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  • 1. AssesseIncome Tax Act 1961 (Act no. 43) defines 'assesse' as a person by whom any tax or any other sum of money is payable<br />Assessment year Assessment year means the period of twelve months commencing on 1st April every year and ending on 31st March of the next year. Income of previous year of an assesse is taxed during the following assessment year at the rates prescribed by the relevant Finance Act.<br />Gross Total IncomeUnder the scheme of computation of total income under the Income Tax Act, the income falling under each head is to be computed as per the relevant provisions of the Act relating to computation of income under that head. The aggregate of income under each head is known as 'Gross Total Income'<br />What does the term Agricultural Income mean?<br />Agriculture income is exempt under the Indian Income Tax Act.<br />As per Income Tax Act income earned from any of the under given three sources meant Agricultural Income;<br />(I)     any rent received from land which is used for agricultural purpose.<br />(ii)   Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent in kind so as to render it fit for the market, or sale of such produce.<br />(iii)   Income attributable to a farm house subject to the condition that building is situated on or in the immediate vicinity of the land and is used as a dwelling house, store house etc<br />TAX RATES FOR FINANCIAL YEAR 2010-2011<br />For Individual tax payers From Rs. 0 to Rs. 1, 60,000 - No tax will be chargedFrom Rs. 1, 60,001 to Rs. 3, 00,000 - 10% tax will be chargedFrom Rs. 3, 00,001 to Rs. 5, 00,000 - 20% tax will be chargedFrom Rs. 5, 00,000 and above - 30% tax will be charged<br />Income Tax Rates/Slabs Rate (%) Up to 1,60,000Up to 1,90,000 (for women)Up to 2,40,000 (for resident individual of 65 years or above) NIL <br />1,60,001 – 5,00,000 10 <br />5,00,001 – 8,00,000 20 <br />8,00,001 upwards 30<br />For Women tax payersFrom Rs. 0 to Rs. 1, 90,000 - No tax will be charged<br />INCOME EXEMPT FORM TAX <br />
    • agriculture income
    • 2. receipts by a member from a Hindu undivided family
    • 3. share of profit from partnership firm
    • 4. casual and non recurring income
    • 5. leave travel concession
    • 6. foreign allowance
    • 7. amount paid on life insurance policies
    • 8. educational scholar ships
    • 9. daily allowances of members of parliament
    • 10. family pension received by members of armed forces
    • 11. income of minor
    • 12. dividends and interest on units
    Types of Leases<br />A. Operating Lease <br />An operating lease is basically a rental agreement. The lessee records rent expense for each of the lease payments. <br />B. Capital Lease <br />A capital lease is a rental agreement in form, but the substance of the transaction is an asset purchase. With capital leases, the lessee records and asset and related liability rather than rental expense.<br />Operating Lease - This is the typical "Off Balance Sheet" type of lease. It is typically a shorter-term lease and frequently is on equipment where there is a high likelihood of it being raised when the lease ends, such as high-tech equipment, computers, or high-usage copiers. It answers 4 criteria as established by the Financial Accounting Standards Board (FASB):<br />1) Ownership of the property does not automatically transfer to the lessee at the end of the lease term.<br />2) The lease does not contain a bargain purchase option.<br />3) The lease term is less than 75% of the useful life of the equipment.<br />4) The present value of the lease payment is equal to less than 90% of the cost of the equipment.<br />Under this scenario, the payments are an expense and no asset or liability is recorded on the balance sheet. <br />Capital Lease - This is also typically called a finance lease. It is an asset and liability issue and the lease typically has a bargain purchase option of $1.00. Companies who use this type of lease will do so for a variety of reasons, primarily for cash flow management, flexibility, fixed payments, and tax deductibility.<br />Sale/Leaseback - This is a situation where a company has purchased and is using the equipment, which they then sell to a leasing company, who in turn charges rent for the usage. The main reason for doing a sale/leaseback is so that a company, which has recently paid cash for a piece of equipment, realizes that they could have put the cash to better use.<br />Trace Lease - This is for vehicles only. In this lease, the lessee guarantees the lesser they will not suffer a loss on the residual buyout at the end of the lease. Typically these types of leases are done with semi-tractors and trailers.<br />TAX EFFECTS ON LEASE AGREEMENTS <br />Businesses, as well as individuals, have occasion to sign a variety of leases including those for office space, vehicles, office equipment and computer hardware. Leases can have tax effects when they are directly related to business activity<br />
    • Personal Leases
    • 13. Payments made towards leases signed by you as an individual only have a tax effect if the item or service being leased directly relates to qualified business activity. Leases pertaining to personal use or for hobbies are not deductible, and they consequently have no tax effect
    • 14. Corporate Lease of Office Space
    • 15. The vast majority of businesses need to lease office space. Payments made towards office leases by companies are deductible on their corporate tax returns.
    Corporate Lease of Vehicles<br /> Some companies need to lease a vehicle to be used solely for business purposes. In this scenario, the company can claim a tax deduction<br />Corporate Lease of Office and Computer Equipment<br /> Corporate leasing of office or computer equipment serves as a deduction reducing the company's corporate tax obligation<br />VENTURE CAPITAL <br />It is a form of risk capital <br />It is a capital that is invested in a project where there is substantial element of risk relating to the future creation of profits and cash flows<br />Risk capital is invested as shares (equity) rather than as a loan and investors requires a higher rate of returns to compensate him for his risk<br />Two sources of venture capitals <br />Venture capital firms <br />Private investors <br />If an entrepreneur is looking to start-up, expand, buy-into a business, buy-out a business in which he works, turnaround or revitalize a company, venture capital could help do <br />Venture capitalist prefers to invest in "entrepreneurial businesses". <br />The venture capitalist will consider several principal aspects:<br />- Is the product or service commercially viable?<br />- Does the company have potential for sustained growth?<br />- Does management have the ability to exploit this potential and control the company through the growth phases?<br />- Does the possible reward justify the risk? <br />
    • 16. The types of venture capitals are classified as per the purpose and time of their application
    • 17. The three principal types of venture capital are
    • 18. Early stage financing
    • 19. Expansion financing
    • 20. Acquisition/buy out financing
    • 21. Early stage financing
    • 22. Early stage financing has three sub divisions
    • 23. seed financing,
    • 24. start up financing and
    • 25. first stage financing.
    • 26. Seed financing is basically a small amount that an entrepreneur receives for the purpose of being eligible for a startup loan
    • 27. Start up financing is given to companies for the purpose of finishing the development of products and services
    • 28. Expansion financing
    • 29. Expansion financing may be categorized into
    • 30. second stage financing,
    • 31. bridge financing and
    • 32. third stage financing
    • 33. Second stage financing is provided to companies for the purpose of beginning their expansion
    • 34. Bridge financing is useful to provide short term interest
    • 35. Acquisition or buyout financing
    • 36. Acquisition or buyout financing is categorized into acquisition finance and management buyout financing
    • 37. Acquisition financing assists a company to acquire certain parts or an entire company
    • 38. Management buyout financing helps a particular management group to obtain a particular product of another company.
    • 40. Economy of scale: reduce its fixed cost by removing duplicate departments and lowering cost compared to the same reeve stream
    • 41. Economy of scope: demand side change like increasing or decreasing the scope of marketing and distribution
    • 42. Increased revenue or market share: absorbing a major competitor and thus increase its market power
    • 43. Cross selling
    • 44. Synergy: due to increased order size and associated bulk buying discounts
    • 45. Taxation: a profitable company can buy a loss maker to use the targets loss as their advantage by redoing their tax liability
    • 46. Geographical diversification:
    • 47. Resource transfer: acquiring firm’s resources can create value through either overcoming scarce resources
    • 48. Vertical integration: it occurs when upstream and downstream firm merges
    • 49. Absorption of similar business
    • 50. Empire building
    BUSINESS VALUATION <br />The five most common ways to evaluate a business are<br />asset valuation,<br />historical earnings valuation,<br />future maintainable earnings valuation,<br />relative valuation (comparable company & comparable transactions),<br />discounted cash flow (DCF) valuation<br />ECONOMIC VALUE ADDED <br />Is a financial performance method to calculate the true economic profit of a corporation? EVA can be calculated as net operating after taxes profit minus a charge for the opportunity cost of the capital invested <br />EVA can be used for following purposes <br />
    • setting organization goals
    • 51. performance measurement
    • 52. determining bonuses
    • 53. communication with share holders and investors
    • 54. motivation of managers
    • 55. capital budgeting
    • 56. corporate valuation
    • 57. analyzing equity securities