Tax Planning

BU Third
semester

Tax
Tax Planning
Planning
Tax planning is the
arrangement of Availing
the tax benefits by making
use of all beneficial
provisions in the tax laws
The assesse Avails certain
exemptions,
deductions,
rebates and reliefs, to minimize
his tax liability.
Tax planning imply compliance with
the Tax Laws

Tax
Tax Avoidance
Avoidance
Tax avoidance the advantage is taken by
finding out loopholes in the laws. The
shortest definition of tax avoidance is that
it is the art of dodging tax without
breaking the law.

In the case of tax avoidance, the tax

payer circumvents the law, without giving
rise to a criminal offence, by the use of a
scheme, arrangement or device, often of
a complex nature but where the main
purpose is to defer, reduce or completely
avoid the tax payable under the law..

Tax
Tax Evasion
Evasion

Falsification of
accounts
Concealment of
income

Inflation of expenses
to suppress income

Evasion, once proved,

not
only
attracts
heavy penalties but
may also lead to
prosecution.

Conscious violation of
rules

TAX PLANNING

TAX AVOIDANCE

TAX EVASION

Legal

Legal

Illegal

Ethical

Unethical

Unethical

No intention to defeat legal

spirit
By taking legitimate benefits
of Income tax law

Intention to defeat legal Intention to defeat legal

spirit
spirit
By
taking
benefit
of Misstatement
and
loopholes of law
falsification of accounts,
incomes and expenses

No Litigation in courts

Leads to litigation in courts

Leads to litigation in courts

No Penalty/ Prosecution

No Penalty/ Prosecution

Attracts penalty/prosecution

Good
for
National It is evil for Nation/Society
Development/
Society
creates employment etc
Promotes
professionalism Encourages bribery
and strengthens economic weakens economic
and political situation
political situation

It is evil for Nation/Society

and Encourages bribery

and weakens economic
political situation

and
and

Planning before tax liability Planning

for
avoidance Tax
evasion
involves
arises
before tax liability arises
avoidance of payment of tax

Objectives of Tax Planning

Reduction of tax
liability
Minimization of
litigation
Productive
investment
Healthy growth of
economy
Economic stability

Factors
Factors on
on the
the
basis
basis of
of which
which Tax
Tax
planning
planning is
is done
done

The following factors are

helpful for effective tax
planning:
Residential
status
and citizenship of
the assesse.
Heads
of
income/Assets to be
included
in
computing
net
wealth.
Latest legal position.
Form v Substance

Tax
Tax Planning Areas under Income Tax
Setting up
new
Business

With respect Specific

to Financial
managerial
Managemen decisions
t decision

Decision
regard to

Tax
Implication
with respect
to

Decision with
regard to

Location

Capital
structure

Make or Buy

Nature

Dividend
Policy

Own or lease

Form of
organization

Bonus Shares

Purchase by
installment Vs
Hire

Pre
commencem
ent expenses
and incomes

Business
Restructuring

Repair
Replace
renewal or
renovation

Employee
Non
remuneratio residence
n

Important
sections
New Business
New Business

New
New Business
Business
New Business, Location of
Business:The correct selection
of location of business also
playsan
important
role
in
Management decision making.
There are a few locational tax
advantages inthe Income Tax Act
which must be considered while
arriving at the decision. In other
words, whenone is trying to start
a new business or start a new
unit in the existing business, it
can considerlocating business in
a place so that it get some tax
exemption which will reduce the

Tax Planning as per

location

Sections
Sections in
in IT
IT
Act
Act for
for tax
tax
Planning
Planning

Section 10A: Newly established. 1

undertaking in Free Trade Zone,
Electronic Hardware Technology Park
.or Software Technology Park
Section 10AA: Newly established. 2
.undertaking in Special Economy Zone
Section 10B: Newly established. 3
.100% Export Oriented Undertaking
Section 10BA: Newly established. 4
manufacturing unit producing hand
made article or things or artistic value
with wood (not being imported) as the
main raw material. At least 90% must
be exported

Sections
Sections in
in IT
IT
Act
Act for
for tax
tax
Planning
Planning

Section 80IB: Industrial undertaking

located in industrial backward state or
.district
Section 80IC: Undertakings or. 6
enterprises located in notified area in
North Eastern State, State of Sikkim,
Himachal Pradesh, Uttranchal. For
units commencing production
or undergoing substantial expansion
on or after 1.4.2007 and located in
North Eastern States or Sikkim, the
provisions of section 80IE shall be
.applicable instead of this section
.

80IE
80IE

Section 80IE:. 8
Undertaking located in North
Eastern states or state of
Sikkim who begun to
commence production or
complete substantial
expansion on or after
31st march 2007 but before
31st March 2017 are covered
under this section instead
.of section 80ID

80ID
80ID
Section 80ID: Undertaking. 7
doing business of hotel or
convention centre in
National Capital Territory of Delhi
and the districts of Faridabad,
Gurgaon, Gautam Budh Nagar and
Ghaziabad, where the new hotel or
the conventional centre is
constructed on or after 1st of April
2007 and before 31st March 2010

Tax Planning as per

Nature of business

Important
sections
Financial Management
Decisions

Nature of
business

Sec

Description

10 AA

Units newly established at Special economic zones

10B

Units newly established 100% EOU[export oriented

undertaking

33AB

Tea Coffee and Rubber development

33ABA

Site restoration fund

35AD

Expenditure on specified business

35E, 42
44BB

Expenditure on mineral, mineral oil

44B

Shipping

Nature of
business

Sec

Description

44D

Royalty income of foreign companies

80IA

P&G of infrastructure company

44AE

Business of plying, hiring, leasing goods and

carriages

44AF,
44BBB

Special provisions of Retail business and turnkey

projects

44DA

Special provisions of royalty income of NRI

80
IAB,80IB

Special economic zone and certain industrial

undertaking

80IC, 80IE

Special category state

Tax benefits Firm, LLP, and

company
Firm

LLP

Company

Tax Rate

30.9 %

30.9%

30.9%

Applicability of
surcharge

NA

NA

7.5% if >1 crore

MAT

NA

NA

Applicable

Dividend Tax

NA

NA

Dividend Tax
@16.608

Tax treatment in
the hands of S
Holder

Share of profit
Share of profit
Dividend in the
not taxable in the not taxable in the hands of
hands of partner hands of partner shareholder is
not taxable

Interest on
capital

Yes if permitted
by agreement if
not > 12%

Yes if permitted
by agreement if
not more than
12%

No interest to
share holder

Specific
Specific Management
Management
Decisions
Decisions
1.
1. Capital
Capital Structure
Structure

While selecting a particular capital

structure the entrepreneur has to keep in
view the following considerations:
serving the capital base with
consistent dividend policy
cost of capital to be raised from the
market
chargeability or otherwise of taxes,
i.e., direct and indirect taxes
keeping a margin for ploughing back
of profits for future plan towards
diversification, expansion,
modernization and other
development aspects.

Means of
financing

Means of financing:

Generally, the following means of

finance are available for a new project:
Equity share capital,
Debentures/Loans and
borrowings/Lease Finance
Capital mix:
A capital structure is said to be optimum when it
has a mix of debt and equity that will yield the
lowest weighted average cost of capital. At the
same time, a capital mix should not have high debt
equity ratio. A high debt/equity ratio has its own
advantages and disadvantages.

Lease Defined
Lease is a contract
under which a lessor, the owner of
the assets, gives right to use the
asset to a lessee,
the user of the assets,
for an agreed period of time
for a consideration called the lease
rentals.
23

Lease
Lease or
or buy
buy
decisions:
decisions:

In recent years, leasing has become

a popular source of financing in
India. From the lessees point of
view, leasing has the attraction of
eliminating
immediate
cash
outflow, and the lease rentals can
be
claimed
as
admissible
expenditure against the business
income. On the other hand, buying
has the advantages of depreciation
allowance and interest on borrowed
capital being tax-deductible. Thus,
an evaluation of the two
alternatives is to be made in order
to take a decision.

Cash Flow on Lease

The purchase price is Rs 800 lakhs and the company if goes for lease can
save net out flow of Rs 800 lakhs
Dep = 800/8= 100 Lease Rent 160 lakhs
Loss of Dep Tax Shield{DTS}= Rs 100*0.35= Rs 35 is lost by the company
After tax Payment of lease rental= 0.65*160= 104- Tax shield on lease rent
Year

Purcase Dep

Price
P0
1
0
1
2
3
4
5
6
7

2
800

3
-100
-100
-100
-100
-100
-100
-100

Dep
Tax
Shield
DTS
4=
(3)*0.35

-35
-35
-35
-35
-35
-35
-35

Before

After
Tax

Net
Cash
Flow
NCF

Tax Shield Shield

Rent-BTLR ALR
6= .
5
65*(5)
7

-160
-104
-139
-160
-104
-139
-160
-104
-139
-160
-104
-139
-160
-104
-139
-160
-104
-139
-160
-104
-139

Example
Virtex has decided to go for fork lift costs
10million. Economic life 6 years. Salvage Rs
1 million. Dep rate 40% Tax 35% The
company can borrow 10 million at 15.6%
Anupam leasing company can give on leasing
for rental Rs 2.4 million per year. Virtex will
have to bear all maintenance, operating and
insurance expenses.

Cash flow For Lease

cash flow for Lease Rs In million

0
1
2
3
4
5
6
A
Cost of fork Lift 10.00

B
Dep @40%

4.00 2.40 1.44 0.86 0.52 0.31

Loss on
C=B*0.3 depreciation tax
5
shield

-1.40 -0.84 -0.50 -0.30 -0.18 -0.11

D
Lease

-2.40 -2.40 -2.40 -2.40 -2.40 -2.40

E=D*0.3
Tax shield on
5
lease

0.84 0.84 0.84 0.84 0.84 0.84

Loss on salvage
F
value

-1.00
G=A+C
Post
Tax cost of borrowing of Virtex 15.4(1-0.35)= 10.0%
+D+E+F

10.00
-2.96 -2.40+-2.06
-1.86 -1.74 -2.67
NPV
Of lease = {2.96/(1+r)}
+
{2.40/(1+r)2}
{2.06/(1+r)3}+{1.86/
(1+r)4}+{1.74/(1+r)5} + {2.67/(1+r)6}.
IRR = 10.00 = NPV Of lease = {2.96/(1+r)} + {2.40/(1+r)2} +{2.06/
(1+r)3} +{1.86/(1+r)4} +{1.74/(1+r)5} + {2.67/(1+r)6}.
IRR= 10.2 This means that the firm chooses purchasing as with borrowing and
as it incurs post tax cost 10.0

Cash Flow
Vitrx can borrow Rs 10 million at 15.4% The after tax
15.4(1-0.35)= 10.0%
NPV Of lease = {2.96/(1+r)} + {2.40/(1+r)2} + {2.06/
(1+r)3}+{1.86/(1+r)4}+{1.74/(1+r)5} + {2.67/(1+r)6}.
IRR = 10.00 = NPV Of lease = {2.96/(1+r)} + {2.40/(1+r)2}
+{2.06/(1+r)3} +{1.86/(1+r)4} +{1.74/(1+r)5} + {2.67/
(1+r)6}.
IRR= 10.2 This means that the firm chooses purchasing as
with borrowing and as it incurs post tax cost 10.0

Lease Benefits to Lessor and

Lessee
A lease can benefit both when their tax rate
differs.
Leasing pays if the lessees marginal tax
rate is less than that of the lessor. In fact in a
lease, the lessee sells his depreciation tax
shield to the lessor.
Gain of both is loss to the government in
form of taxes.

29

An asset costing Rs 1,00,000 is to be

acquired- two alternatives- Buy asset taking
a loan of Rs 1,00,000, payable in 5
installment @ 20,000 and 14 % interest.
Assuming lease rentals, processing fees,
interest and principal amount payable at the
year end
Second lease option of lease rent Rs 30,000
upto 5 years and 1% processing charge.
Assume IRR to be 10% and PV factor 10%
is
Years

PV Fact 0.909

30

0.826

0.751

0.683

0.621

Purchasing the Asset

1
1.Loan
Repayment
2. Interest 14%
3. Cash out flow
1+2
4. Depreciation
15% WDV
5. Total 2+4
6. Tax saving
30.9% of 5
7.Adjusted cash
31
Flow
[3-6]

20,000

20,00
0
14,000 11,20
0
34,000 31200
15,000
29000
8961
25039

20,00 20,000 20,0

0
00
8400 5,600 2,80
0
28,40 25,600 22.8
0
00
12,75 10,83
9212 7,83
0
8
0
23950 19238 14812 106
30
7401 5945
4577 328
5
23799
22455
21023 195
Total
Rs 85760
15

Lease
1
1. Lease Rentals
2. Processing Fees
3. Cash Flow [1+2]
4. Tax saving @
30.9% of 3
5. Adjusted cash flow
[3-4
6.PV Factor
7. PV of adjusted
cash flow [5x6]
32

30,00 30,00
0
0
1000
3100 30,00
0
0
9579 9270

30,00
0

30,00
0

30,0
00

30,00
0
9270

30,00 30,0
0
00
9270 9270

2142 2073 20730 20730 2073

1
0
0
0.909 0.826 0.751 0.683 0.62
1
Total1712
Rs 79195
1947
15568 14159 1287
2
3
3

Leasing Benefits Come from

Both, lessor and lessee, gain at governments expense
because of the difference in their tax rates.
The government gains from the tax on lease rentals
while it loses on depreciation and interest tax shields.
The implicit principal payments in a lease rental are
shielded by depreciation, while interest deductions
provide for implicit return on the lessees capital.

33

1.Lease rental is a revenue expense can be claimed.

2.Obsolescence of risk if high then lease
3.Non depreciable assets leasing

1.Purchase depreciation U/s 32

2.Loan interest amount claimed as revenue or
capitalized. But when the interest is paid after using of
asset then it is revenue expense.
3.Residual value more purchase
4.10A, 10B 10 assessment years
5.Gestation period 6-7 years special benefits

10 A and 10B
The benefit in
respect of newly
established
Industrial
Undertaking in FTZ,
EHTP SEZ or STP is
Available to all
Assessee on Export
of Certain Articles
or things or software
-

not

1. Should
be formed by
splitting up or reconstruction
of unit already in existence
2. Should not be formed by
transferring machinery or
plant previously used.
3. In certain conditions as
specified in the Act second
hand machinery is allowed.
4. Sale proceeds should be
brought in convertible forex
within 6 months from the end
of P.Y. (iv) Report in Form
No.56F -

1.Tax Holiday: For units which have begun

priorto AY 2003-04,100%profit from export of such
article, thing, software for 10 consecutive A.Y. from the
A.Y. relevant to P.Y. in which it begun to manufacture
subject to some conditions and restrictions mentioned
in the Act.
2.However for AY 2003-04 it is 90%.For units
whichhave begun on or after AY 2003-04the
deduction is 100% for first 5 years and 50% for next 2
years and next 3 years 50% subject to creation of
Special Economic Zone Reinvestment Allowance
Reserve Account and fulfillment of conditions relating
thereto failing which the unutilized or wrongly utilized
Reserve would be deemed income as per the
provisions of the Act and the Rules.
3.No deduction for A.Y.2012 13 or thereafter

Make
Make or
or buy
buy
decision
decision

Now a decision regarding the

manufacturing of these components is
to be taken. It is decided whether the
product/part/component of product
should be bought from the market or
should be manufactured by having
necessary manufacturing facilities.
The main consideration affecting such
a decision is cost. In a make or buy
decision, the variable cost of making
the product or part/component of
product is compared with its purchase
price prevailing in the market.

R Limited Produces most of its own parts

Standard wage rate Rs 6 per hour Variable
manufacturing Oh is Rs 4.5 Fixed Oh Rs
10.50 per hour. The company requires a
new part and can be made with out any
Expansion. But the testing cost Rs 15000
pm . The material cost is Rs 24 per unit. The
purchase cost is Rs 36 from outside.
Company estimate that it will need
.2,00,000new parts
. Decide you buy or make

2,00,000 units

Cost of manufacturing
For Unit

Raw material

Total

24.00

48,00,000

Wages

6.00

12,00,000

VOH

4.50

9,00.000

0.90

1,80,000

Additional Fixed cost

Inspection
15,000 x 12/2,00,000

70,80,000

Total cost if bought = 2,00,000 x 36= 72,00,000

Total cost if manufactured = 70,80,000
Expenses related to manufacturing allowed as
tax deductions and no special deduction in tax
Savings = 72,00,000- 70,80,000= 1,20,000

Repair/Renewal
Repair/Renewal or
or
Replacement
Replacement of
of an
an
asset:
asset:

Repairs/Renewal: Deduction for expenditure

on repairs/renewal will be allowed as revenue
expenditure in computation of business income
as under: If the building is a rented building, any
expenditure on repairs shall be allowed
as deduction.
It may be noted that if the repairs
expenditure are of capital nature it shall
not be allowed as deduction either
under section 30, 31 or 37.
Replacement of assets: If the asset has to be
replaced, the expenditure incurred on
replacement shall be capital expenditure and the
assessee shall only be entitled to depreciation
on such assets and as such, the entire
expenditure cannot be claimed as deduction
which was allowed in case of repairs.

Important
sections
Employee Remuneration

Residential
Residential
Status
Status

Residential status: Sometime by better tax

planning a taxpayer can avoid becoming
.resident in a particular year
The advantage of this is that if he is nonresident in a particular year, he is not liable
.to be taxed for his overseas income in India
In case he becomes resident in India for tax
purpose, he is taxed for his worldwide
. income
However, this may not have any effect if the
tax paid abroad on overseas income is equal
to more than the tax payable on such income
in India, as the taxpayer is entitled to get
credit of taxes paid abroad in case that
.income gets taxed in India

Individual
Individual

Individuals investment: Taxpayer

can plan investment in a manner so
. that overall return is optimum
This may involve analyzing
different investment options taken
into consideration, availability of
tax deduction u/s 80C, exemption
of interest/dividend income on a
particular investment, capital
gain, possibility of exemption from
capital gain, rate of return, risk
factor, liquidity etc

Employee
Employee
Remuneration
Remuneration

Employees remuneration: There is no effect on the tax

liability in the hand of the employer on account of
designing of salary package of employees. Still, every
employer wants to design the salary package in a way so
that the incidence of tax on the employee is kept to
.minimum
By doing this, the take home pay of the employee is
. increased
To design such a package it is necessary to understand
how perquisites and benefits are taxed and which are
those perquisites or benefits which are not taxed or taxed
.at concessional rate
It is also necessary to understand, how Fringe Benefit
tax is payable, as it may be advisable for the employer to
pay FBT instead of letting that benefit be taxed in the
.hand of the employee through allowances

Tax
Tax planning
planning in
in
case
case of
of employees
employees
remuneration
remuneration
This requires consideration from the point
of view of
Employer:
While calculating the
business income of the employer, the
remuneration payable to the employee, in
whatever form, should be fully deductible
otherwise the employer will have to pay
tax on such remuneration also as the same
will not be allowed as deduction while
computing his business income. In some
cases, the employer shall have to pay
fringe benefit tax on certain benefits
given to the employees.

Employee:
Employee: The
The salary
salary received
received by
by the
the employee,
employee, whether
whether
in
in cash
cash or
or kind,
kind, should
should attract
attract minimum
minimum income-tax
income-tax
liability.
liability. He
He should
should be
be in
in aa position
position to
to avail
avail maximum
maximum
exemption/concession
exemption/concession in
in respect
respect of
of such
such salary
salary received
received
by
by him.
him. Some
Some of
of the
the exemptions/concessions
exemptions/concessions available
available to
to
employee
employee under
under Income-tax
Income-tax Act
Act

Totally Tax free

Section

Categories

10 (1)

Agriculture Income

10(2)

Received from HUF

10(2A)

Partners Share of profit from partnership

10(10AA)

Leave Encashment on retirement sub to

limits ( max 3 Lakhs) . Leave encashment
to legal heirs
Scholarship for Education

10( 16)
10(18)

Pension / Family pension received by the

Gallantry awardee

10(32)

Income of minor up to Rs 1500 p.a

10(34)

Dividend Income from Indian company

10(35)

Dividend Income from mutual fund

Exemptions
Sl No

IT Section

Exempted Allowance/Perks

Amount Of Exemption

Categories

10(5)

Leave Travel

Actual or Amount prescribed

All employees

10(10)(i)

Death/Retirement gratuity

Actual

Government
Employee

10(10(ii)

Gratuity under gratuity act

Least of month salary for

number of years served or 10
Lakhs

10(10A)(i)

Commuted Pension

Full Amount

State/ Central /
Defence employees

10(10A)(iia)

Commuted Pension, where

employee is eligible for
gratuity

33.33% of commuted Pension

Employees
excluding sl no 4

10(10A)(iib)

Commuted Pension, where

employee is not eligible for
gratuity

50%

Employees
excluding sl no 4

10(10b)

Compensation by workmen
under industrial dispute act

Compensation as computed
under S 25F ( b) of industrial
dispute act or % Lakhs
whichever is less

Individual

Exemptions
Sl
No

IT Section

Exempted
Allowance/Perks

Amount Of Exemption

Categories

10(10c)

Voluntary Retirement
benefits approved by IT
Dept

Max Rs 5 Lakhs

All employees .
Exemption not
allowed if relief is
provided under S
89

10

10(13A)

HRA

Under Rule 2A

All employees

11

10(10D)

Maturity Value received

under LIC

Full

All employees

12

10(11)

Amount Received from

PF approved and PPF

Full

All employees

Agricultural Income
Rent
Any rent received
from land which is
used for
agricultural
purpose

Operation

Farm House

Any income
derived from such
land by agricultural
operations
including
processing of
agricultural
produce, raised or
received as rent in
kind so as to
render it fit for the
market, or sale of
such

(iii) Income
attributable to a
farm house subject
to the condition
that building is
situated on or in
the immediate
vicinity of the land
and is used as a
dwelling house,
store house etc

Exempted perks
1. Refreshments- Tea, snakes- No
alcoholic beverages ( up to ` 70)
2. Free Meal up to ` 50 provided in
office or eating joints through non
transferrable coupon
3. Free ration to armed forces
4. Goods manufactured by employer sold
at concessional rates

Perks Exempted
5. Conveyance between office and
residence and vice versa
6. Training Cost
7. Government employees any
perks being citizen of India,
working outside india
8. Employers contribution to group
insurance, pension scheme, or
deferred annuity

Perks Exempted
9. Medical facility at office
10.Medical reimbursement up to `15,000
11.Periodical and journals
12.Telephone or mobile facility
13.Free education facility up to `1000pm
no restriction on children
14.Health club and sports club facility

Perks exempted
15.Computer and lap top
16.RFA to high court / supreme court
judges,
17.RFA MP, Union Minister, leader
of opposition
18.RFA to employer- a mining site,
onshore exploration, project
execution, dam site, power
generation site, offshore site
19.RFA to chairman or retired
chairman UPSC

Specified employee
Director even for a day in PY
specified employee
An employee who has substantial
interest in the company( 20%or
more voting power)
Gross taxable salary of 50000 or
more in PY

Inflation of expenses to suppress income is an act of

.
1.Tax Planning
2.Tax Avoidance
3.Tax Evasion
4.Tax Management

The filing of return of loss u/s 139(3) to avail benefit

of set off and carry forward of loss is called
.
(A) Tax Planning
(B) Tax Avoidance
(C) Tax Evasion
(D) Tax Management

Mr. Aditya, an employee of Shri Ram Krishna Seva

Mandal, stays in housing facility provided by the
trust. This is an act of ..
(A) Tax Planning
(B) Tax Avoidance
(C) Tax Evasion
(D) Tax Management

Mr. Yash, a businessman, purchases National Saving

Certificates of Rs.50,000, so as to reduce his income
chargeable to tax from Rs.4,00,000 to Rs.3,50,000. This is
an act of ..
(A) Tax Planning
(B) Tax Avoidance
(C) Tax Evasion
(D) Tax Management

An assesse cannot claim the benefit of . for

the purpose of tax deduction if he Own the asset.
1.Depreciation on asset
2.Repair expenses of revenue nature
3.Interest on money borrowed to purchase the asset
4.None of the above

When the asset is owned by the assessee, he can

claim benefit of for tax deduction.
(A) Lease rental
(B) Repair and Maintenance expenses of capital
nature
(C) Depreciation
(D) Cost of Asset

Which of the following will be not be allowed as

deduction in case of Lease of an asset?
(A) Depreciation
(B) Cost of Capital
(C) Interest on loan borrowed for acquiring the asset
(D) Rental paid to lessor

Lease rental can be claimed as ________ against

business income.
1.Admissible expenses
2.Inadmissible expenses
3.Both (A) and (B)
4.None of the above

Deduction for expenses on repair and renewal is

allowed as _________
1.Capital expenditure
2.Revenue expenditure
3.Differed Revenue expenditure
4.Both (A) and (C)

Remuneration paid to employee will be

1.Fully deductible
2.Partly deductible
3.Non deductible
4.Depends on situation

Thank You