Module 3

1) Explain EPF and PPF and how it works.

EPF stands for Employees' Provident Fund, and PPF stands for Public
Provident Fund. Both are savings schemes that provide a way for individuals
to save money for their future, with some benefits and incentives thrown in.
Employees' Provident Fund (EPF):
EPF is a mandatory savings scheme for employees in India, managed by the
Employees' Provident Fund Organization (EPFO). It is a retirement benefits
scheme that provides a lump sum payment to employees at the time of their
retirement or when they leave their job.
Here's how it works:
➢ Employers and employees contribute a certain percentage of the
employee's salary to the EPF every month. The current contribution rate is
12% of the basic salary, with the employer contributing 8% and the
employee contributing 4%.
➢ The contributions are collected and invested in various instruments such
as stocks, bonds, and government securities.
➢ The accumulated amount in the EPF account earns interest, which is
declared by the EPFO every year.
➢ Employees can withdraw a portion of their EPF balance in certain
situations, such as buying a house, getting married, or for medical
purposes.
➢ When an employee retires or leaves their job, they can withdraw the entire
EPF balance, which includes the employer's contribution, employee's
contribution, and the interest earned.

Public Provident Fund (PPF):

PPF is a voluntary savings scheme that provides a safe and secure way for
individuals to invest their money and earn interest on it. It is managed by the
Ministry of Finance and is open to all Indian citizens.
Here's how it works:
 ➢ Anyone can open a PPF account and start depositing money into it. The
minimum deposit amount is Rs. 500, and the maximum deposit amount is
Rs. 1.5 lakh per year.
➢ The deposits made into a PPF account are eligible for tax deductions under
Section 80C of the Income Tax Act.
➢ The interest rate on PPF deposits is fixed by the government and is
currently set at 7.9% per annum.
➢ The interest earned on PPF deposits is tax-free.
➢ Withdrawals from a PPF account are allowed after a certain period, subject
to certain conditions. For example, a withdrawal can be made after five
years from the date of opening the account, or after the completion of 15
years from the date of opening the account.
➢ If an individual dies before the maturity of their PPF account, their
nominee can withdraw the entire amount in the account.

In summary, both EPF and PPF are savings schemes that provide a way for
individuals to save money and earn interest on it. However, EPF is a
mandatory scheme for employees, while PPF is a voluntary scheme open to
all Indian citizens. EPF provides a lump sum payment at retirement or when
an employee leaves their job, while PPF allows for partial withdrawals after a
certain period.

2) Explain various investment schemes for retirement

planning.
1. National Pension Scheme (NPS): NPS is a government-backed pension
scheme that allows individuals to save for their retirement. It is a defined
contribution scheme, which means that the subscriber contributes a certain
amount of money to the scheme, and the returns generated are based on the
investments made by the fund manager. NPS offers a range of investment
options, including equity, corporate bonds, and government securities. The
scheme also provides tax benefits, and the returns are tax-free until
withdrawal.
2. Senior Citizen Saving Scheme (SCSS): SCSS is a savings scheme
designed for senior citizens, offering a high-interest rate and a low-risk
investment option. The scheme has a maturity period of five years and offers
an interest rate of 8.6% per annum. The maximum deposit amount is 15 lakh
rupees, and the interest earned is taxable.
3. Bank Fixed Deposit (FD): Bank FD is a traditional investment option that
offers a fixed rate of interest for a specific period. The interest rate varies
depending on the tenure of the deposit, with longer tenures offering higher
interest rates. FDs are considered a low-risk investment option, but the returns
are generally lower than other investment options.
4. Public Provident Fund (PPF): PPF is a long-term savings scheme that
offers a fixed rate of interest and tax benefits. The scheme has a maturity
period of 15 years, and the interest rate is currently 7.9% per annum. The
maximum deposit amount is 1.5 lakh rupees per year, and the returns are tax-
free.
5. Unit Linked Insurance Plans (ULIPs): ULIPs are investment plans that
offer a combination of insurance and investment. The investor pays a
premium, and the insurance company invests the premium in various assets
such as stocks, bonds, and money market instruments. The returns generated
are based on the performance of the investments, and the policyholder can
choose to invest in different fund options. ULIPs offer tax benefits, and the
returns are tax-free.
6. Mutual Funds: Mutual funds are investment vehicles that pool money
from various investors to invest in different assets such as stocks, bonds, and
money market instruments. The returns generated are based on the
performance of the investments, and investors can choose to invest in different
fund options such as equity funds, debt funds, and balanced funds. Mutual
funds offer diversification and professional management, but the returns are
not guaranteed and are subject to market risks.
3) Discuss life cycle approach of financial planning.
The life cycle approach to financial planning is a method that takes into
account an individual's current stage of life and financial goals to create a
personalized financial plan. This approach recognizes that an individual's
financial needs and priorities change over time, and it divides the financial
planning process into three distinct stages: wealth protection, wealth
accumulation, and wealth distribution.
1. Wealth Protection (Early Life):
The first stage of the life cycle approach is wealth protection. This stage
typically covers the early years of an individual's life, from college to the early
30s. During this stage, the focus is on protecting one's assets, minimizing debt,
and building an emergency fund. The goal is to create a solid financial
foundation that can withstand unexpected events, such as job loss, illness, or
accidents.
➢ Recommended financial goals for this stage:
­ Build an emergency fund
­ Pay off high-interest debt
­ Invest in insurance (health, disability, and life)
­ Start saving for retirement
2. Wealth Accumulation (Middle Life):
The second stage of the life cycle approach is wealth accumulation. This stage
typically covers the middle years of an individual's life, from the 30s to the
50s. During this stage, the focus is on building wealth through investments,
retirement savings, and increasing income. The goal is to create a significant
amount of wealth that can sustain a comfortable lifestyle in the long term.
➢ Recommended financial goals for this stage:
­ Increase income through career advancement or side hustles
­ Invest in tax-advantaged retirement accounts (401(k), IRA, Roth
IRA)
­ Build a diversified investment portfolio
­ Save for specific goals (college funds, down payment on a house)

3. Wealth Distribution (Later Life):

The third stage of the life cycle approach is wealth distribution. This stage
typically covers the later years of an individual's life, from the 60s and beyond.
During this stage, the focus is on managing and distributing wealth to maintain
a comfortable lifestyle, minimize taxes, and leave a legacy. The goal is to
ensure that the wealth accumulated over the years is used effectively and
efficiently.
➢ Recommended financial goals for this stage:
­ Create a sustainable withdrawal strategy from retirement accounts
­ Consider charitable giving or philanthropy
­ Review and update estate planning documents (will, trust,
beneficiaries)
­ Consider long-term care insurance
4) Write note on: Senior Citizen’s Saving Scheme
The Senior Citizen's Saving Scheme (SCSS) is a government-backed savings
scheme designed specifically for senior citizens in India. It is a popular
investment option for retirees looking for a regular income and capital
protection. Here are some key features and benefits of the SCSS:
1. Eligibility: The SCSS is open to Indian citizens who are 60 years or above.
However, individuals who have taken voluntary retirement (VRS) or
superannuation can also invest in this scheme if they are 55 years or above but
less than 60 years, subject to certain conditions.
2. Investment amount: The minimum investment amount is Rs. 1,000, and
the maximum is Rs. 15 lakhs. Investors can open multiple SCSS accounts, but
the total investment amount should not exceed the maximum limit.
3. Tenure: The SCSS has a tenure of five years, which can be extended by
another three years.
4. Interest rate: The interest rate on SCSS is reviewed quarterly and is
currently at 7.4% per annum for the first quarter of the financial year 2023-
24. The interest is paid quarterly, and the investor can choose to receive the
interest payment either through a cheque or directly in their bank account.
5. Tax benefits: Investments in SCSS are eligible for tax deductions under
Section 80C of the Income Tax Act, up to a maximum limit of Rs. 1.5 lakhs
per financial year. However, the interest earned on SCSS is taxable as per the
investor's income tax slab.
6. Premature withdrawal: SCSS allows premature withdrawal after one
year, but with a penalty. If the investor withdraws the amount before two
years, 1.5% of the deposit amount is deducted as a penalty. If the investor
withdraws the amount after two years but before five years, 1% of the deposit
amount is deducted as a penalty.
7. Nomination facility: SCSS allows investors to nominate a person who can
receive the amount in case of the investor's demise.
In summary, SCSS is a safe and secure investment option for senior citizens
looking for regular income and capital protection. It offers a decent interest
rate, tax benefits, and the flexibility to withdraw the amount prematurely,
albeit with a penalty.
5) Write note on: National Pension Schemes (NPS)
National Pension Schemes (NPS) are long-term retirement savings plans
introduced by the Indian government to provide financial security to its
citizens in their old age. NPS is a voluntary and defined contribution pension
system that aims to inculcate a culture of saving for retirement among the
Indian population.
1. Objective: The primary objective of NPS is to promote a habit of saving
for retirement among individuals and provide them with a self-managed
pension system. It aims to ensure that individuals have adequate financial
resources to sustain themselves during their post-retirement years.
2. Eligibility: NPS is open to all Indian citizens, including government
employees, private sector employees, and self-employed individuals. There is
no minimum age limit to join NPS, but the maximum age limit is 65 years.
3. Contribution: Individuals can contribute to NPS through various modes,
including online and offline. The minimum annual contribution for Tier I
account is Rs. 6,000, and there is no maximum limit. For Tier II account, there
is no minimum contribution, and the maximum annual contribution is Rs.
1,25,000.
4. Investment Options: NPS offers two types of accounts, Tier I and Tier II.
Tier I account is mandatory, and it is a retirement savings account. Tier II
account is optional, and it is a voluntary savings account. Both accounts offer
multiple investment options, including equity, corporate bonds, government
securities, and alternative investment funds.
5. Tax Benefits: Contributions made to NPS are eligible for tax deductions
under Section 80CCD(1) and Section 80CCD(2) of the Income Tax Act, 1961.
The amount withdrawn from NPS after retirement is also tax-exempt under
certain conditions.
6. Exit Options: After retirement, individuals can withdraw up to 60% of the
corpus as a lump sum, and the remaining 40% has to be invested in an annuity
plan. In case of untimely death, the nominee can receive the entire corpus.
7. Regulatory Framework: NPS is regulated by the Pension Fund
Regulatory and Development Authority (PFRDA), which ensures the
transparency, efficiency, and security of the pension system.
 In conclusion, NPS is a well-designed retirement savings plan that offers
several benefits to individuals. It promotes a culture of saving for retirement,
provides tax benefits, and offers multiple investment options. It is a must-have
retirement savings plan for all Indian citizens.

6) Write note on: Superannuation Fund and Gratuity

Superannuation Fund:
A superannuation fund is a type of retirement savings account
that is designed to provide financial security to individuals after they retire. It
is a long-term investment vehicle that allows individuals to accumulate funds
over their working years, which can then be used to support their lifestyle
during retirement.
Superannuation funds are typically established by employers for
their employees, although individuals can also set up their own funds.
Contributions to the fund are made by both the employee and the employer,
with the aim of building a substantial nest egg over time. These contributions
are usually made on a regular basis, such as monthly or quarterly, and are
based on a percentage of the employee's salary.
The funds accumulated in a superannuation account are invested
in various assets, such as stocks, bonds, and property, with the goal of
generating returns and growing the fund's value. The investment strategy is
usually determined by the fund manager, who is responsible for managing the
fund's assets and ensuring that it remains financially viable.
One of the key advantages of a superannuation fund is the tax
benefits it offers. Contributions made to the fund are generally tax-deductible,
which means that individuals can reduce their taxable income by contributing
to their superannuation. Additionally, the investment earnings within the fund
are taxed at a concessional rate, which can help to maximize the growth of the
fund over time.
Upon reaching the eligible age for retirement, individuals can
access their superannuation funds and use the accumulated funds to support
their living expenses. This can be done through various options, such as taking
a lump sum payment, setting up a regular income stream, or a combination of
both.

Gratuity:
Gratuity is a form of monetary benefit that is provided to
employees by their employers as a token of appreciation for their service and
loyalty. It is a lump sum payment that is made to employees upon their
retirement, resignation, or termination, depending on the terms and conditions
specified in their employment contract or the applicable labor laws.
The amount of gratuity is usually calculated based on the
employee's length of service and their last drawn salary. In many countries,
there are specific rules and regulations that govern the calculation and
payment of gratuity, which may include factors such as the number of years
of service, the average salary, and a statutory cap on the maximum amount
payable.
Gratuity serves as a financial cushion for employees during their
transition from active employment to retirement or a new job. It can be used
to meet various financial needs, such as paying off debts, covering living
expenses, or investing in other ventures.
It is important for both employers and employees to understand
the gratuity provisions applicable to their specific jurisdiction and ensure
compliance with the legal requirements. Employers are responsible for setting
aside funds for gratuity payments and ensuring that they are made in a timely
manner, while employees should be aware of their entitlements and rights
regarding gratuity.
Overall, gratuity serves as a valuable form of financial support
for employees, recognizing their contributions and providing them with a
financial safety net as they transition into the next phase of their lives.
7) Write note on: Reverse Mortgage.
A reverse mortgage is a type of loan that allows homeowners who are at least
62 years old to convert a portion of their home equity into cash. Unlike a
traditional mortgage where the borrower makes monthly payments to the
lender, in a reverse mortgage, the lender makes payments to the borrower.
Here are some key points to note about reverse mortgages:
1. Eligibility: To qualify for a reverse mortgage, the homeowner must be at
least 62 years old, own their home outright or have a significant amount of
equity, and live in the home as their primary residence.
2. Loan Repayment: Unlike a traditional mortgage, a reverse mortgage does
not require monthly repayments. The loan is typically repaid when the
homeowner sells the home, moves out permanently, or passes away. The loan
balance is usually paid off through the sale of the home, with any remaining
equity going to the homeowner or their heirs.
3. Loan Amount: The amount of money a homeowner can borrow through a
reverse mortgage depends on several factors, including the age of the
borrower, the appraised value of the home, and current interest rates.
Generally, the older the borrower and the more valuable the home, the higher
the loan amount.
4. Payment Options: Reverse mortgages offer various payment options to
the borrower. They can choose to receive a lump sum, a line of credit, fixed
monthly payments, or a combination of these options. The chosen payment
plan can have implications on the total loan amount and interest accrued.
5. Financial Implications: While a reverse mortgage provides homeowners
with additional income, it is essential to understand the financial implications.
The interest on the loan accumulates over time, potentially reducing the equity
in the home. Additionally, reverse mortgages may affect eligibility for certain
government assistance programs like Medicaid.
6. Non-Recourse Loan: A reverse mortgage is a non-recourse loan, which
means that the borrower or their heirs are not personally liable for any loan
amount exceeding the value of the home. If the loan balance exceeds the
home's value, the lender absorbs the loss, and the borrower or their heirs are
not responsible for the difference.
Reverse mortgages can provide financial flexibility for older homeowners,
allowing them to access their home equity without having to sell their
property. However, it is crucial to carefully consider the terms, costs, and
long-term implications before deciding if a reverse mortgage is the right
option. Seeking advice from financial professionals can help homeowners
make an informed decision based on their specific circumstances.
 Module 4
1) What is form-16? Explain its structure.
2) Explain individual status of a person.
In the context of financial planning and taxation, the individual status of a
person refers to their specific circumstances and characteristics that impact
their financial situation and tax obligations. Here are some key aspects related
to individual status in this context:
1. Filing Status: This refers to the category in which an individual is classified
for tax purposes. Common filing statuses include single, married filing jointly,
married filing separately, head of household, or qualifying widow(er). The
filing status determines the tax rates, deductions, and credits available to the
individual.
2. Income Status: This involves assessing a person's income from various
sources, such as employment, self-employment, investments, rental
properties, or other forms of income. The income status determines the tax
bracket in which the individual falls and the applicable tax rates.
3. Deduction and Credit Eligibility: Individual status affects the eligibility
for certain deductions and credits. For example, married couples filing jointly
may have different deductions and credits available compared to those filing
separately. The status of being a parent or caregiver may also provide
eligibility for specific deductions or credits.
4. Employment Status: This includes factors such as being an employee,
self-employed, or unemployed. Different employment statuses have varying
implications for tax obligations, such as the availability of certain deductions
or credits related to business expenses or unemployment benefits.
5. Retirement Status: This aspect considers whether an individual is actively
working, retired, or receiving retirement benefits. Retirement status impacts
the taxation of retirement account withdrawals, Social Security benefits, and
eligibility for certain retirement-related deductions or credits.
6. Investment Status: This involves assessing an individual's investment
activities, such as owning stocks, bonds, mutual funds, or real estate
properties. Different investment statuses have implications for capital gains
taxes, dividend income, or rental income taxation.
7. Estate Planning Status: This aspect focuses on an individual's plans for
the distribution of their assets after death. Estate planning status may involve
considerations such as wills, trusts, and the potential for estate taxes.
Understanding and considering these individual statuses is crucial for
effective financial planning and tax management. It helps individuals and their
financial advisors make informed decisions regarding income management,
tax optimization, retirement planning, investment strategies, and estate
planning.
3) Give examples of incomes which are exempted from tax.
1. Gifts and Inheritance: In many countries, gifts and inheritance are not
considered taxable income. However, there may be some exceptions, such as
when the gift or inheritance is very large or comes from a foreign source.
2. Child Support: Child support payments are not typically considered
taxable income for the recipient.
3. Life Insurance Proceeds: The proceeds from a life insurance policy are
usually not taxed as income to the beneficiary, unless the policy has
accumulated cash value.
4. Disability Benefits: In some cases, disability benefits may be exempt from
taxation, depending on the source of the benefits and the nature of the
disability.
5. Scholarships and Grants: Scholarships and grants used for educational
expenses are often not considered taxable income, as long as they are used for
qualified education expenses.
6. Certain retirement plan distributions: Distributions from qualified
retirement plans, such as 401(k)s and IRAs, may be exempt from income tax
under certain circumstances.
7. Social Security Benefits: In many cases, Social Security benefits are not
taxable, or only partially taxable, depending on the recipient's income level.
8. Gains from the Sale of a Personal Residence: In some cases, gains from
the sale of a personal residence may be exempt from taxation, up to a certain
amount, as long as the proceeds are used to purchase another residence.

It's important to note that tax laws vary by jurisdiction, so it's always a good
idea to consult with a tax professional to determine whether a particular type
of income is taxable in your specific situation.
4) Explain Deductions Under Chapter – VI (A) for
Individuals.
Chapter VI A of Income Tax Act contains various sub-sections of section 80
that allows an assesses to claim deductions from the gross total income on
account of various tax-saving investments, permitted expenditures, donations
etc. Such deductions allow an assesses to considerably reduce the tax payable.
The Chapter VI A of Income Tax Act contains the following
sections:
80C: Deduction in respect of life insurance premium, deferred annuity, contributions to
provident fund (PF), subscription to certain equity shares or debentures, etc. The
deduction limit is Rs 1.5 lakh together with section 80CCC and section 80CCD(1).

80CCC: Deduction in respect of contribution to certain pension funds. The deduction

limit is Rs 1.5 lakh together with section 80C and section 80CCD(1).

80CCD(1): Deduction in respect of contribution to pension scheme of Central

Government – in the case of an employee, 10 per cent of salary (Basic+DA) and in any
other case, 20 per cent of his/her gross total income in a FY will be tax free. Overall limit
is Rs 1.5 lakh together with 80C and 80CCC.

80CCD(1B): Deduction up to Rs 50,000 in respect of contribution to pension scheme of

Central Government (NPS).

80CCD(2): Deduction in respect of contribution to pension scheme of Central Government

by employer. Tax benefit is given on 14 per cent contribution by the employer, where such
contribution is made by the Central Government and where contribution is made by any
other employer, tax benefit is given on 10 per cent.

80D: Deduction in respect of Health Insurance premium. Premium paid up to Rs 25,000

is eligible for deduction for individuals, other than senior citizens. For senior citizens, the
limit is Rs 50,000 and overall limit u/s 80D is Rs 1 lakh.

80DD: Deduction in respect of maintenance including medical treatment of a dependent

who is a person with disability. The maximum deduction limit under this section is Rs
75,000.

80DDB: Deduction in respect of expenditure up to Rs 40,000 on medical treatment of

specified disease from a neurologist, an oncologist, a urologist, a haematologist, an
immunologist or such other specialist, as may be prescribed.

80E: Deduction in respect of interest on loan taken for higher education without any upper
limit.
 80EE: Deduction in respect of interest up to Rs 50,000 on loan taken for residential house
property.

80G: Donations to certain funds, charitable institutions, etc. Depending on the nature of
the done, the limit varies from 100 per cent of total donation, 50 per cent of total donation
or 50 per cent of donation with a cap of 10 per cent of gross income.

5) What is form - 26AS. Explain its components.

WHAT IS FORM 26AS ?
Form 26AS means a Tax Credit Statement and is an important document for
taxpayers. 26AS full form is Annual Information Statement (AIS). Form
26AS provides a detailed overview of your financial activities for a specific
year, going beyond just TDS (Tax Deducted at Source) and TCS (Tax
Collected at Source) transactions. It serves as proof of income and tax
payments, linked to your PAN number. Based on the details mentioned in
Form 26AS, the taxpayers file annual returns. When filing your tax return,
verify that the taxes you claim match the tax values stated in Form 26AS.
WHAT’S NEW IN FORM 26AS?
To make tax return filing easier and more transparent, the Central Board of
Direct Taxes (CBDT) has made changes to Form 26AS. The updates to Form
26AS include:
­ Inclusion of foreign remittances mentioned in Form 15CC
­ Quarterly information on TDS deductions from salaries
­ Details of ongoing or completed income tax proceedings
­ Information on income tax demands and refunds, if applicable
­ Details of advance tax payments made by the taxpayer

In addition to the previously required personal details such as name, address,

and PAN, the new Form 26AS includes additional information to enhance
communication options:
­ Date of birth
­ Registered email address
­ Mobile/phone number
STRUCTURE OF FORM 26AS:
The new Form 26AS is designed to make filing taxes easier and give you a
complete picture of your tax-related details. Understanding each part will help
you manage your tax-related activities more efficiently:

Part A: Details of TDS

Amount of TDS deducted from your income, such as salary, interest, pension.
It is updated quarterly and provides information about your tax deductor as
well.
• Part A1: Details of TDS for Form 15G/15H: Gives details of cases
where the taxpayer has submitted Form 15G or 15H to declare that no
TDS should be deducted from their income.
• Part A2: Details of TDS on Property: Gives details about your TDS
deducted on transactions of property sales, rent, and making payments
to resident contractors or professionals

Part B: Details of TCS

If you, as a seller, collect tax at the time of sale, this section displays
information about the tax collected from the buyer.
Part C: Details of Tax Paid (Other than TDS or TCS)
If you're involved in transactions related to selling property, receiving rent, or
making payments to contractors or professionals, this section displays the
TDS deducted on those transactions.
Part D: Details of Paid Refund
If you've received a tax refund, this section displays the details, such as the
payment method, refund amount, any interest paid, and the date of payment.
It's good to verify these details for your records.
Part E: Details of Statement of Financial Transactions (SFT)
This section provides additional information about your financial transactions,
such as cash deposits/withdrawals, property sales/purchases, credit card
payments, and more.
Part F: TDS on Property Sale, Rent, and Professional Fees (From
Buyer/Tenant Perspective)
If you're the buyer or tenant involved in property transactions or making
payments to contractors and professionals, this part shows the TDS deducted
by you.
Part G: TDS Defaults (Processing of Defaults)
This section highlights any defaults related to the processing of statements.
It's essential to review this part to address any issues or discrepancies
promptly.