A Glance on Indian Taxation

Presented By-Utkarsh Srivastav, EN Final Year,Shri Ram Murti Smarak College Of Engg. & Tech. , unnao

SALES TAX(VAT)

SALES TAX

STATE SALES TAX CENTRAL SALES TAX

Production within state

Only SST No CST

State of manufacturing

Transportation to another

stateOnly CST

State Sales Taxation system

Central Sales Taxation System

Scheme of Sales TaxIt is optional for the firm to get CST registration, while just after a certain limit firm has to get state sales tax registration.

CST < SST

Currently in India CST is 4% or SST(whatsoever is lower). That’s why registration of CST would give significant economic advantage.

AN ENTREPRENEUR MUST KNOW-

1. Whether registration is compulsory or not.2. Rate of sales tax.3. Form ‘c’ is required for CST.4. A purchased product can be sold.5. A resold product may have zero or lower

sales tax.

Note- However , sales tax has been replaced by uniform VAT throughout the country.

Registration Under VAT

Entrepreneur’s firm

Online registration for VAT

A distinct registration number

Sample Invoice

Payment Under VAT

1. VAT registration as dealer.2. Maintenance of the required books of

account.3. Filling of periodical returns showing all sales

and purchase.4. The VAT payable is to be deposited in the

treasury(through authorised bank) with the challan in a prescribed form.

EXCISE DUTYExcise Duty is imposed by the Central Government on the production of specific goods.

It is levied on the goods cleared from the factory.

Different rates of Excise Duty is applied on different type of products.

AN ENTREPRENEUR MUST KNOW-

1. Is it compulsory for him to pay Excise duty because small entrepreneur & some specific goods are exempted from excise duty.

2. Rate of excise duty on the product manufactured by entrepreneur.

3. An entrepreneur has to familiarize himself with the procedure , records and formalities.

Note- goods are exempted if they are exported.

A GLANCE ON DIFFERENT TYPE OF GOODS & THEIR CURRENT EXCISE DUTY RATES

INCOME TAXIncome tax act, 1961 has made it manadatory for all people , whose income during the previous year is more than the prescribed exemption limit, to pay tax at prescribed limit.

Obligations of an Entrepreneur as a TAX payer

1. Maintenance of Account Books.2. Permanent account number(PAN)3. Income Tax Return4. Payment of Tax.

Computation of Income from Business

For computation of business income, the profit from the business should be determined & adjustment should be as per provisions of income tax act 1961.Deductions expressly allowed in computing business income-1. Rent rates, taxes, repairs & insurance of business

building, machinery, plant, furniture.

2. Expenditure on Scientific Research.

3. Expenditure on Patents and Copyrights.

4. Insurance premium against risk of damage or destruction of stocks.

5. Bonus and commission to employees.

6. Interest on borrowed capital.

7. Contribution to provident fund.

INCOME TAX benefits to small scale Entrepreneurs

1. Tax holiday2. Depreciation allowance3. Rehabilitation allowance4. Investment allowance

Tax Holiday

• (Section 80J of income tax act 1961), new industrial undertakings, including small scale industries, are exempted from the payment of income tax on their profit subjected to a maximum of 6% per annum of their capital employed for 5 years.

Depreciation Allowance

• (Section 32, 1961 act) A small scale industry is entitled to a deduction on depreciation account on block of assets at the prescribed rate.

• In case of small scale industry, deduction from actual cost of plant & machinery is allowed subject to a maximum of Rs. 20 lakhs.

Rehabilitation Allowance• (Section 33B, 1961 act) It is granted to the small scale

units whose business is discontinued on account of-1. Flood , Cyclone , Earthquake or other natural

calamities.2. Civil disturbance.3. Explosion or accidental fire.4. Action taken in combating an enemy.

Note- it must be used within 3 year. Only 60% of the amount of deductions allowable.

Investment Allowance• (Section 31A, 1961 act) it is allowed at the rate

of 25% of the cost of new plant installed.• In comparison to the other industries Small

Scale Industries have an advantage in claiming a deduction of investment allowance.

• It can be used in a year of installation failing which the benefit will be forfeited.

Income Tax concession to Small Scale Industries in Backward/Rural Areas

• (section 80 H & 80 HHA) the entrepreneurs are allowed in deduction of 20% on it’s profit & gains provided the unit satisfies the following conditions-

1. It must be in a backward/rural area.2. No splitting or reconstruction of an existing unit.3. Account is audited by a chartered accountant.4. 10 or more workers with aid of power or 20 or

more without aid of power.

THANK YOU