Taxable Income and

Tax liability.
 determination of Tax
liability
• The residential status of a company identifies its tax liability on
income earned. A company is a resident in India if it's an Indian
company or its control & management is situated in India. All the
income earned by a resident company is liable to tax under corporate
tax law.
• As a result of this, the issue of double taxation may occur. It refers to
the taxing of the same income twice by the company, because of the
different tax laws of different countries. Section 90 & 91 of the I.T. Act
provides relief against double taxation.
Components of Income of a
company: 
• 
• The total income of the business that is put to tax under corporate taxation is
inclusive of:
• Profits and Gains from the Business & Profession;
• Capital Gains;
• Earnings from House Property;
• Earnings from other sources like interests, lotteries, etc.
• The income calculated is adjusted as per section 79 set off and carried forward of
losses in companies and total gross income is ascertained. The deductions under
Chapter VI-A are made from the total gross income to arrive at the net income.
The computed value of net income is exposed to tax.
 Types of corporate
Taxes
• 1) Dividend distribution tax

• 2) minimum alternative tax.

• 3) general corporate Tax:

 Domestic company
• The Tax rate is @ 30%

• The surcharge levied on incase income more than 1 crore but less
than 10 crore 7% will be levied.

• The surcharge levied on incase income more than 10 crore 12%

surcharge will be levied on Tax.
 Foreign company

Up to Rs. 1,00,00,000 40%

More than Rs. 1,00,00,000 but Less than Rs.

40%
10,00,00,000

More than Rs. 10,00,00,000 40%

 Taxable income

• To the total income so obtained, 'current and brought forward losses'

should be adjusted for set off in subsequent assessment years to
arrive at the gross total Income. Thus the total income so computed is
the 'gross total income'. The 'set off ' means, adjustment of certain
losses against the incomes under other sources/heads: Section 79.
Section 79
• Section 79 applies to all losses including losses under the head
'Capital Gains.

• Unabsorbed depreciation may be carried-forward for set-off

indefinitely. But carry back of losses or depreciation is not permitted.
However, business losses can be carried forward for eight consecutive
financial years and can be set off against the profits of subsequent
years.
• From the gross total income, prescribed 'deductions' under are made
to get the 'net income'.

• Generally, all expenses incurred for business purposes are deductible

from taxable income, given that the expenses must be wholly and
exclusively incurred for business purposes and also that the expenses
must be incurred/paid during the previous year and supported by
relevant papers and records. But expenses of personal or of capital
nature are not deductible.
• But no deduction shall be allowed in respect of any expenditure
incurred in relation to income which does not form part of total
income.

• Tax liability is computed on the 'net income' that is chargeable to tax.

It is done either on accrual basis or on receipt basis (whichever is
earlier). However if an income is taxed on accrual basis, it shall not be
taxed on receipt basis.