UNIT 4 – CORPORATE TAX

AND GST
 WHAT IS TAX?
•Samuelson – “Income redistribution”
•Stiglitz – “Used to fulfill government’s obligations of
expenditure”
•Infrastructure, Education, Healthcare
•Methods of taxation
•Types of tax
 METHODS OF TAXATION

• Progressive
• Regressive
• Proportional
LAFFER CURVE
 TAX

INDIRECT
DIRECT TAX
TAX

INCOME CORPORATE
TAX TAX
INCOME TAX SLABS
 WHAT IS CORPORATE TAX?

• A corporate is an entity that has a separate and independent legal entity from its shareholders.
• The types of companies can be defined as under:
• Domestic Company
• Foreign Company
 INCOME OF A COMPANY

1. Profits earned from the business

2. Capital Gains
3. Income from renting property
4. Income from other sources like dividend, interest etc.
APPLICABLE TO DOMESTIC COMPANIES
APPLICABLE TO FOREIGN COMPANIES
SURCHARGE RATE
 OTHER TAXES AND CESSES LEVIED

• Health & education Cess: Further 4% of income tax calculated and applicable surcharge will be
added to the amount of total tax liability before this cess.
• Minimum Alternate Tax (MAT): Alternatively, all the companies (including foreign
companies) are required to pay minimum alternate tax at the rate of 15% on book profits if the
tax calculated as per above rates are less than 15% of book profits. This will be applicable if the
company does not opt for Section 115BAA or Section 115BAB.
 METHODS TO REDUCE TAX

• Tax evasion
• Tax avoidance
• Tax planning
 CORPORATE TAX PLANNING

• Tax payer would want to save income lost to tax

• Tax collector would want to levy more tax
• Tax planning is the arrangement of financial activities so that maximum tax benefits are enjoyed
by the tax payer.
• Exemptions, deductions, rebates, reliefs.
 OBJECTIVES OF TAX PLANNING

• Reduction of tax liability

• Minimization of litigation
• Productive investment
• Healthy growth of economy
• Economic stability
FACTORS ON WHICH TAX PLANNING IS DONE

• Residential status and citizenship of the assessee

• Heads of income
• Latest legal position
• Form vs substance
• Form of transaction
• Genuineness of transaction
• Proof of transaction
 TAX MANAGEMENT

• Unlike Tax planning, tax Management is mandatory.

• Maintenance of records, Filing of returns, etc.
• Poor tax management may lead to penalty and even prosecution.