09 Mba Bl  Lect Nov 23  Tax Laws   Final
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09 Mba Bl Lect Nov 23 Tax Laws Final

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  • 1. TAX LAWS REFERENCE : “ BUSINESS ENVIRONMENT” By SHAIKH SALEEM , Chap 8
  • 2.
    • BECAUSE TAXES INFLUENCE PERSONAL & BUSINESS DECISIONS
    • BECAUSE COMPLIANCE IS COSTLY
      • RECORD KEEPING
      • PREPARATION TIME & EFFORT
      • TAX PAYMENT
      • RETURN FILING
      • FOLLOW UP
    WHY STUDY TAX?
  • 3.
    • BECAUSE TAX LAWS INFLUENCE ROUTINE AS WELL AS NEW VENTURE DECISIONS
      • BUYING AND SELLING
      • FINANCING DECISIONS
      • EMPLOYER DECISIONS
        • FRINGE BENEFITS
        • DEFERRED COMPENSATION
    WHY STUDY TAX?
  • 4.
    • FOR SELF PROTECTION
      • PENALTIES FOR ERRORS IN PAYING TAXES, AND INCORRECT REPORTING
      • MISTAKES BY PREPARER OR TAXPAYER
    WHY STUDY TAX?
  • 5. WHAT IS THE DEFINITION OF A TAX?
    • AN ENFORCED, INVOLUNTARY CONTRIBUTION
    • REQUIRED AND DETERMINED BY LAW
    • PROVIDING REVENUE FOR PUBLIC AND GOVERNMENTAL PURPOSES
    • FOR WHICH NO SPECIFIC BENEFITS OR SERVICES ARE RECEIVED
  • 6. WHAT IS THE PURPOSE OF A TAX?
    • REVENUE TO GOVERNMENT
    • PENALTY FOR IMPORTS
    • SOCIAL CHANGES
    • ECONOMIC CHANGES
    • EQUITY
  • 7. OVERVIEW ON TYPES OF TAXES CITIZEN BREATHING TAX? SLEEPING TAX? WALKING TAX? T NOT DOING ANYHING TAX? PROFESSIONAL TAX ENTERTAINMENT TAX TOLL TAX CESSES ENTRY OCTROI TAX SALES TAX CUSTOMS DUTIES EXCISE DUTIES INCOME TAX WEALTH TAX GIFT TAX DEATH TAX SERVICE TAX LUXURY TAX CORPN TAX ORIGIN OF THE WORD “TAX”: TAXARE =TO TOUCH SHARPLY
  • 8. TYPES OF TAXES
      • DIRECT & INDIRECT TAXES :
      • A TAX IS A DIRECT TAX IF THE IMPACT AND INCIDENCE OF THE TAX IS ON THE SAME PERSON,
      • IT IS INDIRECT TAX IF THEY ARE ON DIFFERENT PERSONS.
      • EXAMPLES : INCOME TAX , WEALTH TAX , GIFT TAX ARE
      • IMPORTANT DIRECT TAXES .
  • 9. TYPES OF TAXES
      • INDIRECT TAXES :
      • SALES TAX , EXCISE DUTY , CUSTOMS DUTY, SERVICE TAX, VAT, ARE IMPORTANT INDIRECT TAXES.
  • 10. TYPES OF TAXES
    • INCOME TAX
      • TAXES ARE PAID BY INDIVIDUALS, CORPORATIONS, ESTATES, AND TRUSTS
      • TAX BASE IS TOTAL INCOME LESS ALLOWED DEDUCTIONS
      • INCOME TAX IS GOVERNED BY THE INCOME TAX ACT,1961.
  • 11. Direct Tax: Corporate Income Tax
    • Effective Corporate Tax Rate = 30 %
    • Sur-Charge = 10 %
    • Education Cess = 3 %
    • ON
    • Taxable Profit
    • After
    • Depreciation & Interest
  • 12. Fringe Benefit tax – Sec 115 W
    • The fringe are benefits enjoyed by employees at the cost of employer
    • These are taxed to Employer full or at concessional rate
    • Free tickets, Equity shares, Contribution to superannuation fund, etc. (100% taxed)
    • Conveyance, Telephones, Club, Tour & travel, Sales promotion, etc.
    • (20/50% taxed)
  • 13. Other Taxes on Corporates
    • Dividend Distribution Tax :
    • 15% +10% SC +3% Cess (16.995%)
    • Wealth Tax : @1% on Net Wealth as on 31 st March each year exceeding Rs.15 lac
    • WT not payable on assets used in business
    • Works Contract Tax: 1% on Building construction works
  • 14. RETURN FILING REQUIREMENTS
    • A TAX RETURN MUST BE FILED ANNUALLY FOR ASSESSMENT OF TAX IN PRESCRIBED RETURN FORMS EACH YEAR BY ASSESSEE
    • NOW RETURNS CAN BE FILED ONLINE.
    • PAN,TAN,REBATES,SURCHARGE, SET OFF OF LOSSES,TAX HOLIDAY, TAXATION OF FOREIGN INCOME etc.
  • 15. ASSESSMENT
    • CORRESPONDENCE EXAMINATIONS
    • OFFICE EXAMINATIONS
    • FIELD EXAMINATIONS
    • REFUNDS, DEMANDS
    • REVISIONS
  • 16. ASSESSMENT AND APPEALS PROCESS
    • SETTLEMENT
    • APPEALS
      • MEETING WITH IRS OFFICERS
      • A CASE MAY BE FILED WITH TAX TRIBUNALS.
  • 17. TAX PLANNING
    • GOAL IS TO MAXIMIZE AFTER -TAX WEALTH
  • 18. TAX PLANNING : TIMING
    • TIME VALUE OF MONEY
      • DEFER INCOME
      • ACCELERATE DEDUCTIONS
    • MARGINAL TAX RATE
      • RECOGNIZE INCOME IN YEAR OF LOWER MARGINAL RATE
      • RECOGNIZE DEDUCTIONS IN YEAR OF HIGHER MARGINAL RATE
      • SHIFT INCOME TO TAXPAYER WITH LOWER MARGINAL RATE
  • 19. TAX PLANNING: TAX AVOIDANCE VS. TAX EVASION
    • TAX AVOIDANCE - TAXPAYERS HAVE NO OBLIGATION TO PAY MORE TAX THAN THE LAW REQUIRES
    • TAX EVASION - TAXPAYERS MAY NOT USE FRAUDULENT OR DECEPTIVE BEHAVIOR TO HIDE TAX LIABILITY
  • 20. ETHICS
    • TAXPAYERS ARE SUBJECT TO PENALTIES FOR NOT PAYING TAXES AND NOT FILING RETURNS TIMELY , AND FOR ANY NEGLIGENCE OR FRAUD.
    • IGNORANCE OF LAW IS NO EXCUSE.
  • 21. INDIAN INDIRECT TAXATION : AN OVERVIEW INDIRECT TAXES CAN BE ON GOODS OR “NON-GOODS” # CUSTOMS DUTY GOODS ON GOODS IMPORTED /EXPORTED # EXCISE DUTY ON GOODS PRODUCED OR MANUFACTURED From and to outside “ INDIA” IN INDIA
  • 22. INDIRECT TAXES
    • TAX EVENT ATTRACTING TAX
    IMPORT OR EXPORT CUSTOMS CENTRAL EXCISE PRODUCTION/ MANFACTURE OF GOODS SALES TAX SALE OR PURCHASE OF GOODS
  • 23. INDIRECT TAXES
    • SALES TAX
    ON GOODS PURCHASED OR SOLD (INCLUDING DEEMED SALE) ENTRY TAX/ OCTROI ON GOODS ENTERING AN AREA FOR CONSUMPTION, USE,TRADE
  • 24. INDIRECT TAXES
    • > SERVICE TAX
    ON RENDERING OF SPECIFIED SERVICES
            • ON NON GOODS :
    • ENTERTAINMENT
    • TAX
    ON DIFFERENT TYPES OF ENTERTAINMENT AND LEISURE ACTIVITIES > LUXURY TAX HOTELS, RESORTS AND OTHER LUXURY PLACES
  • 25. CENTRAL EXCISE DUTY
    • EXCISE IS PRINCIPAL SOURCE OF REVENUE FOR CENTRAL GOVT.
    • EXCISE IS LEVIABLE ON ALL GOODS(OTHER THAN SALT) PRODUCED IN INDIA.
    • TWO TYPES:1. SPECIFIC ,AND
    • 2. AD VALOREM
  • 26. CENTRAL EXCISE DUTY
    • THE MODVAT SCHEME ESSENTIALLY ENABLES MANUFACTURERS OF EXCISABLE GOODS TO REDUCE THE FINAL FINAL BURDEN OF EXCISE DUTY BY CLAIMING CREDIT FOR THE EXCISE DUTY PAID ON RAW MATERIALS,COMPONENTS etc.
  • 27. CUSTOMS DUTY
    • CUSTOMS DUTY IS LEVIED BY CENTRAL GOVERNMENT ON IMPORT OR EXPORT OF GOODS.
    • THE RATES OF DUTY IS SPECIFIED UNDER THE CUSTOMS TARIFF ACT 1975,AND FOLLOWS A CODING SYSTEM.
  • 28. CUSTOMS DUTY
    • THE GOVT IS EMPOWERED UNDER THE ACT TO NOTIFY BAN ON IMPORT OR EXPORT OF CERTAIN GOODS.
    • IF CUSTOM IS CHARGED AD VALOREM , IT IS CHARGED AT PREVAILING INTERNATIONAL PRICES.
  • 29. SALES TAX
    • MAJOR SOURCE OF REVENUE FOR STATE GOVT.
    • CST ON INTERSTATE TRADE AS PER CENTRAL SALES TAX ACT 1956 AS STATES CANNOT IMPOSE SALES TAX ON INTERSTATE TRADE.
  • 30. V.A.T . WHAT IS V.A.T. AND WHAT IT IS NOT VALUE ADDED TAX A METHOD TO ELIMINATE DOUBLE TAXATION ON THE SAME TRANSACTION THIS IS NOT VAT !#*&*
  • 31. VAT : CHARECTERISTICS MULTIPOINT TAXATION: TAX AT EVERY POINT OF SALE EFFECTIVE TAX AT EVERY POINT OF SALE: ONLY ON THE VALUE ADDITION AT EACH POINT OF SALE METHODOLOGY ADOPTED IS BY A SYSTEM OF OFFERING CREDIT OF TAX TO THE BUYER . HE USES THIS FOR PAYING TAX ON HIS SALES PURCHASED SOLD DESTINATION BASED. ENTIRE BURDEN ON CONSUMER
  • 32. VAT :CLARITY OF ISSUES WHAT IS <VALUE ADDITION> VALUE ADDITION WITHOUT ANY CHANGE IN THE PRODUCT EG: TRADING OR RESALE VALUE ADDITION RESULTING IN A NEW PRODUCT EG: MANUFACTURE OF NEW GOODS FROM OTHER GOODS WE MAKE TASTY FOOD CAR DEALER
  • 33. FINANCIAL REGULATION IN INDIA
  • 34. REFERENCES
    • “ INDIAN FINANCIAL SYSTEM”
    • by:
    • 1) H. R. Machiraju
    • 2) M.Y. Khan
    • 3) Bharati Pathak
  • 35. Financial System in India
    • Financial Sector consists of three main segments :
    • 1) Financial markets - money market,
    • debt market, capital market, forex market
    • 2) Financial institutions - banks, mutual funds, insurance companies
    • 3) Financial products - loans, deposits, bonds, equities
  • 36. Types of Financial Markets Types of Financial Markets Types of Financial Markets Types of Financial Markets Types of Financial Markets Types of Financial Markets Capital Market Money Market Forex Market Equity Debt Retail Corporate Banks FI FIIs T-Bills Call Money ICD, CP, CD Banks Corporate FI, FIIs Spots Forwards Banks Corporate FI, FIIs Agriculture Produces, Metals, Financial futures like Interest rate, currency, indices etc Banks, FIs Corporate Derivatives Market
  • 37. Structure of Indian Financial Markets Structure of Indian Financial System GOI Ministry of Finance RBI SEBI Depositories Companies Broker Dealers Clearing Corporations Stock Exchanges Mutual Funds Banks Registrar of Companies Merchant Bankers Registrar & Transfer Agents Primary Dealers GOI Dept of Co. Affairs Depository Participants GOI Ministry of Finance RBI SEBI Depositories Companies Broker Dealers Clearing Corporations Stock Exchanges Mutual Funds Banks Registrar of Companies Merchant Bankers Registrar & Transfer Agents Primary Dealers GOI Dept of Co. Affairs Depository Participants
  • 38. Scams, scams, and more scams….
    • Murarka Finance, 1987
    • Mazda Leasing and Mehta, April 1992
    • Morgan Stanley Mutual Fund, April 1994
    • tMt = TNT, 1999 – 2000
    • Mastershare and UTI 1988 – 2002
    • ?? ?????????
    • Scams, scams, and more scams….
  • 39. Greed: Two hands to clap!
    • The financial “services” industry wishes to make quick money,
    • Investors wish to make “quick” profits,
    • Greed on both sides
    • No investment, but speculation!
    • The regulator comes into picture!
  • 40. Financial Sector Regulators Regulators Reserve Bank of India (RBI) Securities & Exchange Board of India (SEBI) Insurance Regulatory and Development Authority (IRDA) Banks Capital Markets/ Mutual Funds Insurance Companies
  • 41. Banking in India Legal framework of Banks Banking Regulation Act,1949 Reserve Bank of India Act,1934
  • 42. Banking in India
    • - Banking in India is governed by
    • BR Act, 1949 and RBI Act, 1934
    • - Banking in India is monitored & controlled by RBI and Govt of India
    • - Controls for different banks are different based on whether the bank is
    • a) a statutory corporation
    • b) a banking company
    • c) a cooperative society
  • 43. Reserve Bank of India CENTRAL BANK RBI REGULATOR SUPERVISOR FACILITATOR
  • 44. RESERVE BANK OF INDIA
    • SUPERVISORY & REGLATORY
    • Issuance of currency notes
    • Banker’s Banker
    • Lender of the last resort
    • Credit Control & Monetary Policy
    • Exchange Control & Forex Management
    • Funds Transfer
  • 45. Money Market Instruments
    • Inter bank call money/deposit
    • Inter bank notice money/deposit
    • Inter bank term money/deposit
    • Certificates of Deposit
    • Commercial Paper
    • Treasury Bills
    • Bill rediscounting
    • Repos
  • 46. INDIAN CAPITAL MARKET
    • Indian Capital Market plays an important role in the economic development of the country
    • It provides opportunities for investors to invest in the market and also to earn attractive rate of return.
    • It also creates source of funds for the various sectors
    • National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are the major stock exchanges in India
  • 47. Securities & Exchange Board of India (SEBI)
    • SEBI was constituted in 1988, and obtained the statutory powers in March,1992
    • SEBI’s functions:
    • To protect the interests of investors
    • To recognize the business in stock exchanges and other security markets
    • To supervise and regulate work of intermediaries, such as stock brokers
    • merchant bankers / custodians / credit raters depositories / bankers to the issues
  • 48. SIGNIFICANT DEVELOPMENTS
    • SYSTEMIC
      • Transparent IPO Process
      • World Class Disclosure Standards
      • Principle Based Accounting Standards
      • Corporate Governance Norms
  • 49. Regulatory Framework
    • Regulations concerning issues and issuers
    • Regulations concerning investors
    • Regulations concerning securities of all types
    • Regulations concerning Stock Exchanges or securities markets : primary & secondary markets, and market processes ,
    • Regulations concerned with Brokers,dealers and agents
    • Regulations concerned with service providers such as Depositories, Credit rating agencies , Clearing houses , underwriters , registrars , lead managers , banks etc.
    • Clearing Corporation Bye-Laws
    • Listing regulations
    • Regulations on corporate governance , etc….
  • 50. Legislative Framework
    • Securities and Exchange Board of India Act, 1992
      • Rules made by the Government of India
      • Regulations made by SEBI
      • Securities Contracts (Regulation) Act, 1956
    • Securities Contracts (Regulation) Rules, 1957
    • Depositories Act, 1996
    • Stock Exchange Bye-Laws
    • Depository Bye-Laws
    • Clearing Corporation Bye-Laws
    • Listing Agreements with Stock Exchanges
    • Companies Act, 1956
  • 51. Penal Framework
    • Four-pronged penal framework :
      • Directions in investor interest
      • Enquiry Proceedings
      • Adjudication Proceedings
      • Criminal Prosecution
    • Each course without prejudice to the others
    • Action under Companies Act, 1956
  • 52. Appellate Structure
    • Any order passed by SEBI is appealable
    • Consent orders not appealable
    • Appeal from SAT lies directly in the Supreme Court – only questions of law
    • Jurisdiction of civil courts entirely barred
    • Writ jurisdiction of High Courts rarely used
  • 53. SEBI LAW
    • Implementation of revised Clause 49 :
      • Independent Directors
      • Subsidiary Monitoring
      • Shareholders’ Prior approval for
      • compensation / stock options to NEDs
      • Audit Committee – Eligibility Criteria, mandatory review etc.
      • Statutory Compliance Review
      • Risk Management Procedure
      • Code of Conduct for Directors & Sr Management
      • CEO and CFO Certification
      • Non-Mandatory : Term of Independent Directors
  • 54. SEBI Law
    • SEBI Press Release (no. 108/2005 dated August 26, 2005) on Minimum Public Shareholding
      • All listed companies to maintain at least 25% shareholding with public for continuous listing. However, companies permitted to make an IPO of atleast 10% to public under Rule 19(2)(b) to maintain min. 10% only
      • Listed companies, not complying with the min. public holding requirement to be given a period of 2 years for compliance
      • Government companies, infrastructure companies and companies registered with BIFR to be exempted
  • 55. SEBI Law
    • Review of Demat Charges :
      • Effective 9-1-2006, no charges will be levied by a depository on a DP and by a DP on a Beneficiary Owner (BO) when a BO transfers his account to another branch of the same DP or to another DP of the same depository or another depository.
      • SEBI had already waived the following charges effective February 1, 2005 –
        • charge towards opening of a BO Account except for applicable statutory charges
        • charge for credit of securities into BO Account
        • custody charge
  • 56. SEBI Law
    • SEBI Press Release dated Dec 30, 2005
      • Public issue refunds through Electronic Clearing Scheme (ECS)
      • Introduction of optional grading of IPOs by credit rating agencies
      • Rationalizing disclosure requirements for further public offers and rights issues
      • Common platform for electronic filing and dissemination of corporate information
      • Amendment to Takeover Regulations
      • Amendment to SEBI (Delisting of Securities) Guidelines
  • 57. Association of Mutual Funds in India (AMFI)
    • AMFI is an association as a non profit organization.
    • AMFI represents mutual funds in India and working for healthy growth of the Mutual Funds.
    • AMFI conduct examinations for MF executives as part of their training
    • activities
  • 58. Insurance Regulatory & Development Authority (IRDA)
    • The regulator for insurance business in India is IRDA .
    • IRDA was established in 2000 .
    • IRDA’s functions :
    • To regulate, promote and ensure orderly growth of the insurance business and reinsurance business in India .
    • To protect the interests of policy holders .
  • 59. QUESTIONS ?
  • 60. THANK YOU