Unit 2 of 4 · M.Com Sem 4
Unit 2: Tax planning across income heads
Tax Planning and Personal Finance notes · PTU syllabus (MCOPAF412-18)
3 min read6 topics10 exam questions
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Unit summary
Tax planning is applied head by head. This unit covers tax planning for salary, house property, business or profession, capital gains and other sources, and with reference to residential status, exempt incomes, permissible deductions, clubbing of income and set-off and carry forward of losses.
After this unit you can
- Plan tax for salaried employees and house property owners
- Plan tax for business income and capital gains
- Use residential status, exempt incomes and deductions in planning
- Plan around clubbing and set-off and carry-forward rules
PTU syllabus topics
- Tax planning for salary
- house property
- business/profession
- capital gains and other sources income
- tax planning with reference to residential status
- exempted incomes
- permissible deductions
- clubbing of income
- setting off/carry forward of losses
Tax planning
Salary
Structure allowances, choose the regime
House property
Home loan interest and principal
Business
Depreciation, presumptive taxation
Capital gains
Holding period, Section 54 exemptions
Other sources
Tax-free instruments
1
Topic 1
Tax planning for salary
- Choice of regime: compare old (deductions) and new (lower slabs, ₹75,000 standard deduction, ₹12 lakh rebate limit for FY 2025-26).
- Salary structuring (old regime): HRA (if paying rent), LTA, children's education allowance, employer's NPS (80CCD(2) — also in new regime), reimbursements; perquisites taxed at concessional values (company car, accommodation).
- Retirement benefits: gratuity, leave encashment, commuted pension within exemptions; employer contribution to PF/NPS/superannuation within ₹7.5 lakh.
- Relief under Section 89 for arrears.
Example
A salaried employee earning ₹15 lakh with ₹2.5 lakh of deductions and HRA exemption of ₹1.5 lakh in the old regime has taxable income ₹10.5 lakh; under the new regime, taxable income ₹14.25 lakh — compute both and choose the lower tax.
2
Topic 2
Tax planning for house property and business
- House property: home loan interest up to ₹2 lakh (self-occupied, old regime) and principal under 80C; let-out property — full interest deductible (loss set-off up to ₹2 lakh, carry forward 8 years); joint ownership lets each co-owner claim limits; 30% standard deduction on NAV.
- Business or profession: choice of form (proprietorship, firm/LLP, company — 22%/15% rates); presumptive taxation (44AD, 44ADA) to reduce compliance; claim depreciation (additional depreciation), Section 35 R&D, 80JJAA employment; avoid disallowances (TDS default, cash payments over ₹10,000, 43B timing); MSME payments within 45 days (43B(h)).
3
Topic 3
Tax planning for capital gains and other sources
- Capital gains: hold equity beyond 12 months for LTCG at 12.5% with ₹1.25 lakh exemption; tax harvesting — book LTCG up to ₹1.25 lakh each year; set off capital losses; reinvest under Sections 54, 54EC (bonds within 6 months, up to ₹50 lakh), 54F; Capital Gains Account Scheme.
- Other sources: gifts from relatives are exempt; prefer tax-free or tax-deferred instruments (PPF, EPF, SGB maturity); senior citizens — 80TTB; avoid casual income at 30% flat.
4
Topic 4
Residential status, exempt incomes and deductions
- Residential status: NRIs/RNORs are not taxed on foreign income — plan stay days (182-day rule; 120 days for high-income citizens) when relocating.
- Exempt incomes: agricultural income (with partial integration), PPF/Sukanya interest, life insurance proceeds (premium limits), gratuity and leave encashment within limits, scholarships.
5
Topic 5
Permissible deductions
| Section | Deduction | Limit / note |
|---|---|---|
| 80C | LIC, PPF, ELSS, EPF, NSC, tuition fees, home-loan principal, Sukanya | ₹1,50,000 (with 80CCC and 80CCD(1)) |
| 80CCD(1B) | Additional NPS contribution | ₹50,000 |
| 80CCD(2) | Employer's NPS contribution | 14% (new regime) / 10% of salary |
| 80D | Health insurance premium, preventive check-up | ₹25,000 self; ₹50,000 if senior; plus parents |
| 80DD / 80U | Disabled dependant / self | ₹75,000; ₹1,25,000 for severe disability |
| 80E | Interest on education loan | Full interest for 8 years |
| 80G | Donations to approved funds | 100% or 50%, with or without qualifying limit |
| 80GG | Rent paid where no HRA | Least of ₹5,000 p.m., 25% of total income, rent − 10% |
| 80TTA / 80TTB | Savings bank interest / senior citizens' interest | ₹10,000 / ₹50,000 |
| 80JJAA | New employment by businesses | 30% of additional employee cost for 3 years |
- Under the new regime (Section 115BAC — default), most Chapter VI-A deductions are not available (80CCD(2), 80CCH and 80JJAA are allowed).
6
Topic 6
Clubbing and set-off of losses in tax planning
- Clubbing: income from assets gifted to spouse or minor child is clubbed — instead, gift to major children or parents (not clubbed), or give loans at interest; income of a minor from own skill is not clubbed; HUF as a separate taxable entity for ancestral or gifted property.
- Set-off and carry forward: file returns on time to carry forward losses; set off short-term capital losses against both STCG and LTCG; plan sale of loss-making assets in the year of gains; unabsorbed depreciation carried forward indefinitely.
Exam tip
In head-wise planning answers, present a small table: head → planning tool → section — it is compact and scores well.
Key terms
- Tax harvesting
- Booking gains or losses to optimise capital gains tax
- Presumptive taxation
- Estimated income at a fixed percentage of turnover
- Joint ownership benefit
- Each co-owner separately claims deductions
- HUF
- Hindu Undivided Family, a separate taxable entity
- Section 54EC bonds
- Specified bonds to save LTCG on land or buildings
Quick revision
- Salary: regime choice, structuring, retirement benefits, Section 89.
- House property: interest and principal, joint ownership, let-out losses.
- Business: legal form, presumptive schemes, depreciation, avoid disallowances.
- Capital gains: holding periods, harvesting, Sections 54/54EC/54F.
- Clubbing workarounds within law; timely returns for loss carry-forward.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.How can a salaried person plan tax under the old regime?
- Q2.What is the benefit of joint ownership of a house for tax?
- Q3.What is presumptive taxation?
- Q4.What is tax-loss harvesting?
- Q5.How can clubbing provisions be avoided legally?
- Q6.Why must a return be filed on time for carrying forward losses?
Long-answer questions
- Q1.Explain tax planning for salaried individuals.
- Q2.Explain tax planning in respect of house property and business income.
- Q3.Explain tax planning for capital gains and income from other sources.
- Q4.Explain tax planning with reference to residential status, deductions, clubbing and set-off of losses.
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