CORPORATE TAX

1. INTRODUCTION (2 HRS)
Definitions, residential status, heads of income, computation of taxable income
2. TAXATION OF COMPANIES (7 HRS)
Special provisions in computation of profit from business Deduction from gross total income
Amalgamation of companies and fiscal incentives
Minimum alternative tax on companies
Special provisions relating to tax on distributed profits of domestic companies
3. TAX PLANNING (7 HRS)
Concept relating to tax avoidance and tax evasion
Tax planning with reference to; location of undertaking,
types of activity, ownership pattern,
dividend policy, Issue of bonus shares, Inter corporate dividends and transfer
Tax planning relating to amalgamation and mergers of companies
Tax considerations in respect of specific managerial decision like make or buy, own or lease,
close or continue, sales in domestic markets or exports,
capital budgeting decisions, managerial remuneration, foreign collaboration and joint ventures.
4. TAX MANAGEMENT (4 HRS)
Filing of returns and assessments Penalties and prosecutions
Appeals and revisions Advance tax, TDS, advance rulings
Avoidance of double taxation agreements
BASIC TEXTS
Students’ Guide to Income Tax (by) Vinod Singhania & Monica Singhania (Taxmann)
Corporate Tax – Planning and Management (by) Girish Ahuja & Ravi Gupta (Bharat’s)
 COVERAGE
1 INTRODUCTION
2 Income tax –Computation of total
Income
3 Taxation of companies
4 Taxation of companies
5 Taxation of companies
6 Tax Planning
7 Tax Planning
8 Tax Planning
9 Tax Management
10 Tax Management
 TAXATION STRUCTURE

TAXATION

DIRECT TAX INDIRECT TAX

GIFT TAX SALES TAX/

INCOME TAX WEALTH TAX CENTRAL EXCISE CUSTOMS SERVICE TAX
(NOW REPEALED) VAT
 BUDGET & FINANCE ACT
• Every Year a Budget is presented before
the parliament (Normally 28th Feb ) by the
Finance Minister.
• One of the most important components of
Budget is the Finance Bill, Which declares
the financial proposals of the Central
Government for the next Financial Year.
 FINANCE ACT
• The Finance Bill contains various amendments
which are sought to be made in the area of
direct and indirect taxes levied by the central
Government.
• The Finance Bill also mentions the rates of
income tax and other taxes .
• When the Finance Bill Approved by both the
houses of parliament and receives the assent of
the president , it becomes the Finance Act. The
provisions of such finance Act are thereafter
incorporated in the Income-Tax Act
 INTRODUCTION
INCOME TAX LAW
• An understanding of the income –tax law
requires the study of the following
• 1.The Income –tax Act,1961 (amended up
to date)
• 2. The Income –tax Rules ,1962 (amended
up to date)
• 3.Circulars clarifications issued by CBDT
• 4.Judicial decisions
 SCHEME OF TAXATION
Every person , whose total Income of the
previous year exceeds the maximum
amount which is not chargeable to income
tax , is an assessee and chargeable to
income –tax in the relevant assessment
year at the rate or rates prescribed in the
Finance Act. However, this total income
shall be determined on the basis of his
residential status in India.
 ANALYSIS OF SCHEME OF
TAXATION
• An analysis of the above statement would reveal the following
important concepts which are necessary for understanding the
framework of the Income-Tax Act.
• 1.Person
• 2.Assessee
• 3.Assessment Year
• 4.Previous Year
• 5.Rate or rates of tax
• 6.Charges of income tax
• 7.Maximum amount which are not chargeable to income tax
• 8.Total Income
• 9.Residential Status
• 10.Finance Act
 IMPORTANT CONCEPTS
1.PERSON
The following persons are liable to Income tax
Person (Section 2(31)) : person Includes
• 1.An individual;
• 2.A Hindu Undivided Family (HUF)
• 3.A company
• 4.A Firm
• 5.An Association of Persons(AOP) or a Body of
Individuals (BOI) whether incorporated or not
• 6. A Local Authority
• 7. Every Artificial judicial Person not falling with any of
the preceding sub-clauses.
 PERSON
• 1.Individual
• Individual means a natural person ie a human
being
• It includes a male, female, minor child and a
lunatic or idiot.

• 2. A Hindu Undivided Family (HUF)

It is not defined under Income Tax Act
However as per the Hindu law , it means a family
which consists of all persons lineally descended
from a common ancestor including their wives
and daughters.
 company
• It is an incorporated under companies Act
which is an artificial judicial person, having
an independent legal entity, with a
perpetual succession, a common seal , a
common capital consists of transferable
shares and carrying limited liability.
 Firm
A Firm refers to Partnership firm. As per
partnership Act, it is relationship between
persons who have agreed to share the
profits of a business carried on by all or
any of them acting for all. It is based on
contract or agreement whether written
Partnership deed or oral one.
 AOP & BOI
Association of persons (AOP)
• AOP means two or more persons who join for a
common purpose with a view to earn income .It
need not be on the basis of contract.
Body of Individual(BOI)
• BOI means a conglomeration of Individuals who
carry on some activity with the objective of
earning some income.
• It would consists only of Individuals
 AOP VS BOI
• An AOP may consist of non –individuals
but a BOI has to consist of Individuals
only.
• If two or more persons (like firm, company,
HUF individual etc) join together it is called
AOP .But if only individual join together it
is BOI
 Local Authority
It means
• Panchayat
• Municipality
• Contonement Board
Eg corporation of chennai
 Artificial Judicial Person
• These are entities which are not natural
persons but separate entities in the eyes
of law. God, idols and deities are artificial
judicial persons.
• Similarly all other artificial persons with a
juristic personality will also fall under this
category, if they do not fall within any of
the preceding categories of persons eg
University of Madras.
 ASSESSEE
• Assessee means: [Section 2(7)]
Any person who is liable to pay any tax or any other sum under the
Income Tax Act, 1961; and
• Assessee includes-
• (a) Every person in respect of whom any proceedings has been
taken for the assessment of -
His Income or Fringe Benefits or of the income of any other person
Loss sustained by him or other person.
Refund due to him or such other person
• (b) Every person who is deemed to be an assessee under the Act
• (c) Every person who is deemed to be an assessee in default under
the Act.
• Note: Individuals and HUF are not liable to Fringe Benefits Tax
 PREVIOUS YEAR
• . Previous Year:
• (a) Income of the Previous Year is
chargeable to tax.
• (b) Previous Year means Financial Year
immediately preceding the Assessment
Year.
• (c) Example: The current previous year is
2009-2010 i.e. from 01/04/.2009 to
31.3.2010.
 ASSESSMENT YEAR
• Assessment Year:
• (a) The income of the previous year is chargeable to tax
during the immediately following Assessment Year.
• (b) Assessment Year means the period of twelve months
commencing on the 1st day of April every year.
• (c) It is the year for which tax is paid.
• (d) Example: For the previous year 2009-10,
Assessment Year is 2010-11. The income of the
previous year 2009-10 i.e. from 1.4.2009 to 31.3.2010, is
chargeable to tax during the Assessment Year 2010-11.
 RATE OR RATES OF TAX
• Income Tax is chargeable at the rate or
rates prescribed on the Finance Act.

• The rates of Taxes for Individual,

Company , Firm etc for the AY 2010-11 is
as follows
1.INDIVIDUAL (other than woman,
Senior citizen),HUF,AOP/BOI

Income Rate of Tax

Up to Rs 150000 NIL

Rs 150001 to Rs 300000 10 %

Rs 300001 to Rs 500000 20 %

Above Rs 500000 30 %
2 INDIVIDUAL WOMEN For Woman ,resident
in India and below the age of 65 years at any time during the Previous
Year

Income Rate of Tax

Up to Rs 180000 NIL

Rs 180001 to Rs 300000 10 %

Rs 300001 to Rs 500000 20 %

Above Rs 500000 30 %
3. INDIVIDUAL SENIOR CITIZEN -For an individual (man
& woman) ,resident in India who is of the age of 65 years
at any time during the Previous Year

Income Rate of Tax

Up to Rs 225000 NIL

Rs 225001 to Rs 300000 10 %

Rs 300001 to Rs 500000 20 %

Above Rs 500000 30 %
FIRM & LOCAL AUTHORITIES
• FLAT RATE @ 30% .
• There is no basic exemption limit
 COMPANIES
RATES OF TAX
• DOMESTIC COMPANIES 30%
• FOREIGN COMPANIES 40%
There is no basic exemption limit.
 CO-OPERATIVE SOCIETIES
Income Rate of Tax

Up to Rs 10000 10 %

Rs 10001 to 20000 20 %

Above Rs 20000 30 %
 SURCHARGE RATES
PERSON RATE

Individual /HUF/BOI/AOP if total 10 %

income exceeds Rs 1000000(ten
lakhs)
Firm/Companies if total income 10%
exceeds Rs 10000000(One crore)

Co-operative societies/Local NIL

Authorities
 EDUCATION CESS
• For all assessees
Education cess (EC)- 2%
Secondary and higher education
cess(SHEC)-1 %
Shall be levied on the total tax (including
surcharge if applicable)
 Charge of Income –tax law

• No tax can be levied or collected in India

excepts under the authority of law.
• Section 4 of Income Tax Act , gives such
authority for charging of income tax
• The base for levy of Tax in any assessment year
is normally the income of the previous year.
• ( except for 1.shipping business of NRI,2.person
leaving India,3.AOI or BOI for particular purpose,
4. person likely transfer property to avoid tax and
5.discontinued business)
 Essential features of Charge of Income
Tax

• 1.Income Tax is an annual tax

• 2.Charge on person
• 3.Charge in respect of total income
• 4. Charge in respect of income of the previous
year
• 5.Exceptional Case of charge for the current
year
• 6.Each year is a self contained accounting
period
• 7.Authority for collection of tax by deduction of
tax at source and advance payments
 Total Income

• To understand Total income one must

know the following
1.Definition of Income
2.Gross Total Income
3.Deduction permissible from Gross Total
Income
 Definition of Income

• Income includes [Section 2(24)]

• 1. Profits or Gains of Business or Profession.
• 2. Dividend.
• 3. Voluntary Contribution received by a
charitable or Religious Trust or Institution or
University or Educational Institution or Hospital.
• 4. Value of perquisite or profit in lieu of salary
taxable u/s 17 and special allowance or benefit
specifically granted either to meet personal
expenses or for performance of duties of an
office or an employment of profit.
 Definition of Income (contd)
• 5. Export incentives like Duty Drawback, Cash
Compensatory Support, Sale of licences etc.
• 6. Interest, salary, bonus, commission or
remuneration earned by a partner of a firm from
such firm.
• 7. Capital Gains chargeable u/s 45.
• 8. Winnings from lotteries, crossword puzzles,
races including horse races, card games and
other games of any sort or from gambling or
betting of any form or nature whatsoever.
 Definition of Income (contd)
• 9. Deemed income u/s 41 or 59.
• 10. Sums received by an assessee from his
employees towards welfare fund contributions
such as provident fund, superannuation fund
etc.
• 11.Amount received under Keyman Insurance
Policy including bonus thereon.
• 12.Amount received under agreement for (a) not
carrying out activity in relation to any business or
(b) not sharing any know-how, patent, copyright
etc.
 Definition of Income (contd)
• 13. Benefit or perquisite received from a
Company, by a Director or a person
holding substantial interest or a relative of
the Director or such person.
• 14. Gifts as defined u/s. 56.
• 15. Profits of a Co-operative Society
engaged in Banking Business.
 GROSS TOTAL INCOME-
Classification

As per section 14, all income shall for the

purpose of Income tax and computation of
total income , be classified in to five major
heads of income.
FIVE MAJOR HEADS OF INCOME

• 1.Salaries
• 2.Income from House Property
• 3.Profits and Gains of Business or
Profession
• 4.Capital Gains
• 5.Income from Other sources
 TOTAL INCOME
Particulars Rs
xxx
Heads of Income
1.Salaries
2.Income from House Property
3.Profits and Gains of Business or Profession
4.Capital Gains
5.Income from Other sources
Add: Clubbing provisions xxx

Less: Set off & carry forward of Loss xxx

Gross Total Income xxx

Less: Deduction under chapter VI A of income Tax Act ie xxx

Deduction U/S 80C to 80U
Total Income xxx