returns filed in year 2011 = 13904

9000 8000 7000 6000 5000 4000 Computation Simple

3000
2000 1000 0 may June July August Simple Computation

1. The number of returns wherein some short of computation was requires was half to that of simple returns.

ANASYSIS # 3
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People who were aware of investment avenues :Awareness Discussion No discussion Sales 68% 32%

Discussion of Investment avenues = 78% No Discussion of Investment avenues = 32%

32%

68%

Discussion

No discussion

1. Out of 5000 odd people who took part in the survey , and among of them 82 % of the people had some sort of clue about the various investment avenues available. 2. This figure is not surprising in the age of internet and 24/7 news and

investment channels as well as going by the education level of the target population most of whom are software professionals. 3. And other observation was that people had no clue about the investment avenues were mostly fresher i.e. those who have recently joined the company straight after graduation.

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ANALYSIS # 4

People who had actully invested in Mutual fund ,unit linked plans, life insurance, PPF,NSC etc during the financial year 2010-2011.
Quarter 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Sales 19 32 41 8

Investment

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

1. On the remaining had not utilized the provisions under the IT act to save up on taxes. 2. While the remaining had not utilized the provisions under the IT act to save up on taxes 3. The major reasons being lack of liquidity, other commitments.

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INTERPRETATION
1. Majority of the population of the study was aware of the investment avenues. 2. There is lack of willingness to invest. 3. Least investments are done by freshers i.e. those who has recently joined the job.

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CHAPTER- 4

CASE STUDY

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CASE STUDY
1. All cases are done in reference to income tax slab for accounting year 20082009 2. All cases are illustrative 3. All suggestion are given for illustration and may not match the original choices 4.1 (CASE) where no investment is done BELOW MENTIONED IS THE INCOME TAX DETAIL OF Mr.X From the given detail we have to make a proper tax plan for Mr.X so that it can help him in minimizing his tax amount. GROSS TOTAL INCOME Less: deductions under section VI-A Total income (a) Tax payable* (b)Education Cess (3% on tax payable) Net tax payable (a+b) 4,50,000 Nil 4,50,000 29,000 870 29,870

In the above example we can see that Mr.X is paying Rs.29, 870 as tax. Now the duty of tax planner is to minimize this amount. Now the various options which are available to Mr.X are: (a) (b) (c) (d) NOTE: *Donations are not generally suggested to individuals as they are like an expense to them which do not provide anything in return Make investments in under section 80/C Can claim conveyance allowance u/s 10 Can take medical policy Can make some donations.

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Lets see if Mr.X make investment under section 80 C then what will the effect on his tax amount.

Salary Less :- deductions u/s 10 : Conveyance allowance Gross total income 10,000

4, 50, 000

10, 000 4, 40, 000

Less: deductions under chapter VI-A Section 80C : Provident fund Insurance premium Mutual funds Public provident fund National saving certificates Unit linked insurance plan Total income Tax payable Education Cess (3% on tax payable) Net tax payable From above solution one can see that by increasing investments in section 80C Mr.X has saved Rs11, 330/51

7, 500 25, 000 40, 000 10, 000 7, 500 10, 000 1, 00, 000 3, 40, 000 18, 000 540 18, 540

4.2 (CASE) where partial investment is done


BELOW MENTIONED IS THE INCOME TAX DETAIL OF Mrs. Neeta From the given detail we have to make a proper tax plan for Mrs. Neeta so that it can help her in minimizing her tax amount. Salary Less deductions under section VI-A Section 80C : Provident fund Insurance premium Fixed deposit Tution fees 8,500 30,000 10,000 4,500 53,000 4,00,000

Total Income

3,47,000

(a) Tax payable (b)Education Cess (3% on tax payable) Net tax payable (a+b)

15,700 471 16,171

In the above example we can see that Mrs. Neeta is paying Rs.16,171 as tax. Now the various options which are available to Mrs. Neeta are: (a) (b) (c) Increase his investments in section 80/C Can claim conveyance allowance u/s 10 Can take medical policy

*tax calculated is 10% on the income 52

Lets see if Mrs. Neeta what is the maximum amount of tax she can save:

Salary Less : deduction U/S 10 Conveyance allowance Gross total salary 10,000

4,00,000

10,000 3,90,000

Less deductions under chapter VI-A Section 80C Provident fund Insurance premium Fixed deposit Tution fees Mutual funds Public provident funds Unit linked insurance plan Total income (a) Tax payable (b)Education Cess (3% on tax payable) Net tax payable (a+b) 8,500 30,000 10,000 4,500 20,000 12,000 15,000 1,00,000 2,90,000 10,000 300 10, 300

From above we can see that by increasing investments Mrs. Neeta is able to save Rs. 5, 871/*tax calculated is 10% on the income
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4.3 (CASE)- where assessee has exhausted 80/c limit The following are particulars of the income of the university teacher Mrs. Meeta. (Senior citizen)

Salary Less: Income from house property Gross total income Less: deductions under chapter VI-A Principal repayment toward housing loan Insurance premium Provident fund Mutual funds Total income Tax payable on total income Education Cess (3% on tax payable) Net tax payable 50, 000 30,000 10, 000 15, 000

5, 00, 000

1, 50, 000 3, 50, 000

1, 00, 000 2, 50, 000 1, 000 30 1, 030

In the above case assessee has exhausted her 80C limit. Now the available options for Mrs. Meeta are to: (1) Can take medical policy u/s 80 D (2) Can claim petrol allowance u/s 10

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Lets see the effect on Mrs. Meeta s tax amount after taking certain actions
Salary Less: deduction u/s 10 Conveyance allowance 10, 000 10,000 4,90,000 Less: Income from house property Gross total income Less: deductions under chapter VI-A Principal repayment toward housing loan Insurance premium Provident fund Mutual funds 50,000 30,000 10,000 15,000 1,00,000 2,40,000 Deduction u/s 80/D 15, 000 15, 000 1,50,000 3,40,000 5,00,000

Total income Tax payable on total income Education Cess (3% on tax payable) Net tax payable

2,25,000 NIL NIL NIL

After making the appropriate investments and claims one can see that Mrs. Meeta is able to save the entire amount of tax.
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CHAPTER- 5 FINDINGS

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FINDINGS:

1) Most of the individuals only look into investments because they want to save TAX. 2) People fail to take into consideration the most important factor INFLATION. 3) Mostly all the freshers in a company, do not have any awareness regarding their investments, tax savings Etc. 4) Todays youth is earning more but their financial literacy is very negligible, While many are unaware of how to manage their income for best returns , quite a number dont even realize the importance of savings and investment. 5) People in different localities show different perception towards investments 6) 30% of the individuals do not invest in the market because of many reasons-: A) Parents decision B) Lack of awareness C) Lots of commitments. Hence less appetite for risk

7) Majority of the people do not have the knowledge of tax planning 8) Majority of the population was unaware about the reason for which we pay tax 9) Majority of the population does not opt for the services of C.As and Financial Consultants 10) There is unawareness about the use of amount of tax paid as tax

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58

59

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CHAPTER - 6

CONCLUSIONS

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CONCLUSION

It was my pleasure to work with CA Mr. Rishabh Parakh and a team of 50 people from 3rd May 9th July 2012 we all worked as a team towards the goal of the company. I played a role in meeting people and making their Portfolio as a portfolio manager which give me immense satisfaction and impulse amount of knowledge. I am very thankful to MIT College of Management and specially Prof. Vaishali who worked so hard for getting me placed for Summer Internship Programme. I hereby conclude that this summer internship programme proved to be very helpful to me, so I am thankful to all the people who are directly or indirectly involved in this.

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CHAPTER - 6

Recommendations

63

SUGGESTIONS:
Basic knowledge of tax should be given to each and every student during educational duration whether of commerce background or not People should opt the services of C.AS and financial consultants For sound financial condition one should have a financial portfolio from a C.A or tax planner
For Moneyplant Consulting to stay ahead of its competitor it must emulate the TAXSMILE model of online filing and hence it is necessary to keep up to date with changing needs and technologies.

Acknowledgement distribution needs to be more streamlined as there were instances of some clients not receiving them on time. Moneyplant Consulting should take this up on a high priority basis.

Portfolio designing is the core activity and hence Moneyplant Consulting should make sure that additional human resources should be allocated as there were instances where Tax filing took precedence over financial planning.

Load Shedding was a genuine problem which made tax computations delayed and hence it is suggested that Moneyplant Consulting should look to having a 24/7 power back up.

Employee attrition was also a problem faced by Moneyplant Consulting and hence additional perks and commissions should be used as an incentive tool for deal closing.

Form wastage should be avoided or at least minimized.

Moneyplant Consulting must make sure of giving existing clients a more personalized and customized service should be one of the priorities. 64

The business model of Moneyplant Consulting is near perfect but reinvention is the mantra to be followed to stay ahead of competition.

With changing times and economic conditions, it has been observed that the disposable income of people have increased and so have the tax slabs been modified by the Government of the Union of India and so people have never had a better period to invest more and participate and reap in the benefits of a strong and growing economy.

Section 80 G which deals with deductions with respect to donations to charitable trusts, relief funds and political parties are subject to misuse as the law leaves lot of ambiguities. Donations to political parties are totally tax deductible while donations to certain trusts and charities are only 50 % tax deductible.

Having a diverse financial portfolio helps one survive in an extremely volatile economic atmosphere. Risk diversification makes the financial health of an individual more or less stable even if a couple of sectors are badly hit.

Financial planning and portfolio designing has to be need based and is unique depending upon the individuals/familys income and liabilities.

Suppose a married couple (DINK) are planning to buy a house property in a couple of years then it doesnt make any sense for them to invest in PPF or NSC which are long term and they will be better off having their money in FDs or the bank. They can choose to invest part of their savings in some sort of ELSS.

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CHAPTER - 7

BIBILOGRAPHY

66

BIBLIOGRAPHY
Reference books & Websites

1. Direct tax: Law and Practice 2. Research Methodology 3. Company Brochures 4. www.moneyplantconsulting.net 5. www.google.com 6. www.incometaxindia.gov.in

Singhania S. P. Kasande

7. www.moneycontrol.com

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ANNEXURE

Questionnaire

1. Name : ________________________________ DOB ____/____/______ 2. Fathers Name : __________________________________________________________ 3. E-mail: Official __________________________________________________________ Other (mandatory) __________________________________________________________

4. Phone No.(M) ___________Off-No____________ (R) _____________ 5. Bank Name & Branch (for refund cases) Name:_____________________________________________________

Bank A/c No. ______________________ MICR No:________________

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