DIRECT TAXATION MODULE 1 RAV.M.V.

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M.COM /MFA 2 YEAR DIRECT TAX

MODULE 1

Basic Framework of Direct Taxation, Principles of Direct Taxation, Appraisal of Annual Finance
Act, Tax planning and it’s Methods, Advance Tax Rulings.

MODULE 1

 Introduction to Taxation
 History Of Taxation
 Basis of Taxation
 Basic Framework of Direct Taxation
 Direct Taxes and Indirect Taxes
 Principles of Direct Taxation,
 Sources and Authority of Taxes in India
 Seventh Schedule of the Constitution
 Appraisal of Annual Finance Act,
 Tax planning and it’s Methods,
 Advance Tax Rulings

Introduction to Taxation
Tax is a levy imposed on public by an appropriate authority. The authority empowered to levy,
collect and administer tax may be central, state or local government. It is revenue to government.
Tax is a compulsory contribution from a person to the government to meet its general expense in
the common interest of all. Without any corresponding benefits to the tax payers. Government
needs funds for various purposes like maintenance of law and order, defense, social
expenditures, health services, Education, infrastructure like roads, railways, metro, airport, dams
etc. Government obtains funds from various sources, out of which one main source is Taxation.
Justice Holmes of Us Supreme Court, has long ago, said that TAX IS THE PRICE WHICH WE
PAY FOR A CIVILISED SOCIETY. If the people are request to pay Rs.500 p.a to the government
for defense, it doesn’t mean to protect only those who pay for it. If this is so no one will pay for
it. Then the alternative before the government is to spend for the defense of the whole country
and recover the amount by imposing taxes to protect the country. The taxes are levied to raise
funds for government expenditure. It is said by many thinkers that two things are certain in the
life of every one i.e. taxes and death. In the budget of every government taxes are the major
source of revenue. Tax system in India mostly evolved in post independence era, new taxes are
introduced for meeting the increasing needs of the government and to achieve the objectives of
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economic development. Taxes like income tax, excise duties, custom duties, wealth tax, estate
duty etc. are lived by the Central Government while sale tax, Professional tax, entertainment tax
are levied by the state Government. It is important to know the relative roles of different taxes in
a country at any given point of time because the impact of relying on a particular tax may be
different from relying on another tax. India has a three- tier federal structure (the union
government the state governments and the urban or local bodies). The power to levy taxes and
duties is apportioned between the union government and the state governments in accordance
with the provisions of the Indian constitution.

HISTRORY OF TAXATION

Historical background of Indian Income tax system

 Government may perform its traditional functions (defense, maintenance of law and
order, welfare Activities, etc) due to impose of taxes. Taxation is one of the systems of
transferring money from private to public hands. This is just as Sun draws moisture from
the Earth to give it back a thousand fold.
 Tax is major revenue of each country in the world. It is divided in two parts as Direct
Taxes and Indirect Taxes. Taxes and death are certain in the life of every human being.
India is one of the nations where tax is collected from ancient age. The references of
taxes are available in many ancient books like Bhagavatgita, Manu Smriti and Kautilya’s
Arthashastra.
 In Kautilya’s ‘Arthshatra’, the details are given about how the King had collected and
utilized taxes. The prevalence and necessity of taxation is recorded by Kalidas in the
“Raghuvansha”. The origin of the word Tax came from ‘Taxation’ which means an
estimate. These were levied either on the sale or purchase of merchandise or lives stock
and were collected in a different manner from time to time.

Taxes in Ancient India

 Taxation in India has existed since ancient times. Taxation was considered as a sacred
duty in Vedic times. The references were available in many ancient books like “Manu
Smriti”, “Srimada Bhagavatam” and Kautilya’s “Arthashstra”. The necessity of Taxation
is recorded by the Kalidas, greatest Sanskrit scholar of ancient India. In his work
Raghuvansa in Kautilya’s Arthashstra the ways are suggest how to run the state in an
efficient and fruitful manner. According to him treasury is fundamental for
administration.

Taxes during Mughal Period.

 Various tax system during Mughal rule are found in contemporary court chronicles,
particularly Ain-i- Akbari (the official chronicler of the reign of the Emperor Akbar)
complied by Abul Fazl, one of Akbar’s courtiers. In fact Babur was the founder of the
Mughal Rule in India, had no tax policy as such. Plundering was his main source of state
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income. Land revenue was one of the sources of income of Mughal rulers. The JIzya on
the non-Muslims abolished by Akbar, was reintroduced by Aurangzeb in 1679 in the
form of a digressive income tax. For the levying of the Jizya, a special service with new
collectors of taxes was created. The discriminatory tax policy based on religion adopted
by some of the Mughal rulers was a contributory factor to the decline of Mughal Empire
after the death of Aurangzeb in 1707.
 The system of progressive taxation perhaps owes its origin to emperor Krishanadevraya
of Vijaynagar who maintained that taxes should not be levied at flat rates and the amount
of tax levied must depend on the income of the farmer. The Mughal emperors granted
land revenue rights to a Mansabdar in exchange for promises of soldiers in war time. The
treaty of 1765 gave Britishers the right to collect taxes on behalf of the emperor. Well
before the dissolution of the Mughal Empire in 1857 the British system of District
Collectors of land revenue was established

Taxes during British Rule

HISTRORY OF TAXATION

 In India Income tax comes into existence in the year 1860 by : James Wilson
 1886 : income tax act passed by British parliament
 Tax imposed on:
 income from salary and pensions
 income from company’s
 income from interest on securities
 income from other incomes
 1922 : income tax act was passed – DTEC
 1961 : income tax act was passed
 Invited: Prof. Nicolas Calder from Cambridge University to make suggestions to
restructure the Indian taxation.
 Sept. 1961 : bill was formed
 With effect from : 1st April 1962
 This enactment with 298 sections and 11 schedules and also large no. of sub-sections and
clauses is applicable to the whole India.
 Income tax act of 1961 extended to whole India from 1st April 1962 including Jammu and
Kashmir and for the state of Sikkim from 1st April 1990 onwards
 However, this Act is about to be repealed and be replaced with a new Act which
consolidates the law relating to Income Tax and Wealth Tax, the new proposed
legislation is called the Direct Taxes Cod (to become the Direct Taxes Code, Act 2010).
Act was referred to Parliamentary standing committee which has submitted its
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recommendations. Act is expected to be implemented with changes from the Financial

Year 2013-14.

Introduction to Taxation
Tax is a levy imposed on public by an appropriate authority. The authority
empowered to levy, collect and administer tax may be central, state or local
government. It is revenue to government. Tax is a compulsory contribution
from a person to the government to meet its general expense in the common
interest of all. Without any corresponding benefits to the tax payers.

• Government needs funds for various purposes like maintenance of law and
order, defense, social expenditures, health services, Education, infrastructure
like roads, railways, metro, airport, dams etc.Government obtains funds
from various sources, out of which one main source is Taxation.
• Justice Holmes of Us Supreme Court, has long ago, said that TAX IS THE
PRICE WHICH WE PAY FOR A CIVILISED SOCIETY.

Objectives of Tax

 Raising Revenue
 Development of Backward Regions
 Reducing Income Inequalities
 Promoting Economic Growth
 To meet Government Expenditures
 To meet social welfare expenditures
 Regulation of Consumption and Production
 Encouraging Domestic Industries
 Stimulating Investment
 Ensuring Price Stability

DIRECT TAXATION IN INDIA:

Direct taxation in India is taken care of by the central board of direct taxes
(CBDT); it is a division of department of revenue under ministry of finance.
CBDT is governed by the revenue act, 1963. CBDT is given authority to
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create and control direct taxes in India. The most important function of
CBDT is to manage direct tax law followed by income tax department.

DIRECT TAX AND INDIRECT TAX:

TYPES OF TAXES

 DIRECT TAXES INDIRECT TAXES


 TAX
INCOME WEALTH TAX EXCISE CUSTOMS SERVICE VAT
DUTY DUTY TAX

Tax is imposing financial charges on individual or company by central government or state

government. Collected Tax amount is used for building nation (infrastructure & other
development), to increase arms and ammunition for defense of country and for other welfare
related work. That’s why it is said that “Taxes are paid nation are made”.

Types of Taxes in India

Direct Taxes:-
These types of taxes are directly imposed & paid to Government of India. There has been
a steady rise in the net Direct Tax collections in India over the years, which is healthy
signal. Direct taxes, which are imposed by the Government of India, are:
(1) Income Tax:-
Income tax, this tax is mostly known to everyone. Every individual whose total income
exceeds taxable limit has to pay income tax based on prevailing rates applicable time to
time.
By doing investment in certain scheme you can save Income Tax.
For FY 2015-16 Income tax rates are:-
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(2) Capital Gains Tax:-

Capital Gain tax as name suggests it is tax on gain in capital. If you sale property, shares,
bonds & precious material etc. and earn profit on it within predefined time frame you are
supposed to pay capital gain tax. The capital gain is the difference between the money
received from selling the asset and the price paid for it.
Capital gain tax is categorized into short-term gains and long-term gains. The Long-term
Capital Gains Tax is charged if the capital assets are kept for more than certain period 1
year in case of share and 3 years in case of property. Short-term Capital Gains Tax is
applicable if these assets are held for less than the above-mentioned period.
Rate at which this tax is applied varies based on investment class.
Example:-
If you purchase share at say 1000 Rs/- (per share) and after two months this price
increased to 1200 Rs/-(per share) you decide to sale this stock and earn profit of 200 Rs/-
per share. If you do so you have to pay Short term CGT (capital gain tax) @ 10%
+Education cess on profit as it is short term capital gain. If you hold same share for 1 year
or above it is considered as long term capital gain and you need not to pay capital gain
tax.it is considered as tax free.
Similarly if you purchase property after two year if you find that property price in which
you invested has increased and you decide to sale it you need to pay short term capital
gain tax.
For property it is considered as long term capital gain if you hold property for 3 years or
above.
(3) Securities Transaction Tax:-
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A lot of people do not declare their profit and avoid paying capital gain tax, as
government can only tax those profits, which have been declared by people. To fight with
this situation Government has introduced STT (Securities Transaction Tax ) which is
applicable on every transaction done at stock exchange. That means if you buy or sell
equity shares, derivative instruments, equity oriented Mutual Funds this tax is applicable.
This tax is added to the price of security during the transaction itself, hence you cannot
avoid (save) it. As this tax amount is very low people do not notice it much.
Current STT Rates are:-

(4) Perquisite Tax:-

Earlier to Perquisite Tax we had tax called FBT (Fringe Benefit Tax) which was abolished
in 2009, this tax is on benefit given by employer to employee. E.g If your company
provides you non-monetary benefits like car with driver, club membership, ESOP etc. All
this benefit is taxable under perquisite Tax.
In case of ESOP The employee will have to pay tax on the difference between the Fair
Market Value (FMV) of the shares on the date of exercise and the price paid by him/her.

(5) Corporate Tax:-

Corporate Taxes are annual taxes payable on the income of a corporate operating in
India. For the purpose of taxation companies in India are broadly classified into domestic
companies and foreign companies.

In addition to above other taxes are also applicable on corporates.

Indirect Taxes:-
(6) Sales Tax :-
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Sales tax charged on the sales of movable goods. Sale tax on Inter State sale is charged by
Union Government, while sales tax on intra-State sale (sale within State) (now termed as
VAT) is charged by State Government.
Sales can be broadly classified in three categories. (a) Inter-State Sale (b) Sale during
import/export (c) Intra-State (i.e. within the State) sale. State Government can impose
sales tax only on sale within the State.
CST is payable on inter-State sales is @ 2%, if C form is obtained. Even if CST is charged
by Union Government, the revenue goes to State Government. State from which
movement of goods commences gets revenue. CST Act is administered by State
Government.
(7) Service Tax:-
Most of the paid services you take you have to pay service tax on those services. This tax
is called service tax. Over the past few years, service tax been expanded to cover new
services.
Few of the major service which comes under vicinity of service tax are telephone, tour
operator, architect, interior decorator, advertising, beauty parlor, health center, banking
and financial service, event management, maintenance service, consultancy service
Current rate of interest on service tax is 14%. This tax is passed on to us by service
provider.
(8) Value Added Tax:-
The Sales Tax is the most important source of revenue of the state governments; every
state has their respective Sales Tax Act. The tax rates are also different for respective
states.
Tax imposed by Central government on sale of goods is called as Sales tax same is called
as Value added tax by state government.VAT is additional to the price of goods and
passed on to us as buyer (end user). Around 220+ Items are covered with VAT.VAT rates
vary based on nature of item and state.
Government is planning to merge service tax and sales tax in form of Goods service tax
(GST).

(9) Custom duty & Octroi (On Goods):-

Custom Duty is a type of indirect tax charged on goods imported into India. One has to
pay this duty , on goods that are imported from a foreign country into India. This duty is
often payable at the port of entry (like the airport). This duty rate varies based on nature
of items.
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Octroi is tax applicable on goods entering in to municipality or any other jurisdiction for
use, consumption or sale. In simple terms one can call it as Entry Tax.
(10) Excise Duty:-
An excise or excise duty is a type of tax charged on goods produced within the country.
This is opposite to custom duty which is charged on bringing goods from outside of
country. Another name of this tax is CENVAT (Central Value Added Tax).
If you are producer / manufacturer of goods or you hire labor to manufacture goods you
are liable to pay excise duty.
(11) Anti Dumping Duty:-
Dumping is said to occur when the goods are exported by a country to another country at
a price lower than its normal value. This is an unfair trade practice which can have a
distortive effect on international trade. In order to rectify this situation Central Govt.
imposes an anti dumping duty not exceeding the margin of dumping in relation to such
goods.
Other Taxes:-
(12) Professional Tax :-
If you are earning professional you need to pay professional tax. Professional tax is
imposed by respective Municipal Corporations. Most of the States in India charge this tax.
This tax is paid by every employee working in Private organizations. The tax is deducted
by the Employer every month and remitted to the Municipal Corporation and it is
mandatory like income tax.
The rate on which this tax is applicable is not same in all states.
(13) Dividend distribution Tax:-
Dividend distribution tax is the tax imposed by the Indian Government on companies
according to the dividend paid to a company’s investors. Dividend amount to investor is
tax free. At present dividend distribution tax is 15%.
(14) Municipal Tax:-
Municipal Corporation in every city imposed tax in terms of property tax. Owner of every
property has to pay this tax. This tax rate varies in every city.
(15) Entertainment Tax:-
Tax is also applicable on Entertainment; this tax is imposed by state government on every
financial transaction that is related to entertainment such as movie tickets, major
commercial shows exhibition, broadcasting service, DTH service and cable service.
(16) Stamp Duty, Registration Fees, Transfer Tax:-
If you decide to purchase property than in addition to cost paid to seller. You must
consider additional cost to transfer that property on your name.
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That cost include registration fees, stamp duty and transfer tax. This is required for
preparing legal document of property.
In simple sense this tax is imposed on the handing over of the title of property ownership
by one person to another. It incorporates a legal transaction fee & stamp duty. This
amount varies from property to property based on cost.
(17) Education Cess , Surcharge:-
Education cess is deducted and used for Education of poor people in INDIA. All taxes in
India are subject to an education cess, which is 3% of the total tax payable. The
education cess is mainly applicable on Income tax, excise duty and service tax.
Surcharge is an extra tax or fees that added to your existing tax calculation. This tax is
applied on tax amount.
(18) Gift Tax:-
If you receive gift from someone it is clubbed with your income and you need to pay tax
on it. This tax is called as gift tax.
This tax is applicable if gift amount or value is more than 50000 Rs/- in a year.
(19) Wealth Tax:-
Wealth tax is a direct tax, which is charged on the net wealth of the assessee. Wealth tax
is chargeable in respect of Net wealth corresponding to Valuation date.Net wealth means
all assets less loans taken to acquire those assets. Wealth tax is 1% on net wealth
exceeding 30 Lakhs (Rs 3,000,000). So if you have more money, assets you are liable to
pay tax.
Note:- Wealth tax is abolished by government in budget 2015.Now onwards surcharge of
12% is applicable on individual earning 1 crore and above.
(20) Toll Tax:-
At some of places you need to pay tax in order to use infrastructure (road, bridge etc.)
build from your money given to government as Tax. This tax is called as toll tax. This tax
amount is very small amount but, to be paid for maintenance work and good up keeping.
So in total you pay 20 different taxes in direct or indirect way. At the end in order to
make you laugh i will tell you one small joke on tax.
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BASIC FRAME WORK OF TAXATION

Study of taxation involves the application of the following:

1. INCOME TAX ACT 1961:

The levy of income-tax in India is governed by the income-tax act, 1961.

This act came into force on 1st April, 1962. The act contains 298 sections
and XIV schedules. These undergo change every year with additions and
deletions brought about by the finance act passed by parliament. In
pursuance of the power given by the income-tax act, rules have been framed
to facilitate proper administration of the income-tax act.
 Basic enactment

 Principles of taxation

 Basic concepts of income taxation

 Base of taxation

 298 sections and large no. of sub-sections

 The rules have been amended on several occasions and almost every year through the
annual finance act.

The major tax enactment in India is the Income Tax Act of 1961 passed by
the Parliament, which imposes a tax on income of individuals and corporations. This
Act imposes a tax on income under the following five heads:

 Income from salaries,

 Income from house and property,

 Income from business and profession,

 Income in the form of Capital gains, and

 Income from other sources

INCOME TAX RULES 1962: the Central Board of direct taxes (CBDT), which takes care of
the administration of the income taxes in India, has provided the rules of computation of income
and income tax. These rules are called as income tax rules 1962.
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2. THE FINANCE ACT:

Every year, the finance minister of the government of India presents the
budget to the parliament. Part A of the budget speech contains the proposed
policies of the government in fiscal areas. Part B of the budget speech
contains the detailed tax proposals. In order to implement the above
proposals, the finance bill is introduced in the parliament. Once the finance
bill is approved by the parliament and gets the assent of the parliament, it
becomes the finance act.

PRICIPLES / CANNONS OF TAXATION

The cannons as suggested by ADAM SMITH:

 CANNONS OF EQUITY: this emphasizes equality of wealth and income

distribution among the citizens of a nation. Taxes according to which should be
collected only from those who have the ability to pay the taxes.
 CANNONS OF CERTAINITY: the tax which each individual is bound to pay
ought to be certain and not arbitrary . The time of payment, the manner of
payment , the amount to be paid, etc.., to be clear and plain and it should be as per
the rules and regulations.
 CANNON OF CONVENIENCE: it suggests that the mode and timing of tax
payment should be convenient to the tax payer and unnecessary trouble should be
avoided.
 CANNON OF ECONOMY: it recommends that the amount of tax to be levied
should be minimum possible. It is considered useless to impose taxes, which are
too widespread and difficult to administer.
 CANNON OF PRODUCTIVITY: this advocates that the tax system should be
able to yield enough revenue to the government.
 CANNON OF BUOYANCY: it suggests that tax revenue should have an inherent
tendency to increase along with an increase in national income, even if the rates
and coverage of taxes are not revised.
 CANNON OF FLEXIBILITY: it presents that it should be possible for the
authorities, with out delay, to revise the tax structure, both with respect to its
coverage and rates, to suit the changing requirements of the economy and the
govt.
 CANNON OF SIMPLICITY: it suggests that the system should be simple to
understand and implement.
 CANNON OF DIVERSITY: this principle recommends tax revenue should come
from diversified sources. A caution here is that too much multiplicity of taxes is
not good for the economy
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Income Tax Slabs & Rates for Assessment Year 2016-17

Income Tax Slabs and Rates for the Assessment Year 2016-17 (applicable on income earned
during 01.04.2015 to 31.03.2016) for various categories of Indian Income Tax payers.

• Individual resident (Age below 60 Yrs.) or any NRI/ • Firm

HUF/ AOP/ BOI/ AJP

• Senior Citizen • Local

Authority

• Super Senior Citizen • Domestic

Company

• Co-operative Society • Other

Company

I. Individual resident aged below 60 years (i.e. born on or after 1st April 1956) or any NRI/
HUF/ AOP/ BOI/ AJP*

Income Tax: Tax Calculator: AY 2016-17

Income Slabs Tax Rates

i. Where the taxable income does not exceed Rs. 2,50,000/-. NIL

ii. Where the taxable income exceeds Rs. 2, 50,000/- but does 10% of amount by which the taxable
not exceed Rs. 5,00,000/-. income exceeds Rs. 2,50,000/-.
Less ( in case of Resident
Individuals only ) : Tax Credit u/s
87A - 10% of taxable income upto a
maximum of Rs. 2000/-.

iii. Where the taxable income exceeds Rs. 5,00,000/- but does Rs. 25,000/- + 20% of the amount by
not exceed Rs. 10,00,000/-. which the taxable income exceeds
Rs. 5,00,000/-.

iv. Where the taxable income exceeds Rs. 10,00,000/-. Rs. 125,000/- + 30% of the amount
by which the taxable income exceeds
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Income Slabs Tax Rates

Rs. 10,00,000/-.

Surcharge: 12% of the Income Tax, where taxable income is more than Rs. 1 crore. (Marginal
Relief in Surcharge, if applicable)

Education Cess : 3% of the total of Income Tax and Surcharge.

* Abbreviations used :
NRI - Non Resident Individual; HUF - Hindu Undivided Family; AOP - Association of
Persons; BOI - Body of Individuals; AJP - Artificial Judicial Person

II. Senior Citizen (Individual resident who is of the age of 60 years or more but below the age of
80 years at any time during the previous year i.e. born on or after 1st April 1936 but before
1st April 1956)

Income Tax: Tax Calculator: AY 2016-17

Income Slabs Tax Rates

i. Where the taxable income does not exceed Rs. 3,00,000/-. NIL

ii. Where the taxable income exceeds Rs. 3,00,000/- but does not 10% of the amount by
exceed Rs. 5,00,000/- which the taxable
income exceeds Rs.
3,00,000/-.
Less : Tax Credit u/s
87A - 10% of taxable
income upto a maximum
of Rs. 2000/-.

iii. Where the taxable income exceeds Rs. 5,00,000/- but does not Rs. 20,000/- + 20% of
exceed Rs. 10,00,000/- the amount by which the
taxable income exceeds
Rs. 5,00,000/-.
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Income Slabs Tax Rates

iv. Where the taxable income exceeds Rs. 10,00,000/- Rs. 120,000/- + 30% of
the amount by which the
taxable income exceeds
Rs. 10,00,000/-.

Surcharge : 12% of the Income Tax, where taxable income is more than Rs. 1 crore. (Marginal
Relief in Surcharge, if applicable)

Education Cess : 3% of the total of Income Tax and Surcharge.

III. Super Senior Citizen (Individual resident who is of the age of 80 years or more at any time
during the previous year i.e. born before 1st April 1936)

Income Tax :Tax Calculator : AY 2016-17

Income Slabs Tax Rates

i. Where the taxable income does not exceed Rs. 5, 00,000/-. NIL

ii. Where the taxable income exceeds Rs. 5,00,000/- but does not 20% of the amount by
exceed Rs. 10,00,000/- which the taxable
income exceeds Rs.
5,00,000/-.

iii. Where the taxable income exceeds Rs. 10,00,000/- Rs. 100,000/- + 30% of
the amount by which the
taxable income exceeds
Rs. 10,00,000/-.

Surcharge: 12% of the Income Tax, where taxable income is more than Rs. 1 crore. (Marginal
Relief in Surcharge, if applicable)

Education Cess : 3% of the total of Income Tax and Surcharge.

I. Co-operative Society
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Income Tax :

Income Slabs Tax Rates

i. Where the taxable income does not exceed Rs. 10,000/-. 10% of the income.

ii. Where the taxable income exceeds Rs. 10,000/- but does not exceed Rs. Rs. 1,000/- + 20% of
20,000/-. income in excess of Rs.
10,000/-.

iii. Where the taxable income exceeds Rs. 20,000/- Rs. 3.000/- + 30% of the
amount by which the
taxable income exceeds
Rs. 20,000/-.

Surcharge : 12% of the Income Tax, where taxable income is more than Rs. 1
crore. (Marginal Relief in Surcharge, if applicable)
Education Cess : 3% of the total of Income Tax and Surcharge.

II. Firm
Income Tax : 30% of taxable income.
Surcharge : 12% of the Income Tax, where taxable income is more than Rs. 1
crore. (Marginal Relief in Surcharge, if applicable)
Education Cess : 3% of the total of Income Tax and Surcharge.

III. Local Authority

Income Tax : 30% of taxable income.
Surcharge : 10% of the Income Tax, where taxable income is more than Rs. 1
crore. (Marginal Relief in Surcharge, if applicable)
Education Cess : 3% of the total of Income Tax and Surcharge.
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IV. Domestic Company

Income Tax : 30% of taxable income.
Surcharge : The amount of income tax as computed in accordance with above
rates, and after being reduced by the amount of tax rebate shall be increased by a
surcharge
 At the rate of 7% of such income tax, provided that the taxable income exceeds
Rs. 1 crore. (Marginal Relief in Surcharge, if applicable)
 At the rate of 12% of such income tax, provided that the taxable income exceeds
Rs. 10 crores.
Education Cess : 3% of the total of Income Tax and Surcharge.

V. Company other than a Domestic Company

Income Tax :
 @ 50% of on so much of the taxable income as consist of (a) royalties received
from Government or an Indian concern in pursuance of an agreement made by it
with the Government or the Indian concern after the 31st day of March, 1961 but
before the 1st day of April, 1976; or (b) fees for rendering technical services
received from Government or an Indian concern in pursuance of an agreement
made by it with the Government or the Indian concern after the 29th day of
February, 1964 but before the 1st day of April, 1976, and where such agreement
has, in either case, been approved by the Central Government.
 @ 40% of the balance
Surcharge :
The amount of income tax as computed in accordance with above rates, and after
being reduced by the amount of tax rebate shall be increased by a surcharge as
under
 At the rate of 2% of such income tax, provided that the taxable income exceeds
Rs. 1 crore. (Marginal Relief in Surcharge, if applicable)
 At the rate of 5% of such income tax, provided that the taxable income exceeds
Rs. 10 crores.

Education Cess : 3% of the total of Income Tax and Surcharge.

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Marginal Relief in Surcharge

When an assessee's taxable income exceeds Rs. 1 crore, he is liable to pay
Surcharge at prescribed rates mentioned above on Income Tax payable by him.
However, the amount of Income Tax and Surcharge shall not increase the amount of
income tax payable on a taxable income of Rs. 1 crore by more than the amount of
increase in

Example In case of an individual assesseee (< 60 years) having taxable income of

Rs. 1,00,01,000/-

1. Income Tax Rs. 28,25,300

2. Surcharge @12% of Income Tax Rs. 3,39,036

3. Income Tax on income of Rs. 1 crore Rs. 28,25,000

4. Maximum Surcharge payable Rs. 700/- (1000 - 300)

(Income over Rs. 1 crore less income tax on income over Rs. 1
crore)

5. Income Tax + Surcharge payable Rs. 28,26,000

6. Marginal Relief in Surcharge Rs. 3,38,336/- (339036

- 700)

ADVANCE TAX RULINGS

Advance Tax: Non-Individuals

Due dates, Rates & Calculator for A Y 2016-17 (FY 2015-16)

Advance Tax Information

 No advance tax (also written shortly as Adv. Tax) is payable if the total income tax liability
after reducing the tax deducted at source is less than Rs. 10000/-.
 If Advance Tax is not paid in full for installments falling due on 15th June (for Corporates
only), 15th September and 15th December, interest at the rate of 1% on the short amount
for 3 months is to be payable.
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 If Advance Tax is not paid in full for installments falling due on 15th March, interest at the
rate of 1% on the short amount for 1 month is to be paid. If the payment of the last
instalment in March is delayed by even a day, interest is to be paid on the entire
instalment amount.
 If you do not pay advance tax at all or if the aggregate paid by March 31 is less than 90
per cent of the total tax payable, you will have to pay an interest of 1 per cent per month
on the deficit amount from April 1 of the following year till the date you file your return.

Advance Tax Installments & Due Dates for Firms, Co-operatives and Local Authorities

Due Date Amount of Tax

15th September At least 30% of Tax on total income for the year.

15th December selected At least 60% of Tax on total income for the year less advance tax already paid.

15th March 100% of Tax on total income for the year less advance tax already paid.

Advance Tax Installments & Due Dates for Companies

Due Date Advance Tax Installment Amount

15th June At least 15% of Tax on total income for the year.

15th September At least 45% of Tax on total income for the year less advance tax already paid.

15th December At least 75% of Tax on total income for the year less advance tax already paid.

15th March 100% of Tax on total income for the year less advance tax already paid.

ADVANCE TAX LIABILITY- UNDER DIFFERENT SITUATIONS

1. Payment of advance tax by the assessee of his own account [sec 210]

An assessee required to estimate his current income and pay advance tax thereon without
having to submit any estimate or statement of income to the assessing authorities.
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2. Payment of advance tax in pursuance of order of assessing officer [sec 210]

The provisions are given below:

 The Tax payer is one who had earlier been assessed to income tax.

 The A.O. may pass on order under sec 210(3) requiring him to pay advance tax on his
current year income.

 The order must specify the different installments in which the advance tax should be
paid.

 Such order may be passed during the previous year but not later than last day of
February.

3.Payment of advance tax in pursuance of revised order of A.O.

the provisions given below:

 The order passed by A.O u/s 210(3) can be revised by him u/s 210(4)

 Such revision is possible if subsequent to passing an order u/s 210(3) but before march 1st
of the relevant financial year, the assessee had furnished a return of income for a later
year.

 On receipt of revised order, the assessee will have to pay advance tax accordingly.

By RAVI .M.V.
CENTRAL COLLEGE BU
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Income Tax Rates on Companies for A.Y. 2015-16

& A.Y. 2014-15

Rates of
Type of Company Income-
tax

A Domestic Company 30%

A Foreign Company where income consists of 50%

-> concern under an agreement made after March 31, 1961, but before
April 1, 1976, or fees for rendering technical services received from
Government or an Indian concern under and agreement made after
February 29, 196, but before April 1, 1976, and where such agreement
has, in either case, been approved by the Central Government.

on the balance, if any, of the total income 40%

where agreement referred above is made after 31st May, 1997 NIL

where agreement referred above is made between 1st April, 1976 to NIL
31st May, 1997.
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Surcharge on Company for A.Y. 2015-16 & A.Y.

2014-15

Type of Assessee Rate of Surcharge

Domestic Company (i) 5% of income-tax, if income exceeds Rs. 1 crore but does
not exceed Rs. 10 crore

(ii) 10% of income-tax, if income exceeds Rs. 10 crore

Foreign Company (i) 2% of income-tax, if income exceeds Rs. 1 crore but does
not exceed Rs. 10 crore

(ii) 5% of income-tax, if income exceeds Rs. 10 Crore

Education Cess: 2% of income tax (including surcharge thereon)

1% Secondary & Higher Education Cess of income tax (including surcharge thereon)

Marginal Relief: In the case of every company having a total income exceeding Rs. 1
crore & 10 crore, the total amount payable as income tax and surcharge on such
income shall not exceed the total amount payable as income tax on total income of
Rs.1 crore & 10 crore by more than the amount of income that exceeds Rs. 1 crore &
10 crore respectively.
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Company's Minimum Alternate Tax A.Y. 2015-16 &

A.Y. 2014-15

Type of assessee Rate of surcharge

Domestic Company 18.5%

Foreign Company 18.5%

The following information is also important for commerce students or for

layman. So you should read the following information about company.

There are two types of companies as given below.

Domestic Company: The company which is registered in India is called

domestic company. Domestic company is further classified as public company
and private company.

Foreign Company: The company which is registered outside India is called

foreign company.

Which company is liable to pay tax?

All companies irrespective of the status and income is liable to pay tax
according to the income tax slab / rates applicable to particular assessment
year. For example the company will pay tax for the period 1-4-2013 to 31-3-
2014 according to income tax slab for A.Y.2014-15.
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How to calculate taxable income of a company?

The same method will be applicable for calculation the taxable income of a
company as applicable to individuals. The income is computed separately under
each head and then aggregated to compute the gross total income. As for
obvious reason there is no need to mention that the company will not
have salary income as individuals.