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Amity Global Business School: MBA, Semester 3 Corporate Tax Planning Ms. Kirandeep Kaur

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Aditya Singh

This document provides an overview of key concepts in Indian corporate tax planning including: 1) Definitions of direct and indirect taxes and examples of each. 2) An overview of the key terms and sections of the Indian Income Tax Act of 1961 including the definition of an assessee, previous year, assessment year, and the heads of income. 3) Details of tax rates for individuals, women, senior citizens, cooperative societies, and local authorities. 4) The distinction between gross total income and total income after exemptions.

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Amity Global Business School: MBA, Semester 3 Corporate Tax Planning Ms. Kirandeep Kaur

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Aditya Singh
39 views14 pages
This document provides an overview of key concepts in Indian corporate tax planning including: 1) Definitions of direct and indirect taxes and examples of each. 2) An overview of the key terms and sections of the Indian Income Tax Act of 1961 including the definition of an assessee, previous year, assessment year, and the heads of income. 3) Details of tax rates for individuals, women, senior citizens, cooperative societies, and local authorities. 4) The distinction between gross total income and total income after exemptions.

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This document provides an overview of key concepts in Indian corporate tax planning including: 1) Definitions of direct and indirect taxes and examples of each. 2) An overview of the key terms and sections of the Indian Income Tax Act of 1961 including the definition of an assessee, previous year, assessment year, and the heads of income. 3) Details of tax rates for individuals, women, senior citizens, cooperative societies, and local authorities. 4) The distinction between gross total income and total income after exemptions.

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39 views14 pages

Amity Global Business School: MBA, Semester 3 Corporate Tax Planning Ms. Kirandeep Kaur

Uploaded by

Aditya Singh
This document provides an overview of key concepts in Indian corporate tax planning including: 1) Definitions of direct and indirect taxes and examples of each. 2) An overview of the key terms and sections of the Indian Income Tax Act of 1961 including the definition of an assessee, previous year, assessment year, and the heads of income. 3) Details of tax rates for individuals, women, senior citizens, cooperative societies, and local authorities. 4) The distinction between gross total income and total income after exemptions.

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AMITY GLOBAL BUSINESS SCHOOL

MBA, Semester 3 CORPORATE TAX PLANNING Ms. KIRANDEEP KAUR

Basic Concepts related to Tax


Tax can be defined as a levy or other type of a financial charge or fee imposed by state or central governments on legal entities or individuals. Tax Classifications A direct tax is a form of tax is collected directly by the government from the persons who bear the tax burden. An indirect tax is a form of tax collected by mediators who transfer the taxes to the government, and also perform functions associated with filing tax returns. The customers bear the final tax burden. Examples of indirect taxes are sales tax and value added tax (VAT).

Income Tax Act, 1961


It came into force on 1st April, 1962. Sec 1 of IT Act, the Act is called as Income Tax Act, 1961 & it extends to whole of India. Means the definition is self explanatory. E.g. Agricultural Income, Assessment Year, Capital Asset. Includes the definition is not exhaustive and its meaning may be extended. E.g. Income, Person, Transfer.

The term person as per Income Tax law is defined to include: 1) An Individual. e.g. Mr. A or Mr. B. 2) A Hindu Undivided Family. e.g. Mr. A (HUF) or Mr. B (HUF). 3) 4) A Company. e.g. XYZ Pvt. Ltd. Or ABC Ltd. A Partnership firm. e.g. M/s ABC or M/s XYZ and Co.

PERSON,SEC 2(31)

5) An Association of persons or a body of Individuals, whether incorporated or not. e.g. ABC Sangh or XYZ Dal. 6) A Local Authority. e.g. Pune Municipal Corporation or PCMC Municipal Corporation. 7) Every Artificial Juridical persons not falling within any of the above categories. (Residual Category).

ASSESSEE,SEC 2(7)
It is defined broadly to include the following: In Simple terms any Person whose income is assessable under any Tax law (herein referred to as The Income Tax Act 1961) is called an Assessee.

PREVIOUS YEAR, SEC.3


It is the financial year immediately preceding the assessment year i.e. The year in which the income is earned is called the previous year. EXCEPTIONS: 1)Persons leaving India,SEC.174 2)Bodies formed for short duration,SEC.174A 3) Persons likely to transfer property to avoid tax,SEC.175 4)Discontinued Business,Sec.176 5)Shipping business of Non-Residents,SEC.172.
6

ASSESSMENT YEAR,SEC.2(9)
Assessment year in simple terms means the financial year immediately succeeding the previous year. In other words it is the year in which one is assessed for his/ her income. Below mentioned example will help you gain more clarity on these terms: Mr. B, a salaried individual earned an income of Rs. 3, 50,000/- in the previous year starting from 1st April 2009 to 31st March 2010 (i.e. 2009-10). Now he has to pay tax on income earned, at applicable rates for assessment year starting from 1st April 2010 to 31st March 2011 PLEASE NOTE: Previous year and Assessment year will always be starting from 1st April and ending on 31st March, In no case it can be followed as a Calendar year i.e. 1st January to 31st December. At present the assessment year 2010-2011 is going on.

Sec 4: Charge of Income Tax

Rates of tax for resident individuals, above 65 yrs at any time during the PY:
Income Upto Rs. 2,40,000 Above Rs. 2,40,000 Upto Rs. 3,00,000 Above Rs. 3,00,000 Upto Rs. 5,00,000 Above Rs. 5,00,000 Rates of Tax Nil 10% 20% 30%

Rates of tax for resident individual, being a woman, aged below 65 yrs:
Income Upto Rs. 1,90,000 Above Rs. 1,90,000 Upto Rs. 3,00,000 Above Rs. 3,00,000 Upto Rs. 5,00,000 Above Rs. 5,00,000 Rate of Tax Nil 10% 20% 30%

Other individuals: Income Upto Rs. 1,60,000 Above Rs. 1,50,000 Upto Rs. 3,00,000 Above Rs. 3,00,000 Upto Rs. 5,00,000 Above Rs. 5,00,000 Rate of Tax Nil 10% 20% 30%

Surcharge : With effect from assessment year 2010-11 surcharge has been abolished. Education Cess : 2% on income tax Secondary & Higher Education Cess: 1% on income tax

Co Operative Societies Income Up to Rs. 10,000 Above Rs.10,000 Upto Rs. 20,000 Above Rs. 20,000 Rate of Tax 10% 20% 30%

Education Cess @ 2% & Secondary & Higher Education Cess @ 1% is applicable.

Local Authorities
Tax at a flat rate of 30% on the whole income. No Surcharge. Education Cess @ 2%. Secondary & Higher Education Cess @ 1%.

GROSS TOTAL INCOME & TOTAL INCOME


GROSS TOTAL INCOME: As per Sec 14, income is chargeable to tax under five heads, those being: 1) Salaries 2) Income from House Property 3) Profits and Gains from Business or Profession 4) Capital Gains. 5) Income from Other Sources The aggregate income under these heads is termed as Gross Total Income. It is always calculated before providing exemptions under Chapter VIA, i.e., deductions from Section 80C to 80U. TOTAL INCOME: Total Income stated simply is the Gross Total Income as reduced by amount permissible as deduction under Sections 80C to 80U

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