JAIIB RBWM Paper-4 Module-D Unit 3: Tax Planning

JAIIB Paper 4 (RBWM) Module D Unit 3: Tax Planning (New Syllabus) 

The Institute of Indian Banking and Finance (IIBF) has recently revealed the revised syllabus and examination pattern for the JAIIB Exam 2023. The JAIIB 2023 will consist of four papers, with Paper 4 (Retail Banking and Wealth Management) covering the crucial topic of “Unit 3: Tax Planning.” It is essential for candidates to thoroughly understand this unit to perform well in the examination.

To assist candidates in comprehending the topic, we will provide all the necessary details related to Unit 3: Tax Planning of JAIIB Paper 4 (RBWM) Module D Wealth Management. We highly recommend that candidates refer to this article and make use of our Online Mock Test Series to enhance their knowledge of  Tax Planning.

Understanding each unit in the syllabus, especially the Marketing unit, is essential for JAIIB Certification Examination 2023 candidates. This unit plays a vital role in the banking industry, and thus, candidates must prepare well to excel in the exam and establish a successful career in the banking sector.


Taxation is the means by which a government or the taxing authority imposes or levies a tax on  its citizens and business entities. From income tax to goods and services tax (GST), taxation applies to all levels.

Classification Of Tax Structure In India 

The tax structure in India can be classified into two main categories: 

  • Direct Tax
  • Indirect Tax

  • Direct Tax: It is defined as the tax imposed directly on a taxpayer and is required to be paid to the government. Also, an individual cannot pass or assign another person to pay the taxes on his behalf.
  • Indirect Tax: It is defined as the tax levied not on the income, profit or revenue but the goods and services rendered by the taxpayer. Unlike direct taxes, indirect taxes can be shifted from one individual to another. Earlier, the list of indirect taxes imposed on taxpayers included service tax, sales tax, value added tax (VAT), central excise duty and customs duty. However, with the implementation of goods and services tax (GST) regime from 01 July 2017, it has replaced all forms of indirect tax imposed on goods and services by the state and central


Direct Taxes Indirect Taxes Other Taxes
Income Tax Sales Tax Property Tax
Wealth Tax Goods & Services Tax (GST) Professional Tax
Gift Tax Value Added Tax (VAT) Entertainment Tax
Capital Gains Tax Custom Duty Education Cess
Securities Transaction Tax Coctroi Duty Toll Tax
Corporate Tax Service Tax Registration Fees


Financial Year and Assessment Year

What is Financial Year?

  • A Financial Year (FY) is the period between 1 April and 31 March – the accounting year in which you earn an income.

What is Assessment Year?

  • The assessment year (AY) is the year that comes after the FY. This is the time in which the income earned during FY is assessed and taxed. Both FY and AY start on 1 April and end on 31 March. For instance, for FY 2020-21, the assessment year is AY 2021-22.

The difference between Financial year and Assessment year

Previous Year 

In simple language, for the purpose of income tax or income tax return, terms financial year and previous year are used interchangeably. So, the financial year (FY) 2020-21 can also be termed as the preceding (previous) year (PY) 2020-21 & the income of such year will become taxable  in assessment year (AY) 2021-22.  As per Sec.2(34) of Income Tax Act, 1961, unless the context otherwise requires, the term ‘previous year’ means the previous year as defined in section 3. In view of above, we need to visit Section 3 of Income Tax Act, 1961, which defines the term previous year as under:

“For the purposes of this Act, “previous year” means the financial year immediately preceding the assessment year:

Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year.”

In such cases income of the previous year is subject to charge of tax in the same previous year, wherein previous year and assessment year are considered as the same in the case of certain assessee to avoid situations of income escaping assessment: 

  • Income from Shipping business in India in the case of non-residents (Section 172)
  • Assessment of persons leaving India permanently or for longer duration (Section 174)
  • Assessment of association of persons (AOP) or body of individuals (BOI) or artificial juridical person (AJP), which are formed for a particular short period of time/ event/  purpose, i.e. which are dissolved within the same previous year (Section 174A) 
  • Assessment of persons suspected to transfer their property to avoid tax liability (Section 175) and
  • Assessment of income from a business which has been discontinued during the previous year (Section 176).
  • Finance Bill (Finance Budget) is presented, discussed in Parliament, passed and executed as per Financial Year. Financial year can be classified into two categories ( 3): 

i)Year in which Income is earned;

ii)Year of paying taxes on income earned or deemed to be earned on advance basis.

Residential Status For Income Tax

The individual taxability of a person depends upon the residency status as per Income Tax Act and it is not to be confused with an individual’s citizenship in India. An individual may be citizen of the country but will be considered at non-resident as per tax guidelines and vice versa.

How to determine residential status?

For the purpose of income tax in India, the income tax laws in India classifies taxable persons as:

  • A resident
  • A resident not ordinarily resident (RNOR)
  • A non-resident (NR)

The taxability differs for each of the above categories of taxpayers. Before we get into taxability, let us first understand how a taxpayer becomes a resident, an RNOR or an NR.


A taxpayer would qualify as a resident of India if he satisfies one of the following 2 conditions:

  • Stay in India for a year is 182 days or more or
  • Stay in India for the immediately 4 preceding years is 365 days or more and 60 days or more in the relevant financial year

In the event an individual who is a citizen of India or person of Indian origin leaves India for employment during an FY, he will qualify as a resident of India only if he stays in India for 182 days or more. Such individuals are allowed a longer time greater than 60 days and less than 182 days to stay in India. However, from the financial year 2020-21, the period is reduced to 120 days or more for such an individual whose total income (other than foreign sources) exceeds Rs 15 lakh.

In another significant amendment from FY 2020-21, an individual who is a citizen of India who is not liable to tax in any other country will be deemed to be a resident in India. The condition for deemed residential status applies only if the total income (other than foreign sources) exceeds Rs 15 lakh and nil tax liability in other countries or territories by reason of his domicile or residence or any other criteria of similar nature.


  • An individual satisfying neither of the conditions stated in (a) or (b) above would be an NR for the year.


  • Resident: A resident will be charged to tax in India on his global income i.e. income earned in India as well as income earned outside India.
  • NR and RNOR: Their tax liability in India is restricted to the income they earn in India. They need not pay any tax in India on their foreign income. Also note that in a case of double taxation of income where the same income is getting taxed in India as well as abroad, one may resort to the Double Taxation Avoidance Agreement (DTAA) that India would have entered into with the other country in order to eliminate the possibility of paying taxes twice.

A Few Important Terms In Income Tax

Assessee: As per Income Tax Act 1961 section 2(7), an assessee is a person who is liable to pay the taxes under any provision of the Income Tax Act 1961. Assessee can also be a person with respect to whom any proceedings have been initiated or whose income has been assessed under the Income Tax Act 1961.Assessee is any person who is deemed assessee under any of the provisions of this act or an assessee in default under any provisions of this Act.

Person: As per Sec 2(31) of the Income Tax Act, 1961, a person would be anyone who is

  • An Individual
  • A HUF (Hindu Undivided Family)
  • A Company
  • A Firm
  • An association of person or body of individuals
  • A local authority
  • Every artificial or juridical person who is not included in any of the above-mentioned categories

PAN Number: PAN stands for Permanent Account Number which is a ten-digit unique alphanumeric number issued by the Income Tax Department as a unique identification ID.  The PAN is applicable whether an Individual, HUF, Company, Firm, or any other assessee. The PAN number is a prerequisite for filing ITR and also, the tax department can trace all communications, returns, refunds, and other activities relating to Income Tax through it.

TAN Number: TAN refers to Tax Deduction Number which is a 10-digit alphanumeric number allotted to those who are liable to deduct TDS by the Income Tax Department.

Tax Deducted at Source (TDS): The option of Tax Deducted at Source (TDS) was introduced in order to collect tax from the very source of income. As per the guideline, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government.  The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by  the deductor.

Covered Under TDS Under The Income Tax Act, 1961

  • Salaries- Section 192
  • Interest in securities- Section 193
  • Payment of interest, other than interest of securities- Section 194A
  • Payment to contractors or sub- contractors- 194C
  • Payment of brokerage and commission- Section 194H
  • Payment by way of rent- Section 1941
  • Payment of professional and technical fees- Section 194J
  • Payment to non-resident- Section 195

Taxpayers and Income Tax Slabs
Taxpayers in India, for the purpose of income tax includes:

  • Individuals, Hindu Undivided Family (HUF), Association of Persons (AOP) and Body of Individuals (BOI)
  • Firms
  • Companies

New tax slabs

Income of Rs 0-3 lakh is nil.

  • Income above Rs 3 lakh and up to Rs 6 lakh to be taxed at 5% under new regime.
  • Income of above Rs 6 lakh and up to Rs 9 lakh to be taxed at 10% under new regime.
  • Income of above Rs 9 lakh and up to Rs 12 lakh to be taxed at 15% under new regime
  • Income above Rs 12 lakh and up to Rs 15 lakh to be taxed at 20% under new regime.
  • Income above Rs 15 lakh to be taxed at Rs 30%.


  • Pay 5% tax between 3-6=15k tax
  • pay 10% tax between 6-7 lacs= 10k

total Tax paid=25k
Govt will refund 25k

Old tax slabs

  • Income up to ₹2.5 is exempt from taxation under both regimes
  • Income between ₹2.5 to ₹5 lakh is taxed at the rate of 5 per cent under the old as well as the new tax regime.
  • Personal income from ₹5 lakh to ₹7.5 lakh is taxed at a rate of 15 per cent under the old regime
  • Income between ₹7.5 lakh to ₹10 lakh is taxed at a rate of 20 per cent in the old regime
  • Under the old regime personal income above ₹10 lakh is taxed at a rate of 30 per cent.


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