Tax Ready Reckoner

The Income Tax Act, 1961 governs the taxation of companies in India, outlining rules for computation, deductions, assessments, and compliance. Below is a structured breakdown of key aspects related to the taxation and assessment of companies under the Act. 1. Taxability of Companies Companies are classified into two categories for taxation: Domestic Companies(incorporated in India) – Taxed

Here’s a structured breakdown of the types, definitions, and residential status of companies under the Income Tax Act, 1961: 1. Types of Companies Based on Incorporation Indian Company[Section 2(26)]: Incorporated under Indian laws (e.g., Companies Act 2013). Always treated as a resident in India, regardless of management location. Foreign Company[Section 2(23A)]: Incorporated outside India. Taxed as a resident in Indiaonly

Section 115JH of the Income Tax Act, 1961, provides transitional and computational rules for foreign companies deemed resident in India due to their Place of Effective Management (POEM) being in India. Here’s a structured breakdown: 1. Background & Purpose POEM Rule: Under Section 6(3), a foreign company is deemed a tax resident in Indiaif its POEM (where key management/commercial decisions are

A closely held company (where the public is not substantially interested) is subject to stricter tax provisions to prevent tax avoidance and misuse of corporate structures. Below are the key special provisions under the Income Tax Act, 1961: 1. Deemed Dividend under Section 2(22)(e) Applicability: If a closely held company gives loans/advancesto: A shareholderholding ≥10% voting power or A concern(HUF, firm, AOP, etc.)

1. Overview Section 115BBD provided a concessional tax rate of 15% (plus surcharge and cess) on dividends received by Indian companies from specified foreign companies where the Indian company held ≥26% equity shares. Introduced in 2011 to promote foreign investments, this provision was withdrawn effective April 1, 2023 (AY 2023–24) to align tax treatment with domestic dividends. 2. Key Provisions (Before Withdrawal) Applicability: Only

1. Basic Framework Companies are taxed on their total incomecomputed under the Income Tax Act, 1961. Tax rates vary based on: Type of company (domestic/foreign) Turnover/special categories (e.g., manufacturing) Applicable tax regime (normal or concessional) 2. Computation of Total Income Step 1: Calculate Gross Total Income Aggregate income under 5 heads: Profits/gains from business/profession Capital gains

1. Overview Section 115BA provides a concessional tax rate of 22% (plus surcharge & cess) for new domestic manufacturing companies that do not claim specified exemptions/deductions. Introduced to boost the “Make in India” initiative, this provision applies from FY 2019-20 (AY 2020-21) onwards. 2. Eligibility Conditions A company can opt for Section 115BA if it meets all of the following: Type of Company: Domestic company incorporated on or after