CORPORATE TAXATION.pptx a ppt on corpate taxation

it is a ppt on corpate taxation for b.com 3 rd yr

1. CORPORATE TAXATION Dr. Amit Kumar Assistant Professor IITM Janakpuri, New Delhi

2. introduction UNIT-1

3. COMPANY As per section 2(17) of companies act company means : 1. Any Indian company 2. any body incorporated by or under the law of country outside I ndia 3. any institution association or body which was assessed as a company for any assessment year commencing on or before 1.4.1970 4. Any institution , association or body whether incorporated or not and whether Indian or Non-Indian, which is declared by general or special order of CBDT to be a company.

4. A company in which public are substantially interested Section 2(18) of income tax has defined a company in which the public are substantially interested” it includes-: 1. a company owned by GOI or RBI 2. A Company having Gov. participation 3. companies registered under section 25 of companies act 1956 4. A company declared by CBDT 5. Mutual benefit finance company 6. a company having cooperative participation 7. public limited company

5. Cont.… Widely held company- : it is a company in which public are substantially interested. Closely held company- : it is a company in which the public are not substantially interested. Indian company -: Means company formed and registered under Indian companies act. 1956 Domestic company- : an Indian company or any other company which in respect of its income , liable to tax under income tax act has made the prescribed arrangement for the declaration and payment within India of the dividend Foreign company- : company which is not domestic company Investment company- : company whose gross total income consist mainly of income which is chargeable under the head house property, capital gain, other sources.

6. INCIDENCE OF TAX FOR A COMPANY The total income of a company is also computed in the manner in which income of any other assesse is computed. The first step to compute Gross Total income. Income computed under four head(except salary) is aggregated. Further set off losses and carry forward losses will also be done . Than deduction under chapter VIA should allowed provided the company has not opted to be taxed under section 115BAA and 115BAB, as the case may be. Note -: in case of domestic company opts to be taxed under section 115BAA or section 115BAB it shall not be allowed any deduction under chapter VIA other than section 80JJAA and section 80M.

7. Income exempt from tax There are some income which is not part of total income, such income are exempt from tax. Under Section 10, there are different sub-sections that define what kind of income is exempt from tax.  1. Income received by an Indian firm through the lease of an aircraft from a foreign firm or government 2 .Any income earned by the NFHC (National Finance Holdings Company ) 3. Any income earned by a foreign firm or company due to crude oil sales within India 4. Any income earned by any authority that has been established by more than one country 5. Any income received from any international event or function relating to sports 6. Income earned in the form of dividends through an Indian firm 7. Income earned in the form of subsidies via the Tea Board

8. Tax computation for a company Ascertain the taxable income under each of the head and arrive at the gross total income after set off of losses of the current year or brought forward losses of earlier years. From the gross total income, a company is eligible to claim following deductions u/s 80 80G, 80GGA, 80GGB, 80IA, 80IAB, 80IB, 80IC, 80IE, 80JJA, 80JJAA, 80LA, 80M,80PA The balance is the total income. Rate of Tax for the A Y 2023-24 Domestic company: i. Winnings u/s115BB 30% ii. STCG Sec111A 15% iii. LTCG Sec 112 10%/20% iv. LTCG Sec 112A 10% v. Other incomes: General rate 30%

9. Cont. Note : U/S 115BA, if total turnover or the gross receipts of domestic company in the Previous Year 2022-23 does not exceed Rs.400 crore, tax shall be charged at 25 % instead of 30% for the A Y 2023-24. Surcharge : 7%, if total income exceeds Rs.1 crore but does not exceed Rs.10 crore; 12 %, if total income exceeds Rs.10 Crore . Health & Education Cess: 4 % Foreign Company : General rate: 40% Surcharge: 2%, if total income exceeds Rs.1 crore but does not exceed Rs.10 crore; 5 %, if total income exceeds Rs.10 Crore Health & Education Cess: 4%

10. Cont.. The Taxation Laws (Amendment) Act, 2019 has inserted two new sections – Sections 115BAA and 115BAB in the Income Tax Act, 1961 w.e.f. A Y 2020-21. Sec 115BAA : provides for concessional rate of tax at 22% (plus surcharge 10% and H&E Cess at 4%) for domestic companies, subject to certain conditions, like non- availability of profit-linked deductions and investment linked tax deduction, non- availability of deduction for contribution to research and development and additional depreciation etc. Sec 115BAB : provides for concessional rate of tax at 15% (plus surcharge at 10% plus H&E Cess at 4%) to new manufacturing domestic companies set up and registered on or after 1.10.2019, commencing manufacturing on or before 31.3.2023. subject to certain conditions like non-availability of profit-linked deductions and investment linked tax deduction, non-availability of deduction for contribution to research and development and additional depreciation etc.

11. Conditions for a Company to be assessed u/s 115BA, 115 BA and 115 BAB Company is not allowed following exemptions and deductions while computing its total income : 1. Sec 10AA – unit in SEZ 2. Sec 32 – Additional depreciation on new plant and machinery 3. Sec 32AD – Investment Allowance 4. Sec 33 AB – Deposit in Tea Development Account 5. Sec 33 ABA – Production of petroleum or natural gas in India 6. Sec 35 – Payment to outsiders for research or expenditure or in-house research 7. Sec 35AD – Capital expenditure or Specified businesses 8. Sec 35CCC – Expenditure on agricultural extension project 9. Sec 35CCD – Expenditure on skill development proje 10. Deduction u/s 80 (Chapter VI-A) except deductions u/s 80JJAA and 80M 11. B/F loss if such loss is attributable to the aforesaid deductions or unabsorbed additional depreciation.

12. Tax on certain dividends received from foreign companies: Sec 115BBD 1. Where the total income of an Indian company includes any income by way of dividends declared or distributed or paid by a specified foreign company, the Indian company shall be liable to tax as under: i. On such dividend income : a) Income tax-15% b) Surcharge- i) 7% if total income exceeds one crore rupees but does not exceed ten crore rupees. ii) @12% if total income exceeds ten crore rupees. c) Health and Education Cess: 4% ii. On other income- as per the provision of Income Tax Act.

13. Minimum Alternate Tax (MAT) on Companies (Section 115JB): Every company is liable to pay a Minimum Alternate Tax (MAT) of 15% of its Book Profit (plus surcharge if any, and H & E Cess). The tax payable by a company is either tax on its total income or minimum alternate tax (MAT), whichever is more. Where a company is paying minimum alternate tax, it is allowed Tax Credit in respect of excess tax paid over tax on total income (i.e., Tax Credit = MAT – Tax on Total Income). This tax credit can be utilized against the tax payable on total income in subsequent assessment years. Tax Credit of any previous year can be carried forward and utilized towards the tax payment in the subsequent 15 years, w.e.f. A Y 2018-19 Note: Where a company is assessed u/s 115BAA or 115 BAB, it is not liable to MAT u/s 115JB .

14. DIFFRENCE B/W mat & amt 1 . Minimum Alternate Tax is imposed on firms. On the other hand,  an alternative minimum tax is imposed on entities and individuals except for companies.  2 . The AMT is calculated as adjusted overall income. On the other hand, a minimum alternate tax on book profits. Adjusted overall income means the overall income arising from claimed deductions if there are any such deductions according to Chapter VI-A(C), Section 80IA-80RRB other than 80P or Section 10AA. Book Profits mean the profit and loss statement of the assessee made according to Schedule VI of the Companies Act of 1956 . 3 . The alternative minimum tax is not imposed on Capital Gain Exempt. On the other hand, the minimum alternate tax is imposed on Capital Gain Exempt. 4 . An organization under minimum alternate tax has to get a report from the CA, according to form 29B, where it is mentioned that the book profit determined for minimum alternate tax is according to Section 115JB of the 1961 Income Tax Act. On the other hand, an individual under the alternative minimum tax has to get a report from a CA, according to Form 29C, where it is certified that the adjusted overall income determined for alternate minimum tax and liability is according to Section 115JC of the 1961 Income Tax Act.

15. Issue of corporate tax UNIT-3

16. TRANSFER PRICING Transfer pricing refers to the prices of goods and services that are exchanged between companies under common control. For example, if a subsidiary company sells goods or renders services to its holding company or a sister company, the price charged is referred to as the transfer price . Entities under common control refer to those that are ultimately controlled by a single parent corporation. Multinational corporations use transfer pricing as a method of allocating profits ( earnings before interest and taxes ) among their various subsidiaries within the organization . Transfer pricing strategies offer many advantages for a company from a  taxation  perspective, although regulatory authorities often frown upon the manipulation of transfer prices to avoid taxes. Effective but legal transfer pricing takes advantage of different tax regimes in different countries by raising transfer prices for goods and services produced in countries with lower tax rates.

17. TRANSFER PRICING In some cases, companies even lower their expenditure on interrelated transactions by avoiding tariffs on goods and services exchanged internationally. International tax laws are governed by the  Organization for Economic Cooperation and Development (OECD)  and the auditing firms under OECD review and audit the financial statements of MNCs accordingly. Consider ABC Co., a U.S.-based pen company manufacturing pens at a cost of 10 cents each in the U.S. ABC Co.’s subsidiary in Canada, XYZ Co., sells the pens to Canadian customers at $1 per pen and spends 10 cents per pen on marketing and distribution. The group’s total profit amounts to 80 cents per pen . Now, ABC Co. will charge a transfer price of between 20 cents and 80 cents per pen to its subsidiary. In the absence of transfer price regulations, ABC Co. will identify where tax rates are lowest and seek to put more profit in that country. Thus, if U.S. tax rates are higher than Canadian tax rates, the company is likely to assign the lowest possible transfer price to the sale of pens to XYZ Co.

18. Arm’s Length Principle Article 9 of the OECD Model Tax Convention describes the rules for the Arm’s Length Principle. It states that transfer prices between two commonly controlled entities must be treated as if they are two independent entities, and therefore negotiate at arm’s length. The Arm’s Length Principle is based on real markets and provides a single international standard of tax computation, which enables various governments to collect their share of taxes and at the same time creates enough provisions for MNCs to avoid double taxation

19. Benefits of Transfer Pricing 1. Transfer pricing helps in reducing duty costs by shipping goods into countries with high tariff rates by using low transfer prices so that the duty base of such transactions is lowered. 2. Reducing income and corporate taxes in high tax countries by overpricing goods that are transferred to countries with lower tax rates helps companies obtain higher profit margins.

20. RISK of Transfer Pricing 1. There can be disagreements within the divisions of an organization regarding the policies on pricing and transfer. 2. Lots of additional costs are incurred in terms of time and manpower required in executing transfer prices and maintaining a proper accounting system to support them. Transfer pricing is a very complicated and time-consuming methodology. 3. It gets difficult to establish prices for intangible items such as services rendered, which are not sold externally. 4. Sellers and buyers perform different functions and, thus, assume different types of risks. For instance, the seller may refuse to provide a warranty for the product. But the price paid by the buyer would be affected by the difference.

21. Advance Tax Advance tax is the  income tax  that is paid in advance instead of lump sum payment at year end. It is the tax that you pay as you earn. These payments have to be made in instalments as per due dates provided by the income tax department.   Salaried, freelancers and businesses – If your  total tax liability is Rs 10,000 or more  in a financial year you have to pay advance tax. The advance tax applies to all taxpayers, salaried, freelancers, and businesses.  Senior citizens–  People aged 60 years or more, and do not run a business, are  exempt from paying advance tax . So only senior citizens (60 years or more) having business income must pay advance tax Presumptive income for businesses– The taxpayers who have opted for the presumptive taxation scheme under section 44AD have to pay the whole amount of their advance tax  in one instalment on or before 15 March . They also have the option to pay all of their tax dues by 31 March. Presumptive income for professionals–  Independent professionals such as doctors, lawyers, architects, etc. come under the presumptive scheme under  section 44ADA . They have to pay the whole of their advance tax liability in one instalment on or before 15 March. They can also pay the entire amount by 31 March.

22. Advance Tax Due Dates For FY 2023-24 Due Date Advance Tax Payment Percentage On or before 15th June 15% of advance tax On or before 15th September 45% of advance tax (-) advance tax already paid On or before 15th December 75% of advance tax (-) advance tax already paid On or before 15th March 100% of advance tax (-) advance tax already paid

23. Advance Tax Due Dates For FY 2023-24 For taxpayers who have opted for Presumptive Taxation Scheme under sections 44AD & 44ADA – Business Income For taxpayers who have opted for Presumptive Taxation Scheme under sections 44AD & 44ADA – Business Income Due Date Advance Tax Payment Percentage  On or before 15th March 100% of advance tax

24. CONCEPT OF TDS TDS is basically a part of income tax. It has to be deducted by a person for certain payments made by them. In this article, we will discuss in detail the TDS provisions under the Income Tax Act. Any person making specified payments mentioned under the Income Tax Act is required to deduct TDS at the time of making such specified payment. But no TDS has to be deducted if the person making the payment is an individual or HUF whose books are not required to be  audited .  However, in case of rent payments made by individuals and HUF exceeding Rs 50,000 per month, are required to deduct TDS @ 5% even if the individual or HUF is not liable for a tax audit. Also, such Individuals and HUF liable to deduct TDS @ 5% need not apply for TAN. Your employer deducts TDS at the  income tax slab rates  applicable. Banks deduct TDS @10%. Or they may deduct @ 20% if they do not have your PAN information.

25. CONCEPT OF TDS The Tax Deducted at Source must be deposited to the government by the 7th of the subsequent month . For instance:  TDS deducted in the month of June must be paid to the government by the 7th of July. However, the TDS deducted in the month of March can be deposited till 30th April. For TDS deducted on rent and purchase of property, the TDS payment due date is 30 days from the end of the month in which TDS is deducted. Tax Deducted at Source has to be deposited using Challan ITNS-281 on the government portal. Read our article for a step by step guide for depositing TDS payment online.

26. RATE OF TDS Form No Transactions reported in the return Due date Form 24Q TDS on Salary Q1 – 31st July  Q2 – 31st October  Q3 – 31st January  Q4 – 31st May Form 27Q TDS on all payments made to non-residents except salaries Q1 – 31st July  Q2 – 31st October  Q3 – 31st January  Q4 – 31st May Form 26QB TDS on sale of property 30 days from the end of the month in which TDS is deducted Form 26QC TDS on rent 30 days from the end of the month in which TDS is deducted

27. TDS CERTIFICATES Form Certificate of Frequency Due date Form 16 TDS on salary payment Yearly 31st May Form 16A TDS on non-salary payments Quarterly 15 days from due date of filing return Form 16B TDS on sale of property Every transaction 15 days from due date of filing return Form 16C TDS on rent Every transaction 15 days from due date of filing return

28. PROCEDURE FOR ASSESSMENT Every assessee, who earns income beyond the basic exemption limit in a  Financial Year  (FY), must file a statement containing details of his income, deductions, and other related information. This is called the  Income Tax Return (ITR) . Once you as a taxpayer file the income returns, the Income Tax Department will process it. There are occasions where, based on set parameters by the Central Board of Direct Taxes (CBDT), the return of an assessee gets picked for an assessment . 1.Self Assessment 2. Summary Assessment 3. Regular Assessment 4. Scrutiny Assessment 5. Best Judgement Assessment 6. Income Escaping Assessment

29. Sections covered Appeal and Revision Section 246 – 251- Appeal before the Commissioner (Appeal ) Section 252- 256-; Appeal to the Appellate Tribunal Section 260A – 260B - Appeal to High Court Section 261- 262- Appeal to Supreme Court Section 263- 264- Revision of Orders

30. Steps Involved • To decide whether the order passed by the AO is appealable before the CIT (Appeal) or not. • To decide whether the order passed by CIT(Appeal) is appealable before the ITAT or not. Similarly order passed by ITAT before the High court and Order passed by High Court to the Supreme Court is appealable or not . • Filing of Appeal before the CIT (Appeal), ITAT, High Court , Supreme Court • Accompanied with Ground of Appeal, fee of appeal filing, Cross Objection etc , . Communication of date of hearing by the court . • Pronouncement of order after heard of both Appellant and Respondent.

31. Form of Appeal and Procedure Appeal shall be filed in Form No. 35, shall be filled electronically . • Appeal shall be filed within 30 days of the service of notice or in case of order u/s 248, the date of payment of tax • Fee shall be Rs . 250/- if amount of total income computed by AO is Rs . 1 lakhs. Rs . 500/-, if computed income is Rs . 1 lakh to Rs . 2 lakh, Rs . 1000/-, if computed income is more than Rs . 2 lakh. If computed income is less than Rs . 1 lakh or nil, fee shall be Rs . 250 /- Facts of case, Grounds of appeal, Pray for stay of demand till disposal of case, pre-deposit, 20% of demand . • CIT(Appeal) shall fix date and place of hearing and give notice to both, appellant and AO . • After heard of both, order shall be passed by the commissioner (Appeal).

32. Revision of orders prejudicial to revenue, Sec. 263 The Principal commissioner or commissioner may call for the and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the AO is erroneous and is prejudicial to the interest of the revenue, he may directing for fresh assessment . • Revision order shall be passed within a period of two years form the end of F.Y. in which the order passed . • Order of revision in consequence of direction by ITAT, High court or Supreme court, shall be passed any time.

33. Revision of other orders, Sec. 264 In any other order other than order to which sec.263 applies, commissioner may, either suo motu or on an application by the assessee for revision, call the record of any proceeding and revise the order . • No order shall be passed suo motu by the commissioner more than one previous year. • Assessee shall filed application within a period of one year from the date on which he has served the order . • Commissioner shall not passed revision order if case is pending for disposal before the court of any commissioner(Appeal), ITAT . • Every application shall be accompanied with a fee of Rs . 500/-. • Order under this section shall be passed within one year from the end of f.y . in which application made.

34. Tax and financial planning UNIT-4

35. CONCEPT OF TAX PLANNING Tax planning is a focal part of financial planning. It ensures savings on taxes while simultaneously conforming to the legal obligations and requirements of the Income Tax Act, 1961. The primary concept of tax planning is to save money and mitigate one's tax burden . Advantages of tax planning: To minimise litigation : To litigate is to resolve tax disputes with local, federal, state, or foreign tax authorities. There is often friction between tax collectors and taxpayers as the former attempts to extract the maximum amount possible while the latter desires to keep their tax liability to a minimum. Minimizing litigation saves the taxpayer from legal liabilities. To reduce tax liabilities : Every taxpayer wishes to reduce their tax burden and save money for their future. You can reduce your payable tax by arranging your investments within the various benefits offered under the Income Tax Act, 1961. The Act offers many tax planning investment schemes that can significantly reduce your tax liability. To ensure economic stability : Taxpayers’ money is devoted to the betterment of the country. Effective tax planning and management provide a healthy inflow of white money that results in the sound progress of the economy. This benefits both the citizens and the economy. To leverage productivity : One of the core tax planning objectives is channelizing funds from taxable sources to different income-generating plans. This ensures optimal utilization of funds for productive causes.

36. TYPES OF TAX PLANNING Following are some of the various methods of tax planning: Short-range tax planning Under this method, tax planning is thought of and executed at the end of the fiscal year. Investors resort to this planning in an attempt to search for ways to limit their tax liability legally when the financial year comes to an end. This method does not partake long-term commitments. However, it can still promote substantial tax savings. Long-term tax planning This plan is chalked out at the beginning of the fiscal and the taxpayer follows this plan throughout the year. Unlike short-range tax planning, you might not be offered with immediate tax benefits but it can prove useful in the long run. Permissive tax planning This method involves planning under various provisions of the Indian taxation laws. Tax planning in India offers several provisions such as deductions, exemptions, contributions, and incentives. For instance, Section 80C of the Income Tax Act, 1961, offers several types of deductions on various tax-saving instruments. Purposive tax planning Purposive tax planning involves using tax-saver instruments with a specific purpose in mind. This ensures that you obtain optimal benefits from your investments. This includes accurately selecting the appropriate investments, creating an apt agenda to replace assets (if required), and diversification of business and income assets based on your residential status.

37. TAX AVOIDANCE The term tax avoidance refers to the use of legal methods to minimize the amount of income tax owed by an individual or a business. This is generally accomplished by claiming as many deductions and credits as are allowable. It may also be achieved by prioritizing investments that have tax advantages, such as buying tax-free municipal bonds. Tax avoidance is not the same as tax evasion, which relies on illegal methods such as underreporting income and falsifying deductions. Taxpayers can take advantage of tax avoidance through various credits, deductions, exclusions, and loopholes, such as: Claiming the child tax credit Investing in a retirement account and maxing out your annual contributions Taking the mortgage tax deduction Putting money into a health savings account (HSA)

38. TAX EVASION Tax evasion is an illegal activity in which a person or entity deliberately avoids paying a true tax liability. Those caught evading taxes are generally subject to criminal charges and substantial penalties . When determining if the act of failure to pay was intentional, a variety of factors are considered. Most commonly, a taxpayer’s financial situation will be examined in an effort to confirm if the nonpayment was the result of committing fraud or of the concealment of reportable income . A failure to pay may be judged fraudulent in cases where a taxpayer made efforts to conceal assets by associating them with a person other than themselves

39. TAX MANAGEMENT Tax management refers to the management of finances, for the purpose of paying taxes. Tax Management deals with filing Returns in time, getting the accounts audited, deducting tax at source etc. Tax Management helps in avoiding payment of interest, penalty, prosecution . Elements of tax management Elements of tax management are: Filing return. Auditing. Source deduction.

40. DIFFRENCE BETWEEN TAX PLANNING & TAX MANAGEMENT Tax Planning Tax Management Tax planning is all about minimizing your tax burden. By taking advantage of tax breaks and deductions, you can lower your overall tax liability A focus is placed on ensuring compliance with legal formalities in order to minimize taxes. It can help you make better decisions. Assists in meeting the conditions for effective decision-making. Prior to selecting the best alternative, various alternatives are compared. The process consists of maintaining accounts in prescribed forms, filing returns, and paying taxes. Future benefits are taken into account in tax planning. In tax management, the past, present, and future are taken into account. Various tax benefits can be claimed through tax planning. The use of tax management contributes to the adherence to the conditions for effective decision-

41. DIFFRENCE B/W TAX EVASION &TAX PLANNING S/N Tax Evasion Tax Avoidance 1.  It is an illegal means of avoiding paying taxes. It is a legal means of reducing tax payments. 2. It is criminal and defaulters may be punished. It is not a crime and not against the laws regulating taxes. 3. It is fraud. It is a means to reduce tax liability. 4. It is done through illegitimate means.  It is done through legal loopholes. 5. It is done after tax liability. It is done before tax liability.