(C.A. Finalist and B.Com. Finalist) Common Service Centre- Urban Level Entrepreneur, authorized by Ministry of IT, Govt. of India, under E-Governance scheme;

Life Insurance Advisor, authorized by Insurance Regulatory Development Authority;

Having a name on Google my Business Programme with “Investuru”

Mr. Shivam Gupta

Direct Taxes:

Overview

What is a Tax ?A fee levied by a government on

a product, income, or on activity such as gambling, betting, lotteries etc.

Main Source to Finance Govt. Expenditure.

failure to pay, or evasion of or resistance

to tax, is usually punishable by law.

Direct Taxes ?Direct Taxes, as the name suggests, are taxes that are

directly paid to the government by the Assessee.

They are called so as the burden of taxation falls directly on the tax payer and cannot be transferred onto anyone else.

overall control for administration of Direct Taxes lies with the Union Finance Ministry which functions through Income Tax Department with the Central Board of Direct Taxes (CBDT) at its apex. The CBDT is a statutory authority

functioning under the Central Board of Revenue Act, 1963.

Types Of DTIncome Tax

Corporation Tax

Security Transaction

Tax (STT)

Dividend Distributio

n Taxes (DDT)

Minimum Alternate Tax (MAT)

Property Tax

Income Tax ?• Income Tax is a tax which is levied on the total taxable income of the assessee. It came into

effect from 1 April,1962. It is administered by CBDT, which is empowered with the provisions of the Income Tax Act, 1961.

• Assessee whose income exceeds the maximum amount, which is not chargeable to the income tax, shall be chargeable to the income tax at the rate or rates prescribed under the finance act for the relevant assessment year, shall be determined on basis of his residential status, i.e. Whether assessee is a Resident and Ordinarily Resident/ Non-Ordinarily Resident/ Non-Resident.

• All residents are taxable for all their income, including income outside India. • Non residents are taxable only for the income received in India or Income accrued in India. • Not-ordinarily residents are taxable in relation to income received in India or income

accrued in India and income from business or profession controlled from India.

Categories of India’s Income Tax Assessees:-

Individual resident aged below 60 years

Senior Citizen

Super Senior Citizen

NRI / HUF / AOP / BOI / AJP

Co-operative Society

Firm

Local Authority

Domestic Company

Other Company

Residential StatusType of person Control & management of

affairs are wholly in IndiaControl & management of affairs are wholly outside

India

Control & management of affairs are partly in India &

partly outside India

HUF/ Firm Resident Non-resident Resident

AOP / BOI Resident Non-resident Resident

Indian company Resident Resident Resident

Other company Resident Non-resident Non-resident

Any other person except an individual Resident Non-resident Resident

Note:- Individuals will be Resident when they Reside in India for 182 days or more; or 60 days or more in PY and 365 days or more in 4 years immediately preceding relevant PY’s. However, Ordinarily Resident, when he is resident for at least for 2/10 PY’s, or 730 Days in 7 Years, immediately preceding relevant PY. HUF will be ordinarily resident, when Karta satisfies the conditions of ordinarily resident.

Heads of Incomes in Income Tax

Income from Salary;

Income from House property;

Income from Profits and gains from business; or profession;

Income from capital gains;

Income from other sources.

Income From Salary Income can be taxed under the head salaries,

when there is a Employee-Employer Relationship between payee and payer. If this relationship is not

exist, or in future, it is ceased to exist. Then, the income would not be deemed under the head Salary. If there is no Element of employer and

employee relationship, then the income shall not be accessible under this head of Income.

Income From House PropertyTax on income from house property is the tax on rental

income which is being earned from house property. However, in case the property is not Rented out, tax would be levied on expected rent that would have been received if this property was rented out. Various deduction like Municipal tax paid by owner only, Standard Deduction (@30% of net annual value) and interest on loan taken for the purpose of house property

under the section 24.

Income from PGBPThe income under this head belongs to section-28 of income tax act. Any income from trade / commerce/ business/ profession/ manufacture under this head of income after deduction certain specified Expenses under section-30 to 37. And, in case of Business of plying, transportation etc., presumptive income is calculated under the section-44AD and 44AE.

Income from Capital GainsAny profit or gains arising from transfer of capital asset [defined under section-2(14)] effected in financial year shall be chargeable to tax under this head and shall deemed to be income in the year of transfer took place unless capital gain is exempt under the section- 54, 54B, 54D, 54EC, 54ED, 54F, 54G and 54GA. But even after this certain assets relating to stock in trade for business and personal effects are not included under this head. Here, if transfer took place after 1 year in case of shares and 3 years in case of other assets, then gain/loss would be considered as Long term capital gain, else will be Short term capital gain.

Income from other sourcesAny income which is not chargeable to tax under the previous 4 heads would be chargeable under this head of income provided that income is not exempt from the computation of total income under the section-10 or as per the provisions of Chapter-VIA of the income tax act, 1961.

Corporate Tax• Corporate Taxes are annual taxes payable on the income of a corporates operating in India. For the

purpose of taxation, companies in India are broadly classified into domestic companies and foreign companies.

• The rate at which Corporates are taxed in India is 30% plus a 3% cess. Thus the total comes to 30.9%. Further if the taxable income is more than Rs. 10 million, then there is an additional

surcharge of 12% also levied on the base tax rate.• The companies and business organizations in India are taxed on the income from their worldwide

transactions under the provisions of Income Tax Act, 1961.• A corporation is deemed to be resident in India if it is incorporated in India or if it’s control and

management is situated entirely in India.• In case of non resident corporations, tax is levied on the income which is earned from their business transactions in India or any other Indian sources depending on bilateral agreement of that

country.

Property Tax• Property tax or 'house tax' is a local tax on buildings, along with

appurtenant land, and imposed on owners. • The tax power is vested in the states and it is delegated by law to the

local bodies, specifying the valuation method, and collection procedures. • The tax base is the annual rental value (ARV) or area-based rating.

Owner-occupied and other properties not producing rent are assessed on cost and then converted into ARV by applying a percentage of cost, usually six percent.

• Vacant land is generally exempted from the assessment. The properties lying under control of Central are exempted from the taxation.

Security Transaction Tax• STT is a tax being levied on all transactions done on the stock exchanges.• STT is applicable on purchase or sale of equity shares, derivatives, equity

oriented funds and equity oriented Mutual Funds. • Current STT on purchase or sell of an equity share is 0.075%.

• Selling the shares after 12 months comes under LTCG and one need not have to pay any tax on that gain.

• In the case of selling the shares before 12 months, one has to pay STCG @10% flat on that gain.

• However, for a trader, all his gains will be treated as trading (Business) and he has to pay tax as per tax slabs. In this case, the transaction tax paid

by him can be claimed back/adjusted in tax to be paid.

Dividend Distribution Tax• Under Section 115-O of the Income Tax Act, any amount

declared, distributed or paid by a domestic company by way of dividend shall be chargeable to dividend tax. So, if a company declares divided, it has to pay an effective rate of 16.995% on the dividends declared.

• This is apart from the 30.9 % of Corporate taxes. The objective for this tax is that after paying this tax, the dividend declared becomes tax free in the hands of the recipient of dividend.

Minimum Alternate Tax• Normally, a company is liable to pay tax on the income computed in

accordance with the provisions of the income tax Act, but many a times due to exemptions under the income tax Act, there is huge

actual profit as shown in the profit and loss account of the company but no taxable income.

• To overcome this issue, and in order to bring such companies under the income tax act net, the concept of Minimum Alternate Tax (MAT)

has been introduced. The present rate of MAT is 19.05%.

For any QueryE-Mail:- investuru@icai.org

Website:- www.investuru.com Google Search:- Investuru

LinkedIn:- www.linkedin.com/investuru

Thank

You