PERSON AL TAX PLANNI NG We are happy t o br ing out t he revised edition of booklet on Per sonal Tax planning updat

ed wit h Finance Act 2003. Tax Planning, as you are aware, is t he process of proper usage of beneficial provisions of exem ptions, deductions, rebat es and reliefs, while fulfilling t he t ax obligations. This process var ies f rom individual t o individual and depends, am ong m any fact or s, t axable incom e, tim e schedule for investm ent s, r isk bear ing inclination, existing investm ent patt ern, expect ed ret urns et c. Over t he years, t ax planning scenar io has becom e m ore dynam ic and com plicat ed, due t o const ant changes in t he t ax laws and falling int erest rat es. Fur t her t ax planning cannot be done in isolation, it should be a par t of overall Financial Planning of an individual. This brochure will afford a birds eye view of t he var ious provisions of I ncom e Tax [ including Capit al Gains Tax] and Wealt h Tax and t axation aspect s of select ed financial investm ent s. By knowing and utilizing t hese provisions, we t rust t hat one should be able t o plan his t ax obligations bett er , wit hin the am bit of t he laws. This publication is int ended pr im ar ily for resident non- corporat e t ax payer s. Tax planning should com m ence r ight at t he beginning of t he financial year and last m inut e rush is best avoided, so st ar t your t ax planning endeavour r ight away! The brochure is organized in t he following m anner . Firstly, we have explained basic concept s of I ncom e Tax such as how I ncom e Tax is ar r ived at, Cur rent I ncom e Tax rat es et c. Then we have discussed on how incom e is ar r ived at under t he five m aj or heads of I ncom e Tax such as Salary I ncom e, I ncom e f rom House Proper t y, Profit s and gains from Business/ profession, Capit al Gains I ncom e and I ncom e f rom ot her sources. This is followed by a descr iption of m aj or Deductions under Chapt er VIA and rebat e under Section 88. Subsequently, we have elaborat ed on im por t ant I T aspect s such as Advance Tax, PAN, TDS, I T ret urns. A few useful tips on I ncom e Tax Planning are also given, followed by a br ief descr iption of Wealt h Tax and

im por t ant feat ures of popular Tax Saving I nvestm ent s. Lastly, a sm all wr it e up is given on how Canara Bank can help you in your t ax planning exercise.I N DEX Page No I ncom e Tax Basics Cur rent I ncom e Tax Rat es 1 Receipt s exem pt f rom I ncom e Tax 1 I ncom e heads as per I ncom e Tax Act 1 St eps in ar r iving at I ncom e Tax 1 Def init ion/ det ails of dif ferent incom e he ads Salary I ncom e 2 I ncom e f rom House Proper t y 3 Profit s and Gains from Business 4 Capit al Gains I ncom e 5 I ncom e f rom ot her sour ces 8 I m por t ant Pe rm issible deduct ions f rom Gross Tot a l I ncom e for all assesse s [ under Chapt er VI A] 9 Tax rebat es ava ilable under sect ion 8 8 10 Ot her I T relat ed m at t ers Paym ent of Advance Tax 12 About PAN 12 Filing I ncom e Tax Ret urn 13 What is TDS? 13 Tips on I ncom e Tax Planning 14 W ea lt h Tax - Br ief I nt roduct ion 15 Tax Saving I nvestm ent s Life I nsurance 16 Mut ual Funds 17

Public Provident Fund 19 National Saving Cer tificat e 19 Bonds 20 National Savings Schem e 21 H ow w e can help you in your t ax planning 22page 1 INDEX I N COME TAX - BASI CS Cur rent I ncom e Tax Rat e s: ( Financia l yea r 2 0 0 3 - 2 0 0 4 ) I ncom e Range Tax Rat e FI RST Rs. 50,000 / - NI L Rs. 50,001/ - TO Rs. 60,000/ 10 % of t he am ount ex ceeding Rs. 50,000/ - . Rs. 60,001/ - TO Rs. 1,50,000/ Rs.1,000/ - + 20 % of t he am ount exceeding Rs. 60,000/ Rs. 1,50,001/ - and higher Rs.19,000/ - + 30 % of t he am ount exceeding Rs. 1,50,000/ Surcharge @ 10 % has t o be added t o t he t ot al t ax if t he t ot al incom e is m ore t han Rs. 8,50,000/ - . Sur charge is Nil, if t ot al incom e does not exceed Rs. 8,50,000/ - . Receipt s Ex em pt from I ncom e Tax : Any m at ur it y proceeds/ survival and deat h benefit s [ including bonus] from Life I nsurance Policy. There are som e exceptions, such as Keym an I nsurance Policy, any sum - received u/ s 80CCC( 2) or 80DDA( 3) or 80DD( 3) . The exem ption is also not applicable where t he prem ium payable for any of t he year s dur ing t he t erm of t he policy ex ceeds 20% of t he act ual capit al sum assured.

Am ount s received f rom Provident Fund and PPF are t ot ally exem pt f rom I ncom e Tax for all assesses. I nt erest received from PPF, Co-PF, EPF, RBI Savings bonds, Dividends from Com panies, I ncom e from unit s of Mut ual Funds, Tax free bonds of Govt/ PSUs and Post Office Savings Bank (POSB) Account are exem pt from incom e t ax. I ncom e H e ads as pe r I ncom e Tax Act : According t o I ncom e Tax Act, t he t axable incom e can be cat egor ised, under t he following heads: heads: A. Salary I ncom e B. I ncom e f rom House Proper t y C. Profit s and gains from Business/ profession D. Capit al Gains I ncom e E. I ncom e f rom ot her sour ces [ i.e. any ot her incom e, which does not fall under any of t he preceding heads] . St eps in ar r iving at I ncom e Tax : St ep 1 : Under each of t he above heads of incom e, t he t axable incom e is ar r ived at aft er deducting perm issible exem ptions and deductions from incom e under t hat head ( descr ibed in pages 2 t o 8) . St ep 2 : By aggregating t he t axable incom e under t he above heads, Gross Tot al I ncom e is ar r ived at. St ep 3 : From such Gross Tot a l I ncom e, deductions under Chapt er VI A of [ I ncom e Tax Act] deductions are allowed t o ar r ive at t ot al I ncom e ( page 9) . St ep 4 : I ncom e t ax is calculat ed on t he t ot al I ncom e at applicable rat e. From t he t ot al incom e t ax so calculat ed, eligible Tax Rebat e u/ s 88, 88B and 88C is deduct ed. On t he balance of t he t ax am ount, Surcharge is applied and added t o get t ot al t ax liabilit y ( page 10) . St ep 5 : From t he t ot al t ax liabilit y so ar r ived at, relief u/ s 89 ( 1) can be claim ed,

where eligible. Then f rom t he balance t ax am ount, Tax Deduct ed atSource and advance t ax paid, if any, are deduct ed. Balance t ax am ount payable, if any, should be paid as Se lf - Assessm ent Tax before filing t he I ncom e Tax Ret urn. page 2 INDEX DEFI N I TI ON / DETAI LS OF D I FFEREN T I N COME H EADS A. SALARY I N COME Am ount received by an em ployee f rom an em ployer , due t o t heir em ploye e and em ploye r r elat ionship, is t axable as Salary . Salary includes Basic Pay, Bonus, Pension, Taxable grat uit y, Leave encashm ent,advance salary, salary ar rears, I ncentives, ex gratia, allowances such as Over tim e allowance, Dearness allowance, Taxable House Rent allowance, Cit y Com pensat ory allowance, Children's Education allowance,Perquisit es, et c. Traveling allowance, Uniform allowance, cer t ain special allowances such as Border Area Allowance, Dist urbed area allowance, Transpor t ation Allowance ( subj ect t o lim it s) et c are not t axable. From t he Gross Salar y incom e, by reducing Ex em pt ions unde r Sect ion 1 0 and deduct ions unde r Se ct ion 1 6 ,N et Salar y I ncom e [ i.e. Taxable incom e under Salary] is ar r ived at. Ex em pt ions in r espect of sa lary incom e under Sect ion 1 0 : 1. Leave Travel reim bursem ent - act ual am ount spent ( subj ect t o specified limit s) in respect of 2 j ourneys in a Block of 4 calendar years ( 2002- 2005) [ Section 10( 5) ] 2. Grat uit y received under t he Paym ent of Grat uit y Act,1972 f rom all em ployers [ Upt o Rs 3.5 lakhs] [ Section 10 ( 10) ii] 3. 33.33% of t he Com m ut ed Value of Pension where t he em ployee receives any grat uit y ot herwise 50% of t he com m ut ed value of t he pension [ Section 10( 10A) ( ii) ] 4. Volunt ary Retirem ent Benefit s Max . limit Rs.5 Lakhs, f rom all em ployer s, received/ receivable [ i.e.,even if received in inst alm ent s] [ Section 10 ( 10C) ]

Deduct ions under Sect ion 1 6 a re a llow ed f rom sala ry : a. St andard Deduction [ section 16( i) ] I ncom e f rom salar y Deduct ion Gross Salary incom e is Rs. 5 lakhs or less 40% of Gross salary or Rs 30,000/ - whichever is b. Act ual Professional Tax paid by t he em ployee is t ot ally deductible from salary [ Section 16( iii) ] . Relief is also available under Section 89( 1) read wit h Rule 21A, subj ect t o t he conditions m entioned t herein, where a per son is in receipt of a sum in t he nat ure of Salary being paid in ar rears or in advance or is in receipt of salary of m ore t han 12 m ont hsb. Act ual Professional Tax paid by t he em ployee is t ot ally deductible from salary [ Section 16( iii) ] . Relief is also available under Section 89( 1) read wit h Rule 21A, subj ect t o t he conditions m entioned t herein, where a per son is in receipt of a sum in t he nat ure of Salary being paid in ar rears or in advance or is in receipt of salary of m ore t han 12 m ont hs page 3 INDEX B. I N COME FROM HOUSE PROPERTY The Annual value of a house proper t y is t axable as incom e in t he hands of t he owner of t he proper t y. For t ax purpose, proper ties m ay be classified as Self Occupied Proper t y and Let out Proper t y . Self occupied proper t y: For one self occupied house proper t y , which has not been let out, t he Annual Value is t aken as Nil. (Where t he owner holds m ore t han one house and bot h are in t he occupation of t he owner for residential purposes, t hen only in respect of one residence at ow ner s choice , annua l va lue w ill be t ak en a s N il. For t he ot her house, t he t ax shall be com put ed by t r eat ing t he proper t y as let out ) Where t he house is self- occupied, t he int erest on capit al bor rowed aft er 01.04.1999 for acquisition/ const ruction is allowed as deduction subj ect t o a m axim um of Rs. 1.5

lakhs, provided t he const ruction/ acquisition is com plet ed wit hin 3 year s from t he end of t he financial year in which t he loan was bor rowed. On all loans t aken pr ior t o t he above dat e and also on loans t aken for repair ing, renewing or reconst ructing the proper t y , t he ceiling is Rs. 30,000. However , in t he case of self occupied proper t y, t axes levied by t he local aut hor it y ( i.e. m unicipal t ax) cannot be claim ed as deduction. Let out prope r t y: Taxable value of t he proper t y shall be t he higher of t he following: A. Am ount for which proper t y m ight reasonably expect ed t o let; or B. Act ual annual rent received / Receivable. However , where t he proper t y was let out but vacant dur ing t he whole or par t of t he year , t hen t axable value will be t he am ount act ually received. The m unicipal t axes act ually paid during t he financial year [ ir respective of t he per iod t o which it per t ains] will be deduct ed from t he t axable value t o ar r ive at t he Annual value of house proper t y . From t his, st andard deduction @30% of Annual value of t he proper t y and I nt erest on bor rowed capit al for t he purpose of acquisition, const ruction, reconst ruction, repairs, renovation et c are allowed as deductions, t o ar r ive at t he t axable incom e. Com m on t o bot h Se lf occupied and Let out : If t here is a Loss f rom House Proper t y , t he sam e can be set off against incom e from any ot her head in t he sam e assessm ent year . If t he loss cannot be set off against incom e f rom any ot her head in t he sam e assessm ent year , t he loss is allowed t o be car r ied forward and set off in 8 subsequent years against incom e from house proper t y only. Fur t her , loss under t he head house proper t y can be notionally set off against salary incom e, at t he t im e of deduct ion of t ax from sa la ry.Pre- const ruct ion int e rest [ i.e. int er est paid/ pa yable , on fund bor rowed for acquisition or const ruction,per t aining t o t he per iod, pr ior t o t he f inancia l yea r in which t he proper t y was acquired or const ruction com plet ed] can be claim ed only as

deduct ion in f ive equal inst alm ent s com m encing from t he f inancia l yea r in w hich t he house proper t y is acquired or const ruct ion com plet ed, in t he I ncom e Tax ret urn subm itt ed by t he bor rower . page 4 INDEX C. PROFI TS AN D GAI N S FROM BUSI N ESS OR PROFESSI ON Busine ss is any t rade, com m er ce or m anufact ure or any advent ure or concern in t he nat ure of t rade, com m er ce or m anufact ure. Profession is defined t o include any profession or vocation, which calls for int ellect ual or m anual skill. It cover s doct ors, lawyers, singers, m usicians et c. Profit s and Gains from Business or profession, incom e received f rom providing services et c will be t reat ed as Business or Professional incom e under t his head. The following are som e of t he im por t ant expenses, t hose can be claim ed as deduct ible expense s : 1. Rent, rat es, Taxes, Repairs and I nsurance of Prem ises/ Buildings ( Taxes only on act ual paym ent basis) 2. Repairs and I nsurance of Plant &Furnit ure, m achinery 3. Depreciation on Building, Plant &Furnit ure, m achinery 4. I nsurance prem ium paid for St ock s/ St ores/ Health I nsurance of Em ployees 5. I nt erest paid on bor rowed capit al - from Public financial instit ution on act ual paym ent 6. PF/ Grat uit y/ Superannuation Fund cont r ibution et c, on act ual paym ent 7. Bad Debt s wr itt en off 8. Salary, bonus, com m ission et c t o em ployees 9. Expendit ure incur red on Ent er t ainm ent, Traveling, Present ation ar ticles, Adver tisem ent, Maint enance of Guest House et c Ever y business has t o follow eit her cash or m ercantile syst em of accounting. Requirem ent s for m a int enance of book s by Professiona ls/ Business

A. The following PROFESSI ONALS whose Gross Receipt s from t heir profession exceeds Rs. 1,50,000/ - p.a. ( I n any of t he 3 im m ediat ely preceding previous years) have t o m aint ain Books of Account s: 1. Legal B. Ever y Busine ssm an whose incom e from business exceeds Rs.1,20,000/ p.a. Or Gross Receipt/ t urnover ex ceeds Rs.10,00,000/ - p.a. in any of t he 3 im m ediat ely preceding previous year s will have t o m aint ain Books of Account s as per t hep.a. Or Gross Receipt/ t urnover ex ceeds Rs.10,00,000/ - p.a. in any of t he 3 im m ediat ely preceding previous year s will have t o m aint ain Books of Account s as per t he Act. page 5 INDEX D. CAPI TAL GAI N S I N COME Capit a l ga ins t ax Capit al gains t ax m eans incom e t ax payable under I ncom e Tax Act, in respect of capit a l gains m ade dur ing a financial year . Capit al gains include any prof it or ga in ar ising from t he t r ansfer of a capit al a sset . Capit a l asset m eans proper t y of any kind held by a per son, whet her or not connect ed wit h his business. However , it does not include: a. St ock- in- t rade, raw m at er ials and st ores held for business purposes. b. Per sonal effect s such as clot hes, furnit ure, m ot or car , air conditioner et c but excluding j ewellery c. Rural agr icultural land d. Gold bonds/ Gold Deposit Bonds, Special Bearer Bonds et c. For t he purpose of capital gains, t ransfe r ( wit h som e ex ceptions provided in t he act ) includes; i. t he sale, ex change or relinquishm ent of t he asset; or

ii. t he extinquishm ent of any r ight s t herein; or iii. t he com pulsory acquisition t hereof under any law; or iv. Conversion or t reating an asset as st ock in t rade; et c. Shor t - and long- t e rm Capit a l asset s The nat ure of asset and t he per iod of holding of an asset det erm ine whet her an asset is a long t erm or a shor t t erm one. N at ure of a sset Long Term Capit a l Asset Shor t Term Capit a l Asset Shares of a Com pany/ Unit s of UTI/ Mut ual Fund/ any ot her secur it y list ed in a recognised st ock exchange When held for m ore t han 12 m ont hs When held for 12 m ont hs or less All asset s ot her t han above When held m ore t han 36 m ont hs When held for 36 m ont hs or less H ow t o com put e t he capit a l gains: Capit al Gains is calculated by subt racting Cost of acquisit ion, Cost of im provem ent of t he asset and Expenses incur red in connect ion w it h t he t ransfe r ( brokerage, legal expenses et c) from Transfe r / Sa le considerat ion of t he

capit al asset. The balance is t he capit al gain/ loss. Cost of acquisition and cost of im provem ent can be index ed, only in ca se of long t erm capit al a sset s. I ndex at ion is t he process of conver ting t he cost of acquisition and cost of im provem ent from hist or ical cost int o inflation adj ust ed cost, utilizing t he Cost I nflation index, being advised by Cent ral Govt. every year f rom 1981- 82. I ndexation benefit is not available t o shor t t erm capit al gains. I ndex ed cost of acquisit ion is ar r ived at f rom cost of acquisit ion as follow s: I f t he asset is acquir ed a f t er 0 1 / 0 4 / 1 9 8 1 ,Cost of acquisition _______________ Cost inflation index ( CI I ) for t he first year in which asset was first held X CI I for t he financial year in which asset is t ransfer red page 6 - Capital Gains Income (Continued) INDEX I f t he Asset is acquir ed on or before 0 1 .0 4 .1 9 8 1 , Cost of acquisition or fair m arket value as on 01.04.1981 ( if opt ed by t he assessee) ________________________________ Cost inflation index ( CI I ) for 1981- 82 X CI I for t he financial year in which asset is t ransfer red Similarly, indexed cost of im provem ent will be ar r ived at on t he basis of Cost inflation index for t he year in which im provem ent t ook place. Capit al Gains I ncom e ( Continued)

Follow ing ex am ple w ill explain t he concept of I ndex at ion. Say Mr . A purchased one acre of urban land at Rs. 1,50,000/ - dur ing August 1981 and sold t he sam e at Rs. 6,80,000/ - dur ing Decem ber 2002. I ndexed Cost of acquisition will be: 1,50,000 x 447 [ being Cost I nflation index for 2002- 03] / 100[ Cost I nflation index for 1981- 82] = Rs. 6,70,500/ Long t erm Capit al Gains = Rs. 6,80,000/ - Rs. 6,70,500/ - = Rs. 9,500/ Cost I nf lat ion index t able is given be low : Financia l Yea r Cost I nf lat ion I ndex Financia l Yea r Cost I nf lat ion I ndex Financia l Yea r Cost I nf lat ion I ndex 1981 - 82 100 1989 - 90 172 1997 - 98 331 1982 - 83 109 1990 - 91 182 1998 - 99 351 1983 - 84 116 1991 - 92 199 1999 - 00 389 1984 - 85 125 1992 - 93 223 2000 - 01 406 1985 - 86 133 1993 - 94 244 2001 - 02 426 1986 - 87 140 1994 - 95 250 2002 - 03 447 1987 - 88 150 1995 - 96 281 2003 04

463 1988 - 89 161 1996 - 97 305 H ow Capit a l Gains t a x is det erm ined: The rat e of Capit al Gains t ax t hat applies on t he sale of an asset depends on: a. The t ype of asset being sold, whet her it is long term or shor t t erm ; b. Tax bracket, you are in. Shor t - t erm gains ar ise on t he sale of a shor t - t erm asset and a re t ax ed at t he norm al I ncom e Tax r at es. A long- t erm capit al gain enj oy s lower level of t ax of 20 per cent plus surcharge. Only t hat am ount of long t erm capit al gains which is included in t he t ot al incom e would be subj ect t o t ax at t he above flat rat e. Conce ssion for secur it ies and unit s : Additional benefit is available in t he case of long- t erm capit al gains ar ising from t he t ransfer of list ed secur ities or unit s of t he Unit Trust of I ndia ( UTI ) [ ex cept t ransfer of US64 unit s aft er 01/ 04/ 2003] and ot her m ut ual funds. I f t he t ax payable at t he rat e of 20 per cent aft er claiming t he benefit s of indexation is m ore t han t he t ax payable at 10 per cent wit hout indexation, t he t ax payable is t o be r est r ict ed t o 1 0 per cent w it hout index at ion.N ew ex em pt ion of long t e rm capit al gains on t r ansfe r of list ed equit y sha re s w it h ef fect from t he a sse ssm ent ye ar 2 0 0 4 - 2 0 0 5 : Capit al gains is not chargeable t o I ncom e Tax, if t he following conditions are satisfied: 1. The asset which is t ransfer red is a long- t erm capit al asset being an eligible equit y share in a com pany. 2. Such shares are pur chased on or aft er March 1, 2003 but before Mar ch 1, 2004. 3. Such shares are held by t he t axpayer for a per iod of 12 m ont hs or m ore. 4. Eligible equit y share for t his purpose m eans, . a) Any equit y share in a com pany being a constit uent of BSE- 500 index of t he St ock Ex change, Mum bai as on 01/ 03/ 2003 and t he t ransactions of purchase and

sale of equit y share are ent ered int o on a recognized st ock ex change in I ndia; or . b) Any equit y share in a com pany allott ed t hrough a public issue on or aft er 01/ 03/ 2003 and list ed in a recognized st ock ex change in I ndia before 01/ 03/ 2004 and t he t ransaction of sale of such share is ent ered int o on a recognized st ock ex change in I ndia. Conversely , long t erm capit al loss ar ising on t ransfer cannot be adj ust ed against any incom e, if t he aforesaid conditions are satisfied. Long- t e rm capit a l ga ins ar e m ore benef icia l t hen a shor t - t e rm capit a l ga ins because 1. I ndexation benefit is available, only on long t erm capit al t ransfer . 2. Tax on long- t erm capit al gain is chargeable at t he lower rat e @10% without indexation or 20% wit h indexation, as t he case m ay be. 3. For long t erm capit al gains specific exem ptions have been provided under sections 54, 54EC, 54ED &54F. page 7- Capital Gains Income (Continued) INDEX DEDUCTI ON S AN D EXEMPTI ON S AVAI LABLE I N RESPECT OF CAPI TAL GAI N S Following are t he im por t ant deductions and exem ptions, if capit al gains/ Net consideration are inve st ed : Sect ion Type of assessee Kind of asset sold N at ure of capit a l Asset sold

N ew asset t o be acquir ed Am m ount t o be inve st ed in new a sset Tim e lim it for acquisit ion Sec. 54 I ndividual and HUF Residential house proper t y held for m ore t han 3 years Long t erm Residential house proper t y Capit al Gains 1 year before t he dat e of t ransfer or wit hin 2 year s aft er t he dat e

of t ransfer purchased t he house proper t y Sec. 54EC Any per son Any asset t ransfer red aft er 01/ 04/ 2000 Long t erm Any bond redeem able aft er 3 years issued by NABARD, NHB, SI DBI NHAI or Capit al Gains wit hin 6 m ont hs from t he dat e of t ransfer54EC per son t ransfer red aft er 01/ 04/ 2000 t erm redeem able

aft er 3 years issued by NABARD, NHB, SI DBI NHAI or REC from t he dat e of t ransfer Sec. 54ED Any per son Sale of any list ed secur it y or unit s aft er 01/ 04/ 2001 Long t erm Eligible issue of initial public offer Capit al Gains wit hin 6 m ont hs from t he dat e of t ransfer

Sec. 54F I ndividual and HUF having not m ore t han one residential house anywhere in I ndia Any asset ot her t han Residential house Long t erm Residential house proper t y Net consideration = full consideration reduced by expendit ure incur red

wholly and exclusively in connection wit h such t ransfer 1 year before t he dat e of t ransfer or wit hin 2 year s aft er t he dat e of t ransfer purchased t he house proper t y or wit hin 3 years aft er t he dat e const ruct ed a residential house page 8 - Capital Gains Income (Continued) INDEX I n case t he new asset s purchased are sold wit hin a per iod of t hree year s of purchase, ex cept in under section 54ED where t he lock in per iod is 1 year , t he exem ption will be rever t ed. I n all t he above cases, if only par t of t he am ount is invest ed, t hen t he propor tionat e am ount of capit al gains will be exem pt and balance is t axable. Deductions under Chapt er VIA [ 80D, 80CCC et c] and rebat e u/ s 88 are not available on long t erm capit al gains. But a resident senior citizen above 65 years of age can claim rebat e u/ s 88B against long- t erm capit al gains. Wom an assessee

less t han 65 year s can claim rebat e under Section 88C against long t erm capit al gains. Where t he liabilit y t o t ax ar ises in t he case of individuals or HUFs only because of t he inclusion of long- t erm capit al gains in t he t ot al incom e, t ax will be levied at t he cor responding flat rat es on t he ex cess over t he m inimum t axable limit. Provisions for set t ing of f t he Capit a l loss Where t he net result for any year in respect of any source falling under any head of incom e is a loss, t he assessee can set it off against his incom e f rom any ot her source under t he sam e head. Then, Sec. 71 allows t he balance loss t o be set off against incom e from any ot her head, subj ect t o som e exceptions. Loss under capit al gains is one such exception. Sec. 74 provides t hat a loss under t he head Capit al Gains can be car r ied forward and set off against capit al gains in t he following 8 years. A loss f rom long- t erm capit al asset can be set of f only against t he prof it fromt he long- t erm capit al asset dur ing t he sam e year or in subsequent 8 assessm ent years. Loss f rom t he long- t erm asset can not be set off against t he shor t - t erm profit s. I nve st ing in Capit a l Gains Account s Schem e 1 9 8 8 : If t he assessee is not able t o invest t he am ount of capit al gain or net consideration under Sections 54, 54B, 54D, 54F and 54G, he can deposit t he sam e in Capit al Ga ins Account s Schem e 1 9 8 8 account w it h any specif ied bank or inst it ut ion. However t his deposit has t o be m ade on or before t he due dat e for f iling I . T. ret urn or act ual dat e of filing the ret urn, whichever is ear lier , of t he previous year in which t ransfer of asset t ook place. The am ount deposit ed has t o be utilised within the tim e specified for t he acquisition of new asset under respective sections i.e. 54, 54B, 54D, 54F & 54G. If t he whole or par t of t he am ount deposit ed is not utilized for t he purpose, t he propor tional am ount of capit al gain relat ed with t he unutilized am ount deposit ed in t he account will be brought t o t ax in t he year in which t he specified per iod expires.

E. I N COME FROM OTH ER SOURCES Residuary I ncom e of ever y kind, which is not chargeable under ot her heads such as Salary, Capit al Gains et c, shall be charged under t his head. I nt erest incom e f rom secur ities, I nt erest f rom Bank Deposit s, Fam ily pension received by legal heirs et c are repor t ed under t his head. page 9 INDEX I MPORTAN T PERMI SSI BLE DED UCTI ON S FROM GROSS TOTAL I N COME [ UN DER CH APTER VI A] The following deductions are allowed on satisfaction of t he conditions stipulat ed under t he relevant sections of I ncom e Tax Act. IT Sect ion Det a ils Am ount of Ex em pt ion 80CCC Prem ium paid t o approved PENSI ON FUNDS Upt o Rs. 10,000/ 80D Paym ent of prem ium t o a MEDI CLAIM policy or HEALTH RI DERS of any LI FE POLI CY t o GI C/ ot her insurers approved by I RDA. Such prem ium can be paid for healt h insurance of spouse, dependent parent s and children. Up t o a m axim um of Rs. 10,000/ - for individuals and Rs. 15,000/ - for Senior Citizens 80DD Any expendit ure for m edical t reatm ent for HANDI CAPPED DEPENDANTS or deposit s

under LI C, UTI or I RDA approved I nsurer s Rs 50000/ - ,higher deduction of Rs. 75000/ - if dependent is80E Repaym ent of EDUCATI ONAL LOAN, including int erest t hereon, t aken from Financial/ Char it able institution for SELF FULL TI ME HI GHER EDUCATI ON for a m axim um per iod of 8 years up t o Rs. 40,000/ - for any graduat e/ PG cour se in Engineer ing/ Medicine/ Managem ent or for PG cour se in Applied or pure science 80G & 80 GGA Donation t o Specified I nstit utions subj ect t o t he limit prescr ibed, depending on t he donee institution 100% or 50% of donation, in som e cases rest r ict ed t o 10% of gross incom e 80 GG Deduction in respect of Rent paid when t here is no HRA subj ect t o prescr ibed ceiling 25% of incom e or rent

paid in excess of 10% of incom e or ceiling of Rs. 24,000/ - p.a, whichever is less 80L I nt erest on Bank deposit s, int erest accrued on NSC, NSS, int erest on deposit s wit h HFI s et c int erest on specified governm ent secur ities, et c. Rs. 12000/ - and additional limit of Rs. 3,000/ - is and available only for int erest on governm ent secur ities. 80U Deduction for handicapped t ax payer [ subj ect t o conditions] Rs 50000/ - ,higher deduction of Rs. 75000/ - if dependent is a per son wit h severe disabilit y. page 10 INDEX TAX REBATES AVAI LABLE UN DER SECTI ON 8 8 Tax Rebat e is a deduction directly from t he t ax payable. It depends on t he Gross Tot al I ncom e [ GTI] . Sl N o. Gross Tot a l I ncom e [ GTI ] Range % of am m ount inve st ed

Max im um rebat e account 1 GTI upt o Rs. 1 lakh * 30% Rs. 30,000/ 2 Rs. 1.5 lakhs and less 20% Rs. 20,000/ 3 Rs. 1,50,001/ - t o Rs. 5 lakhs 15% Rs. 15,000/ 4 More t han Rs. 5 lakhs Nil Not Applicable * and also salary incom e before st andard deduction and professional t ax should not be less t han 90% of GTI . Gross t ot al incom e refer s t o incom e ar r ived at before allowing any deductions underChapt er VI A. Senior Citizens [ resident s in I ndia] aged 65 years and above, are entitled for 100% t ax rebat e from t he t ax payable on t he t ot al incom e subj ect t o a m axim um of Rs. 20,000/ - , apar t from Section 88 benefit s.Under Section 88C, Wom en t ax payer s [ resident s in I ndia] below t he age of 65 years are eligible for a additional rebat e of Rs. 5,000/ - , apar t from Section 88 benefit s. I n t he next page, we have given t he det ails of investm ent eligible for Tax Rebat e U/ S 88.Som e of t hese investm ent s have also been discussed in det ail between pages 16 and 21. Tax rebat e allowed u/ s 88 in an assessm ent year , can be wit hdrawn in subsequent assessm ent year under t he following circum st ances: 1. If t he t axpayer fails t o pay any life I nsurance Prem ium or t erm inat es t he cont ract of insurance before prem ia been paid for 2 year s. 2. If t he t axpayer fails t o pay prem ium for ULIP before cont r ibutions have been

paid for 5 years. 3. If t he t axpayer t ransfer s his house proper t y ( in respect of which t ax rebat e has been availed) before t he expiry of 5 year s f rom t he end financial year in which possession of such proper t y was obt ained or receives back t he am ount. Assessm ent Ye ar and Previous ye ar I ncom e Tax is calculat ed on t he incom e received/ accrued dur ing a financial year .The Assessm ent Year is t he year next t o t he financial year [ which is also refer red as previous year ] in which t he incom e is charged t o t ax. For exam ple, for assessm ent year 2004- 2005, t he financial year ( previous year ) is 2003- 2004 ( i.e. from 1.4.2003 t o 31.3.2004) . page 11 INDEX I N VESTMEN TS ELI GI BLE FOR TAX- REBATE U / S. 8 8 * N am e of Schem es / Funds I nve stm ent can be in t he nam e of Feat ure s 1) Life I nsurance Prem ium Spouse, self & Children Tailor m ade schem es, Longer lock

in per iod, Tax f ree ret urn, Life Risk cover [ Paym ent of prem ium in excess of 20% of sum assured, cannot be included.] 2) St at ut ory & Recognised Provident Fund Self t ax free ret urn, - Voluntary cont r ibution also perm issible 3) Public provident Spouse, self & m inor Children t ax free ret urn of 8.0% - Term of 15 years. Loans and Par tialfund m inor Children 15 years. Loans and Par tial wit hdrawals subj ect t o conditions, Rs. 500/ - t o Rs. 70,000/ - per annum can be invest ed in lum p sum or inst alm ent s. 4) National Savings Cer tificat es [ NSC] Self 8.0% , Term of 6 years, int erest for first 5 year s is also eligible for rebat e. I nt erest is t axable and deductible under Section 80L. 5) Unit Linked I nsurance Plan [ ULI P] of Unit Trust if I ndia or

Dhanraksha Plan of LI C Spouse, self & Children Unit s wit h insurance cover ,Term of 10/ 15 years, Ret urn is t axable and deductible under Section 80L. 6) Hom e Loan Account schem e of NHB self Ret urn is fully t axable and not deductible under Section 80L. 7) Subscr iption not Exceeding Rs. 10,000/ - t o Equit y Linked Savings Schem e of any m ut ual fund Self Lock in per iod 3 years- ret urns subj ect t o capit al m arket per form ance, Ret urn is t axable and deductible under Sec 80L. 8) Housing Loan Pr incipal repaym ent Self (m axim um of Rs. 20,000/ - )

I nst alm ent or par t paym ent of Housing loan t aken for purchase or const ruction of new residential proper t y . 9) Tuition Fees paid t o a universit y, college or school or ot her educational institution sit uat ed in I ndia. Up t o two children of t he t axpayer (m axim um of Rs 12,000/ - per child) Should be paid for full tim e education. Can not be claim ed for any developm ent fees or donation or paym ent of sim ilar nat ure. 10) I nf rast ruct ure Bonds Self Lock in per iod 3 years, Ret urn is t axable and deductible under Sec 80L * You can invest a m axim um of Rs. 70,000/ - in it em s 1 t o 9, whereas m axim um of Rs. 1 lakh can be invest ed in it em s 1 t o 10 i.e. Additional Rebat e on Rs. 30,000/ - is

available for it em 10page 12 INDEX OTH ER I N COME TAX RELATED MATTERS ( i) Provisions for paym ent of Advance Tax ot her t han com panies Advance Tax is payable in the following inst alm ent s: I nst allm ent Percent age t o advance t ax Due dat e First upt o 30% 15t h Sept em ber Second upt o 60% 15t h Decem ber Final upt o 100% 15t h March No Advance Tax be paid, if t ot al t ax payable for t he previous year is less t han Rs. 5,000/ - . Non- paym ent or shor t paym ent of Advance Tax will att ract int erest @1% per m ont h or par t of a m ont h. ( ii) Perm anent Account N um be r ( PAN ) Perm anent Account Num ber ( PAN) is an alphanum er ic com bination of 10 charact er s allott ed by t he I ncom e Tax Depar tm ent and issued in t he form of a laminat ed card. It can be obt ained by m aking an application in prescr ibed Form 49A t o t he assessing officer . PAN is required for 1. Filing of I.T. Ret urns and cor respondence wit h the depar tm ent, 2. Filling of challans for paym ent of t axes, 3. Opening of a Bank Account, 4. Making a fixed Deposit of m ore t han Rs. 50,000/ - wit h any Bank. 5. Making any cash deposit for m ore t han Rs. 50,000/ - in a day with any bank, 6. Acquiring a t elephone or cell- phone connection, 7. Buying or selling a m ot or vehicle ot her t han a t wo wheeler , 8. Making a deposit of m ore t han Rs. 50,000/ - in post office account s. 9. Buying or selling shares or debent ures valued m ore t han Rs.1,00,000/ -

10. Buying or selling im m ovable proper t y valued Rs. 5,00,000/ - or m ore, 11. Making paym ent t o hot els and rest aurant s against bills exceeding Rs. 25000/ - at a tim e 12. Making cash paym ent for foreign t ravel of m ore t han Rs. 25,000/ at one tim e For t he t ransactions 3 t o 12, if any per son is not allott ed PAN/ GI R No, he can car ry out t he t ransaction by filing a sim ple declaration in Form N o 6 0 , giving par ticulars of t he t ransaction. Those who quot e wrong PAN, will have t o pay a pena lt y of Rs. 1 0 ,0 0 0 / - . I T Dept has m ade ar rangem ent with UTI I nform ation Services Lt d for quick issue of t he PAN cards.page 13 - Other Income Tax Related Matters (Continued) INDEX ( iii) Filing of I ncom e Tax Ret urn Ever y individual, whose t ot al incom e exceeds t he m axim um am ount, which is not chargeable t o t ax, is required t o file a ret urn ( i.e. where t axable incom e exceeds Rs. 50,000/ - , in case of individual or HUF) . Fur t her , if t he person fulfils any of t he conditions m entioned below, he is obligat ed t o f ile a ret urn under one by six schem e. 1. Ownership/ lease of a m ot or vehicle 2. Occupation of cer t ain specified cat egor ies of im m ovable proper ties ( ownership, t enancy or ot herwise) 3. Foreign t ravel t o a count ry ( wit h exceptions) 4. Subscr iption of a cellular t elephone not being Wireless in local loop t elephone.

5. Holder of a credit card ( not being as "add- on" card) issued by a bank or an instit ution 6. Mem ber of a club where t he ent rance fee charged is Rs. 25,000/ or m ore ( However , if an individual is 65 years old or m ore, and not engaged in any business or profession, he is not subj ect t o im m ovable proper t y and t elephone conditions. ) Salaried em ployees should file t heir ret urn before 31st July and Persons covered under one by six econom ic cr it er ia shall subm it before 31st Oct ober . Penalt y for not filing t he ret urn before t he end of relevant assessm ent year is - Rs. 5,000/ - [ sec 271F] . Rem em ber , I T ret urn is a legal docum ent, it should be filled wit h care and caution. I T depar tm ent has also m ade ar rangem ent s for filling ret urns t hrough identified int erm ediar ies. ( iv) Tax Deduct ion at Source ( TDS) Tax Deduction at source [ TDS] is a com pulsory and convenient m et hod of t ax collection, dur ing t he generation of incom e it self. All sum s of t ax deduct ed from t he incom e is t reat ed as, and added t o t he incom e of t he payee. Payee can claim t he TDS am ount against t he t ax payable, by enclosing t he or iginal TDS cer tificat e t o his I T ret urn. I f a per son is liable t o pay less t ax am ount t han t he t ax deduct ed at source, he can claim refund by filing his I T ret urns. If t he assessee has not received TDS cer tificat e, he can subm it it within two years from t he end of t he year in which such incom e was assessable. I n any case, he has t o disclose t he relat ed incom e in his ret urn for t hat year . Som e im por t ant TDS rat es in ca se of a re sident ot her t han com pany 1. I nt. on debent ures & Bonds 10% over Rs. 2,500/ -

2. I nt.on fixed deposit s in Banking/ Hsg. Finance Cos. 10% over Rs. 5,000/ 3. I nt.ot her t han int.on secur ities ( w.e.f 1.6.2000) 10% over Rs. 5,000/ N ot e :- A Sur charge of 10% shall be calculat ed on all t he above, if t heN ot e :- A Sur charge of 10% shall be calculat ed on all t he above, if t he am ount paid / payable is m ore t han Rs 8,50,000/ - in a financial year . Where eligible, you can declare in Form s 15 H or 15 G and request for nondeduction of t ax at sour ce. page 14 INDEX TI PS ON I N COME TAX PLAN N I NG 1. First t ake care of your I nsurance, bot h life and healt h. Riders, options, m ix and m at ches are quit e popular now. Term insurance has t he lowest cost wit h highest cover . Minim um of t erm insurance is required for everyone. 2. Avail fully t he provisions of 80CCC [ Pension Plan] and 80 D [ Medi- claim] , as t hey reduce your Gross Taxable incom e. 80CCC provide for retirem ent planning also. 3. Avail Housing Loan. Loss on House Proper t y m ay br ing down your gross t ot al incom e below t he cut off limit, say Rs 1.5 lakhs or 5 lakhs. Through t his, you m ay enj oy higher rebat e u/ s 88. 4. Plan your t ax planning investm ent s f rom t he beginning of t he year . By June, you should have planned your t ax planning investm ent s up t o next Mar ch. 5. Pay advance t ax in tim e and file I ncom e t ax ret urn prom ptly t o avoid paym ent of int erest. Please not e t hat int erest paid t o I ncom e Tax depar tm ent is not a deductible expendit ure. 6. Fund higher st udies for your adult children wit h educational loan, even if you

have funds t o m eet t he sam e. However , not e t hat it is t he child who has t o t ake a loan and t he deduction is available on his incom e; not yours, even if you t ake t he loan. I nvest t he m oney you have earm arked for t heir education in ot her att ractive avenues. It will also m ake your child m ore responsible, when he st ar t s earning. 7. Preserve TDS Cer tificat es in respect of I nt erest/ dividend received carefully. You have t o att ach t he or iginal TDS cer tificat es t o your I T ret urn. Keep full records for all your capit al purchases such as House, Shares et c. 8. Maint ain a separat e file for t axation and file your copies of your I T ret urns and ot her relat ed cor respondence. This will help you in answer ing t he quer ies, if any of I T dept. 9. Keep your self inform ed on Taxation m att ers. I ncom e Tax Depar tm ent has got excellent websit es. Financial Newspapers also give t ax inform ation in t heir websit es. Also, go t hrough booklet s, Tax Payers I nform ation Ser ies being brought out by Direct orat e of I ncom e Tax . 10. To enj oy peace of m ind, pay your t ax fully and prom ptly. Never evade your t ax obligation. Be a honest t ax payer and hold your head high as a honorable citizen.page 15 INDEX W EALTH TAX Wealt h t ax is an annual levy payable on t he net wealt h as on March 31 each year . Net wealt h is ar r ived at by deducting t he liabilities incur red t o acquire t he asset s from value of t he asset s [ t here are rules t o ar r ive at t he value of t he asset s] Where t he net wealt h does not ex ceed Rs. 15 lakhs, t he wealt h t ax is Nil. Where t he net wealt h exceeds Rs. 15 lakhs, Wealt h t ax is 1% of t he am ount by which t he net wealt h exceeds Rs. 15 lakhs. Asset s on w hich W ea lt h t ax is cha rge able

There are six t ypes of asset s which are t o be t aken int o account at t he tim e of com puting wealt h t ax. Wealt h t ax is chargeable only on t he following asset s: 1. Any guest house, residential houses [ one house exem pt ed] , com m er cial proper t y , urban farm house, wit h exceptions. 2. Mot or car for per sonal use. 3. Jewellery 4. Yacht s, boat s, and aircraft used for non- business purposes. 5. Urban land, subj ect t o t he conditions specified. 6. Cash in hand exceeding Rs. 50,000/ - . All ot her asset s, including shares, secur ities, loans, deposit s, Gold Deposit bonds, fixed deposit s, office prem ises and godowns are not subj ect t o wealt h t ax, ir respective of t heir value. I f you have m ore t han one residential house, t he one wit h t he higher valuation can be claim ed as exem pt, leaving t he one wit h t he lower valuation subj ect t o wealt h t ax. Cut of f dat e for det erm ining W e alt h Tax liabilit y March 31st is t he cut off dat e t o det erm ine whet her an asset is chargeable t o wealt h t ax. If an asset is pur chased on March 31st, it will be t axable. Likewise, if an asset held t hrough t he year is sold j ust before Mar ch 31st, it will not be liable t o t ax . GI FT TAX Gift Tax Act has been repealed wit h effect f rom 01/ 10/ 1998. Hence gift s received by donee aft er 01.10.1998 will not be charged t o gift t ax. These wil not be t reat ed as incom e in t he hands of t he donee.page 16 INDEX TAX SAVI N G I N VESTMEN TS Ever y t ax saving investm ent schem e has inherent advant ages and disadvant ages. Each individual has t o decide his investm ent st rat egy based on :

- Lock in per iod and Safet y of t he investm ent - Ret urn before t ax/ Ret urn aft er t ax/ Tax f ree ret urns - Whet her int erest will be t reat ed as f resh investm ent under Section 88 - 80L exem ptions - Age and r isk per ception - Liquidit y Again cer t ain aspect s such as Life I nsurance, Healt h I nsurance or a roof over our head should be im m ediat e pr ior ities for any invest or . We have given hereunder a birds eye view of t he som e im por t ant Tax saving investm ent s and t heir feat ures. LI FE I N SURAN CE Life I nsurance Product s provide s * Prot ection against r isk for t he fam ily of t he insured * Painless saving Prem ium is less, being long t erm saving * Liquidit y - generally policies accept ed as collat eral for loans f rom banks and financial instit utions, aft er stipulat ed per iod * Tax Relief - Under Section 88 - for prem ium paid under t he general cat egory up t o Rs. 70,000/ - Under Section 10( 10D) all sum s received under life insurance policy is exem pt ed from I ncom e t ax, wit h ( som e exceptions) . This benefit is not available in respect of policies issued aft er 31/ 03/ 2003, where t he prem ium paid in any of t he year s dur ing t he t erm of t he policy exceeds 20% of t he act ual capit al sum assured - U/ s 80CCC( I ) - Cont r ibution t o t he ext ent of upt o Rs. 10,000/ - is deduct ed from Gross Taxable I ncom e - All Life I nsurance Policies are exem pt f rom Wealt h Tax Va r ious t ypes of policies a re a va ilable. Com m on one s ar e

- :Term I nsur ance : Pay s deat h insurance t o t he legal heirs of t he per son insured, if he/ she dies dur ing t he t erm of t he policy. There m ay not be survival benefit s t o t he insured. I nexpensive policy. - W hole life I nsur ance : guarant ees deat h benefit t o legal heirs of t he insured, t hroughout t he course of life. Prem ium s are payable for 35 years or till the age of 80, whichever is m ore. - Endow m ent Assur ance : Pay s out eit her on t he deat h of assured, whenever it occurs or aft er a fixed num ber of years. - Annuit ie s : a form of pension, in which an I nsurance Com pany m akes a ser ies of per iodic paym ent s t o a person or his legal heirs over a num ber of years - Unit link ed policies : is a life assurance policy, in which t he benefit s depend upon t he per form ance of a por tfolio of shares/ unit s. - Money Back Policie s : provides paym ent of cer t ain percent age of sum assured on sur vival for fixed per iod, dur ing t he t enure of t he policy.assured on sur vival for fixed per iod, dur ing t he t enure of t he policy. Com bination of t he benefit s of t he above policies is possible. Riders [ Double Accident benefit, Healt h I nsurance et c] are also perm itt ed. There are also special product s for Wom en and Children. Va r isht ha Pension Bim a Yoj ana of LI C: This schem e launched on 14/ 07/ 2003, guarant ees a life long pension at 9% int erest for Senior Citizens above 55 years. This is a governm ent subsidized schem e and LI C has been given t he sole pr ivilege t o operat e t he schem e. I n t he event of unfor t unat e deat h of t he pensioner , purchase pr ice will be ret urned t o t he nom inee. Minim um Pension Rs 250/ - per m ont h [ ie Rs 750/ - per quar t er , Rs 1500/ - per half year , Rs 3000/ - per year ] , Maxim um pension Rs 2000/ - per m ont h. page 17 - Tax Saving Investments (Continued) INDEX MUTUAL FUN DS

A Mut ual Fund is a t rust t hat pools t he savings of a num ber of invest or s and invest s t he funds in secur ities in accordance wit h t he obj ectives as disclosed in t he offer docum ent. The incom e earned t hrough t hese investm ent s and t he capit al appreciation realized by t he schem e are shared by it s unit holders in propor tion t o t he num ber of unit s owned by t hem . Each Mut ual Fund schem e has a defined investm ent obj ective and st rat egy. Types of Mut ual Fund Schem es Mut ual fund schem es m ay be classified on t he basis of it s st ruct ure and it s investm ent obj ective. 1 ] By St ruct ure Open- end Funds An open- end fund is one t hat is available for subscr iption all t hrough t he year . These do not have a fixed m at ur it y. I nvest or s can conveniently buy and sell unit s at Net Asset Value ( "NAV" ) relat ed pr ices Closed- end Funds A closed- end fund has a stipulat ed m at ur it y per iod, which generally ranges from 3 t o 15 years. The fund is open for subscr iption only dur ing a specified per iod. I nt e rva l Funds I nt erval funds com bine t he feat ures of open- ended and close- ended schem es. They are open for sale or redem ption dur ing pre- det erm ined int ervals at NAV- relat ed pr ices. 2 ] By I nvestm ent Obj ect iveThe aim of incom e funds is t o provide regular and st eady incom e t o invest ors. Such schem es generally invest in fixed incom e secur ities such as bonds, corporat e debent ures and Governm ent secur ities. Ba lanced Funds The aim of balanced funds is t o provide bot h growt h and regular incom e.

Such schem es per iodically dist r ibut e a par t of t heir earning and invest bot h in equities and fixed incom e secur ities in t he propor tion indicat ed in t heir offer docum ent s. Money Ma rk et Funds The aim of m oney m arket funds is t o provide easy liquidit y, preservation of capit al and m oderat e incom e. These schem es generally invest in safer shor t - t erm inst rum ent s such as t reasur y bills, cer tificat es of deposit, com m er cial paper and int er - bank call m oney. page 18 - Tax Saving Investments, Mutual Funds (Continued) INDEX 3 ] Special Schem e s I ndust r y Specif ic Schem es I ndust r y Specific Schem es invest only in t he indust r ies specified in t he offer docum ent. The investm ent of t hese funds is limit ed t o specific indust r ies like I nfot ech, FMCG, Pharm aceuticals, et c. I ndex Schem e s I ndex Funds att em pt t o replicat e t he per form ance of a par ticular index such as t he BSE Sensex or t he NSE50 Sect or al Schem e s Sect oral Funds are t hose which invest ex clusively in a specified sect or . This could be an indust ry or a group of indust r ies or var ious segm ent s such as A Group shares or initial public offer ings. Tax Benef it s in investm ent in Mut ua l Funds:

- I ncom e received in respect of unit s of UTI/ m ut ual fund specified u/ s 10( 23D) are exem pt from I ncom e Tax. - Am ount invest ed is exem pt from Wealt h Tax wit hout limit - Long t erm capit al gains are eligible for exem ption u/ s 54F, 54EC and 54ED. - Any incom e ar ising from t ransfer of US 64 unit s will be exem pt f rom Capit al gains t ax- Consequently, loss ar ising on t ransfer of unit s of US64 cannot be set off against any incom e in t he sam e year in which it is incur red and t he sam e can not be car r ied forward. I nve stm ent in follow ing Mut ua l Fund Schem es a re ent it led t o r ebat e in t axunde r Sect ion 8 8 : 1 ] Unit Link ed I nsur ance Plan, 1 9 7 1 ( ULI P) of UTI A] Can be invest ed singly/ j ointly B] At m at ur it y, Bonus + cash equivalent of unit s will be paid. C] Duration: 10 or 15 year s A m em ber can continue beyond t he 10/ 15 year per iod, subj ect t o conditions D] ULI P can be t aken in t he nam e of Spouse, children m aj or / m inor E] Provides life insurance cover upt o t he t arget am ount and Personal Accident cover upt o Rs. 50,000/ F] Reinvestm ent of dividend in unit s G] Target am ount: Minim um Rs. 15,000/ Maxim um Rs. 2,00,000/ H] I nvestm ent upt o Rs. 70,000/ - is eligible for t ax rebat e u/ s 88. I] Prem at ure t erm ination of m em ber ship is possible J] No m edical exam ination is necessary t o j oin t he plan LI C Mut ual fund offer s schem e, similar t o ULI P called LI C- D hanr ak sha 8 9 . 2 ] Equit y Link ed Savings Schem e [ ELSS] From Decem ber 98, t he governm ent has perm itt ed MFs t o have open- ended

ELSS subj ect t o t he condition t hat an MF will have only one such schem e. I nvestm ent up t o m axim um of Rs. 10000/ - eligible for rebat e u/ s Section 88 3 ] Ret ir em ent Funds: UTI s retirem ent benefit plan ( RBP) and Franklin Tem plet ons Pension plans ( FTPP) are st ruct ured as retirem ent plans. I nvest or can choose between life long pension or lum p sum paym ent, m inim um investm ent is Rs. 10,000/ - . Entire Rs. 70,000/ - limit under Section 88 can be invest ed in t hese funds page 19 - Tax Saving Investments (Continued) INDEX PUBLI C PROVI DEN T FUN D ( PPF) A] Any individual can open only one Account besides his GPF Account B] Option t o pay each cont r ibution in one lum p sum p.a., or in 12 inst alment s, not necessar ily m ont hly. C] Per iod: 15 years (Minimum 16 Annual cont r ibutions) - Option t o continue aft er m at ur it y in blocks of 5 year s for any num ber of blocks. D] No wit hdrawal can be m ade till end of 6t h financial year . Only one wit hdrawal per year is perm issible t hereaft er . E] I nvestm ent: m in. 500, Max. 70,000 p.a. F] Aft er 15 year s, entire balance can be wit hdrawn. G] I nt. 8% com pounded annually. H] Limit ed loan facilit y available up t o 6 year s I] Account can be opened in Post Office, any branch of SBI or its subsidiar ies or in specified Nationalised Banks J] Tax rebat e: I nt erest earned is t ot ally exem pt u/ s 10 ( 11) I nvestm ent up t o Rs. 70,000/ - is eligible for rebat e u/ s 88 No t ax liabilit y at t he tim e of wit hdrawal Any change in int erest rat es im pact s t he entire out st anding balanceN ATI ON AL SAVI NGS CERTI FI CATES ( N SC VI I I I SSUE)

1. Can be bought Singly/ Jointly/ HUF 2. Minim um Rs. 100/ - No m axim um limit 3. Duration 6 years 4. I nt erest rat e from 1.3.2003 is 8% p.a. ( com pounded half year ly) . 5. I nt erest accrued between 1st and 5t h year is deem ed t o have been reinvest ed and t herefore, is available for rebat e. 6. Can be offered as secur it y t o loans. 7. Tax Benefit s: I nt erest accrued eligible for deduction u/ s 80L (m ax. Rs. 12,000/ - ) . I nvestm ent & deem ed reinvestm ent upt o Rs. 70,000/ - is eligible for rebat e u/ s 88, I nvestm ent exem pt ed f rom Wealt h Tax, No TDS at t he tim e of encashm ent. I nt e rest on N SC of Rs.1 0 0 0 / - N SC accrue s int e rest a s show n below : Yea r I I I I I I I V V VI Tot al I nt e rest I NT.@12% ( Upt o 31.12.98) 124.0 139.0 156.0 175.0 197.0 224.0 1015.0 I nt.@11.5% ( from 1.1.99 t o 14.1.2000) 118.3 132.3 148.0 165.4 185.1 206.9 956 I nt. @ 11% ( from 15.1.2000 t o 28.2.2001)

113.0 125.8 140.0 155.8 173.5 193.1 901.2 I nt. @ 9.5% ( from 1.3.2001 t o 28.2.2002) 97.2 106.7 117.1 128.5 141.0 154.7 745.2 I nt. @ 9% ( 1.3.2002 t o 28.2.2002) 92.0 100.5 109.7 119.8 130.9 142.9 695.9 I nt. @ 8% ( on or aft er 1.3.2003 ) 81.6 88.3 95.5 103.2 111.6 120.8 601.0 page 20 - Tax Saving Investments (Continued) INDEX BON DS Bonds are secur ities issued by a com pany, financial instit ution or governm ent. They offer regular paym ent of int erest in ret urn for bor rowed m oney for a cer t ain per iod. There are var ious t ypes of Bonds. Fixed rat e Bonds car ry fixed rat e of int erest t hroughout t he t enure of t he bond. Floating rat e Bonds car ry int erest rat e which is linked t o independent reference rat es and m ay vary wit h of m ovem ent of such independent rat es. Deep Discount Bonds are issued at a discount t o t he face value.The face value is paid at t he m at ur it y. These bonds are also known as Zero coupon bonds. Coupon Rat e is t he rat e of int erest which t he issuer pays on t he pr incipal/ paid up value of t he Bond. Mat ur it y Dat e is t he dat e on which t he Bond m at ures. Generally Bonds m at ure in a bullet form wit h a single repaym ent of pr incipal am ount on m at ur it y dat e. But som e bonds have split or par t redem ptions wit h varying repaym ent dat es. I nt erest paym ent dat es are t he dat es on which t he issuer pays out

int erest on t he paid up value of t he Bonds. I nt erest paym ent f requency is t he frequency of paym ent of int erest on t he bonds, which could be m ont hly, quar t er ly, sem i annually, annual or cum ulative at redem ption. Yield t o m at ur it y is average rat e of ret urn on bond if it is held t o it s m at ur it y dat e and if all cash flows are reinvest ed at t he sam e rat e of int erest. Gilt s are fixed int erest secur ities issued by t he Governm ent t o raise m oney. Corporat e debent ures are issued by I ndian com panies, secured or unsecured, having m at ur it y of 18 m ont hs and above. These are issued in cer tificat e form and are t ransferable inst rum ent s. Public Sect or Bonds are m edium and long- t erm obligations issued by public sect or com panies where t he Governm ent shareholding is 51% and m ore. Tax saving bonds offer t ax incentive eit her under section 88 or against Capit al Gains Tax. I nve st ing in Bonds for saving Tax : I nfr a st ruct ur e Bond I nf rast ruct ure bonds are float ed t ypically by financial I nstit utions like I CI CI , I DBI. They offer a 15% t o 20% t ax rebat e on investm ent s up t o Rs 1,00,000/ - as per provisions of section 88 in a given financial year . These bonds are norm ally fixed rat e bonds and t here is no int erest rat e r isk dur ing bond t enure. Capit a l Gains Bonds I n any par ticular year , capit al gains ar ising out of t he t ransfer of a long- t erm capit al asset, if invest ed in Capit al Gains bonds issued under Section 54EC by REC, SI DBI, NABARD, NHAI and NHB will not be subj ect t o t ax t o t he ext ent of capit al gains invest ed in t hese bonds. These bonds norm ally have a m inim um lock in per iod of t hree year s. Tax Fr ee Bonds : These bonds, w here int ere st e arned on t he bonds is t ax fre e, ar e bene f icia l

for invest ors in high t ax brack et . Few of such bonds ava ilable a r e 1] RBI 6 .5 % Tax Free Bonds: Beneficial for invest ors in high t ax bracket page 21 - Tax Saving Investments - Tax Free Bonds (Continued) INDEX 1 ] RBI 6 .5 % Tax Free Bonds ( cont inued ) :- The m inimum investm ent am ount is Rs. 1,000 and t hereaft er in m ultiples of Rs 1,000/ - No m axim um limit for investm ent s - The dat e of realization of cheque is dat e of issue of bond - I nt erest is payable eit her half- year ly or cum ulatively at m at ur it y. - Bonds are not t radable in secondar y m arket - cannot be given as collat eral for loans - I nvestm ent in Relief Bonds is exem pt f rom Wealt h t ax also - Prem at ure Encashm ent available aft er 3 years lock in per iod, subj ect t o conditions - The bonds shall be repayable on t he expiry of 5 years from t he dat e of issue. 2 ] 8 % Savings [ Tax able ] Bonds - Only resident individuals, HUFs, char it able instit utions and universities are eligible. - The int erest earned will be t axable under t he I ncom e Tax Act 1961. - The bonds will be exem pt from Wealt h- t ax under t he Wealt h Tax Act 1957. - The Bonds shall not be t radable in t he secondar y m ar ket - The Bonds shall not be eligible as collat eral for loans. - The Bonds shall be repayable on t he expiration of 6 ( six years) from

t he dat e of issue. - The bonds will be issued at par and t here is no m axim um limit. - The bonds will be issued for a m inim um am ount of Rs.1,000/ - ( face value) and in m ultiples t hereof. W hat is Se lf Assessm ent Tax If t here is incom e- t ax payable ( aft er adj usting TDS and advance t ax) on t he basis of I ncom e Tax Ret urn, t he sam e should be paid as Self Assessm ent Tax, before filing I T ret urn. Any penal int erest payable eit her for shor t paym ent of Advance Tax or lat e filing of I T ret urn, m ust also be paid as par t of Self Assessm ent Tax. page 22 INDEX SCH EMES AN D SERVI CES AVAI LABLE AT CAN ARA BAN K AN D I TS SUBSI DI ARI ES FOR YOUR I N COME TAX PLAN N I N G You can - Avail Housing Loan f rom branches of t he Bank and CanFin Hom es. - Enj oy 80L benefit s in respect of int erest on deposit wit h Bank and CanFin Hom es. - Avail Educational Loan f rom any branch of t he bank. - Buy Govt of I ndia secur ities from select ed branches and enj oy additional exclusive Rs. 3000/ - benefit under Section 80L.- Buy Govt of I ndia secur ities from select ed branches and enj oy additional exclusive Rs. 3000/ - benefit under Section 80L. - I nvest in GOI - Tax f ree Relief bonds, available at designat ed branches. - I nvest in PPF account at designat ed branches. - Buy insurance product s from identified branches - I nvest in Capit al Gains account wit h our branches. - I nvest in Equit y Linked Savings Schem e of CanBank Mut ual Fund. - I ncom e Tax rem itt ance can be m ade at designat ed branches

*********************** This brochure is not for sa le. The provisions given above are as on 29/ 02/ 2004,for t he financial year 2003- 04 and t hey are only indicative and not exhaustive. For bett er underst anding, var ious provisions have been sim plified in t his brochure and t he brochure does not claim t o be t he exact act. For full det ails, we advise t he cust om er s t o refer t he relevant por tions as cont ained in t he act s, rules, notifications or regulations issued by I ncom e Tax Depar tm ent or consult t heir Tax advisors/ consult ant s W hile ever y e f for t has been m ade t o ensur e t he accuracy of t he inform at ion, Canar a Bank assum es no liabilit y for any e r rors or om ission of inform at ion in t his brochure . *********************** For fur t her suggestions / clar ifications, please cont act us at Canara Bank , Execut or , Taxation Section, HO, Bangalore.