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Union Budget 2021: Latest Professional and Corporation Tax Slab

Updated on May 18, 2024 , 4300 views

As per the Union Budget 2021, here are the latest update on Corporation Tax, Professional Tax and Business Tax.

Latest Professional and Corporation Tax Slab

What is a Corporation or Business Taxation?

Corporation tax is a direct tax applied to the net Income or profit that the companies make from their business. Both public and private companies registered under the Companies act 1956 are liable to pay corporation tax.

According to the provisions of the income tax Act 1961, this tax is imposed at 25 per cent if the income is up to Rs. 250 crores. Turnover exceeding above Rs. 250 crores will attract 30 per cent tax.

What is Professional Tax?

A professional tax is levied and garnered by the state government of India. Every individual who generates income through employment has often seen the Deduction of professional tax in the salary slip. Other than this, professions namely lawyer, CS, CA, doctor, businessman, etc., are liable to pay professional tax in some states of India. The maximum amount of tax cannot be exceeded Rs. 2,500 annually.

Section Under 44ADA Income Tax

Section 44ADA computes the profits and gains of small professionals. Basically, section 44ADA was introduced to extend the scheme of simple taxation to specific professionals. Previously, this scheme was applicable only for small business.

Sec 44ADA reduces the load on small professions and assists in the ease of doing business. Under this scheme, profits are considered at 50 per cent of gross receipts. An individual, Hindu Undivided Families (HUF) and partnership firm are eligible for taxation under section 44ADA.

Here are some professions eligible under section 44ADA:

  • Interior decorations
  • Technical consulting
  • Engineering
  • Accounting
  • Legal
  • Medical
  • Architecture

This list also includes professions like movie artist, editor, songwriter, lyricist, director, music director etc.

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Latest Tax Rates for Domestic Companies

For domestic companies, the tax depends on the turnover.

Tax slab rates for Domestic Companies as per Union Budget 2021:

Turnover Tax Rate
Turnover in the previous year less than Rs. 250 crore 25%
Turnover in the previous year more than Rs. 250 crore 30%
Surcharges- Income Range between Rs.1 crore and Rs. 10 crore 7%
Surcharges- Income range exceeds Rs. 10 crore 12%

This may attract cess charges of 4%

Corporate Tax for Foreign Companies

If the Royalty received from govt/Indian concern or technical fees as per agreement approved by the government.

Here’s the income tax slab for foreign companies as per Union Budget 2021:

Income Tax Rate
Up to 1 crore 50%
Above 1 crore but up to 10 crore 50,00,000 +50%
Above 10 crore 5,00,00,000+50%
Any other income- Up to 1 crore 40%
Any other income- Above 1 crore but up to 10 crore 40,00,000+40%
Any other income- Above 10 crore 4,00,00,000+40%

Income Chargeable for Business/Profession

Every business or profession is liable to pay tax under the income tax act. Note the following types of income are chargeable for business and profession:

  • The profit earned by a assesses from the business at any time during the previous year
  • Any compensation or payments received by any person defined in section 28 of the income tax act
  • Income earned by a business, profession or alike association from specific services performed for its members
  • Profit earned by the transfer of the duty entitlement passbook scheme
  • The perquisite converted into money arising from the business
  • Any interest, bonus or commission received by a partner of a firm
  • Any income received under the keyman insurance policy
  • Income received from any speculative transactions

Computation of income: Deductions are not allowed on the following points:

  • Losses because of illegal trade practices
  • Expenses excluded from business
  • Loss on sales of shares
  • Advance payment for the new business which is not inaugurated

Who has to File a Business Tax Return?

  • The basic taxable limit is Rs. 2.5 lakh. If your income is above 2.5lakh then it is obligatory for you to file your business Tax Return.
  • All partnership firms are required file the ITR, irrespective of the amount of income or loss.
  • All LLPs are required file the ITR, irrespective of the amount of income or loss.
  • Proprietor between 60-80 years of age has to file income tax if the income exceeds Rs. 3 lakhs. Proprietors over the age of 80 years are required to file income tax if the income exceeds Rs. 5 lakh.
  • All companies registered in India are required to file Income Tax Returns each year.

Calculation of Taxable Income under Business/ Profession

As of now, there are two ways in which you can calculate the Taxable Income for your business. Tax is calculated on the taxable income, not the gross turnover. The two provisions in which the taxable income is calculated are Normal Provision and Presumptive Taxation.

Normal Provision

The normal provision is calculated through the traditional method:

Taxable Income- Total Sales- Cost of Goods Sold= Expenses

You need to make sure that not all the expenses are allowed as deduction. You need to claim a deduction for the purpose of calculation of taxable income.

Presumptive Taxation

The Presumptive applicable for the business whose turnover is up to Rs. 2 crores. And, professionals whose annual value does not exceed Rs, 50 lakhs.

Under the Section 44AD business other than the profession has to pay 8 per cent of annual turnover.

Under the section, 44ADA profession has to pay 50 per cent for the value of services.

All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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