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MF0012 – Taxation Management

MF0012 – Taxation Management

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Published by Ashish Kulshrestha
MF0012 – Taxation Management solved assignment (Fall 2010)
MF0012 – Taxation Management solved assignment (Fall 2010)

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Published by: Ashish Kulshrestha on Nov 19, 2010
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Master of Business Administration- MBA Semester 3MF0012 – Taxation Management - 4 Credits(Book ID: B1037)
Assignment Set- 1
Q1. What are the incomes from house property which are exempted from tax?
ollowing incomes from house property is completely exempt from any tax liability:i.Income from any farmhouse forming part of agricultural income;ii.Annual value of any one palace in the occupation of an ex-ruler;iii.Property Income of a local authority;iv.Property Income of an authority, constituted for the purpose of dealing with and satisfying theneed for housing accommodation or for the purposes of planning development or improvementof cities, towns and villages or for both. (The Finance Act, 2002, w.e.f. 1.4.2003 shall deletethis provision.);v.Property income of any registered trade union;vi.Property income of a member of a Scheduled Tribe;vii.Property income of a statutory corporation or an institution or association financed by theGovernment for promoting the interests of the members either of the Scheduled Castes orScheduled tribes or both;viii.Property income of a corporation, established by the Central Govt. or any State Govt. forpromoting the interests of members of a minority group;ix.Property income of a cooperative society, formed for promoting the interests of the memberseither of the Scheduled Castes or Scheduled tribes or both;
Property Income, derived from the letting of godowns or warehouses for storage, processing orfacilitating the marketing of commodities by an authority constituted under any law for themarketing of commodities;xi.Property income of an institution for the development of Khadi and village Industries;'xii.Self-occupied house property of an assessee, which has not been rented throughout theprevious year;xiii.Income form house property held for any charitable purposes;xiv.Property Income of any political party.
Q2. Define the term tax holidays. What are the different tax incentives for new unitsestablished in SEZ?
tax holiday
is a temporary reduction or elimination of a tax. Governments usually create taxholidays as incentives for business investment. The taxes that are most commonly reduced by nationaland local governments are sales taxes. In developing countries, governments sometimes reduce oreliminate corporate taxes for the purpose of attracting Foreign Direct Investment or stimulatinggrowth in selected industries. Tax holiday is given in respect of particular activities, and sometimesalso only in particular areas with a view to develop that area of business.Or If an assessee is permitted or given exemption for not to pay tax for certain number of year/years then that particular year or years will be termed as Tax holiday. The following are the some ofprovisions mentioned by income tax department regarding tax holidays.1.100% export oriented units 10 year tax holiday is allowed for 100% of the income.2.For newly established industrial undertaking in Free trade zones , electronic hardwaretechnology park, software technology park or special economic zone- 10 year tax holiday isallowed for 100% of the profits(except for SEZ)For SEZ the deduction is as followsa)For the first 5 years100% of export profitb)For the next 2 years50% of export profitc)For the next 3 years50% of export profit
Tax incentives for new units established in SEZ:
In India, SEZs are the special zones created by the Government and run by Government-Private orsolely Private ownership, to provide special provisions to develop industrial growth in that particulararea. The government of India launched its first SEZ in 1965, in Kandla, Gujarat.
The incentives and facilities offered to the units in SEZs for attracting investments into theSEZs, including foreign investment include:-
Duty free import/domestic procurement of goods for development, operation and maintenanceof SEZ units
100% Income Tax exemption on export income for SEZ units under Section 10AA of the IncomeTax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back exportprofit for next 5 years.
Exemption from minimum alternate tax under section 115JB of the Income Tax Act.
External Commercial Borrowing by SEZ units up to US $ 12500 billion in a year without anymaturity restriction through recognized banking channels.
Exemption from Central Sales Tax.
Exemption from Service Tax.
Single window clearance for Central and State level approvals.
Exemption from State sales tax and other levies as extended by the respective StateGovernments.The major incentives and facilities available to SEZ developers include:-
Exemption from customs/excise duties for development of SEZs for authorized operationsapproved by the BOA.
Income Tax exemption on income derived from the business of development of the SEZ in ablock of 10 years in 15 years under Section 80-IAB of the Income Tax Act.
Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act.
Exemption from dividend distribution tax under Section 115O of the Income Tax Act.
Exemption from Central Sales Tax (CST).
Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).Currently there are 114(as on Oct 2010) SEZs operating throughout India in the following states.Karnataka - 18; Kerala - 6; Chandigarh - 1; Gujarat - 8; Haryana - 3; Maharashtra - 14; Rajastan - 1;Orissa - 1 TamilNadu - 16; Utter Pradesh - 4; West Bengal - 2.Additionally, more than 500 SEZs are formally approved (as on Oct 2010) by the Govt of India inthe following states. Andhra Pradesh - 109; Chandigarh - 2; Chattisgarh - 2; Dadra Nagar Haveli - 4;Delhi- 3; Goa - 7; Gujarath - 45; Haryana - 45; Jharkand - 1; Karnataka - 56; Kerala - 28; MadhyaPradesh - 14; Mahrashtra - 105; Nagaland - 1; Orissa - 11; Pondicherry - 1; Punjab - 8; Rajasthan - 8;TamilNadu - 70; Uttarankhand - 3; Utter Pradesh - 33; West Bengal - 22;
Q3. What are the key steps to calculate the tax liability of an individual ?
Steps to calculate the tax liability of an individual are:
Determine residential status
- First of all to determine the residential status of the assessee.The incomes are taxed according to residential status i.e. Resident in India, Not Ordinarilyresident, or Non resident.
Calculation of gross total income
- For the calculation of the gross total income we shouldhave to calculate the income of five heads according to the provisions of Income Tax Act.
Exempted Incomes
- While calculating the incomes of the different heads, the incomes whichare exempted will not be included.
Income of other persons to be included in the income of assessee
- Few incomes of otherpersons (Sec. 64) includes in the income of assessee.
Set-off of losses
- If there is negative income in a particular head then it is to be set offaccording to the provisions of Income Tax Act.
Deductions u/s 80
- After the above steps, the aggregate amount of income is known as GrossTotal Income. From the gross total income few deductions which are provided under section 80of income tax act will be deducted. After deductions, the balance of income is known as TotalIncome or Taxable Income. The list of deductions available to an individual are as follows:1.Investments and deposits (sec 80C)2.Contribution to certain pension funds (sec 80CCC)3.Contribution of new pension scheme (sec 80CCD)4.Payment to medical insurance premium (sec 80D)5.Medical treatment of handicapped dependents and amount deposited for maintenance ofhandicapped dependents (sec 80DD)6.Expenditure on medical treatment of certain diseases (sec 80DDB)7.Repayment of loan and interest thereon taken for higher education (sec 80E)8.Donations to certain funds/charitable institutions etc. (sec 80G)9.Deductions in respect of rent paid (sec 80GG)10.Donations for scientific research and rural development (sec 80GGA)
Contribution to political parties (80GGC)12.Profit and gain of new industrial undertaking set up for infrastructure development (sec 80IA)13.Profit and gains of new industrial undertakings (sec 80IB)14.profit and specific industrial undertakings establish in specific states (sec 80IC)15.Deduction in respect of profits and gains from business of collecting and processing of biogradable waste (sec 80JJA)16.Deduction in respect of certain incomes of offshore banking unit (sec 80LA)17.Deduction in respect of royalty income to authors (80QQB)18.Deduction in respect of royalty on patent (sec 80RRB)19.Deduction in case of person with disability (sec 80U)
Income rounded off in the multiple of 
The total income calculated will roundedoff in multiple of Rs. 10. For this rupee five or more than Rs. 5 will be treated as Rs. 10 andless than Rs. 5 will be deleted.
Q4. Define the treatment of remuneration paid to partners under income tax act.
In all most all the partnership, provision for salary has been included and decided with mutualconsent .But as per Income Tax Act, full amount of salary is not allowed as expenses in profit & lossaccount but salary is restricted to % of profit before salary to the partner. There are some conditionsalso which are to be complied to claim deduction of salary as expense in P & L account of partnershipfirm.
Conditions are defined in section 40(b) of the income tax act.
1.Salary should be paid to working partner.2.Salary must be written/authorized by the Partnership deed3.Salary should be related to the period after the partnership deed date.

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