Mar
16

Income Tax Slabs for FY 2012-2013

admin on March 16th, 2012

In the latest budget announcement on 16th March 2012, the financial minister, Pranab Mukherjee, announced raising the tax exemption limit  from the curent level of Rs 1.8 lakh to Rs 2 lakh. For income upto Rs 2 lakh, the tax deduction will now be NIL. For those with an income between Rs 2-5 lakh the tax deduction would be 10%. For income between Rs 5-10 lakh the tax bracket will be 20%. Income above Rs 10 lakh will now come under the 30% tax bracket. Please note the assessment year for this will be AY 2013-2014.

Rest of the details and detailed slabs for women, senior citizens etc are not out yet and will be updated later.

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Income Tax 25 Comments »
Nov
19

Corporate Taxes in India

admin on November 19th, 2011

Domestic companies are subject to income tax on all sources of income and capital gains wherever arising.

Foreign companies are subject to income tax only on their income from Indian Sources.

Company tax is levied as follows: Rates
Domestic companies 33.22%
Foreign companies 42.23%

Note: Where the total income of the domestic or foreign company does not exceed Rupees ten million, no surcharge is levied. In such cases, the effective rate of tax for domestic companies and foreign companies is 30.9% and 41.2% respectively.
However, the following income of foreign companies is taxed at the following specified rates on a gross basis and not at 42.23%.

Royalty and Fees for Technical Services (subject to certain conditions):

• Royalty and Fees for Technical Services received pursuant to an agreement made
– after 31 May 1997 but before 1 June 2005 (if the payment exceeds Rs 10m) 21.12%
– after 1 June 2005 (if the payment exceeds Rs 10m) 10.56%

If the payment does not exceed 10M then the rates would be 20.6% and 10.3% respectively.

• Interest Income 21.12%
• Income from units of Mutual Funds purchased in foreign currency 21.12%
• Income from Global Depository Receipts (GDRs) 10.56%
• Income by offshore funds (overseas company) 10.56%

Income of Foreign Institutional Investors (FIIs) in listed securities:
– Short term capital gains in respect of transactions chargeable to Securities Transaction Tax 15.84%

– Short term capital gains in cases other than the one mentioned above 31.67%

– Long term capital gains (other than those subjected to Securities Transaction Tax) 10.56%

– Other income 21.12%

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Income Tax 20 Comments »
Nov
19

Taxes Related to Corporate Restructuring

admin on November 19th, 2011

Implications of Corporate Restructuring on Taxes for a Company in India –

MERGER
Specific provisions have been made in the Income Tax Act 1961 (the Act) in relation to corporate merger/ amalgamations. Corporate restructuring is tax neutral subject to the fulfilment of certain conditions.

DEMERGER
Under the Act, ‘demerger’ means any transfer by a demerged company of one or more undertakings to another company (resulting company) pursuant to a scheme of arrangement under sections 391 and 394 of the Companies Act. With effect from 1 April 2000, the transfer of shares in a scheme of demerger has been made tax
neutral subject to fulfilment of certain conditions.

SLUMP SALE
The Act defines ‘slump sale’ to mean the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities. Profits or gains arising from slump sale are taxable as long-term capital gains if the undertaking is owned and held by the assessee for more than 36 months prior to date of transfer. Otherwise, they are taxable as short-term capital gains.Net Worth of the undertaking so transferred shall be deemed to be the cost of acquisition, No Indexation benefit is allowed
on case of a Slump Sale.

BUYBACK
Buyback refers to the purchase of own shares by a company from its shareholders in lieu of consideration. Consideration received by a shareholder from the company for purchase of its own shares is taxable as a long-term capital gain, if shares were held for more than 12 months prior to transfer to the company. Indexation benefit is available for long term capital gains. Otherwise, they are taxable as short-term capital gains in the year in which the shares are purchased by the company.

FOREIGN SOURCED INCOME
Profits derived by a foreign branch of an Indian enterprise are taxable in India. However, credit is allowed for foreign taxes paid by the branch in India either under the tax treaties or under the Act.

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Income Tax 1 Comment »
Nov
19

Tax Holiday for SEZ in India

admin on November 19th, 2011

In India, a tax holiday is available in respect of profits derived from exports by a 100% export oriented undertaking, or an undertaking located in a free trade zone, export processing zone, special economic zone, software technology park, etc. The tax holiday is available in respect of profits derived by non-SEZ units up to Assessment year 2011-12.

In the case of an undertaking located in a SEZ commencing activities on or after 1 April 2003, the tax incentives are available as follows:

First five years – 100% of profits
Next two years – 50%of profits
Last three years – 50% of profits or amount transferred to credit of SEZ Re-Investment Allowance reserve whichever is lesser.

In the case of new units located in a Special Economic Zone commencing activities on or after 1 April 2006, the tax incentives available are as follows:

First five years – 100% of profits
Next five years – 50% of profits or amount transferred to credit of SEZ Re-Investment Allowance reserve whichever is lesser.

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Income Tax 5 Comments »
Nov
19

Minimum Alternate Tax (MAT) in India

admin on November 19th, 2011

MINIMUM ALTERNATE TAX (MAT)

In India, in the case of companies, if the tax payable on their taxable income for any assessment year is less than 18.54% of their ‘book profit’(if book profit does not exceed Rs 10 m),or 19.9305% of book profit (if book profit exceeds Rs 10 m), an amount equal to 18.54% of the book profit (if book profit does not exceed Rs 10 m) or 19.9305% of book profit (if book profit exceeds Rs 10 m) is regarded as their tax liability.

The tax so paid could be carried forward and set off against normal tax (in excess of MAT for that year) of future years up to ten years but from the financial year 2010-11 said carry forward shall not apply to a limited liability partnership which has been converted from a private company or unlisted public company.

‘Book profit’ means net profit as per the profit and loss account as adjusted (increased or reduced) by certain specified items which includes income tax paid or payable and the provisions made for unascertained liabilities, amounts carried to any reserves, provisions for meeting unascertained liabilities, losses brought forward or unabsorbed depreciation, deferred tax, interest on tax , surcharge, education cess, income exempt from tax, non-taxable profits from export of goods, computer software etc.

However, the following are included within book profits, despite being exempted from normal income tax:

• profits of undertakings located in free trade zones, software and hardware technology parks
• profits from the export of computer software
• long-term capital gains arising from the transfer of listed equity shares/units.

MAT is applicable in respect of Export Oriented Unit Schemes (EOU) but not Special Economic Zones (SEZ).

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Other Taxes 1 Comment »
Nov
19

Dividend Distribution Tax in India

admin on November 19th, 2011

DIVIDEND DISTRIBUTION TAX –

In India, domestic companies that declare, distribute or pay dividends are subject to dividend distribution tax at 16.61% on the amount of such dividends. However, income distributed by a specified company or mutual fund is taxable at differential rates as follows:

• Income distributed from the Money market/liquid funds is taxable at 27.68%
• Income distributed from other mutual funds to individuals or HUFs is taxable at 13.84% and to others at 22.15%.

However, no additional tax is payable on income distributed to unit holders of equity oriented funds.

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Other Taxes 1 Comment »
Sep
17

Tonnage Tax for Shipping Industry

admin on September 17th, 2011

TONNAGE TAX FOR SHIPPING INDUSTRY

The tonnage tax scheme for eligible shipping companies (dredgers included) was introduced in India with effect from 2005/06 and provides for a tonnage-based presumptive tax. Indian shipping companies now have the option to pay taxes on tonnage income in place of normal taxable income. There is a lock in period of 10 years. If a company opts out, it is debarred from re-entry for 10 years.

Tonnage income is to be taxed at the normal corporate tax rate. Tax is payable even if there is a loss in a year. Tonnage income is separately calculated for each qualifying ship by multiplying the number of days in the previous year with the daily tonnage income as per specified slab rates.

 

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Other Taxes 3 Comments »
Sep
17

Securities Transaction Tax (STT)

admin on September 17th, 2011

SECURITIES TRANSACTION TAX (STT) is applicable to the purchase or sale of equity shares, derivatives, units of equity-oriented funds through a recognised stock exchange in India or the sale of a unit of an equity-oriented fund to a mutual fund.

With effect from 1 June 2006, the STT is payable equally by the purchaser and seller at 0.125% of the transaction value on delivery based transactions. On non-delivery based transactions in equities or units of an equity oriented fund it is payable by the
seller at 0.025%. In case of sale of options in securities, STT is levied at the rate of 0.017% of the option premium to be paid by the seller. In case of sale of options in securities where the option is exercised, STT is levied at 0.125% of the settlement price and is paid by the purchaser. In case of sale of futures in securities, STT at 0.017% is to be paid by the seller. In the case of sale of units of an equity oriented fund to the mutual fund, it is payable by the seller at 0.25%.However, with effect from Oct 1,2009 STT will not be applicable in respect of transactions entered into by any person for or on behalf of New Pension System Trust.

The transaction value is determined as follows:

  1. Options – Aggregate of strike price and premium of the option
  2. Futures – the traded price
  3. Other Securities – Sale/ Purchase Price

Sometimes to promote a security trading and to bring liquidity into the new products, government waive off the STT charges.

STT is to be collected by the Recognised Stock Exchange for taxable securities or prescribed person the mutual funds in case of sale of units to the mutual funds and paid to the Government. STT so paid is allowable as deduction in computation of taxable income under the head profits or gains from business or profession with effect from 1 April 2009.

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Transaction Tax 8 Comments »
Jul
23

Filling ITR V Verification Form

admin on July 23rd, 2011

If you are wondering what has to be filled in “my capacity as ___” in the verification form at the bottom

I ______ son/daughter of _________, holding permanent account number _____ solemnly declare to the best of my knowledge and belief, the information given in the return and the schedules thereto which have been transmitted electronically by me vide acknowledgement number mentioned above is  correct and complete and that the amount of total income/ fringe benefits and other particulars shown therein are truly stated and are in accordance with the provisions of the Income-tax Act, 1961, in respect of income and fringe benefits chargeable to income-tax for the previous year relevant to the assessment year 2011-12. I further declare that I am making this return in my capacity as _____________ and I am also competent to make this return and verify it.

In case of Individual it can you yourself (your name) or Authorized signatory

In case of HUF it can be Karta or Authorized signatory

In case of Partnership it can be Partner or Authorized signatory

In case of Company it can be director or Authorized signatory

So, if you are an individual just write your name in the blank.

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Income Tax 18 Comments »
Jun
18

How to file tax returns online

admin on June 18th, 2011
e-filing income tax returns

e-filing income tax returns

The filing dates for tax return are just around the corner. With the introduction of e-filing or online filing of tax returns, the task has become much easier than it used to be earlier. E-filing of tax returns is a simpler options for the direct tax payers in India. There are three ways in which Read the rest of this entry »

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Income Tax 18 Comments »