CORPORATE TAXATION IN INDIA AN OVERVIEW

Contents 1.PAN (Permanent Account Number) 2.TDS (Tax Deduction at Source) 3.Corporate Tax 4.Sales Tax 5.Service Tax 6.Excise Tax (Excise Duty) 7.FEMA (Foreign Exchange Regulation Act)

PAN Permanent Account Number Permanent Account Number (PAN) is a ten-digit alphanumeric identifier, issued by Income Tax Department. Each assessee (e.g. individual, firm, company etc.) is issued a unique PAN. - Income Tax Act 1961 Who must have?  All existing assessees or taxpayers or persons who are required to file a return of income, even on behalf of others.  Any person, who intends to enter into economic or financial transactions where quoting PAN is mandatory.

Documents needed 1.Certificate of Incorporation 2.Certificate of Directorship 3.Address Proof Note: Application for PAN can be filed online. Application for New PAN

Under the system of Tax Deduction at source (TDS), the payer is required to deduct tax at the time, the payment is received by or credited to the account of the payee. This withheld amount can be adjusted against tax due. - Income Tax Act 1961 TDS Tax Deduction at Source

Persons who are required to deduct TDS All persons For other payments, every person except Individuals and HUF whose sales / gross receipts in business is less than Rs 40 lacs or professional receipts is less than Rs 10 lacs have to deduct tax For Dividend where dividend payment exceeds Rs. 1000/- Salary Winnings from lotteries Winnings from horse races Payment to Non - Residents All payments other than above Who has to deduct TaxNature of Payment Tax has to be deducted by the person making payments -

1.If salary is expected to exceed Rs 1,50,000 per annum. 2.Rs 1,20, If the contract value exceeds Rs 20,000 4.If aggregate amount of interest payable or creditable during the financial year exceeds Rs 5,000 5.If aggregate sum payable during the year exceeds Rs 5,000 6.If the aggregate payment or credit made up to , exceeds Rs. 2,500 1.Salary 2.Rent 3.Payments to contractors and subcontractors 4.Interest other than interest on securities 5.Insurance Commission 6.Commission and brokerage ThresholdNature of Payment The threshold limits for deducting tax

1.Depends on the salary level % in case company 1 crore Rs. 3.In case company 1 crore Rs: and respectively % in case company 1 crore Rs. 5.Same as above % in case company 1 crore Rs. 1.Salary 2.Rent 3.Payments to contractors and sub- contractors 4.Interest other than interest on securities 5.Insurance Commission 6.Commission and brokerage TDS RatesNature of Payment Rates of TDS Note- There are different rates for firms and individual etc.

Corporate Tax When Companies pay taxes under the Income tax Act it is called Corporate tax. Companies residents in India are taxed on their worldwide income arising from all sources in accordance with the provisions of the Income Tax Act. Non-resident corporations are essentially taxed on the income earned from a business connection in India or from other Indian sources - Income Tax Act 1961

Residence of a company : A company is said to be a resident in India during the relevant Previous year: If it is an Indian company if it is not an Indian company then, the control and the management of its affairs is situated wholly in India A company is said to be non-resident in India: if it is not an Indian company and some part of the control and management of its affairs is situated outside India.

Corporate Tax Rates : DescriptionRate* (%) A)Domestic Company Regular Tax MAT DDT B)Foreign Company Regular Tax © (of books profits) (c1) * Inclusive of applicable surcharge and education cess (C) 30.90% where the total income is equal to or less than Rs. 10 million. (C1) 41.20% where the total income is equal to or less than Rs 10 million.

Sales Tax Sales Tax is a tax, levied on the sale or purchase of goods. It is primarily the liability of the seller, who generally recovers it from the purchaser. Each state has its own sales tax act under which tax is imposed at different rates. - Sales Tax Act 1956 Types: 1.Central Sales tax – Imposed by the centre 2.Sales Tax – Imposed by states

CST (Central Sales Tax) – Payable on the sale of all goods by a dealer in the course of inter-state trade or commerce or outside a state or in the course of import into or export from India to the sales tax authority in the state from which the movement of goods commences. The Central Sales Tax Act covers interstate sales. Exemptions  Sales to resellers such as wholesalers and retailers having valid state resale certificate.  Sales to tax-exempt institutions such as schools or charities.  A concessional rate of sales tax is applicable if the buyer is registered with the Sales Tax authorities.

VAT/ ST (Sales Tax imposed by states) – Since April 01, 2005, most of the State Governments in India have replaced sales tax with VAT Each state has its own sales tax act under which tax is imposed at different rates. Depends on the type of goods also for example luxury goods are normally taxed at a higher rate than other commodities Exemptions Sales to resellers such as wholesalers and retailers having valid state resale certificate. Sales to tax-exempt institutions such as schools or charities.

Rates Central Sales Tax – 4% or 3% with form C Central Sales Tax – proposed in Budget to be reduced from 3% to 2% Each state has its own sales tax act under which tax is imposed at different rates. It depends on the type of goods for example luxury goods are normally taxed at a higher rate than other commodities.

Service Tax Service Tax is a form of indirect tax imposed on specified services called “taxable services”. -Finance Act 1994 Rate of Service Tax  12% of value of taxable services.  In addition, education cess of 2% and SAH education cess of 1%  Total Service Tax – 12.36%

 If payment for such services is received in convertible foreign exchange in India and the same is not repatriated outside India.  Service Tax can not be levied on any service which is not included in the list of taxable service.  Other Exemptions Exemptions

Excise Tax (Excise Duty) ‏ Excise Duty is an indirect tax, levied by the State on the manufacture of the commodity. The essential features of an Excise duty can be outlined as follows: It must be a duty on the goods; The goods must be excisable; The goods must be manufactured or produced; The manufacture or production has to be within India. - Central Excise & Salt Act 1944 Excise Act 1957 Finance Act 1978

Types of Central Excise Taxes: 1.Basic Excise Duty 2.Additional Duty of Excise 3.Special Excise Duty T he liability to pay Excise Duty: Manufacturer or Producer. A person is treated as Manufacturer, if he does the following: Manufactures goods on his own account. Manufactures the goods with the help of hired labour.

Rates of Excise Tax:  In Budget 2008 effective rate has been reduced from 16.48% to 14.42%.  products also attracts special excise duty/ and an additional duty of excise at the rate of 8% above the 16% excise duty.  2% education cess is also applicable on the aggregate of the duties of excise.  The rates of excise duty vary depending on the nature of the commodity, end use, taxability of inputs etc.

FEMA Foreign Exchange Management Act Introduction FEMA 1999 came into force on 1 st June 2000 by replacing FERA (Foreign Exchange Regulation Act The objective of FEMA is to facilitate external trade and payments for promoting the orderly development and maintenance of foreign exchange market in India. FEMA vests with the Reserve Bank of India, the sole authority to grant general or special permission for all foreign exchange related activities

FEMA characteristics FEMA’s management regime of Foreign Exchange is consistent with the emerging frame work of the World Trade Organisation (WTO). FEMA is well compatible with the policies of pro-liberalisation of government of India. Any offence under FEMA is civil offence, not criminal offence as it was in FERA.

FEMA is applicable to - To the whole of India. Any Branch, office and agency, which is situated outside India, but is owned or controlled by a person resident in India. Any contravention of provisions of FEMA, by all those, who are covered under above two aspects committed outside India

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