Page 208 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 11: Taxation Planning

The assessee can avail the benefits of exemption and deductions under each head of income. Notes
Further he can avail the benefit of rebate and relief under the Act.
3. Latest legal position: It is the foremost duty of a tax-planner to keep him fully conversant
with the latest position of the taxation laws along with the allied laws and also the judicial
pronouncements in respect thereof. For this purpose he must have a thorough and up-to-
date understanding of the annual finance Acts, the Taxation Laws Amendments, the
amendments, if any, of the allied laws, the latest judicial pronouncements of the High
Courts and the Supreme Court, various Circulars of the Central Board of Direct Taxes
which seek to clarify the legal position in so far as the Revenue is concerned.

4. Form v Substance: A tax planner has to bear in mind the following principles enunciated
by the courts on the question whether form or substance of a transaction should prevail in
Income-tax matters.
5. (a) Form of transaction: When a transaction is arranged in one form known to law, it will
attract tax liability while, if it is entered into another form which is equally lawful,
it may not.
(b) Genuineness of transaction: In deciding whether the transaction is a genuine or
colourable one because in such a situation, it is not the question of form and substance
but of appearance and truth. It will be open to the authorities to pierce the corporate
veil and look behind the legal façade, at the reality of the transaction.
(c) Expenditure: In the case of expenditure, the mere fact that the payment is made under
an agreement does not preclude the department from enquiring into the actual
nature of the payment.

11.9 Tax Exemption

A tax exemption is an exemption from all or certain taxes of the nation in which part of the taxes
that would normally be collected from an individual or an organization are instead foregone.
Normally a tax exemption is provided to an individual or organization which falls within a
class which the government wishes to promote economically, such as charitable organizations.
Tax exemptions are usually meant to either reduce the tax burden on a particular segment of
society in the interests of fairness or to promote some type of economic activity through reducing
the tax burden on those organizations or individuals who are involved in that activity. In certain
cases, the Income tax Cat, 1961 provides exemption to pay the tax.

11.9.1 Incomes Exempt from Tax

Deductions Under Section 80

Under Income tax, deduction u/s 80C, 80CCC, 80D, 80DD, 80DDB, 80G, 80GG, 80GGA, 80GGC,
80IAB, 80IB, 80IC, 80ID, 80IE, 80JJA, 80QQB, 80RRB, 80U are relevant to Individuals depending
on the condition fulfillment. The following chart of deductions will give instant and fair idea
about certain deductions to individual tax payers. (section 80IAB to 80IE are not discussed which
are specific to business men).

SI. No Section Details of deductions Quantum
1 80C General deduction for investment in Maximum ` 1 ,00,000 is allowed.
PPF,PF,Life Insurance, ULIP, Stamp duty on Investment need not be from taxable
house, Fixed deposits for 5 years , bonds etc income.
Contd...

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