Sip - Project

Sulochana Sabat Reg No.
: 220609928/07/2008
SULOCHANA SABAT Page 1

e_SIP thru GOLS Academy
Project Report on TAX LAWS

Submitted By :

Name : SULOCHANA SABAT

Roll No. : 220609928/07/2008

Date : 18
th
June. 2013

Sulochana Sabat Reg No.: 220609928/07/2008

TAX LAW

Sl No Topics Page No
1. Introduction 3

2 Types of Tax 4

3 Direct Tax 5-13

4 Indirect Tax 14-29


(1)INTRODUCTION

A TAX IS A FINANCIAL CHARGE IMPOSED UPON TAX
PAYER(AN INDIVIDUAL OR LEGAL ENTITY) BY A STATE. FAILURE
TO PAY TAX IS PUNISHABLE BY LAW.

A tax is a picuniary burden laid upon individuals or property owner to
support the Government.
Tax is not a voluntary payment or donation but an enforced contribution
imposed by government under the name of: -
Toll

Duty

Custom

Excise

Subsidy

or other name

(2) TYPES OF TAX


Tax consists of:-
1. Direct tax

2. Indirect tax

(3)DIRECT TAX

Direct tax means a tax which is directly paid by assessee to government.

In case of failure of paying tax government come to home to collect tax.

TYPES OF DIRECT TAX:-

Direct Tax is divided into following types:-

Income tax
Wealth tax
Negative income tax
Capital gain tax
corporate tax
Property tax
Expatriation tax etc.

INCOME TAX:-

It is a direct tax. A tax that Government impose on financial income
generated by all entities within their jurisdiction . By law, business and individual
must file an income tax return every year to determine whether they owe any taxes
or are eligible for a tax refund. Income tax is a key source of fund that the
Government uses to fund its activities and serve the public.

Income include
Income from salary
Income from house property
Income from other sources
Income from business and profession
Income from capital gain


INCOME TAX SLAB AND RATE:-

(1.) Individual and HUF-

Income slab Income tax rate

- Total income does not exceed
Rs. 200000 NIL
- Total income exceed Rs. 200000
But not exceed Rs. 500,000 10% of the amount of income exceed
Rs.200,000
-Total income exceed Rs. 500,000
But not exceed Rs. 1000000 Rs.30,000+20% of amount of income
Exceed Rs.500000
- Where total income exceed
Rs 1000000 Rs.130,000+30% of the amount of income
Exceed Rs. 1000000
*Note- Education cess = 3%of Income tax.
(2.) Co-cperative Society:-
Income slab Income tax rate
-Where total income does not exceed 10% of the income
Rs. 10000
-Where total income exceed Rs.10000 1000+20% of income exceed
But not exceed Rs.20000 Rs.10000
-Where total income exceed Rs.20000 Rs.3000+ 30% of the amount by
which
The total income exceed
Rs.20000

*Education cess-3% of income tax
Surcharge=NIL

(3.) Firm- Income tax rate 30% of total income

Education cess- 3% of income tax

Surcharge NIL

(4.) Local authority- Income tax rate- 30% of total income
Education cess- 3% of income tax
Surcharge NIL

(5.) Domestic company-Income tax rate- 30% of total income
Surcharge- 5% of total income exceed Rs. 1 crore
Education cess- 3% of the total income tax and surcharge
(6.) Foreign company- Income tax rate 40% of total income
Surcharge 2%
Education cess- 3% of the total of income tax and surcharge

WEALTH TAX:-

(a) Wealth tax is imposed on the wealth possessed by individuals in a country.
It is levied by central Government on few persons.
Power to levy Wealth tax is derived by Constitution of India.
(b) Wealth tax recognized 6 types of assets (section 2ea):-

Wealth from building
Wealth from jewellary
Wealth from land
Wealth from car
Wealth from air/water vehicle
Wealth from cash in hand
In wealth tax, tax is always levied for Assets standing on Valuation date i.e.
31
st
March.
Person on whom Wealth tax is levied is known as an ASSESSEE.
Person liable to pay Wealth tax:-
1. Individual
2. HUF
3. Company

.
Negative income tax:-
Negative income tax is a progressive income tax. System where people earning
below to certain amount receive supplemental pay from the government instead of paying
tax to the government.

Capital gain tax:-
Income tax treat capital gain as part of income subject to tax Capital gain is
generally gain on sale of capital assets.

Corporate tax:-
Corporate tax refers to Income, capital , net worth or other taxes imposed on
corporation. Rate of tax and the taxable base for corporation may differ from those for
individual or other taxable persons.


Property tax:-
A property tax is a ad-valeron tax levied on the value of property. Property tax
are usually charged on a yearly basis.

Expatriation tax:-
It is a tax on individual who renounce their citizenship or residence.
Assesse:- Means the person who is liable to pay tax.

Four important aspects:-

Tax planning

Tax management

Tax Avoidance

Tax evasion

Tax planning:-

It may be defined as an arrangement of ones financial affairs in such a way
that without violating in any way the legal provision maximum advantage is taken of all tax
exemption , deductions, consession rebate allowance and other benefit and relief permitted
under the Act.

Tax management:-

It means systematic, well-devised and well-organized steps taken by an Organization in
order to ensure compliance with tax laws within the specified manner with a view to
minimize the tax cost. Thus, tax management refers to compliance of tax laws so
as to avoid interest and penalties which can be levied on such non compliance whereas tax

Planning is aimed to minimize the tax liability.

Tax avoidance:-

It means the arrangement of transaction in such a way that it will reduce tax
liability by taking benefit of loopholes of law.

Tax evasion:-

It means reducing of tax liability by way of unlawful or unethical means. Incase of
tax evasion, it attracts heavy penalties and prosecution.
Meaning of Tax Deducted at Source (TDS):-
TDS is one of the means of recovery of income tax from the assessee in the
previous year itself. In case certain income, tax is deducted at source by the payer at the
prescribed rate at the time of credit or payment of such income to the payee. The payee
gets the benefit of TDS from his income tax liability. TDS is also known as Withholding
Tax.

Advance Tax:-
Advance Tax shall be payable during any financial year, in respect of the current
income of the assessee which would be chargeable to tax in the assessment year
immediately following that financial year.

Section under Advance Tax:-

Section 207 Opening Section

Section 208 Person liable to pay Advance Tax i.e. any assessee whose tax
liability after deducting TDS and TCS is Rupees 10000 or more.
Section 211 Instalment and due date of Advance Tax :-

Due Date Company Other than Company
15
th
JUNE Upto 15% NIL
15
th
SEPTEMBER Upto 45% Upto 30%
15
th
DECEMBER Upto 75% Upto 60%
15
th
MARCH Upto 100% Upto 100%

Interest:-
Any assessee will be liable for interest in case of late filing of return, late payment
of Advance Tax and late of Instalment of advance tax U/S 234(a), 234(b), 234(c) .
Simple Interest= P*T*R / 100 [where P= Principal
R= Rate of Interest i.e. 1% per month
T= Time Period ]
Meaning of Return:-
Return is one type of declaration.

Section under Return:-

Section 139 (1)
Section 139 (1a)
Section 139 (3)
Section 139 (4)
Section 139 (5)
Section 139 (9)
Section 139A

Section 139 (1):-Compulsory Submission of Return

(a)Any Company Weather Government or Non- Government, private or public
company, Section 25 company.
(b)Any Partnership firm weather registered or not.
(c)Every Person who is having his total income before giving effect to any deduction U/S 80
above the exemption limit.
(d)Every person who is Ordinary Resident in India and having any asset India is required
to file return irrespective of their income.

Section 139(1a):-Filing of bulk Return
Incase of any employer who furnish return of his employees by the due date
then he requires to file return under this section.

Section 139(3);-Return of Loss
A return may be submitted under the section, if the assessee wants to claim
any set off of losses which is incurred during the previous year.

Section 139 (4):-Belated Return
It can file by the assessee within one year from end of relevant assessment
or before completion of assessment year whichever is earlier.

Section 139 (5):-Revised Return
A revised return can be filed by the assessee after discovering any omission
or wrong statement and such revised return shall be filed within one year from end of
relevant assessment year or before completion of assessment year whichever is earlier.

Section 139(9): Defective Return This section tells about defective return.

Section 139A:-Permanent Account no. (PAN)
It is a ten digit number. Assessee required PAN for following purpose:
In case of demate account
For deposit 50000 or more at a time in bank
Restaurant bill exceeding 25000
For filing of income tax return
Due Date For Filing Of Return:-

30
th
NOVEMBER Any person who required to furnish report
U/S 92(e)
30
th
SEPTEMBER ->Every Company
->Every assessee who required audit under
income tax Act, 1961.
->Every partner of a partnership firm who
required audit.
31
st
JULY In any other cases

(4) INDIRECT TAX

Indirect taxes are the taxes which are levied on a product or service the
incidence of which is borne by the consumers who ultimately consume the product or the
service, while immediate liability to pay tax may fall upon another person such as a

manufacturer or a seller of goods.
Different types of indirect taxes:-
Central Excise

VAT etc.

Custom

CENTRAL EXCISE

Excise duty is a duty on production or manufacture of excisable goods in India.
The Central government has power to levy excise duty since the subject matter is
covered
under Entry 84 of union list.

Body of central excise law consist the following:-

(i)The Central Excise Act 1944
(ii) The Central excise Tariff Act 1985
(iii) The central excise Rule, 2002
(iv) The CENVAT Credit Rule,2004 etc.

Basic condition for levy of excise duty is as under:-
There must be goods
Such goods must be excisable
Such goods must result out of production or manufacture
Such production or manufacture must take place in India

Manufacture in Central Excise:-

The taxable event in Central Excise is production or manufacture of the excisable goods.
Manufacture [Section2 (f)]: Manufacture includes any process-
-incidental or ancillary to the completion of a manufactured product;
and the word manufacture shall be construed accordingly and shall include not only a
person who employs hired labour in the production or manufacture of excisable goods, but
also any person who engages in their production or manufacture on his own account.
Concept of Manufacture:-
As per Rule-4, the manufacture of excisable goods or the person who stores such goods in a
warehouse shall be liable to pay the duty leviable on such goods in the manner provided
under Rule-8 or under any other law.
The manufacture can divided into following two categories:-

(i)a person who manufactures goods on his own account.
(ii)a person who manufactures the goods through hired labour.
Central Excise Officer[Section 2(b)]:- Central Excise Officer means the
-Chief Commissioner of Central Excise,
- Commissioner of Central Excise, Commissioner of Central Excise (Appeals),
- Additional Commissioner of Central Excise,
-Joint Commissioner of Central Excise,
-Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise or
-any other officer of the Central Excise Department, or
-any person (including an officer of the State Government) invested by the Central Board
of
Excise and Customs constituted under the Central Board of Revenue Act, 1963(54 of 1963)
With any of the powers of a Central Excise Officer under this Act.

Main features of the Central Excise Tariff:-

(a)The Central Excise Tariff has been made very detailed and comprehensive after taking
into account all technical and legal aspects.
(b)It is based on Harmonized Commodity Description and Coding System.
(c)Goods of the same class have been grouped together to enable parity in treatment.
(d)It contains section/Chapter Notes and Sub-Notes giving detailed explanation as a to the
Scope and ambit of the respective chapter. These Notes have been given statutory backing
And have been incorporated at the top of each chapter.
(e)New eight digit codes have been introduced at par with Custom Tariff mentioning first
Four digits to the chapter heading, first six digits to the chapter sub-heading and eight
digits
to the tariff item no. to facilitate more item in the chapter.

Emergency Power of The Central Government to increase the duty of excise under
Section 3 of the central excise tariff Act 1985:-

Section-3 of Central Excise Tariff Act 1985, empowers the Central
Government to increase the duties of excise by amendment to the First Schedule and
Second
Schedule, by notification the official gazette in the following manner
(a)In case where the rate of duty as specified in the first schedule and the Second schedule
as in force immediately before the issue of such notification is nil, a rate of duty not
exceeding 50% ad -valorem expressed in any form or method.
(b)In any other case a rate of duty which shall not be more than twice the rate of duty
Specified in respect of such goods in the First Schedule and Second Schedule as in force
Immediately before the issue of the said notification.

Boards power to issue Instructions to Central Excise Officers:-

Section 37B of the Central Excise Act, 1994 empowers the Central
Board of Excise and Customs (CBEC) to issue orders, instructions and directions to the
Central Excise/Customs officers
(i) for the purpose of uniformity in classification of the goods,
(ii) with respect to the levy of duty thereon.

The Basis on which the Excise duty is payable:-

As per the Central Excise Tariff Act 1985,excise duty is payable on the following basis
(i)Specific Duty;

(ii)Duty based on value (ad-valorem duty) i.e. fixed percentage of:-
(a)Tariff value fixed under Section3 (2) of the Central Excise
Act,1944;
(b)Transaction value determined under section 4 of the Central
Excise Act, 1944;
(c)Retail Sale price determined under Section 4 A of the
Central Excise Act,1944;
(iii)Duty based on production capacity.
(iv)Compounded Levy Scheme (Rule 15 of the Central Excise Rules, 2002).
(v)Specific Duty-cum - Ad-valorem duty.
Different tariff values may be fixed in respect of excisable goods [Section3 (3)] :-
Different tariff values may be fixed
(a)for different classes or descriptions of the same excisable goods; or
(b)for excisable goods of the same class or description
-produced or manufactured by different classes of producers or
manufacturers.
-sold to different classes of buyers.
Transaction value under Section 4 of Central Excise Act 1944. :-
As per Section4 (1)(a) of the Central Excise Act,1944,where duty of
Excise is leviable with reference to value, then on each removal of such goods, the value
Shall be the Transaction value if the following conditions are satisfied
(i)There should be sale if excisable goods by the assessee.
(ii)The goods sold should be for delivery at the time and place of removal.
(iii)The assessee and the buyer of the goods should not be related persons and
(iv)The price should be sole consideration for the sale.
(v)It includes any amount charged for or to make provision for the following:-
-Advertising or publicity
-Marketing, selling and organization expenses

-Storage
-Outward handling
-Servicing
-Warranty
-Commission

Value Added Tax (VAT)

VAT is a tax on value addition. Value addition means the value of
the output as reduced by the value of bought out inputs. In a pure VAT system, all taxes
paid
on bought out inputs are allowed to be set off against the taxes paid on the outputs, in order
to subject only the value addition at each stage to taxation. The VAT system, thus, requires
maintenance of proper accounts and documents at each stage and also an appropriate
collection system.

Central Value Added Tax (CENVAT):-

CENVAT is a modified version of VAT system as it allows set off of only Central Excise
Duty and additional duties of Customs paid on inputs and capital goods and service tax
paid on input services against the duty liabilities on final product and service tax liability
on output services.

Cascading Effect:-
Cascading Effect means duty on duty. While the process of
manufacturing, a raw material passes through various stages before it is converted into a
finished product for the final consumers. Hence, there is levy of duty at every stage

resulting in cascading effect of duty i.e. duty on duty.The final consumers have to bear such
cascading effect, hence, MODVAT (now known as CENVAT) scheme was introduced to
avoid this cascading effect of Duty.

Features of CENVAT scheme :-
The fundamental features of CENVAT scheme are as follows
(i)It is introduced with the object to prevent cascading effect of duty on final product and
service tax on output services. The CENVAT credit rule extends to whole of India except
the State of Jammu and Kashmir.
(ii)A manufacturer or producer of final product can take CENVAT credit. The scheme
applies to all excisable goods, manufactured or produced from eligible inputs or by using
input service.
(iii)Credit is allowed of duty paid on input, capital goods and input services.
(iv)The CENVAT is allowed only for payment of duties of excise on final product or
payment of service tax on output services.
(v)The CENVAT credit can be taken immediately on receipt of inputs. But in case of
capital goods credit can be taken not exceeding 50% in the financial year in which capital
goods are received and balance credit can be taken in subsequent years.
(vi) The CENVAT credit can be refunded to manufacturer/service provider if input/input
services are used for manufacturing final products or for provision output services which
are exported.
Documents and accounts on the basis of which CENVAT credit can be availed:-
(a)INVOICE
(b)SUPPLEMENTARY INVOICE
(C)Bill of entry
(d)Invoice, bill or challan issued by a provider of input service

(e) Invoice, bill or challan issued by an input service distributer

Various types of controls on the Central Excise assessees for assessment and collection of
duty of Excise
(i)Physical control
(ii)Self assessment
(iii)Special procedure for payment of duty

Registration under Central Excise Act, 1944 :-

(i)Every manufacturer of dutiable excisable goods
(ii)First and second stage dealers
(iii)Person holding ware houses for storing non duty paid goods.
(iv)Persons who obtain excisable goods for availing end use based
Exemption
(v)Persons who get yarns fabrics, readymade garments etc.
Manufacture on job work under Rule 12B.

CUSTOM

A tax levied on import by the Custom Authority of a country to
raise state revenue and to protect domestic industries from more efficient or predatory
competitors from abroad. Custom Duty is based generally on value of the goods or upon
the

weights, dimensions or some other criteria of the item.
Custom Duty is imposed under the Indian Custom Act
formulated
In 1962 by the constitution of India under article 265.
The Central Government has been empowered by Entry 83 of
Union List of the VII schedule of the Constitution of India to levy Custom Duty. Entry 83
of
Union List are as under
Duties of Custom include export duty.
Power to make laws in respect of Custom Duty vests with the
Central Government
Object of Custom Duty:-
(i)Restricting import for conserving foreign exchange
(ii)Protecting Indian industry from undue competition
(iii)Prohibiting import and export of goods for achieving the
policy
objectives of the Government
(iv)Regulating Export

Body of Custom Law:-
(i)The Custom Act, 1962
(ii)The Custom Tariff Act, 1975
(iii)Rules
(iv)Regulations
(v)Notifications under Customs Act

(i)The Custom Act, 1962:-
It provides for levy of import and export duties of Customs on

Goods imported into or exported from India through sea, air or land. It

contains Provisions of levy and collection of duty, importation or exportation,

transit and Transshipment, prohibition, warehousing, duty drawback, appeals,

settlement commission, advance rulings , offences and prosecution etc.

(ii)The Custom Tariff Act, 1975:-
The Custom Tariff Act, 1975 has been enacted for classification of
goods. The various types of Custom Duties to be levied on the importation and exportation
of the articles are provided under this Act. It contains two Schedules
(i)The First Schedule is known as, Import Tariff and it refers to
goods liable to import duties of customs.
(ii)The Second Schedule is known as, Export Tariff and it
refers to
goods liable to export duties of customs.

(iii) Rules:-
Sections 156 of the Customs Act, 1962 empower the Central
Government to make rules. Such rules may provide for matters relating to the manner of
determining the value of imported goods/ export goods, duty drawback, baggage etc. The
Rules so framed are consistent with the provisions of the Customs Act, 1962.

(iv)Regulations:-
The Central Board of Excise is empowered under section 157 of
The Custom Act, 1962 to make regulation to carry out the purpose of the Act. The
regulation so framed are consistent with the provisions of the Act as well as the rules
framed by the Central Government.

(v)Notifications under Customs Act:-
The Central Government has been empowered to issue notifications under various section
of the custom Act 1962

While Custom Duty include both import and export Duties. But export Duty
Contributed only nominal revenue , import duty alone constituted major part the revenue
from custom duties and include the following

Basic Custom Duty (BCD)
Additional Duty of Custom U/S 3(1)
Additional Duty of Custom U/S 3(5)
Auxiliary Duty of Custom
Safeguard Duty
Anti-dumping Duty
Protective Duty
Duty on subsidized goods
Anti-dumping Duty on dumped article

(i)Basic custom duty:-
- Custom tariff Act1975 grant authority to levy basic custom duty.
- the basic custom duty may be at

(1) Standard rate or

(2) Preferential rate of duty(when import made from countries

Declared as preferential area.

*basic custom duty generally 10% of assessable value.

(ii)Auxiliary Custom duty:-
-Parliament has been given power under Article 271 to impose surcharge.
-Such surcharge are called Auxiliary duty i.e. EC and SHEC (3%) i.e.[2% + 1%] i.e.
3%
on [BCD + duty U/S 3(1)]

(iii)Additional Duty:-
Additional Duty is of two types
(a)Additional duty U/S 3(1)
(b) Additional duty U/S 3(5)

(a)Additional duty U/S 3(1) :-
->It is also known as countervailing duty (CVD)
Additional duty U/S 3(1) is levied equal to the excise duty leviable on the like
goods
produced/ manufactured in India .
Additional duty U/S 3(1) is levied to counter balance the excise duty.

(b) Additional duty U/S 3(5):- Levy to recover the loss of VAT.
Highest rate of duty is 4%
Conditions under which duty U/S 3(5) will not be charged:-

1.If BCD exempt, Duty U/S3(1) exempt then duty U/S3(5) is also exempt.

1. If VAT on a particular goods exempt then U/S 3(5) is not exempt

2. If on any imported goods duty U/S 3(1) is charged on MRP(4A) then duty U/S 3(5)

3. Will be exempted. Imported goods having any special importance then duty U/S 3(5)
will be exempted.
Safeguard duty:- Where due to increase quantity of import if the Central
Government
Thinks after making proper enquiry that it will cause serious injury to a domestic
Industry, then the Government can levy safeguard duty.
Duration of safeguard duty will be of 4years and which can exceed upto 10 years
from
the date of imposition.
No safeguard duty will be levy where the goods imported by Export Oriented
Undertaking (EOU), Special Economic Zone (sez), Free Trade Zone (FTZ).
Ant-Subsidy Duty:- The Central Government has the power to levy Anti- Subsidy
duty
On Imported goods where the exporting country provides sussidy to its exporters.
No anti-subsidy duty can be provided unless it is proved that the subsidy is related
With export performance.
Central Government has the power to levy anti-subsidity duty retrospectively.
However, it will not go beyond 90 days from the date of imposition of duty.
Anti-subsidity duty can be levied for a period of 5 years and which can extend upto
10
Years from the date of imposition.
Anti-dumping duty:- The Central Government has the power to levy anti dumping
Duty on dump article. However the amount of anti-dumping duty cannot exceed
Margin of dumping.

Some important Definitions regarding Custom:-

(a)Imported goods:-
It means any goods brought into India from a place outside India but does not
include
that goods which have been cleared for home consumption.
(b)Coastal goods:-
It means other than imported goods transferred from vessel from one port to
another
with in India.
(c)Exported goods:-
It means any goods which already crossed territorial water of India.
(d)Dutiable goods:-
It means goods which are chargeable for duty but still duty has not been paid.
Person in Charge in Custom:-
Vessel--Master of vessel
RailwayConductor or Guard or Driver
AircraftCommander of Pilot
Any other ConveyanceDriver

Adjusting authority:-
It means authority competent to pass order. But does not include Board,
Commissioner or Appellate Tribunal.

Taxable Event:-
(a)Taxable Event in case of Importation:-
Import of goods will commence when they cross the territorial water of India. But, it
is completed when it reaches Custom barrier and become part of mass of goods with in the
country.

(b) Taxable Event in case of Exportation:-
Export Event Commence the date on which the exporter file shipping bill.
Export Event Complete when goods crossed the territorial water of India.
Definition of India:-[1 NM 1.852K.M]
12 NM Territorial water (with in India) used for defining taxable event in case of
Importation/Exportation.
24 NM Contignous zone
-Smuggling goods check, Doubtful persons. Then Govt. having right to cease/penalty
but not charge duty.
200 NM Exclusive Economic Zone/continental shelf Govt. having only right of oil
Production/ oil exhaustions.
No rights go check, smuggling goods/ doubtful person,
No right to charge duty, etc.
Rate of Custom Duty:-
->Basic Custom Duty = 5%, 7.5%, and 10%
->Highest rate of basic Custom Duty for non-agriculture items.
->On baggage, rate of Duty = 35%

DUTY DRAWBACK :-
Duty drawback is an export incentive scheme where the duties/taxes paid on any
imported materials or excisable materials or input services which are used in the
Manufacture/processing/carrying out any operations on the goods that are exported
outside India is allowed as refund to the exporter.
There are two important sections under Duty drawback-
Section 74
Section 75

Section 76
Section 74:-
When imported goods are exported without manufacturing

Section 75:-
When imported goods are exported after manufacturing

Section 76:-
Conditions where draw back not allowed-
# If the market price of the goods is less than the amount of drawback.
# If the drawback of any goods is less than Rs. 50.

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