TAXATION OF COMPANIES

Group members:
Akanksha Gupta
LakshmiKant Patnaik
Khushboo Goel
Pulkit Sachdeva

WHAT IS A COMPANY?
A company has been defined as a
juristic person having an
independent and separate legal
entity from its shareholders.

WHAT IS A COMPANY?

As per section 2(17) of Income Tax Act, company means:

Any Indian company; or
Any body incorporated by or under the laws of a country
outside India; or
Any institution, association or body which was assessed as
a company for any assessment year under the Income-tax
Act, 1922 or was assessed under this act for any
assessment year as a company commencing on or before
01.04.1970
Any institution, association or body, whether incorporated
or not and whether Indian or Non-Indian, which is declared
by a general or special order of CBDT to be a company

COMPANY
A company in which the public are substantially interested u/s
2(18)
A company owned by Government or Reserve Bank of
India
A company having Govt. participation.
Companies registered under sec 25 of the Indian
Companies Act, 1956
A company declared by the CBDT
Mutual benefit finance company

TYPES OF COMPANY
1. Widely held company Its a company in which
the public are substantially interested.
2. Closely held company Its a company in which
the public are not substantially interested
3. Indian company u/s 2(26) means a company
formed and regd. under the Companies Act, 1956.
It shall be registered or, as the case may be,
principal office of the company, corporation,
institution, association or body, in all cases is in
India

TYPES OF COMPANY
4. Domestic Company u/s 2(22A) means an Indian Company or
any other company which in respect of its income, liable to tax
under

the

Income-tax

Act,

has

made

the

prescribed

arrangements for the declaration and payment within India

payable out of such Income.

5. Foreign company u/s 2(23A) A company which is not a

domestic company.

TYPES OF COMPANY
6. Investment company means a company
whose GTI mainly consists of Income
chargeable

under

the

heads

House

Property, Capital Gains, and other sources.

RESIDENTIAL STATUS OF
COMPANIES
Resident

An Indian Company

The control and

management of its
affairs is situated
wholly in India

Non Resident

Not an Indian
Company
The control and
management of its
affairs is situated
partially or wholly
outside India

INCIDENCE OF TAX
Covered u/s 5 of Income-tax Act
In case of Company Resident in India
Any income received or deemed to be received in India
during the relevant previous year by or on behalf of such
person
Any income which accrues or arises or is deemed to
accrue or arise in India during the relevant previous year

Any income which accrues or arises outside India

during the relevant previous year

INCIDENCE OF TAX
In case of Company Non-Resident
Any income which is received or is
deemed to be received in India during
the relevant previous year by or on
behalf of such person
Any income which accrues or arises or is
deemed to accrue or arise to him in
India during the relevant previous year

COMPUTATION OF TOTAL
INCOME

Calculate
income under
four heads
(Salary head to
be excluded)

Section 60 and
61, and set off
and carry
forward of
losses
applicable to
calculate GTI.

Subtract
deductions to be
allowed from
GTI to arrive at
Total Income

DEDUCTIONS
NO.

SECTIO
N

EXPLANATION

80G

DONATIONS TO CERTAIN FUNDS/CHARITABLE

INSTITUIONS, ETC.

80GGA

CERTAIN DONATIONS FOR SCIENTIFIC RESEARCH

OR RURAL DEVELOPMENT

80GGB

CONTRIBUTIONS GIVEN BY COMPANIES TO

POLITICAL PARTIES

80IA

PROFITS AND GAINS OF NEW INDUSTRIAL

UNDERTAKINGS OR ENTERPRISES ENGAGED IN
INFRASTRUCTURAL DEVELOPMENT,ETC.

80IAB

DEDUCTIONS IN RESPECT OF PROFITS AND GAINS

BY AN UNDERTAKING OR ENTERPRISE ENGAGED IN
DEVELOPMENT OF SPECIAL ECONOMIC ZONE

80IB

PROFITS GAINS FROM CERTAIN INDUSTRIAL

UNDERTAKING OTHER THAN INFRASTRUCTURE
DEVELOPMENT UNDERTAKINGS

DEDUCTIONS
NO.

SECTIO
N

EXPLANATION

80IC

DEDUCTIONS IN RESPECT OF CERTAIN

UNDERTAKINGS OR ENTERPRISES IN CERTAIN
SPECIAL CATEGORY STATES

80ID

DEDUCTIONS IN RESPECT OF PROFITS AND GAINS

FROM HOTELS AND CONVENTION CENTRES IN
SPECIFIED AREA

80IE

SPECIAL PROVISIONS IN RESPECT OF CERTAIN

UNDERTAKINGS IN NORTH-EASTERN STATES

10

80JJA

DEDUCTIONS IN RESPECT OF PROFITS AND GAINS

FROM BUSINESS OF COLLECTING AND
PROCESSING BIO-DEGRAGDEABLE WASTE

11

80LA

DEDUCTIONS IN RESPECT OF CERTAIN INCOMES OF

OFFSHORE BANKING UNITS AND INTERNATIONAL
FINANCE SERVICES CENTRE

12

80JJAA

DEDUCTION IN RESPECT OF EMPLOYMENT OF NEW

TAX RATES
Short-term capital gain on equity shares in a company
or units of an equity oriented fund where the
transaction is chargeable to securities transaction tax

15%

Tax on long-term capital gains

20%

Tax on winnings from lotteries, cross word puzzles,

races including horse races, etc.

30%

Tax on income by way of dividends declared,

distributed or paid by a specified foreign company

15%

Tax on any other income

Domestic Company
Foreign Company

30%
40%

Surcharge in case total income exceeds Rs 10 crores

Domestic Company
Foreign Company

10%
5%

Education cess

2% on Tax

Senior and Higher education cess

1% on Tax

MINIMUM ALTERNATE TAX

Tax payable for any assessment year cannot be less
than 18.5% of book value:
In case of company, the income tax payable on total
income is computed under the Income Tax Act, in
respect of PY relevant to AY or is less than 18.5% of its
book profit, such book profit shall be deemed to be the
total income of the assessee and the tax payable by
the assessee on such total income (book profit) shall be
the amount of the income tax at the rate of 18.5%.

SPECIAL PROVISION
Section 115JAA provides that where any amount of
tax is paid under section 115JB(1) by a company for
any AY shall be computed as under
MAT credit available = Tax paid u/s115JB Tax Payable
on the total income under normal provisions of the
act.
The amount of credit so determined shall be allowed to
carried forward and set of in a year when the taxes
become payable on the total income computed
under the regular provisions.

Illustration:
Suppose the book profit of a company
for

the

AY

2014-15

are

10,00,000

whereas

its

total

income

(including

STCG of 1,60,000 referred to in section

111A) as per provisions of Income Tax
Act is 4,00,000. The tax shall be payable
as under:

(1)Tax on total income as per provision of the Act

tax on STCG referred to in section 111A
1,60,000 @ 15%
24000
Tax on balance total income
2,40,000 @ 30%
72000
Total tax
96000

(2) Tax @ 18.5% on book profit

of 10,00,000
1,85,000

In the above case tax payable on total income

i.e. 96,000 is less than 18.5% of the book
profits i.e. 1,85,000. Hence in this case,
deemed total income shall be 10,00,000 and
the tax payable shall be:

Tax payable

1,85,000

Add: Surcharge

NIL*

Add: Edu. Cess and SHEC @ 3%

5,550

Total tax payable

1,90,500

* Surcharge is charged only when total income of

the company exceeds 10 crores.