Income Tax India, Corporate Tax, Company Tax, Corporation Tax, Business Taxation

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 Corporate Taxation
Company is independent legal entity...

Corporate Tax ManagementThe Company has been defined as a juristic person having an independent and separate legal entity. A Company, whether Indian or foreign, is liable to pay tax under Indian Income Tax Act 1961. The income of the company is calculated and assessed separately in the hands of the company. However, the income distributed among shareholders as dividend is not treated as expenditure. The income distributed as dividend is appropriation of the profit of the company.

Company Residency:
A company is counted as Resident Company in India during the relevant previous year.
  • If the company is an Indian Company
  • If it is not a Indian Company then the control and the management is located wholly in India
A company is counted as Non-Resident Company in India during the relevant previous year:
  • If the company is not Indian and some part of the control and management is located out of India
Tax on Corporate Income: The tax imposed on the income of the company depends upon its residency. Indian Origin companies are liable to pay taxes in India, whereas foreign companies are liable to pay taxes on earnings of Indian operations. Royalty, Interests, Capital gain in India, Dividend from Indian Companies, and Fees for technical services are treated as Income for foreign companies.

Tax on Dividend: Earlier, a company was not required to pay any income tax on Dividend declared, distributed or paid. But such dividend was included in the income of the shareholders. The Finance Act 1997 brought about the changes to the rule.
  • Tax on distributed profit:
    • The domestic company would be required to pay Additional Income Tax on the amount of dividend declared, distributed or paid after June 1997.

  • Exemption of Dividend in the hands of shareholders:
    • In view of the Income Tax now payable by the domestic companies, dividend declared, distributed or paid is exempted in the hands of shareholders.

  • Payment of Additional Income Tax:
    • The Domestic Company has to deposit Additional Income Tax to the Government within 14 days of Declaration of Dividend, Distribution of Dividend or Payment of Dividend to shareholders, whichever is earlier.

  • Additional tax is not allowed as Deduction:
    • The company is not allowed any deduction on account of such Additional Income Tax under any provisions of the Indian Income Tax Act.

Tax Rebates for Corporate Tax:
  • Domestic companies are allowed to deduct Dividend received from other Domestic Companies in certain cases
  • Special Provisions apply to Venture Fund and Venture Capital companies
  • Long-Term Capital gains have lower taxes
  • Deductions are allowed to Exports and new undertakings under certain circumstances
  • Special Deductions for developing, maintaining, and operating new infrastructure and power facilities
  • Business Losses can be carried over for eight years
  • Interest, Dividends,and Long-Term Capital Gain income earned by an Infrastructure Fund from investments in shares or long-term finance in enterprises carrying on the business of developing, monitoring and operating specified infrastructure facilities or in units of Mutual Funds involved with the infrastructure of power sector are proposed to be tax exempt.
Corporate Tax Planning is basically a strategy to reduce the taxes. Tax Planning, Implementation and Management are very complex and tricky issues. High priority should be given in dealing with taxation.

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