Laws For Txation
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  • 3. WHAT IS TAX? A tax may be defined as a "pecuniary burden laid upon individuals or property owners to support the government, a payment exacted by legislative authority. India has a well-developed taxation structure
  • 4. TYPES OF TAXES Tax imposed can be broadly classified into two categories:1. Direct Tax (Central Board of Direct Taxes): This kind of tax is named so as such a tax is directly paid to the Union Government of India. A direct tax is one that cannot be shifted by the taxpayer to someone else.2. Indirect tax (Central Board Of Excise and Customs): An indirect tax is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). An indirect tax is one that can be shifted by the taxpayer to someone else.
  • 5. Direct Taxes Indirect Taxes Income Tax Custom Duty Corporation Tax Excise Duty Property Tax Service Tax Inheritance Tax Sales Tax Gift Tax VAT Wealth Tax
  • 6. METHODS OF ASSESSING TAX1. Step System:This is an old method in which income tax is levied at a single rate on the totalincome of the assesse. It is a regressive method of Income Tax.For e.g.Suppose the taxable income of an assesse for the A.Y. 2009-10 is Rs 3,00,000and Rs. 3,10,000.
  • 7. INCOME TAX RATE BY INCOME RS. BY INCOME RS. 3,00,000 3,10,000Upto 1,50,000 Nil1,50,001 – 3,00,000 10% 30,0003,00,001 – 5,00,000 20% 62,000
  • 8. 2. Slab Method:It is a progressive method of charging tax in which the totalincome of the assesse is divided into different slabs and each slabis charges at respective rate. It was introduced in 1939 in India.
  • 9. INCOME TAX RATE BY INCOME RS. BY INCOME RS 3,00,000 3,10,000Upto 1,50,000 Nil1,50,001 – 3,00,000 10% 30,000 30,0003,00,001 - 5,00,000 20% 2,000
  • 10. DEFINITIONS Person: As per Income Tax Act 2 (31) has given an inclusive definition of a person as follows:  Individual  HUF  A Firm  Association of person or body of individuals (C.I.T. vs. Indira Balkrishna)  A Local authority  Artificial judicial person
  • 11.  Assesse: An assesse is a person by who any tax or any other sum of money is payable under this act. Any other sum of money includes penalty interest, etc. Assessment: It is a process of determining the correctness of Income on assesse and deciding the amount of tax payable by him and procedure for imposing tax liability. Assessment year: It is a period of 12 month commencing on 1st April and ending on 31st march. It is the year in which the income of the previous year is to be assessed. Previous Year: It is a financial year immediately preceding the assessment year.
  • 12. TYPES OF DIRECT TAXES Income Tax:Income Tax Act, 1961 imposes tax on the income of the individuals orHindu undivided families or firms or co-operative societies (other tancompanies) and trusts (identified as bodies of individuals associationsof persons) or every artificial juridical person. There are threeresidential status, viz., (i) Resident & Ordinarily Residents (Residents) (ii)Resident but not Ordinarily Residents and (iii) Non Residents.
  • 13. Conditions For Resident:An individual is said to be resident in any previous year if he satisfies atleast one ofthe following two basic conditions:i. He is in India in the Previous Year for a period of 182 days or more.ii.(a). He is in India for a period of 60 days or more during previous year and(b) He is in India for a period of 365 days or more during 4 year immediatelypreceding to the previous year.
  • 14. Conditions for Resident & Ordinary ResidentA resident individual is treated as ordinary resident in India if hesatisfies the following two conditions.i. He has been resident in India in atleast 2 out of 10 years immediately preceding the relevant previous year.ii. He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant previous year.
  • 15. Conditions for Non ResidentAn individual is non resident in India if he satisfies none of thebasic conditions of resident.
  • 16. PERFORMA OF STATEMENT SHOWING TAXABLEINCOMEPARTICULARS AMOUNT AMOUNTTaxable income from Salary XXXTaxable income from House & Property XXXTaxable income for Business & profession XXXTaxable income from Capital gain XXXTaxable income from Other Sources XXXGross Total Income XXXLess: General Deductions: XXXi. In respect of payment 80C, 80CCC, 80CCD, 80D, XXX 80DD, 80DDB, 80E, 80GGii. In respect of income 80QQB, 80RRB, 80U XXX XXXTotal Taxable Income XXX
  • 17.  Corporation TaxThe companies and business organizations in India are taxed onthe income from their worldwide transactions under theprovision of Income Tax Act, 1961. A corporation is deemed to beresident in India if it is incorporated in India or if it’s control andmanagement is situated entirely in India. In case of non-residentcorporations, tax is levied on the income, which is earned fromtheir business transactions in India or any other Indian sourcesdepending on bilateral agreement of that country.
  • 18.  Property Tax:Property tax or house tax is a local tax on buildings, along with appurtenant land,and imposed on owners. The tax is calculated as follows: Step 1: The annual value is calculated by taking the maximum of the following –  Actual Rent received  Municipal Valuation  Fair Rent (as determined by the IT department)  Step 2: From this, deduct Municipal tax paid and you get the Net Annual Value. From Net annual value we deduct:  30% of Net Annual Value  Interest paid or payable on a housing loan.
  • 19.  Note:In the case of a self occupied house interest paid or payable issubject to a maximum limit of Rs, 1,50,000 (if loan is taken on orafter 1 April 1999) and Rs.30, 000 (if the loan is taken before 1April 1999). For all non self-occupied homes, all interest isdeductible, with no upper limits.
  • 20.  Inheritance (Estate) Tax:An inheritance tax (also known as an estate tax or death duty) is a tax,which arises on the death of an individual. It is a tax on the estate, ortotal value of the money and property, of a person who has died. Indiaenforced estate duty from 1953 to 1985.The levy of Estate Duty in respect of property (other than agriculturalland) passing on death occurring on or after 16th March 1985 has alsobeen abolished under the Estate Duty (Amendment) Act, 1985.
  • 21.  Gift Tax :Gift tax in India is regulated by the Gift Tax Act which was constitutedon 1st April 1958. It came into effect in all parts of the country exceptJammu and Kashmir. As per the Gift Act 1958, all gifts in excess of Rs.25,000, in the form of cash, draft, check or others, received from onewho doesnt have blood relations with the recipient, were taxable.But in 2004, the act was again revived partially. A new provision wasintroduced in the Income Tax Act 1961 under section 56 (2). Accordingto it, the gifts received by any individual or Hindu Undivided Family(HUF) in excess of Rs. 50,000 in a year would be taxable.
  • 22.  Wealth Tax:It is a tax based on the market value of assets that are owned.These assets include, but are not limited to, cash, bank deposits,shares, fixed assets, private cars, assessed value of real property,pension plans, money funds, owner occupied housing and trusts.Although many developed countries choose to tax wealth, theUnited States has generally favored taxing income. Wealth tax ispaid to Central Government @1% on wealth exceeding Rs.30lakhs.
  • 23. TYPES OF INDIRECT TAX Custom Duty:The Customs Act was formulated in 1962 to prevent illegal imports andexports of goods. Duties of customs are levied on goods imported orexported from India at the rate specified under the Customs Tariff Act,1975.The various types of duties leviable are as follows: Basic Duty: This duty is levied on imported goods under the Custom Act, 1962.
  • 24.  Additional Duty (Countervailing Duty): This is levied under section 3 (1) of the Custom Tariff Act and is equal to excise duty levied on a like product manufactured or produced in India. If a like product is not manufactured or produced in India, the excise duty that would be leviable on that product had it been manufactured or produced in India is the duty payable. Anti – Dumping Duty: Sometimes, foreign sellers abroad may export into India goods at prices below the amounts charged by them in their domestic markets in order to capture Indian markets to the detriment of Indian industry. This is known as dumping. In order to prevent dumping, the Central Government may levy additional duty equal to the margin of dumping on such articles.
  • 25.  Cess on Export: Under sub-section (1) of section 3 of the Agricultural & Processed Food Products Export Cess Act, 1985 (3 of 1986), 0.5% according to value as the rate of duty of customs be levied and collected as cess on export of all scheduled products.  Education Cess: Education Cess is leviable @ 2% on the aggregate of duties of Customs.  Secondary and Higher Education Cess: Leviable @1% on the aggregate of duties of Customs.
  • 26.  Central Excise Duty:The Central Government levies excise duty under the Central Excise Act, 1944and the Central Excise Tariff Act, 1985. Central excise duty is tax, which ischarged on such excisable goods that are manufactured in India and are meantfor domestic consumption.Various Central Excise are: Basic Excise Duty: Excise Duty, imposed under section 3 of the ‘Central Excises and Salt Act’ of 1944 on all excisable goods other than salt produced or manufactured in India, at the rates set forth in the schedule to the Central Excise Tariff Act, 1985, falls under the category of Basic Excise Duty In India.
  • 27.  SpecialExcise Duty: According to Section 37 of the Finance Act, 1978, Special Excise Duty is levied on all excisable goods that come under taxation, in line with the Basic Excise Duty under the Central Excises and Salt Act of 1944. Additional Duty Of Excise: Section 3 of the ‘Additional Duties of Excise Act’ of 1957 permits the charge and collection of excise duty in respect of the goods as listed in the Schedule of this Act.
  • 28.  National Calamity Contingent Duty (NCCD):NCCD was levied on pan masala and certain specified tobacco productsvide the Finance Act, 2001. The Finance Act, 2003 extended this levy topolyester filament yarn, motor car, two wheeler and multi-utilityvehicle and crude petroleum oil. Education Cess: Education Cess is leviable @2% on the aggregate of duties of Excise.Secondary and Higher Education Cess: Secondary and HigherEducation Cess is Leviable @1% on the aggregate of duties of Excise.
  • 29.  Service Tax:The service providers in India except those in the state of Jammu and Kashmirare required to pay a Service Tax under the provisions of the Finance Act of1994. The provisions related to Service Tax came into effect on 1st July 1994.Under Section 67 of this Act, the Service Tax is levied on the gross or aggregateamount charged by the service provider on the receiver. However, in terms ofRule 6 of Service Tax Rules, 1994, the tax is permitted to be paid on the valuereceived. The interesting thing about Service Tax in India is that theGovernment depends heavily on the voluntary compliance of the serviceproviders for collecting Service Tax in India.
  • 30.  Sales Tax :Sales Tax in India is a form of tax that is imposed by the Government onthe sale or purchase of a particular commodity within the country.Sales Tax is imposed under both, Central Government (Central SalesTax) and State Government (Sales Tax) Legislation. Generally, each Statefollows its own Sales Tax Act and levies tax at various rates. Apart fromsales tax, certain States also imposes additional charges like workscontracts tax, turnover tax and purchaser tax. Thus, Sales Tax Acts as amajor revenue-generator for the various State Governments.
  • 31.  Value Added Tax (VAT):The practice of VAT executed by State Governments is applied on each stage of sale, with aparticular apparatus of credit for the input VAT paid. VAT in India classified under the tax slabs are- 0% for essential commodities,- 1% on gold ingots and expensive stones,- 4% on industrial inputs, capital merchandise and commodities of mass consumption, and- 12.5% on other items.The rules are similar to sales tax.
  • 32. VAT can be computed by using any of the three methods:(a) Subtraction method: The tax rate is applied to the difference between the value of output and the cost of input.(b) The Addition method: The value added is computed by adding all the payments that is payable to the factors of production (viz., wages, salaries, interest payments etc).(c) Tax credit method: This entails set-off of the tax paid on inputs from tax collected on sales.