Wealth Assure Insurance & Investment Advisory.

Taxation September’09 Wealth Assure Insurance & Investment Advisory.

Index Taxation System Total Income and Assessee Taxable Income Slab Capital Gain Terminologies Mutual Fund Taxation Equity Broking Taxation PMS Taxation Private Equity Taxation Gold Taxation Real Estate Taxation Insurance Taxation Section 80 C Product offered in 80 C

Taxation System India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. Direct Taxes Capital Gains Tax Tax on Corporate Income Personal Income Tax Tax Incentives Double Taxation Avoidance Treaty Securities Transaction Tax Taxes Levied Indirect Taxes Excise Duty Service Tax Taxes Levied by State Governments and Local Bodies Sales Tax/VAT Other Taxes

Total Income and Types of Assessee GROSS TOTAL INCOME: As per the Income Tax Act Income is Chargeable to tax under five heads, those being: 1) Salaries 2) Income from House Property 3) Profits and Gains from Business or Profession 4) Capital Gains. 5) Income from Other Sources PERSON/ TYPES OF ASSESSEE: 1) An Individual. e.g. Mr. A or Mr. B. 2) A Hindu Undivided Family. e.g. Mr. A (HUF) or Mr. B (HUF). 3) A Company. e.g. XYZ Pvt. Ltd. Or ABC Ltd. 4) A Partnership firm. e.g. M/s ABC or M/s XYZ and Co. 5) An Association of persons or a body of Individuals, whether incorporated or not. e.g. ABC Sangh or XYZ Dal. 6) A Local Authority. e.g. Pune Municipal Corporation or PCMC Municipal Corporation. 7) Every Artificial Juridical persons not falling within any of the above categories. (Residual Category).

Taxable Income Slab for individuals Financial year 2009- 2010

Capital Gain A Capital Gain can be defined as an any income generated by selling a capital investment . The 'gain' here is the difference between the price originally paid for the investment and money received upon selling it, and is taxable. Losses under the head “Capital Gains” cannot be set off against income under other heads of income whether salary, Business & profession, House Property, Income from other source. Short-term capital loss can be set off against Short-term capital gain & long term capital gains Long-term capital loss can be set off only against Long-term capital gain. If Long-term and short-term capital losses cannot be set off against the capital gain of that particular year then it can be carried forward for the next 8 consecutive years. loss from speculative business can be set off only against income from speculative business. In these cases, the net loss can be carried forward for setoff against the profits and gains only from the respective business and the carry forward is allowed for only 4 years and not 8 years.

Intraday Trading Profit from intraday trading Short Term <12 months Business Income STCG Tax Rate: 15% Speculative Business Income i.e. Intraday Trading Tax Rate: As per Tax Slab Non – Speculative i.e. Derivatives (F&O) Tax Rate: As per Tax Slab • Profit/loss from Intra day day trading can be taxed either • Short term capital gain tax or • Speculative business income • Treatment of these type of transaction is depended on intention of the assesses ,quantum of transaction , frequency of transaction etc • Short term capital gain. Suppose if any individual’s intraday transaction is1-2 times in a week/month and that is also within his net worth value he can treat that income loss as short term capital gain. • Speculative Business IncomeIncase if he purchases in lots heavier than his net worth / volume of transaction is heavy then it can also be treated as speculative short selling

Dividend Distribution Tax (DDT) Dividends on shares or mutual fund received will not be taxable on the hands of the assessee. It is not a direct tax paid by the investor therefore, he cannot file for exemption from distribution tax. The dividend distribution tax will be payable by company/mutual fund. * including a surcharge of 10% and an additional education cess of 3% on the amount of tax plus surcharge

Security Transaction Tax (STT) • STT is a tax being levied on all transactions done on the stock exchanges. Securities Transaction Tax is applicable on purchase or sale of equity shares, derivatives, and equity oriented funds • Switch and redemption of equity oriented mutual funds. • It is not applicable in case of government securities, bonds, debentures and units of mutual fund other than equity oriented mutual fund.

Tax Deducted at Source (TDS) The tax deducted at the time of payment or redemption by the issuer of the security and deposited with the Government. This tax is deducted by the issuer from income payable to the investor and the investor gets credit of the same while filing his annual return of tax. In cases where the individual /HUF/AOP/BOI is not liable to pay tax on interest earned on FDs, he may claim an exemption from TDS by filing a Form 15H for senior citizen and 15G for any other person with the issuing body of the security.(whoever deducts TDS) A TDS certificate is issued in the name of the investor mentioning the details of the transaction and the tax deducted. The TDS certificate is commonly issued in Form16 A. *Additional education cess of 3% on the amount of tax

Surcharge and Education Tax • Surcharge • It is a charge in addition to a charge, or a tax added to the original tax. • Surcharge has been completely removed/abolished incase of individual and partnership firms. • Surcharge @10% is applicable only incase of Domestic Company (Any company registered in India – Private & Public ) if net income exceeds Rs. 1 Cr Education Cess To give a boost to primary education in the country and in conformity with the Common Minimum Programme of the UPA government, a Education cess is levied on income tax, corporation tax, excise and customs duties and service tax. The education cess is to be paid on the tax payable

MF Equity Oriented Scheme TDS – Tax deducted at Source HUF – Hindu Undivided Family AOP- Association of Persons BOI- Body of Individual *Additional education cess of 3% on the amount of tax $ Additional surcharge of 10% and an education cess of 3% on the amount of tax plus surcharge if the net income of Domestic companies exceeds 1 Cr ^ Additional education cess of 3% on the amount of tax if the net income of Domestic companies is less than 1 Cr #DDT includes 10% surcharge and 3% education cess

MF Debt Oriented Scheme TDS – Tax deducted at Source HUF – Hindu Undivided Family AOP- Association of Persons BOI- Body of Individual *Additional education cess of 3% on the amount of tax $ Additional surcharge of 10% and an education cess of 3% on the amount of tax plus surcharge if the net income of Domestic companies exceeds 1 Cr ^ Additional education cess of 3% on the amount of tax if the net income of Domestic companies is less than 1 Cr #DDT includes 10% surcharge and 3% education cess

Equity Broking /Trading Taxation TDS – Tax deducted at Source HUF – Hindu Undivided Family AOP- Association of Persons BOI- Body of Individual *Additional education cess of 3% on the amount of tax $ Additional surcharge of 10% and an education cess of 3% on the amount of tax plus surcharge if the net income of Domestic companies exceeds 1 Cr ^ Additional education cess of 3% on the amount of tax if the net income of Domestic companies is less than 1 Cr #DDT includes 10% surcharge and 3% education cess

PMS Taxation • TDS – Tax deducted at Source HUF – Hindu Undivided Family AOP- Association of Persons BOI- Body of Individual • Portfolio Manager is just an agent • Purchases & Sales is in name of client and therefore the tax liability is on the client • Detailed summary /account statement is furnished to the client by the PMS for his taxation purpose each financial year • Incase the PMS has generated STCG and the income has not been distributed to the investor in that financial year, he is still liable to pay tax for that particular financial year *Additional education cess of 3% on the amount of tax $ Additional surcharge of 10% and an education cess of 3% on the amount of tax plus surcharge if the net income of Domestic companies exceeds 1 Cr ^ Additional education cess of 3% on the amount of tax if the net income of Domestic companies is less than 1 Cr #DDT includes 10% surcharge and 3% education cess

Private Equity Taxation • Benefit of indexation is available for LTCG in case of Equity shares but not in debentures • STCG and LTCG is paid by the investor • Purchases & Sales is in name of the client and therefore the tax liability is on the client • Detailed summary /account statement is furnished to the client by the PE vehicle for his taxation purpose each financial year • All the above figures include Surcharge and education cess • Tax Deducted at Source (TDS) will be deducted as mention in slide no 10 *Additional education cess of 3% on the amount of tax $ Additional surcharge of 10% and an education cess of 3% on the amount of tax plus surcharge if the net income of Domestic companies exceeds 1 Cr ^ Additional education cess of 3% on the amount of tax if the net income of Domestic companies is less than 1 Cr #DDT includes 10% surcharge and 3% education cess

Gold Taxation While gains are taxed, a loss in gold ETF will be available as a set-off too. The only restriction is that a long-term capital loss will be available for a set-off against a long-term capital gain only, while a short-term capital loss can be set off either against a long-term capital gain or a short-term capital gain

Real Estate Taxation Any other long term capital gain is exempt if the capital gains are invested within 6 months in 3 year bonds issued by REC or NHAI and that investment is retained for three years. Investment cannot exceed Rs 50 lakhs - section 54EC of Income Tax Act.

Insurance taxation

All about section 80C Section 80C of the Income Tax Act allows certain investments and expenditure to be tax-exempt. The total limit under this section is Rs. 100,000 (Rupees One lakh) this is irrespective of how much you are earn and under which tax bracket you fall. Investments that fall under Section 80C. Provident Fund Public Provident Fund Life insurance premium Pension plans Equity Linked Saving Schemes of mutual funds Infrastructure bonds National Savings Certificate Besides these investments, the payments towards the principal amount of your home loan are also eligible for an income deduction. All the above must be made from the current year's earnings and not past earnings. So if you are paying tax for the financial year 2005-06, then your investments must be made from earnings during this period.

Product offered for Tax Benefit u/s 80C

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