Corporate Income Tax: Imposed On The Net Income Of The Company. Domestic Companies Are Taxed At The Rate Of 30%

Corporate Income Tax • Imposed on the net income of the company. • Domestic companies are taxed at the rate of 30%. Tax or mandatory contribution

Statutory tax rate

Tax base

Payments (number)

Corporate Income Tax

30%

Taxable profits

12

Social Security Contributions • Companies contribute 12% of their employee’s specified salary into Provident fund scheme. Tax or mandatory contribution

Statutory tax rate

Tax base

Payments (number)

Social Security Contributions

12%

Gross salaries

12

Employee’s State Insurance Contribution • Employees' State Insurance (abbreviated as ESI) is a self-financing social security and health insurance scheme for Indian workers.

• As per ESI Act 1948, this is managed by the Employees' State Insurance Corporation (ESIC) • An employee who is not required to pay employees' contribution is called an exempted employee.

• Has to be paid every month (i.e. 12 times a year). • Statutory Tax Rate: 4.75% • The tax is calculated on the gross salaries • Total tax and contribution rate: 4.64%

Stamp Duty • Stamp duty is a tax that is levied on documents. • Stamp duty is payable under Section 3 of the Indian Stamp Act, 1899.

• Stamp Duty must be paid in full and on time. • If there is a delay in payment of stamp duty, it attracts penalty. • Document not properly stamped, is not admitted as evidence by the court. • Statutory Tax Rate: 6.00%

• The tax is calculated on the transaction value. • Total tax and contribution rate: 3.64%

Dividend Tax • Dividend distribution tax is the tax imposed by the Indian Government on companies according to the dividend paid to a company's investors.

• Has to be paid once in a year. • Statutory Tax Rate: 14.00% • The tax is calculated on the dividend distributions. • Total tax and contribution rate: 3.37%

Property Tax in Delhi • The property tax is calculated on the basis of Annual value method. • Tax is payable to one of the three municipal corporations in Delhi, i.e., North Delhi Municipal Corporation, South Delhi Municipal Corporation and East Delhi Municipal Corporation.

• Property tax is levied as a percentage charge on the annual value of the property as determined by the MCD based on below criteria. Property tax or House Tax = Annual value * Rate of tax Tax or mandatory contribution

Statutory tax rate

Tax base

Payments (number)

Total Tax & Contribution rate (% of Profit)

Property Tax

10%

Assessed Value

1

2.95

Income Surcharge • Surcharge is an additional charge or tax. Description: A surcharge of 10% on a tax rate of 30% effectively raises the combined tax burden to 33%. In the case of individuals earning a net taxable salary of more than Rs 1 crore, a surcharge of 10% is levied on tax liability Tax or mandatory contribution

Statutory tax rate

Income Surcharge

10%

Tax base

Payments (number)

Total Tax & Contribution rate (% of Profit)

On all federal taxes

0

0.92

Fuel Tax • A fuel tax is an excise tax imposed on the sale of fuel.

Tax or mandatory contribution

Statutory tax rate

Fuel Tax

6% + INR 3.25 per liter

Tax base

Payments (number)

Total Tax & Contribution rate (% of Profit)

Fuel consumption

1

0.51

Vehicle Tax • Has to be paid once a year on the vehicle owned. • The tax imposed by law comprises of: 

Pollution : INR 240



Road Tax : INR 4640



Permit Fee (Depends on the permit)



National Permit (Truck) :

i. Temporary (2 months): INR 240 ii. Permanent (5 years): INR 2000

Vehicle Tax (Contd.)  Vehicle Fitness Charges (For fitness certificate valid for 15 years) i.

Heavy Motor Vehicle: INR 150

ii. Medium Motor Vehicle: INR 100 iii. Light Motor Vehicle: INR •

Total tax and contribution Rate (% of profits) : 0.28

Fringe Benefit Tax • The fringe benefit tax is payable by the employer in respect of the value of fringe benefits provided or deemed to have been provided to his employees during the previous year.

• Fringe Benefits are extra benefits in addition to wages. • Has to be paid 4 times a year on the value of specified corporate expenses (Usually 20%) • Statutory Tax Rate : 30% • Total tax and contribution Rate (% of profits) : 0.26

Tax on Insurance Contracts • Service tax on the premium for insurance products. • The premium paid in life insurance policies represents two portions – risk coverage and savings. The service tax is only on the risk portion of the premium and not on savings portion.

• Has to be paid once a year online based on insurance premium. • Statutory Tax Rate : 12% • Total tax and contribution Rate (% of profits) : 0.26

Environment Tax • Environmental taxes, also known as green taxes, pollution taxes or eco taxes, are a wide range of legislative charges on businesses and private individuals, aimed at reducing practices which cause damage to the environment.

• Has to be paid once a year. • Fixed fee of INR 4200. • Tax is calculated based on the hazardous waste produced. • Total Tax and Contribution rate is 0.22%.

GST – Goods & Services Tax • The Goods and Services Tax (GST) is the largest reform in NIL India’s indirect tax structure .

• The GST is a consumption-based tax, as it is applicable where consumption takes place.

• The GST is levied on value-added goods and services at

5%

each stage of consumption in the supply chain.

• Tax structure under GST: GST operates under a 5 rate structure and all goods and services would fall under one of these slabs:

For essential commodities Packaged food items, coffee, tea, spices, apparel and footwear below a threshold, insulin, transport services etc.

12% / Median rates under GST 18% 28%

Luxury and sin goods

Composition Scheme under GST • GST also has a scheme of lower taxes (1% for a manufacturer, 2.5% in case of Restaurant and 0.5% in case of other suppliers) for small businesses with turnover up to INR 75 Lakhs in the previous financial year. It is called the composition scheme. This scheme offers some respite from tax burdens to newly established businesses.

Integration of Multiple Taxes in GST

VAT (Value Added Tax) • As per previous VAT structure, any business with a turnover of more than INR 5 Lakh has to get VAT registration and pay VAT (different in different states). Under GST this threshold is 20 lakhs thus exempting many small businesses including startups. GST also has a scheme of lower taxes for small businesses with turnover between 20 to 1Cr though its optional. It is called the composition scheme. This will bring respite from tax burdens to newly established businesses.

• Startups often working on tight budget had to deal with compliances under Excise, VAT, CST, Service Tax etc. earlier. Now they are finding it much easier to file and pay one GST tax instead of both VAT and service tax.

CENVAT - Central VAT • This was an indirect tax that is levied on all the goods manufactured or produced in India. It was different from customs duty because it was applicable only on things produced in India and was also known as the Central Value Added Tax or CENVAT.

• It has now moved under GST and startups need not have to pay separate CENVAT.

Tax Burdens for Manufacturing Startups • However, startups in the manufacturing sector will bear the brunt. Under the existing excise laws, only manufacturing business with a turnover more than INR 1.50Cr has to pay excise. However, with the implementation of GST, the turnover limit has been reduced to INR 20 lakh thus increasing the tax burden for many manufacturing startups with the only respite being composition scheme.