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Tax:-Defined as Compulsory exaction of money by public authorities for public enforceable by law & is not payment for services. Tax is Classified into Two Types: i. Direct Tax ii. Indirect Tax
TAXATION LAW Direct Tax Income Tax
Indirect Tax
Wealth Tax
Customs Duty
Sales Tax (Central /State
Excise Duty (Central/State)
First introduced by Sir.James Wilson. In order to meet loss suffered by Govt. 1857 it was amended from time to time. In 1886 separate Income Tax which remained in force till 1917. 1918-New income Tax Act,Shortly Replaced by Income Tax 1922.which Remained till 1961 Present Act:-The Income Tax Act 1961 Came into force from 1st April 1962,which applies to whole India,which has 298 section & XII schedules.
Framed by central Board of Direct Taxes(CBDT) Framed from time to time for carrying out the purposes of the I.T.Act and Finance Act. And such rules are called Income Tax Rules 1962. Assessment:-is the procedure by which income of an assessee is determined by the assessing officer. Assessee:-sec.2(7) Assessee means a person whom any tax or other sum of money is payable under this Act.
Sec.4 Provides the following: Income Tax Shall be charged at the rates prescribed for the year by the annual Finance Act. The Charge is on every person including the assessable entities specified in sec.2(31) The levy of Tax shall be made on the total income of the assessee,computed as per the provisions of the Income Tax Act and Rules.
Tax Planning India is an application to reduce tax liability through the finest use of all accessible allowances, exclusions, deductions, exemptions, etc, to trim down income and/or capital profits. Over 1600 major and minor amendments have been made. The stability of the Tax laws as well as the tax rate structure has been affected adversely.
With increasing of burden of direct taxes like income tax, wealth tax etc..the tax planning has been increased. 1.Money Conditions & credity squeeze. 2.Income Tax claims a huge share i.e. 55% of corporate profits leaving just 45% to share holders. 3.Inflation coupled with over taxation of corporate profits.
Choice of form of Business Organization Income tax Recognizes 7 form of business organization:a) Individuals b) Hindu undivided families c) Companies d) Partnership firms e) Association of persons and bodies f) Local authorities g) Artificial judicial person. Therefore tax rates are applicable to these different form of organization. i.
ii. Choice of Business iii)Choice of Area location iv)Choice of proper Capital Structure v)Capital budgeting vi)Expansion and new business vii)Choice of ing Year
On 5th Jan.1957- It came into force. Covers whole India including Jammu and kashmir. This Act formulates principles for determining when a sale or purchase of goods take place. a. In course of inter-state trade of commerce. b. Outside a state or c. In the course of import into or export from India.
To formulate the principles for determining to when a sale or purchase of goods take place. To provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-state trade or commerce. To declare certain goods to be of special importance in inter-state trade or commerce. To specify the restrictions and conditions to which state law is imposing on the sale or purchase of such goods of special importance shall be subject.
◦ Deals with the inter state sales(Sec 3),sale or purchase of goods taking place outside a state(sec 4),sale or purchase in the course of export and import(sec.5),liability and charge to sales tax(sec 6),registration of dealers(sec 7),determination of taxable turnover(sec 8),levy and collection of tax(Sec 9),offenses(Sec 10 & 12),declared goods(Secs.14 & 15).
The act mainly deals with the following:1. To provide certain definition of the 2. To provide as to when a transaction becomes: (a)sale in the course in inter-state sales (b)sale outside & inside the state (c)sale in the course of import or export 3.To levy, collect &distribute taxes (a)levy of sales tax (b)collection of sales tax (c)distribution of collected sales tax 4.To deal with offences 5.Taxation scheme for goods declared by parliament as of special importance 6.Residue matters:(a)power of states to make rules (b)liability of special cases.
Appropriate state:-According to Sec 2(a) of the Act, "appropriate state means in relation to a dealer who has one or more places of business situated in the same state, that state and if a dealer has more than one place of business situated in different states, each of these states will be the appropriate state in relation to the place or places of business situated in that state.
“Crossing the customs frontiers of India”
This means crossing the limits of the area of a customs station in which imported goods or exports goods are ordinarily kept before clearance by customs authorities.
Sale or Purchase of goods in the course of inter-state trade. Sec 3 lays down the principles. The sale or purchase of goods shall be deemed to take place under:1.If the sale or purchase occasions the movement of goods from one state to another state. 2.If sale or purchase is effected by transfer of documents of title to goods during their movement from one state to another state. 3.Inter state transfer of goods by principal to agent or by the agent to the principal 4.Good send from head office to a branch office or vice versa.
A sale which takes place outside the other states. E.g. A dealer X of Chennai makes a single contract dealer of Mumbai for the sale of 2000 tons of wheat,1200 tons lying at Madurai and 800 tons at Mumbai. Here this sale transaction will be considered to be of two separate contracts. The contract for the sale of 1200 tons will be considered as of inter-state sale and contract for the sale 800 tons will be treated as of sale outside the Tamil Nadu
Sec 6 to 13 of the CST deals with the Interstate sales tax Every dealer is liable to pay tax on all the sales effected by him in the course of interstate or commerce. Sec 8 of the Act deals with the inter-state sales tax, it is charged at different rates depending upon the status of the buyer and the category of the goods.
Rate of Inter-State Sales tax Declared Goods
Non-Declared Goods
On the sales of the Government
4 percent
On the sales to authorized ed dealers for the re-sale purpose
4 percent
On all other sales
State rate of sales tax
When taxable under the state law at a rate less than two percent on all sales.
State rate of sales tax
On sales to government
4 percent
On sales to authorized ed dealers for authorized purpose
4 percent
On all other sales
10 percent
TAXATION LAW Direct Tax Income Tax
Indirect Tax
Wealth Tax
Customs Duty
Sales Tax (Central /State
Excise Duty (Central/State)
First introduced by Sir.James Wilson. In order to meet loss suffered by Govt. 1857 it was amended from time to time. In 1886 separate Income Tax which remained in force till 1917. 1918-New income Tax Act,Shortly Replaced by Income Tax 1922.which Remained till 1961 Present Act:-The Income Tax Act 1961 Came into force from 1st April 1962,which applies to whole India,which has 298 section & XII schedules.
Framed by central Board of Direct Taxes(CBDT) Framed from time to time for carrying out the purposes of the I.T.Act and Finance Act. And such rules are called Income Tax Rules 1962. Assessment:-is the procedure by which income of an assessee is determined by the assessing officer. Assessee:-sec.2(7) Assessee means a person whom any tax or other sum of money is payable under this Act.
Sec.4 Provides the following: Income Tax Shall be charged at the rates prescribed for the year by the annual Finance Act. The Charge is on every person including the assessable entities specified in sec.2(31) The levy of Tax shall be made on the total income of the assessee,computed as per the provisions of the Income Tax Act and Rules.
Tax Planning India is an application to reduce tax liability through the finest use of all accessible allowances, exclusions, deductions, exemptions, etc, to trim down income and/or capital profits. Over 1600 major and minor amendments have been made. The stability of the Tax laws as well as the tax rate structure has been affected adversely.
With increasing of burden of direct taxes like income tax, wealth tax etc..the tax planning has been increased. 1.Money Conditions & credity squeeze. 2.Income Tax claims a huge share i.e. 55% of corporate profits leaving just 45% to share holders. 3.Inflation coupled with over taxation of corporate profits.
Choice of form of Business Organization Income tax Recognizes 7 form of business organization:a) Individuals b) Hindu undivided families c) Companies d) Partnership firms e) Association of persons and bodies f) Local authorities g) Artificial judicial person. Therefore tax rates are applicable to these different form of organization. i.
ii. Choice of Business iii)Choice of Area location iv)Choice of proper Capital Structure v)Capital budgeting vi)Expansion and new business vii)Choice of ing Year
On 5th Jan.1957- It came into force. Covers whole India including Jammu and kashmir. This Act formulates principles for determining when a sale or purchase of goods take place. a. In course of inter-state trade of commerce. b. Outside a state or c. In the course of import into or export from India.
To formulate the principles for determining to when a sale or purchase of goods take place. To provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-state trade or commerce. To declare certain goods to be of special importance in inter-state trade or commerce. To specify the restrictions and conditions to which state law is imposing on the sale or purchase of such goods of special importance shall be subject.
◦ Deals with the inter state sales(Sec 3),sale or purchase of goods taking place outside a state(sec 4),sale or purchase in the course of export and import(sec.5),liability and charge to sales tax(sec 6),registration of dealers(sec 7),determination of taxable turnover(sec 8),levy and collection of tax(Sec 9),offenses(Sec 10 & 12),declared goods(Secs.14 & 15).
The act mainly deals with the following:1. To provide certain definition of the 2. To provide as to when a transaction becomes: (a)sale in the course in inter-state sales (b)sale outside & inside the state (c)sale in the course of import or export 3.To levy, collect &distribute taxes (a)levy of sales tax (b)collection of sales tax (c)distribution of collected sales tax 4.To deal with offences 5.Taxation scheme for goods declared by parliament as of special importance 6.Residue matters:(a)power of states to make rules (b)liability of special cases.
Appropriate state:-According to Sec 2(a) of the Act, "appropriate state means in relation to a dealer who has one or more places of business situated in the same state, that state and if a dealer has more than one place of business situated in different states, each of these states will be the appropriate state in relation to the place or places of business situated in that state.
“Crossing the customs frontiers of India”
This means crossing the limits of the area of a customs station in which imported goods or exports goods are ordinarily kept before clearance by customs authorities.
Sale or Purchase of goods in the course of inter-state trade. Sec 3 lays down the principles. The sale or purchase of goods shall be deemed to take place under:1.If the sale or purchase occasions the movement of goods from one state to another state. 2.If sale or purchase is effected by transfer of documents of title to goods during their movement from one state to another state. 3.Inter state transfer of goods by principal to agent or by the agent to the principal 4.Good send from head office to a branch office or vice versa.
A sale which takes place outside the other states. E.g. A dealer X of Chennai makes a single contract dealer of Mumbai for the sale of 2000 tons of wheat,1200 tons lying at Madurai and 800 tons at Mumbai. Here this sale transaction will be considered to be of two separate contracts. The contract for the sale of 1200 tons will be considered as of inter-state sale and contract for the sale 800 tons will be treated as of sale outside the Tamil Nadu
Sec 6 to 13 of the CST deals with the Interstate sales tax Every dealer is liable to pay tax on all the sales effected by him in the course of interstate or commerce. Sec 8 of the Act deals with the inter-state sales tax, it is charged at different rates depending upon the status of the buyer and the category of the goods.
Rate of Inter-State Sales tax Declared Goods
Non-Declared Goods
On the sales of the Government
4 percent
On the sales to authorized ed dealers for the re-sale purpose
4 percent
On all other sales
State rate of sales tax
When taxable under the state law at a rate less than two percent on all sales.
State rate of sales tax
On sales to government
4 percent
On sales to authorized ed dealers for authorized purpose
4 percent
On all other sales
10 percent
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