Corporate tax law planning

Introduction :  In India, Income-Tax Act, 1961 is the primary legislation dealing with taxability of income arising in the hands of individual or business entity. Corporate restructuring practices like Amalgamation and Mergers are important tools of economic development and they also helps to gain market share and improve operational efficiency of an enterprise. In this regard, the income tax legislation in India is quite development oriented for domestic companies going in for mergers or amalgamations. In simple terms, tax incentives have been granted to the business houses under Income Tax act, 1961 for certain specified restructuring practices which are as follows: Amalgamation of Companies Demergers Slump sale Corporatization of an existing Non-Corporate Business Succession of a Private Company or An Unlisted Company by a Limited Liability Partnership (LLP) : TAX PLANNING WITH RESPECT TO AMALGAMATION OF COMPANIES Amalgamation :  When two or more companies merge into one an...

Deductions from gross total income u/s 80 related to company assessee Section 80G, 80GGA and 80GGB of Income Tax act, 1961 (A.Y. 2019-20) Section 80IA, 80IAB, 80IAC and 80IB of Income Tax act,1961 (A.Y. 2019-20) Section 80IBA, 80IC, 80ID and 80IELof Income Tax act, 1961 (A.Y. 2019-20) 1. Section 80JJA (Profits from processing of bio-degradable wastes) Eligible assessee:  All industrial undertakings in Specified Business . Rate and period of deduction:  100% of the profit for 5 consecutive years, beginning from the year of commencement. Specified Business:  Collection and processing or  treatment of bio-degradable waste for:- Power generation Producing bio-fertilizers or bio-pesticides etc. Producing bio-gas Making pellets or  briquettes for fuel  and Making organic manure. 2. Section 80JJAA (Deduction in respect of Employment of new employees) Eligible assessee:  All assessees (Corporate and Non-Corporate) who are subject to Tax Audit u/s 44AB. Rate a...

Deductions from gross total income u/s 80 related to company assessee Section 80G, 80GGA and 80GGB of Income Tax act, 1961 (A.Y. 2019-20) Section 80IA, 80IAB, 80IAC and 80IB of Income Tax act,1961 (A.Y. 2019-20) 1. Section 80IBA (Profits from developing and building approved housing projects) Eligible assessee:  All assessees (Corporate and Non-Corporate) Deduction limit:  100% of the profit derived from such business. 2. Section 80IC (Deduction for setting up undertakings in special States) This deduction is allowed from profits of certain undertakings or enterprises located in certain special category states. These states are Sikkim, Himachal Pradesh, Uttaranchal and North Eastern States. Rate and period of deduction u/s 80IC:-   Period of commencement   State   Rate   Period of deduction From 23-12-2002 To 31-03-2007 Sikkim 100% For first 10 Assessment years From 07-01-2003 To 31-03-2012 Himachal Pradesh and Uttaranchal 100% 30% For first 5 Assessment ye...

Deductions from gross total income u/s 80 related to company assessee Section 80G, 80GGA and 80GGB of Income Tax act, 1961 (A.Y. 2019-20) 1. Section 80 IA (Profits and Gains from industrial undertaking engaged in Infrastructure development etc.) Rationale:  The existence of infrastructural facilities is very essential for industrial growth and economic development of economy. Recognising the need of establishing and developing infrastructure facilities, Government of India has provided tax incentives for undertakings engaged in the business of Infrastructure development. Eligible assessee:  Industrial undertakings engaged in Eligible business Rate and period of deduction:  A deduction of an amount equal to stated percentage of profits and gains, derived from any eligible business, shall be allowed for stated consecutive assessment years. Eligible Business:  The deduction under this section is available to an assessee whose "Gross Total Income" includes any profi...

Deductions from Gross Total Income (GTI) u/s 80 related to company assessees 1. Section80G ( Donations to charitable Institutions) Eligible assessee:  All assessees ( Individual, HUF, Company etc. ) Deduction limit:  100% or 50% of the donated amount or qualifying limit, allowed donation in cash upto ₹2000              This deduction is available on account of any donation made by the assessee to specified funds or institutions. In some cases, deduction is available after applying the qualifying limit while in others, it is allowed without applying any qualifying limit. The amount paid to the following as donations during the previous year qualify under section 80G:-   (A) No Limit Donations   (B) With Limit Donations  Donations given to:- The National defence fund The Jawaharlal Nehru memorial fund The Prime minister's national relief fund National children fund National sports fund etc.  Donations given to:- The State or...

Corporate sector is the most widely used form of business organisation for medium and large scale business. Corporate taxation refers to taxation of companies and it is a major source of revenue to the government. Company assessees are entitled to claim various deductions as per section 80 of Income Tax act, 1961.  A  deduction  from income tax point of view is the investment / expenditure that helps in reducing gross total income, thereby reducing the tax payable on total income. Income tax deduction needs to be claimed at the time of filing Income tax return (ITR) and the amount of deduction should be reduced from gross total income to arrive at the taxable income. :- Company assessee are entitled to claim following deductions as per section 80 of Income Tax act 1961:- Section 80G  {Donations to charitable institutions} Section 80GGA  {Donations for scientific research and rural development} Section 80GGB  {Contributions made to political parties} Section...

Introduction:-  The incidence of tax on any assessee depends upon his residential status under the Income-tax act.  For all purposes of income-tax, taxpayers are classified into three broad categories  on the basis of their residential status viz. (1) Resident and ordinarily resident  (2) Resident but not ordinarily resident  (3) Non-resident The residential status of an assessee must be ascertained with reference to each  previous year. A person who is resident and ordinarily resident (ROR) in one year may become non-resident (NR) or resident but not ordinarily resident (RNOR) in another year or vice versa. Residential status of a Company:-   Section 6(3) of Income tax act, 1961 contains provisions regarding residential status in case of a company assessee. According to this section, a company can either be a resident or a non resident. the residential status is to be determined on the basis of its incorporation or registration. Section 6 (3) provides...

# Differences between Tax Planning and Tax avoidance:-   Basis of difference   Tax Planning   Tax Avoidance Meaning It refers to the arrangement of a person's financial affairs in such a way that assessee gets full benefit of all permissible deductions and exemptions as per law. Tax Avoidance is an exercise of reducing tax liability by exploiting some loopholes of the taxation laws. Intention It involves fear of obedience of law with an honest attitude. It involves foul play with the law by dodging the tax authorities. Nature Legal and moral Legal but immoral What is it It is the saving of tax It is the dodging of tax Nature of transactions In tax Planning, transactions are real and natural. Transactions are Sham and are fabricated artificially. Time horizon Tax planning is long term  Tax avoidance is a short term measure Motive Tax Planning has a Bonafide motive Tax avoidance has a malafide motive Objective To reduce tax liability, by complying to the letter and spi...

Tax Evasion Tax evasion  refers to an exercise / attempt by a taxpayer for not paying the tax legally due. It is an illegal method of saving tax and makes the person liable to penalties and prosecution. Tax evasion is considered as a "white collar crime" and leads to generation of Black money. The tax evasion is resorted to by applying following dishonest means:- Under disclosure of income Inflating the expenditure Manipulation of accounts Willful violation of rules Benami transactions etc.  Reasons for tax evasion (why people resort to tax evasion ? ) High tax rates (progressive taxation system) Complicated taxation laws and filing mechanism Rampant corruption Absence of sound social security system Weak surveillance mechanism Lack of transparency in government spendings Inflation Absence of effective judiciary Various tools of tax evasion :-  These are some of the ways in which people may avoid or evade tax liability :- Failing to pay the tax dues Smuggling Submitting f...

Tax Avoidance Tax avoidance is an art of dodging the tax authorities without breaking the law. It means when a taxpayer arranges his financial activities in such a manner that although it is within the four corners of the law but the assessee takes advantage of loopholes which exist in the tax law in order to reduce his tax liability.                    In other words, though he has complied to the letter of law but not the spirit behind the law. Following transactions are considered to be under the purview of tax avoidance:- 1. Use of colourable devices (use of dubious or unfair method for reduction in tax liability). 2. Facts of the case are presented in a false manner. 3. There is a malafide intention and spirit behind the law is avoided. 4. Doctrine of substance is defeated.                             **********

Tax management is a part of tax planning which deals with management of financial affairs for the purpose of paying tax. It has three main aspects:- 1. Past:-  It includes filing of various returns, issuing certificates, payment of tax etc.   2. Present:- It includes payment of tax on due date, deduction of tax at source, it's payment etc. 3. Future:-  It involves rectification of any mistakes committed, going in for appeals.                                                   Tax management involves compliance with legal formalities to avail of various incentives available under Income Tax act. Tax management is very essential because often the tax deductions / exemption / incentives provided under income tax act are conditional. Thus, it becomes imperative to fulfill the conditions and to comply with the statutory requirements to get a reductio...

Introduction: Tax may be defined as a financial charge or other levy imposed on an individual or a legal entity by government in pursuant to its legislative authority. Indian taxation system is one of the world's largest systems in terms of its wide application on large number of individuals. In India there are two types of taxes.                                                                                Taxes   Direct Tax (Income Tax) Indirect Tax (Goods and services Tax) The main goal of every taxpayer is to minimise his tax liability. So, under tax planning and management, an assessee arranges his financial affairs in such a way that the burden of taxation on assessee is reduced to the minimum. To achieve this objective coma the taxpayer may Resort to following three methods:- ...