1.1 INTRODUCTION
Income Tax is an annual tax on income. The Indians income tax act (section 4) provides that in respect of the total income of the previous year of every person, income tax shall be charged for the corresponding assessment year at the rates laid down by the finance act for the assessment year. Section 14 of the income tax act further provides that for the purpose of the charge of income tax and computation of total income shall be classified under the following heads of income.

Salaries Income from House Property Profits and Gains of Business or Profession. Capital Gain Income from Other Sources.

The total income from all the above heads of income is calculated in accordance with the provisions of the act as they stand on the first day of the April of any assessment year.
In this booklet an attempt is being made to discuss the various provisions relevant to the salaried class of tax prayers as well as pensioners and senior citizens.

1.2 FILING OF THE INCOME TAX RETURN
Section 139(1) of the income -tax act, 1961 provides that every person whose total income during the previous year exceeded the maximum amount net chargeable to the tax shall furnish a return of the income. The Finance Act, 2003 has introduced section 139 (1B) which provides for furnishing of the returns of the income on computer readable media, such as floppy, diskette, magnetic cartridge tape, CD ROM, etc., in accordance with the scheme specified by the Board In this regard.
W.e.f. 1.4.1997, every person who, even though not satisfying the above, fulfils any of the 6 conditions given blew, shall be required to furnish a return of the income:-

Is in occupation of an immovable property exceeding a specified floor area or Is the owner or lesser of a motor vehicle or Is a subscriber to a telephone or Has incurred expenditure for himself or any other person on travel to any foreign country or Is a holder of a credit card, not being an "add-on" card ,issued by any bank or institution or Is a member of a club whose entrance fee charged is Rs.25, 000/- or more.

It may be noted that no return under Section 139(1) of the Income Tax Act is required to be filed for the assessment year 2006-07 and henceforth as the 'one by six scheme' has been omitted by the Finance Act, 2006.
The Finance Act, 2004 has provided that w.e.f. 01.04.2006 every person shall file a return of the income on or before the relevant due date if his total income without giving effect to the provisions of Chapter VI-A (Please see Chapter 5 of this booklet) exceeds the maximum amount not chargeable to tax.

1.3 DUE DATES FOR PAYMENT OF ADVANCE TAX & FILING OF RETURNS
Liability for payment of advance tax arises where the amount of tax payable by the assessee for the year is Rs. 5,000/- or more. The due dates for various instalments of advance tax are given below:

Sl No.	Due Date	Amount Payable
i.	On or before 15th September	Amount not less than 30% of such advance tax.
ii.	On or before 15 December	Amount not less than 60% of such advance tax.
iii.	On or before 15th March	Entire balance amount of such advance tax.

Also any amount paid by way of advance tax on or before 31st march is treated as advance tax paid during the financial year. The due date for filling of the returns of income in case of salaried employees is 31st of July. If the return of the income has not been filed within the due date, a belated return may still be furnished year the expiry of one year from the end of the assessment year or completion of assessment, whichever is earlier.

1.4 FORMS TO BE USED
The forms (relevant for the salaried class of taxpayers) to be used for filing the returns of income are mentioned below:-

From 2: to be used by non-corporate assessees not claming exemption u/s 11 of the I.T. and having income from business/profession.
From 3: to be used by non-corporate assessees not claming exemption u/s 11 of the I.T. and having income from business/profession.

'Saral' from 2D has been introduced w.e.f. 24.06.02 and is an alternative to From 2 or From 3. Assessees who are required to use either of these forms can, at their option, use this Form.

From 2C to be used persons who are not liable to furnish a return of the income u/s 139(1) but who fulfill any one of the 6 conditions specified in first provisions to section 139(1) as mentioned in para 1.2 above.

As mentioned in para 1.2, no returns in form 2C under the one by six scheme has to filed for the assessment year 2006-07 and henceforth.

Form 2E This form also called the "Naya Saral" form has been introduced from A.Y. 2003-04 and is intended for resident individual/HUF assessees not having income from business or profession or capital gains or agricultural income.

CHALLAN FORMS:

ITNS-270:	For depositing advance tax, self assessment tax, tax on regular assessment & other receipts.
ITNS-271:	Tax deduction/collected at source. It is important to note that w.e.f. October'2004' new challan forms have been introduced and are as fallows:-
ITNS-280:	To be used for depositing advance tax, self assessment tax, tax on regular assessment and other receipts. This challan is to be filled in a single copy and quoting of PAN herein is Mandatory.
ITNS-281:	To be used for depositing TDS/TCS from both company and non company deductees.

1.5 RATES OF INCOME TAX
The rates of income tax for assessment years 2003-04 to 2005-06 shall be.

Particulars	Income Tax Rates
i Where total income does not exceed Rs.50000/-	NIL
ii Where total income exceeds Rs.50000/- but does not exceed Rs.60000/-	10% of the amount in excess of Rs. 50,000/-
iii Where total income exceeds Rs.60000/- but does not exceed Rs. 150000/-	Rs. 1000+20% of the amount in excess of Rs.60,000/-
iv Where total income exceeds Rs.50000/- but does not exceed Rs. 150000/-	Rs. 1900/-+30% of the amount in excess of Rs.1,50,0,000/-

The Rates for charging income tax from A.Y.2006-07 shall be as fallows:-

I In case of individual (other than II and III below) and HUF:-

Particulars	Income Tax Rates
i Where total income does not exceed Rs.1,00,000/-	NIL
ii Where total income exceeds Rs.1,00,000 but does not exceed Rs.1,50,000/-	10% of the amount in excess of Rs. 1,00,000
iii Where total income exceeds Rs. 1,50,000/-but does not exceed Rs. 2,50,000/-	Rs. 5000+20% of the amount in excess of Rs.60,000/-
iv Where total income exceeds Rs 2,50,000/-	Rs. 25000/-+30% of the amount in excess of Rs. 2,50,000/-

II In case of individual being a woman resident in India and below 65 Years at any time during the previous year :-

Particulars	Income Tax Rates
i Where total income does not exceed Rs.1,35,000/-	NIL
ii Where total income exceeds Rs. 1,35,000/- but does not exceed Rs.1,50,000/-	10% of the amount in excess of Rs. 1,35,000/-
iii Where total income exceeds Rs. 1,50,000/-but does not exceed Rs. 2,50,000/-	Rs. 1500+20% of the amount by which total income exceeds Rs.1,50,000/-
iv Where total income exceeds Rs 2,50,000/-	Rs. 21000/-+30% of the amount by which total income exceeds Rs. 2,50,000/-

III In case of individual resident who is of the age of 65 years or more at any time during the previous year:-

Particulars	Income Tax Rates
i Where total income does not exceed Rs.1,85,000/-	NIL
ii Where total income exceeds Rs. 1,85,000/-but does not exceed Rs. 2,50,000/-	20% of the amount in excess of Rs. 1,85,000/-
iii Where total income exceeds Rs. 1,50,000/-but does not exceed Rs. 2,50,000/-	Rs. 13,000 + 30% of the amount by which total income exceeds Rs. 2,50,000/-

Further, the amount of income tax as computed in accordance with above rates, and after being reduced by the amount of tax rebate (please see Chapter 6 of this handbook ) shall be increased by a surcharge at the rate of the 10% of such income tax, provided that the total income exceeds Rs.8,50,000/-. The Finance Act, 2005 has raised this income limit Rs 10 lacs. Thus, in case of individual/HUF no surcharge shall be payable if the total income is below Rs.10 lacs. The tax and surcharge, if any, are to be further enchanced by education cess levied @ 2% for A. Y.2005-06 onwards.

It may be mentioned here that no charges have been made by the Finance Act, 2006 in so far as the slabs and tax rates are concerned. Thus, the above rates shall continue to remain in force for assessment year 2006-07.

1.6 CALCULATION OF INTEREST
The Income Tax Act Provides for charging of interest for non- payment/short payments/deferment in payment of advance tax which is calculated as below:

I INTEREST U/S 234A:
For late or non furnishing of return, simple interest @ 1% (substituted in place of 1.25% with effect from 8.9.2003). for every month or part there of from the due date of filling of the return to the date of furnishing of return, on the tax determined u/s 143(1) or on regular assessment as reduced by TDS/advance tax paid.

II INTEREST U/S 234B
For short fall of payment of advance tax by more than 10%, simple interest @ 1% (substituted in place of 1.25% with effect from 8.9.2003). Per month or part thereof is chargeable from 1st April of the assessment year to the date of processing u/s 143(1) or regular assessment, on the tax determined u/s 143(1) or on regular assessment less advance tax paid / TDS.

III INTEREST U/S 234C
For deferment of advance tax. If advance tax paid by 15th September is less than 30% of tax payable on retuned income less TDS, simple interest @ 1% % (substituted in place of 1.25% with effect from 8.9.2003). Similarly, if amount of tax paid or on before 15th December is less than 60% of tax due on retuned income, interest @1.25% per month is to be charged. Again, if the advance tax paid by 15th March is less than tax due on returned income, interest @ 1.25 % on the shortfall is to be charged.

IV INTEREST U/S 234D
Interest @ 0.5% is levied under this section when any refund is granted to the assessees and on regular assessment it is found that either no refund is due or the amount already refunded exceeds the refund determined on regular assessment. The said inter4est is levied @ 1.5% on the whole or excess amount so refunded for every month or part thereof from the date of grant of refund to the date of such regular assessment.

1.7 IMPORTANT CONCEPT & PROCEDURES UNDER THE INCOME TAX ACT

1.7.1	Assessees (section 2(7): An assesseee is a person by whom any tax or any other sum of money is payable under the Act.
1.7.2	Assessment Year (section 2(9)): Assessment year means the period of 12 months starting from 1st April of every year and ending on 31st March of the next year.
1.7.3	Previous Year (section 3): Income earned in a year is taxable in the next year. The year in which income is earned is known as the previous year and the next year in which income is taxable is known as the assessment year.
1.7.4	Receipt Vs accrual of income: Income is said to have been received by a person when payment has been actually received whereas income is said to have accrued if there arises in the persons a fixed and unconditional right to receive it.
1.7.5	Belated Return: Section 139(4) provides that a return which has not been furnished by the due date still be furnished by the due date may still be furnished as a belated returns before the expiry of one year from the end of the assessment year or before the completion of assessment, whichever is earlier. It may be noted that w.e.f. 1.4.99 on filing a belated return in form 2C filed under the 1 out of 6 criteria scheme, the assesseee shall be liable to pay penalty of Rs.500/-u/s. Similarly, on any returns of income that has not been filed by the end of the relevant assessment year, penalty of Rs. 1000/- us 271 F shall be levied. The Finance Act 2002 has provided that w.e.f. 1.6.2002, failure to furnish any return of income (including return filed under the 1 out of the 6 scheme) shall entail a penalty of Rs.5000/- under the amended section 271F.
1.7.6	Revised Return: If any person having filed his return within the due date discovers any omission or wrong statement therein, he may file a revised return before the expiry of one of completion of assessment whichever is earlier.
1.7.7	Processing u/s 143(1): During the stage of processing, every return of the income is examined and if any tax or interest is found due, on adjustment of tax deducted at source or advance tax or self assessment, then an intimation specifying the amount payable is issued to the assesseee. Similarly, if any refund is found due, it is to be send along with an intimation to such effect. If no demand or no refund arises, the acknowledgement of the return is deemed to be intimation. W.e.f. 1.6.99 no prima facie adjustments are to be made during the date of processing. It may be noted that w.e.f. 1.6.2001 such intimation is to be sent within one year in which the return is filed.
1.7.8	Assessment u/s 143(3): If the assessing officer, on the basis of the return filed by assessees, considers that it is necessary to ensure that the assessees has not understand his income, he shall serve on the assessees a notice u/s 143 (2) and, after obtaining such information as he may require, complete the assessment (commonly referred as security assessment) u/s.
1.7.9	Rectification of mistake u/s 154: If any order passed by an income tax authority suffers from a mistake apparent from record, the assesseee may make an application for rectifying the same before the expiry of four years from end of the financial year in which the above order was passed. The Finance Act 2001 has provided that where an application for rectifying under this section is made by the assesseee on or after 1.6.2001, the same shall have to be acted upon by the income tax authority within a period of six months from the end of the month in which the application is received.
1.7.10	Interest on refund u/s 244A: If the refund due to the assesseee is more than 10% of the tax payable by him, he shall be entitles to receive simple by him, he shall be entitled to receive simple interest thereon at the rate of 0.5% per months (substituted in place of 0.5% per month w.e.f.8.9.2003) or part there on, from 1st April of the assessment year to the on which refund is granted.

2.1 WHAT IS "SALARY"
Salary is the remuneration received by or accruing to an individual, periodically, for service rendered as a result of an express or implied contract. The actual receipt of salary in the previous year is not material as for as its taxability is concerned. The existence year is not material as far as its taxability is concerned. The existence of thee employer employee relationship is the sine-qua-non for taxing a particular receipt under the head "salaries" For instance, the salary received by the partner from his partnership firm carrying on a business is not chargeable as "salaries" but as "profits & Gains from business & Profession". Similarly, salary received by a person as MP or MLA is taxable as "Income from other sources", but if a person received salary as Minister of State/Central Government the same shall be charged to tax under the head "Salaries". Pension received by an assesseee from his former employer is taxable as "Salaries" whereas pension received on his death by member of his family (Family Pension) is taxed as "taxed as "Income from other sources".

2.2 WHAT DOED "SALARY INCLUDE "
Section 17(1) of the Income tax Act gives an inclusive and not exhaustive definition of "Salaries" including therein (i) Wages(ii) Annuity or pension (iii) gratuity(iv) Fees, Commission perquisites or profits in lieu in salary(vii) Contribution of the employee to a Recognised Provident Fund in excess of the prescribed limit (viii) Leave Encashment (ix)Compensation as a result of variation in Service contract etc.

2.3 DEDUCTION FROM SALARY INCOME
The following three deductions from salary income are admissible as per section 16 of the Income-Tax Act.

(i) Standard Deduction: From assessment year 2002.2003, standard deduction is to be allowed at the following rates:-

Particulars	Standard Deduction Rates
(i) Where gross income under the head "Salaries" is less than Rs. 1.5 Lacs	Rs. 30,000/- or 1/3 of the salary, whichever is less
(ii) Where gross income under more than Rs. 1.5 Lacs but less than Rs. 3 Lacs	Rs. 25,000/-
(iii) Where gross income under the head "Salaries" more than Rs. 3 Lacs but less than Rs. 5 Lacs	Rs. 20,000/-
(iv) Where gross income under the head "Salaries" is more than Rs. 5 Lacs	NIL

As introduced by the Finance Act 2003, the standard deduction shall be allowed at the following rates w.e.f. 01.04.2004:-

Particulars	Standard Deduction Rates
(a) Where gross income under the head "Salaries" is more than Rs. 5 Lacs	Rs. 30,000/- or 40% of the salary, whichever is less
(b) Where gross income under the head "Salaries" exceeds Rs. 5 Lacs	Rs, 20,000/-.

It is to be noted that no standard deduction is available from salary income w.e.f. 01.04.2006 i.e. A.Y. 2006-07 onwards.

(ii) Professional/Employment tax levied by the state Govt.

(iii) Entertainment Allowance- Deduction in respect of this is available to a government employee to the extent of Rs. 5000/- or 20% of his salary, whichever is less.

2.4 PERQUISITES
"Perquisite" may be defined as any casual emolument or benefit attached to an officer or office or position in addition to salary wages.

"Perquisite" is defined in the section 17(2) of the Income Tax as including:

Value of rent-fee /concessional rent accommodation provided by the employer. Any sum paid by employer in respect of an obligation which was actually payable by the assesseee. Value of any benefits/amenity granted free or at concessional rate to specified employees etc.

2.5 VALUATION OF PERQUISITES
As a general rule, the taxation value of perquisites in the hands of the employee is its cost to the employer. However, specific rules for valuation of certain perquisites have been laid down in rule 3 of the I.T. Rules. These, as revised by CBDT notification dated 25.9.2001, are briefly given below.

2.5.1 Valuation of residential accommodation provided by the employer:- Union or state Government Employees- The value of perquisite is the license fee as determined by the Govt. as reduced by the rent actually paid by the employee. Non Govt. Employees - The value of perquisite is an amount equal to 10% of the salary (7.5% of the salary in cities where population as per 1991 census is below 4 lacs) . In case the accommodation provided is not owned by the employer, but is taken on lease rent paid/payable by the employer or 10% of the salary, whichever is lower. In both of above cases, the value of the perquisite would be reduced by the rent, if any, actually paid by the employee. 2.5.2 Value of the Furnished Accommodation: The value would be the value of unfurnished accommodation as computed above, increased by 10% per annum of the cost of furniture (including TV/radio/refrigerator/AC/other gadgets). In case such furniture is hired from a third party, the value of unfurnished accommodation would be increased by the hire charges paid/payable by the employer. However, any payment recovered from the employee towards the above would be reduced from this amount. 2.5.3 Value of hotel accommodation provided by the employer .The Value of perquisite arising out of the above would be 24% of the salary or the actual charges paid or payable to the hotel, whichever is lower. The above would be reduced by any rent actually paid by the employer. However, any payment recovered from the employee towards the above would be reduced from this amount. 2.5.4 Perquisite of motor car provided by the employer:- If it is used wholly and exclusively for the official purpose, the value of the prerequisite would be nil. Rule 3(2) (B) provides that the value would be taken as nil provided the following documents maintained by the employer_:- Complete details of journey undertaken (including date of journey, destination, mileage etc.) Certificate by the employee that the expenses were incurred wholly and exclusively for official purpose. Certificate by the supervising authority that the expenses were incurred wholly and exclusively for official purpose. If it is used exclusively for private purpose of the employee or any member of his household, the value of the any member of his household, the value of the perquisite would be the actual expense incurred by the employer on the running/maintenance of the car, remuneration paid to the chauffeur and normal wear and tear of the car. For the purpose of this sub-rule, the normal wear & tear of the car shall be taken as 10% per annum of the actual cost. If it is used for both personal and official purposes, the valued of the perquisite would Rs. 1200 (Rs.1600 if the car has H.P. greater than 16) plus Rs. 600 for chauffeur, if any, the expense on running/maintenance relating to the personal use are met by the employee, the value of the perquisite would be Rs.400 (Rs. 600 if car has H.P. greater than 16) plus Rs. 600 for chauffeur. In case the motor car is owned by the employee but the running/maintenance charge and chauffeur's salary, if any, are met by the employer, then the value of the perquisite would be:- Nil, if the vehicle is used for official purpose and the documents listed at (a) above are maintained. If used for both personal and official purpose, the value would be the actual expenses incurred by the employer as reduced by an amount of Rs. 1200 (Rs. 1600 if car has H.P. greater than 16) plus Rs.600 In case any driver has been engaged. 2.5.5 Perquisite arising out of supply of gas, electric energy or water: This shall be determined as the amount paid by the employer to the agency supplying the same. If the supply is from the employer's own resources, the value of the perquisite would be the manufacturing cost per unit incurred by the employer. 2.5.6 Free/concessional educational facility: Value of the perquisite would be the expenditure incurred by the employer. If the education institution is maintained & owned by the employer, the value would be nil if the value of the reasonable cost of such education in a similar institution or near the locality. 2.5.7 Free concessional journeys provided by an undertaking engaged in cartridge of passengers or good: Value of perquisite would be the value which such amenity is offered to general public as reduced by any amount, if recovered from the employee. 2.5.8 Provision for sweeper, gardener, watchman or personal attendant: the value of benefits resulting resulting from provisions of any these shall be the actual cost borne by the employer in this respect as reduced by any amount paid by the employee for such services. 2.5.9 Value of certain other fringe benefits Interest free/concessional loans- The value of the perquisite shall be the same equal to the simple interest computed @ 10% per annum in respect of house or conveyance loans and @ 13% per annum for loans as reduced by any interest actually paid by the employee. Value of free meals - shall be the expenditure incurred by the employer. However, free meals provided during office hours or though non-transferable paid vouchers usual only at eating joints shall be exempt upto Rs.50/- per meal. Value of gift or voucher or token received by the employee from the employer would be the sum equal to the amount of such gift. However, if the aggregate value of such gifts during the year is below Rs. 5000/- , the perquisite shall be taken as nil. Credit card provided by the employer - The value of the perquisite shall be the amount of expense including membership fees and annual fees incurred by the employee. However, if the same is used exclusively for official purpose, the value of the perk shall be nil. Club membership provided by employer- The value of the perquisite shall be the amount of all expenses incurred by the employer or reimbursed to the employee including the annual fees. However, if the same is incurred exclusively for official purposes, the value of the perquisite shall be nil. 2.5.9 The value of any other benefits or amenity provided by the employer shall be determined on the basis of cost to the employer under an arms 'length transactions as reduced by the employee's contribution.

2.6 PERQUISITE EXEMPT FROM INCOME TAX
Some instances of perquisite exempt from tax are given below.

Provision of medical facilities-(proviso to Sec. 17(2): value of medical treatment in any hospital maintained by the government or any local authority or the employer or approved by the chief commissioner of income tax. Besides, any sum paid by the employer towards medical reimbursement other than as discussed above is exempt upto Rs.15,000/- Perquisite allowed outside India by the government to the citizen of India for rendering services outside India (Sec. 10(7). Rent free official residence provided to a judge of High Court or Supreme Court or an Officer of Parliament, Union Minister or leader of Opposition. No perquisite shall arise if interest free/concessional loans are made available foe medical treatment of specified diseases in rule 3A or where the loan is petty exceeding in the aggregate Rs. 20,000/- No perquisite shall arise in relation to expense on telephone including a mobile phone incurred on behalf of the employee by the employer.

2.7 ALLOWANCES
Allowance is defined as a fixed quantity of money or other substance given regularly in addition to salary for meeting specific requirement of the employees.

2.7.1 House rent allowance:- Provided that expenditure on rent is actually incurred, exemption available shall be the least of the fallowing: HRA Received Rent Paid less 10% of salary 40% of salary (50% in case of Mumbai, Chennai, Kolkata, Delhi) if dearness allowance is provided by the terms of employment. 2.7.2 Leave Travel Allowance: The amount actually incurred on performance of travel on leave to any other place in India by the shortest route to that place is exempt. This is subject to a maximum of the air economy fare or AC 1st Class fair (if journey is performed in a block of 4 calendar years. 2.7.3 Certain allowances given by the employer to the employee are exempt u/s 10(14). W.e.f. 1.7.1995, all these exempt allowances are detailed in rule 2BB of Income-tax Rule and briefly given below:- Allowance granted to meet cost of the travel on tour or journey in connection with transfer. Allowance granted on tour or journey in connection with transfer to meet the daily charges incurred by the employee. Allowance granted to meet conveyance expenses incurred in performance of duty, provided no free conveyance is provided. Allowance granted to meet expense incurred on a helper engaged for the performance of official duty. Academic, research or training allowance granted in educational or research institutions. Allowances granted to meet expenditure on purchase/maintenance of uniform Under Section 10(14) (ii), the following allowances have been prescribed as exempt. Types of Allowance Amount Exempt (i) Leave Compensatory Allowance or high altitude allowance or climate allowance Rs 800 common for various areas of North East, Hilly areas of U.P.,H.P. & J&K and Rs. 7000 per month for Siachean area of J&K and Rs. 300 common for all places at a height of 1000 mts or more other than the above places (ii) A border area allowance or remote area allowance or a difficult area allowance or disturbed area allowance. Various amounts ranging from Rs. 200 per month to from Rs. 200 per month to Rs.1300 per month are exempt for various area specified in rule 2BB (iii) Tribal area allowance Available in M.P., Assam, U.P., Karnataka, West Bengal, Bihar, Orissa. Rs. 200 Per Month (iv) Any allowance granted to an employee working in any transport system to meet his personal expenditure during duty performed in the course of running of such transport from one place to another. 70% of such allowances upto a maximum of Rs. 6000per month (v) Children education allowance Rs. 100 per month per child upto a maximum 2 children. (vi) Allowances granted to meet hostel expenditure or employee's child. Rs. 300 per month child upto a maximum two children. (vii) Compensatory field area allowance available in various areas of Arunanchal Pradesh, Manipur, Nagaland, Sikim,H.P. U.P. & J&K. Rs. 2600 per month. (viii) Compensatory modified field area allowance available in specified areas of Panjab, Rajstan, Haryana, U.P. & J&K., H.P. & North East. Rs. 1000 per month. (ix) Counter insurgency allowance to member of Armed Forces. Rs. 3900 per month. (x) Transport Allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of residence &duty Rs. 800 per month. (xi) Transport allowance granted to physically disabled blind employee for the purpose of commuting between place of duty and residence Rs.1600 per month (xii) Underground allowance granted to an employee working in under ground coal mines. Rs. 800 p. m. (for altitude of 9000-15000ft.) (xiii) Special allowance in the nature of high altitude allowance granted to member of the armed forced Rs. 1060 per month. (xiv) Special allowance granted to member of armed forces in the nature of island duty allowance. Rs. 3,200 per month.

3.1 INTRODUCTION
Under the Income Tax Act what is taxed under the head house property is the inherent capacity of the property to earn income called Annual Value of the property. The above is taxed in the hands of the owner of the property.

3.2 COMPUTATION OF ANNUAL VALUE

GROSS ANNUAL VALUE (G.A.V.) is the highest of Rent received or receivable Fair market value. Municipal valuation. (If however, the rent Control is applicable, the G.A.V. is the standard rent or rent received, whichever is higher). It may be noted that if the let out property was vacant for whole or any part of previous year and owning to such vacancy the rent received or receivable is less than the sum referred to in clauses (a) above, then the amount actually receive/receivable shall be taken into account while computing the G.A.V. if any portion of he rent is unrealizable, (condition of unrealisable of rent are laid down in rule 4 of I.T. Rules) then the same shall not be included in the actual rent received receivable while computing the G.A.V. NET VALUE (N.A.V.) is the GAV less the municipal taxes paid by the owner. Provided that the taxes were paid during the year. ANNUAL VALUE is the N.A.V. less deductions available u/s 24.

3.3 DEDUCTIONS U/S 24:
Are exhaustive and no other deductions are available:-

A sum equal to 30% of the annual value as computed above. Interest on money borrowed for acquisition/construction/repair/renovation of property is deductible on accrual basis. Interest paid during the pre construction/acquisition period will be allowed in five successive financial years starting with the financial year in which construction/ acquisition is completed. This deduction is also available in respect of a self occupied property and can be claimed up to maximum of Rs.30, 000/- The Finance act, 2001 had provided that w.e.f. A.Y. 200203 the amount of deduction available under this clause would be available up to Rs. 1, 50,000/- in case the property is acquired or constructed with capital borrowed on or after 1.4.99 and such acquisition or construction completed before1.4.2003. the requirement of acquisition/ construction being completed before1.4.2003 and has simply provided that the acquisition/ construction of the property must be completed within three years from the end of the financial year in which the capital was borrowed.

3.4 SOME NOTABLE POINTS

In case of one self occupied property, the annual value is taken as nil. Deduction u/s 24 for interest paid may still be claimed there from. The resulting loss may be set off against income under other heads but can not be carried forward. If more than one property is owned and all are used for opted as self occupation purpose only, then any one can be opted as self occupied, the others are deemed to be let out. Annual value of one house away from workplace which is not let out can be taken as NIL provided that it is the only house owned and it is not let out. If a llet out property is partly self occupied or is self occupied for a part of the year, then the value in proportion to the portion of self occupied property or period of self occupation, as the case may be is to be excluded from the annual value. From assessment year 99-2000 onwards, an assesseee who apart from his salary income has loss under the head "Income from house Property ", may furnish the particulars of the same in the prescribed from to his Drawing and Disbursing Officer who shall then take the above loss also into account for the purpose of TDS from salary. A new Section 25B has been inserted with effect from assessment year 2001-2002 which provides that where the assesseee, being the owner of any property consisting of any building or lands appurtenant thereto which may have been let to a tenant, receives any arrears of rent not charged to income tax for any previous year, then such arrears shall be taxed as the income of the previous year in which the same is received after deducting therefrom a sum equal to 30% of the amount of arrears in respect repairs/collection charges. It may be noted that the above provisions shall apply whether or not the assesseee remains the owner of the property in the year of receipt of such arrears.

3.5 PROPERTY INCOME EXEMPT FROM TAX

Income from farm house (Sec.2 (1A) (C) read with Sec. 10 (1). Annual value of any one palaces of an ex-ruler (Sec.10 (19A). Property income of a local authority (Sec.10 (20), university/educational institution (Sec.10 (22), approved scientific research association (Sec. 10(23), trade union (Sec. 10(22A), political party (Sec.13A). Property used for own business or profession (Sec.22) One self occupied property (Sec.23 (2). House property held for charitable purposes (Sec.11).

4.1 CAPITAL GAIN
Profit or gain arising from the transfer of a capital asset during the previous year is taxable as "capital gains" under section 45(1) of the Income Tax Act, . The Taxability of capital gains is in the year of transfer of the capital asset.

4.2 CAPITAL ASSET
As defined in section 2 (14) of the Income Tax Act, it means Property of any kind held by the assesseee exempt.

Stock in trade, consumable stores or raw materials held for the purpose of business or profession. Personal effects, being moveable property (excluding Jewellery ) held for personal use. Agricultural land, except land situated within or in area upto 8 kms, from a municipality, Municipal Corporation, notified area committee, town committee or a cantonment board with population of atleast 10,000. Six and half percent Gold Bond, National Defense Bonds and Special Bearer Bonds.

The total income from all the above heads of income is calculated in accordance with the provisions of the act as they stand on the first day of the April of any assessment year.
In this booklet an attempt is being made to discuss the various provisions relevant to the salaried class of tax prayers as well as pensioners and senior citizens.

4.3 TYPES OF CAPITAL GAINS
When a capital asset is transferred by an assesseee after having held it for atleast 36 months, the capital gains arising from this transfer is known as Long Term Capital Gains. In case of shares of a company or unit of UTI or a unit of a Mutual Fund, the minimum period of holding for long term capital gains to arise is 12 months. If period of holding is less than above, the capital gains arising there from are known as short Term Capital Gains. It may be mentioned here that long Term Capital Gains are taxed at a flat rate of 20%, the benefit of indexing the cost of acquisition is available and a number of exemptions there from are also available, specified in Section 54G of the Income Tax Act. The Finance Act 1999 has provided that in case of transfer of a long term capital asset, being listed securities, if the tax payable exceeds 10% of the amount of capital gain computed without indexing the cost of acquisition, then such excess would be ignored for the purpose of computing the tax payable by the assesseee.

4.4 COMPUTATION OF CAPITAL GAINS (Sec.48)
Capital gain is computed by deducting from the full value of consideration, for the transfer of a capital asset, the following:-

cost of acquisition of the asset (COA):- in case of long capital gains, the cost of acquisition is indexed by the factor which is equal to the ratio of the cost inflation index of the year of transfer to the cost inflation index of the year acquisition of the asset. Normally, the cost of acquisition is the cost than a person has incurred to acquire the capital asset. However in certain cases, it is taken as following: When the capital asset becomes a property of an assesseee under a gift or will or by succession or inheritance or on partition of Hindu Undivided Family or on distribution of assets, or dissolution of a firm, or liquidation of a company, the COA shall be the cost for which the previous owner acquired it, as increased by the cost of improvement till the date of acquisition of the asset by the assesseee. When shares in an amalgamated Indian company had become the property of the assesseee in a scheme of amalgamation, the COA shall be the cost of acquisition of shares in the amalgamating company Where the capital asset is goodwill of a business, tenancy right, stage carriage permits or loom hours the COA is the purchase price paid, if any or else nil. The COA of rights shares is the amount which is paid by the subscriber to get them. In case of bonus shares, the COA is nil. If a capital asset has become the property of the assesseee before 1.4.81, the assesseee may choose either the fair market value as on 1.4.81 or the actual cost of acquisition of the asset as the COA. Cost of improvement, if any such cost was incurred. In case of long term capital assets, the indexed cost of improvement will be taken. Expenses connected exclusively with the transfer such as brokerage etc.

4.5 SOME IMPORTANT EXEMPTIONS FROM LONG TERM CAPITAL GAINS

Section 54: In case the asset transferred is a long term capital asset being a residential house, and if out of the capital gains, a new residential house is constructed within three years, or purchased 1 year before or 2 years after the date of transfer, then exemption on the LTCG is available on the amount of investment in the new asset to the extent of the capital gains. It may be noted that the amount of capital gains not appropriated towards purchase or construction may be deposited in the capital Gains Account Scheme of a public sector bank before the due date of filling of Income Tax Return. This amount should subsequently be used for purpose or construction of a new house within 3 years. Section 54F: When the asset transferred is a long term capital asset other than a residential house and if out of the consideration, investment in purchase or construction of a residential house is made within the specified time as in sec. 54, then exemption from the capital gains will be available as: If cost of new asset is greater than the net consideration received, the entire capital gain is exempt. Otherwise, exemption = Capital Gains x Cost of new asset/Net Consideration. It may be noted that this exemption is not available, if on the date of transfer, the assesseee owns any house other than the new asset. It may be noted that the Finance Act 2000 has provided that with effect from assessment year 2001-2002, the above exemption shall net be available if assesseee owns more than one residential house, other than new asset, on the date of transfer investment in the Capital Gains Account Scheme may be made as in Sec. 54. Section 54 EA: If any long term capital asset is transferred before 1.4.2000 and out of the consideration, investment in specified bonds/debentures/shares is made within 6 months of the date of transfer, then exemption from capital gains is available as computed in Section 54 F. Section 54 EB: If any long term capital asset is transferred before 1.4.2000 and investment specified assets is made within a period of 6 months from the date of transfer, then exemption would be as computed in section 54F. Section 54 EC: this section has been introduced from assessment year 2001-2002 onwards. It provides that if any long term capital asset is transferred and out of the consideration, investment in specified assets (including bonds issued by National Bank for Agricultural & rural Development or by National Highway Authority of India or by Rural Electrification Corporation is made within 6 months from the date of transfer, then exemption would be available as computed in sec. 54 F. As proposed by the Finance Bill 2006, with effect from assessment year 2006-07, the benefit of tax exemption under this section shall be restricted to investment of those bonds, which are redeemable after 3 years and are issued by the National Highways Authority of India and the Electrification Corporation Ltd. Only. Section 54 ED: This section has been introduced from assessment year 2002-03 onwards,. It provides that if a long term capital asset, being listed securities or units, is transferred and out of the consideration and , investment in acquiring equity shares forming part of an eligible issue of capital is made within six months from the date of transfer, then exemption would be available as computed in Sec. 54 F . it is proposed by the Finance Bill, 2006 that with effect from assessment year 2007-08, no exemption under this section shall be available.

4.6 LOSS UDER CAPITAL GAINS.
Can not be set off against any income under any other head but can be carried forward for 8 assessment years and be set off against capital gains in those assessment years.

4.7 EXEEMPT INCOME
The Finance Act 2003, has introduced S.10(33 and S.10(36) w.e.f. 01.04.2004 which provide that income arising from certain types of transfer of capital assets shall be trated as exempt income . S.10(33) provides for exemption of income arising from transfer of units of the US 64 (Unit scheme 1964) S. 10(36) provides that income arising from transfer of eligible equity shares held for a period of 12 months or more shall be exempt.

The Finance Act 2004 has introduced Section 10(38) of the I.T., Act which provides that no capital gains shall arises in case of transfer of equity shares held as a long term capital asset by an individual or HUF w.e.f. 01.04.2005 provided such a transaction is chargeable to 'securities transaction tax'.

Financial Year	Cost Inflation Rate
1981-82	100
1982-83	109
1983-84	116
1984-85	125
1985-86	133
1986-87	140
1987-88	150
1988-89	161
1989-90	172
1990-91	172
1991-92	182
1992-93	199
1993-94	223
1994-95	259
1995-96	281
1996-97	305
1997-98	331
1998-99	351
1999-2000	389
2000-2001	406
2001-2002	426
2002-2003	447
2003-2004	463
2004-2005	480
2005-2006	497

5.1 INTRODUCTION
The Income Tax Act provides that on determination of the gross total income of an assesseee after considering income from all the heads, certain deductions there from may be allowed. These deductions detailed in chapter VIA of the Income Tax Act must be distinguished from the exemptions provides in section 10 of the Act. While the former are to be the income at all.

5.2
The chart given below describes the deductions allowable under chapter VIA of the I.T> from the gross total income of the assesseee having income salaries.

SECTION	NATURE OF DEDUCTION	REMARKS
80CCC	Payment of premium for annuity plan of LIC or any other insurer deduction is available upto a maximum of Rs. 10,000/-	The Premium must be deposited to keep in force a contract for an annuity plan of the LIC or any other insurer for receiving pension from the fund. The finance Act, 2006 has enhanced the ceiling of deduction under section 80CCC from Rs. 10,000 to Rs. 1, 00,000 with effect from 1.4.2007.
80CCD	Deposit made by a Central government servant in his pension account to the extent of 10% of his salary.	Where the central Government servant in his pension account, deduction of such contribution to the extent of 10% of salary shall be allowed. Further, in any year where any amount is received from the pension amount shall be charged to tax as income of that previous year.
80D	Payment of medical insurance premium. Deduction is available upto Rs.10,000/	The premium is to be paid by cherub and the insurance scheme should be framed by the General Insurance Corporation of India & approved by the Central Govt. or any other insurer and approved by the insurance regulatory & Development Authority. The premium should be paid in respect of health insurance of the assesseee or his family members.
80DD	Deduction of Rs. 40,000/- in respect of expenditure incurred on medical treatment, (including nursing), training and rehabilitation of handicapped dependant relative. Payment or deposit to specified scheme for maintenance of dependant handicapped relative. W.e.f. 01.04.2004 the deduction under this section has been enhanced to Rs. 50,000/- Further, if the dependant is a person with severe disability a deduction of Rs. 75,000/- shall be available under this section.	The handicapped dependent should be a dependent relative suffering from a permanent disability (including blindness) or mentally retarded, as certified by a specified by a specified physician or psychiatrist. Note: A person with "server disability means a person with 80% or more of one or more disabilities as outlined in section 56(4) of the "Persons with disabilities (equal opportunities, protection of rights and full participation)" Act..
80DDB	Deduction of Rs. 40,000 in respect of medical expenditure incurred. W.e.f.01.04.2004, deduction under this section shall be available to the amount actually paid, whichever is less.	Expenditure must be actually incurred by resident assesseee on himself or dependent relative for medical treatment of specified disease or ailment. The diseases have been specified in rule 11DD. A certificate in from 10 I is to be furnished by the assesseee from any Registered Doctor.
80E	Deduction in respect of loan or interest on such loan taken for higher studies upto Rs. 40,000 per year.	This provision has been introduced to provide relief to students taking loans for higher studies. The repayment of the principal amount of loan and interest thereon will be allowed as deductions upto Rs.3.2 lakhs over a period of 8 years. This section has been amended by the Finance act, 2005. Thus w.e.f. 01.04.2006, deduction shall be allowed only in respect of interest of interest on loan taken for pursuing higher education. The ceiling of Rs.40, 000/- has been done away with.
80G	Donation to certain funds, charitable institution etc.	The Various donations specified in Sec.80G are eligible for deduction upto either 100% 50% with or without restriction as provided in Sec. 80G.
80GG	Deduction available is the least of Rent paid less 10% of the total Income Rs.2000 per month (iii)25% of total income	Assesseee or his spouse or minor child should not own residential accommodation at the place of employment He should not be in receipt of house rent allowance. He should not have a self occupied residential premise in any other place.
80L	Interest/Dividend/Income from any Govt. Security (Central or State) NSC,VI,VII& VIII issues. Notified Debentures of public sector undertakings, co-operative societies/land mortgage bank or land development bank Notified National Deposit Scheme. Any other deposit Scheme framed by Central Govt. and notified. Deposit under Post Office Monthly Income Account rules, 1987 Deposits with banking companies, banking co-op. societies, land mortgage or land development bank. Deposits with banks established under any law made by parliament Deposits with financial corporations approved by central Government. Deposits with any authority constituted in India under any law for planning, development or improvement of cities, towns and villages etc. Deposits with co-operative societies. Deposits with any public companies providing long term finance for construction or purchase of houses. Income from U.T.I. Income from Units of Mutual fund specified under clause (23D) of Sec.10.	Rs. 9000 plus an additional deduction of Rs. 3000 allowed in respect of interest on any Central /State Govt. Securities. W.e.f. 01.04.204, no deduction u/s 80L shall be available in respect of dividends from an Indian Company, income received in respect of units from the UTI and income received is respect of units of a Mutual Fund u/s 10(23). This section has been omitted by the Finance Act, 2005. Thus, no deduction under this section shall be available w.e.f. 01.04.2006
80U	Deduction of Rs. 40,000/- to an individual who suffers from a physical disability (including blindness) or mental retardation. W.e.f. 01.04.2004 Deduction of Rs. 50,000/- shall be available under this section. Further, If the individual is a person with severe disability deduction of Rs. 75,000/- shall be available u/s 80U.	Certificate should be obtained from a Govt. Doctor. The relevant Rule is Rule 11D
80R	Deduction on remuneration received from any foreign university, educational institution or any association set up outside India of an amount equal to 75% of such remuneration brought to India in convertible foreign exchange within 6 months from the end of the previous year or within the extended time allowed by the chief Commissioner or Commissioner of Income-tax. From assessment year 2001-2002 the above deduction will be available as: Deduction of 60% of such remuneration for assessment year 2001-2002. Deductions of 60%of such remuneration for assessment year 2002-2003 Deductions of 30% of such remuneration for assessment year 2003-2004 Deductions of 15% of such remuneration for assessment year 2004-2005.	Available to professors, teachers or research workers, certificate in From 10H to be furnished. No deduction shall be allowed in respect of A.Y. 2005-06 onwards.
80RR	Deduction in remuneration received from foreign sources including Government of a foreign state or any person not residing in India of an amount equal to 75% of such remuneration as is brought to India subject to conditions specified as 80R. From assessment year 2001-2002 the above deduction will be available as:- Deduction of 60% of such remuneration for assessment year 2001-2002. Deduction of 45% of such remuneration for assessment year 2002-2003. Deduction of 30% of such remuneration for assessment year 2003-2004. Deduction of 15% of such remuneration for assessment year 2004-2005.	Available to individual residents in India being authors, playwrights, artists, musician, actor or sportsman. Certificate in Form 10 H to be furnished. No deduction shall be allowed in respect of A.Y. 2005-06 onwards.
80RRA	Deduction on remuneration received from any employer (foreign or Indian ) for services rendered outside India of an amount equal to 75% of such remuneration subject to conditions mentioned aforesaid. From assessment year 2001-2002 the above deduction will be available as: Deduction of 60% of such remuneration for assessment year 2001-2002. Deduction of 45% of such remuneration for assessment year 2002-2003. Deduction of 30% of such remuneration for assessment year 2003-2004. Deduction of 15% of such remuneration for assessment year 2004-2005.	Certificate in Form 10H to be furnished. No deduction shall be allowed in respect of A.Y. 2005-06 onwards.
80RRB	Deduction in respect of any income by way of royalty in respect of a patent registered on or after 01.04.2003 under the Patents Act 1970 shall be available as:- Rs. 3 lacs or the income received, whichever is less,	The assesseee must be an individual resident is India who is a patentee. The assesseee must furnish a certificate is the prescribed from duly signed by the prescribed authority.
80QQB	Deduction is respect of royalty or copyright income received in consideration for authority any books of literary, artistic or scientific nature other than text book shall be available to the extent of Rs. 3 lacs or income received whichever is less.	The assesseee must be an individual resident in India who receives such income in exercise of his profession. To avail of this deduction, the assesseee must furnish a certificate in the prescribed from along with the return of income.
80C	This section has been introduced by the Finance Act, 2005. Broadly speaking, this section provides deduction from total income in respect of various investments/expenditure/payment in respect of which tax rebate u/a 88 was earlier available. The total deduction under this section is limited to Rs. 1 lakh only.	-

The following investment/payments are eligible for deduction u/s 80C.

NATURE OF INVESTMENT	REMARKS
Life Insurance Premium	For individual, policy must be in self or spouse's or any child's name. For HUF, it may be on life of any member of HUF.
Sum paid under contract for deferred annuity	For individual, on life of self, spouse or any child
Sum deducted from salary payable to Govt. servant for securing deferred annuity for self-spouse or child	Payment limited to 20% of salary.
Contribution made under Employee's Provident Fund Scheme	-
Contribution to PPF	For individual can be in the name of self/spouse, any child &for HUF, it can be in the name of self/spouse, any child &for HUF, it can be in the name of any member of the family.
Contribution by employee to a Recognized Provident Fund	-
Sum deposited in 10 years/15 year account of Post Officer Saving Bank	-
Subscription to any notified securities/ notified deposits scheme.	e.g. NSS
Subscription to any notified saving certificate, Unit Linked Saving certificates.	E.g. NSS VIII issue.
Contribution to unit Linked Insurance Plan Of LIC Mutual Fund	e.g. Dhanrakha 1989
Contribution to notified deposit scheme/Pension fund set up by the National Housing Scheme.	-
Certain payment made by way of instalment or part payment of loan taken for purchase/construction of residential house property.	Condition has been laid that in case the property is transferred before the expiry of 5 years from the expiry of 5 years from the end of the financial year in which possession of such property is obtained by him, the aggregate amount of deduction of income so allowed for various years shall be liable to tax in that year.
Contribution to notified annuity Plan of LIC (e.g. jeevan Dhara) or Units of UTI/notified Mutual Fund.	If in respect of such Contribution, deduction u/s 80CCC has been availed of rebate u/s 88 would not be allowable.
Subscription to units of a Mutual Fund notified u/s 10(23D)	-
Subscription to deposit scheme of a public sector, company engaged in providing housing finance.	-
Subscription to equity shares/debentures forming part of any approved eligible issue of capital made by public company or public financial institutions.	-
Tuition fees paid at the time of admission or otherwise to any school, College, university or other educational institution situated within India for the purpose of full time education of any two children	Available in respect of any two children.
Any term deposit for a fixed period of not less than five years with any scheduled bank.	-
It may be noted that the aggregate amount of deductions under section 80C, 80CCC and 80CCD are subject to an overall ceiling of Rs. 1 lac.	-

6.1 INTRODUCTION
The total income of an assesseee is determined after determined after deductions from the gross total income are made as discussed in the previous chapter. It is on this total income that the tax payable is computed at the rates in force. The income Tax Act further provides for rebate from the tax payable as computed above if certain investment or payment are made. Rebate provided u/s 88 of the Act must be distinguished from deductions provided in Chapter VIA of the Act. While the latter reduce the gross total income, rebate is a reduction from the tax payable.

For assessment year 2002-2003 rebate u/s 88 is available @ 20% on certain investment. For author, playwright, artist, musician, actor, sportsman, a higher rate of 25% is available. The Finance Act 2001 has provided that an individual whose income under the head "salary" is below Rs. 1 lakh during the previous year and constitutes at least 90% of his gross total income, shall be entitled to rebate @ 30% on the investment/payments qualifying for rebate u/s 88 is Rs.60,000. However, additional rebate on investment uptoRs.20, 000 is available in respect of subscription to specified infrastructure equity shares/debentures.

The Finance Act 2002 has introduced some changes in the above which shall come into effect from A.Y. 2003-2004. The rate of rebate has been kept at 20% in cases the gross total income, before giving effect to the deductions under chapter VIA, is below Rs. 1.5 lacs while the rate would be 15% for gross total income is higher than Rs 1.5 lacs but lower than Rs. 5 lacs.

On the other hand, if the gross total income exceeds Rs. 5 lacs, no rebate under this chapter would be available. It has also been provided that an individual whose income under the head 'Salaries' is below Rs.1lakh during the previous year and constitutes at least 90% of his gross total income, shall be entitled to rebate @ 30% on the investment/ payments specified in Section 88. the maximum amount of investment qualifying for rebate u/s 88 has been enhanced to Rs, 30,000 is available in respect of subscription to specified infrastructure equity share debentures.

Investment qualifying for rebate u/s 88 must be out of income chargeable to tax in the relevant previous year. The above requirement has, however, been deleted by the Finance Act 2002 w.e.f. A.Y. 2003-2004.

With effect from assessment year 2001-2002 onwards a new section 88C has been inserted. It provides that in case of assesseee being a woman resident in India and below65years of age, tax rebate of an amount of Rs. 5,000 or 100% of tax, whichever is less, shall be available. The above rebate is to be allowed from the amount of Income Tax computed before allowing for tax rebate u/s 88 as discussed below in paragraph 6.2.

6.2	NATURE OF INVESTMENT	REMARKS
-	Life Insurance Premium	For individual, policy must be in self or spouse's or any child's name. For HUF, it may be on life of any member of HUF.
-	Sum paid under contract for deferred annuity	For individual, on life of self, spouse or any child
-	Sum deducted from salary payable to Govt. Servant for securing deferred annuity for self- spouse or child	Payment limited to 20% of salary.
-	Contribution made under Employee's Provident	-
-	Contribution to PPF	For individual, can be in the name of self/spouse, any child & for HUF, it can be in the name of any member of the family
-	Contribution by employee to a Recognized Provident Fund.
-	Sum deposited in 10Year/15 year account of Past Office Saving Bank	-
-	Subscription to any notified securities/notified deposit scheme	e.g. NSS
-	Subscription to any notified saving certificate, Unit Linked Saving certificates.	E.g. NSS VIII issue.
-	Subscription to any notified saving certificate, Unit Linked Saving certificates.	e.g. NSC Dhanrakhsa
-	Contribution to notified deposit scheme/Pension fund set up by the National Housing Scheme.	-
-	Certain payment made by way of instalment or part payment of loan taken for purchase/construction of residential house property	Qualifying amount limited to Rs. 10,000. The limit has been raised to Rs.20, 000 w.e.f. assessments year 2001-2002.
-	Contribution to notified annuity Plan of LIC (e.g. Jeevan Dhara) or Units of UTI/notified Mutual Fund.	If in respect of such contribution, deduction u/s 80CCC has been availed of, rebate u/s 88 would not be allowable.
-	Subscription to units os a Mutual Fund notified u/s 10(23D)	-
-	Subscription to deposit scheme of a public Sector Company/Authorised Authority Provided long term house financing	-
-	Subscription to equity shares/ debentures forming part of any approved eligible issue of capital made by a public company or public financial institution.	In respect of it, a higher limit of qualifying investment of Rs. 70,000(Rs.80, 000 w.e.f. A.Y. 2001-2002) is available as against Rs. 60,000 in case of other investments.
-	(w.e.f. 01.04.2004) Tuition fees paid at the time of admission or otherwise to sny school, college, university or other educational institution situated within India for the purpose of full time education of any two children.	The qualifying amount limited to Rs. 12,000/- in respect of each child.

It is important to note that no tax rebate u/s 88 shall be available from A.Y.2006-07 onwards. Similarly, Sections 88C providing special rebate to senior citizens and ladies, stand omitted w.e.f. 01.04.2006.

6.3 RELIEF UNDER SECTION 89 (1)
Is available to an employee when he receives salary advance or in arrear or when in one financial year, he receives salary of more than 12 months or receives 'profits in lieu of salary' w.e.f. 1.6.89, relief u/s 89 (1) can be granted at the time of TDS by employees of all companies co-operative societies, universities or institutions as well as govt./public sector undertaking, the relief should be claimed by the employee in Form No 10E and should be worked out as explained in rule 21 A of the Income Tax Rules.

7.1 WHAT IS P.A.N.?
P.A.N. or Permanent Account Number is a number allotted to a person by the Assessing Officer for the purpose of identification. P.A.N. of the new series has 10 alphanumeric characters and is issued in the form of laminated card.

7.2 WHO SHALL APPLY FOR P.A.N.?
Section 139 A of the Income Tax Act provides that every person whose total income exceeds the maximum amount not chargeable to tax or every person who carries on any business or profession whose total turnover or gross receipt exceed Rs. 5 lakhs in any previous year or any person required to file a return of income u/s 139(4A) shall apply for PAN. Besides, any person not fulfilling the above conditions may also apply for allotment of PAN. With effect from 01.06.2000, the Central Government may be notification specifies any class/classes of person including importers and exporters, whether or not any tax is payable by them, and such persons shall also then apply to the Assessing Officer for allotment of PAN.

W.e.f 01.04.2006 a person liable to furnish a return of fringe benefits under the newly introduced section 115WD of the I.T. Act is also required to apply for allotment of PAN. Of course, if such a person already has been allotted a PAN he shall not be required to obtain another PAN.

The finance Bill, 2006 has provided that for the purpose of collecting any information, the Central Govt. may by way of notification specify any class or classes of persons for allotment of PAN and such persons shall apply to the Assessing officer within the prescribed time. Provision for suomoto allotment of assessing officer may allot a permanent account no. to any person whether or not any tax is payable by him having regard to the nature of transactions.

7.3 TRANSACTIONS IN WHICH QUOTING OF PAN IS MANDATORY

Purchase and sale of immovable property. Purchase and sale of motor vehicles. Transaction in shares exceeding Rs. 50,000. Opening of new bank accounts. Fixed deposits of more than Rs.50, 000. Application for allotment of telephone connections. Payment to hotels exceeding Rs.25, 000. Provided that till such time PAN is allotted to a person, he may quote his General Index register Number or GIR No.

7.4 HOW TO APPLY FOR PAN

Application for allotment of PAN is to be made in form 49A. following points must be noted while filling the above forms:- Application form must be typewritten or handwritten in black ink BLOCK LETTERS. Two black & white photographs are to be annexed. While selecting the "Address for Communication", due care should be exercised as all communications thereafter would be sent at indicated address. In the space given for "Father's name "only the father's name should be given. Married ladies may note that husband's name is not required and should not be given. Due care should be exercised to fill the correct date of birth. The form should be signed in English or any of the Indian Languages in the 2 specified places. In case of thumb impressions attestation by a Gazetted Officer is necessary.

8.1 INTRODUCTION
On retirement, an employee normally receives certain retirement benefits. Such benefits are taxable under the head 'Salaries' as "profits in Lieu of Salaries" as provided in section 17(3). However, in respect of some of them, exemption from taxation is granted u/s 10 of the Income Tax Act, either wholly or partly. These exemptions are described below:-

8.2 GRATUITY (sec. 10(10):

Any death cum retirement gratuity received by Central and State Govt. employees, Defense employees and employees in Local authority shall be exempt. Any gratuity received by persons covered under the Payment of Gratuity Act, 1972 shall be exempt subject to following limits: For every completed year or service or part thereof, gratuity shall be paid at the rate of fifteen days wages based on the rest of wages last drawn by the concerned employee. The amount of gratuity as calculated above shall not exceed Rs. 3, 50,000(w.e.f 24.9.97). iii. In case of any other employee, gratuity received shall be exempt subject to the following exemptions:- Exemption shall be limited to half month salary ( based on last 10 months average) for each completed year of services or Rs. 3.5 Lakhs whichever is less. Where the gratuity was received in any one or more earlier previous years also and any exemption was allowed for the same, then the exemption to be allowed during the year gets reduced to the extent of exemption already allowed, the overall limit being Rs. 3.5 lakhs.

As per Board's letter F.No. 194/6/73-IT (A-1) dated 19.6.73; exemption in respect of gratuity is permission even in cases of termination of employment due to registration. The taxable portion of gratuity will qualify for relief u/s 89(1).

Gratuity payment to a widow or other legal heirs of any employee who dies in active service shall be exempt from income tax (Circular No. 573 dated 21.8.90).

8.3 COMMUNICATION OF PENSION (SECTION 10 (10A):

In case of employees of central & State Govt. Local Authority, Defense Service and corporation established under Central or State Acts, the entire commuted value of pension is exempt. In case of any other employee, if the employee receives gratuity, the commuted value of 1/3 of the pension is exempt, otherwise, the commuted value of ½ of the pension is exempt.

Judges of S.C. & H.C. shall be entitled to exemption of commuted value upto ½ of the pension (Circular No. 623 dated 6.1.1992).

8.4 LEAVE ENCASHMENT (Section 10(10AA);

Leave Encashment during service is fully taxable in all cases, relief u/s 89 (1) if applicable may be claimed for the same. Payment by way of leave encashment received by Central & State Govt. employees at the time of retirement in respect of the period of earned leave at credit is fully exempt. Vide notification no. 10749 dated 27.11.1998; limit on the maximum amount receivable by employees of Central Govt. has been specified at rs. 2.4 Lakhs for employees retiring whether on superannuation or otherwise after 1.7.1997. In case of other employees, the exemption is to be limited to a maximum of 10 months of leave encashment, based on last 10 months average salary. This is further subject to a limit of Rs. 2,40,000 for retirement after 01.07.1997. Leave salary paid to legal heirs of a deceased employee in respect of privilege leave standing to the credit of such employee at the time of death is not taxable.

For the purpose of section 10(10AA), the term 'Superannuation or otherwise' covers resignation (CIT Vs. Shahney 159 ITR 160(Madras).

8.5 RETRENCHMENT COMPENSATION (Sec. 10(10B):
Retirement compensation received by a workman under the Industrial Dispute Act 1947 or any other Act or Rules is exempt subject to following limits:-

Compensation calculated @ fifteen days average pay for every completed year of continuous services or part there of in excess of 6 months. The above is further subject to an overall limit of Rs. 5, 00,000 for retrenchment on or after 1.1.77 (Notification No. 10969 dated 25.6.99).

8.6 COMPENSATION ON VOLUNTARY RETIREMENT OR 'GOLDEN HANDSHAKE' (Sec. 10 (10C).

Payment received by an employee of the following at the time of voluntary retirement, or termination of service is exempt to the extent of Rs. 5 Lakh: