Government of India | NITI Aayog

Compliance

TRUST

TAX LIABILITY:

Public Charitable Trusts, under Indian laws are treated as organisations with charitable purpose entitling all the tax benefits applicable.

Private trust or family trust is not a Public Charitable Trusts and hence does not enjoy the privileges entitled to a trust with charitable purpose.

The following groups are ineligible for tax exemption: all private religious trusts; and charitable trusts or organizations created after April 1, 1962, and established for the benefit of any particular religious community or caste. But note that a trust or organization established for the benefit of “Scheduled Castes, backward classes, Scheduled Tribes or women and children” is an exception; such a trust or organization is not disqualified, and its income is exempt from taxation.

SOLE PROPRIETORSHIP

TAX LIABILITY UNDER SOLE PROPRIETORSHIP:

These can include:

  • Service Tax – Service tax registration for businesses providing services is mandatory for companies in India who’s turnover has crossed Rs. 9 lacs.
  • CST / VAT Registration – Company providing goods will have to register for Value Added Tax or VAT (within same state) and/or Central Sales Tax or CST (between states) once their turnover has crossed Rs. 5 lacs, as it becomes mandatory then.
  • Other Registrations – Importer Exporter Code (IEC), Professional Tax, Shop and Establishment License, etc. must be obtained, if applicable.~

Taxation: A Sole Proprietorship is taxed as an individual on the Slab Rates applicable.

The Slab Rates are: –

  • For Income up to Rs 2,50,000 – No tax
  • Income from Rs 2,50,000 – Rs 5,00,00 = 5%
  • Income from Rs 5,00,000 – 10,00,000 = 20%
  • Income more than Rs 10,00,000 = 30%
  • Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
  • Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.
  • Cess: 3% on total of income tax + surcharge.

GST: If turnover exceeds 20 lakh then you must get yourself registered. Although, if you are tied-up with an E-Commerce platform, then you must get your registration regardless of your turnover.

SOCIETY

TAX LIABILITY:

An incorporated society may be entitled to an income tax exemption, but the tax exemptions are applicable only as long as the income tax department accepts their activities as being charitable.

SECTION 8

TAX LIABILITY:

 Taxation over section 8 company is treated at par with other companies. The profits are taxes @30%. However, if section 8 company is registered under section 12AA (tax exemption) of the income tax act, then Section 8 profit is completely exempt and no tax is levied on the company.

However, certain compliances is to be made every year to continue enjoying the tax exemption.

PUBLIC LIMITED COMPANY

Indian Public Limited Company is considered a tax resident; it is therefore eligible for tax under Income Tax Act, 1961. Tax rate of 30% on the total income and surcharge of 5% if the income exceeds 10 Million plus 3% Education cess & Secondary and Higher Education cess on the total of income tax and surcharge.

PRIVATE LIMITED COMPANY

  • Private Limited Company with a total turnover of upto Rs.50 crores during the previous year are taxed at 25% of total income.
  • Private limited company with a total turnover of more than Rs.50 crores during the previous year are taxed at 30% of total income.

In addition to Income Tax, a Private Limited Company is also liable to pay Income Tax Surcharge, Education Cess and Secondary and Higher Education Cess.

CAP ON INCOME TAX SURCHARGE FOR COMPANIES:

However, the Income tax surcharge is capped. For a Private Limited Company having a total income exceeding Rs.1 crore but not exceeding Rs.10 crores, the total amount payable as income-tax and surcharge would not exceed the total amount payable as income-tax on a total income of Rs.1 crore by more than the amount of income that exceeds Rs.1 crore.

Also for a Private Limited Company having a Total Income of more than Rs.10 crores, the total amount payable as Income-Tax and Surcharge would not exceed the total amount payable as Income-Tax and Surcharge on a total income of Rs.10 crores by more than the amount of income that exceeds Rs.10 crores.

EDUCATION CESS FOR COMPANY:

Private limited companies are liable to pay education cess at the rate of 2% of the amount of income tax as increased by the applicable surcharge.

SECONDARY AND HIGHER EDUCATION CESS FOR COMPANY:

Private limited companies are liable to pay secondary and higher education cess at the rate of 1% of the amount of income tax as increased by the applicable surcharge.

MINIMUM ALTERNATE TAX FOR COMPANY:

Some companies that generated income during a year are able to reduce the tax liability by taking advantage of various income tax laws and provisions. This led to an increase in the number of zero tax paying companies. Hence, minimum alternate tax was introduced by the Government. Minimum alternate tax is applicable only when the normal tax liability of the company is less than 18.5% of book profit.

Minimum alternate tax is applicable for private limited companies at the rate of 18.5% of book profit plus surcharge and education cess.

PARTNERSHIP

TAX LIABILITY

The Profits of a Partnership firm are taxed at 30% + educational cess. There are no annual return filing requirement for a Partnership firm.

OPC

OPCs are taxed similar to Private Ltd Companies.

The total tax can be divided amongst: Flat corporate tax + Surcharge (SC) + Education Cess (EC) + Minimum Alternative Tax (MAT) as applicable

Tax @ flat 30%+ SC + EC

MAT Applicable

LLP

The LLP taxation policy is similar to that of a Partnership firm. From assessment year 1993-94, a partnership firm is treated as a separate taxable entity and has to pay tax on its income. Income of a partnership firm is taxed at 30% plus 2% Education Cess plus 1% Secondary and Higher Education Cess – similar to a private limited company.