Tax Laws: Laws relating to income, Profits, Wealth tax, Corporate tax
The Income-tax Act, 1961
The Income tax Act, focusing on the rules and regulations of tax regulation, was initially put into existence in the year 1961. Under this act, everything related to Taxation and more are mentioned which also includes collection and levy.
The Income Tax Act was enacted in the year 1961 and is the statute under which everything related to taxation is listed. This includes levy, collection, administration and recovery of income tax. The act basically aims to consolidate and amend the rules related to taxation in the country.
The Income tax Act contains a long list of sections, each of which deal with different aspects of taxation in the country. Let us look into each of these chapters of the IT Act and their related sections and sub-sections.
Chapter I: This is the first section and is hence for introducing the IT Act and to give a basic idea about the same.
Chapter II: This chapter talks about the commencement and the extent of the Income Tax Act.
Chapter III: The third chapter of the IT Act is basically about the charge of income tax, the scope of total income, dividend income, and income arising as a result of working abroad and so on.
Chapter IV: This chapter deals with all forms of income that do not form part of the total income. These include income from property, trusts, institutions, incomes of Political Parties etc.
Chapter V: The fifth chapter is about incomes of other individuals that form part of the assessee’s income. This includes income from capital gains, from businesses, from house property etc.
Chapter VI: This deals with the transfer of income when there is no actual transfer of assets. This includes transfer as well as revocable transfer. Chapter VII: Chapter VII is basically about the deductions that are applicable on certain payments and certain incomes
Chapter VIII: Chapter VIII deals with rebates and share of member in an association or body
Chapter IX: This talks about double taxation relief that is rebate on income tax and relief in income tax.
Proposed Direct Tax code
The direct taxation of the income of individuals, companies and other entities is governed by the Income Tax Act, 1961. The Direct Taxes Code seeks to consolidate the law relating to direct taxes. The Bill will replace the Income Tax Act, 1961, and the Wealth Tax Act, 1957. The Bill widens tax slabs, and lowers corporate tax rates. It removes a number of exemptions and grandfathers some others.
The new direct tax code will try to bring more assessees into the tax net, make the system more equitable for different classes of taxpayers, make businesses more competitive by lowering the corporate tax rate and phase out the remaining tax exemptions that lead to litigation. It will also redefine key concepts such as income and scope of taxation. Globally, governments are racing to woo investments and boost job creation by offering lower corporate tax rates. In December, the US enacted a Tax Cuts and Jobs Act, lowering the country’s corporate tax rate from 35% to 21%. A month later, Apple Inc. said it would invest $30 billion to expand US operations. India’s new direct tax code will take forward the plan to lower the corporate tax rate from 30% to 25% for all firms gradually as revenue collection improves. From 2018-19, the 25% tax rate is available to all firms with sales less than Rs250 crore.
The wealth tax, 1957
The Wealth Tax Act, 1957 governed the taxation process associated with the net wealth that an individual, a Hindu Undivided Family (HUF), or a company possesses on the valuation date. The valuation date was an important component in the calculation of the Wealth Tax. The net wealth that an assessee possessed on the valuation date determined the amount of tax. The valuation date was the day of 31 March immediately preceding the Assessment Year.
Government of india decided to abolish the levy of wealth tax under the Wealth-tax Act, 1957 with effect from the 1st April, 2016. The objective of taxing high networth persons shall be achieved by levying a surcharge on tax payer earning higher income as levy of surcharge is easy to collect & monitor and also does not result into any compliance burden on the assessee and administrative burden on the department.
corporate tax laws in india
Corporate Income Tax (CIT) refers to the corporate tax rate imposed on: the ‘net income’ of companies registered under the Companies Act, 1956 or foreign companies earning income in India. India has among the highest corporate tax rates in the world, but the effective tax liable differs across Industry and sector. In this ARTICLE, we briefly discuss the structure of corporate taxation in the country.
A company, whether Indian or foreign, is liable to pay CIT under the country’s Income Tax Act, 1961. While a resident company is taxed on its worldwide income, a non-resident (foreign) company is taxed only on income that is received in India, or that arises, or is deemed to accrue in India.
Previously, a foreign company was considered a resident company only if the control and management of their affairs were wholly situated in India in the financial year. Companies that were partly or wholly controlled and managed from outside India were treated as non-resident companies. This was amended by the Finance Act of 2015 to align the rules with international best practices.
India’s Finance Act 2015
Properly determining tax residency is critical for foreign companies doing business in India. A spate of recent court cases challenging the tax residency status of foreign companies spurred the government to enact changes clarifying the law. The Finance Bill as introduced provided that a company would be considered a resident of India if its place of effective management (POEM) was in India “at any time” during the year. This wording would potentially cause a company to qualify as a resident in India even if it were to have a POEM in India for only one meeting during the year. Under this scenario, a foreign company with Indian operations could be deemed a resident in India, which could lead to taxation in India on the company’s worldwide income.
Minimum Alternative Tax
Following criticism of the multiple minimum alternative tax assessments (MAT) on Foreign Institutional Investors, the Lok Sabha (or lower house of parliament) introduced a change to the original bill. The change clarifies the government’s position on the applicability of the MAT to foreign companies.
The Finance Act extends the explicit exemption from the MAT to any foreign company that earns income in the form of capital gains on securities, interest or royalties and fees for technical Services. The exclusion applies as long as the tax payable on such income is less than 18.5 percent; that is, the rate of the MAT. However, the Finance Act stops short of providing retroactive relief for foreign investors that received tax notices on MAT applicability to past gains on investments.
General Anti-Avoidance Rules
Another timely provision of the Finance Act is the deferral of the general anti-avoidance tax rules (GAAR). GAAR represents a major area of concern and uncertainty for foreign investors doing business in India; the government has not yet issued guidelines explaining its implementation.
The Finance Act defers GAAR’s effective date so that it applies to transactions taking place on or after April 1, 2017. This is the fourth time that the government has postponed implementation. As written, GAAR provisions would give tax authorities greater powers to examine cross-border transactions for signs of Tax Evasion. Such powers would include the power to override all tax treaties and to disregard, look through, or re-characterize business arrangements that are deemed to be impermissible avoidance arrangements.
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Tax laws are a complex and ever-changing set of rules that govern how much Money individuals and businesses owe to the government. While the details of tax laws can vary from country to country, there are some general principles that apply in most jurisdictions.
One of the most important principles of tax law is that taxes should be fair. This means that the tax burden should be distributed evenly among taxpayers, and that no one should be able to avoid paying their fair share. To achieve this goal, tax laws often include progressive tax rates, which means that higher-income taxpayers pay a higher Percentage of their income in taxes.
Another important principle of tax law is that taxes should be efficient. This means that the cost of collecting taxes should be low, and that the tax system should not create unnecessary distortions in the economy. To achieve this goal, tax laws often include features such as deductions and credits, which allow taxpayers to reduce their tax liability.
Tax laws are also designed to promote certain social and economic goals. For example, many countries have tax laws that encourage Investment in research and development, or that provide tax breaks for businesses that hire new employees.
Tax laws are a complex and ever-changing subject, but they are essential to the functioning of any government. By understanding the principles of tax law, taxpayers can better understand their obligations and ensure that they are paying their fair share.
Income tax is a tax levied on the income of individuals and businesses. It is a major source of revenue for governments around the world. Income tax is typically levied on the gross income of individuals and businesses, less certain deductions and exemptions. The tax rate may be progressive, meaning that higher-income taxpayers pay a higher percentage of their income in taxes.
Profit tax is a tax levied on the profits of businesses. It is also a major source of revenue for governments. Profit tax is typically levied on the net income of businesses, after accounting for expenses such as cost of goods sold, salaries, and depreciation. The tax rate may be progressive, meaning that higher-profit businesses pay a higher percentage of their profits in taxes.
Wealth tax is a tax levied on the wealth of individuals. It is less common than income tax and profit tax, but it is still used by some governments. Wealth tax is typically levied on the total value of an individual’s assets, less certain exemptions such as a primary residence. The tax rate may be progressive, meaning that wealthier individuals pay a higher percentage of their wealth in taxes.
Corporate tax is a tax levied on the profits of corporations. It is a major source of revenue for governments around the world. Corporate tax is typically levied on the net income of corporations, after accounting for expenses such as cost of goods sold, salaries, and depreciation. The tax rate may be progressive, meaning that higher-profit corporations pay a higher percentage of their profits in taxes.
Tax laws are complex and ever-changing, but they are essential to the functioning of any government. By understanding the principles of tax law, taxpayers can better understand their obligations and ensure that they are paying their fair share.
Income Tax
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What is income tax?
Income tax is a tax levied on individuals and businesses on their income. Income can be from a variety of sources, including wages, salaries, interest, dividends, capital gains, and rental income. -
Who has to pay income tax?
In most countries, all individuals and businesses with income are required to pay income tax. However, there are some exceptions, such as low-income earners and certain types of businesses. -
How is income tax calculated?
The amount of income tax that an individual or business owes is calculated based on their income and their tax bracket. Tax brackets are ranges of income that are subject to different tax rates. The higher the income, the higher the tax rate. -
When is income tax due?
Income tax is usually due on April 15 of each year. However, there are some exceptions, such as for taxpayers who are abroad or who have a qualifying hardship. -
How can I reduce my income tax liability?
There are a number of ways to reduce your income tax liability, such as itemizing your deductions, taking advantage of tax credits, and contributing to retirement accounts.
Profit Tax
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What is profit tax?
Profit tax is a tax levied on the profits of businesses. Profits are calculated by taking the total revenue of a business and subtracting the total expenses. -
Who has to pay profit tax?
In most countries, all businesses with profits are required to pay profit tax. However, there are some exceptions, such as small businesses and certain types of businesses. -
How is profit tax calculated?
The amount of profit tax that a business owes is calculated based on their profits and their tax rate. Tax rates vary from country to country. -
When is profit tax due?
Profit tax is usually due on a quarterly or annual basis. However, there are some exceptions, such as for businesses that are abroad or that have a qualifying hardship. -
How can I reduce my profit tax liability?
There are a number of ways to reduce your profit tax liability, such as taking advantage of tax credits and deductions.
Wealth Tax
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What is wealth tax?
Wealth tax is a tax levied on the total value of an individual’s assets. Assets can include property, stocks, Bonds, and cash. -
Who has to pay wealth tax?
In most countries, only individuals with a high net worth are required to pay wealth tax. However, there are some exceptions, such as for low-income earners and certain types of assets. -
How is wealth tax calculated?
The amount of wealth tax that an individual owes is calculated based on the value of their assets and the applicable tax rate. Tax rates vary from country to country. -
When is wealth tax due?
Wealth tax is usually due on an annual basis. However, there are some exceptions, such as for individuals who are abroad or who have a qualifying hardship. -
How can I reduce my wealth tax liability?
There are a number of ways to reduce your wealth tax liability, such as taking advantage of tax credits and deductions.
Corporate Tax
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What is corporate tax?
Corporate tax is a tax levied on the profits of corporations. Profits are calculated by taking the total revenue of a corporation and subtracting the total expenses. -
Who has to pay corporate tax?
In most countries, all corporations with profits are required to pay corporate tax. However, there are some exceptions, such as small businesses and certain types of businesses. -
How is corporate tax calculated?
The amount of corporate tax that a corporation owes is calculated based on their profits and their tax rate. Tax rates vary from country to country. -
When is corporate tax due?
Corporate tax is usually due on a quarterly or annual basis. However, there are some exceptions, such as for corporations that are abroad or that have a qualifying hardship. -
How can I reduce my corporate tax liability?
There are a number of ways to reduce your corporate tax liability, such as taking advantage of tax credits and deductions.
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Which of the following is not a type of tax?
(A) Income tax
(B) Sales tax
(C) Wealth tax
(D) Corporate tax -
Which of the following is the most common type of tax?
(A) Income tax
(B) Sales tax
(C) Wealth tax
(D) Corporate tax -
Which of the following is a tax on the income of individuals and businesses?
(A) Income tax
(B) Sales tax
(C) Wealth tax
(D) Corporate tax -
Which of the following is a tax on the sale of goods and services?
(A) Income tax
(B) Sales tax
(C) Wealth tax
(D) Corporate tax -
Which of the following is a tax on the value of assets?
(A) Income tax
(B) Sales tax
(C) Wealth tax
(D) Corporate tax -
Which of the following is a tax on the profits of businesses?
(A) Income tax
(B) Sales tax
(C) Wealth tax
(D) Corporate tax -
Which of the following is the government’s main source of revenue?
(A) Income tax
(B) Sales tax
(C) Wealth tax
(D) Corporate tax -
Which of the following is the most progressive type of tax?
(A) Income tax
(B) Sales tax
(C) Wealth tax
(D) Corporate tax -
Which of the following is the most regressive type of tax?
(A) Income tax
(B) Sales tax
(C) Wealth tax
(D) Corporate tax -
Which of the following is the most efficient type of tax?
(A) Income tax
(B) Sales tax
(C) Wealth tax
(D) Corporate tax