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Income Tax Saving in India

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Syskool
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Income Tax Saving in India

Some of the Sections of Income Tax Act, 1961 are detailed below which detail few exemptions and categories of exempt income that you can take advantage of:

Section 80C: Investment in specified instruments and expenses

Section 80C gives every income tax payer up to a maximum of Rs. 1,00,000 tax-free income in a year if they invest in or buy the following instruments. Please not that this is a combined total of Rs. 1,00,000 and not an individual figure for every instrument:
1. Premium for Life Insurance or ULIP
2. Provident Fund (PF) contribution
3. Public Provident Fund (PPF) – only up to Rs. 70,000 in a year
4. Repayment of home loan principal
5. Equity Linked Savings Schemes (ELSS) of Mutual Fund Companies
6. Infrastructure Bonds
7. National Savings Certificates (NSC)
8. Tax Saving Fixed Deposits with Banks
9. Tuition Fees of children
Must Read: Investment for Tax Exemption

 

Comparison of 80C Investment Avenues

Type of 80C Instrument Lock In Period Returns Risk Taxation of Returns
Equity Linked Savings Scheme (Mutual Fund) 3 years
Market Linked
(58% Category Average for yr ending Dec 28,2007)
 High No tax
Life Insurance Premium 2 years
6%
 Low No tax
ULIP Premium 1 3 years
Market Linked
 High No tax
PPF (fixed returns) 15 years
8%
 Low 2 No tax
Home Loan Repayment 5 years
NA
 NA NA
Infrastructure Bonds
(fixed returns)		 3 years (min)
6%
 Risk Free Interest is taxed
NSC (fixed returns) 6 years
8.16%
 Risk Free Interest is taxed
Tax Saving Fixed Deposits
(fixed returns)		 5 years
8%-8.75%
 Risk Free Interest is taxed

 

Notes:
1:ULIP premium needs to be at least 1/5th of the sum assured to qualify under Section 80C
2: PPF returns are set by the Government of India and can be revised either upwards or downwards in any year.
Section 80D: Health Insurance Premium

You can take advantage of an annual deduction of Rs. 15,000 from taxable income for payment of Health Insurance premium for self and dependants. For senior citizens, this deduction is Rs. 20,000.
Section 80E: Interest paid on educational loans
You can claim a deduction on the interest paid on loans taken for higher education for yourself, your spouse and children. There is no limit on the amount of deduction you can claim.
The only thing to keep in mind is that the program for which the loan is taken should be a graduate or post-graduate program in engineering, medicine or management or a post-graduate course in the pure or applied sciences.
Read Also: Key Banking and Financial Terms
Section 80G: Donations to Charitable institutions
You can claim a deduction for any donation that you might have made to a charitable fund or institution. However, please note that these donations should be made only to specified institutions. And a proper proof of payment must be provided for the same. Based on the classification of the charity , you can claim either 100% or 50% of the donated amount as the deduction. The deduction might also be subject to a certain limit again based on the type of charity that you are donating money.
Section 24: Interest paid on housing loan
Under Section 24, a maximum of Rs 1,50,000 can be deducted from your taxable income as interest repayment for a self-occupied house. Please note that this deduction is not available if you the house is still under construction and you do not have the occupation of the house.
 
Provisions that you should take advantage of if you are a salaried employee:
 
Section 10(13A) : House Rent Allowance
You can take advantage of the provisions in this section if you are renting an accommodation. These provisions will not be available to you if you stay in a rent-free accommodation or live with your family or in your own house.
Under Section 10(13A), HRA is exempt to the least of the following: i) 50/40 per cent of basic salary= Dearness Allowance (if, applicable), ii) excess of rent paid over 10 per cent of basic salary; and iii) actual HRA received.
Let’s illustrate this calculation with an example:
Assumptions
HRA per month = Rs 15,000
Basic monthly salary = Rs 30,000
Monthly rent = Rs 14,000
Rental accommodation is in Delhi.
 
Exemption
The HRA exemption would be the least of the following:
1. Actual amount of HRA: Rs 15,000
2. 50% of salary (basic component + dearness allowance) = 50% x (30,000 + 0) = Rs 15,000
3. Actual rent paid – 10% of salary (basic component + dearness allowance)= Rs 14,000 – [10% of (30,000 + 0)] = 14,000 – 3,000 = Rs 11,000
Rs 11,000 being the least of the three amounts will be the exemption from HRA.
The balance HRA of Rs 4,000 (15,000-11,000) would be taxable.
Please note that HRA exemptions are only available on submission of rent receipts or the rent agreement.
 
Paying Rent to parents or relatives

If you want to pay rent to your parents or any relatives (like uncle/cousin) whom you are staying with. You will need to treat them as landlords. And request the owner of the house (which will be one of your parents) to declare it in his/ her personal income tax return. This will prevent any litigation in the future.
 
Section 10 (14) Rule 2BB(10) : Transport Allowance
Transport allowance granted for commuting between your residence and place of work is exempt up to Rs. 800 a month. You can take advantage of this provision to get a tax exemption of Rs 9600 annually by providing your employer with bills or a self-declaration.
 
Section 17(2) : Medical Reimbursement
You can claim exemption up to Rs 15,000 annually on actual expenditure incurred on your medical treatment or for the treatment of any of your dependents. Moreover, there is no restriction of approved hospitals or clinic for the same. This is exempt only on provision of actual bills.
However, if the amount is paid out as an allowance, not a reimbursement then it would be fully taxable.
Also, Read:
Tips are not Salary Income, Still Taxable
Indian Revenue Service (IRS) Incom Tax, Customs & Central Excise
Finance Ministry rules out tax relief for SEZs

India’s Trade Policy

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Syskool
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India's Trade Policy

Objectives of India’s trade policy

India’s Trade policy of a country refers to the set of policies which govern the external sector of its economy. As India is a developing country trade policy is one of the many economic instruments used to suit the requirements of economic growth. On the one hand, India seeks to promote export, on the other hand, see the level of imports to the level of foreign exchange available to the government. For a developing country such as India, the basic problem is the domestic non-availability of certain crucial inputs like industrial raw minerals, machinery, and technology. These can be produced through imports. Though imports can be financed through foreign aid in the short run, imports must be financed by additional exports in the long run. The basic objective of India’s trade policy revolves around the instruments and techniques of export promotion and import management.
Also, Read: Indian Economy

Present Objectives of India’s export policy

1. To earn adequate foreign exchange to finance the required volume of imports.

2. To effect a change in the directional pattern to reduce development on a single country/limited number of                      countries.

3. To supplement domestic demand for increasing employment opportunities.

4. To raise unit value realization wherein competition is severe.

5. To impose minimum price regulation wherein competition is severe.

6. To impose control when domestic availability is less adequate.

 

Read Also: Committee On Various Sectors In Economy

Importance of export

In the context of development planning, the importance of exports was first recognized in India during the middle of Second Plan when contiguous foreign reserves built up during Second World War faced a virtual exhaustion. The Second Plan placed great emphasis on the development of capital intensive industries. This resulted in the large volume of imports which resulted in the severe balance of payments crisis in the absence of a corresponding increase in exports.
Must Read:

Recommendation of the KC Chakrabarty Committee on Recapitalisation of RRBs

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Syskool
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KC Chakrabarty Committee
The Government of India had constituted a committee in September 2009 (Chairman Dr. KC Chakrabarty committee) to study the current levels of capital-to-risk-waited asset ratio (CRAR) of RRBs and to suggest a road-map for achieving a CRAR of 9% by March 2012. The committee was also required to suggest the acquired capital structure for RRBs given their business level so that their CRAR is sustainable and provides for future growth and compliance with regulatory requirements. The committee submitted its report to the Government of India on April 30, 2010.
The following are the main recommendations of the KC Chakrabarty committee on recapitalisation of RRBs:
  • The KC Chakrabarty committee carried out an assessment of capital requirement for all 82 RRBs to enable them to have CRAR of at least 7% as on March 31, 2011, and at least 9% from March 31, 2012, onward. The recapitalisation requirement would be Rs. 2200 crore for 40 out of 82 RRBs. This amount may be released in two installments i.e., Rs. 1338 crore in 2010-11 and Rs. 863 crore 2011-12. The remaining 42 RRBs will not acquire any capital and will be able to maintain CRR of at least 9% as on March 31, 2012, and thereafter on their own.
  • The committee noted that some of the weak RRBs, particularly in North-Eastern and Eastern regions, might not be able to fully meet all the projected business parameters despite generally achieving acceptable growth. The committee, therefore, suggest that an additional amount of Rs. 700 crore may be kept to meet such contingencies and need based-additional capitalization provided to such RRBs once their draft balance sheets are prepared.
  • The recapitalisation of Rs. 2200 crore to 40 RRBs should be one-time measure, and released subject to the signing of the memorandum of understanding (MoU) by the chairman of the RRB and on achieving the performance parameters specified in MoU. As per section 5 of the RRB Act, the authorized capital of RRB is Rs. 5 Crore. As a result recapitalisation amount are kept as share capital deposit. The KC Chakrabarty committee has recommended that the accumulated losses on March 31, 2010, may be written off against the available share capital deposits and the balance amount of share capital deposit may be appropriated as paid-up capital further, in view of expanding business of the RRB, the KC Chakrabarty committee recommended to increase in the authorized capital RRBs to Rs. 500 crore.
  • In order to build public confidence, in due course, RRB with higher net worth may be allowed to access capital from the market.
  • For improving the functioning of the RRB, change of sponsor banks may be considered, where ever required.
  • RRB with a net worth of Rs. 100 crore or more as on March 2009 may be permitted to pay the  dividend on April 1, 2013, onward. RRBs to be recapitalised in the current phase may be allowed to pay the dividend only after achieving a sustainable CRAR of at least 9%.
  • RBI may prescribe “Fit and Proper” criteria for chairman of RRB. The sponsor may depute officer conforming to such criteria as Chairman on a tenure basis and wherever needed, such officers may be recruited by them from the open market and the deputed to RRBs. The compensation of chairman may be de-linked from existing salary structure of commercial banks and be more market oriented and a system of incentives and disincentives linked to performance benchmarks approved by the board may be built in the compensation package.
  • The board as a body as well as individual board members may be made accountable for the banks performance and individual board need to be assigned specific responsibilities as per their expertise.
  • Wherever required, sponsor banks may recruit the suitable person from the market, including staff of the RRB in their own service and then depute them as general managers in RRBs.

Must Read:

Bankruptcy Bill Cleared by Joint Parliament Standing Committee

The Narasimham Committee

Recommendations of Narasimham Committee on Banking Sector Reform – 1998

Globalization and International Business

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Syskool
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Globalization is a process through which different economies of the world gradually lift up the restrictions, that hinders the free flow goods, services, resources etc. across various political boundaries.
This is done in particular through International Business (carries out mainly through International Trade and Investment), aided by sophisticated technologies and market integration.

International Business

International Business means carrying out businesses beyond national boundaries. The international business includes both International Trade as well as Foreign Direct Investment (FDI).
International Trade can broadly be divided into two parts viz. Export and Import.
  • Export – The transaction of goods and services (via. sales, barter, gift or grant) from home country to the host country is called Export.
  • Import – The transaction of goods and services (via. sales, barter, gift or grant) to home country from host country is called Import.

Read Also: FDI Reforms in India: Steps in the Right Direction

Foreign Direct Investment occurs when an investor based in one country (at home country) acquires an asset in another country (the host country) with intent to manage that asset. It is the management dimension that typically differentiates FDI from Portfolio Investment in foreign securities and financial instruments in foreign securities  and financial instruments.
In most cases both the investor and the asset, it manages abroad are the business entity. In such a case investor is typically referred to as ‘parent firm’ and the asset it manages is called ‘affiliate’ or ‘subsidiary’.
Motive behind Foreign Direct Investment (FDI) includes:-
  • Acquiring natural resources
  • Recovery of large expenditure made on research and development
  • Capturing a large International Market System
  • Earning Large Profit
  • Maintaining Balance of Payment

Must Read: Infrastructure and development

Importance of International Business

The importance of International Business can be studied at two levels:
Macro Level
  1. No country (be it developed or developing) produces all the commodities to meet its requirement as such it needs to port those commodities that are either not produced or produced in insufficient quantity in domestically to meet its requirements.
  2. At the same time, all the country tries to export all the commodities that are in excess of its domestic consumption.
  3. Maintaining the favorable balance of payment.
Micro Level
  1. Maximization of corporate wealth
    Corporate wealth is the value of productive asset plus the present value of wealth created by those assets.
    Alternatively, corporate wealth quals to the sum of the total of debt and equity of a firm.
  2. Minimization of cost
    Acquiring the resources which are relatively cheaper helps reduce the cost of production.
  3. Minimization of risk through

    (A) Diversification of business

    (B) Expansion of business

Approaches to International Business

  • Ethnocentric– In this form of approach, the policies of a firm operating in the foreign country are based upon that of the home country.
  • Polycentric– In this form of approach, the policies of a firm operating in the foreign country are based upon that of the host country in which it is operating.
  • Geocentric– Between above two approaches, geocentric approach follows a real life situation, where there exist no distinction (or boundaries) of framing the policies in terms of either home or host country. This approach aims to fit the “right policy at the right place”.

Also, Read:

International Article India-Africa Partnership in the Era of Globalizatio

International Year of Pulses 2016 : United Nations

The International Fund for Agricultural Development (IFAD)

Inventory Control Methods

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Syskool
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Inventory Control Methods
There are many used for inventory control methods, here are those inventory control methods, along with their benefits and limitations:
Min-Max System: In this method, after a careful examination of you inventory needs, you set two lines – one at the top and one at the bottom of how much of each product you must keep on hand. When you reach the bottom line, you order enough of that product so you won’t go above the top line. As long as you’re somewhere in the middle, you’re okay.
Benefit: This method is simple and it makes the task of balancing inventory fairly straightforward.
Limitation: Its simplicity could lead to trouble because you might order too many products or run out before they arrive.
Two-Bin System: In this system, you have  main bin and a backup bin of products. You normally use the main bin, but once you run out and need to reorder, you use the backup bin to fill orders until the new products are received.
Benefit: You’ve always got spare products for emergencies and sudden rises in demand.
Limitation: The products in the backup bin could spoil or become obsolete unless they are cycled into the main bin every now and then. Also, you need to keep an eye on your carrying costs.
ABC Analysis: Separate your products into three groups: A, B and C. Expensive items go into A, less-expensive items go into B, and small parts and other inexpensive items go into C. This way, you can organize your data and know how long it will take to order different parts and products, based on which group they’re in.
Benefit: Now this is more like it. This system doesn’t set rigid standards on how many products to keep on hand; it simply tells you how long it will take to order those products. You can do the rest with the help of inventory control software.
Limitation: It still requires a lot of work to maintain healthy inventory levels.
Order-Cycling System: Forget constantly checking your inventory. This system lets you do inventory checks at set intervals (e.g. 30 days) and reorder products that are likely to run out by the next check.
Benefit: If you’re REALLY good at inventory management, you might be able to pull this off. It certainly doesn’t require as much time as other methods.
Limitation: This system is risky and costly! Doing a physical inventory check every 30 days or so will get expensive quickly. And there’s no margin for error on ordering the right amount of products at each check.
There you go! Now you can decide which of these inventory control methods will work best for your organization, depending on your size, products and needs.
by Robert Lockard
Also, Read:
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