CORPORATE TAXATION

in
INDIA.

Ajit Kumar Satapathy

Rai Business School.
3rd
Semester
M.B.A + P.G.P.M.
RBS / PGPM / SPR
 CONTENTS.
WHY TAX ?
 EVALUATION OF INCOME TAX.
TYPES OF TAX.
SCHEME OF TAXATION.
RESIDENTIAL STATUS .
CONCLUSION.
 WHY TAX COLLECTED ?
India is an independent country governed by the Govt. of India.
For the day - to-day activities of country like decency, medical,
health, welfare, education, etc Govt. requires fund.
Taxation has been consider as the best and major source of
income of the govt. Here the govt. collects it’s revenue by way of
imposing and collecting tax.
Taxation source of revenue collection is an old concept which
was introduced in India by the Britisher in the year 1860 for the
first time.
Tax implies a compulsory contribution made by the people to
the ruling authority i.e. Govt. Presently the taxation structure of the
govt provides for the types of taxes such as direct tax and indirect
tax.
DIRECT TAXES
Incidence of which falls on
persons who pay them to
the government.
Ex. Income Tax. (1961)
Wealth Tax. (1957)
Gift Tax. (1958)
INDIRECT TAXES
Initially paid by one person
and the burden is passed
over to some other person
Ex. Sales Tax.
Custom Tax. (1962)
 HISTORY OF INCOME TAX

The any amount of money which is paid by

the assessee on his total income is called
Income Tax.
It was first introduced by the Britisher’s in
the year 1886.
Again one set of law was introduced in the
year 1922 till 1947 and by the Indian govt till
1961.
In the year 1961 India framed a new set of
law.
 Scheme of Taxation .
1)Person.
2)Assessee.
3)Previous Year.
4)Assessment Year.
5)Rate of Tax.
6)Finance Act.
7)Charge of Tax.
8)Maximum amount not chargeable to Tax.
9)Total Income.
10)Residential Status.
 PERSON. [SEC 2(31)]
1. Individual.
2. A Hindu Undivided Family.
3. A Firm.
4. AOP or BOI.
5. Local Authority.
6. Artificial Juridical Person.
7. A Company.
 any Indian company
 any body corporate incorporated by under the laws of a country
outside India
 any institution, association or body whether Indian or non Indian,
which is declared by general or special order of the board to be a
company
 any institution, association or body which is or was assessable or
was assessed as a company for any assessment year under the
Indian Income tax Act, 1922 or which is or was assessable or was
assesses under this act as a company for any assessment year
commencing on or before the 1st day of April. 1970
CLASSIFICATION OF COMPANIES
For the purpose of taxation, companies are broadly classified
as:-

• Domestic company [Section 2(22A)]:- means an Indian

company (i.e. a company formed and registered under the
Companies Act,1956) or any other company which, in respect of
its income liable to tax, under the Income Tax Act, has made the
prescribed arrangement for declaration and payments within India,
of the dividends payable out of such income. A domestic company
may be a public company or a private company.

• Foreign company [Section 2(23A)] :- means a company whose

control and management are situated wholly outside India, and
which has not made the prescribed arrangements for declaration
and payment of dividends within India.
 ASSESSEE. [SEC 2(7)]
It means a person by whom any tax or any other sum is payable
under this Act and includes :
a) Ordinary Assessee: Any person who is entitled to refund of
tax under this Act.
b) Deemed Assessee: Giving tax on the income of other.
c) Assessee-In-Default: A person is deemed to be an assessee
in default if he fails to fulfill his statutory obligations. In case
of an employer paying salary or a person who is paying
interest it is their duty to deduct tax at source & deposit the
amount of tax so collected in Govt. treasury. If he fails to
deduct tax from tax or not deposit he is known as Assessee
in default.
 ASSESSMENT YEAR. [SEC 2(9)]

Assessment year means the period of twelve

months commencing on 1st April every year and
ending on 31st March of the next year. Income of
previous year of an assessee is taxed during the
following assessment year at the rates prescribed
by the relevant Finance Act.
 PREVIOUS YEAR. [SEC 3]

The Financial Year in which the income is

earned is known as the previous year. Any
financial year begins from 1st of April and ends on
subsequent 31st March. The financial year
beginning on 1st of April 2009 and ending on 31st
March 2010 is the previous year for the
assessment year 2010-2011.
N.B :- A) Continuing Business.
B) Newly setup business or profession.
C) In case of a newly created source of income.
 Exceptional Cases for Previous
Year.
1) Shipping Business Income of non-resident
ship-owners. (sec – 172) .
2)In case of Persons leaving India. (sec – 174).
3)Assessment of any AOP, BOI, or Artificial
Judicial person formed or established only for
a limited period. (sec - 174A).
4)In case of persons who are likely to transfer
their assets to avoid tax. (SEC -175).
5)In case of discontinued Business (SEC – 176).
RATE OF TAX FOR INDIVIDUALS & MEN.
INCOME LEVEL. RATE OF TAX.
Where the total income
doe snot exceeds Nil.
1,60,000
Where the total income
10% of amount by which
exceeds Rs 160000/- but
the total income exceeds
does not exceed Rs
Rs 1,60,000/-
300000/-
Where the total income
20% of amount by which
exceeds Rs 3,00,000/-
the total income exceeds
but does not exceed Rs
Rs 3,00,000/-
5,00,000/-
Where the total income 30% of amount by which
exceeds Rs 5,00,000/- the total income exceeds
Rs 5,00,000/-
 RATE OF TAX FOR WOMEN.
INCOME LEVEL. RATE OF TAX.
Where the total income
doe snot exceeds Nil.
1,90,000
Where the total income
10% of amount by which
exceeds Rs 190000/- but
the total income exceeds
does not exceed Rs
Rs 1,80,000/-
300000/-
Where the total income
20% of amount by which
exceeds Rs 3,00,000/-
the total income exceeds
but does not exceed Rs
Rs 3,00,000/-
5,00,000/-
Where the total income 30% of amount by which
exceeds Rs 5,00,000/- the total income exceeds
Rs 5,00,000/-
RATE OF TAX FOR SENIOR
CITIZENS.
INCOME LEVEL. RATE OF TAX.
Where the total income
doe snot exceeds Nil.
2,40,000
Where the total income
10% of amount by which
exceeds Rs 2,40,000/-
the total income exceeds
but does not exceed Rs
Rs 2,40,000/-
3,00,000/-
Where the total income
20% of amount by which
exceeds Rs 3,00,000/-
the total income exceeds
but does not exceed Rs
Rs 3,00,000/-
5,00,000/-
Where the total income 30% of amount by which
exceeds Rs 5,00,000/- the total income exceeds
Rs 5,00,000/-
RATE OF TAX FOR HUF/ AOP/ BOI/ Artificial
Judicial Person.
INCOME LEVEL. RATE OF TAX.
Where the total income
doe snot exceeds Nil.
2,40,000
Where the total income
10% of amount by which
exceeds Rs 2,40,000/-
the total income exceeds
but does not exceed Rs
Rs 2,40,000/-
3,00,000/-
Where the total income
20% of amount by which
exceeds Rs 3,00,000/-
the total income exceeds
but does not exceed Rs
Rs 3,00,000/-
5,00,000/-
30% of amount by which
Where the total income the total income exceeds
exceeds Rs 5,00,000/- Rs 5,00,000/-
 SURCHARGE AND CESS
• Further, the amount of income tax as computed in
accordance with above rates, and after being
reduced by the amount of tax rebate shall be
increased by a surcharge at the rate of 10% of such
income tax, provided that the total income exceeds
Rs. 10 lacs. Thus, in case of individuals/HUFs no
surcharge shall be payable if the total income is
below Rs.10 lacs.
• The tax and surcharge, if any, are to be
further enhanced by education cess levied
@ 3% from A. Y. 2008-09 onwards.
 FIRM
i. Income-tax: 30% of total income.
ii. Surcharge: The amount of income tax
as computed in accordance with above
rates, and after being reduced by the
amount of tax rebate shall be increased
by a surcharge at the rate of 10% of such
income tax, provided that the total
income exceeds Rs. 1 crore.
iii.Education Cess: 3% of the total of
Income-tax and Surcharge.
 LOCAL AUTHORITY

i. Income-tax: 30% of total income.

ii. Surcharge: Nil
iii.Education Cess: 3% of Income-tax.
 DOMESTIC COMPANY
i. Income-tax: 30% of total income.
ii. Surcharge: The amount of income tax
as computed in accordance with above
rates, and after being reduced by the
amount of tax rebate shall be increased
by a surcharge at the rate of 10% of such
income tax, provided that the total
income exceeds Rs. 1 crore.
iii.Education Cess: 3% of the total of
Income-tax and Surcharge.
 FOREIGN COMPANY
i. Income-tax:
@ 50% of on so much of the total income as consist of (a) royalties
received from Government or an Indian concern in pursuance of an
agreement made by it with the Government or the Indian concern after the
31st day of March, 1961 but before the 1st day of April, 1976; or (b) fees for
rendering technical services received from Government or an Indian concern
in pursuance of an agreement made by it with the Government or the Indian
concern after the 29th day of February, 1964 but before the 1st day of April,
1976, and where such agreement has, in either case, been approved by the
Central Government; @ 40% of the balance
ii. Surcharge: The amount of income tax as computed in accordance with
above rates, and after being reduced by the amount of tax rebate shall be
increased by a surcharge at the rate of 2.5% of such income tax, provided that
the total income exceeds Rs. 1 crore.
iii. Education Cess: 3% of the total of Income-tax and Surcharge.
FINANCE ACT: A budget is prepared and presented by finance
minister. It is a financial bill which declares the financial proposal of the
govt. for upcoming year.
Charge of Tax. Sec 4 of gives an authority to the central govt. for
charging of income tax. It states where any central act enacts that income
tax shall be charged for any assessment year at any rate or rates then at that
rate or rates income tax shall be charges for that year in accordance with the
provision of the act.
Total Income :- Includes the following
1. Concept of Income.
2. Definition Income.
3. Gross Total Income.
4. Total Income.
Maximum amount not chargeable to tax:
In case of certain assess there is no tax on incomes up to a certain limit
such a limit is called as basic exception limit or maximum amount not
chargeable to tax.
 Computation of Total Tax Liability.
Particular Amount.
Salaries (sec 15-17) XXX
Income from house property (sec 22-27) XXX

Income from business or profession (sec 28 – 44D) XXX

Income from Capital Gain (Sec 44 – 55A) XXX

Income form Other Source (sec 56-59) XXX

Gross total income. XXX

(-) Deduction U/S 80C to 80U. XXX
Total Income / Tax on above. XXX
(-) Rebates (sec 88E) XXX
(+) Surcharge @10% XXX
(+) Education Cess @3% XXX
Total Tax XXX
RESIDENTIAL STATUS (SEC – 6)

RESIDENTIAL STATUS (SEC-6)

RESIDENT

NON-RESIDENT.
ORIDINARY RESIDENT NOT ORIDINARY RESIDENT
 RESIDENTIAL STATUS OF
INDIVIDUAL.
RESIDENT[SEC – 6(1)]:- An individual shall be resident in India if he
satisfies at least one of the following two basic conditions. i.e. .
1. He is in India for a total period of 182 days or more during the RPY.
2. He is in India for a total period of 60 days or more during the RPY and
also has been in India for a total period of 365 days or more in the
immediate four PPY.
There are two exceptions to the above rules. In these exceptional cases
the second basic condition doesn’t apply.
a) An individual who is a citizen of India & leaves India for employment in
abroad or as a crew member of a Indian ship.
b) An individual who is a citizenship of India or a person of Indian or origin
who ordinary resides abroad but comes to India on a visit.

Non-Resident[SEC – 2(30)] :- If an individual fails to satisfy at least one

of the basic two condition, then that individual will treated as a Non-
Resident.
 RESIDENTIAL STATUS OF
INDIVIDUAL.
ORIDINARY RESIDENT [SEC 6(1)]:- An individual shall be
resident and ordinary resident in India if he satisfies at least
one of the above two basic conditions and also satisfies both
the following two additional conditions. i.e. .
1. He is resident in India for two or more years in the
immediate ten (10) PPY.
2. He is in India for a total period of 730 days or more in the
immediate seven (7) PPY.

Resident but not Ordinary-Resident [SEC 6(6)]:-An individual

shall be resident but not ordinary resident if he satisfies at
least one of the two basic condition but fails to satisfy both
the additional conditions.
N.B 1. considered arrival and departure day.
2. Indian origin if his parents were born in India.
RESIDENTIAL STATUS OF HUF.(SEC – 6)

RESIDENTIAL STATUS OF HUF. [SEC-6(2)]

RESIDENT

NON-RESIDENT. [SEC-
ORIDINARY RESIDENT
2(30)]
NOT ORIDINARY RESIDENT [SEC-6(6)(B)]
RESIDENTIAL STATUS OF
COMPANY.(SEC – 6)

RESIDENTIAL STATUS OF COMPANY. [SEC-6(3)]

NON-RESIDENT. [SEC-
RESIDENT
2(30)]
 SCOPE OF TOTAL INCOME (SEC-5).

Different Types of Status.

Different kinds of Income.
Not-Ordinarily Non-
Resident
Resident. Resident.
Income earned in India whether received in
Taxable Taxable. Taxable.
India or not.

Income received in India whether earned in

Taxable Taxable. Taxable.
India or not.

Incomes earned & received outside India from

Taxable Taxable. Not.
a business or profession w.e. control in India.

Incomes earned & received outside from a

Taxable Not. Not.
source other than all the above.

Past untaxed income brought into India

Not. Not. Not.
during the previous year.
 CONCLUSION.
 Tax is collected by the Govt. i.e. Ruling Party.
 It is the major source of Govt. for collection of Revenue.
 The Rate of Tax is determined by the Govt. in each year.
 The Rate of Tax is differ from person to person.
 Total Tax is calculated on the basis of Toal Income and
Residential Status of a person.
 There is a difference between resident and citizen from
Income Tax point of view.
ANY QUIRIES ?