Income Tax Return Filing for Corporates
File the Income Tax Return & related compliances for your sole proprietorship business in India
File the Income Tax Return & related compliances for your Partnership Business in India
Limited Liability Partnership
File the Income Tax Return & related compliances for your LLP business in India
File the Income Tax Return & related compliances for your Public/Private Limited Company in India
NGO Tax Filing
Lets know about Tax Filing for a Not for Profit Organisation.
Income Tax Notice
Lets know about Income Tax Notice for
TDS on Salary
Lets know about TDS Applicability, Deduction, Payment & Filing for TDS on Salary
TDS on Non Salary
Lets know about TDS Applicability, Deduction, Payment & Filing for TDS on Non Salary
TDS on Foreign Payments
Lets know about TDS Applicability, Deduction, Payment & Filing for TDS on Foreign Payments
All you need to know for filing your Business Tax Return!
Business Tax Returns: Applicability & Types
What is a business tax return?
A business tax return is just an income tax return with a statement of income and expenditure details. Also, you need to declare in this return any tax to be paid on the profits made. It also contains details of the assets and liabilities held by the business. Items like fixed assets, debtors and creditors of the business, loans taken & given are declared here.
Income Tax Audit
Who has to file a business tax return?
The filing of Income Tax returns depends on your business type. For example:
👉 Proprietorship: Your business income, personal income like salary, house property income, interest income, etc., all have to be declared on the same return you will be filing.
👉 If the total income before adjusting any deductions is higher than the taxable limit, then you must file your ITR irrespective of your business profit or loss.
👉 The basic taxable limit is Rs. 5 lakh(with exemption u/s 87A). So, if your net income before deductions is above Rs 5 lakh, you must file your Income-tax return as a Business.
👉 Pvt Ltd Companies, firms and Limited Liability Partnership (LLP), you must file a business tax return irrespective of profit or loss. Even if you are not operating the business, a return has to be filed.
👉 Companies, firms, and LLPs are taxed at a rate of 30%.
What are the due dates for filing of returns?
For the Individuals not liable to a tax audit, the last date for the filing of the return is 31st August after the end of the financial year (You can file Late returns with a penalty up to 31 March). The due date is 30 September if you're an Individuals (Tax auditable), Company, LLP or partnership firm. For the FY 2017-18, this due date has been extended from 30 September 2018 to 31 October 2018.
The penalty for non-filing of returns: You can not carry forward losses if the return is filed after the due date of filing an income tax return. Also, a fine of Rs.5,000/- under section 271F can be levied on the assessee.
How do we save Corporate Tax in India?
Corporate taxes are levied on the profits earned by companies and firms operating within the country. The rate of taxation applicable to a company depends on the scale of the company’s profits/taxable income and factors such as capital depreciation, Cost of goods sold(COGS), and selling, general and administrative expenses. Careful management of some of these expenses can aid to save some corporate tax and minimize the loss of income through taxation.
Types of Corporation:
A corporation is referred to as a legal entity independent from its shareholders entitled to specific rights and duties of its own. Here in India, corporations are of two categories:
👉 Domestic Corporations: A Company whose management and control is in India and is registered under the MCA, as per Indian Companies Acts of 1956 or 2013 is a domestic corporation. Now, if the Indian arm of a foreign company such as Hindustan Unilever Limited, is wholly controlled and managed within India, it may also be deemed a domestic corporation.
👉 Foreign Corporations: A company based outside India or has a portion of its operations controlled and managed outside the nation’s borders like Infosys & TCS, is a foreign corporation.
Corporate Tax Structures:
Corporate tax is levied upon a company's net profit gained through avenues such as capital gains, rent, dividends, interest, or from the business itself. Once the taxable income is determined after deductions, taxation occurs in the following manner: capital gains, rent, dividends, interest or from the business itself. Once the taxable income is determined after deductions, taxation occurs in the following manner :
👉 25% of gross turnover is below or equal to Rs 400 crore.
👉 30% if the gross turnover exceeds Rs. 400 crore
👉 Additionally, a surcharge of 7% is levied if the income is between Rs 1 and 10 crores, and this value rises to 10% if the income exceeds Rs. 10 crores.
👉 Health & Education Cess is also charged @4% on the Income-tax and surcharge.
Foreign Corporations :
👉 Royalties or fees for technical services from the government or any Indian concern are taxed at a rate of 10%
👉 Additionally, any other type of income is taxed at 40%
👉 The surcharges are 2% for corporations with incomes between Rs.1 crore – Rs.10 crore and 5% for those exceeding this range.
👉 Health & Education Cess is also charged @4% on the Income-tax and surcharge.
👉 Alternately, companies can pay an Alternate Minimum Tax of 15% if the amounts calculated per the above rates are less than 15% of book profits. There is an additional health and education cess of 4% thereon along with surcharge as per applicable rate.
Corporate Tax Planning:
From the above, it is fairly straightforward that it is no simple task to navigate and save corporate tax in the current landscape effectively. This is where the concept of corporate tax planning comes in. The term should not be associated with tax evasion, which is an illegal practice. Instead, it involves carefully managing a company’s assets and operations to maximize gains and prevent the loss of large portions of the corporation’s income to taxation. Tax planning comes in. The term should not be associated with tax evasion, which is an illegal practice. Instead, it involves carefully managing a company’s assets and operations to maximize gains and prevent the loss of large portions of the corporation’s income to taxation.
Emphasize deductions, exemptions and rebates, and the appropriate management and reporting of the organization’s expenses, and it can Minimize payable taxes. These deductions may include :
👉 Capital Gains can either be taxed at a flat rate of 15% or 20% or tax-exempt under Sections 54D, 54G, 54GA 54EC etc.
👉 Donations to charitable organizations may be 50 -100% tax-exempt under Section 80G, subject to terms and conditions.
👉 Dividends may be eligible for rebates in some instances.
👉 15% Deductions for depreciation under Section 32 for old assets like machinery. 20% additional deduction on the purchase of new assets for manufacturer or production process of any establishment, transmission or distribution of power.
👉 Deduction in respect of employment of new employee u/s 80JJAA
Measures for Appropriate Planning:
In addition to the above deductions, there are specific other measures to save corporate tax. This saving relies on how the company's management devises its tax-saving strategy.
👉 Effective Expense Management: Many businesses within the country operate with unorganized labour, hindering proper bookkeeping. Hence it is necessary to maintain detailed reports of overhead costs and wages to claim deductions on various expenses like labour and production.
👉 Equity Valuation: While stock prices are valued at cost, there are cases involving shorter shelf lives where it can also be valued at its Net Realizable Value or NRV. This valuation prevents it from being overvalued and limits the taxable income from capital gains. It's only applicable in some instances where this value remains relatively steady, as large fluctuations may be grounds for fraud.
👉 Making Use Of Deductions: It is the most effective method of regulating taxable income. Their proper management could prove vital for companies looking to save corporate tax.
Conclusion: It is essential to balance the various available methods to save corporate tax, such as deductions and rebates, and the effective management of expenses. It fully understands the situations that these measures are best suited to also goes a long way in maximizing the gains of your corporation.