BUSINESS & TAX LAWS

CLASSIFICATION OF TAX
• Direct
– Cannot be shifted on others
– Collects from pockets of earners out of their income
– Income Tax, Professional Tax , Wealth Tax, Estate Tax
• Indirect
– Collected through manufacturer or service provider &
sale of product & services
– Inclusive in price of products & services
– Sales Tax, VAT, CST , Excise, Customs, Services Tax
• Revenues generated distributed between CG & SG as per
subjects listed in Union list & State list
• Collected by center - Excise, Customs, Services Tax Income
Tax, Wealth Tax, Estate Tax
• Collected by state – Sales Tax ,VAT
 INCOME TAX
• Finance Act –
– Part B
– Approved by Parliament
– Assent of President
– CBDT , Settlement Commission , ITAT, Commissioner
• Assessee
• Assessment year
• Previous year
• Receipt Vs accrual
• Belated return
• Revised Return
 APPLICABILITY OF INCOME TAX

• Individual
• HUF
• Company
• Firm
• AOP or BOI
• Local authority
• Artificial juridical person
 BASIS OF CHARGE
• Individual or HUF( A Y 2008-09)
– 110000 / 145000 / 195000 – NIL
– UPTO 150000 – 10 %
– UPTO 250000 – 20 %
– ABOVE 250000 – 30 %
– CESS 2%
– SHEC 1 %

• Companies - 30 % flat
 HEADS OF INCOME
• Income from salaries
– Employer – employee relationship
– Wages , salaries , pension gratuity , commission fees
leave encashment or HRA or any allowance or perks
given by employer

• House property
– Residential or commercial building
– 30 % Deduction for repairs
– Interest on borrowed capital

• Business or profession
– Income minus expenses = profit
 HEADS OF INCOME
• Capital gain
– Property of any kind but not including
• Stock in trade
• Personal effects
• Rural Agricultural land
• Some specific gold or bearer bonds
– Treatment of STCG & LTCG on shares & land
• Other sources
– Dividends
– Winning from lotteries , crossword puzzles, races ,
gambling , betting
– Interest
– Any residual income not taxed in 4 heads above
 Remuneration Details

SALARY COMPUTAION Monthly

Assistant Manager Band I
Annual
Basic 7,000 84,000
HRA * 5,000 60,000
Conveyance Allowance 2,500 30,000
Superannuation Allowance ** 1,050 12,600
Leave Travel Allowance 2,000 24,000
Additional HRA 3,125 37,500

Reimbursements
Medical 1,250 15,000

Total 21,925 263,100

Perks
Canteen (subsidy) *** 1,000 12,000

Retirals
Retirals (PF, Gratuity) **** 1,423 17,077

Total Perks 2,423 29,077

Total CTC 24,348 292,177

Performance Bonus (Average) # 2,450 29,400

Cost of Loans ## 4,167 50,000

Total (incl PB & Loans) 30965 371,577

* HRA for A Class City. HRA for B Class City - Rs. 4000, HRA for C Class City - Rs. 3500, HRA for D Class City - Rs. 3000

**You have an option to join the Superannuation scheme and in such case the 15% of your annual basic salary will be credited to
the Superannuation Fund and the superannuation allowance will be withdrawn
*** Lunch Allowance will be paid up to Rs 50/- per working day.
**** Company contribution towards PF is 12% and Gratuity is 8.33%
#Please note that there is no minimum guaranteed bonus.

##Overall loan entitlement incuding Housing loan is Rs.5 lac@ an interest rate of 2.5%
 EXEMPTED INCOME
• Agriculture income
• Receipts by individual from HUF
• Share of profit from partnership firm
• Sum received from LIC
• Scholarships
• LTCG on shares
• Income of MLA/MP
• Income of Local authorities
• Political parties
• Charitable trusts
• Income from new undertakings in FTZ EPZ SEZ
• 100 % EOU
   Assistant Manager Band I

  Monthly Annual

Basic 7,000 84,000

HRA * 5,000 60,000

Conveyance Allowance 2,500 30,000

Superannuation Allowance ** 1,050 12,600

Leave Travel Allowance 2,000 24,000

Additional HRA 3,125 37,500

Reimbursements    

Medical 1,250 15,000

Total 21,925 263,100

Perks    

Canteen (subsidy) *** 1,000 12,000

Retirals    

Retirals (PF, Gratuity) **** 1,423 17,077

Total Perks 2,423 29,077

Total CTC 24,348 292,177

Performance Bonus (Average) # 2,450 29,400

Cost of Loans ## 4,167 50,000

Total (incl PB & Loans) 30965 371,577
 WEALTH TAX
• Direct tax
• Chargeable in respect to net wealth of individual / HUF
and company @ 1 % if it exceeds 15 lacs
• No WT on Sec 25 company, club, co-op society political
party or mutual fund
• Net wealth is assets minus liabilities
• Assets
– 1) Building / land or a farm situated within 25 kms of
any municipality but exclude
• House exclusively residential purpose
• House forming part of stock in trade
• House for purpose of Business or profession
• House not let out for minimum period of 300 days
• Commercial establishment or complexes
 WEALTH TAX
– 2) Motor cars ( not running on hire or stock in trade)
– 3) Jewelry , bullion or furniture ( not stock in trade)
– 4) Yatch boats & aircrafts (except commercial purpose)
– 5) Urban land in municipality limit of not less than
10000
– 6) Cash in hand exceeding 50000 in case of individual
& HUF & in other cases amount not recorded in books
of account

• Exempted assets
– Agriculture land , crops, standing trees
– Animals
– Building owned by cultivator
 WEALTH TAX
• Deemed assets
– Assets transferred by one spouse to another
• Otherwise than for adequate consideration or in
agreement to live apart
– Assets held by minor
• Net wealth of minor is included in wealth of the
parent whose net wealth is more
• If marriage doesn’t subsist then it is included in
wealth parent who maintains minor
• If assets are acquired by minor by his own skill or
knowledge then it is not clubbed in hands of parents
• If minor is suffering from disability then also assets
are not clubbed in hands of parents
 CENTRAL EXCISE
• Indirect tax
• Duty collected on product manufactured in India
• Levied on manufacture irrespective of sales realisation
• CG is empowered to levy Excise except on
– Alcoholic liquors
– Opium , hemp & narcotic drugs
• Goods means every kind of movable property ( not
actionable claims or money) including crops grass & thing
attached to land which are agreed to be served before sale
• Movability - Building when constructed is not a goods ,
hence no Excise
• Marketability - The goods can be capable of being bought
or sold i e goods must be known in the market
• Kinds of duties
– Basic excise duty
– Special excise duty under Finance Acts
– Additional excise in lieu of sales tax
– Additional duties specified under different acts
• CBEC – highest administrative authority
• CENVAT- Central value added tax
– Manufacturer has to pay normal duty & he gets credit
of duty paid on inputs ( raw material or paints or
packaging material ) if he submits proof of payment of
duty
– No credit if final product is exempted from duty
– CENVAT is adjusted against duty on final product &
cannot be refunded in any case except export
 SERVICE TAX

• Indirect tax
• On services provided
• CENVAT credit available, refund in case of export
• 12 % plus cess
• Tax is levied on amount received for services rendered
• More than 80 % services are covered
• ST is 50200 crores as against IT of Rs 98774 crores ,
customs Rs 98770 crores & excise Rs 130220 crores &
WT of Rs 315 crores in Union Budget 2007 where total tax
receipts is 548000 crores
 FRINGE BENEFIT TAX
• Any privilege , service , facility or benefit provided by
employer to employee is taxed as FBT
• It is tax on expenses , hence a company in loss will also has
to pay FBT
• On companies & partnership firms
• Expenses covered are
– Entertainment festival celebration gifts
– Club facility food , beverages guest house
– Conference employee welfare health club sports
– Conveyance tour travel hotel
boarding lodging
– Repair & maintenance of car / aircraft Telephone
– Scholarship to children
• 20 % of such expense is taxed @ 30 % plus cess
 CUSTOMS

• Basic , countervailing , anti dumping, protective etc

• Export or import duty
• Exemptions
– Goods derelict or wreck
– Lost , destroyed or abandoned or pilferage
– Denaturing or mutilation of goods
 VAT ( SALES TAX)
• Indirect tax collected by destination state on sales
• Tax is levied on value added in the price of a commodity
& is collected at each stage by respective state
• Full set off of earlier tax is granted & thus eliminates
cascading effect
• Sales
– Conventional sale – transfer of goods
– Hire purchase
– Supply of goods by company or society to members
– Works contract
– Transfer of right to use any goods
– Supply of goods being food or any other article for
human consumption