Taxation of Companies

Taxable Income-How Computed

Ascertain Income from Different heads of Income Income of other persons may be included in the income of company under section 60 and 61 Current and brought forward losses should be adjusted The total income computed under different heads is GTI. From the GTI so computed, the following deductions are permissible under sections 80 C to 80 U.

Nature of Deductions
80G-Donations to Charitable institutions and funds 80 GGA-donations for scientific research 80 GGB-contribution to political parties 80 IA-profits and Gains from industrial undertaking engaged in development of special economic Zone 80 IAB-profits and Gains from industrial undertaking other than development of special economic Zone 80 IB- IAB-profits and Gains from certain industrial undertaking other than development of special economic Zone

 80 IC-profits and Gains of certain undertakings in certain States 80 ID- profits of hotels and convention centers 80 IE-profits of undertaking in North eastern states 80 JJA-Profits from the business of collecting and processing of bio-degradable waste 80 JJAA-employment of new workmen 80LA-income of offshore Banking Units.

Tax Liability of a Company

Under Normal Provisions:
Find out the Taxable income under normal provisions. Find out the income tax @30%
Long Term capital Gain @20 % Income from winning from Lotteries @30 % In case of Foreign company @40%

Add surchage @7.5%, if net income exceeds 1 crore. Add income tax and Surchage Add education cess @2% and secondary and higher education cess @1% Deduct Tax credit or Tax rebate This amount is Tax Liability of a company(It can not be less than 0)

Tax Liability of a Company

Under Minimum Alternate Tax
Fine out the book profit Calculate 18% of the book profit Add surcharge @7.5% (in case of foreign company, 2.5%) Add education cess @2%and secondary and higher education cess @1 % (of book profit and surcharge) This total income can be Tax Liability
Tax Liability of a company is the amount calculated under normal provisions or under MAT whichever is more

Calculation of Book Profit

For calculation of Book profit, the Net profit as shown in profit and loss account shall be adjusted as follows: Amount to be added back if debited to profit and loss account:
Income tax paid or payable and the provisions therefore Amount carried to any reserve, by any name Amounts set aside to provisions made for meeting liabilities, other ascertained liabilities Amount by way of losses of subsidiary companies

Calculation of Book Profit

Add:
Amount of dividend paid or proposed Amount of expenditure relatable to any exempt income Amount of depreciation Amount of deferred tax

Calculation of Book Profit

Amount to be deducted from Net profit
Amount withdrawn from reserve Income exempt from tax Depreciation Amount withdrawn from revaluation reserve Amount of loss brought forward or unabsorbed depreciation, whichever is less Amount of profit eligible for deduction under sections 80 HHC,80HHE and 80HHF Profit of sick industrial unit Amount of deferred tax

Alteration in Net profit

In the following 2 cases assessing officer can rewrite the profit and loss account
If profit and loss account is not prepared according to companies act If accounting policies, accounting standards or rates or method of depreciation are different