Masters in Financial Management

SEMESTER – III - MFM -2019-2022

Corporate Taxation
Topic: “Depressing, but true: taxes are on everyone’s mind almost
24x7 since they influence our daily lives. Robert W. Wood”

Roll No Group Member Name

19- F- 202 Anushree Almadi
19- F- 208 Pratik Dalal
19-F-209 Harsha Dattani
19- F- 218 Tejas Ganger
19- F- 255 Prashant Mahyavanshi
19- F- 256 Surendra Malaviya
Depressing, but true: taxes are on everyone’s mind almost 24x7 since
they influence our daily lives. Robert W. Wood.

Objectives

1. Evolution of Tax in India

2. Broad Classification of Taxes
3. Taxes paid to the government used for public welfare
4. Tax saving techniques
5. Tax concerns according to different categories
6. Conclusion: Tax handling, Effective ways

Introduction
Government needs funds for various purposes, like maintenance of law and
order, defence, social/health services, etc. Government obtains funds from
various sources, out of which one important source is taxation.
―The hardest thing in the world to understand is income tax!
- Albert Einstein The above sentence is a statement, but if you study, nothing
is impossible. The taxes are the basic source of revenue for the Government.
Revenue raised from the taxes are utilized for meeting the expense of
Government like, provision of education, infrastructure facilities such as roads,
dams etc.

What is Tax?
Justice Holmes of US Supreme Court pointed out “tax” is the price which we
pay for a Civilized Society. Taxes are broadly divided into two parts i.e. direct
taxes and indirect taxes. The tax that is levied directly on the income or wealth
of a person is called direct tax. As the name suggests, direct taxes” are paid
directly and “indirect taxes” are paid indirectly. The direct taxes are paid
directly by a person or a business organization directly to the Government. In
case of indirect taxes, one person pays them, but he recovers the same from
another person. Thus, the person who actually bears the tax burden (the
ultimate “consumer”) pays it indirectly through some other person, who
practically, merely acts as collecting agent. Of course, he is liable if he fails to
collect and pay the taxes.
Direct taxes are those which the tax payer pays directly from his income/
wealth/ estate etc., while indirect taxes are those which the tax payer pays
indirectly i.e. while purchasing goods and commodities, paying for services etc.
Broadly speaking, direct taxes are those which are paid after the income
reaches hands of taxpayer; while indirect taxes are paid before the goods /
services reach the tax payer. Important direct taxes are Income
Tax, Gift Tax and Wealth Tax. Important indirect taxes are Central Excise
(Duty on Manufacture), Customs (Duty on Imports and Exports); Sales Tax/
GST; Octroi, Entry Tax, Service Tax, Expenditure Tax etc.
Since Constitution of India is foundation and source of powers to all laws in
India, it is necessary to understand general background of Constitution to
enable us to understand and appreciate each individual Law. In India,
Constitution that came into effect on 26th January 1950 is supreme and all
laws and Government actions are subordinate to our Constitution.
The features of taxes are as follows:
1. It is compulsory contribution, refusal to pay is a punishable offence.
2. In the payment of a tax, the element of sacrifice is involved because tax
payer cannot claim direct benefit against tax.
3. Taxes are imposed by the Government only.
4. Tax should be paid regularly and periodically.
5. The aim of taxation is the welfare of the community as a whole.
Objectives of Taxation
The main objectives of taxation in India are given below:
1. To achieve high rate of economic growth.
2. To break the vicious circle of poverty.
3. To step up the rate of saving and investment.
4. To remove regional disparities.
5. To promote employment opportunities.
6. To mobilize resources for economic development. and
7. To equitably distribute income and wealth.
Tax system in India
India is a socialist, democratic and republic country. The Constitution of India
is the supreme law of land. All other laws are subordinate to the Constitution
of India. The Constitution provides that “no tax shall be levied or collected
except by Authority of Law”. The Constitution includes three lists in the
Seventh Schedule providing authority to the Central Government and the State
Governments to levy and collect taxes on subjects stated in the lists.
India has a well-developed tax structure with clearly demarcated authority
between Central and State Governments and local bodies. Central
Government levies taxes on income (except tax on agricultural income, which
the State Governments can levy), customs duties, central excise and service
tax. Value Added Tax (VAT), Goods and Service Tax (GST), stamp duty, state
excise, land revenue and profession tax are levied by the State Governments.
Local bodies are empowered to levy tax on properties, octroi and for utilities
like water supply, drainage etc.
Indian taxation system has undergone tremendous reforms during the last
decade. The tax rates have been rationalized and tax laws have been simplified
resulting in better compliance, ease of tax payment and better enforcement.
The process of rationalization of tax administration is ongoing in India.
Are taxes good or not?

The taxes collected in India is a requirement for the Government as it assists to

carry out mandatory functions and duties. These include supporting the public
institutions, development of infrastructure and other initiatives and schemes
related to public welfare. If there is a proper taxation process led by the
government, the increasing level of proportion of the tax levied and the amount
of income or revenue can be managed. While taxes are good when they are put
to effective use for the public welfare, the problem may arise when there is no
evidence to prove that these taxes will be a form of investment or growth
towards the same. There are instances where the rich have left India because of
reasons like high tax rates and hike in marginal taxes which influence their
mind to not return and invest in this country.

Why are taxes important?

The general perception above taxes is that, they make a fine assurance that the
money is efficiently applied in such a way that the economy is completely free
of corruption and the legal system is capable of punishing violations. It all
depends on the nature of bureaucracy and the delays in our legal system.
Competitive tax rates are thus very important till we look at it and understand
that the countries must not compete on tax rates. As a fact, the taxes come to
better use when they are handed to private individual or companies rather
than politicians and bureaucrats. Along with this, another view of taxes used
efficiently is that it reaching till the poor. Definitely so, rich work largely only to
earn psychological rewards i.e., winning against its competitors, taking new
challenges and contributing to the society. The argument is done whether the
tax money really reaches the needy or not.

What is the general perception about taxes?

India needs to improve its tax collections which does not mean they are raised
unsympathetically. When the budget day approaches, people have discussions
as to what is the proportion of tax cuts will be this year. The tax is kind of
social contract between its citizens and the economy. It should encourage
people to pay the same without fail. Tax administration helps people to register
them formally and expand the tax base and increasing tax revenues.
Complicated tax systems are associated with high tax evasion.

Basic scheme of Taxation under Indian Constitution

India has a well-developed tax structure with a three-tier federal structure,
comprising the Union Government, the State Governments and the
Urban/Rural Local Bodies. The power to levy taxes and duties is distributed
among the three tiers of Governments, in accordance with the provisions of the
Indian Constitution. The main taxes/duties that the Union Government is
empowered to levy are Income Tax (except tax on agricultural income, which
the State Governments can levy), Customs duties, Central Excise and Goods
and Service Tax (GST). The principal taxes levied by the State Governments are
Sales.
Tax (tax on intra-State sale of goods), Stamp Duty (duty on transfer of
property), State Excise (duty on manufacture of alcohol), Land Revenue (levy on
land used for agricultural/non- agricultural purposes), Duty on Entertainment
and Tax on Professions & Callings. The Local Bodies are empowered to levy tax
on properties (buildings, etc.), Octroi (tax on entry of goods for
use/consumption within areas of the Local Bodies), Tax on Markets and
Tax/User Charges for utilities like water supply, drainage, etc.
Lets discuss about Taxation structure in India. Taxation Structure in India
Direct Taxes Indirect Taxes
1. Income Tax 1. Excise Duty
2. Wealth Tax 2. Customs Duty
3. Sales Tax (GST).
As the above taxation structure states there are two types of taxes prevailing in
India such as Direct taxes and indirect taxes. Direct taxes are those taxes
which are directly paid to the government and indirect taxes are those which
are indirectly paid to the government, through some intermediaries like
manufactures, wholesalers, retailers etc. The following chart provides the broad
classification of Tax system in India.

TAX

DIRECT TAX INDIRECT TAX

CENTRAL CUSTOME
INCOME TAX WEALTH TAX GOODS MISC.
EXCISE DUTY DUTY AND OTHER
SERVICETA TAXES
X (GST)

A) Direct Taxes: They are imposed on a person‘s income, wealth, expenditure,

etc. Direct Taxes charge is on person concern and burden is borne by person
on whom it is imposed.
Example-Income Tax/ Wealth Tax.
B) Indirect Taxes: They are imposed on goods / services. The Immediate
liability to pay is of the manufacturer / service provider / seller but its burden
is transferred to the ultimate consumers of such goods / services.
The burden is transferred not in form of taxes, but, as a part of the price of
goods / services.

Example-Excise Duty, Customs Duty, Goods & Service Tax, Value-Added Tax
(VAT), Central Sales Tax (CST), Entertainment Tax.

The Budget 2020-21 estimated the Gross Tax Revenue (GTR) is to be 24.23
lakh crore which is 10.8 per cent of GDP.
This builds into growth of 12 per cent over the revised estimates (RE) of 2019-
20 and 20.6 per cent over 2019-20 PA.
The direct taxes, comprising mainly of corporate and personal income tax,
constitute around 55 per cent of GTR.
These were envisaged to grow at 12.7 per cent relative to 2019-20 RE and 27.2
per cent relative to 2019-20 PA.
On the other hand, the indirect taxes were expected to grow at 11.1 per cent
vis-à-vis 2019-20 RE and 15 percent as against 2019-20 PA.
The contribution of different taxes in GTR as envisaged in 2020-21 BE is
shown in Figure 10.
Income tax slab rate applicable for New Tax regime - FY 2020-21.

New Regime Income Tax Slab Rates

Income Tax Slab for FY 2020-21
(Applicable for All Individuals & HUF)

Rs 0.0 - Rs 2.5 Lakhs NIL

Rs 2.5 lakhs- Rs 3.00

Lakhs
5% (tax rebate u/s 87a is available)
Rs. 3.00 lakhs - Rs 5.00
Lakhs

Rs. 5.00 lakhs- Rs 7.5

10%
Lakhs

Rs 7.5 lakhs - Rs 10.00

15%
Lakhs

Rs 10.00 lakhs - Rs.

20%
12.50 Lakhs

Rs. 12.5 lakhs- Rs. 15.00

25%
Lakhs

> Rs. 15 Lakhs 30%

During the current financial year,

5.78 crore individuals filed returns disclosing income of financial year 2018-
19
Of these,1.03 crore have shown income below Rs 2.5 lakh.
3.29 crore individuals disclosed taxable income between Rs 2.5 lakh to Rs 5
lakh
4.32 crore individuals have disclosed income up to Rs 5 lakh, it also said
Since budget 2019 exempted individual taxpayers having income up to Rs 5
lakh, so 4.32 crore individual taxpayers having income up to Rs 5 lakh would
not be liable to pay tax for the current FY20 and following years.
Income Tax Return (ITR) is the form in which taxpayer files information about
her/his income to the Income Tax Department.
There are various types of ITR like ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, ITR
7. As per the Income Tax Act 1961 Every India citizen who fit the income tax
slab have to pay their Income Tax at the end of every financial year, before the
specific due date.
As per the Income tax Department “In the current financial year there are 4.37
crore people income tax return by the end of 28 December 2020. In the last
budget finance minister Nirmala Sitaram said gross tax collection at 10.26
lakh crore.
The Gross Tax Revenue during the first eight month of 2020-21 was 10.26
lakhs crore.
In this financial year 2020-21 over 4.37 crore people filed the retune file.
The bifurcation of 4.37 core taxpayer filing ITR-1 is 2.44 crore, over 32.30 lakh
filing ITR-2, over 53.12 lakh filing ITR 3, over 95.64 lakh filing ITR-4.
ITR – 1: IRT Sahaj can be filed by an individual residency whose total income
does not exceed Rs. 50 Lakh.
IRT – 2: IRT-2 is filed by people having income form residential property.
IRT – 3: This is filed for Businesses.
IRT – 4: This is for Individual residency, HUFs and firms having a total income
up to 50 lakhs.

Wealth Tax

Wealth tax is imposed on the richer section of the society. One measure to
reduce income inequalities that is seeing a resurgence across the world is
the wealth tax, the intention of doing so is to bring parity amongst the
taxpayers which is input as a surcharge over and above the income tax top
slab of above 30% with a surcharge of 10% for the super-rich section.
Individuals with an income of above Rs.1 crore and companies with an income
of over Rs.10 crore fall under the ambit of the super-rich segment this
effectively bring total tax to about 37%
Additional Health and Education cess at the rate of 4 % will be added to the
income tax liability in all cases. (increased from 3% since FY 18-19)
Eg :- If the total net wealth of an individual, HUF or company exceeds Rs. 50
lakhs, on the valuation date, tax @10% will be leviable on the amount in excess
of Rs. 50 lakhs. Every person whose net wealth exceeds such limit shall furnish
a return of net wealth. The due date is same as that of Income tax return.
Surcharge applicable as per tax rates below in all categories mentioned
above:
1. 10% of Income tax if total income > Rs.50 lakh
2. 15% of Income tax if total income > Rs.1 crore
3. 25% of Income tax if total income > Rs.2 crore
4. 37% of Income tax if total income > Rs.5 crore

Asset is a resource which is held and has future economic benefit which are
considered in for wealth tax

1. Any building or land appurtenant whether used for residential/ other

purposes, but doesn’t include:

a. House allotted by accompanying/ employer to be used exclusively for

residential purposes, where the gross total salary of the assessee is less
than Rs.10 lakhs
b. House which forms part of Stock in trade
c. House occupied by the assessee for business/ professional purpose
d. Residential property let out for minimum of 300 days in the previous year
e. Property in the nature of commercial establishment or complex
2. Motorcars, other than those used for running them on hire or those held as
stock in trade
3. Jewellery, bullion, furniture, utensils or other articles made fully/ partly of
gold, silver, platinum or such precious metals
4. Yachts, boats and aircrafts other than those used for commercial purpose
5. Urban land situated in the Specified area, other those classified as
agricultural land and used for such purpose & those in which building
construction is not permissible also Land occupied by building, which was
constructed with the approval of the appropriate authority, Unused land held
by assessee for industrial purposes for a period of 2 years from the date of
acquisition and land held by the assessee as stock in trade for over 10 years
from the date of acquisition
6. Cash in hand in excess of Rs. 50,000

Assets which are not considered as a part of wealth for the computation of
wealth tax

1. Property held under trust/ for the purpose of charitable/religious

purposes.
2. Interest in coparcenary property of Hindu Undivided family.
3. Jewellery in possession of ruler not being his personal property.
4. Money/Asset brought by a person of Indian origin/by an Indian citizen.
5. In case of an Individual/HUF, a house/ part of house or plot of land not
exceeding 50sq.mtr in area.
What about India?

India, too, has a history with the wealth tax. From the late 1950s to 2015, a tax
was imposed — the last applicable rate was 1% on net wealth in excess of Rs
30 lakh because it didn’t help the government much — the total collection of
tax was only Rs 1,008 crore in 2013-14.

In the 2019 budget, the government hiked the surcharge rates, which continue
to stand at 15% (for income between Rs 1 to Rs 2 crore); 25% (for income
between Rs 2 crore to 5 crore) and 37% if income is above Rs 5 crore.

Only 3.16 lakh individual taxpayers have disclosed income more than Rs 50
lakh The number of individual tax payers who have disclosed income above Rs
5 crore in the whole of the country is only around 8,600,” it also
CBDT also said that only about 2200 doctors, chartered accountants, lawyers,
and other professionals have disclosed annual income of more than Rs 1 crore

About GST
Goods and Services Tax (GST) is an indirect tax which has replaced many
indirect taxes in India such as the excise duty, VAT, services tax, etc. The
Goods and Service Tax Act was passed in the Parliament on 29th March 2017
and came into effect on 1st July 2017.
The key advantages of GST:
1. Avoids cascading effect of previous taxes

2. Higher threshold for GST registration

3. Ease of compliance owing to online process

4. Improves the efficiency of logistics sector

GST replaced the following list of central and state taxes:

 Central Excise Duty

 Duties of Excise
 Additional Duties of Excise
 Additional Duties of Customs
 Special Additional Duty of Customs
 Cess
 State VAT
 Central Sales Tax
 Purchase Tax
 Luxury Tax
 Entertainment Tax
 Entry Tax
 Taxes on advertisements
 Taxes on lotteries, betting, and gambling

The following items are excluded from the ambit of GST

 Petroleum crude;
 High-speed diesel;
 Motor spirit (commonly known as petrol);
 Natural gas;
 Aviation turbine fuel; and
 Alcoholic liquor for human consumption.

The key components of GST include:

CGST: It is the tax collected by the Central Government on an intra-state
sale (e.g., a transaction happening within Maharashtra)
SGST: It is the tax collected by the state government on an intra-state sale
(e.g., a transaction happening within Maharashtra)
IGST: It is a tax collected by the Central Government for an inter-state sale
(e.g., Maharashtra to Tamil Nadu)
The below chart depicts the consolidated revenues from GST in the last one
and half year. GST revenues dipped to record low in April 2020 to below INR
40,000 crores, recovering to INR 115,000 crores in December 2020.
 100,000
120,000
140,000

0
20,000
40,000
60,000
01-04-19 80,000
01-05-19
01-06-19
01-07-19
01-08-19
01-09-19
01-10-19
01-11-19
01-12-19
01-01-20
01-02-20
01-03-20
01-04-20
01-05-20
01-06-20
GST REVENUE (in INR, crores)

01-07-20
01-08-20
01-09-20
01-10-20
01-11-20
01-12-20
 Business Taxes Overview
Business taxes which is Direct Taxes, it is levied on the income that different types of
business entities earn in a financial year. There are different types of taxpayers
registered with the Income tax department and they pay taxes at different rates. For
eg, An individual and a company being a taxpayer are not taxed at the same rate.
Therefore, Direct Taxes are again subdivided as:
Personal Income Tax: The income-tax paid by the individual taxpayers is the personal
income tax. Individuals get taxed on the basis of tax slabs at different rates. AND
Corporate Tax: The income-tax paid by domestic companies, Firms and foreign
companies on their income in India is corporate income-tax (CIT).

Personal Income tax on Business Income

Tax on Business income by individual/HUF is taxed on the basis of slabs and have
different tax rates.

With deduction of under chapter VI from section 80C to 80U they can claim as
deduction from total income, where below are major highlight of deduction which
individual/HUF can claim.

Limit for FY
Income Tax Deduction for FY 2019- Who can
Sections 2019-20 (AY
20 (AY 2020-21) Invest?
2020-21)
Investing into very common and
popular investment options like LIC, Individual or
Section 80C Upto Rs 1,50,000
PPF, Sukanya Samriddhi Account, HUF
Mutual Funds, FD etc
Section 80CCC Investment in Pension Funds Individuals
Section 80CCD Atal Pension Yojana and National
Individuals
(1) Pension Scheme Contribution
Section Atal Pension Yojana and National
Individuals Upto Rs 50,000
80CCD(1B) Pension SchemeContribution
Amount
Contributed
or
14% of Basic
Salary + Dearness
Allowance (in case
the employer is
Section National Pension SchemeContribution CG)
Individuals
80CCD(2) by Employer 10% of Basic
Salary+ Dearness
Allowance(in case
of any other
employer)

- Whichever is
lower
Medical Insurance Premium and Individual or
Section 80D Upto Rs 1,00,000
Medical Expenditure HUF
Income Tax Deduction for FY 2019- Who can Limit for FY
Sections
20 (AY 2020-21) Invest? 2019-20 (AY
 2020-21)

Normal Disability:
Medical Treatment of a Dependent Individual or Rs 75000/-
Section 80DD
with Disability HUF Severe Disability:
Rs 125000/-
Senior Citizens:
Individual or Upto Rs 1,00,000
Section 80DDB Specified Diseases
HUF Others: Upto Rs
40,000
100% of the
Interest paid on Loan taken for interest paid upto
Section 80E Individual
Higher Education 8 assessment
years
Upto Rs 50,000
Section 80EE Interest paid on Housing Loan Individual subject to some
conditions
Upto Rs
Section 80EEA IInterest paid on Housing Loan Individual 1,50,000/- subject
to some conditions
Upto Rs 1,50,000
Section 80EEB Interest paid on Electric Vehicle Loan Individual subject to some
conditions
100% or 50% of
the Donated
All Assessee
amount or
(Individual,
Qualifying limit,
Section 80G Donation to Charitable Institutions HUF,
Company
Allowed donation
etc)
in cash upto
Rs.2000/-
Rs.60,000/-
25% of Total
Income
Income Tax Deduction for House Rent
Section 80GG Individual Rent paid - 10% of
Paid
Total Income

- whichever is
lower
100% of the
amount
Individual contributed.
Individuals on contribution to
Section 80GGC HUF No deduction
Political Parties
available for
contribution made
in cash
Limit for FY
Income Tax Deduction for FY 2019- Who can
Sections 2019-20 (AY
20 (AY 2020-21) Invest?
2020-21)
 Individuals
(Indian Rs.3,00,000/-
citizen or Or
Section 80RRB Royalty on Patents foreign Specified Income
citizen being - whichever is
resident in lower
India)

Individual
engaged in
the business
Section 80IBA Profits from Housing Projects of Housing 100% of the profit
Projects as
may be
specified

Individuals
(Indian Rs.3,00,000/-
citizen or Or
Section 80QQB Royalty Income of Authors foreign Specified Income
citizen being - whichever is
resident in lower
India)

Individual
Or
Section 80TTA Interest earned on Savings Accounts HUF (except Upto Rs 10,000/-
senior
citizen)

Individual
Interest Income earned on
Section 80TTB (60 yrs or Upto Rs 50,000/-
deposits(Savings/ FDs)
above)
Normal Disability:
Rs. 75,000/-
Section 80U Disabled Individuals Individuals
Severe Disability:
Rs. 1,25,000/-
There is addition exemption was budgeted in 2018 and as of 2019 it is amended
as below
Rebate u/s 87A increased :
The amount of rebate u/s 87A has been increased from Rs. 2,500 to Rs. 12,500.
Rebate is available to the individuals whose taxable income for Financial year 2019-20
does not exceed Rs. 5,00,000/- Read more about Rebate u/s 87A.

Introduction of new section 80EEA :

The union budget 2019 introduced new section which provide interest deduction for
housing loan taken for affordable housing for the first home buyers. Under this section
a maximum amount of Rs. 1,50,000 and loan should be taken during 01 April, 2019
to 31 March, 2020. This deduction is over and above exemption available under
section 24 of Rs. 2,00,000.
Introduction of new section 80EEB :

Deduction of interest on loan taken to purchase electric vehicles has been introduced
in Budget 2019. Under this section, the maximum amount of deduction available is
Rs. 1,50,000.
Standard deduction :

Standard deduction for salary class employees has been increased from Rs. 40,000 to
Rs. 50,000/-.

For an example Individual have income of 1 crore in financial year 2019-2020,

so tax on Individual calculated as below
From above you can see there are no relief u/s 87A, because income exceeded
more than 5 lakh and no surcharge due to individual having income less than 1
cr.

Corporate tax on Business Income

Under section 28 (i) says that any Profit and gains from any business or
profession carried on by the assessee at any time during the previous year, are
chargeable to tax under the head Profit and Gains from Business or Profession.

Section 28, 41 & 43 of Income tax Act gives brief description about
chargeability of income under this head
Section 30 to 37 are gives information about amount of deduction allowed
while computing of Profit and gains of Business or profession

Section 40 of Income Tax Act, is gives information about disallowed expenses

under this head

Section 43 gives details of expenses deductible on actual payment basis which

are as below
The following expenses shall be allowed as deduction if such expenditure are actually paid on
or before the due date of filing of return of income:-

Section Particulars

43B(a) Any Tax, Duty, Cess or Fees under any Law

43B(b) Any contribution to Provident Fund/Superannuation Fund/Gratuity

Fund/Welfare Fund

43B(c) Bonus or Commission paid to employees which would not have been payable as
profit or dividend

43B(d) Interest on Loan or Borrowings from Public Financial Institutions/State

Financial Institutions etc.

43B(da) Interest on loan from a deposit taking NBFC or systemically important non-
deposit taking NBFC

43B(e) Interest on loan or advance from bank

43B(f) Payment of Leave Encashment

43B(g) Sum payable to the Indian Railways for the use of railway assets.

Section 44 gives threshold limit to assessee that why they need to maintain
their books of account and when they need to conduct statutory audit of their
books by Chartered Accountant.

Section Particulars Threshold

44AA Compulsory maintenance of Persons carrying on specified profession and

prescribed books of account – their gross receipts exceed Rs. 1,50,000 in all
Specified Profession the three years immediately preceding the
(Subject to certain conditions previous year
and circumstances)

44AA Compulsory maintenance of 1) If total sales, turnover or gross receipts

books of account – Other
business or profession
(Subject to certain conditions
and circumstances)
exceeds Rs. 25,00,000 in any one of the three
years immediately preceding the previous year;
or
2) If income from business or profession
exceeds Rs. 2,50,000 in any one of the three
years immediately preceding the previous year
44AB Compulsory Audit of books of 1) If total sales, turnover or gross receipts
accounts (Subject to certain exceeds Rs. 2 Crore in any previous year, in
conditions and case of business; or
circumstances) Note:
a) Provided that this section is not applicable to
the person, who opts for presumptive taxation
Scheme under Section 44AD and his total sales
or turnover does not exceed Rs 2 crores.
b) Threshold limit of Rs. 1 crore shall be
increased to Rs. 5 crore in case where the cash
receipt and payment made during the year does
not exceed 5% of total receipt or payment the
business
2) If gross receipts exceeds Rs. 50 Lakhs in any
previous year, in case of profession.

Presumptive Taxation
A professional having a gross revenue upto Rs 50 lakhs can opt for the presumptive
scheme of tax wherein he can straightaway offer 50% of the gross revenue as his
taxable income and pay taxes as per his slab rates on such income

Section Nature of business Presumptive income

44AD Income from eligible business can
be computed on presumptive
basis if turnover of such business
does not exceed two crore rupees.
Note: If an assessee opts out of
the presumptive taxation scheme,
after a specified period, he cannot
choose to revert back to the
presumptive taxation scheme for a
period of five assessment years
thereafter. [section 44AD(4)]
(Subject to conditions)
Presumptive income of eligible business
shall be 8% of gross receipt or total
turnover.
Note: Presumptive income shall be
calculated at rate of 6% in respect of total
turnover or gross receipts which is received
by an account payee cheque or draft or use
of electronic clearing system or through
any other electronic mode as may be
prescribed.

44ADA Income from eligible profession Presumptive income of such profession

u/s 44AA(1) can be computed on shall be 50% of total gross receipt.
presumptive basis if the total
gross receipts from such
profession do not exceed fifty lakh
rupees in a previous year.
(Subject to conditions)

44AE Presumptive income from For Heavy Goods Vehicle:

business of plying, hiring or
leasing of goods carriage if
assessee does not own more than
10 goods carriage.
Rs. 1,000 per ton of gross vehicle weight
for every month or part of a month during
which the heavy goods vehicle is owned by
assessee.
For Other Goods Vehicle:
Rs. 7,500 for every month or part of a
month during which the goods carriage is
owned by assessee.
Note: ‘Heavy goods vehicle’ means goods
carriage vehicle the gross vehicle weight of
which exceeds 12,000 kilograms.
Tax rates applicable in Corporate Tax, the following rates are applicable to the
domestic companies for AY 2020-21 based on their turnover:

Sections Tax Rate Surcharge

Section 115BA (Companies having turnover up to Rs 25% 7%/12%*
250 crore in FY 2017-18)
Section 115BAA 22% 10%
Section 115BAB 15% 10%
Any other case (Limited Liability Partnership or a 30% 7%/12%*
Firm) & (A Company having turnover more than Rs.
250 crores)

* Please note the rate of surcharge is 7% in case the total income is above one crore
rupees and up to Rs 10 crore. The surcharge is 12% in case total income is above Rs
10 crore. However, if a company opts for taxation under section 115BAA or section
115BAB, the surcharge is 10% irrespective of the total income.
There are three different types of corporate tax
1) Minimum Alternate Tax u/s 115JA @18.5% – where taxes need to pay as per
u/s 115BA @25% or @u/s 115JA @18.5% whichever is higher.
2) Dividend Distribution Tax @15% – It is basically a tax levied on companies
based on the dividend they pay to their investors. This tax is applicable on the
gross or net income an investor receives from their investment.
3) Banking Cash Transaction Tax @0.1% – Banking Cash Transaction Tax is yet
another form of tax that has been abandoned by the Indian government. This
form of taxation was operation from 2005-2009 until the then FM Pranab
Mukherjee nullified the tax. This tax suggested that every bank transaction
(debit or credit) would be taxed at a rate of 0.1%.

Conclusion: Tax handling, Effective ways

This assignment examines the process of defining a taxpayer from a specific point of
view, namely the issue that has to be dealt with beforehand: classifying the legal
structure by means of which the taxable income is acquired.

Several critics of the tax reform programme in India have tended to judge the success
or failure of the programme in terms of increases in revenue that the reform has
brought about. Adequacy of increase is measured in terms of revenue to GDP ratio. To
be sure, one of the objectives of tax reform is to improve revenue elasticity and the tax
ratio. However, it should be remembered that the impact of the reform on revenue
increase will not be immediate; tax compliance will increase with reduction in rates
only gradually. Similarly, improvements in tax enforcement will take time.

A major objective of the tax reform is to facilitate and promote faster growth of the
economy. What is needed is not an immediate increase in the tax ratio but a faster
growth in revenue arising from a higher growth rate of the economy. With an elasticity
greater than one, in course of time, the tax ratio will rise. It could be said with some
confidence that the tax system has been reformed in India significantly enough to
facilitate a higher rate of growth.

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