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Preface

The last two months was a wonderful experience. Firstly, because I got an opportunity which provided me a pathway to be familiar with industrial interface and thereby relate the conceptsstudied in the classroom with the real business environment. Secondly, to work for SAIL,an indias

largest steel producing company and with people of such high designation was indeed a pleasure.

What is the Tax Planning ?

Systematic analysis of differing tax options aimed at the minimization of tax liability in current andfuture tax periods. Whether to file jointly or separately, the timing of a sale of an asset, ascertainingover how many years to withdraw retirement funds, when to receive income, when to payexpenditures, the timing and amounts of gifts to be made, and Estate Planning are examples of taxplanning. Tax Software can be used for tax planning purposes.

The project is an outcome of immense hard work done by full determination, dedication anddevotion. I rationally hope that this work of mine will help the organization to understand pointsconcerning there distribution channel & perception about LOTTE & its sub-brands in mind of retailers ,its awareness in the market vis-a- vis its competitors in the retail industry.

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Tax evasion is where you deliberately try to hide income from the Tax Office, byvarious methods including secret bank accounts, not recording cash transactions,cooking the books etc.

GENERAL AREAS OF TAX PLANNING

There are several general areas of tax planning that apply to all sorts of small businesses. These areas include the choice of accounting and inventory-valuation methods, the timing of equipment

purchases, the spreading of business income among family members, and the selection of tax-favored benefit plans and investments. There are also some areas of tax planning that are specific to certain business forms i.e., sole proprietorships, partnerships, C corporations, and Scorporations. Some of the general tax planning strategies are described below:

ACCOUNTING METHODS. Accounting methods refer to the basic rules andguidelines under which businesses keep their financial records and prepare their financial reports. There are two main accounting methods used for record-keeping: the cash basis

and the accrual basis. Small business owners must decide which method to use dependingon the legal form of the business, its sales volume, whether it extends credit to customers,and the tax requirements set forth by the Internal Revenue Service (IRS). The choice ofaccounting method is an issue in tax planning, as it can affect the amount of taxes owed

by a small business in a given year. Accounting records prepared using the cash basis recognize income and expenses

according to real-time cash flow. Income is recorded upon receipt of funds, rather than based upon when it is actually earned, and expenses are recorded as they are paid, ratherthan as they are actually incurred. Under this accounting method, therefore, it is possible to defer taxable income by delaying billing so that payment is not received in the current year. Likewise, it is possible to accelerate expenses by paying them as soon as the bills

are received, in advance of the due date. The cash method is simpler than the accrual method, it provides a more accurate picture of cash flow, and income is not subject totaxation until the money is actually received.

In contrast, the accrual basis makes a greater effort to recognize income and expenses inthe period to which they apply, regardless of whether or not money has changed hands.Under this system, revenue is recorded when it is earned, rather than when payment isreceived, and expenses recorded when they are incurred, rather than when payment ismade. The main advantage of the accrual method is that it provides a more accurate

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picture of how a business is performing over the long-term than the cash method. The main disadvantages are that it is more complex than the cash basis, and that income taxesmay be owed on revenue before payment is actually received. However, the accrual basismay yield favorable tax results for companies that have few receivables and large current liabilities.

Under generally accepted accounting principles (GAAP), the accrual basis of accountingis required for all businesses that handle inventory, from small retailers to large manufacturers. It is also required for corporations and partnerships that have gross salesover $5 million per year, though there are exceptions for farming businesses and qualified

personal service corporations such as doctors, lawyers, accountants, and consultants.Other businesses generally can decide which accounting method to use based on the relative tax savings it provides.

INVENTORY VALUATION METHODS. The method a small business chooses forinventory valuation can also lead to substantial tax savings. Inventory valuation isimportant because businesses are required to reduce the amount they deduct for inventory

purchases over the course of a year by the amount remaining in inventory at the end ofthe year. For example, a business that purchased $10,000 in inventory during the year but had $6,000 remaining in inventory at the end of the year could only count $4,000 as anexpense for inventory purchases, even though the actual cash outlay was much larger.Valuing the remaining inventory differently could increase the amount deducted from income and thus reduce the amount of tax owed by the business.\

The tax law provides two possible methods for inventory valuation: the first-in, first-out method (FIFO); and the last-in, first-out method (LIFO). As the names suggest, these inventory methods differ in the assumption they make about the way items are sold from inventory. FIFO assumes that the items purchased the earliest are the first to be removedfrom inventory, while LIFO assumes that the items purchased most recently are the first to be removed from inventory. In this way, FIFO values the remaining inventory at the ost current cost, while LIFO values the remaining inventory at the earliest cost paid that year.

LIFO is generally the preferred inventory valuation method during times of rising costs.It places a lower value on the remaining inventory and a higher value on the cost ofgoods sold, thus reducing income and taxes. On the other hand, FIFO is generally

preferred during periods of deflation or in industries where inventory can tend to lose itsvalue rapidly, such as high technology. Companies are allowed to file Form 970 andswitch from FIFO to LIFO at any time to take advantage of tax savings. However, theymust then either wait ten years or get permission from the IRS to switch back to FIFO.

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EXECUTIVE SUMMARY

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OBJECTIVE OF THE STUDY:

The basic idea behind undertaking the Project on Tax planning of SAIL was to:

To analyze the effectiveness of the tax planning of SAIL To compare the Tax Planning of SAIL with other PSU. To study the Concept of Tax Planning and their route.

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CHAPTER 1

INTRODUCTION

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An overview o f C OR PORA TE TA X PL A NNING

Corporate tax planning provides strategies that are significant in minimizingtaxes. Some valuable ways to save include sponsoring a retirement plan,writing off company assets, claiming depreciation expense, taking deductions

on business automobiles, office expenses, self employment health insurance,employer sponsored child care resources, and using a home office for the company. Business tax planning involves understanding what it means to be self -employed. A company owner needs to be aware of anything that might impact taxes paid. Self-employment tax, company expenses and deductions,

business assets, charitable contributions, shifting income, and retirement planning are important considerations.

Self-employment tax is due from those who are receiving income as anindependent contractor, sole proprietor, or anyone who is conducting businessthrough selling services or products. Corporate tax planning provides some

ways that a business owner can save on income taxes both short-term andlong-term. Income received must be reported but deductions can reduce the amount that is actually owed. The deductions can vary depending upon the type of industry and what are considered legitimate deductions.

Some company owners shift income to a family member as a tax advantage.In order to do this a family member must be providing some benefit to the

business and the amount should be in line with the type of compensation.Shifting income legitimately can lower a company into a lower tax bracket.Of course the shifting of income to a family member could raise their income

bracket and this should be considered. This is a business tax planning venture

that should benefit both parties and should be done ethically and reasonably.To shift a large amount of income to a family member just to avoid payingtaxes would be unethical unless there were a legitimate reason such as

payment for services.

A retirement plan is a tax advantage to a person who is self-employed. Thiscan be done with or without employees. However, it would affect the type of

plan that is embraced. A self-employed person can place pre-tax dollars into a retirement account. Having employees mean providing for them the capability of doing the same. A company owner can also choose otheremployee benefit plans to attract employees. Corporate tax planning involves

looking out for employees by offering retirement, cafeteria and medical benefit plans. Cafeteria plans allow employees to use a portion of pre-taxincome for medical or child care expenses. Corporations do not have to pay

payroll taxes or workers comp premiums on the dollars that are paid into a cafeteria plan or medical benefits plan.

There are many deductions that a company can take advantage of includingstartup costs, business trip expenses, home office use, the use of automobiles,

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and other assets. The costs of health care expenses are often deductible especially for the owner and dependents. In addition, any contributions made to a health savings account are also deductible expenses. Business tax

planning includes knowing what plans provide the greatest benefits andimplementing those plans to not only provide benefits to the company but

benefits to employees as well.When starting up a company many of the initial expenses can be written offup to a certain dollar amount. Some of these may include personal propertylike furniture or office equipment. Other things that can be written off the first year of purchase include machinery, fixtures, storage facilities, and other

personal property. Other considerations when starting up a business include travel, vehicle usage, home office, and uniforms. Corporate tax planningsources suggests making sure that write-offs are legitimate business expenses.When using a home office for company use only a percentage of expensescan be written off. Travel expense can only apply when the travel is for the company. Combining company business with personal business must be taken into consideration for any type of write-off to be legitimate.

There is a degree of burden that is felt from tax legislation by any and everyowner. However, there are positive ways that a corporation can comply withobligations and find ways to develop a strong company otherwise. Businesstax planning includes taking advantage of opportunities to provide reliefwhen possible. A corporate planning attorney can provide some good advice on how to structure a company to be optimally successful while remainingcompliant with considerations such as paying taxes. Information can be foundon the Internet that can help prepare a new business owner with how to be compliant in every area when it comes to reporting income and deductingexpenses.

Charitable contributions are a great way for a company to save on taxes andhelp those in the community. Many non profit organizations are set up to helpthose who are less fortunate within the community that they reside and some offer services to anyone who they can help no matter where they are located.There are limits on how much of a contribution that can be counted and the organization has to fit the guidelines used by the IRS to be considered a legitimate charitable organization. Some of the ones who usually do qualifyare churches, educational companies, scientific or medical researchinstitutions, those that provide true charitable services and organizations whohelp animals. There is more information on the Internet about organizationsthat truly qualify as charitable.

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CHAPTER

C OMPANY PROFILE

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(RDCIS) at Ranchi which helps to produce quality steel and develop new technologiesfor the steel industry. Besides, SAIL has its own in-house Centre for Engineering andTechnology (CET), Management Training Institute (MTI) and Safety Organisation at Ranchi. Our captive mines are under the control of the Raw Materials Division inKolkata. The Environment Management Division and Growth Division of SAIL operate

from their headquarters in Kolkata. Almost all our plants and major units are ISO Certified.

Majo r Unit s

Integrated Steel Plants Bhilai Steel Plant (BSP) in Chhattisgarh Durgapur Steel Plant (DSP) in West Bengal Rourkela Steel Plant (RSP) in Orissa Bokaro Steel Plant (BSL) in Jharkhand IISCO Steel Plant (ISP) in West Bengal

Special Steel Plants Alloy Steels Plants (ASP) in West Bengal Salem Steel Plant (SSP) in Tamil Nadu Visvesvaraya Iron and Steel Plant (VISL) in Karnataka

S ub sid iary Maharashtra

Elektrosmelt Limited (MEL)in Maharashtra

J oi nt Vent ures

N TPC SAIL Power Company Pvt. Ltd (NSPCL) A 50:50 joint venture between Steel Authority of India Ltd. (SAIL) and NationalThermal Power Corporation Ltd. (NTPC Ltd.); manages the captive powerplants at Rourkela, Durgapur and Bhilai with a combined capacity of 314megawatts (MW). It has installed additional capacity by implementation of 500MW (2 x 250 MW Units) power plant at Bhilai. The commercial generation of 1st Unit has commenced in April2009 and the 2nd Unit in October 2009

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Towards achieving the target of making steel PSUs self reliant in the area of coking coal, a joint venture company has been incorporated comprising of fivecentral PSU companies i.e. SAIL, Rashtriya Ispat Nigam Limited (RINL), CoalIndia Limited (CIL), NTPC Limited and National Mineral Development Corporation (NMDC). The company is scouting for coal properties in Australia,

Mozambique and other target countries.

Ownership and Management

The Government of India owns about 86% of SAIL's equity and retains voting control of the Company. However, SAIL, by virtue of its Maharatna status, enjoys significant operational andfinancial autonomy

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Back Ground And History

A Rich Heritage

The Precursor

SAIL traces its origin to the formative years of an emerging nation - India. Afterindependence the builders of modern India worked with a vision - to lay theinfrastructure for rapid industrialisaton of the country. The steel sector was to propelthe economic growth. Hindustan Steel Private Limited was set up on January 19, 1954.

Expanding Horizon (1959-1973)

Hindustan Steel (HSL) was initially designed to manage only one plant that wascoming up at Rourkela. For Bhilai and Durgapur Steel Plants, the preliminary workwas done by the Iron and Steel Ministry. From April 1957, the supervision and controlof these two steel plants were also transferred to Hindustan Steel. The registeredoffice was originally in New Delhi. It moved to Calcutta in July 1956, and ultimately toRanchi in December 1959.

The 1 MT phases of Bhilai and Rourkela Steel Plants were completed by the end of December 1961. The 1 MT phase of Durgapur Steel Plant was completed in January1962 after commissioning of the Wheel and Axle plant. The crude steel production of HSL went up from .158 MT (1959-60) to 1.6 MT. A new steel company, Bokaro SteelLimited, was incorporated in January 1964 to construct and operate the steel plant at Bokaro.The second phase of Bhilai Steel Plant was completed in September 1967after commissioning of the Wire Rod Mill. The last unit of the 1.8 MT phase of Rourkela - the Tandem Mill - was commissioned in February 1968, and the 1.6 MT stage of Durgapur Steel Plant was completed in August 1969 after commissioning of the Furnace in SMS. Thus, with the completion of the 2.5 MT stage at Bhilai, 1.8 MT at Rourkela and 1.6 MT at Durgapur, the total crude steel production capacity of HSLwas raised to 3.7 MT in 1968-69 and subsequently to 4MT in 1972-73.

Holding Company

The Ministry of Steel and Mines drafted a policy statement to evolve a new model formanaging industry. The policy statement was presented to the Parliament onDecember 2, 1972. On this basis the concept of creating a holding company to

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manage inputs and outputs under one umbrella was mooted. This led to the formationof Steel Authority of India Ltd. The company, incorporated on January 24, 1973 withan authorized capital of Rs. 2000 crore, was made responsible for managing fiveintegrated steel plants at Bhilai, Bokaro, Durgapur, Rourkela and Burnpur, the AlloySteel Plant and the Salem Steel Plant. In 1978 SAIL was restructured as an operating

company.

Since its inception, SAIL has been instrumental in laying a sound infrastructure for theindustrial development of the country. Besides, it has immensely contributed to thedevelopment of technical and managerial expertise. It has triggered the secondaryand tertiary waves of economic growth by continuously providing the inputs for theconsuming industry.

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SAI L - I nto the F uture

Modernisation & Expansion

SAIL, is in the process of modernizingand expanding its production units, rawmaterial resources and other facilities tomaintain its dominant position in the Indian steel market. The objective is toachieve a production capacity of 26.2MTPA of Hot Metal from the base level

production of 14.6 MTPA (2006-07

Actual).A new unit coming up at ISP

Orders for all major packages of ISP & SSP and part packages of BSL, BSP, RSP & DSPExpansion have been placed and these packages are in various stages of implementation

Objective of Expansion Plan 100% production of steel through Basic Oxygen Furnace (BOF) route 100% processing of steel through continuous casting Value addition by reduction of semi-finished steel

Auxiliary fuel injection system in all the Blast Furnaces State-of-art process control computerization / automation State-of-art online testing and quality control Energy saving schemes Secondary refining Adherence to environment norms

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Production Target

The production target of hot metal, crude steel and saleable steel after Expansion is indicated

below:

(Million tonne per annum)

Item Base Case (2006-07)

Actual After Expansion

Hot Metal 14.6 26.2 (23.5)Crude Steel 13.5 24.6 (21.4)

Saleable Steel 12.6 23.1 (20.2)

Figures in bracket indicate capacity after implementation of ongoing phase ofmodernisation and expansion to be completed by 2012-2013

Construction activity at ISP

Capital Expenditure

Amount spent on Expansion Plan and other Capital Schemes of SAIL (incl. subsidiary) duringlast 3 years are as follows:

Year Total

(Rs./Crore)2007-08 2181

2008-09 52332009-10 10606

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V I SION

To be a respected wor ld c lass c orpora t ion and the leader in Indian s tee l bus inessin qual i ty, product iv i ty, prof i tabi l i ty and cus tom er sa t is fac t ion

CREDO

We build lasting relationships with customers based on trust and mutual benefit.

We uphold highest ethical standards in conduct of our business.

We create and nurture a culture that supports flexibility, learning and is proactive tochange.

We chart a challenging career for employees with opportunities for advancement andrewards.

We value the opportunity and responsibility to make a meaningful difference in people'slives.

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C ompanies Policies

Corporate Social Responsibility Policy

Sail Mediclaim Scheme For Retired E mployees

Inter Plant Standardization in Steel Industry (IPSS)

Safety Policy

Quality Policy

Corporate Environmental Policy

Human Resource Policy

HIV/AIDS Policy

Information Technology Security Policy

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PRODUCTS

Product Mix

Product Wise

Semis Blooms, Billets & Slabs

Long Products StructuralsCrane Rails Bars, Rods & RebarsWire Rods

Flat Products

HR Coils, Sheets & SkelpPlates CR C oils & Sheets GC Sheets\ GP Sheets and C oilsTinplates Electrical Steel

Tubular Products Pipes

Railway Products Rails Wheels, Axles, Wheel Sets

Plant Wise

Bhilai Steel Plant Blooms, B illets & SlabsBeamsChannels, Angles Crane RailsPlates

Rails Pig Iron, Chemicals & Fertilisers

Bokaro Steel Plant HR Coils & SheetsPlates CR Coils & Sheets GP Sheets & Coils/ GC SheetsPig Iron, Chemicals & Fertilisers

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Durgapur Steel Plant Blooms, B illets & SlabsJoists, Channels, AnglesBars, Rods & RebarsSkelp Wheels, Axles, Wheel Sets

Pig Iron, Chemicals & Fertilisers

Rourkela Steel Plant HR CoilsPlates CR Coils & SheetsGP Sheets/ GC SheetsTinplates Electrical Steel Pipes Pig Iron, Chemicals & Fertilisers

Salem Steel Plant Stainless Steel

Other Products

Pig Iron

The mass of pig shall be either 45 kg having two notches or 22.5 kg having one notch, subject to mutual agreement between the purchaser and manufacturer.

Specification Grade Designation Si% Mn% P% S% max

IS 13502/ 1992

Steelmaking PG Si X Mn1P40

See Note 1

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Coal Chemical

Benzene (NG) Toluene (NG & IG) Xylene Light Solvent Naptha Solvent Oil Heavy Solvent Naptha Benzol (IG) Still Bottom Oil Hard, Medium, Granulated and Liquid Pitch Extra Hard Pitch Hot Pressed Naphthalene/ Naphthalene Flakes Heavy Creosote Oil Anthracene Oil Light Creosote Oil Meta Para Creosole Light Oil Sodium Phenolate Drained Naphthalene Oil Dephenolised Oil Heavy Benzol NG: Nitration Grade IG: Industrial Grade

For purchase of coal chemicals customers may kindly contact the Marketing Managers of the plants at Bhilai, Bokaro, Durgapur and Rourkela.

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Chapter 2

Review of Litreture

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Chapter 3

Research Methodology

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Research is a one kind of process to get knowledge about some topic. Research is done so

that systematic analysis can be done and problem can also be solved.

In this project Descriptive research Design was use. At the first stage theoretical study is attempted. At the second stage Historical study is attempted. At the Third stage Comparative study of Tax Planning is undertaken.

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Chapter 4

Recommendations and Conclusion