Presenting: Direct Tax - Trends in India

Presenting
DIRECT TAX TRENDS IN

INDIA
Presented By:
Seema Sharma
Poorna
Subramanian
Vishwata Jadhav
Dinesh Bhatt
INTRODUCTION
Direct Tax
What is direct tax?
It is the tax which is charged directly on the tax payer. The
term direct tax generally means a tax paid directly to the
government by the person on whom it is imposed.
In India it is governed by the Central Board of Direct Taxes
(CBDT).
It is a division of Department of revenue under Ministry of
Finance.
TYPES OF DIRECT TAX

Banking Cash Transaction Tax.
Personal Income Tax.
Capital Tax.
Corporate Tax.
Double Tax Avoidance Agreement.
Fringe Benefit Tax.
Security Transaction Tax.
Gift tax
Wealth Tax.
BANKING CASH TRANSACTION TAX

The government had introduced 0.1 per cent BCCT in 2005 on
cash withdrawals of more than Rs 50,000 (individuals) and Rs
1,00,000 for others in a single day from non-savings bank
account maintained with any scheduled bank.
This levy was introduced in 2005 to track unaccounted money
and trace its source and destination.
This tax has been withdrawn since April 1, 2009 following an
announcement made by the then Finance Minister P
Chidambaram in his budget.
PERSONAL INCOME TAX

A personal or individual income tax is levied as a percentage
of a persons wages and salaries, with some deductions
permitted, along with the net income or loss from business.
Heads of Income:
Income Taxable under the head Salaries.
Income Taxable under the head House Property.
Income Taxable under the head Business & Profession.
Income Taxable under the head Capital Gains.
Income Taxable under the head Other Sources
TRENDS OF INCOME TAX

SLAB RATES
P.T.O
FOR THE FINANCIAL YEAR 2007-08

TAX
BASIC EXEMPTION
10% TAX
General
110000
110001- 150000
WOMEN
145000
SENIOR CITIZEN
195000
145001-150000
NIL
20% TAX
150001-250000
150001-250000
195001- 250000
30% TAX
Above 250000
Above 250000
Above 250000
WOMEN
SENIOR CITIZEN
180000
225000
TAX
General
BASIC EXEMPTION
150000
10% TAX
150001-300000
20% TAX
300001-500000
300001-500000
300001-500000
30% TAX
Above 500000
Above 500000
Above 500000
180001-300000
225001-300000

TAX
BASIC EXEMPTION
10% TAX
General
WOMEN
160000
190000
160001-300000
190001-300000
SENIOR CITIZEN
240000
240001-300000
20% TAX
300001-500000
300001-500000
300001-500000
30% TAX
Above 500000
Above 500000
Above 500000
WOMEN
SENIOR CITIZEN
190000
240000
TAX
General
BASIC EXEMPTION
160000
10% TAX
160001-500000
20% TAX
500001-800000
500001-800000
500001-800000
30% TAX
Above 800000
Above 800000
Above 800000
190001-500000
240001-500000
TAX
BASIC EXEMPTION
10% TAX
General
WOMEN
180000
190000
180001-500000
190001-500000
SENIOR CITIZEN
250000
250001-500000
20% TAX
500001-800000
500001-800000
500001-800000
30% TAX
Above 800000
Above 800000
Above 800000
Resident individual aged 80 years and above have an enhanced basic exemption upto Rs.5,00000.
Capital Gain Tax

In India the capital gains taxes are a type of direct tax. These are
paid by both individual and institutional investors. These taxes
are normally collected by the national government and the
primary area of taxation is the capital gained from the sale of
these assets.
Capital tax gains are divided into the higher taxed short-term
capital gains, and the lower taxed long-term capital gain. The
following provides a snapshot of changes made in the last 10
years.
1997 2002
In 1997, capital gains tax rate changes was cut down from 28%
to 20%. Due to the lower tax rate, the capital gains revenue
increased by almost 92% over four years. It went from $66
billion to $127 billion. In 2001 and 2002 capital gains revenue
decreased because of the crash in the stock market prices. The
decline was almost 62% from 2000 to 2002.
2003 - 2007
In 2003, capital gains taxes were reduced from 20% to 15%
through the Jobs and Growth Tax Relief Reconciliation Act.
This reduction is scheduled to expire at the end of 2010 and the
rate will be increased back to 20%. Many democrats are
pushing for a higher capital gains tax rate, some are suggesting
as much as 35%.
2008 2009
Both in FY 2008 and FY 2009 budget resolution conferences, there
was a debate for the capital gains tax rate to be returned to 20% after
2010. Many believe that increasing capital gains tax they will harm
the economy because many employers will move their businesses
elsewhere
The Housing and Economic Recovery Act and Housing Assistance
Tax Act of 2008 have made some recent changes to capital gains
taxes. The changes were implement to specifically cater to the
subprime mortgage crisis and it's affect of house sales. A refundable
tax credit of 10% has been instituted as well, with a maximum credit
of $7,500.
Another major change for 2008 has been the exclusion of capital
gains taxes with respect to primary residences. Before 2008, a
homeowner could benefit from the exclusion of capital gains tax if
they lived at the principal residence for 2 consecutive years out of
the last 5 years. However, as of January 1, 2009, this exclusion will
apply only for those in their principal residence for a 5 year period
You should discuss capital gains tax related issues with your tax
advisor to make sure you benefit from all capital gains deductions
and exclusions that you may be eligible for. There are many
complex tax laws that can legally defer capital gains tax that a
homeowner may be eligible for and a tax advisor can help you
benefit from the benefits.
CORPORATE TAX
Corporate Tax Rates for Firms, Companies and Local Authorities

Entity Type
Rates
Surcharge
Education Cess
Secondary
Education Cess
Firms
30%
Nil
2% of Income Tax
1% of Income Tax
Domestic
Companies
30%
5%**
2% of Income Tax
and Surcharge
1% of Income Tax
and Surcharge
Foreign
Companies
40%*
2%**
2% of Income Tax
and Surcharge
1% of Income Tax
and Surcharge
Local Authorities
30%
Nil
2% of Income Tax
1% of Income Tax
Corporate Tax Rates for Co-operative societies

Co-operative societies has different tax slabs and rates.
Net Income Range
Tax Rate
Surcharge
Education Cess
Secondary
Educatrion
Up to 10,000
10%
Nil
2% of Income Tax
1% of Income Tax
10,000 - 20000
20%
Nil
2% of Income Tax
1% of Income Tax
Above 20000
30%
Nil
2% of Income Tax
1% of Income Tax
Corporate Tax Rate for Domestic Companies

As per the corporate tax rates for the 2011-12 fiscal, domestic
companies, with total income of more than 10 million rupees, need
to pay a corporate tax of 32%. This includes a basic rate of 30%
along with a surcharge of 5 percent and an education cess of 2%.
In case their aggregate income is less than INR 10 million, the
domestic companies are required to pay corporate taxes at a rate of
30.9 percent. This is inclusive of a direct tax of 30% and an
education cess of 3 percent.
Corporate Tax Rate for International Companies
According to the corporate tax rates for 2011-12 fiscal, international
business organizations working in India and earning more than 10
million rupees need to pay a corporate tax rate of 42% percent. This
includes a basic tax of 40%, an education cess of 3 percent and a
surcharge of 2.5%.
Important Corporate Tax Rates in India

A dividend distribution tax of 17% is applicable for the
domestic companies. . In case of short Term Following are
some other important taxes for the 2011-12 that are applicable
for the business in addition to the corporate taxes:
Minimum Alternate Tax at a rate of 19 percent along with
applicable cress and surcharge.
Companies whose turnover exceeds 10 million rupees, need to
pay an extra surcharge of 10% on their basic tax. Term capital
gains, the normal basic tax rates are applied but in case of the
long term ones, the tax rate varies between 10 and 20 percent.
Short term profits, which are made from selling equity shares or
units of equity based funds, can be taxed at 15 percent.
However, long term profits in these transactions are exempted

from taxes. Dividends received by Indian companies from
outside India, are subjected to a tax rate of 30 percent along
with cress and surcharge.
In case the net wealth of a company is more than 3 million
rupees, there is a wealth tax of 1 percent on the difference.
Corporate Withholding Taxes in India 2011-12
The following rates are applicable in case of withholding taxes

that come into force when payments are made to nonresidents:
Interest - 20 percent
Technical Services - 10 percent
Royalties - 20 percent
Other Services - 40 percent of earnings
DOUBLE TAXATION TREATY

Double taxation is the case where two or more countries
concurrently tax the same tax payers on account of the same
subject matters of tax (Such as Income, Property, etc).
Double taxation generally arises on account of conflicting
criteria adopted by different countries to levy the taxes.
Where by it is ensured that the same subject matter is not
taxed by two governments. This solution would be called
avoidance of double taxation.
Government may enter into an agreement where by the

economic units liable to double taxation are provided partial
relief.
A country may decide to give unilateral tax relief to its own
subjects even when no tax agreement exists with other
countries.
India has entered into comprehensive agreement for the
advantages of double taxation of income with several
countries including Austria, Belgium, and The federal republic
of Germany, France, Japan and the Scandinavian countries.
DOUBLE TAX AVOIDANCE TREATY

Known as Double tax avoidance
agreement (DTAA)
India has entered into DTAA with 84 countries including US.

In case of countries with which India has double tax avoidance
agreement, the tax rate are determined by such agreements.
Domestic corporation are granted credit on foreign tax paid by
them, while calculating tax liability in India.
There are agreed rates of tax and jurisdiction on specified
types of income arising in a country to a tax resident of
another country.
Under the Income Tax Act 1961 of India, there are two
provisions, Section 90 and Section 91, which provide specific
relief to taxpayers to save them from double taxation.
Section 90: For taxpayers who have paid the tax to a country
with which India has signed DTAA.
Section 91: Provides relief to tax payers who have paid tax to
a country with which India has not signed a DTAA.
THE FRINGE BENEFIT

TAX
The Fringe Benefits Tax (FBT) was the tax applied to
most, although not all, fringe benefits in India.
A new tax was imposed on employers by India's Finance

Act 2005 was introduced for the financial year
commencing April 1, 2005.
The fringe benefit tax was abolished in the 2009 Union
budget of India by Finance Minister Pranab Mukherjee.
THE FOLLOWING ITEMS WERE COVERED:

Employer's expenses on entertainment, travel, employee welfare and
accommodation. The definition of fringe benefits that have become
taxable has been significantly extended. The law provides an exact
list of taxable items.
Employer's provision of employee transportation to work or a cash
allowances for this purpose.
Employer's contributions to an approved retirement plan (called a
superannuation fund).
Employee stock option plans (ESOPs) have also been brought under
fringe benefits tax from the fiscal year 200708.
WEALTH TAX
Based on total wealth that includes:
Housing
Bank deposits
Cash
Money funds
Insurance and pension savings
Investments
GIFT TAX
Levied on something one living person gifts another
Included in 'Income from other sources
Only on gifts above 50,000
No tax on gift received from relatives
No tax on gifts received in marriage or via inheritance or by
charitable trusts
To evade tax get a 'Gift Deed' signed by donor
CONCLUSION
Taxation is a key tool of economy.
It has significant effects on savings and investments, on the
allocation of resources between alternative sectors of the
economy and efficiency with which resources are utilized.
The current system of tax is fraught with complexities owing to
many amendments over the years.
Therefore the New Direct Tax Code (DTC) is said to replace the
existing Income Tax Act of 1961 in India.
The Finance Minister P. Chidambaram has indicated that it may
be difficult for the government to meet the April 1, 2013
deadline for the implementation of the Direct Taxes Code
(DTC).
Thank you

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Presenting

DIRECT TAX TRENDS IN

TYPES OF DIRECT TAX

BANKING CASH TRANSACTION TAX

PERSONAL INCOME TAX

TRENDS OF INCOME TAX

FOR THE FINANCIAL YEAR 2007-08

FOR THE FINANCIAL YEAR 2008-09

FOR THE FINANCIAL YEAR 2009-10

FOR THE FINANCIAL YEAR 2010-11

FOR THE FINANCIAL YEAR 2011-12

Capital Gain Tax

Corporate Tax Rates for Firms, Companies and Local Authorities

Corporate Tax Rates for Co-operative societies

Net Income Range

Corporate Tax Rate for Domestic Companies

Important Corporate Tax Rates in India

However, long term profits in these transactions are exempted

The following rates are applicable in case of withholding taxes

DOUBLE TAXATION TREATY

Government may enter into an agreement where by the

DOUBLE TAX AVOIDANCE TREATY

India has entered into DTAA with 84 countries including US.

THE FRINGE BENEFIT

A new tax was imposed on employers by India's Finance

THE FOLLOWING ITEMS WERE COVERED:

Insurance and pension savings

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