A tax structure refers to various taxes that constitute tax system of a country, broadly comprising of direct and indirect taxes. Income tax and wealth tax are the central direct taxes of the central government of India. While income tax can be categorized into two parts viz. personal income tax and corporate income tax. Income tax levied on individuals, Hindu undivided families, firms, an association of persons, body of individuals, local authorities and the artificial juridical person is charged under private income tax and income tax charged on companies is known as a corporate tax.
Taxation of companies or corporations
A corporation is a legal entity organized under the company laws. A corporation can be taxed on their income, property, or income from other sources. In India tax is charged upon both domestic company as well as the foreign residential company.
Indian residential company: – Indian residential company means a company formed and registered under the companies act, 2013. Or any other companies which in respect of its income liable to tax, under the income tax act, has made the prescribed arrangement for declaration and payment within India, of the dividends payable out of such income it may be a private company or public company.
Foreign company: – foreign company means any company whose control and management are situated wholly outside India and which has no made the prescribed arrangement form declarations and payment within India.
Tax rates applicable to the company’s income:-
Any Indian resident company whose gross turnover of the previous year is up to 250cr will be charged tax @ of 25% .the Company whose turnover is more 250cr in the previous year will be charged tax @30%.
Tax rates applicable to foreign companies:-
Where any royalty received by any company from the government under an agreement made before 1april1976 and approved by the central government, such companies will be charged tax @50% and any other income @of 40%
Health and education tax:-
Also, 4% of income tax applicable after calculation of surcharge will be added to the amount of total tax liability before health and education tax.
Minimum Alternate Tax (MAT)
All the companies whether domestic or foreign are required to pay minimum alternate tax at the rate of 18.5 % on profits booked if only the tax as per surcharge rates are less than18.5%.
Dividend Distribution Tax (DDT)
Companies are required to pay tax on the dividend distributed to the shareholders in a particular year. Also, the profit of amount 10lakh are exempted which is distributed to shareholders. Although the companies are responsible for the tax @20.56%.
Due date of filing tax:-
Companies are required to submit charge on or before September 30 of every year which also includes foreign companies.
Forms for tax returns:-
ITR6 is required for all companies leaving those companies which claims deduction under section 11of income tax act.
ITR7 is required to all companies which are registered under section 8 of companies act 2013.
Work of lawyer: – Tax filing is a simple but also tiring process ,the tax rates are flexible because they change mostly every year and there are different heads of income upon which tax is levied that makes the process tiring process. For the purpose of tax filing its necessary to remember tax rates and exemptions provided under different heads of income.
By Ankur Sharma, Law Student