A PROJECT REPORT ON

“Taxation in India”

Submitted By

KOTARU SINDHU

Submitted To

Dr. G.D. POL FOUNDATION

YMT COLLEGE OF MANAGEMENT

Sec-4, Kharghar, Navi Mumbai-410210

CERTIFICATE

This is to certify that the project entitled “TAXATION IN INDIA”

submitted by “SUSHIL N MOHOD” in partial fulfillment for the award

of Master in Management Studies of University of Mumbai is his/her

original work and does not form any part of the projects undertaken

previously.

Also it is certified that the project represents the original work on the part

of the candidate.

Place: Navi Mumbai

Date:

Signature of the Director Signature of Guide

C. Babu Prof. Nanili

DECLARATION

I hereby declare that the project entitled “TAXATION IN INDIA”

Submitted to YMT College of Management in partial fulfillment for the

Award of Master of Management Studies of University of Mumbai is my

original work and does form any part of previously carried/conducted

projects.

Signature of Student

Place:

Date:

ACKNOWLEDGEMENT

I am sincerely thankful to my Faculty supervisor Prof. Nalini, YMT

COLLEGE OF MANGEMENT KHARGHAR who spared his/her

Valuable time and effort to guide me in the completion of project report.

Last but not least I would like to thank all my friends who stood by my

Side through times and helped me tide over many obstacles during the

Completion of this project.

CONTENTS

Sr. No. Particulars Page No.

1) Need for the study

2) Objective of the study

3) Scope of the study

4) Company Profile History of The Company Board of The Directors Company Structure

5) My job profile6) Introduction To Taxation In India

7) Direct and Indirect Tax Collection

8) Direct Taxes Income Tax

Form 16(A) TDS (Tax Deduction At Source)

Wealth Tax Corporate Tax Professional Tax

9) Indirect Taxes VAT

VAT form 231 Excise Duty Custom Duty Service Tax Entertainment

10) Conclusion & suggestions Bibliography Webliography

NEED FOR THE STUDY:

The purpose of the study is to get detailed knowledge about

Taxation in India.

The purpose of the study is to help the Tax Payer to briefly

understand the need for charging Tax and the benefits out of

that.

Need to understand how government raise their fund to run

government and provide services to the public. 

OBJECTIVES OF THE STUDY

To study different types of taxes.

To study various benefits of tax

To find out distinguishing procedures to filling tax

TAXATION IN INDIA

DIRECT TAX INDIRECT TAX

1) Personal Income Tax 1) Vat Tax

2) Wealth Tax 2) Excise Duty

3) Corporate Tax 3) Custom Duty

4) Professional Tax 4) Service Tax

5) Entertainment Tax

INTRODUCTION

TAXATION SYSTEM IN INDIA

India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax.Value Added Tax (VAT), (Sales tax in States where VAT is not yet in force), stamp duty, State Excise, land revenue and tax on professions are levied by the State Governments. Local bodies are empowered to levy tax on properties, octroi and for utilities like water supply, drainage etc.In last 10-15 years, Indian taxation system has undergone tremendous reforms. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement. The process of rationalization of tax administration is ongoing in India.Since April 01, 2005, most of the State Governments in India have replaced sales tax with VAT.

Taxes Levied by Central GovernmentDirect TaxesTax on Corporate IncomeCapital Gains TaxPersonal Income TaxTax IncentivesDouble Taxation Avoidance TreatyIndirect TaxesExcise DutyCustoms DutyService TaxSecurities Transaction TaxTaxes Levied by State Governments and Local BodiesSales Tax/VATOther Taxes

Direct and Indirect Tax Collection

Direct And Indirect Tax Graphically For Last Five Year

Direct TaxIndirect

Tax

2008-09 195412 381184

2009-10 267771 456252

2010-11 355607 521889

2011-12 393125 566723

2012-13 423683 602777

2005-06 2006-07 2007-08 2008-09 2009-100

100000

200000

300000

400000

500000

600000

700000

Direct TaxIndirect Tax

DIRECT TAXES

Company’s residents in India are taxed on their worldwide income arising from all

sources in accordance with the provisions of the Income Tax Act. Non-resident corporations

are essentially taxed on the income earned from a business connection in India or from other

Indian sources. A corporation is deemed to be resident in India if it is incorporated in India

or if it’s control and management is situated entirely in India.

Domestic corporations are subject to tax at a basic rate of 30% and a 5% surcharge.

Foreign corporations have a basic tax rate of 40% and a 2 % surcharge. In addition, an

education cess at the rate of 3 % on the tax payable is also charged.

. 1) INCOME TAX

The government of India imposes an income tax 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. Levy of

tax is separate on each of the persons. The levy is governed by the Indian Income Tax Act,

1961. The Departments governed by the Central Board for Direct Taxes (CBDT) and is part

of the Department of Revenue under the Ministry of Finance, Govt. of India.

An income tax is a tax levied on the income of individuals or businesses (corporations or

other legal entities). Various income tax systems exist, with varying degrees of tax

incidence. Income taxation can be progressive, proportional, or regressive. When the tax is

levied on the income of companies, it is often called corporate, corporate income tax, or

profit tax. Individual income taxes often tax the total income of the individual (with some

deductions permitted), while corporate income taxes often tax net income (the difference

between gross receipts, expenses, and additional write-offs). Various systems define income

differently, and often allow notional reductions of income (such as a reduction based on

number of children supported).

Charge to Income-tax

Every Person whose total income exceeds the maximum amount which is not chargeable to

the income tax is an assesse, and shall be chargeable to the income tax at the rate or rates

prescribed under the finance act for the relevant assessment year, shall be determined on

basis of his residential status.

Income tax is a tax payable, at the rate enacted by the Union Budget (Finance Act) for every

Assessment Year, on the Total Income earned in the Previous Year by every Person.

Residential Status

The three residential status, viz.,

(i) Resident Ordinarily Residents (ii) Resident but not Ordinarily Residents (iii) Non Residents.

There are several steps involved in determining the residential status of a person

(i) Resident Ordinarily Residents (Residents) Under this category, person must be living in India at least 182 days during previous year. Also, must have been in India 365 during 4 years preceding previous year and 60 days in previous year. (ii) Resident but not Ordinarily Residents andMust have been in India 2 out of 10 years preceding previous year or Have been in India 730

days out of last 7 years (iii) Non Residents.

Ordinary residents are always taxable. Not Ordinarily residents are taxable in relation to income received in India or income accrued or deemed to be accruing or arise in India and income from business or profession controlled from India. Non Residents are exempt from tax......if accrue or arise or deemed to be accruing or arise outside India. Taxable if income is earned from business or profession setting in India...or having their head office in India. 

Heads of Income

The total income of a person is divided into five heads, viz., taxable

Individual Heads of Income

Income from Salary

All income received as salary under Employer-Employee relationship is taxed under this

head. Employers must withhold tax compulsorily, if income exceeds minimum exemption

limit, as Tax Deducted at Source (TDS), and provide their employees with a Form 16 which

shows the tax deductions and net paid income. In addition, the Form 16 will contain any

other deductions provided from salary such as:

1. Medical reimbursement: Up to Rs. 15,000 per year is tax free if supported by bills.

2. Conveyance allowance: Up to Rs. 800 per month (Rs. 9,600 per year) is tax free if

provided as conveyance allowance. No bills are required for this amount.

3. Professional taxes: Most states tax employment on a per-professional basis, usually a

slabbed amount based on gross income. Such taxes paid are deductible from income

tax.

4. House rent allowance: the least of the following is available as deduction

1. Actual HRA received

2. 50%/40%(metro/non-metro) of basic 'salary'

3. Rent paid minus 10% of 'salary'. Basic Salary for this purpose is basic+DA

forming part+commission on sale on fixed rate.

Income from salary is net of all the above deductions.

Income from House property

Income from House property is computed by taking what is called Annual Value. The

annual value (in the case of a let out property) is the maximum of the following:

Rent received

Municipal Valuation

Fair Rent (as determined by the I-T department)

If a house is not let out and not self-occupied, annual value is assumed to have accrued to

the owner. Annual value in case of a self occupied house is to be taken as NIL. (However if

there is more than one self occupied house then the annual value of the other house/s is

taxable.) From this, deduct Municipal Tax paid and you get the Net Annual Value. From

this Net Annual Value, deduct:

30% of Net value as repair cost (This is a mandatory deduction)

Interest paid or payable on a housing loan against this house

In the case of a self occupied house interest paid or payable is subject to a maximum limit of

Rs, 1, 50,000 (if loan is taken on or after 1 April 1999 and construction is completed within

3 years) and Rs.30, 000 (if the loan is taken before 1 April 1999). For all non self-occupied

homes, all interest is deductible, with no upper limits.The balance is added to taxable

income.

Income from Business or Profession

carry forward of losses

An example... An architect works out of home and co-ordinates work for his clients. All the

following expenses would be deductible from his professional fees.

he uses a computer,

he travels to sites in his car,

he has a peon to help him collect payments

He has a maid who comes in daily

part of the society maintenance bills

Entertainment expenses incurred...

Books and magazines for his professional practice.

The computation of income under the head "Profits and Gains of Business or Profession"

depends on the particulars and information available.

If regular books of accounts are not maintained, then the computation would be as under: -

Income (including Deemed Incomes) chargeable as income under this head xxx Less:

Expenses deductible (net of disallowances) under this head xxx Profits and Gains of

Business or Profession xxx

However, if regular books of accounts have been maintained and Profit and Loss Account

has been prepared, then the computation would be as under: -

Net Profit as per Profit and Loss Account xxx

Add: Inadmissible Expenses debited to Profit and Loss Account xxx

Deemed Incomes not credited to Profit and Loss Account xxx

Xxx

Less: Deductible Expenses not debited to Profit and Loss Account xxx

Incomes chargeable under other heads credited to Profit & Loss A/c xxx

xxx

Profits and Gains of Business or Profession xxx

Income from Capital Gains

Transfer of capital assets results in capital gains. A Capital asset is defined under section

2(14) of the I.T. Act, 1961 as property of any kind held by an assesse such as real estate,

equity shares, bonds, jewellery, paintings, art etc. but does not include some items like any

stock-in-trade for businesses and personal effects. Transfer has been defined under section

2(47) to include sale, exchange, relinquishment of asset, extinguishment of rights in an

asset, etc. Certain transactions are not regarded as 'Transfer' under section 47.

For tax purposes, there are two types of capital assets: Long term and short term. Long term

asset are held by a person for three years except in case of shares or mutual funds which

becomes long term just after one year of holding. Sale of such long term assets gives rise to

long term capital gains. There are different scheme of taxation of long term capital gains.

These are:

1. As per Section 10(38) of Income Tax Act, 1961 long term capital gains on shares or

securities or mutual funds on which Securities Transaction Tax (STT) has been

deducted and paid, no tax is payable. STT has been applied on all stock market

transactions since October 2004 but does not apply to off-market transactions and

company buybacks; therefore, the higher capital gains taxes will apply to such

transactions where STT is not paid.

2. In case of other shares and securities, person has an option to either index costs to

inflation and pay 20% of indexed gains, or pay 10% of non indexed gains. The

indexation rates are released by the I-T department each year.

3. In case of all other long term capital gains, indexation benefit is available and tax

rate is 20%.

All capital gains that are not long term are short term capital gains, which are taxed as such:

Under section 111A, for shares or mutual funds where STT is paid, tax rate is 10% From

Asst Yr 2005-06 as per Finance Act 2004. For Asst Yr 2009-10 the tax rate is 15%.

In all other cases, it is part of gross total income and normal tax rate is applicable.

For companies abroad, the tax liability is 20% of such gains suitably indexed (since STT is

not paid).

Income from Other Sources

This is a residual head; under this head income which does not meet criteria to go to other heads is taxed. There are also some specific incomes which are to be taxed under this head.

1. Income by way of Dividends2. Income from horse races3. Income from winning bull races4. Any amount received from key man insurance policy as donation.5. Income from shares (dividend other than Indian company)

Deduction

While exemptions are on income some deduction in calculation of taxable income is

allowed for certain payments.

Section 80C Deductions

Section 80C of the Income Tax Act allows certain investments and expenditure to be tax-

exempt. The total limit under this section is Rs. 100,000 (Rupees One lakh) which can be

any combination of the below:

Contribution to Provident Fund or Public Provident Fund. PPF provides 8% return

compounded annually. Maximum limit to contribute in it is 70,000 for each year. It is a

long term investment with complete withdrawal not possible till 15 years though partial

withdrawal is possible after 5 years. Besides, there is employee provident fund which is

deducted from the salary of the person. This is about 10% to 12% of the BASIC salary

component. Recent changes are being discussed regarding reducing the instances of

withdrawal from EPF especially when one changes the job. EPF has the option of full

settlement on leaving the job, taking VRS, retirement after 58. It also has options of

withdrawal for certain expenses related to home, marriage or medical. EPF contribution

includes 12% of basic salary from employee and employer. It is distributed in ratio of

8.33:3.67 in Pension fund and Provident fund

Payment of life insurance premium

Investment in pension Plans. National Pension Scheme is meant to save money for the

post retirement which invests money in different combination of equity and debt.

Depending upon age up to 50% can go in equity. Annuity payable after retirement is

dependent upon age. NPS has six fund managers. Individual can make minimum

contribution of Rs6000/- . It has 22 point of purchase (banks).

Investment in Equity Linked Savings schemes (ELSS) of mutual funds

Investment in National Savings Certificates (interest of past NSCs is reinvested every

year and can be added to the Section 80 limit)

Tax saving Fixed Deposits provided by banks for tenure of 5 years. Interest is also

taxable.

Payments towards principal repayment of housing loans. Also any registration fee or

stamp duty paid.

Payments towards tuition fees for children to any school or college or university or

similar institution. (Only for 2 children) or towards coaching fee of various competitive

exams.

Post office investments

The investment can be from any source and not necessarily from income chargeable to tax.

Section 80CCF: Investment in Infrastructure Bonds

From April, 1 2010, a maximum of Rs. 20,000is deductible under section 80CCF provided

that amount is invested in infrastructure bonds. This is in addition to the 100,000 deduction

allowed under Section 80(C).

Section 80D: Medical Insurance Premiums

Health insurance, popularly known as Mediclaim Policies, provides a deduction of up to Rs.

35,000.00 (Rs. 15,000.00 for premium payments towards policies on self, spouse and

children and (read as in addition to) Rs. 15,000.00 for premium payment towards non-senior

citizen dependent parents or Rs. 20,000.00 for premium payment towards senior citizen

dependent). This deduction is in addition to Rs. 1, 00,000 savings under IT deductions

clause 80C. For consideration under a senior citizen category, the incumbent's age should be

65 years during any part of the current fiscal, e.g. for the fiscal year 2010-11, the incumbent

should already be 65 as on March 31, 2011), This deduction is also applicable to the

cheques paid by proprietor firm..

Interest on Housing Loans Section

For self occupied properties, interest paid on a housing loan up to Rs 150,000 per year is

exempt from tax.(Excluding Rs.1,00,000/p.a. u/s 80c Saving) However, this is only

applicable for a residence constructed within three financial years after the loan is taken and

also the loan if taken after April 1, 1999.

If the house is not occupied due to employment, the house will be considered self occupied.

For let out properties, the entire interest paid is deductible under section 24 of the Income

Tax act. However, the rent is to be shown as income from such properties. 30% of rent

received and municipal taxes paid are available for deduction of tax.

The losses from all properties shall be allowed to be adjusted against salary income at the

source itself. Therefore, refund claims of T.D.S. deducted in excess, on this count, will no

more be necessary.

Use of Deductions

While the use of the above sections helps one to avoid paying money as tax if one falls in

the tax bracket, one should look at this more as an investment-return opportunity. One

should still file income tax, even if one is not paying any tax. Except ELSS (Equity Linked

Savings Scheme) and the NPS (National Pension Scheme), other schemes under 80C

typically offer a relatively risk-free investment and guaranteed returns.

Tax Rate for non-Individuals

There are special rates prescribed for Firms, Corporate, and Local Authorities & Co-

operative Societies.

Corporate Income tax

For companies, income is taxed at a flat rate of 30% for Indian companies, with a 5%

surcharge applied on the tax paid by companies with gross turnover over Rs. 1 crore (10

million). Foreign companies pay 40%. An education cess of 3% (on both the tax and the

surcharge) is payable, yielding effective tax rates of 32.5% for domestic companies and

41.2% for foreign companies. From 2005-06, electronic filing of company returns is

mandatory.

Tax Penalties

The major number of penalties initiated every year as a ritual by I T Authorities is under

section 271(1)(c) which is for either concealment of income or for furnishing inaccurate

particulars of income. What is inaccurate particulars of income is not defined under Income

Tax Act 1961, however recently Supreme Court in case of CIT vs. Reliance Petro

products states as under "If we accept the contention of the Revenue then in case of every

Return where the claim made is not accepted by Assessing Officer for any reason, the

assesse will invite penalty under Section 271(1) (c). That is clearly not the intendment of the

Legislature."

 "If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course

of any proceedings under this Act, is satisfied that any person-

(b) has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2)

of section 143 or fails to comply with a direction issued under sub-section (2A) of section

142, or

(c) Has concealed the particulars of his income or furnished inaccurate particulars of such

income,

He may direct that such person shall pay by way of penalty,-

(ii) In the cases referred to in clause (b), in addition to any tax payable by him, a sum of ten

thousand rupees for each such failure;

(iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which

shall not be less than, but which shall not exceed three times, the amount of tax sought to be

evaded by reason of the concealment of particulars of his income or the furnishing of

inaccurate particulars of such income.

TDS (Tax Deduction at Source)

Tax Deducted at Source or best known TDS is one of the modes of collecting Income-tax

from the assessee in India. This is governed under Indian Income Tax Act, 1961, by the

Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed

by Indian Revenue Service (IRS), Ministry of Finance, and Govt. of India.

In simple terms, TDS is the tax getting deducted from the person the amount

(Employee/Deductee) by the person paying such amount (Employer/Deductor). This is

applicable for certain types of payments, as applicable under the Act.

In the process of TDS, deduction of tax is effected at the source when income arises or

accrues. Hence where any specified type of income arises or accrues to any one, the

Income-tax Act enjoins on the payer of such income to deduct a stipulated percentage of

such income by way of Income-tax and pay only the balance amount to the recipient of such

income.

The tax so deducted at source by the payer has to be deposited in the Government treasury

to the credit of Central Govt, within the specified time. The tax so deducted from the income

of the recipient is deemed to be payment of Income-tax by the recipient at the time of his

assessment.

Income from several sources is subjected to tax deduction at source. Presently this concept

of TDS is also used as an instrument in enlarging the tax base. Some of such incomes

subjected to TDS are salary, interest, dividend, interest on securities, winnings from lottery,

horse races, commission and brokerage, rent, fees for professional and technical services,

payments to non-residents etc. It is always considered as an Advance tax which is paid to

the government.

Tax Deduction Account Number

Tax Deduction Account Number or TAN is a unique identification number for person

deducting the tax. The person who is liable to deduct the Tax should obtain a TAN before

deducting such Tax. TAN should apply through Form No 49B (prescribed under Income

Tax Law). Such form can be submitted online at NSDL website. OR can also be submitted

at Tax Information Network Facilitation Center (TIN-FC). These centres are established by

NSDL (which is an appointed intermediary by the Government) across India.

TAN Application should accompany a 'proof of identity' and a 'proof of address'

(photocopies) of the Deductor. In case, the application is made online, these documents need

to be sent over mail (post/courier) to NSDL - TAN Application division.

Once NSDL receives the TAN application along with said documents (either

through TIN FC / Online), the details are verified and then sent to Income Tax Department.

Once approved, Income Tax Department will allocate a unique number, and indicate the

applicant through NSDL.

TAN will be a 10-character alphanumeric string composed of four

alphabetic, five numeric, and then one alphabetic character. E.g.: "BLRR02933A". The first

three characters are an Income Tax Region Code (BLR => Bangalore) and the fourth digit is

the first character of the Deductor name (R => is denote to the deductee. That which is

individual or Company if individuality denote =P and Company Denote =C Remaining

characters form a unique combination to get identified at Income Tax Department.

TDS Rates Chart A.Y. 2012-13/F.Y. 2011-12 [updated: June 2011]

With effect from 1-4-2010, the deductee shall furnish his PAN (Permanent Account Number) to Deductor, failing which tax at the below rates of TDS or at the rate of 20% whichever is higher shall be deducted at source. Where PAN provided to the Deductor is invalid or does not belong to the deductee, it shall be deemed that deductee has not furnish his PAN to the Deductor and higher rate of TDS as mentioned below shall be applicable.No surcharge, education cess and secondary and higher education cess is leviable for the financial year 2010-11 onwards for TDS purposes in case of payment to resident. But in respect of TDS on salary, cess will be leviable.

TDS Rates Chart assessment year 2012-13 or financial year 2011-12 (ay 12-13 / fy 11-12)

Relevant Section

Nature of Payment (to resident)

Threshold Limit

Individual HUF

(Resident in India)

Company Firm/Co-op Sec. Local Authority (Domestic Company)

192 Payment of salary to a resident/non-resident

Normal Income Tax Rates: See Income Tax Slab

193 Interest on securities 10 10

194 Deemed dividends  u/s 2(22)(e)

10 10

194A Interest other than Interest on securities

5000 10 10

194B Lottery or crossword puzzle or card game or other game of

10000 30 30

any sort.

194BB Horse races 5000 30 30

194C Contracts/sub-contracts 30000 1 2

194D Insurance Commission 20000 10 10

194EE Payment in respect of deposits under NSS

2500 20 -

194F Payment on account of repurchase of units of MF or UTI

1000 20 10

194G Commission on sale of lottery tickets

1000 10 10

194H Commission or brokerage 5000 10 10

194-I Rent  of Plant and Machinery 180000 2 2

Rent of Land or Building or Furniture and Fitting

180000 10 10

194J Fees for professional or technical services

30000 10 10

194LA Payment of compensation to a resident on acquisition of certain immovable property

100000 10 10

Notes: we.f. 1.10.2009, no TDS is to be deducted on payment to a contractor/sub-contractor, during the course of business of plying, hiring or leasing goods carriages, if the payee furnishes his PAN to the Deductor [sec. 194C(6)]

Circumstances in which tax is not to be deducted at source or is to be deducted at a lower rate:

Sino Type of Income

Form No in which application to be made

Certificate to be issued by the Assessing Officer

Period of validity

1. Salary (sec192) Form No 13 (see rule 28)

Form No 15AA (see rule 28AA). The certificate is issued to the

Valid for the period specified in the certificate (see Rule 28AA) Fresh

Deductor under advice to the applicant

application required after expiry of validity period.

2.Interest on securities (Section 193)

-do- -do- -do-

3.

Interest other than interest on Securities (Section 194A)

-do- -do- -do-

4.Insurance Commission (Section 194D)

-do- -do- -do-

5.Rental Income (Section 194I)

-do- -do- -do-

6.Income in respect of Units (Section 194K)

-do- -do- -do-

7.Payment to non-residents (Section 195)

-do- -do- -do-

8.

Payment to Contractors or Sub-Contractors (Section (194)

Form No.13C(See Rule 28)

No prescribed form. The certificate can be issued by the Assessing Officer on a plain paper

For the relevant FY.

9.Commission on sale of lottery tickets (sec 194G)

Form No 13D (applies to lottery agents and not prize winners)

-do- -do-

10.

Payment of fees for professional or technical services (sec 194J)

Form No 13E -do- -do-

11.

Payment to non-resident banking company (sec 195(3))

Form No 15C (see rule 29B)

Form No 15EFor the FY specified in the certificate

12. Payment to non- Form No 15D -do- For the relevant

resident company carrying on business or profession in India through a branch (not being interest or dividend)-sec 195(3)

(see rule 29B) FY

Types of income/payment where the above benefit is not available under the Act:

1. Winning from Lottery or Crossword puzzles Section 194B 2. Winning from horse race Section 194BB 3. Payments to non-resident Sportsmen or Association Section 194E 4. Payments in respect of NSS deposits Section 194EE 5. Payments on account of repurchase of units issued by Mutual funds Section 194F 6. Income in respect of units of non-residents, Off-shore Funds; foreign currency

bonds; (FIIs) Section 196A,196B, 196C & 196D

2) CORPORATE TAX

For companies, income is taxed at a flat rate of 30% for Indian companies, with a 5%

surcharge applied on the tax paid by companies with gross turnover over Rs. 1 crore (10

million). Foreign companies pay 40%.An education cess of 3% (on both the tax and the

surcharge) are payable, yielding effective tax rates of 32.5% for domestic companies and

41.2% for foreign companies. From 2005-06, electronic filing of company returns is

mandatory.

Many countries impose corporate tax or company tax on the income or capital of some

types of legal entities. A similar tax may be imposed at state or lower levels. The taxes

may also be referred to as income tax or capital tax. Entities treated as partnerships are

generally not taxed at the entity level. Most countries tax all corporations doing business

in the country on income from that country. Many countries tax all income of

corporations organized in the country.

Company income subject to tax is often determined much like taxable income for

individuals. Generally, the tax is imposed on net profits. In some jurisdictions, rules for

taxing companies may differ significantly from rules for taxing individuals. Certain

corporate acts, like reorganizations, may not be taxed. Some types of entities may be

exempt from tax. Many countries tax corporate entities on income and also tax the

owners when the corporation pays a dividend. Where the owners are taxed, a

withholding tax may be imposed. Generally, these taxes on owners are not referred to as

corporate tax.

3) PROFESSIONAL TAX

In India, this tax is imposed by various states. It is imposed on business owners, working

individuals, merchants and people carrying out various occupations. The following states

impose this levy in India - Karnataka, West Bengal, Andhra Pradesh, Maharashtra,

Tamilnadu, Gujarat, and Madhya Pradesh.

Professional tax is levied by particular Municipal Corporations and majority of the Indian

states impose this duty. It is a source of revenue for the government. The maximum amount

payable per year is ` 2,400/- and in line with your salary, there are predetermined slabs. It is

paid by every member of staff employed in private companies. It is subtracted by the

employer each month and sent to the Municipal Corporation. It is compulsory as income

tax. You will be eligible for income tax deduction for this payment.

Professional Tax Slabs in Various States

in West Bengal

Income Tax to be imposed

Upto 1,500 Nil

From ` 1501 To ` 2001 ` 18

From ` 2001 To ` 3001 ` 25

From ` 3001 To ` 5001 ` 30

` 5001 ` 40

From ` 6001 -7001 ` 45

From ` 7001 to ` 8000 ` 50

From ` 8001 to ` 9000 ` 90

From ` 9001 to ` 15,000 ` 110

From ` 15001 to ` 25,000 ` 130

From ` 25,001 to ` 40,000 ` 150

Beyond ` 40,001 ` 200

In MaharashtraIncome Tax to be imposed

Upto ` 2500 Nil

From ` 2500 to ` 3500 ` 60

From ` 3500 to ` 5000 ` 120

From ` 5000 to ` 10000 ` 175

More than ` 10000 ` 200

In Tamil NaduIncome Tax to be imposed

Upto ` 21000 Nil

From ` 21001 to ` 30000 ` 75

From ` 30001 to ` 45000 ` 188

From ` 45001 to ` 60000 ` 390

From ` 60001 to ` 75000 ` 585

More than ` 75001 ` 810

In New DelhiIncome Tax to be imposed

Upto ` 1,10,000 Nil

From ` 1,10,000 To ` 1,45,000 Nil

From ` 1,45,000 To ` 1,50,000 10 %

From ` 1,50,000 To ` 1,95,000 20 %

From ` 1,95,000 To ` 2,50,000 20 %

More than ` 2,50,000 30 %

Collection Of Revenues From Direct Tax

Income tax collections for the 1 quarter of 2011, that is april-june is increased by 23.91 % to 104136 crore rupees. These figure are of gross collection of the income tax department. Gross direct tax collections during the first quarter of the current fiscal (April - June2011) were up by 23.91 percent at Rs.104,136 crore as against Rs.84,041 crore. While gross collection of corporate taxes was up 23.49 percent (Rs.68,223 crore against Rs.55,244 crore last year), gross collection of personal income tax was up by 24.63 percent (Rs.35,859 crore against Rs.28,772 crore last year).Net collections, however, stood at Rs.57,268 crore, down from Rs.68,675 crore in the same period last fiscal on account of an increase of 205.01 percent in tax refunds, which stood at Rs.46,868 crore as against Rs.15,366 crore last fiscal. Tags-income tax collection, income tax collection for quarter 1 2011,income tax receipts of 2011.

INDIRECT TAXES

In the colloquial sense, an indirect tax (such as sales tax, a specific tax [a tax per

unit], value added tax (VAT), or goods and services tax (GST)) 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 consumer). The intermediary later files a tax return and

forwards the tax proceeds to government with the return. In this sense, the term indirect tax

is contrasted with a direct tax which is collected directly by government from the persons

(legal or natural) on which it is imposed. Some commentators have argued that "a direct tax

is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can

be."

An indirect tax may increase the price of a good so that consumers are actually paying the

tax by paying more for the products. Examples would be fuel, liquor, and cigarette taxes. An

excise duty on motor cars is paid in the first instance by the manufacturer of the cars;

ultimately the manufacturer transfers the burden of this duty to the buyer of the car in form

of a higher price. Thus, an indirect tax is such which can be shifted or passed on. The degree

to which the burden of a tax is shifted determines whether a tax is primarily direct or

primarily indirect. This is a function of the relative elasticity of the supply and demand of

the goods or services being taxed. Under this definition, even income taxes may be indirect.

1) Excise duty

An excise or excise tax (sometimes called an excise duty) is a type of tax charged on goods

produced within the country (as opposed to customs duties, charged on goods from outside

the country). It is a tax on the production or sale of a good. This tax is now known as the

Central Value Added Tax (CENVAT).

Though the collection of tax is to augment as much revenue as possible to the government to

provide public services, over the years it has been used as an instrument of fiscal policy to

stimulate economic growth. Thus it is one of the socio-economic objectives.

An excise or excise tax (sometimes called a duty of excise special tax) is commonly

understood to refer to an inland tax on the sale, or production for sale, of specific goods; or,

more narrowly, as a tax on a good produced for sale, or sold, within a country. An excise tax

is one levied on specific goods or commodities produced or sold within a country, or on

licenses granted for specific activities. Excises are distinguished from customs, which are

taxes on importation. Excises are inland taxes, whereas customs duties are border taxes.

An excise is considered an indirect tax, meaning that the producer or seller who pays the tax

to the government is expected to try to recover the tax by raising the price paid by the buyer

(that is, to shift or pass on the tax). Excises are typically imposed in addition to another

indirect tax such as a sales tax or VAT. In common terminology (but not necessarily in law)

an excise is distinguished from a sales tax or VAT in three ways: (i) an excise typically

applies to a narrower range of products; (ii) an excise is typically heavier, accounting for

higher fractions (sometimes half or more) of the retail prices of the targeted products; and

(iii) an excise is typically specific (so much per unit of measure; e.g. so many cents per

gallon), whereas a sales tax or VAT is ad valorem, i.e. proportional to value (a percentage of

the price in the case of a sales tax, or of value added in the case of a VAT).

STATE EXCISE DUTY

Increase in the State Excise Duty In Case Of Liquor, etc.

Sr. Type of product Proposed Excise Rate

 

1 Country Liquor Rs. 95 per proof liter

2 Foreign Liquor Rs. 240 per proof litre

3 Mild Beer Rs. 33 per bulk litre

4 Fermented Beer Rs. 42 per bulk litre

What are the types of excise duty?

There are three different types of central excise duties which exist in India which are as

follows:

Basic - Excise Duty, imposed under section 3 of the 'Central Excises and Salt Act' of 1944

on all excisable goods other than salt produced or manufactured in India, at the rates set

forth in the schedule to the Central Excise tariff Act, 1985, falls under the category of basic

excise duty in India.

Additional - Section 3 of the 'Additional Duties of Excise Act' of 1957 permits the charge

and collection of excise duty in respect of the goods as listed in the schedule of this act. This

tax is shared between the central and state governments and charged instead of sales tax.

Special - According to Section 37 of the Finance Act, 1978, Special Excise Duty is levied

on all excisable goods that come under taxation, in line with the Basic Excise Duty under

the Central Excises and Salt Act of 1944. Therefore, each year the Finance Act spells out

that whether the Special Excise Duty shall or shall not be charged, and eventually collected

during the relevant financial year.

Which goods are excisable goods?

The term 'excisable goods' means the goods which are specified in the first schedule and the

second schedule to the Central Excise Tariff Act, 1985, as being subject to a duty of excise

and includes salt.

Who is liable to pay excise duty?

The liability to pay tax excise duty is always on the manufacturer or producer of goods.

There are three types of parties who can be considered as manufacturers:

Those who personally manufacture the goods in question

Those who get the goods manufactured by employing hired labour

Those who get the goods manufactured by other parties

Is it mandatory to pay duty on all goods manufactured?

Yes, it is mandatory to pay duty on all goods manufactured, unless exempted. For example,

duty is not payable on the goods exported out of India. Similarly exemption from payment

of duty is available, based on conditions such as kind of raw materials used, value of

turnover (clearances) in a financial year, type of process employed etc.

What is the consequence of evading payment of excise duty?

Under the different sections of the central excise act, the fines for evading tax can range

from twenty-five to fifty per cent of the amount of duty evaded. When you look at the

amount of excise you may have to pay, this is a rather large amount and along with the

financial repercussions, you also have to encounter a tarnished image.

2) Custom duty

The custom duty in India is regulated by the Customs Act of 1962. Main purpose of the

custom duty in India is the prevention of illegal export and import of goods. Rates of the

custom duty levied on the imported and exported goods are assigned in the Custom Act,

1962. Customs Act of 1962 was devised mainly to prevent the interest of the indigenous

industries and securing the Indian currency from exchange rate. If too much illegal goods

and services would be imports and exports to and from the country then this would harm

India industry and directly affect the exchange rate of the Indian currency.

Custom Duties are levied on goods that are exported or imported from India at a rate that is

specified under the Customs Act of 1975. The Central Government of India in order to

maintain proper surveillance on the different import and export activities happening within

the country reserves the power to notify the various ports and airports. The ports and

airports have to provide information regarding all loading and unloading activities such as;

loading of the exported goods, unloading of imported goods, the routes by which the

imported and exported goods will pass and the different locations for clearance of goods etc.

The Central Board of Excises Customs is the body that publishes books which provide

information on the numerous tariffs rules.

Custom duty in India

Custom duties in India fall under various categories. Below is a list of the different types of

custom duties in India

Basic Duty: This is the general kind of duty levied under the Customs Act, 62

Additional Duty (Countervailing Duty): This duty is levied under the Custom

Tariff Act, section 3 (1)

Anti-dumping Duty: This duty prevents the dumping of foreign goods by the

transnational companies

Protective Duty: This duty protect the interests of the Indian industrial sector

Export Duty: This duty is levied on the export of goods

Acts under custom duty in India

Foreign Trade (Exemption from application of Rules in certain cases) Order, 1993

Customs Act, 1962

Registrars of Companies in different states chiefly manage

Customs Tariff Act, 1975

Foreign Trade (Development and Regulation) Act, 1992

Taxation Laws (Amendment) Act, 2006

Provisional Collection of Taxes Act, 1931

Central Excise Tariff Act, 1985

Foreign Trade (Regulation) Rules, 1993

Central Excise Act, 1944

As per FY 2009-10

Below is a list of the latest introductions made in 2009 and 2010 in the Custom duties

Act.

Set Top Boxes for the purpose of television broadcasting will carry a Customs duty

of 5 percent.

The Customs duty charged to LCD Panel manufacturers will be reduced from 10

percent to 5 percent.

Full custom duty exemption will be given to mobile phone parts and accessory

manufacturers for the next one year.

Custom duties will be exempted on the list of the specific raw materials exported for

sports goods. Further five more items will be added to the existing list of items.

Also additions will be made in the list of raw materials imported by the many

manufacturers of textile products, leather goods and the footwear industry in India.

Customs duty charged on un worked corals will be decreased from 5 percent to zero.

Customs duty will be reduced from 10 percent to 5 percent on ten life saving

vaccines and drugs

Customs duty will be reduced for certain specific medical devices like PDA/ASD

occlusion device and, artificial heart from 7.5 percent to 5 percent

Customs duty will be reduced from 7.5 percent to 5 percent on permanent magnets

imported for use in generators above 500 KW meant for the purpose of electricity

generation.

Customs duty charged on bio-diesel will be decreased from 7.5 percent to 2.5

percent

Concessions will be offered on the rate of customs duty charged on specific

machineries for coffee, tea and rubber plantations.

Customs duty will also be reduced from 7.5 percent to 5 percent. Also the CVD will

be reduced from 8 percent to zero on such plantations.

The Customs duty charged on gold coins and gold bars which are serially numbered

will be raised to ` 200 per 10 gram. Previously it was ` 100 per 10 gram. Customs

duty for gold in all other forms will be ` 500 per 10 gram. Previously it was from `

250 per 10 gram. The Customs duty charged on silver will also increase from ` 500

per Kg. to ` 1000 per Kg. This kind of duties will; be charged on the import of gold

and silver as personal baggage.

Cotton waste Customs duty will be decreased from 15 percent to 10 percent.

Wool waste Customs duty will be decreased from 15 percent to 10 percent.

Rock phosphate Customs duty Customs duty will be decreased from 5 percent to 2

percent.

No more exemptions will be allowed CVD Aerial Passenger Ropeway Projects.

Concrete batching plants which have capacity of 50 cum per hour or even more will

be exempted from paying Customs duty. These types of plants will carry a customs

duty of 7.5 percent from now onwards.

Customs duty on water sports equipments like snow-skis, surf-boats, inflatable rafts,

water skis and sail-boards will be fully exempted.

Rules and regulations under custom duty in India

Below is a list of the rules and regulations mentioned under the Custom Duty Act in India?

Foreign Privileged Persons (Regulation of Customs Privileges) Rules, 1957

Denaturing of Spirit Rules, 1972

Customs (Attachments of Property of Defaulters for Recovery of Government Dues)

Rules, 1995

Accessories (Condition) Rules, 1963

Specified Goods (Prevention of Illegal Export) Rules, 1969

Re-Export of Imported Goods (Drawback of Customs Duties) Rules, 1995

Notice of Short-Export Rules,1963

Customs Tariff (Identification, Assessment and Collection of Countervailing Duty

on Subsidized Articles and for Determination of Injury) Rules, 1995

Customs and Central Excise Duties Drawback Rules,1995

Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on

Dumped Articles and for Determination of Injury) Rules, 1995

Customs Valuation (Determination of Price of Imported Goods) Rules, 1988

Customs Tariff (Determination of Origin of Goods under the Agreement on SAARC

Preferential Trading Arrangement) Rules,1995

Notified Goods (Prevention of Illegal Import) Rules, 1969

Customs Tariff (Determination of Origin of Goods under the Bangkok Agreement)

Rules, 1976

Customs Tariff (Determination of Origin of the U.A.R. and Yugoslavia) Rules, 1976

Customs (Settlement of Cases) Rules, 1999

Customs( Import of Goods at Concessional Rate of Duty for Manufacture of

Excisable Goods) Rules, 1996

Customs (Publication of Names) Rules,1975

Rules of Determination of Origin of goods under the Agreement on South Asian

Free Trade Area (SAFTA)

Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997

Baggage Rules, 1998 Customs Tariff (Determination of Origin of Other Preferential

Areas) Rules,1977

Customs Tariff (Determination of Origin of Goods under the Free Trade Agreement

Between the Democratic Socialistic Republic of Sri Lanka and the Republic of

India) Rules, 2000

3) Service Tax

Service tax is a part of Central Excise in India.[7] It is a tax levied on services

provided in India, except the State of Jammu and Kashmir. The responsibility of collecting

the tax lies with the Central Board of Excise and Customs (CBEC).

The Finance Minister of India, Pranab Mukherjee in his Budget speech has indicated the

government's intent of merging all taxes like Service Tax, Excise and VAT into a common

Goods and Service Tax by the year 2011. To achieve this objective, the rate of Central

Excise and Service Tax will be progressively altered and brought to a common rate. In

budget presented for 2008-2009 It was announced that all Small service providers whose

turnover does not exceed Rs10 lakhs need not pay service tax.

Circular No. 127/9/2010-ST, dated 16-8-2010 regarding Service tax on commercial training

and coaching - Whether ‘donation' is ‘consideration'. A representation has been received

seeking clarification whether donations and grants-in-aid received from different sources by

a charitable Foundation imparting free livelihood training to the poor and marginalized

youth, will be treated as ‘consideration' received for such training and subjected to service

tax under ‘commercial training or coaching service'. 2. The matter has been examined. The

important point here is regarding the presence or absence of a link between ‘consideration'

and taxable service. It is a settled legal position that unless the link or nexus between the

amount and the taxable activity can be established, the amount cannot be subjected to

service tax. Donation or grant-in-aid is not specifically meant for a person receiving such

training or to the specific activity, but is in general meant for the charitable cause

championed by the registered Foundation. Between the provider of donation/grant and the

trainee there is no relationship other than universal humanitarian interest. In such a situation,

service tax is not leviable, since the donation or grant-in-aid is not linked to specific trainee

or training.

1. Levy of service tax

 

1.1     As on 1st May, 2011, 119 services are taxable services in India.

These taxable services are specified in Section 65(105) of the Finance

Act, 1994.  Section 64 of the Finance Act, 1994, extends the levy of

service tax to the whole of India, except the State of Jammu & Kashmir.

          Generally, the liability to pay service tax has been placed on

the ‘service provider’. However, in respect of the taxable services

notified under Sec.68 (2) of the Finance Act, 1994, the service tax shall

be paid by such person and in such manner as may be prescribed at the

rate specified in Sec.66 of the Act and all the provisions of Chapter-V

shall apply to such person as if he is the person liable for paying the

service tax.

The following services have been notified under Sec.68 (2) of Finance

Act, 1994:

A. the services,-

(i)         In relation to telecommunication service;

(ii)        In relation to general insurance business;

(iii)       In relation to insurance auxiliary service by an insurance agent;

and

(iv)      In relation to transport of goods by road in a goods carriage,

where the consignor or consignee of goods-

(a)  Any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

(b) Any company established by or under the Companies Act, 1956 (1 of 1956);

(c) Any corporation established by or under any law;

(d)  Any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India;

(e)  Any co-operative society established by or under any law;

(f)  Any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made there under; or

(g)  Anybody corporate established, or a partnership firm registered, by or under any

 (v)       In relation to Business Auxiliary Service of distribution of mutual fund by a mutual fund distributer or an agent, as the case may be;

(vi)      In relation to sponsorship service provided to anybody corporate or firm located in India;

B.     Any taxable service provided or to be provided from a country other than India and received in India, under Sec.66a of the Finance Act, 1994.   

 1.2    From 01.06.2007 to 23.02.2009, the Service tax was payable @ 12% of the ‘gross amount’ plus 2% Education Cess on service tax plus 1% Secondary Higher Education Cess on service tax i.e. totalling to 12.36% ( in specific cases partial deductions are allowed, refer section 67 of the Finance Act) charged by the service provider for providing such taxable service. From 24.02.2009, vide Notification No.8/2009-ST dated 24.02.2009 the rate of service tax is 10% on gross value of the taxable

service plus 2% Education Cess on the service tax amount and 1% Secondary Higher Education Cess on the service tax amount.

 Example: Suppose the value of taxable service is Rs.100. Service tax @10% will be Rs.10 and Education Cess @2% of the Service Tax will be Rs.0.20 and Secondary & Higher Education Cess @1% of the service tax will be 0.10.

1.3     The Table below shows the category of services which are taxable with the date of introduction of such service. The table also shows the ‘accounting heads’ for each category service, for the purpose of payment of service tax:

Sr.No Service Category Date of

 Introduction

Accounting codes

Tax Collection

Other Receipts

1 Advertising 01.11.1996 00440013 00440016

2 Air Travel Agent 01.07.1997 00440032 00440033

3 Airport Services 10.09.2004 00440258 00440259

4 Architect 16.10.1998 00440072 00440073

5 ATM Operations, Management or Maintenance

01.05.2006 00440346 00440347

6 Auctioneers' service, other than auction of property under directions or orders of a count of or auction by Central Govt.

01.05.2006 00440370 00440371

7 Authorized Service Station 16.07.2001 00440181 00440182

8 Auxiliary to General Insurance 16.07.2001   

 

00440169

 

 

00440170

9 Auxiliary to  Life Insurance 16.08.2002

10 Banking & Other Financial Services 16.07.2001 00440173 00440174

Note:

1. Accounting Code for ‘Education Cess’ is ‘00440298’ for all services.

2. Accounting Code for ‘Secondary & Higher Education Cess’ is ‘00440426’ for all services.

3. The sub-head ‘Other receipts’ is meant for interest, penalty on delayed payment of service tax.

2. Registration

 

2.1     Every person liable for paying the service tax shall make an application to the concerned Superintendent of Central Excise in Form ST-1 for registration within a period of thirty days from the date on which the service tax under section 66 of the Finance Act, 1994(32 of 1994) is levied:

             Provided that where a person commences the business of providing a taxable service after such service has been levied, he shall make an application for registration within a period of thirty days from the date of such commencement.

           Also, the following two categories of persons have been identified as ‘Special Category of Persons’ under The Service Tax (Registration of Special Category of Persons) Rules, 2005:

i)     Input Service Distributor;

ii)    Any provider of taxable service whose ‘aggregate value of taxable service’ (‘aggregate value’ has been defined in Rule 2(b) of The Service Tax (Registration of Special Category of Persons) Rules, 2005) in a financial year exceeds nine lakh rupees.

              

  2.2    The service tax is administered by the Central Excise Department. The government website www.exciseandservicetax.nic.in gives the details of the jurisdictional offices of the Central Excise Department, State-wise, District-wise as well as Commissionerate-wise.

 2.3      Total 67 Central Excise & Service Tax Commissionerates, 7 exclusive Service Tax Commissionerates and 5 Large Taxpayer Units administer Service tax collection in India.

 

2.4      Following are the 7 Service tax Commissionerates:

1.    Mumbai-I2.    Mumbai-II3.    Delhi

4.    Chennai5.    Kolkata6.    Bangalore7.    Ahmedabad

 2.5     There are 5 Large Taxpayer Units (LTUs) as listed below:

          1. Bangalore,          2. Chennai,          3. Mumbai,          4. Delhi and          5. Kolkata 

Payment of Service Tax

 Any person providing taxable service to any person shall pay service tax at the rate specified in Sec.66 in such a manner and within such period as may be prescribed.(Sec.68 of the Finance Act, 1994)The table below shows the rate of service tax applicable at the relevant period of time. 

Sr.No. Period Rate of Service Tax

Rate of Education

Cess

Rate of Secondary

& Higher Education

Cess1. Till 13.05.2003 5% Nil Nil2. 14.05.2003 to

09.09.20048% Nil Nil

3. 10.09.2004 to 17.04.2006

10% 2% of the S.T.

Nil

4. 18.04.2006 to 31.05.2007

12% 2% of the S.T.

Nil

5. 01.06.2007 to 23.02.2009

12% 2% of S.T. 1% of S.T.

6. 24.02.2009 to 31.03.2012

10% 2% of S.T. 1% of S.T.

7 From 01/04/2012

12% 2% of S.T. 1% of S.T.

  In case of Individuals or Proprietary Concerns and Partnership Firm,

service tax is to be paid on a quarterly basis. The due date for payment of service tax is the 5th of the month immediately following the

respective quarter (in case of e-payment, by 6th of the month immediately following the respective quarter). For this purpose, quarters are: April to June, July to September, October to December and January to March. However, payment for the last quarter i.e. January to March is required to be made by 31st of March itself.  

In case of any other category of service provider other than specified at 6.1 above,  service tax is to be paid on a monthly basis, by the 5th of the following month ( in case of e-payment, by 6th of the month immediately following the respective month). However, payment for the month of March is required to be made by 31st of March itself.      

Service tax is to be paid to the Central Government in respect of service deemed to be provided as per the rules framed.     

The facility of e-payment of service tax has been introduced with effect from 11.05.2005. From 1st April, 2010 e-payment of service tax has been made mandatory for the assesses who have paid service tax of Rs.10 Lakh (cash+ cenvat) and above during the last financial year or who have paid service tax of Rs.10 Lakh (cash + cenvat) and above during the current financial year. The e-payment shall be made only in designated banks by 6th day of the following month.

The assesse is required to deposit the amount of service tax in the designated banks through GAR-7 chalan.   

While depositing the service tax, the appropriate ‘account head’ pertaining to the particular service category should be mentioned on the chalan. The correct accounting heads have been given in the table showing the ‘List of Services’ in Para 1.3. 

If the assesse deposits the amount of tax liable to be paid, by cheque, then the date of presentation of the cheque to the designated bank would be treated as the date of payment of service tax.

Where an assesse has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or partially for any reason, or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract the assesse may take credit of such excess service tax paid by him, if the assesse:-          a) Has refunded the payment or part thereof, so received for the service provided to the person from whom it was received or          b) Has issued a credit note for the value of the service not so provided to the person to whom such an invoice has been issued

  The assessee can opt for provisional payment of service tax in case he is

not able to correctly estimate the tax liability. In such a situation he may request in writing to the jurisdictional Assistant / Deputy Commissioner for the same.  

Service tax (including interest, penalty, and refund) is to be rounded off to the nearest rupee. 50 paisa or more should be rounded off to the next rupee and less than 50 paisa should be ignored.   

Any person, who has collected any sum on account of service tax, is under obligation to pay the same to the Government. He cannot retain the sum so collected with him by contending that service tax is not payable.           

Interest

          The due date for payment of service tax is 6 th day of the month following the relevant month/quarter, if electronically paid and in other cases, 5th day of the month following the relevant month / quarter. It is provided under section 75 of the Finance Act, 1994 that in case of delayed payments (after due date) the assessee is required to pay simple interest at the rate prescribed. Notification No. 26/2004 dated 10.09.2004 has specified the rate of interest at 13% per annum. The table below shows the rate of interest applicable at relevant period of time. 

Sr.No. Period Rate of Interest1. Till 11.05.2001 1.5% per month2. 11.05.2001 to 11.05.2002 24% per annum3. 11.05.2002 to 10.09.2004 15% per annum4. From 10.09.2004 to 31.03.2011 13% per annum5. From 01.04.2011 18% per annum

4) Entertainment tax

In India, movie tickets, large commercial shows and large private festival celebrations may incur an entertainment tax.

Entertainment falls in List 2 of the Seventh Schedule of the Constitution of India and is exclusively reserved as a revenue source for the state governments. Historically, before India acquired independence British government imposed heavy taxes on the events of amusements and entertainment, where a large gathering of Indians could have caused rebellion or mutiny. Thus, various entertainment tax acts of the state

governments permit the rate of tax beyond 100%. After independence, old enactments continued and there has been no revision or repeal of these acts.

This source of revenue has grown with the advent of Pay Television Services in India. Since, entertainment is being provided through the services such as Broadcasting Services, DTH Services, Pay TV Services, Cable Services, etc. The component of entertainment is intrinsically intertwined in the transaction of service, that it cannot be separated from the whole transaction. Given the nature of transaction of service, it is being subjected to tax by the Union and the State governments both.

The fiscal principle underlying article 246 of the constitution of India separates the sources of taxation for the Union and the States and also maintains the exclusivity. This article also provides that in case of conflict between the powers of Union and the States, the Union power to tax shall supersede the power of the State to levy tax on the taxable event or in relation to the subject or object of taxation.

The entertainment Industry in India is facing the challenge of double taxation on such transactions.

The entertainment department is a major source of revenue for the Government of India. It also has a great contribution towards the publicity of Indian arts that portrays ancient culture and various sports. This is done by granting tax-free benefits to the same. The organizers of any entertainment shows will have to seek the permission of the Entertainment Tax Department before putting up any commercial shows. The entertainment tax in India is levied upon the organizers or proprietors depending on the kind of shows being organized. There are a range of tax schemes for various entertainment programs. These are as follows:

Tax schemes designed for amusement parks Tax-paid programs Programs based on tax exempted sectors Tax programs on cable television networks Tax for various invitee programs Tax on entertainment betting Tax on video parlors

To alleviate the tax generating program, a series of technologies has been introduced in the entertainment tax department. For example, the computerized ticket booking system has been incorporated for booking movie tickets along with the online data transmission in the entertainment industry. The more advanced the entertainment industry is becoming the tax rate is increasing at a proportional rate. Implementation of innovative technologies for an easier access for the customers demands for sufficient entertainment tax rate depending on the revenue. Customers mostly look for convenience and less hazardous tasks while going for any entertainment program and so faster access would definitely attract more customers. 

Details of Revenue Collection (Direct Taxes and Indirect Taxes) from 1995-96 onwards:        DIRECT TAXES                                                                                       Rs. (In crores)

 

FIN. YEAR ACTUAL COLLECTIONS

     

  Corporate Tax Personal Income Tax* Other Direct Taxes TOTAL

1995-96 16487 15592 1485 33564

1996-97 18567 18234 2094 38895

1997-98 20016 17101 11163 48280

1998-99 24529 20240 1831 46600

1999-00 30692 25655 1612 57959

2000-01 35696 31764 845 68305

2001-02 36609 32004 585 69198

2002-03 46172 36866 50 83088

2003-04 63562 41386 140 105088

2004-05 82680 49268 823 132771

2005-06 101277 63689 250 165216

2006-07 144318 85623 240 230181

2007-08 192911 118962 340 312213

          2008-09             213395             120034           389 333818

2009-10 244725 132833 505 378063

2010-11 298688 147560 687 446935

2011-12# 323224 170788 787 494799

*2012-13 (up to Jan 20130

248131 141494 685 390310

 Source: Pr CCA CBDT# 1997-98 figure includes collection of Rs 9803 on account of VDIS

* Personal Income Tax includes DTT, FBT, BCTT, etc; # Provisional

* Figures of 2012-13 ( up Jan. 2013 ) are provisional

        

        INDIRECT TAXES                                                                                  Rs. (In crores)

FIN. YEAR ACTUAL COLLECTIONS

     

  CUSTOMS UNION EXCISE SERVICE TAX TOTAL

1995-96 35757 40187 862 76806

1996-97 42851 45008 1059 88918

1997-98 40193 47962 1586 89741

1998-99 40668 53246 1957 95871

1999-00 48420 61902 2128 112450

2000-01 40268 72555 3302 116125

2001-02 44852 82310 4122 131284

2003-04 48629 90774 7891 147294

2004-05 57566 99401 14134 171101

2005-06 65049.64 110664.75 23052.95 198767.34

2006-07 86304 117088* 37484 240876

2007-08 102852 122711* 51133 276696**

 2008-09           99708         104141         60716  264565

 

        *Excluding cess administered by other than Department of Revenue.

CONCLUSION

Taxation is a very important branch to study & understand the overall gamut of the Taxation

system of India. In last 10-15 years, Indian taxation system has undergone tremendous

reforms. The tax rates have been rationalized and tax laws have been simplified resulting in

better compliance, ease of tax payment and better enforcement. The process of

rationalization of tax administration is ongoing in India.Since April 01, 2005, most of the

State Governments in India have replaced sales tax with VAT.

After conducting a comprehensive evaluation for this project, I

immensely pleased in stating that a significant and innovative step has indeed been taken by

the Central Government in coordination with and the State Governments to improve the

efficiency and productivity of the tax systems prevailing in India. This pioneering move will

not only aid in rendering satisfaction and economical growth but will also yield in

establishing a healthy image of taxes and their derived benefits in the minds of the citizens.

The first part of this project shows great potential and by far has been successful in fulfilling

all the aspired objectives in the field of direct taxes. However, in the second part it indirect

taxes are explained. It is strongly emphasizes upon the highlighted recommendations and

focused aspects that may for the future positively render in establishing thorough

professionalism and more stability. Significantly, it is further suggested to proceed with the

commencement of both the parts of this project as this radical step to add value to the

present taxation system and boost the economy thus introducing an era of change and

advancement.

SUGGESTION

To apply Progressive tax, Regressive tax, and Proportional tax into Tax progressivity.

Circular 230 and Individual Taxpayer Identification Number into Internal Revenue Service.

Economic development incentive programs.

Bibliography

1. Income Tax Act- By Pradeep S Shah, Rajesh S. Kadakia2. Income Tax Act & Rules- By Taxman Publication3. Direct Taxes Ready Reckoner- By Dr. Vinod K. Singhania

Webliography

1. Value Added Tax – By Sales Tax Department.2. www.google.com3. www.tax4india.com4. www.vat.maharashtra.gov.in

5. www.incometaxindia.gov.in6. http://www.wikipedia.org