LAB-SANDEEP KUMAR RAINA-B54-ROLL NO 27-10_LAB_Week5_s7-9_Application

Assignment

Q1 Carefully look at the annual report of your company and identify the heads under which
corporate tax deductions can be availed. Suggest recommendations as to how tax planning can
benefit your company

I have referred the latest annual report 2015-16 of my company which is available at link:

https://bharatpetroleum.com/Bharat-Petroleum-For/Investors/Our-Financials/Annual-

Reports.aspx

The first head is the capital gains head. The report indicates that the company had earnings per

share of 102.78 per share. Also, the profit after tax of earnings per share were 7,431.88.

Another head is the income from business gains. These gains came from the sales.

The report provides a graph of gross sales turnover and profit after tax of in cores. There is a

second graph representing data on profit after tax and profit after tax, offering more evidence of

income from business sales. There is pie chart representing expenditure with an income tax of

1.46% in the report as well. Further, BPCL recorded a profit after tax of 8,463.98 cores in

2015-2016.

Earnings per share were 110.38 in the current year indicating capital gains income head. The

report has a record of other income head as well. Combined with sales, it recorded an income of

218,425 and had a tax of 3,219.

Property income is another head present in the company since the report says that the assets tax

was 547.15 in cores.

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Assignment

However, the report says that the rapid decrease in crude prices has not made an impact to the

consumers throughout the world due to the increment of duties and taxes imposed by different

governments. This shows that even after companies complying with the governments,

consumers welfare has not yet improved.

Tax planning encompasses looking at ones current and projected earnings and then advancing

strategies that will defer and maximize taxes. Tax planning makes it possible for corporations to

stay alive during the times of competition. BPCL could optimize its tax burden by taking

advantage of the provisions by the law. This would eliminate double taxation since BPCL is

trading locally and internationally. This would prevent economic distortion. The potential here

arises as a result of the comparison of the local tax system and the foreign tax system while

computing the income.

Tax planning would also minimize the tax liability observed in the company to maximize profits.

We could use the after-tax profit as the driver since it is critical for earnings-per-share ratio,

shareholder value and prices. Reducing tax rates by tax planning is a fundamental measure to

achieve reduced costs. Tax planning is legit and puts into consideration interests of businesses

and the government to provide services.

However, the company should not conduct a complete minimization since doing so would imply

doing no business at all. As a result, they should set an optimization goal of the tax burden which

would reflect the existing balance between tax-driven and non-tax driven business goals. A good

strategy in order to achieve this would involve strategy, anticipating, value-adding, negotiating

and, transforming. Managers should focus on the business strategic plan, anticipate tax effect on

all those business players affected by the transaction, add value by consideration of these effects
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Assignment

while negotiating for the most fruitful arrangement. The company should transform the tax

treatment to the most favourable status as well.

Q2 as an individual, what are the deductions, allowances and exemptions allowed

in India that u can utilized by you in your personal finance to optimize your tax
payment. Elaborate.

Tax deductions and exemptions aim at reducing the amount of taxable income. In India, the

Indian Income Tax has many provisions on deductions and exemptions including, Sukanya

Samridhi Contributions, NPS, Public Provident Fund (PPF) in which one can get deduction

under Section 80C (1961), Life Insurance Premiums under section 80C of the Indian Tax Act

(1961), National Saving Certificate(NSC), Bank fixed deposits for a period of five years, Senior

Citizen Saving Scheme(SCSS), Unit-linked Insurance Plans(ULIP), Home Loan EMIs,

Retirement Savings plan, Medical insurance premiums etc. Allowances that I can utilize to

optimize my tax payment include the partly-exempted allowance such as house allowance

provided in the Income Tax Act Section 10(13A).

I can file a claim implying that I pay rent even regardless of whether I am receiving house rent

allowance. If it happens that I stay with my parents, I can pay their rent and avail deduction in

my tax. Also, I can buy medical insurance for my parents to assist me receive additional

deduction in my taxes and, for their better treatment. These are just a few examples of how I can

apply these allowed deductions, allowances and exemptions to optimize my tax payments.

A Gist of of some deductioins is as below:

S. Tax Details Max Tax

n
Sections Exemption
o
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Assignment

1 80C/CCC/ Investment in EPF, ELSS, PPF, FD, NPS, NSC, Pension Plans, Life 1,50,000

CCD insurance, SCSS, SSA and NPS. Home loan principal repayment,

tuition Fees, Stamp Duty

2 80CCD Investment in NPS 50,000

(1B)
3 24 Interest paid on Home loan for self-occupied homes. No limit for 2,00,000

Rented house.
4 80E Interest paid on education loan , No Limit No limit

5 80CCG 50% of investments in RGESS approved stocks & MFs 25,000

6 80D Premium payment for medical insurance for self & parents. 60,000

7 80DDB Treatment for serious illness for self and dependents 80,000

8 80U Physically Disabled Tax Payer 1,25,000

9 80DD Physically Disabled Dependent (75k for 40-80% disability) 1,25,000

1 80G Donations to approved Chariatable Funds, PM/CM relief fund 40,000

0
1 80GGA Donations for Scientefic research or rural development 100,000

1
1 80GGC Donations to Political parties 60,000

2
1 80TTA Interest received in savings account 10,000