NCRD’S STERLING INSTITUTE OF MANAGEMENT STUDIES

Subject:

Legal & Tax Aspects of Business

Project On:

Income Tax

Presented to:Prof. Anjana Menon

Presented By:F.Y.MMS – Div : B

Sanket Upadhyay-70

Rhutuja Gharat-82

Amey Parab-79

Mayuri Ghag-83

Nishant Hande-84

Apurva Singh-62

1

2

INCOME TAX ACT 1961

3

WHAT IS TAX??????????

A sum of money demanded by government for its support or for specific facilities or services, levied upon incomes, property, sales etc.

OR

A burdensome charge, obligation, duty, or demand

4

A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority".

Taxes consist of direct tax or indirect tax

5

REVENUE FROM PEOPLE’S INCOME DEVELOPMENT OF COUNTRY

“INCOME TAX IS THE PRICE ONE PAYS FOR

CIVILISATION”

6

TAXES IN INDIA

Three tier system which is based between the

Central, State Governments and the local

government organizations.

Some minor taxes are also levied by the local authorities such

the Municipality or the Local Council.

The authority to levy a tax is derived from the 

Constitution of India which allocates the power to levy various

taxes between the Centre and the State.

7

INCOME TAX ACT 1961

Major tax enactment in India passed by the Parliament, which imposes a tax on income of individuals and corporations.

 This Act imposes a tax on income under the following five heads:

a) Income from house and property

b) Income from business and profession

c) Income from salaries

d) Income in the form of Capital gains

e) Income from other sources

8

INCOME TAX ACT EXTENDS TO WHOLE OF INDIA

India-territory of India as defined under International law.

Applicable to person residing in India as well as to the income arising in India.

9

SECTION 2

ASSESSMENT YEAR PREVIOUS YEAR PERSON INCOME

10

ASSESSMENT YEAR :[ SEC. 2 (9)]

“The period of 12 months commencing on the 1st day of April every year.

The Assessment Year is the Financial Year of the Govt. of India during which income a person relating to the relevant previous year is assessed to tax.

The year in which whole of this process is under taken is called Assessment Year.

Example- Assessment year 2008-09 which will commence on April 1, 2010, will end on March 31, 2011.

11

PREVIOUS YEAR : [ SEC. 3 ]

Previous Year is the Financial Year preceding the Assessment Year 

e.g. for Assessment Year 2008-2009 the  Previous Year should be the Financial Year ending 31st March 2008.

12

PERSON 

An Individual a Hindu undivided family (HUF) a company Firm Association of Persons Local Authority Artificial juridical person

13

INCOME Income is a periodical monetary return with

some sort of regularity Profit Dividends Perquisites Special Allowances Capital Gains Winning from Lottery’s

14

DIRECT TAXES & INDIRECT TAXES

A Direct tax is a kind of charge, which is imposed directly on the taxpayer and paid directly to the government by the persons (juristic or natural) on whom it is imposed.

A Direct tax is one that cannot be shifted by the taxpayer to someone else. Some important direct taxes imposed in India are as under:

Income Tax Corporation Tax Property Tax Inheritance (Estate) Tax Gift Tax

15

INDIRECT TAXES An Indirect tax is a tax collected by an intermediary

(such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). An indirect tax is one that can be shifted by the taxpayer to someone else.

An Indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products. The some important indirect taxes imposed in India are as under:

Customs Duty Central Excise Duty Service Tax Sales Tax Value Added Tax (VAT) Securities Transaction Tax (STT)

16

TAXES LEVIED BY THE CENTRAL GOVERNMENT OF INDIA

The Central Indian Government that is officially named as the "Union Government" is responsible for the imposition of both direct taxes as well indirect taxes. Listed below are some of the taxes that are imposed by the India Government:

Direct Taxes

Indirect Taxes

Banking Cash Transaction TaxCorporate TaxCapital Gains TaxSecurities Transaction TaxPersonal Income Tax

Custom DutyExcise DutySales TaxService TaxValue Added Tax or V. A. T.

17

ROLE OF DIRECT AND INDIRECT TAXES

Resource Mobilization

Reduction in Inequalities of Income

Social Welfare

Foreign exchange

Regional Development

18

RESIDENTIAL STATUSThe three residential status:

Resident Ordinarily Residents living in India at least 182 days during previous year In India 365 days during 4 years preceding previous year & 60 days in previous

year.

Resident but not Ordinarily ResidentsNon-resident in India 9 out of 10 years preceding previous year or have been in India in total 729 or less days out of last 7 years preceding the previous year. Non Residents

Non Residents are exempt from tax if accrue or arise or deemed to be accrue or arise outside India. Taxable if income is earned from business or profession setting in India or having their head office in India.

19

TDS (Tax deducted at source)

This tax is deducted at the source of income, by the

employer or the payer and paid to the government. It

includes salary, interest, commission and contract fees, rent,

professional fees, etc. This type of deduction is popularly

known as TDS. Such tax is subject to certain limits and

certain conditions. For example if the earning up on fixed

deposit is Rs. 5,000 in a bank, TDS at 10% and education

cess at 2% i.e. a total of 10.2% will be deducted at the time

of credit or at the time of payment, whichever is earlier.

20

TCS (Tax collected at source)

Unlike tax deducted at source, TCS is

collected by a seller of certain specified

goods at the specified rates on the purchase

of the goods and it is remitted to the

treasury on behalf of the buyer.

21

INCOME TAX RAID What leads to income tax raids, searches and seizures?

The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.

A tax raid may also be conducted against a person in possession of undisclosed income or property not belonging to him but to someone else

STEPS TO PREVENT AN INCOME TAX RAID

1. Make correct disclosure of income and wealth in returns.

2. Comply with summons or notices to prevent a tax raid.

3. Preserve important vouchers and other documentary evidence for the acquisition of assets.

23

VODAFONE CASE-STUDY

Vodafone International Holdings B.V. vs. Union of India & Anr. – An Analysis of the Judgment

by Shalin on February 25, 2012 The battle between the Income Tax Department

and telecom giant Vodafone which continued for over four years has finally come to an end with the Supreme Court giving its ruling in favour of Vodafone International Holdings. The Supreme Court in its landmark decision has set aside the

24

VODAFONE CASE-STUDY CONTD..

Bombay High Court’s judgment asking Vodafone to pay Rs 11,000 crore to the Income Tax department, on the ground that Indian authorities do not have jurisdiction on the instant overseas transaction.

The Apex Court held that the Government has no Jurisdiction over Vodafone’s purchase of mobile assets in India as the transaction took place in Cayman Islands and Indian authorities have no jurisdiction over transactions, which have taken place outside the country.

The Supreme Court has also ordered the IT department to refund Vodafone Rs. 2,500 crore with 4 percent interest. This long awaited decision will boost the investors’ confidence globally re-establishing the independence of Indian Judiciary.

The aspect of whether a transaction between 2 non-residents can be taxed in India was dealt in detail by the Bombay High Court. The High Court held that the jurisdiction of a State to Tax a non-resident is based on the nexus connecting the person sought to be taxed with the jurisdiction which seeks to tax. The question as to whether the sum paid to a non-resident or a foreign company pursuant to a transaction is chargeable to tax is determined by sections 5(2), 9(1) and 195 of the Income Tax act, 1961.

RELATIONSHIP BETWEEN RESIDENTIAL STATUS AND INCIDENCE OF TAX (SECTION 5) :

The below diagrammed table will provide distinct clarity on Income Chargeability on the basis of one’s Residential Status:-

 Type of

Income

ROR RNOR Non Resident

Indian

Income Taxable in India Taxable in India Taxable in India

25

 Type of Income ROR RNOR Non Resident

Foreign Income

If it is Business Income business is control wholly or partly from India

Taxable in India

Taxable in India

Not Taxable in India

It is from Income from Profession which is setup in India

Taxable in India

Taxable in India

Not Taxable in India

26

27

ANY OTHER FORM OF PERSON

Type of Income Resident Non Resident

 Indian Income Taxable in India Taxable in India

Foreign Income Taxable in India Not Taxable in India

28

Thank You