Tax Project.docx

University Of Mumbai

Project Report On: “A STUDY ON TAX INVESTMENT BY SALARY EMPLOYED.”

IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF MASTER OF COMMERCE (MCOM) IV Semester (2019-2020) Submitted By:

WAGH CHAITRALI BHAGIRATH ROLL NO. Under Guidance Of: DR. SUMATI GOPAL

STERLING COLLEGE OF ARTS, COMMERCE AND SCIENCE PLOT NO. 93, SECTOR - 19, NERUL (E), OPPOSITE TO SEAWOOD RAILWAY STATION, NAVI MUMBAI, MAHARASHTRA 400706

DECLARATION

I, WAGH CHAITRALI BHAGIRATH student of MCOM-II (SEM-IV) fromSTERLING COLLEGE OF ARTS, COMMERCE AND SCIENCE, hereby declare that I have completed this project on “A STUDY ON TAX INVESTMENT BY SALARY EMPLOYED.” in the academic year 2018-2019. The information submitted in the project is original and true to the best of my knowledge and has not been submitted to any other universities.

Date: Place: NAVI MUMBAI (NERUL)

WAGH CHAITRALI BHAGIRATH

ACKNOWLEDGEMENT

It is my great pleasure and privilege to avail the opportunity to place on record of deep sense of gratitude and heartfelt thanks to DR. SUMATI GOPAL, Sterling College Of Arts, Commerce And Science, Nerul, for her valuable guidance, constant encouragement, meticulous care with a lot of patience, constructive criticism and invaluable suggestions rendered during the period of action research work and preparation of this project. It’s my privilege in extending sincere and hearty thanks toDR. M. G. GONDA Principle .of Sterling College of Arts, Commerce and Science, Nerul for giving me an opportunity to do the project work. I would also extend my gratitude to the Sterling College Of Arts, Commerce And Science Library staff members for their help and support in collection of resource materials. I wish to express my affectionate to my mom Mrs. ManishaBhagirathWagh and my father Mr. BhagirathBalaramWagh, all my friends for their encouragement, help, care and love which provided me moral support throughout the course of program.

National Centre for Rural Development’s

Sterling College of Arts, Commerce & Science Affiliated to University of Mumbai & Approved by Govt. of Maharashtra

CERTIFICATE This is to certify that Ms.CHAITRALI BHAGIRATH WAGH of Master of Commerce has undertaken and completed the project work titled “A STUDY ON TAX INVESTMENT BY SALARY EMPLOYED.during the academic year 2018 – 2019 under the guidance of DR. SUMATHI GOPAL submitted on ____________ to this college in fulfillment of the curriculum of Master of Commerce Studies University of Mumbai. This is a bonafide project work and the information presented is true and original to the best of our knowledge and belief.

PROJECT GUIDE (____________________)

COURSE CO-ORDINATOR (_________________________)

PRINCIPAL (____________________)

EXTERNAL GUIDE (_________________________)

Plot No. 43, Sector - 19, D.G. WalsePatil Marg, Nerul (E), Navi Mumbai – 400 706, Maharashtra Tel. No. 022-27705535, 022-27708059, website : sterlingcollege.edu.in

EXECUTIVE SUMMAR

INDEX

Chapter No.

1

Contents

Introduction

Page No

7

1.1 Meaning & Definition

7-8

1.2 Introduction

9-11

1.3 History

12-14

1.4 Features of equity shares

15

1.5 Advantages of equity shares

16

1.6 Disadvantages of equity shares

17

1.7 Types of equity shares

18-20

1.8 Calculation

21-23

1.9 Information of Trading

24-26

2

Review of Literature

27-31

3

Research Methodology

32

3.1Objectives

32

3.2Hypothesis

33

3.3Research Methodology

34

4

Data Analysis & Interpretation

35-59

5

Conclusion

60

6

Recommendation

61

Annexure

Bibliography

62-67

68

CHAPTER NO 1 INTRODUCTION TAX Taxis an amount of money that you have to pay to the government so that it can pay for public service. TYPES OF TAXES Taxes are of two distinct types, direct and indirect taxes. The difference comes in the way these taxes are implemented. Some are paid directly by you, such as the dreaded income tax, wealth tax, corporate tax etc. while others are indirect taxes, such as the value added tax, service tax, sales tax, etc DIRECT TAX: Direct taxes include the taxes that cannot be transferred or shifted to another person, for instance the income tax an individual pays directly to the government. In this case, the burden of the tax falls flatly on the individual who earns a taxable income and cannot shift the tax to others. INDIRECT TAX: Indirect taxes, on the other hand, are taxes which can be shifted to another person. An example would be the Value Added Tax (VAT) that is included in the bill of goods and services that you procure from others. The initial tax is levied on the manufacturer or service provider, who then shifts this tax burden to the consumers by charging higher prices for the commodity by including taxes in the final price. After determining the tax and types of taxes further under direct tax includes heads of income

Income classified under different Heads [sec.14]

As per the Section 14 Income Tax Act there are five main income tax heads for an individual. The computation of income tax is an important part and has to be calculated according to the income of a person. For a hasslefree calculation, the income has to be classified properly so that there is no confusion regarding the same. The government has classified the sources of income under separate heads and then the income tax is computed accordingly. The provisions and rules are according to the details mentioned in the Income Tax Act. Sec.14 of the income-tax act states that “all income shall, for the purpose of charge of income-tax and computation of total income, be classified under the following heads of income(1) Salaries (2) Income from house properties. (3) Profit and gain of business or profession. (4) Capital Gain. (5) Income from other sources.” Income from Salary The first head of Income Tax heads is income from salary whichThis clause essentially assimilates any remuneration, which is received by an individual in terms of services provided by him based on a contract of employment. This amount qualifies to be considered for income tax only if there is an employer-employee relationship between the payer and the payee respectively. Salary also should include the basic wages or salary, advance salary, pension, commission, gratuity, perquisites as well as the annual bonus. Income from House Property The second head of Income Tax heads is Income from house property, According to the Income Tax Act 1961, Sections 22 to 27 is dedicated to the provisions for the computation of the total standard income of a person from the house property or land that he or she owns. An

interesting aspect is that the charge is derived out of the property or land and not on the amount of rent received. However, if the property is utilized for letting out the normal course of business, then the income from the rent will be considered. Income from Profits of Business The third head of Income Tax heads is Income from Profits of Business in which the computation of the total income will be attributed from the income earned from the profits of business or profession. The difference between the expenses and revenue earned will be chargeable. Here is a list of the income chargeable under the head: 

Profits earned by the assesse during the assessment year



Profits on income by an organization



Profits on sale of a certain license



Cash received by an individual on export under a government scheme



Profit, salary or bonus received as a result of a partnership in a firm



Benefits received in a business

Income from Capital Gains Capital Gains are the profits or gains earned by an assesse by selling or transferring a capital asset, which was held as an investment. Any property, which is held by an assesse for business or profession, is termed as capital gains. Income from other sources Any other form of income, which is not categorized in the above-mentioned clauses, can be sorted in this category. Interest income from bank deposits, lottery awards, card games, gamblingor other sports awards are included in this category. These incomes are attributed in Section 56(2) of the Income Tax Act and are chargeable for income tax.

Objectives of study 

Classification of income into various heads



Concept of salary income



Incomes forming part of salary



The computation of basic salary in grade system



The concept of allowances



Various income tax provisions for computing taxable value of allowance.



Computation of taxable value of allowance



To analyse the impact of tax planning on saving habits and investment pattern of the assesses belonging to the salaried class.



The procedure of tax collection should be changed in a way that it saves time, money and energy both to the government and tax payers.

Hypothesis Based on the problems identified and the objectives set, the following hypotheses were formulate H0 - These would be no significant between the individual salaried person with their pattern of saving that lead to income tax planning . H1- These would be significant between the individual salaried person with their pattern of saving that lead to income tax planning . H0-There would be no significant between the individual salaried person with regard to repayment of liabilities that lead to tax planning. H1-There would be significant between the individual salaried person with regard to repayment of liabilities that lead to tax planning. H0-There would be no significant between the individual salaried person with regard to their pattern of investments in financial assets. H1-There would be significant between the individual salaried person with regard to their pattern of investments in financial assets.

Review of Literature Stoner and Freeman (2002) consider a new pay approach as and towards salary system that leads to the process of setting and achieving organization objectives. These scholars advance that linking pay to success of the organization; the managers can use the salary system to foster teamwork and other organizational goals. It is therefore necessary for the reward system not to make inflationary rate in the country into related business to be introduced by both private and public sectors of the Nigeria economy. Strong and freeman observed further that every good compensation or salary policy is aimed at attracting, retaining and motivating high quality employees in an organization. It is aimed at rewarding organization member for high performance and high productivity by making sure that compensation method is such that the organization can shoulder conformably.

Obikeze and Anthony (2003) pointed out, salaries or wages are the rewards that individual receive from organization in exchange for their labour and that every organization has its distinct salary system. Choosing a successful salary system depends on consideration of salary levels, salary structure and individual pay determination.

Dagget and Habu (2004) “salary administration is the method and process that an organization uses for compensating their workers” They argued that workers cannot obtain financial job satisfaction unless the organization achieved its goals.

Kamar (2005) there are three typical ways in which organization can administrate its salaries and wages. Ad hoc increase in salaries and wages are given erratically often at the demand of the employees rather than at the initiative of the company. In a small organization, it can produce an illogical and unfair salary structure which will cause discontents and for obvious reasons, salaries and wages paid by this system are intended to be confidential. Incremental scales, in this system, long service and loyalty are encouraged by regular high trade. Salaries in the incremental system are non-confidential because all staff’s jobs are evaluated and granted. The salary and wages range appearing as most schemes permit a manage towards

increment for exception merits or without an increment for unsatisfactory work or conduct but as a robe, the standard increment is given autocratically. It is customary for salaries and wages incremental system to be non-confidential. Thus, unemployment can exist for only a short period of time and if employment does not exist, its due to fact that workers are shiftless is lazy and would not work for the going wages or salaries rate. This work emphasis is placed on the supply of labour.

Gilelman (1968) “Investment theory of wages and salary”. He proposed on investment of wages as a replacement for the marginal productivity (MPT). That as the marginal productivity theory focuses on the output of labour input, wages and salary are assumed to be a return on worker investment, then one would assume that the larger the investment, the larger the investment, the higher the wages and salaries. In practice, however, this will not always be true.

Carvajal (1999) Earning is the primary reason why people go to work. A review of the literature Carvajal (1999) suggested that the level earning exerts a substantial and positive effect on job satisfaction, other things equal, greater earnings lead to greater satisfaction.

Profile and awareness of salaried class investors and their attitude and satisfaction towards investment (2008) K.krishnamoorthy.ehis study has analyzed the profile and awareness of salaried class investors and their attitude and satisfaction towards investment. It has been concluded that salaried people were aware of bank deposits, PF schemes however only few were aware of UTI. Investment pattern of salaried people- A study is Coimbatore district. Sreepriya, P. Gurusamy (Jan 2013) this study has made an attempt to analyze the saving and investment pattern of salaried class investor. An in dept. analysis is done to identify the attitude, factor influencing investors to save and savings preference of investors. It is hoped that the saving public (particularly salaried class) will analyze their saving and investment. This study identified the problem faced by the investors the impending problems could be solved in the right direction.

A study on preferred investment avenues among salaried people with reference to Namakkal Taluk, Tamil Nadu, India V.R.PalaniveluK.Chandrakumar (March 2013) The study reveals that investment is the most important thing today. People are earning more, but they do not know where, when and how to invest. A proper understanding of money, its value, the available avenues for investment, various financial institution, the rate of return/risk etc. are essential to successfully manage one’s finance for achieving life’s goal. Through this study an analysis has been made into preferred investment avenues among salaried peoples in Namakkal, Taluk and Tamilnadu, India. The results highlight that certain factors like education level awareness about the current financial system, age of investors etc. Make significant impact while deciding the investment avenues. A study of investment perspective of salaried people (private sector) Prof. CA. Yogesh.P.Patel: Prof CS Charul.Y.Patel (oct 2012) Investment is the employment of funds with the aim of getting return on it. It is the commitment of funds which have been saved from current consumption with the hope that some benefit will accrue in future. Thus, it is reward for waiting for money. So the first step to investment is savings. In common usage, saving generally means putting money aside, for example, by putting money in the bank or investing in a pension plan. In a broader sense, saving is typically used to refer to economizing, cutting costs, or to rescuing someone or something. In terms of personal finance, saving refers to preserving money for future use typically by putting it on depositthis is distinct from investment where there is an element of risk. The main element of investment is return, risk and time. This research aims to study and understand the behavioral pattern of investment among the salaried people working in private sector and the difference in perception of an individual related to various investment alternatives. It also aims to provide an insight into factors considered for investment. Gives a wider scope to understand various issues related to investment by salaried people.