Types of Taxes

Avinash Kaur

005

Monica 006Shilpi Jain

037

Shilpa Mittal

050

Swati Luthra

054

TYPES OF TAXES

TYPES OF TAXES

WHO ARE LIABLE FOR TAX?1. Individuals2. Hindu Undivided families3. Companies4. Firms (partnerships)5. Association of persons or bodies of

individuals6. Local authority (municipal bodies)7. Artificial juridical person

TAX SYSTEM IN INDIA IS A THREE TIER SYSTEM:

IMPORTANCE’S OF TAX1. Economic growth2. Government revenue3. Private savings 4. Restraining the consumer

demand

INCOME TAX• Annual charge levied on both earned

income(wages, salaries,comission)andunearned income (dividends,interest,rents).

• The Income Tax Law comprises The Income Tax Act 1961, Income Tax Rules 1962, issued by central board of direct taxes(cbdt)

Personal income tax, levied on income of individuals,households,partnership and sole-proprietorships.

Income tax is a tax payable, at the rate enacted by the Union Budget (Finance Act) for every Assessment Year, on the Total Income earned in the Previous Year by every Person

BASIC TYPES OF INCOME TAXES

• Corporation  income tax, levied on profits of incorporated  firms. However, presence of tax loopholes (whose number increases in direct proportion to the complexity of tax code) may allow some wealthy persons to escape higher taxes without violating the letter of the tax laws.

Corporation  income tax

The total income of a person is segregated into five heads:-

1. Income from salaries2. Income from house property3. Profits and gains of business or profession4. Capital gains and5. Income from other sources

Heads of income

Sales Tax on Intellectual Property

Sales Tax was charged on sale of Goods under the Sale Of Goods Act,1930. Central Sales Tax is payable on the sale of all goods by a dealer in the course of

inter- state trade or commerce; Outside a state or ; In the course of import into or export from India. Sales tax is levied on the sale of movable goods.

The levy of sales tax on intangibles has been marred by controversy.

TAXATION – SALES TAX Controversies in taxing intangible assets

In case of interstate transaction, Sec 3, 4 and 5 makes taxing of intangibles difficult.

Section 4 Physical location of asset is basic criteria for imposing

sales tax by a state government. Controversy of location determination arises in case of assignment of patent, trade mark or copy right.

Section 3 and Section 5 Actual physical movement of goods is necessary from

one state to another or from outside India to inside or from inside India to outside in order to be charged under CST. Such physical movement may be absent in the case of intangibles.

Definition Of Goods Sale of Goods Act,1930 – [section 2(7)] “Goods” means every kind of movable

property other than actionable claims and money……

Both corporal and incorporeal Both tangible and intangible

Central Sales Tax Act ,1956 - [section 2 (d)] “Goods” includes all materials, articles,

commodities and all other kinds of movable property, but does not include newspapers, actionable claims, stocks, shares and securities.

Are IPR’s Goods The Supreme Court held that intangibles are Goods for the Purpose of “Sales tax”.

TEST TO DETERMINE “GOODS” In India the test to determine whether a

property is ‘goods’ for the purpose of sales tax, is not whether the property is tangible or intangible or incorporeal. The test is whether the item concerned is capable of abstraction, consumption and use and whether it can be transmitted, transferred, delivered, stored, possessed, etc.

This necessarily implies that states have the right to tax transfer of IP.

INTER- STATE TRANSFER IN CASE OF TANGIBLE GOODS

As per sec 3&4 of the CST Act if goods moving in pursuance of contract:

Taxable in the state where the movement commences

In case of goods not moving pursuance of the contract, then taxable in the state where the appropiation is made.

Intangibles like patents, copyrights, trademarks since there is no movement of goods as such, transfer thereof is taxable in the State where agreement is made.

ConclusionsA comprehensive IP tax regime

should be developed.Uniform IP tax policy should be

adopted.Provisions of IP need to be codified

for better assessment and administration.

No mechanism in India to monitor the movement of IPR’s inter – state for the purpose of taxing.

WEALTH TAXWealth Tax is a tax on the value of wealth owned by a person, levied under the Wealth Tax Act, 1957.It is one of the direct taxes.It is an annual tax. Wealth is a tax on “Assets”.Wealth Tax is charged on “Net Wealth”

Net Wealth = Total Assets - Total Debts

CONT….

Wealth Tax is paid by “Individuals/HUF/Companies”The tax is levied @ 1 per cent on the amount of wealth as on 31st March of every year, where such amount exceeds Rs.30,00,000.

ASSETSBuilding and Land Appurtenant

to the BuildingCommercial buildingResidential buildingGuest houseFarm house

Motor CarJewellery

Precious stonesArticles made up of gold,

silver or any other precious metal

CONT…Urban LandCash in Hand

Individual/HUFup to 50,000: exemptBalance: taxable

CompaniesRecorded amount: exemptUnrecorded amount: taxable

Yachts, Boats & Aircrafts

ASSETS EXEMPTED FROM WEALTH TAX

Property held under a trust.Interest in the property of HUF for a family member.Residential building of an ex-ruler.Jewellery of an ex-ruler.Any house or plot of an individual.

or HUF up to 500 sq meters.

IMPACT ON ECONOMYThe revenue from wealth tax is negligible as compared to the revenue from income tax. The expenses incurred in collection of the wealth tax is very high compared to the revenue earned.It fails to bridge the gap between the rich and the poor, as the tax rate is extremely low.

SERVICE TAX It is a tax which is payable on

services provided by the service provider.

The tax came into effect in 1994 and was introduced by the then Finance Minister Dr. Manmohan Singh.

119 services are taxable services in India. These taxable services are specified in Section 65(105) of the Finance Act,1994. Section 64 of the Finance Act, 1994.

Current Service Tax Rate The current service tax rate is 12%

(+) Education Cess@ 2% = 0.2%

Senior & Higher Education Cess @ 1% = 0.1%

Effective Service Tax Rate = 12.36%

Services on which tax is imposed In relation to telecommunication service. In relation to general insurance business. In relation to insurance auxiliary service by an

insurance agent . In relation to transport of goods by road in a goods

carriage, where the consignor or consignee of goods.

In relation to Business Auxiliary Service of distribution of mutual fund by a mutual fund distributer or an agent.

In relation to sponsorship service provided to any body corporate or firm located in India;

Now Questions Arises??

WHO SHOULD PAY

WHEN TO PAY

HOW TO PAY

Indian union budget 2012-13 indirect tax proposals

How to save tax?

Thank you!!