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TAX Holidays & MAT for IT

Presentation Brief

Company Profile: Manufacturing and marketing mass consumption items

Target Audience: Middle level managers Topic: Tax holidays and MAT for IT

Objective: Basic concepts on Tax holidays and MAT in IT sector and relate

it to the company and business through the use of appropriate examples

MURUGANANDAM M

1011037

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TAX HOLIDAY AND MAT FOR ITTAX HOLIDAY AND MAT FOR IT

I T

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About me

Muruganandam M

Management Trainee

Business Development Department

Joined this organization on 1st August 2010

PGP in Management, IIM Bangalore Batch 2010

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Why Investment? Why are we investing a part of our earnings in instruments such as

Government Bonds

PPF

Government Infrastructure bonds

National Security Certificate

Equity linked Saving Schemes

ANSWER: TO SAVE TAX

Benefit? : More money in our pocket

More we invest, more the industry and economy grow

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Tax Holiday A tax holiday is a temporary reduction or elimination of a tax

A Tax slashing Device

Import Excise Duty, Custom duty

Sales Tax, Corporate Tax

Example:

Tax deductions of 100 percent of IT export profits.

100 % tax deduction for the IT investments in tier II and tier III cities

These benefits will differ industry to industry Condition:

Minimum investment of Rs. 1 Crore

Deductions under tax holiday

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Tax Holiday A tax holiday is a temporary reduction or elimination of a tax

A Tax slashing Device

Import Excise Duty, Custom duty

Sales Tax, Corporate Tax

Benefits:

Incentive for business investments

FDI Foreign Direct Investments

Stimulating growth in selected industry

Less 'pinch' on the pockets and a good fast growth of economy

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Tax Holiday - Information and Technology Sector Income Tax Holiday

STPI (Software Technology Parks ofIndia)

Key Benefits:

Income Tax holiday; Central Sales Tax reimbursement

100% customs duty exemption on imports of capital equipments

(Lease/Loan/Paid)

100% Depreciation on capital goods over a period of five years

Are we benefiting from this?

YES

New IT service company in STPI Hubli, to export

software to our companies in Europe and USA

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MAT - Minimum Alternate Tax Taxable income calculation

Companies Act

Income Tax Act

Minimum of this should be paid as Tax to Income tax department

Example:

We bought the following new items at the beginning of this financial year

computers worth Rs. 50000 Expected life is 5 years

Printers worth Rs. 30000 Expected life is 3 years

Companies Act - SLMmethod to calculate the depreciation expenses

Income Tax Act WDV method to calculate the depreciation expenses It allows 100% depreciation for these items

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Understanding MAT

BeforeMAT After MAT

Realized PROFIT 60000 58200

Companies Act, India Amt (Rs.) Income Tax Act, India Amt (Rs.)

Net Sales 500000 Net Sales 500000

Expenses 420000 Expenses 420000

Less Dep. Charge-Computer

= 50000/5

10000 Less Dep. Charge-Computer

= 50000*100%

50000

Less Dep. Charge Printer

=30000/3

10000 Less Dep. Charge Printer

=30000*100%

30000

Taxable Income 60000 Taxable Income 0

Tax payable at 30% 1800 Tax Payable 0

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Understanding MAT

Before MAT we paid Rs. 0 as Income Tax

After MAT we pay Rs. 1800 as Income Tax

Is government taking away our hard earned money???

Before MAT our profit

After MAT our profit

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Q & A

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