Taxation

By

Deepa Chaudhary
Management Students
NIILM School of Business
New delhi

Self Assessment
U/s 140A, any tax is payable on the basis of any return being submitted U/s 139 or 142,
148, 153A or 158 BC. The Assesses shall deposit the amount of tax, after taking into
consideration tax already paid, before the submission of Return and the Return must be
accompanied by proof payment of such tax.

Tax so paid shall be adjusted towards the tax liability as ascertained on regular
assessment.

The assessee is required to make a self assessment and pay the tax on the basis of the
returns furnished. Any tax paid by the assessee under self assessment is deemed to have
been paid towards regular assessment.

Many people, especially those who are filing a return for the first time, find that self-
assessment is a daunting and time-consuming task. Our experts ensure that your tax
return is filed correctly and on time so that you do not incur any penalties. We will make
all the tax calculations for you and advise you on your liabilities and how to plan for
them.

Our personal taxation service also includes:

• Queries with tax codes

• Tax credit claims
• Tax on their rental income
• Tax relief on pension payments
• Reliefs avaliable for business mileage whilst using their personal car.
VAT(value added tax)

Value Added Tax (VAT) is an indirect tax on goods, introduced in lieu of sales tax, to
ensure transparency and greater compliance. The basic premise of VAT is to tax the “true
value” added to the goods, at each stage of the transaction chain. This ultimately reduces:

• Tax paid to the government.

• Cost/tax passed onto the consumer.

VAT is one of the most complex tax regimes that are imposed on a business - so complex
that many businesses inadvertently overpay or underpay VAT.

We provide an efficient and most importantly cost effective service which includes:

• Assistance with VAT Registration

• Advice on VAT planning
• VAT control and reconciliations
• Completion of VAT returns

Vat cocept
The essence of VAT is in providing set-off for input tax and this is applied through the
concept of input credit/rebate. This input credit in relation to any period means setting off
the amount of input tax by a registered dealer against the amount of his output tax. Value
Added Tax (VAT) is based on the value addition to the goods, and the related VAT
liability of the dealer is calculated by deducting the input credit from the tax collected on
sales during the payment period.

VAT works in two different ways:

• If VAT-registered business receives more output tax than the taxes paid as input,
they will need to pay the difference to the Commissioner of Taxes (State)
• If the input tax paid is more than the output tax collected,
o You can carry forward the Input credit and adjust it against the output tax
in the subsequent months.
o You can have the Input Credit refunded to you by the Government at the
end of the current or following year.
o You can receive refunds for Input Credit on exports within a period of
three months.
VAT Composition

In order to relieve some small businesses of the need to keep detailed records, the law has
made provision for a simpler method of accounting for VAT. The method of calculating,
VAT payable is also made easier. Such a method is called a VAT Composition Returns.

The VAT Composition Returns states that “Small dealers with an annual gross turnover
not exceeding 5 to 50 lakhs and subject to respective state act and rules, who are
otherwise liable to pay VAT, shall however have the option for a composition scheme
with payment of tax at a small percentage of gross turnover. The dealers opting for this
composition scheme will not be entitled to input tax credit.”

VAT Rates

According to the White Paper, there are 550 categories of goods under the VAT system.
They are classified into the following four groups, depending on the VAT rate:

VAT @ 4%

The largest number of goods (270) comprising of basic necessity items such as drugs and
medicines, agricultural and industrial inputs, capital goods and declared goods are under
4% VAT rate.

Exempted from VAT

There are about 46 commodities under the exempted category. This includes a maximum
of 10 commodities that each state would be allowed to select, from a broader approved
list for VAT exemption. The exempted commodities include natural and unprocessed
products in unorganized sector as well as items, which are legally barred from taxation.

VAT @ 1%

This is for a specific category of goods like gold, silver, etc.

VAT@12.5%

The remaining commodities are under the genera

Items Covered in Indian VAT

550 items covered
Tea-producing states options
either percentage VAT
270 items of basic needs, like
medicine, drugs, agro & industrial
inputs, capital & declared goods
4% VAT
Petrol, diesel, liquor, lottery not
included *
Rest 12.5% VAT. Gold & silver
jewellery - 1%
Sugar, textile & tobacco excluded
for one year
Corporation Tax
The corporate tax rate in India is at par with the tax rates of the other nations
worldwide. The corporate tax rate in India depends on the origin of the
company.

If the company is domicile to India, the tax rate is flat at 30%. But for a
foreign company, the tax rate depends on a number of factors and
considerations. The companies that are domicile to India are taxed on the
global income whereas the foreign companies in India are taxed on their
income within the Indian territory. The incomes that are taxable in case
of foreign companies are interest gained, royalties, income from the
capital assets in India, income from sale of equity shares of the company,
dividends earned, etc .
Domestic Corporate Income Taxes Rates:
A Domestic Company means an Indian Company or any other company with respect to its
income, liable to tax under the Income-Tax Act, has made the prescribed arrangements for the
declaration and payment within India, of the dividends (including dividends on preference
shares) payable out of such income.

Thus, all Indian Company are treated as Domestic Company but all Domestic Company are not
Indian Company.

If a Foreign Company makes prescribed arrangements for payment of dividends in India it shall
be treated as Domestic Company.

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.

Foreign Companies income tax rates:

• For dividends: - 20% for non-treaty foreign companies and 15% incase of
companies under the treaty based in the United States
• For interest gains: - 20% for non-treaty foreign companies and 15% for
companies under the treaty based in the United States
 • For royalties: - 30% for non-treaty foreign companies and 20% for companies
under the treaty based in the United States
• For the technology based services in case of non-treaty foreign companies & 20%
for companies under the treaty based in the United States
• For all other kinds of income and gains: - 55% in case of non-treaty foreign
companies and 55% for the companies under the treaty based in the United States
• Attention should be given on levying inter corporate rates in case holding is
minimum
• Attention should be given on the fact that sanctions of the tax authorities on tax
withholding
• Attention should be given on several of the tax treaties that India signed with
other countries and also on the various encouraging tax rates

Corporate tax fixed at 30% in DTC Bill

The corporate tax rate is now going to be 30% including surcharges and cess etc,
currently that rate is 33%.

The minimum alternative tax (MAT) has been set at 20% as book profits interestingly the
dividend distribution tax as well the capital gains tax have not been changed.

The wealth tax however is now going to be - what the cabinet has approved rather is
going to be - 1% for above Rs 1 crore. I can tell you with a lot of certainty that before the
cabinet meeting tax rates have not been decided.

However, what I have picked from my source is that rates for tax deducted at source
(TDS) have been decided. From the original draft, there have been some key changes for
example income for mutual funds there is going to be a TDS rate of 10% for Hindu
Undivided Family (HUFs) and individuals and 20% for other deductees for payments.

For life insurance policies, it is going to be 10% again for HUFs and individuals and 20%
for other deductees.

The rationale has been to include these TDS net is to have better tax compliance. Also
TDS has been hiked from 1% to 2% for payment on works contract, service contract,
advertising as well as payment on rent for immovable properties, machinery and
equipment. So those are some of the key tax rates that have been decided by the cabinet.
Corporate tax deductions

For the Assessment Year 2007-08

Description Existing Rate* (%) Proposed Rate* Difference + - =
(%) (%)
Domestic Company

Regular Tax 33.6 33.9** +0.33

MAT 11.22 11.33 +0.11
(of book profits) (of book profits)
DDT 16-995 +2.97
Foreign Company
Regular Tax 41.82 42.82# 0.41

It includes the applicable surcharge and the education cess.

If the income is equal or less than Rs 10 million, it is 30.9%.
If the income is equal or less than Rs 10 million, it is 41.2%.

http://finance.indiamart.com
http://conceptaccounts.co
http://www.incometaxmanagement.com
http://business.mapsofindia.com
http://www.tax4india.com
http://www.moneycontrol.com