Business & Tax Laws
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BUSINESS & TAX LAWS
CLASSIFICATION OF TAX • Direct – Cannot be shifted on others – Collects from pockets of earners out of their income – Income Tax, Professional Tax , Wealth Tax, Estate Tax • Indirect – Collected through manufacturer or service provider & sale of product & services – Inclusive in price of products & services – Sales Tax, VAT, CST , Excise, Customs, Services Tax • Revenues generated distributed between CG & SG as per subjects listed in Union list & State list • Collected by center - Excise, Customs, Services Tax Income Tax, Wealth Tax, Estate Tax • Collected by state – Sales Tax ,VAT
INCOME TAX • Finance Act – – Part B – Approved by Parliament – Assent of President – CBDT , Settlement Commission , ITAT, Commissioner • Assessee • Assessment year • Previous year • Receipt Vs accrual • Belated return • Revised Return
APPLICABILITY OF INCOME TAX
• • • • • • •
Individual HUF Company Firm AOP or BOI Local authority Artificial juridical person
BASIS OF CHARGE • Individual or HUF( A Y 2008-09) – 110000 / 145000 / 195000 – NIL – UPTO 150000 – 10 % – UPTO 250000 – 20 % – ABOVE 250000 – 30 % – CESS 2% – SHEC 1 % • Companies - 30 % flat
HEADS OF INCOME • Income from salaries – Employer – employee relationship – Wages , salaries , pension gratuity , commission fees leave encashment or HRA or any allowance or perks given by employer • House property – Residential or commercial building – 30 % Deduction for repairs – Interest on borrowed capital • Business or profession – Income minus expenses = profit
HEADS OF INCOME • Capital gain – Property of any kind but not including • Stock in trade • Personal effects • Rural Agricultural land • Some specific gold or bearer bonds – Treatment of STCG & LTCG on shares & land • Other sources – Dividends – Winning from lotteries , crossword puzzles, races , gambling , betting – Interest – Any residual income not taxed in 4 heads above
Remuneration Details
SALARY COMPUTAION
Assistant Manager Band I
Monthly
Annual
Basic
7,000
84,000
HRA *
5,000
60,000
Conveyance Allowance
2,500
30,000
Superannuation Allowance **
1,050
12,600
Leave Travel Allowance
2,000
24,000
Additional HRA
3,125
37,500
1,250
15,000
21,925
263,100
1,000
12,000
Retirals (PF, Gratuity) ****
1,423
17,077
Total Perks
2,423
29,077
24,348
292,177
Performance Bonus (Average) # Cost of Loans ##
2,450
29,400
4,167
50,000
Total (incl PB & Loans)
30965
371,577
Reimbursements Medical Total Perks Canteen (subsidy) *** Retirals
Total CTC
* HRA for A Class City. HRA for B Class City - Rs. 4000, HRA for C Class City - Rs. 3500, HRA for D Class City - Rs. 3000
**You have an option to join the Superannuation scheme and in such case the 15% of your annual basic salary will be credited to the Superannuation Fund and the superannuation allowance will be withdrawn *** Lunch Allowance will be paid up to Rs 50/- per working day. **** Company contribution towards PF is 12% and Gratuity is 8.33% #Please note that there is no minimum guaranteed bonus. ##Overall loan entitlement incuding Housing loan is Rs.5 lac@ an interest rate of 2.5%
EXEMPTED INCOME • • • • • • • • • • • •
Agriculture income Receipts by individual from HUF Share of profit from partnership firm Sum received from LIC Scholarships LTCG on shares Income of MLA/MP Income of Local authorities Political parties Charitable trusts Income from new undertakings in FTZ EPZ SEZ 100 % EOU
Assistant Manager Band I
Monthly
Annual
Basic
7,000
84,000
HRA *
5,000
60,000
Conveyance Allowance
2,500
30,000
Superannuation Allowance **
1,050
12,600
Leave Travel Allowance
2,000
24,000
Additional HRA
3,125
37,500
1,250
15,000
Total
21,925
263,100
Perks
1,000
12,000
Reimbursements Medical
Canteen (subsidy) *** Retirals
Retirals (PF, Gratuity) ****
1,423
17,077
Total Perks
2,423
29,077
24,348
292,177
Performance Bonus (Average) #
2,450
29,400
Cost of Loans ##
4,167
50,000
Total (incl PB & Loans)
30965
371,577
Total CTC
WEALTH TAX • Direct tax • Chargeable in respect to net wealth of individual / HUF and company @ 1 % if it exceeds 15 lacs • No WT on Sec 25 company, club, co-op society political party or mutual fund • Net wealth is assets minus liabilities • Assets – 1) Building / land or a farm situated within 25 kms of any municipality but exclude • House exclusively residential purpose • House forming part of stock in trade • House for purpose of Business or profession • House not let out for minimum period of 300 days • Commercial establishment or complexes
WEALTH TAX – – – –
2) Motor cars ( not running on hire or stock in trade) 3) Jewelry , bullion or furniture ( not stock in trade) 4) Yatch boats & aircrafts (except commercial purpose) 5) Urban land in municipality limit of not less than 10000 – 6) Cash in hand exceeding 50000 in case of individual & HUF & in other cases amount not recorded in books of account • Exempted assets – Agriculture land , crops, standing trees – Animals – Building owned by cultivator
WEALTH TAX • Deemed assets – Assets transferred by one spouse to another • Otherwise than for adequate consideration or in agreement to live apart – Assets held by minor • Net wealth of minor is included in wealth of the parent whose net wealth is more • If marriage doesn’t subsist then it is included in wealth parent who maintains minor • If assets are acquired by minor by his own skill or knowledge then it is not clubbed in hands of parents • If minor is suffering from disability then also assets are not clubbed in hands of parents
CENTRAL EXCISE • • • •
Indirect tax Duty collected on product manufactured in India Levied on manufacture irrespective of sales realisation CG is empowered to levy Excise except on – Alcoholic liquors – Opium , hemp & narcotic drugs • Goods means every kind of movable property ( not actionable claims or money) including crops grass & thing attached to land which are agreed to be served before sale • Movability - Building when constructed is not a goods , hence no Excise • Marketability - The goods can be capable of being bought or sold i e goods must be known in the market
• Kinds of duties – Basic excise duty – Special excise duty under Finance Acts – Additional excise in lieu of sales tax – Additional duties specified under different acts • CBEC – highest administrative authority • CENVAT- Central value added tax – Manufacturer has to pay normal duty & he gets credit of duty paid on inputs ( raw material or paints or packaging material ) if he submits proof of payment of duty – No credit if final product is exempted from duty – CENVAT is adjusted against duty on final product & cannot be refunded in any case except export
SERVICE TAX
• • • • • • •
Indirect tax On services provided CENVAT credit available, refund in case of export 12 % plus cess Tax is levied on amount received for services rendered More than 80 % services are covered ST is 50200 crores as against IT of Rs 98774 crores , customs Rs 98770 crores & excise Rs 130220 crores & WT of Rs 315 crores in Union Budget 2007 where total tax receipts is 548000 crores
FRINGE BENEFIT TAX • Any privilege , service , facility or benefit provided by employer to employee is taxed as FBT • It is tax on expenses , hence a company in loss will also has to pay FBT • On companies & partnership firms • Expenses covered are – Entertainment festival celebration gifts – Club facility food , beverages guest house – Conference employee welfare health club sports – Conveyance tour travel hotel boarding lodging – Repair & maintenance of car / aircraft Telephone – Scholarship to children • 20 % of such expense is taxed @ 30 % plus cess
CUSTOMS
• Basic , countervailing , anti dumping, protective etc • Export or import duty • Exemptions – Goods derelict or wreck – Lost , destroyed or abandoned or pilferage – Denaturing or mutilation of goods
VAT ( SALES TAX) • Indirect tax collected by destination state on sales • Tax is levied on value added in the price of a commodity & is collected at each stage by respective state • Full set off of earlier tax is granted & thus eliminates cascading effect • Sales – Conventional sale – transfer of goods – Hire purchase – Supply of goods by company or society to members – Works contract – Transfer of right to use any goods – Supply of goods being food or any other article for human consumption
CLASSIFICATION OF TAX • Direct – Cannot be shifted on others – Collects from pockets of earners out of their income – Income Tax, Professional Tax , Wealth Tax, Estate Tax • Indirect – Collected through manufacturer or service provider & sale of product & services – Inclusive in price of products & services – Sales Tax, VAT, CST , Excise, Customs, Services Tax • Revenues generated distributed between CG & SG as per subjects listed in Union list & State list • Collected by center - Excise, Customs, Services Tax Income Tax, Wealth Tax, Estate Tax • Collected by state – Sales Tax ,VAT
INCOME TAX • Finance Act – – Part B – Approved by Parliament – Assent of President – CBDT , Settlement Commission , ITAT, Commissioner • Assessee • Assessment year • Previous year • Receipt Vs accrual • Belated return • Revised Return
APPLICABILITY OF INCOME TAX
• • • • • • •
Individual HUF Company Firm AOP or BOI Local authority Artificial juridical person
BASIS OF CHARGE • Individual or HUF( A Y 2008-09) – 110000 / 145000 / 195000 – NIL – UPTO 150000 – 10 % – UPTO 250000 – 20 % – ABOVE 250000 – 30 % – CESS 2% – SHEC 1 % • Companies - 30 % flat
HEADS OF INCOME • Income from salaries – Employer – employee relationship – Wages , salaries , pension gratuity , commission fees leave encashment or HRA or any allowance or perks given by employer • House property – Residential or commercial building – 30 % Deduction for repairs – Interest on borrowed capital • Business or profession – Income minus expenses = profit
HEADS OF INCOME • Capital gain – Property of any kind but not including • Stock in trade • Personal effects • Rural Agricultural land • Some specific gold or bearer bonds – Treatment of STCG & LTCG on shares & land • Other sources – Dividends – Winning from lotteries , crossword puzzles, races , gambling , betting – Interest – Any residual income not taxed in 4 heads above
Remuneration Details
SALARY COMPUTAION
Assistant Manager Band I
Monthly
Annual
Basic
7,000
84,000
HRA *
5,000
60,000
Conveyance Allowance
2,500
30,000
Superannuation Allowance **
1,050
12,600
Leave Travel Allowance
2,000
24,000
Additional HRA
3,125
37,500
1,250
15,000
21,925
263,100
1,000
12,000
Retirals (PF, Gratuity) ****
1,423
17,077
Total Perks
2,423
29,077
24,348
292,177
Performance Bonus (Average) # Cost of Loans ##
2,450
29,400
4,167
50,000
Total (incl PB & Loans)
30965
371,577
Reimbursements Medical Total Perks Canteen (subsidy) *** Retirals
Total CTC
* HRA for A Class City. HRA for B Class City - Rs. 4000, HRA for C Class City - Rs. 3500, HRA for D Class City - Rs. 3000
**You have an option to join the Superannuation scheme and in such case the 15% of your annual basic salary will be credited to the Superannuation Fund and the superannuation allowance will be withdrawn *** Lunch Allowance will be paid up to Rs 50/- per working day. **** Company contribution towards PF is 12% and Gratuity is 8.33% #Please note that there is no minimum guaranteed bonus. ##Overall loan entitlement incuding Housing loan is Rs.5 lac@ an interest rate of 2.5%
EXEMPTED INCOME • • • • • • • • • • • •
Agriculture income Receipts by individual from HUF Share of profit from partnership firm Sum received from LIC Scholarships LTCG on shares Income of MLA/MP Income of Local authorities Political parties Charitable trusts Income from new undertakings in FTZ EPZ SEZ 100 % EOU
Assistant Manager Band I
Monthly
Annual
Basic
7,000
84,000
HRA *
5,000
60,000
Conveyance Allowance
2,500
30,000
Superannuation Allowance **
1,050
12,600
Leave Travel Allowance
2,000
24,000
Additional HRA
3,125
37,500
1,250
15,000
Total
21,925
263,100
Perks
1,000
12,000
Reimbursements Medical
Canteen (subsidy) *** Retirals
Retirals (PF, Gratuity) ****
1,423
17,077
Total Perks
2,423
29,077
24,348
292,177
Performance Bonus (Average) #
2,450
29,400
Cost of Loans ##
4,167
50,000
Total (incl PB & Loans)
30965
371,577
Total CTC
WEALTH TAX • Direct tax • Chargeable in respect to net wealth of individual / HUF and company @ 1 % if it exceeds 15 lacs • No WT on Sec 25 company, club, co-op society political party or mutual fund • Net wealth is assets minus liabilities • Assets – 1) Building / land or a farm situated within 25 kms of any municipality but exclude • House exclusively residential purpose • House forming part of stock in trade • House for purpose of Business or profession • House not let out for minimum period of 300 days • Commercial establishment or complexes
WEALTH TAX – – – –
2) Motor cars ( not running on hire or stock in trade) 3) Jewelry , bullion or furniture ( not stock in trade) 4) Yatch boats & aircrafts (except commercial purpose) 5) Urban land in municipality limit of not less than 10000 – 6) Cash in hand exceeding 50000 in case of individual & HUF & in other cases amount not recorded in books of account • Exempted assets – Agriculture land , crops, standing trees – Animals – Building owned by cultivator
WEALTH TAX • Deemed assets – Assets transferred by one spouse to another • Otherwise than for adequate consideration or in agreement to live apart – Assets held by minor • Net wealth of minor is included in wealth of the parent whose net wealth is more • If marriage doesn’t subsist then it is included in wealth parent who maintains minor • If assets are acquired by minor by his own skill or knowledge then it is not clubbed in hands of parents • If minor is suffering from disability then also assets are not clubbed in hands of parents
CENTRAL EXCISE • • • •
Indirect tax Duty collected on product manufactured in India Levied on manufacture irrespective of sales realisation CG is empowered to levy Excise except on – Alcoholic liquors – Opium , hemp & narcotic drugs • Goods means every kind of movable property ( not actionable claims or money) including crops grass & thing attached to land which are agreed to be served before sale • Movability - Building when constructed is not a goods , hence no Excise • Marketability - The goods can be capable of being bought or sold i e goods must be known in the market
• Kinds of duties – Basic excise duty – Special excise duty under Finance Acts – Additional excise in lieu of sales tax – Additional duties specified under different acts • CBEC – highest administrative authority • CENVAT- Central value added tax – Manufacturer has to pay normal duty & he gets credit of duty paid on inputs ( raw material or paints or packaging material ) if he submits proof of payment of duty – No credit if final product is exempted from duty – CENVAT is adjusted against duty on final product & cannot be refunded in any case except export
SERVICE TAX
• • • • • • •
Indirect tax On services provided CENVAT credit available, refund in case of export 12 % plus cess Tax is levied on amount received for services rendered More than 80 % services are covered ST is 50200 crores as against IT of Rs 98774 crores , customs Rs 98770 crores & excise Rs 130220 crores & WT of Rs 315 crores in Union Budget 2007 where total tax receipts is 548000 crores
FRINGE BENEFIT TAX • Any privilege , service , facility or benefit provided by employer to employee is taxed as FBT • It is tax on expenses , hence a company in loss will also has to pay FBT • On companies & partnership firms • Expenses covered are – Entertainment festival celebration gifts – Club facility food , beverages guest house – Conference employee welfare health club sports – Conveyance tour travel hotel boarding lodging – Repair & maintenance of car / aircraft Telephone – Scholarship to children • 20 % of such expense is taxed @ 30 % plus cess
CUSTOMS
• Basic , countervailing , anti dumping, protective etc • Export or import duty • Exemptions – Goods derelict or wreck – Lost , destroyed or abandoned or pilferage – Denaturing or mutilation of goods
VAT ( SALES TAX) • Indirect tax collected by destination state on sales • Tax is levied on value added in the price of a commodity & is collected at each stage by respective state • Full set off of earlier tax is granted & thus eliminates cascading effect • Sales – Conventional sale – transfer of goods – Hire purchase – Supply of goods by company or society to members – Works contract – Transfer of right to use any goods – Supply of goods being food or any other article for human consumption
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