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Application Exercise (Assignment to be submitted) (180 min) Identify the sectors under which your company can avail

l the benefits under the Income Tax Act. Please answer keeping in view the latest amendments. Discuss with your Finance/Tax Department and find out the Tax planning measures adopted by your company and the magnitude of Income Tax that has been saved as a result of these measures.

Submitted By: Shreyas Raut Roll No : 52

Corporate Tax in India Intro.


Corporate tax rate in India is at par with the tax rates of other nations of the world. The corporate tax rate in India is based on the origin of the company. If the company is domicile to India, then the tax rate is flat at 30%. But for a foreign company, then the tax rate depends on several other factors and considerations. For companies that are domicile to India, tax is charged on the global income whereas for the foreign companies present in India, tax is charged on their income within Indian Territory. Incomes that are taxable for foreign companies include income from the capital assets in India, interest gained, income from sale of equity shares of the company, royalties, dividends earned, etc. Incase of Domestic Corporations the effective tax rate as well the tax rate with surcharge as is 30%. It should be noted that if the taxable income is greater than Rs. 1 million then a surcharge of 10% of the tax on income is also levied. It is important to note the fact that all the companies formed in India are considered as Indian domestic companies, even for ancillary units with mother companies in foreign countries

General Tax benefits under Income tax act:


The Government offers many incentives to investors in India with a view to stimulating industrial growth and development. The incentives offered are normally in line with the government's economic philosophy, and are revised regularly to accommodate new areas of emphasis. The following are some of the important incentives offered, which significantly reduce the effective tax rates for the beneficiary companies:

Five year tax holiday for:

o o o o o

Power projects. Firms engaged in exports. New industries in notified states and for new industrial units established, in electronic hardware/software parks. Export Oriented Units and units in Free Trade Zones. As of 1994-95 budget firms engaged in providing infrastructure facilities, can also avail of this benefit.

Tax deductions of of 100 per cent of export profits. Deduction of 30 per cent of net (total) income for 10 years for new industrial undertakings. Deduction of 50 per cent on foreign exchange earnings by construction companies, hotels and on royalty, commission etc. earned in foreign exchange. Deduction in respect of certain inter-corporate dividends to the extent of dividend declared. Gains pertaining to long term capital are subject to low tax incidence Venture capital funds and venture capital companies have special tax provisions Specula tax provisions are applicable for non resident Indians involved in activities in India Under the Finance Bill 1996, the minimum alternative tax (MAT) is levied on the corporate sector Capital Allowances expenses on R&D, mergers & acquisitions qualify for deduction Depreciation available at specific percentage depending on the nature of the asset and depreciation not set off against current years income can be carried forward for set off against any future income for an unlimited period. Stock/Inventory valuation at market value or cost whichever is lower Interest Interest paid on the borrowings Losses can be set off against any other income in the same Assessment Year and against business profits in subsequent assessment years subject to certain conditions. Domestic companies are allowed to deduct dividend received from other Domestic Companies in certain cases Special Provisions apply to Venture Fund and Venture Capital companies

Subject to certain conditions Deductions are allowed to Exports and new undertakings Special Deductions for developing, maintaining, and operating new infrastructure and power facilities Business Losses can be carried over for eight years Interest, Dividends and Long-Term Capital Gain income earned by an Infrastructure Fund from investments in shares or long-term finance in enterprises carrying on the business of developing, monitoring and operating specified infrastructure facilities or in units of Mutual Funds involved with the infrastructure of power sector are to be tax exempt.

Oil firms seek 7-yr tax holiday in Budget (Specific to L&T OGSP)
An association of private and PSU oil companies has demanded a slew of tax incentives, including income tax holiday for natural gas production and extending the same for oil refineries by another five years. In a pre-Budget memorandum to the government, the Petroleum Federation of India (PetroFed), a body comprising almost all public and private sector oil companies, sought seven-year holiday for payment of income tax to all refineries that are commissioned by March 2017. Currently, the tax breaks are available only for units beginning production by March this year. "This would ensure that India becomes the export hub which would put pressure on the product prices and bring down the international prices of sensitive products and would also enable reduction in under recoveries of the oil companies," it said. PetroFed said the period of tax holiday for both exploration and refining activities should be extended to 10 years as in case of power sector. "Government has granted 100 per cent tax holiday in respect of profits derived by undertakings engaged in the generation or generation and distribution of power for a period of any 10 consecutive years out of 15 years beginning with the year in which the undertaking starts generation or distribution of power," it said, adding hydrocarbon sector should be treated at par with power sector "Hydrocarbon sector is quite critical for the speedy and balanced growth of any economy, especially ours in the context of the over-dependence on oil imports to meet our domestic demand which has significantly increased over the recent years in view of the robust growth," it said. It also wanted the definition of infrastructure sector be be expanded to include oil and gas pipeline.

PetroFed said the the government had in 2009 extended tax holidays for production of natural gas from areas awarded under New Exploration Licensing Policy's (NELP) round-VIII. This "is clearly discriminatory in nature, since it denies the benefit to Production Sharing Contracts (PSCs) signed so far under the NELP/ CBM (Coal Bed Methane) policy, where the government is clearly bound under the doctrine of promissory estoppel to honour its commitment." Promissory estoppel prevents a person or institution from reneging on a promise. The association suggested inclusion of natural gas production for the purpose of availing income tax breaks. It also suggested abolition of the National Calamity Contingent Duty (NCCD) of Rs 50 per ton, saying the levy was imposed on domestic and imported crude oil in Union Budget for 2003-04 for one year but it has not yet been done away with.