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As per the Union Budget 2021, here are the latest update on Corporation Tax, Professional Tax and Business Tax.
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.
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 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:
This list also includes professions like movie artist, editor, songwriter, lyricist, director, music director etc.
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For domestic companies, the tax depends on the turnover.
Tax slab rates for Domestic Companies as per Union Budget 2021:
|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%
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:
|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%|
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:
Computation of income: Deductions are not allowed on the following points:
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.
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.
The Presumptive Taxation.is 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.
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