Final Direct Tax

8/19/2019 Final Direct Tax

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DIRECT TAX – TRENDS IN

INDIA

Presenting

Presented By:• Seema Sharma• PoornaSubramanian• Vishwata Jadhav• Dinesh Bhatt


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INTRODUCTION

What is direct tax?

• It is the tax which is charged directly on the tax payer. The

term direct tax generally means a tax paid directly to the

government by the person on whom it is imposed.

• In India it is governed by the Central Board of Direct Taxes

(CBDT.

• It is a division of Department of reven!e !nder "inistry of

#inance.

Direct Tax


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TYPES OF DIRECT TAX

Ban$ing Cash Transaction Tax.

%ersonal Income Tax.

Capital Tax.

Corporate Tax.

Do!ble Tax &voidance &greement.

#ringe Benefit Tax.

'ec!rity Transaction Tax.

ift tax

Wealth Tax.


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BANKING CASH TRANSACTION TAX

The government had introd!ced ).* per cent BCCT in +)), on

cash withdrawals of more than -s ,)))) (individ!als and -s

*))))) for others in a single day from non/savings ban$

acco!nt maintained with any sched!led ban$.

This levy was introd!ced in +)), to trac$ !nacco!nted money

and trace its so!rce and destination.

This tax has been withdrawn since &pril * +))0 following an

anno!ncement made by the then #inance "inister %

Chidambaram in his b!dget.


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PERSONA INCO!E TAX

& personal or individ!al income tax is levied as a percentage

of a person1s wages and salaries with some ded!ctions

permitted along with the net income or loss from b!siness.

2eads of Income3

Income Taxable !nder the head 'alaries.

Income Taxable !nder the head 2o!se %roperty.

Income Taxable !nder the head B!siness 4 %rofession.

Income Taxable !nder the head Capital ains.

Income Taxable !nder the head 5ther 'o!rces


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TRENDS OF INCO!E TAXSAB RATES"

P.T.O


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FOR THE FINANCIAL YEAR 2007-08

TAXGeneral WOMEN

SENIOR CITIZEN

BASIC EXEMPTION110000

145000

195000

0! TAX110001- 150000

145001-150000 NIL

20! TAX 150001-250000 150001-250000 195001- 250000

"0! TAX Above 250000 Above 250000 Above 250000

FOR THE FINANCIAL YEAR 2008-0#

TAX GeneralWOMEN SENIOR CITIZEN

BASIC EXEMPTION 150000 180000 225000

0! TAX 150001-300000180001-300000

225001-300000

20! TAX 300001-500000 300001-500000 300001-500000


FOR THE FINANCIAL YEAR 200#-0

TAXGeneral WOMEN

SENIOR CITIZEN

BASIC EXEMPTION 160000 190000 240000

0! TAX160001-300000

190001-300000240001-300000

20! TAX 300001-500000 300001-500000 300001-500000



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FOR THE FINANCIAL YEAR 200-

TAX GeneralWOMEN SENIOR CITIZEN

BASIC EXEMPTION 160000 190000 240000

0! TAX 160001-500000190001-500000

240001-500000

20! TAX 500001-800000 500001-800000 500001-800000


FOR THE FINANCIAL YEAR 20-2

TAXGeneral WOMEN

SENIOR CITIZEN

BASIC EXEMPTION 180000 190000 250000

0! TAX180001-500000

190001-500000250001-500000

20! TAX 500001-800000 500001-800000 500001-800000


Resident individual aged 80 years and above ave an enan!ed basi! e"e#$tion u$to Rs%5&00000%


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Ca#ita$ Gain Tax

In India the capital gains taxes are a type of direct tax. These are

paid by both individ!al and instit!tional investors. These taxes

are normally collected by the national government and the

primary area of taxation is the capital gained from the sale of

these assets.

Capital tax gains are divided into the higher taxed short/term

capital gains and the lower taxed long/term capital gain. The

following provides a snapshot of changes made in the last *)years.


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%&&' – ())(

In *006 capital gains tax rate changes was c!t down from +78

to +)8. D!e to the lower tax rate the capital gains reven!eincreased by almost 0+8 over fo!r years. It went from 9::

billion to 9*+6 billion. In +))* and +))+ capital gains reven!e

decreased beca!se of the crash in the stoc$ mar$et prices. The

decline was almost :+8 from +))) to +))+.

())* + ())'

In +)); capital gains taxes were red!ced from +)8 to *,8

thro!gh the


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()), – ())&

Both in #= +))7 and #= +))0 b!dget resol!tion conferences therewas a debate for the capital gains tax rate to be ret!rned to +)8 after

+)*). "any believe that increasing capital gains tax they will harm

the economy beca!se many employers will move their b!sinesses

elsewhere

The 2o!sing and >conomic -ecovery &ct and 2o!sing &ssistance

Tax &ct of +))7 have made some recent changes to capital gains

taxes. The changes were implement to specifically cater to the

s!bprime mortgage crisis and its affect of ho!se sales. & ref!ndabletax credit of *)8 has been instit!ted as well with a maxim!m credit

of 96,)).


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&nother ma@or change for +))7 has been the excl!sion of capital

gains taxes with respect to primary residences. Before +))7 ahomeowner co!ld benefit from the excl!sion of capital gains tax if

they lived at the principal residence for + consec!tive years o!t of

the last , years. 2owever as of


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CORPORATE TAX


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Corporate Tax Rates for Firms, Companies and Local Authorities

Net Income Rane Ta! Rate Surchare "ducation #essSecondary

"ducatrion

$% to &'(''' 10% Nil 2% of Income Tax 1% of Income Tax

&'(''' ) *'''' 20% Nil 2% of Income Tax 1% of Income Tax

+bove *'''' 30% Nil 2% of Income Tax 1% of Income Tax

Corporate Tax Rates for Co-operative societies'o-o$erative so!ieties as di((erent ta" slabs and rates%

"ntity Ty%e Rates Surchare "ducation #essSecondary

"ducation #ess

,irms 30% Nil 2% of Income Tax 1% of Income Tax

Domestic

#om%anies30% 5%**

2% of Income Tax

and Surcharge

1% of Income Tax

and Surcharge

,orein

#om%anies40%* 2%**

2% of Income Tax

and Surcharge

1% of Income Tax

and Surcharge

-oca +uthorities 30% Nil 2% of Income Tax 1% of Income Tax


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C-r#-rate Tax Rate .-r D-/estic C-/#anies

&s per the corporate tax rates for the +)**/*+ fiscal domestic

companies with total income of more than *) million r!pees need

to pay a corporate tax of ;+8. This incl!des a basic rate of ;)8along with a s!rcharge of , percent and an ed!cation cess of +8.

In case their aggregate income is less than IA- *) million the

domestic companies are re!ired to pay corporate taxes at a rate of

;).0 percent. This is incl!sive of a direct tax of ;)8 and aned!cation cess of ; percent.

C-r#-rate Tax Rate .-r Internati-na$ C-/#anies

&ccording to the corporate tax rates for +)**/*+ fiscal international

b!siness organiations wor$ing in India and earning more than *)million r!pees need to pay a corporate tax rate of +8 percent. This

incl!des a basic tax of )8 an ed!cation cess of ; percent and a

s!rcharge of +.,8.


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I/#-rtant C-r#-rate Tax Rates in In0ia

& dividend distrib!tion tax of *68 is applicable for thedomestic companies. . In case of short Term #ollowing are

some other important taxes for the +)**/*+ that are applicable

for the b!siness in addition to the corporate taxes3

"inim!m &lternate Tax at a rate of *0 percent along with

applicable cress and s!rcharge.

Companies whose t!rnover exceeds *) million r!pees need to

pay an extra s!rcharge of *)8 on their basic tax. Term capital

gains the normal basic tax rates are applied b!t in case of thelong term ones the tax rate varies between *) and +) percent.

'hort term profits which are made from selling e!ity shares or

!nits of e!ity based f!nds can be taxed at *, percent.


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2owever long term profits in these transactions are exempted

from taxes. Dividends received by Indian companies from

o!tside India are s!b@ected to a tax rate of ;) percent alongwith cress and s!rcharge.

In case the net wealth of a company is more than ; million

r!pees there is a wealth tax of * percent on the difference.

C-r#-rate 1it22-$0ing Taxes in In0ia ()%%+%(

The following rates are applicable in case of withholding taxes

that come into force when payments are made to non/residents3

• Interest / +) percent• Technical 'ervices / *) percent• -oyalties / +) percent• 5ther 'ervices / ) percent of earnings


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DOUBE TAXATION TREATY

Do!ble taxation is the case where two or more co!ntries

conc!rrently tax the same tax payers on acco!nt of the same

s!b@ect matters of tax ('!ch as Income %roperty etc.

Do!ble taxation generally arises on acco!nt of conflicting

criteria adopted by different co!ntries to levy the taxes.

Where by it is ens!red that the same s!b@ect matter is nottaxed by two governments. This sol!tion wo!ld be called

avoidance of do!ble taxation.


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overnment may enter into an agreement where by the

economic !nits liable to do!ble taxation are provided partialrelief.

& co!ntry may decide to give !nilateral tax relief to its own

s!b@ects even when no tax agreement exists with otherco!ntries.

India has entered into comprehensive agreement for the

advantages of do!ble taxation of income with severalco!ntries incl!ding &!stria Belgi!m and The federal rep!blic

of ermany #rance


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DOUBE TAX A3OIDANCE TREATY

India has entered into DT&& with 7 co!ntries incl!ding E'.In case of co!ntries with which India has do!ble tax avoidanceagreement the tax rate are determined by s!ch agreements.

Domestic corporation are granted credit on foreign tax paid bythem while calc!lating tax liability in India.

There are agreed rates of tax and @!risdiction on specifiedtypes of income arising in a co!ntry to a tax resident ofanother co!ntry.

/nown as Doube ta! avoidance

areement 0DT++1


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Ender the Income Tax &ct *0:* of India there are two

provisions 'ection 0) and 'ection 0* which provide specific

relief to taxpayers to save them from do!ble taxation.

'ection 0)3 #or taxpayers who have paid the tax to a co!ntrywith which India has signed DT&&.

'ection 0*3 %rovides relief to tax payers who have paid tax to

a co!ntry with which India has not signed a DT&&.


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THE FRINGE BENEFIT

TAX• T2e Fringe Bene.its Tax 4FBT5 6as t2e tax a##$ie0 t-/-st7 a$t2-8g2 n-t a$$7 .ringe 9ene.its in In0ia:

• A ne6 tax 6as i/#-se0 -n e/#$-;ers 9; In0ia2er?ee:


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T2> #5FF5WIA IT>"' W>-> C5G>->D3

• >mployers expenses on entertainment travel employee welfare andaccommodation. The definition of fringe benefits that have becometaxable has been significantly extended. The law provides an exactlist of taxable items.

• >mployers provision of employee transportation to wor$ or a cashallowances for this p!rpose.

• >mployers contrib!tions to an approved retirement plan (called a

s!perann!ation f!nd.

• >mployee stoc$ option plans (>'5%s have also been bro!ght !nderfringe benefits tax from the fiscal year +))6H)7.


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1EATH TAX

Base0 -n t-ta$ 6ea$t2 t2at inc$80es@

• 2o!sing

• Ban$ deposits

• Cash

• "oney f!nds

• Ins!rance and pension savings

• Investments


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GIFT TAX

• Fevied on something one living person gifts another

• Incl!ded in Income from other so!rces

• 5nly on gifts above ,))))

• Ao tax on gift received from relatives• Ao tax on gifts received in marriage or via inheritance or by

charitable tr!sts

• To evade tax get a ift Deed signed by donor


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CONCUSION

•Taxation is a $ey tool of economy.

• It has significant effects on savings and investments on the

allocation of reso!rces between alternative sectors of the

economy and efficiency with which reso!rces are !tilied.

• The c!rrent system of tax is fra!ght with complexities owing tomany amendments over the years.

• Therefore the Aew Direct Tax Code (DTC is said to replace the

existing Income Tax &ct of *0:* in India.

• The #inance "inister %. Chidambaram has indicated that it may be diffic!lt for the government to meet the &pril * +)*;

deadline for the implementation of the Direct Taxes Code

(DTC.


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T2an> ;-8

Final Direct Tax

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