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OVERVIEW OF TAXATION

OVERVIEW OF TAXATION. BY VIJAY VORA CHARTERED ACCOUNTANT. OVERVIEW-------- PART-1. Direct Taxation consist of a) Income Tax Act and b) wealth Tax Act ………. Indirect Taxation includes of a) Excise Duty b) Custom Duty c) Service Tax d)Value Added Tax ………….

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OVERVIEW OF TAXATION

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  1. OVERVIEW OF TAXATION BY VIJAY VORA CHARTERED ACCOUNTANT

  2. OVERVIEW-------- PART-1 • Direct Taxation consist of a) Income Tax Act and b) wealth Tax Act ………. • Indirect Taxation includes of • a) Excise Duty • b) Custom Duty • c) Service Tax • d)Value Added Tax …………..

  3. DIRECT TAXATION • Income Tax Act : Income under this consist of Five Major Head • Income under head Salaries and computation • Income from House Properties • Income /Profits and Gains of Business or Profession • Income from Capital Gain • Income from Other Sources

  4. Direct Taxation ( Continue ) • Residential Status • Tax Rates • Clubbing of Income • Advance Tax • Tax Deducted at souece • Penalty , Search and Seizure • Deduction from Gross Total Income • Agricultural Income

  5. Basis of Charge • Income Tax is charged in Assessment Year at the Rates specified in Finance Act applicable from 1st April of relevant Assessment Year • It is charged on Total Income of any Person for income of Previous Income It is computed as per provision of Act. • Tax is deducted at source or paid in Advance where ever required under provision of Act.

  6. Definition of Person • The term “Person” includes : • An individual • A Hindu Undivided Family ( HUF ) • A company • A Firm • A local authority • An AOP or BOI • Every arficial judicial person

  7. Definition AY and PY • Assessment Year means the period beginning from 1 st April and ending on 31 st March of next Year. • Previous Year : Income earned in a year is taxable in the next year . The year in which Income is earned is known as PREVIOUS YEAR , and the next year in which income is taxable is known as ASSESSMENT YEAR . • Uniform Previous Year • Agricultural Income in India is not chargeable to tax . • Income arises either on receipt basis or on accrual basis • Taxability of Illegal Income , Reimbursement of expenses • Method of Accounting –Mercantile or Cash system

  8. Income from Salaries • Salaries & wages as employee…. • Includes fee, commission, perquisites ,advance salary , arrears of salary , bonus , incentives , leave salary , gratuity, Pension , Annuity , Overtime and payment for extra work / duty , allowances of any nature , • Chargeable on Due or Receipt basis • Taxability of Tiffin allowance , entertainment allowance , medical allowance , city compensatory allowance , House rent allowance , Servant allowance • Services of Gardner , watchman , sweeper , supply of Gas , water and Electricity , interest free/ concessional loan to employee , car / transport facility , credit cars , club membership, ESOP , etc……

  9. Income from House Property • Concept and chargeability • Ownership of property • Rental Income • Gross annual value • Deduction of Municipal Taxes • Deduct Standard Deduction @ 30 % • Self occupied Property • Interest on Borrowed capital – ceiling Rs. 200000

  10. Income under the head profits and gain from Business or Profession • Basis of Charge Profits and Gains of any business or Profession • It includes any Trade , commerce , Manufacturing , Profession , service, vocation • Illegal Business is not exempt from Tax • Trading Loss / Carried forward of Losses & depreciation • All business and trade related/ incidental expenses are permissible deductions – advertisement , travelling , repairs and maintenance ,Rates and Taxes ,Office expense , salary , wages , bonus, Interest etc. • Method of Accounting • Depreciation – WDV , Block of assets , use of assets • Research and Development Expenditure – weighted Deduction

  11. Income under Capital Gain • Concept of capital gain • Long term and short term capital gain – 36 months and 12 months criteria • Transfer of Assets - Fixed assets , shares ,gifts , will • Cost of acquision • Cost Inflation Index – 1981-82 =100,…2012-13 = 852 • Computation of capital gain • Investment in Capital Bonds

  12. Income from Other Sources • Basis of charge • Income from Dividend , winning from lotteries , crossword puzzles, Horse races Card game s , Interest from securities , Rental income of Machinery , Plant or Furniture , KBC , Gift , Directors fee, Insurance commission , Casual income , Income on Bank Deposit and loans , Income from Royalty ….ETC • Method of accounting – due basis or cash basis

  13. Clubbing of Income and Advance Tax • Substantial interest • Relative • Minor • Recovery of Tax ADVANCE TAX : Liability to pay if tax exceed Rs. 10000 Instalments due on 15 th June (15%), September (45%) , December ( 75 %)and March (100%) In case of Corporate Assessee.

  14. Deduction from Gross Total Income • 80-C deduction = Maximum permissible Rs. 150000 includes Insurance premium , PPF , National saving certificates ,ect. • Donations to charitable institutions, Certain Pension funds ELIS – ELSS , Medical insurance premia , Higher Education Loan /Interest • Medical Expenditure – Reimbursement , Handicapped and retarded Dependent , • Agricultural Income • Share of Partner from Partnership Firm • Concession on export profit , SEZ EOU etc. • Interest on Deposit in Saving Account – Rs. 10000

  15. PAN and Tax Rates • Permanent account number ( PAN ), concept , requirement , penalty , compliance etc . • Filing of Return Of Income –E –return • Due dates for return filing and Penalty for late filing and non filing • TAX RATES : For corporate 30% FOR INDIVIDUALS , HUF , AOP , BOI…. • UP TO RS .250000 NIL • Rs. 25001 to Rs. 500000 10% • Rs.500001 to Rs. 1000000 20% • Above Rs. 1000001 30% Rates are higher gor senior citizen 60 Years and 80 Tears Above

  16. TDS and SEARCH and SEIZURE • Tax Deducted at Source : To avoid cases of tax evasion , Income Tax Act has made provision to collect Tax at source on Accrual of Income with certain limit . • TDS on DIVIDENDs, Winning from lotteries , Payment to contractors , Payment of Insurance commission , Payment of fees for technical and Professional services ,etc . • Provisions for search and seizure and raid on unaccounted income or business .

  17. Residential Status and its effect on Tax • To decide residential status of Tax Payer Resident and Ordinarily Resident in India • Resident but Not ordinarily Resident in India • Non-Resident in India • Basic Conditions : A) In India for a period of 182 days or more in Previous Year B) In India for 60 days or more and 365 days or more during 4 PY Additional condition : • In India for 2 out of 10 PY immediately preceding the PY • 730 days or more during 7 immediately Preceding PY Important criteria for Residential Status ………

  18. THANK YOU

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