MINIMUM TAX REGIME:

Minimum Tax Regime:

Certain types of incomes are subject to minimum tax under the ITO 2001 to assure that certain portion of
tax is paid by the taxpayer irrespective of quantum of income. These are:
(i) Minimum tax under section 113 on turnover
Tax on turnover:
113. Minimum tax on the income of certain persons.-
a resident company,
permanent establishment of a non-resident company
an individual (having turnover of 100 million rupees or above) in the tax year 2017 or in any subsequent
tax year
an association of persons (having turnover of 100 million rupees or ) in the tax year 2017 or in any
subsequent tax year.
How to calculate tax on turnover: Turnover Tax Liability = Turnover x Turnover Tax Rate
(ii) Commercial importer under section 148(7).
(iii) Tax deduction at source @ 10% from gross amount of service rendered under section 153 for all
persons other than a company.
(iv) Tax collected up to the electricity bill amount of Rs 360,000 per annum for a person other than
company under section 235.
PROBLEM:
ABC & Co. is an AOP with annual turnover under normal tax regime of Rs. 116,000,000 during the
tax year 2023. If the taxable profit of the AOP is Rs. 1,570,000. Compute the tax liability of the AOP
for the tax year 2023.
Answer:
Turnover tax rate for year 2023 = 1.25% of turnover
1.25 of 116,000,000 = 116,000,000 x 1.25/100
= 1,450,000
Income tax under normal tax regime:
2023 Slab rate of individual (not salaried):
1,200,001 - 2,400,000 - 60,000 + 17.5% of the amount above 1,200,000
Taxable profit = 1,570,000 ( taxable income)
Rate of tax = 60,000 + 17.5% of the amount above 1,200,000
17.5% of the amount above 1,200,000:
= 1,570,000 – 1200000
= 370000
17.5 of 370000 = 64750
Rate of Tax = 60,000 + 64750
= 124,750

The AOP has to pay higher of minimum tax under section 113 or income tax as computed above
under normal tax regime. As the turnover tax is higher than tax computed under normal tax regime
therefore the same is to be paid by the AOP (i. e.) Rs. 1,450,000.