Key Taxation aspects-Broad

course outline
 Course Objectives
 This course aims at familiarizing the
participants with the importance of
study of taxation aspects in
management decision making
process.
 The broad outline of topics-
 Dividend- final and interim, dividend from subsidiary, dividend and
bonus stripping
 Buy back of shares
 Capital gains – Mergers, amalgamations, demerger, conversion of
partnership\LLP into Private Limited company, listed and unlisted
shares, units of mutual funds
 MAT and AMT – Companies, SEZs LLPs- Accounting and taxation
 Depreciation and Carry forward and set off of losses
 Managerial decisions and taxation issues- Make or buy, local or export,
Purchase or lease
 ESOPs- Accounting, legal and taxation issues
 Issue of shares at a premium- Corporate Law and Income Tax
implications
 GST- Overview
Pedagogy
Class discussion
PPTs
Case studies
Revising Basic concepts
CORPORATE LAWS
1. Balance Sheet as per Schedule III
2. Company and Body corporate
3. Reserve and Provision
4. Shares & securities
5. Capital & revenue profits
6. Tangible & Intangible assets
7. Trade and non-trade investments
8. Depreciation as per Corporate Laws & Income Tax Act
9. Accounting standards
10. Debt equity ratio
11. Current ratio
Balance sheet as per Schedule III
Companies to prepare financial
statements as per the format and
details specified in Schedule III to rhe
Companies Act, 2013
Company and Body corporate
Company means a company
registered under the Companies’
Act (Private, Public)
Body corporate includes a
company incorporated outside
India
 PROVISION RESERVE

1. Charge against profits 1. Appropriation of profits

2. No relation to profit 2. Some percentage of

earned profit made

3. Created for future 3. Created for safeguarding

liabilities unforeseen losses
Shares and Securities
 Share means a share in the share
capital of a company (Preference and
Equity)
 Securities means securities as defined
in Securities Contract (Regulation)
Act, 1956
Capital and revenue profits
 Capital profit is earned by
selling assets, shares and
debentures at a price more
than their book value and
face value
 Capital profit is not
available for the distribution
to shareholders as dividend
 Capital profit is transferred
to capital reserve and used
for meeting capital losses
 Revenue profit is earned in
the ordinary course of the
business.
 Revenue profit is available
for the distribution to
shareholders as dividend.
 Revenue profit is used to
distribute dividend and
create reserve and fund for
various purposes.
Tangible and intangible assets
 A tangible asset is  An intangible asset
anything that has a is anything that a
physical existence, company owns that
meaning that it can does not have a
actually be seen or physical existence,
felt by a person meaning things like
 e.g. Building, plant, information and
machinery company logos
 Goodwill, patents,
trademarks,
software
 Trade investments are those made to
promote and secure one's business.
In other words, investment made in
the securities, whether quoted or not,
of companies, with which we have
relationship as supplier, customer and
the like.
 Investments in securities not related
to the business are non-trade
investments
Depreciation
Companies’ Act Income Tax Act
 Amortisation over  Rates as per block of
useful life of the assets on WDV
asset method
Accounting standards
Mandatory for the companies to
comply with the various Accounting
standards while preparing financial
statements
Accounting ratios
Debt equity ratio Current ratio
Long term Debt Current assets
(Secured + _____________
unseured)
_________________ Current liabilities
Equity (Shareholders’
funds)
INCOME TAX CONCEPTS
 Financial year, previous year, assessment year
 Person
 Assessee
 Heads of Income
 Method of Accounting
 Gross total Income
 Deductions and exemptions
 Total Income
 Tax, surcharge and HE cess
 MAT and AMT
 Dividend distribution tax (DDT)
 Financial year, previous year,
assessment year- Financial year
means April 1 to March 31. Previous
year means the financial year
preceding the Assessment year.
 e.g. For Assessment year 2018-19,
Previous Year shall be 2017-18
Person- includes
An individual,
HUF,
Firm,
Company,
Co-operative Society,
Trust,
Association of Persons (AOP),
Body of Individuals (BOI)
Assessee – means a person liable to
tax
Heads of Income- Income of a person
is taxable under the following heads-
Salaries,
House property,
Business or profession,
Capital Gains,
Other sources
Income under various Heads-
how calculated?
1. Salaries- Gross Salaries less Exempt
allowances and Standard deduction for medical
and conveyance (Rs. 40,000 at present)
2. House Property- Rent received less municipal
taxes and 30 % for repairs
3. Capital Gains- Sales proceeds less cost of
acquisition\construction
4. Other sources- Gross income less incidental
expenditure
Profits and Gains from
Business\Profession
1. Profit as per Statement of Profit and
loss
2. Less: Income taxed under other
heads
3. Less: Income exempt from tax
4. Add: Inadmissible expenses
Tennis star claims he paid ‘fees’
to his dad
Father and son entered
into an agreement on
June 10, 1994, where
Bhupathi agreed to
reimburse the Rs 28.5
lakh spent by his father
on him on educating,
feeding and clothing him,
and for his tennis training
and travel
He also claimed it as an
expenditure against his
earnings in his Income
Tax Return
LVMH-TAG watch worth Rs 40 lakh was a gift on account of
love and affection to her from the company selling it and
not part of her professional income.
A similar reasoning by her regarding a Toyota Prius car,
valued at Rs 27 lakh,

 The value of both items

were treated as taxable
perquisites in the hands
of Chopra, under section
28(iv) of the Income-tax
(I-T) Act. This section
treats as taxable, 'the
value of any benefit or
perquisite (whether
convertible into money or
not), arising from
business or exercise of
profession.'
 Method of Accounting
 Mercantile- also known as accrual
 Cash- also known as Receipts
 Gross total Income- Summation of
taxable income under all heads of
income
 Deductions and exemptions-
Deductions are amounts deductible from
Gross Total Income. Deductions can be
in respect of income earned (e.g income
earned by a blind or handicapped
person) or expenditure incurred
(Donations to charitable institutions).
 Exemptions means income exempt
from tax
Total Income- Gross Total Income less
deductions
Tax, surcharge and HE cess – Basic
income tax at applicable rates,
surcharge is on basic tax. If income
exceeds specific limit, HE cess is on
Basic tax + surcharge
MAT and AMT- Minimum Tax payable
by companies, Firms or LLPs. It is
18.5% of book profits + Surcharge +
HE cess
Dividend distribution tax (DDT)- it is
payable on dividend distributed by
the company
 Parenting tip.....
 Always snatch and
eat one third of your
child's chocolate and
ice cream.
 Let them cry....
doesn't matter.....
 This will prepare
them to pay Income
Tax when they grow
up...
Thanks