Professional Documents
Culture Documents
Dr Sarbesh Mishra
Finance Area
Dr Sarbesh Mishra 1
Backdrop
1. A tax that is levied on income of individuals /
corporations / legal entities is known as
Income Tax.
2. The Central Board for Direct Taxes (CBDT)
governs the Indian Income Tax department.
3. Income tax is imposed by Govt. of India on
taxable income of individuals, Hindu
Undivided Families (HUFs), companies, firms,
co-operative societies and trusts (Identified
as body of Individuals and Association of
Persons) and any other artificial person.
4. Levy of tax is different for different entities
and it is governed by the Indian Income
Tax Act, 1961. Dr Sarbesh Mishra 2
Tax Rates 2009 – 10 (A.Y 2010 – 11)
The new tax slabs applicable from April 1, 2009 are
as follows:
On all incomes up to Rs. 1,60,000 per year. (For
women -Rs. 1,90,000 and for senior citizens - Rs.
2,40,000), no Income Tax is applicable.
From 1,60,001 - 3,00,000 : 10% of amount more
than Rs. 1,60,000/- ( The lower limit differs
appropriately for women as well as senior citizens)
From 3,00,001 to 5,00,000 : 20% of amount more
than Rs. 3,00,000 + 14,000 (slightly less for
women and further less for senior citizens)
Above 5,00,000 : 30% of amount more than Rs.
5,00,000 + 54,000 (for women – slightly less and
for senior citizens - further less)
Dr Sarbesh Mishra 3
Income from Salary
Under this head, income received as salary
under Employer-Employee relationship is
taxed. If income exceeds minimum
exemption limit, then Employers must
withhold tax compulsorily as Tax Deducted
at Source (TDS). The employees should
also be provided with a Form 16 which
shows the tax deductions and net paid
income. Form 16 also contains any other
deductions provided from salary as
follows:
Dr Sarbesh Mishra 4
Contd….
Medical reimbursement up to Rs. 15,000 per year
is tax exempt provided bills are given
Conveyance allowance up to 9600 per year is tax
free
Professional taxes which are usually a slabbed
amount based on gross income are deductible
from income tax.
House rent allowance: the minimum of the
following is available as deduction
• The actual HRA received
• 50%/40 % (metro/non-metro) of 'salary'
• Rent paid minus 10% of 'salary'
Dr Sarbesh Mishra 5
Income from House Property
Income from House property is
calculated by considering the Annual
Value. The annual value (for a let out
property) will be maximum of the
following:
• HRA Rent received
• Municipal Valuation
• Fair Rent (as determined by the I-T
department)
Dr Sarbesh Mishra 6
Contd….
However if a house is not let out and not self-
occupied, then annual value is assumed to
have accrued to the owner. In case of a self
occupied house, annual value is to be taken
as NIL. But if there is more than one self
occupied house then the annual value of the
other house/s is taxable. From this, Municipal
Tax paid is deducted to arrive at the Net
Annual Value. From this Net Annual Value,
the following are deducted:
• 30% of Net value as repair cost - mandatory deduction
• Interest paid or payable on a housing loan for the house
Dr Sarbesh Mishra 7
Income from Business or
Profession
1. Income arising from profits and gains of any
Business or Profession; income derived by a
Trade/ Professional/ similar Association by
performing specific services for its members;
2. Any benefit from business whether convertible
into money or not, incentives for exporters;
any salary, interest, bonus, commission or
remuneration received by Partner of a firm;
3. Any amount received under a Key man
Insurance Policy which also covers Bonus;
income from managing agency and speculative
transactions; is taxable.
Dr Sarbesh Mishra 8
Income from Capital Gains
Under section 2(14) of the I.T. Act,
1961, Capital asset is defined as
property of any kind held by an
assessee such as real estate, equity
shares, bonds, jewellery, paintings,
art etc. but does not consist of items
like stock-in-trade for businesses or
for personal effects. Capital gains
arise by transfer of such capital
assets.
Dr Sarbesh Mishra 9
Contd….
Long term and short term capital assets are
considered for tax purposes.
Long term assets are those assets which
Dr Sarbesh Mishra 11
Income from other sources
There are some specific incomes which are to
be taxed under this category such as
income by way of dividends, horse races,
winning of bull races, winning of lotteries,
amount received from key man insurance
policy.
Dr Sarbesh Mishra 12
All about Sec – 80C
Section 80C replaced the erstwhile Section 88
with more or less the same investment mix
available in Section 88 but with a major
change in the method of providing a tax
benefit.
The limit
The limit under this section is Rs 1,00,000.
Dr Sarbesh Mishra 16
Corporate Income tax
1. For companies, income is taxed at a flat
rate of 30% for Indian companies, with a
10% surcharge applied on the tax paid
by companies with gross turnover over
Rs. 1 crore (10 million).
2. Foreign companies pay 40%.An
education cess of 3% (on both the tax
and the surcharge) are payable, yielding
effective tax rates of 33.99% for
domestic companies and 41.2% for
foreign companies.
Dr Sarbesh Mishra 17
Minimum Alternate Tax u/s 115JB
This section is applicable from assessment year 2001-
02. If tax liability of a company under normal
provisions is lower than 10 per cent (7.5% for the
assessment years 2001-02 to 2006-07) of "book
profit", book profit shall be deemed as total income
and 10 per cent (7.5% for the assessment years
2001-02 to 2006-07) of book profit should be
deemed as tax liability.
Book profit is a profit which is demonstrated on paper,
but not yet actually real. The best way to think
about book profit is in terms of stock value; if
someone purchases a stock and the value goes up,
he or she has made a book profit. By selling the
stock, the investor can turn the book profit into an
actual profit.
Exception: There is an exception for companies in SEZ.
Dr Sarbesh Mishra 18
MAT Calculation
If tax payable @30% (at present) by
business units as per provisions of IT
Act and if it is less than 10% of the
book profits, tax payable will be 10%
of the book profits plus surcharge
plus cess... as per provisions of
Section 115JB of income tax act.
Dr Sarbesh Mishra 19