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Tax in India which has an impact in our business

In India the major sources of Income of the State Government and the Central Government are Taxes. We the common people making the economy stable by paying taxes from Income Tax to GST. In our daily life we are paying different types of taxes. Taxes are divide into two types- Direct Tax and Indirect Tax

Direct Taxes are Direct payments to government by individuals and organizations, like Income Tax, Capital Gain Tax, Securities Transaction Tax, etc..,

An indirect tax is collected by one entity in the supply chain (usually a producer or retailer) and paid to the government, but it is passed on to the consumer as part of the purchase price of a good or service. The consumer is ultimately paying the tax by paying more for the product.

In this article, we are discussing about two taxes, which has direct impact on business and personal life, ie, Income Tax and Goods and Service Tax

Income tax

Income tax is governed by Income Tax Act and Finance Act. It is the Tax applicable for our income or profits or gains from business. For partnerships and Limited Liability Partnerships, the Income Tax rate is 30 percentage on profits. For registered Companies the tax rate varies from 25 percentage and 30 percentage based on the turnover of the organization. For individuals, Income tax is based on the income and the same is divided into income slabs. It varies from 5% to 30%. All individuals (except NRI’s as defined in the Act or exempted income earning persons like farmers) having income of Rs 2,50,000/- or more after deductions or 5,00,000/- or more (as per new scheme) and organizations having profits shall pay Income Tax by filing ITR returns. In several cases this tax may be deducted as TDS by the employer or person giving money to us. TDS means Tax Deducted at Source, ie deduct tax by whom giving money to us. For eg. TDS on Salary, TDS on Service etc. There is also an option to pay advance tax ourselves as quarterly payments for our expected profit. Everything in Income Tax is tracked based on our PAN Number

Goods and Service Tax

Goods and Service Tax is the new tax reform of our country. It 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. Various taxes like  State Value Added Tax/Sales Tax, Service Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry Tax, Purchase Tax, Luxury Tax,  Taxes on lottery, Betting and gambling, State cess and surcharges insofar as they relate to supply of goods and services, Central Excise Duty,  Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Additional Customs Duty commonly known as Countervailing Duty, Special Additional Duty of Customs, Central Surcharges and Cess so far as they relate to the supply of goods and services. The ultimate payer of the GST is the end user of the product or service. However the GST registered person will get the credit/setoff against GST collected by him/her. Different rates are there for GST, based on the activities. Everyone in their daily life are paying GST, even while purchasing for our daily needs

Tax Incentives in India

 Exception from GST

Service Sectors having turnover less than 20 lakhs or goods trading busniess having turnover less than 40 lakhs, need not take GST Licence

Incentives for Startups

Tax incentives granted to eligible start-ups are the tax holiday for any consecutive 3 years (from initial 5 years) in respect to 100% of their profits, including fast-tracking of patent applications with 80% rebate.

Incentives for Special Economic Zones

Incentives are available for Special Economic Zones started operations before 1st April 2020. It includes deduction of 100% of profits and gains derived from export business for first 5 years of commencement, 50% of profits and gains derived from export business for next 5 years, 50% of ploughed-back profits and gains from export business for next 5 years. 

Incentives for  Research & Development

Incentives are available for Companies in respect of any expenditure on R&D in an approved in-house facility. It includes Weighted tax deduction of 200% granted to companies

Incentives for Investments

Investment in certain sectors, any capital expenditure incurred for specified businesses is allowed as a deduction in the year in which it is incurred.

Incentives for International Financial Services Centre

Such centres deal with flows of finance, financial products and services across borders will get tax concessions on capital gains, Minimum Alternate Tax and Dividend Distribution Tax

Biswas Filing Service is a pre and post business registration compliance management service provider. We are a group of Chartered Accountants, Company Secretaries and Advocates based in Thiruvananthapuram. Our aim is to register start-ups, micro, small and medium business at an affordable cost, by limiting our charges, in order to provide a support for the budding businesses in Kerala. The above post is the openion of the author


Gayatri Dhote

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