The tax structure in India is divided into direct and indirect taxes.
While direct taxes are levied on taxable income earned by individuals and corporate entities, the burden to deposit taxes is on the assessees themselves. On the other hand, indirect taxes are levied on the sale and provision of goods and services respectively and the burden to collect and deposit taxes is on the sellers instead of the assessees directly.
Taxes in India are levied by the Central Government and the State Governments. Some minor taxes are also levied by the local authorities such as the Municipality and the Local Governments.
Over the last few years, the Central and many State Governments have undertaken various policy reforms and process simplification towards great predictability, fairness and automation. This has consequently lead to India’s meteoric rise to the top 100 in the World Bank’s Ease of Doing Business (EoDB) ranking in 2018. The Goods & Services Tax (GST) reform is one such reform to ease the complex multiple indirect tax regime in India.
Major Central Taxes
Income Tax
Central Goods & Services Tax (CGST)
Customs DutyIntegrated
Goods & Services Tax (IGST)
Major State Taxes
State Goods & Services Tax (SGST)
Stamp Duty & Registration
Municipality taxes
Land revenue
Professional tax
Goods and Service Tax;
GST is one of the biggest indirect tax reforms in the Country.
GST is a comprehensive indirect tax levied on manufacture, sale and consumption of goods as well as services at the national level. It has replaced all indirect taxes levied on goods and services by the Central and State Governments.
GST regime was implemented from 1st July 2017, and India has adopted the dual GST model in which both the Centre and States levy taxes:
GST Registration
Aggregate annual turnover exceeds INR 40 lakhs
Aggregate annual turnover exceeds INR 20 lakhs (for Jammu & Kashmir, Himachal Pradesh, Uttarakhand and North-Eastern States)
Businesses specified under the GST Act (irrespective of the above-stated conditions)
Importer/ Exporter
Online Trader
Process under GST regime
- Register your business
- Issue tax invoices
- Accounting for GST
- Tax-return filing
- Input tax credit
- Claiming GST refund
- Making GST payment
Income Tax: Individuals
Tax incidence of an individual depends upon his residential status, which is defined on the basis of his physical presence in India as per the Income Tax Act.
Income Tax Slab Rate for AY 2020-21 for Individuals:
Individual (resident or non-resident), who is of the age of less than 60 years on the last day of the relevant previous year:
Up to Rs. 2,50,000
Nil
Rs. 2,50,000- Rs. 5,00,000
5%
Rs. 5,00,000- Rs. 10,00,000
20%
Above Rs. 10,00,000
30%
Resident senior citizen, i.e., every individual, being a resident in India, who is of the age of 60 years or more but less than 80 years at any time during the previous year:
Up to Rs. 3,00,000
Nil
Rs. 3,00,000 – Rs. 5,00,000
5%
Rs. 5,00,000- Rs. 10,00,000
20%
Above Rs. 10,00,000
30%
Resident super senior citizen, i.e., every individual, being a resident in India, who is of the age of 80 years or more at any time during the previous year:
Up to Rs. 5,00,000
Nil
Rs. 5,00,000- Rs. 10,00,000
20%
Above Rs. 10,00,000
30%
Plus: Surcharge:
10% of income tax where total income exceeds Rs. 50,00,000.
15% of income tax where total income exceeds Rs. 1,00,00,000.
Health and Education cess:
4% of income tax and surcharge.
Note: – A resident individual is entitled for rebate under section 87A if his total income does not exceed Rs. 5,00,000. The amount of rebate shall be 100% of income-tax or Rs. 12,500, whichever is less.
Income Tax: Firm/LLP:
Tax incidence of a Limited Liability Partnership (LLP) depends on the residential status of the LLP,i.e., whether the control and management of its affairs are situated wholly or partially in India.
An LLP incorporated in India is treated as a tax resident of India and is taxed @ 30%* of its global income. It is required to obtain a PAN and TAN, and file an annual return of income. When LLP distributes its profits to partners, they are not taxed in the hands of the LLP or its partners. Repatriation of capital contribution (say, upon dissolution) is permissible without any thresholds and is not subject to any additional taxes.Plus applicable surcharge and cess
Income Tax Rate for Partnership Firm for AY 2020-21:
A partnership firm (including LLP) is taxable at 30%.
Plus:
Surcharge:- 12% of tax where total income exceeds Rs. 1 crore.
Health and Education cess: 4% of income tax plus surcharge.
Income Tax: Companies:
Tax incidence of a company depends on the residential status of the company,i.e., whether the company has been incorporated in India or its place of effective management lies in India.
All Companies are required to obtain a PAN and TAN, and file an annual return of income. Profit repatriation by way of a dividend is subject to Dividend Distribution Tax (DDT) in the hands of the company @ 20.36% of dividend declared.
Tax Rate for Companies for AY 2020-21:
Tax rates for domestic companies: Total turnover or gross receipts during the previous year 2017-18 doesn’t exceed Rs. 250 Crore
25%
Other domestic companies
30%
Tax rates for foreign companies:
The tax rate for foreign company is 40%.
Plus:
Surcharge:
Domestic Company
Net income is between Rs. 1Cr. – 10 Cr.
7%
Net income exceeds Rs. 10Cr.
12%
Foreign company
Net income is between Rs. 1Cr. – 10 Cr.
2%
Net income exceeds Rs. 10Cr.
5%
Health and Education cess: 4% of income tax plus surcharge.
Income Tax Rates For HUF/AOP/BOI/Any other Artificial Juridical Person for AY 2020-21:
Income-Tax rate
Up to Rs. 2,50,000
Nil
Rs. 2,50,000- Rs. 5,00,000
5%
Rs. 5,00,000- Rs. 10,00,000
20%
Above Rs. 10,00,000
30%
Plus: –
Surcharge: – 10% of income tax where total income exceeds Rs. 50,00,000.
15% of income tax where total income exceeds Rs. 1,00,00,000.
Health and Education cess: – 4% of income tax and surcharge.
Income Tax Slab Rate for Co-operative Society for AY 2020-21:
Income-Tax rate
Up to Rs. 10,000
10%
Rs. 10,000 to Rs. 20,000
20%
Above Rs. 20,000
30%
Plus:
Surcharge:- 12% of tax where total income exceeds Rs. 1 crore.
Health and Education cess: 4% of income tax plus surcharge.
Income Tax Slab Rate for Local Authority for AY 2020-21:
A local authority is taxable at 30%.
Plus:
Surcharge:- 12% of tax where total income exceeds Rs. 1 crore.
Health and Education cess: 4% of income tax plus surcharge
Tax compliances:
Every taxpayer is required to undertake certain compliances, such as:
Annual filing of:
Return of income
Report of audit under the ITA (if applicable)
Transfer pricing certificate (if applicable)
Monthly deposition of withholding taxes
Quarterly deposition of advance tax
Quarterly filing of withholding tax return
Note: In certain cases, the return of income filed by a taxpayer is subject to verification or audit by tax authorities. This process is called an ‘assessment’. In case a taxpayer is aggrieved by the outcome of the assessment, he/she can challenge the same before the dispute resolution authorities.
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