Tax Overview by Ramesh Kumar Nehra

8/14/2019 Tax Overview by Ramesh Kumar Nehra

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Business and Tax laws

Presented By:-


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Classification

In the system of taxation in India the taxes are classified asfollows:


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The Important Terminologies under theIT Act, 1961 (ITA)

Assessee Person

Assessment year

Financial Year Income, Total income , Gross Total Income

Previous Year

Accrual of Income

Belated Returns

Revised Return

Self Assessment


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Who is a Person under the ITA, 1961?

An Individual A HUF

A Company

A Firm

An Association of Persons ( whetherincorporated or not)

A Local Authority

Every Artificial Juristic Person, who doesnot fall under the category of the abovestated persons.


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Heads of Income as per the

Income of a individual can be under any

one of the five heads

Income from salary

Income from House property

Profits and Gains of business orprofession

Capital Gains

Other incomes


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Income from Other Sources

Dividends

Lotteries, Cross word puzzles

Contributions received by employees

under staff welfare scheme Interest on securities , if it is not charged

under profits and gains of business

Income from machinery, plant furniturealong with the building

Any other sums received like bonus, ifnot taxed under salary or business


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Income that are exempted fromcalculation of Total Income

Agricultural Income Receipts of HUF income by an individual Share of profit of a partner in a firm.

Income by way of interests, premium etc notifiedunder the law Scholarship grants to meet the cost of education Long term capital gain Income and allowances of the MLAs and MPs

that is received in their position Income of former rulers etc.


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DeductionsThe total income of an assessee is computed by deducting

from the gross total income. All deductions permissible under Sections 80C - 80U. The deductions can be in respect ofe) Life Insurance premium.f) Deferred Annuityg) Contribution to Provident Fundh) National Saving Schemei) Pension Funds) Loans ( As specified under the Tax laws)

k) Medical Insurancel) Donations etc..The tax which is deducted at source will be refunded by theIncome Tax Department, When the Assessee produces thereceipts of any of the above stated savings.


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Wealth Tax

The other species ofdirect tax legislation isWealth Tax.

Wealth tax is levied for the benefits derived fromproperty ownership. The tax is to be paid yearafter year on the same property on its market

value, whether or not such property yields anyincome. Tax charged at the rate of 1% of amountwhere the net wealth exceeds 15Lakhs


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What are chargeable assets?

The assets includeAny guest house, residential house,commercial property, urban farm houseetc..

Motor car for personal use.

Jewellery, bullion, furniture, utensils orany other article made wholly or partly of

gold, silver, platinum.Yachts, boats, and air-crafts used for


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Wealth Tax Not Charged

No wealth tax is chargeable in respect of the

wealth of the following:

Company registered under Section 25 of the

Companies Act.Any Co-operative Society.

Any Social Club.

Any political party.A mutual fund specified by the Income Tax.


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Deemed Assets

Assets transferred by one spouseto another- That are transferred inhis or her spouses name other

than for consideration. Assets held by minor child- All the

assets are held by a minor child areincluded in the net wealth of the

individual. The net wealth of theminor will be included in the netwealth of the parent as per theAct.


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Central Excise (The Central Excise Act,

It has been enacted to consolidate and amend the lawrelating to central duties of excise on goods manufactureor produced in certain parts of India.

It is collected by both Central and State Governments. Excise duty on alcohol, alcoholic preparations and

narcotic substances are collected by State Governmentas State Excise Duty.Difference between Excise Tax and Sales Tax

Excise Tax is a tax on act of manufacture or production ofgoods.

Sales Tax is on the act of sale. Excise duties are levied by the Central Government. It islevied uniformly through out the countryand the duty rate/ structure are governed through the tariff/ budgetnotification.


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CENVAT (Meaning)

It stands forCentral Value Added Tax. It was earlier brought into practice as a scheme

known as MODVAT- which enabled themanufacturers of excisable goods to get credit forexcise duty component in the cost of rawmaterials, finished or semi finished components,consumables and packing material

These are the provisions that are used in theCentral Excise to implement the concept of VATat the manufacturing level by giving the credit ofduty on inputs.


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SALES TAXThe Government of India Act, 1935 has permittedlevying of tax on sale of goods and on advertisement.

The States could levy taxes if one of the followingingredients have been present:

The goods are present or in existence in the state

at the time of saleThe manufacture has taken place in the

State.

The property in goods is transferred in the State

for a price.There has been a payment of price and title in the goodshas been passed.


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Applicability of Central Sales Tax

The applicability of the CST is as follows:Tax is levied on interstate sales.

Sales tax collected by the States is

retained by the collecting State.Sales tax to be paid in the state from

where the movement of goods begin.

The CST has formulated the principles to

determine as to where and how the sale of goods

has taken place.


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Value Added Tax (VAT)

VAT is a kind of sales tax is that collected bygovernment of destination State on theconsumer expenditure i.e. the State in which

the final consumer is located.It is imposed and collected through thebusiness transactions, involving sale of goodswithin the State.

It is a tax on value added in the price of acommodity. It is taxed at the final or retail pointof sale, which is collected at each stage of salewhen there is a value addition to the goods.


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Customs Duty (Customs Act 1962)

One of the other forms of indirect tax that islevied by Central Government is Customs Duty.

It is collected by the Central Government onevery product that is exported or imported fromIndia.

The duty is levied as a percentage on theassessed value of the product that is exported orimported from India. It is equal through out Indiaat the time of importing and exporting.

The goods may be transported by land, air or bywaterincluding the Indian territorial waters.(12nautical miles from the sea coast of India)


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The objectives of levying customs duty

To restrict imports, so as to preserveforeign exchange.

To protect domestic industries from unduecompetition.

To achieve the policy objectives of thegovernment.

To regulate exports.

To co-ordinate the legal provisions thatdeal with foreign exchange like, FEMA, FT(D&R)A, COFEPOSA etc.


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Liabilit and Exem tions

Tax is collected, when the goods are on

the vehicle for transport out of India.

Exemptions- for payment of customs duty

are:

Goods derelict, wreck etc.Remission of duty on goods that are lost,

destroyed or abandoned etc.

Denaturing or mutilation of GoodsMany amendments are made to facilitateorigin of goods and matters relating to it.


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VAT is multi point levy of tax, which isdifferent from the sales tax, which isgenerally a single point tax levy.The term goods has been specificallydefined for the purpose of imposing taxunder VAT.

Goods under VAT includes :The Conventional Sales,Goods transferred in execution of workscontract,

Delivery of goods on hire purchase or anyother system of payment,Supply by way of or part of any services or


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Service Tax It is another kind of tax paid by the customerfor

certain kinds of services that he or she avails. The tax collected under the service tax have to

be deposited with the Central GovernmentAccounts within a stipulated period.

It includes transport, telecom, hospital servicesetc. It includes services rendered byindividuals and other non-commercialorganizations who are brought under the purview

of the service tax laws. The consumers pay to the service providers and

in turn the service providers will be submitting itto the concerned authority.


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The main objectives of Service Tax

Determining the turnover of the unorganizedservice sectors.

To bring the organized sector under the Taxpurview.

Revenue generation to the government, asservice sector is the major contribution to the

contribution to the GDP. The best examples of the services are,

advertising agencies, banking , logistics, onlineinformation etc


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Fringe Benefit Tax

Any monetary or non monetary benefit given bythe employer to the employee as a perquisite inaddition to the cash salary or wages are calledfringe benefits.

It can be any privilege, service, facility oramenity which can be given directly or indirectlyto the employee.

Usually it is taxed in the hands of the employees

but to be collected by the employer. It is the duty of the employer to bear the taxes

for the perquisites paid by the employer.


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Fringe benefits that are taxableunder the Finance Act 2005

Entertainment

Gifts

Festival celebrations

Employee welfare

Telephone

Maintenance of motor car Scholarship for the children of the

employees etc.

Documents

Tax Overview by Ramesh Kumar Nehra