EEE EET ETE explained

There are 3 ways Govt. taxes the monies invested by public at various stages of investment.
When the money is invested it goes through three stages, which are -

• Contribution to an investment scheme.
• Accumulation of interest.
• Withdrawal stage, when the lump sum amount (sum of money invested and accrued interest) is withdrawn.

How does EEE relate to these stages?

EEE stands for Exempt, Exempt, Exempt which means -

• First exempt means that the amount invested will be eligible for deduction under some section (As exp 80C) subject to the total exemption limit. The invested amount will be deducted from the total taxable income of the individual.
• Second Exempt means the accrued interest will not be added to the total income and will not be taxed. Thus in case of second exempt interest earned is not taxed.
• Third exempt means the income from the investment, at the time it is withdrawn, would be tax free.

As of now EPF, PPF, SSY, Life Insurance Policies, ELSS comes under EEE.

How does ETE relate to these stages?

ETE stands for Exempt, Taxed, Exempt which means -

• First exempt means that the amount invested will be eligible for deduction under some section (As exp 80C) subject to the total exemption limit. The invested amount will be deducted from the total taxable income of the individual.
• Taxed means the accrued interest will be taxed.
• Third exempt means the income from the investment, at the time it is withdrawn, would be tax free.

Some of the investments which can be categorized under ETE would be Tax Saver FDs, NSC.

How does EET relate to these stages?

EET stands for Exempt, Exempt, Taxed which means -

• First exempt means that the amount invested will be eligible for deduction under some section (As exp 80C) subject to the total exemption limit. The invested amount will be deducted from the total taxable income of the individual.
• Second Exempt means the accrued interest will not be added to the total income and will not be taxed. Thus in case of second exempt interest earned is not taxed.
• Taxed means the income from the investment (Principal + Accrued Interest), at the time it is withdrawn, would be taxed.

Some of the investments which can be categorized under EET would be National Pension Scheme(NPS), Pension Plans.

There are other similar terms too like TTE (Fixed deposits), TEE (Stocks and Equity Funds if kept for more than 3 years).

That's all for this topic EEE EET ETE explained. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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Shah Rukh Khan's net worth

According to a report in Wealth-X Shahrukh's estimated net worth is $600 million (More than 3600 Crore). He is named as the second richest Actor in the world beaten only by Jerry Seinfeld with the estimated net worth of $820 million.

Shahrukh Khan was the only Bollywood star to feature in the top ten of the international celebrity rich list for 2013 - compiled by Wealth-X.

Some of the ways Sharukh khan makes money -

There are movies of course and his own production house but there are many other ways by which SRK makes money.

• Endorsements - SRK can be seen endorsing a whole gamut of products cold drinks, cars, pan masala, paint to fairness creams. According to a study Shahrukh's brand value is Rs. 1011 Crore which is the highest among the celebrities.
• Performing in weddings - According to a report in TOI (http://timesofindia.indiatimes.com/entertainment/hindi/bollywood/news/Shah-Rukh-Khan-charges-a-hefty-amount-for-weddings/articleshow/19999554.cms) SRK charges around Rs. 8 crore for wedding performance. So, just by shaking a leg in 10-15 odd weedings he can make close to 100 Crores in a year. Just as FYI Shah Rukh received around 250 invites for wedding appearances/performances in 2012 but took up only 10 of them.

• Investments - Apart from owning a very famous address in Mumbai by the name "Mannat", SRK also owns several other properties (including houses) in several cities and countries across the globe, like London and Dubai to name a few. He also heads a production house 'Red Chillies Entertainment' - Film production and VFX being the two most important businesses of this house, which together constitute almost 70% of it's revenues.
  IPL team Kolkata Knight Riders (KKR) one of the profit making IPL franchise is also owned by SRK.

• TV Show hosting - SRK after starting his career in TV once again made his presence felt in the television world as the host of reality shows. He has hosted reality shows like; Kaun Banega Crorepati Season 3, Kya Aap Paanchvi Pass Se Tez Hain? and Zor Ka Jhatka: Total Wipeout. A TOI report says that in 2011, he charged Rs 2.5 crores for Zor Ka Jhatka..., an Indian adaptation of the American reality show Wipeout.
• Performance at Award Shows - Shah Rukh Khan who is one of the most active participants in almost all award ceremonies, makes a lot of money through performance in such shows. And the number of awards (shows) that we have these days (which is really MANY!) is certainly helping him!
  According to reports SRK charges around Rs 2-3 crore for over an hour's performance, which may also include hosting.

How Many Indians Pay Income Tax

India being a developing country is supposed to have a low Income Tax paying population but it would still be surprising to read that only about 3% of Indian population pay Income tax, which comes to 35 million tax payers (3.5 crore). In that too majority of the tax payers fall under 2.5 - 5 Lakhs slab. Just as comparison in USA around 45 percent of the population pays taxes.

Update : Income tax department has released the data for AY 2015-2016. As per the data there were 4.07 crore returns filed by individuals in AY 2015-2016 (FY 2014-2015). Number of returns filed in AY 2014-2015 was 3.65 crore.

But the disappointing fact is that out of 4.07 crore tax returns filed about 2.06 crore people actually paid any tax. Rest of the 2.01 crore filed the return but paid zero tax.

Of that 2.06 crore who did pay tax, around 1.85 crore were in the lowest tax slab and paid an average Rs. 24,000 as income tax in AY 2015-2016 meaning a collection of Rs. 44615 crore from these 1.85 crore people.

Out of the total returns filed, only 9690 paid income tax of more than INR 1 crore. Total income tax collection from these 9690 tax payers was 22,984 crore.

There was only one individual who paid more than 100 crore in taxes, tax collection from that individual was 238 Crore.

Reference : https://www.incometaxindia.gov.in/Documents/Direct%20Tax%20Data/Income-Tax-Statistics-IT-Return-AY-2015-16.pdf

As per the last census average household size in India is 4.8 person per house hold. If we take it as 5 and assume there is only one earning member per household then these 3.5 crore tax payer people take care of 17.5 crore population. Moreover according to Rangarajan committe below poverty line population in India is estimated at 363 million (36.3 crore) in 2011-12 This means 29.5% of the India population lives below the poverty line.
If we add these numbers (Population which is coming from the household where one of the member is paying taxes and the population which is below poverty line thus unable to even take care of their daily bread forget taxes)

17,50,00,000 + 36,30,00,000 = 53,80,00,000 (53.8 crore)

Now if we take the population of India as 125 crore (1,25,00,00,000 or 1.25 billion), number of people left -

1,25,00,00,000 - 53,80,00,000 = 71,20,00,000 (71.2 crore)

If we go by 5 people per houshold that will mean 14.24 crore households which are not paying any income tax.

If we take another 30% population whose income is less than the taxable income that will leave out another 21.36 crore people. Still there are 49.84 crore people left coming to around 10 crore household. Which means roughly there are around 10 crore households who should pay taxes but not doing so.

It's anybody's guess that most of these people who are not paying any taxes are -

1. Rich farmers - Agriculture income is exempted from tax in India. Though many of the small farmers may be having a hand to mouth existence but there are rich farmers too who should be taxed.
Refer Crorepati farmers: tax them please! to know how people are evading tax by showing more agricultural income.
2. Business owners - According to RBI data, cash still accounts for 90 per cent of all monetary transactions in India. So it is easy for the business owners to manipulate their taxable income by dealing in cash and under invoicing or not giving invoice at all.
3. Self Employed Professionals - This can be explained through an example -
   Let's take an example of two chartered accountants A & B residing in the same apartment. A works in a financial institution and B has his own practice in the same commercial complex. Both of them drive to office. They both spend around Rs 12,000 on petrol bills. While A gets tax benefit of only Rs 1600 (Conveyance limit has been increased from Rs. 800 to Rs. 1600) B can claim the entire amount as a deduction from his income. Same for food bills self employed can claim the whole amount as business expenses. So self employed person can claim a lot of expenses as business expenses and pay almost nil tax.

Deviation in the number of Income Tax payers

Data about the number of income tax payers also show the inequality in the earnings and how the wealth is concentrated among very few, it also shows how people are not disclosing their true income. We have to go through some data to see that -

Details of number of income tax payers in the tax slabs

Details of number of income tax payers in the tax slabs of Rs. 0-5 lakh, Rs. 5-10 lakh, Rs. 10-20 lakh and beyond Rs. 20 lakh, as furnished by the Ministry in their written submission are given as under :

Slab	Number (in lakhs)	Percentage of taxpayers
0-5 lakhs	288.44	89.0%
5-10 lakhs	17.88	5.5%
10-20 lakh	13.78	4.3%
>20 lakh	4.06	1.3%

This data shows how much inequality there is among the tax payers. Only 1.3 percent of the tax payers have taxable income above Rs. 20 Lakhs, whereas, 89 percent of the tax payers have taxable income not more than Rs. 5 Lakhs.

Amount of tax collected as per tax slabs

Details regarding amount of tax collected under the existing rates and percentage of tax collected in each of the said slabs as furnished by the Ministry are given as under :

Slab	Tax Collected (Rs. in crores)	Percentage of tax collected
0-5 lakhs	15,010	10.1%
5-10 lakhs	21,976	14.8%
10-20 lakh	17,858	12.1%
>20 lakh	93,229	63.0%

Again notice the deviation 89 percent of tax payers are paying 10.1 percent of the taxes where as 1.3 percent of tax payers pay 63 percent of the taxes.

Going by the data it can be seen that GOI need to increase the tax base rather than increasing the income tax or service tax (Which is increased to 14% in this year's budget (2015)). Any increase in service tax hits the salaried class more as they end up paying more in double taxation.

Readers are welcome to present their thoughts

** Source for this post is Standing commitee on finance(2011-12) report (49).

That's all for this topic How Many Indians Pay Income Tax. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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Income tax slabs for FY 2015-16

Income tax rates may change every year and it is important to have an idea about the current income tax rates. In this post we'll see the different tax slabs for the current financial year. Please note that the income tax slabs for the FY (Fiscal Year) 2014-15 and FY 2015-16 i.e. AY (Assessment Year) 2015-16 and AY 2016-17 are the same.

Tax payers may be categorized into 2 categories -

1. Non-business.
2. Business.

The non-business categories of income tax payers in India are -

1. Male Individual residents below 60 years of age and HUF.
2. Female Individual residents below 60 years of age.
3. Senior Citizen Individual resident who is of the age of 60 years or more but below the age of 80 years at any time during the previous year.
4. Super Senior Citizen (Individual resident who is of the age of 80 years or more at any time during the previous year.

The business categories of income tax payers in India are -

1. Co-operative societies.
2. Firms.
3. Domestic Companies.
4. Foreign companies.

Here we'll discuss only about the non-business categories of income tax payers.

Tax slabs for individual residents aged below 60 years and HUF

For individual resident aged below 60 years and HUF rates of income tax are as-

Income Slabs	Rates of income tax
Taxable income does not exceed Rs. 2,50,000.	Till the income of Rs. 2,50,000 there is no tax so in this case the tax is NIL.
Taxable income is more than Rs. 2,50,000 but does not exceed Rs. 5,00,000.	10% of amount by which the taxable income exceeds Rs. 2,50,000. Less: Tax credit (under u/s 87A) of Rs. 2,000 available only to resident Individuals having total taxable income upto Rs. 5 lakhs.
Taxable income is more than Rs. 5,00,000 but does not exceed Rs. 10,00,000.	Rs. 25,000 + 20% of the amount by which the taxable income exceeds Rs. 5,00,000.
Taxable income exceeds Rs. 10,00,000.	Rs. 125,000 + 30% of the amount by which the taxable income exceeds Rs. 10,00,000.

Note that for FY (Fiscal Year) 2014-15 and 2015-16 income tax slabs for males and females are same.

Surcharge on income-tax - If taxable income exceeds one crore rupees, surcharge of 10% is levied on the calculated income tax. In the case of surcharge marginal relief is also applicable if the condition for that is satisfied.

Education Cess - There is also 2% education cess and 1% secondary and higher education cess(total 3%) of the total of income tax and net surcharge.

Tax slabs for a resident senior citizen (who is 60 years or more at any time during the previous year but less than 80 years on the last day of the previous year)

For a resident senior citizen (who is 60 years or more at any time during the previous year but less than 80 years on the last day of the previous year) rates of income tax are as-

Income Slabs	Rates of income tax
Where the taxable income does not exceed Rs. 3,00,000.	Till the income of Rs. 3,00,000 there is no tax so in this case the tax is NIL.
Taxable income is more than Rs. 3,00,000 but does not exceed Rs. 5,00,000.	10% of the amount by which the taxable income exceeds Rs. 3,00,000. Less: Tax credit (under u/s 87A) of Rs. 2,000 available only to resident Individuals having total taxable income upto Rs. 5 lakhs.
Taxable income is more than Rs. 5,00,000 but does not exceed Rs. 10,00,000.	Rs. 20,000 + 20% of the amount by which the taxable income exceeds Rs. 5,00,000.
Taxable income exceeds Rs. 10,00,000.	Rs. 120,000 + 30% of the amount by which the taxable income exceeds Rs. 10,00,000.

Surcharge on income-tax - If taxable income exceeds one crore rupees, surcharge of 10% is levied on the calculated income tax. In the case of surcharge marginal relief is also applicable if the condition for that is satisfied.

Education Cess - There is also 2% education cess and 1% secondary and higher education cess(total 3%) of the total of income tax and net surcharge.

Tax slabs for a resident super senior citizen (who is 80 years or more at any time during the previous year)

For a resident super senior citizen (who is 80 years or more at any time during the previous year) rates of income tax are as-

Income Slabs	Rates of income tax
Where the taxable income does not exceed Rs. 5,00,000.	Till the income of Rs. 5,00,000 there is no tax so in this case the tax is NIL.
Taxable income is more than Rs. 5,00,000 but does not exceed Rs. 5,00,000.	20% of the amount by which the taxable income exceeds Rs. 5,00,000.
Taxable income exceeds Rs. 10,00,000.	Rs. 100,000+ 30% of the amount by which the taxable income exceeds Rs. 10,00,000

Surcharge on income-tax - If taxable income exceeds one crore rupees, surcharge of 10% is levied on the calculated income tax. In the case of surcharge marginal relief is also applicable if the condition for that is satisfied.

Education Cess - There is also 2% education cess and 1% secondary and higher education cess(total 3%) of the total of income tax and net surcharge.

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