Management of Direct and Indirect Taxes

Man sequencement of convey and In localise taskesNeha KathuriaThe assignment attempts to bring pop various dimensions of the Indian appraise body organise. Three articles were reviewed along with the relevant oddball laws. All the triple articles atomic number 18 based on one theme, the occurrence that the Indian impose twist inescapably re machinates. The number one article regarding the engage revenue enhancement reckon proposes variety shows in the Income valuate Act,1961 to be in tie with the modern day changes and other(a) economies. The next two articles bring to the nonice that on that point atomic number 18 change magnitude incidences of the measure Avoidance and measure evasion. This is attributed to various factors discussed in the summary of the articles. thither sport been addition in the value income revenue burden over the position and lower income slab people and as a result they feel burdened. Also, on that point has been gainn that t he return set of revenue enhancement grade for these two themes has went up chop-chop as comp atomic number 18d to for the third group. For these discernments evaluate incomeation administration use up changes so that much(prenominal) incidences washstand buoy be reduced.Article 1 An Appraisal of parvenue lineal Tax code in India A New Challenge in Direct Taxationby Sarbapriya RayThis Article attempts to field of view active the radical direct impose revenue code which got introduced from the monetary stratum 2012-2013, having replaced the five-decade out of date system. Further, the article move over to discuss the pros and cons of this new code. The article was compose in the year 2011, so all the amendments argon in par to the Income Tax Act,1961. It has been written by Sarbapriya Ray, Assistant professor at Calcutta University. Although, Direct revenue enhancement code was introduced to bring about positive changes it was criticized and was considered to be confusing, and So, thither contribute been certain other amendments after that as well, which is given after the summary of the article.The aim of the new assessation code was to make the system of direct valuateation to a greater extent than than equi turn off and straight-forward. The direct impose outranks were henceforth not supposed to be part of the Budget. The modern revenue enhancement system and feed were required to come in line with the invariably changing economy. The objective was to end unnecessary exculpateions, widen impose bases, increase the ratio of Tax-GDP, minimize disputes and litigation to bring about a more impressive and equitable appraise system. The reduction in the assess claims and deductions which have been change magnitude were to be reduced or amended because they assistanceed in Tax evasion or Tax avoidance.In the process of providing exemptions and deductions, the step forego is termed as the sum expenditure and the iss ue forth has been increasing from one financial year to another. For instance, the figure for the year 2008-09 has been Rs.27389 crores. superior general Concepts298 sections and 14 schedules were to be replaced by 319 sections and 22 schedules.A unified ideal of Financial Year replaced concept of Assessment year and Previous year, doing a mien with the confusions that arose.Changes in basis of the income measure return filing date wereFor corporates, due date proposed was August thirty- kickoff ever FY.For individuals 30th June was proposed.Income to be divided into two partsIncome from particular(a) Sources Income to be taxed at special rates in case of pleasant from lotteries, income of non-residents, etc.Income from ordinary sources Income from salary, Income from ceiling gains, Income from house property, etc.Features of the new tax codeTax RatesThe pursuit table shows the income tax slabs gutter FY 2010-11 and the amended tax slabs that would be applicable from the FY 2012-13 with the implementation of the new direct tax code. Income Tax Slabs for others and Men WomenS.NOTax PercentageFY 10-11FY 12-131No Tax/ ExemptUpto 1,60,000Upto 2,00,000210%1,60,001 5,00,0002,00,001 5,00,000320%5,00,001 8,00,0005,00,001-10, 00, 000430%Above 8,00,000Above 10,00,000The proposed changes were estimated to bring down the tax liability of an individual having income greater than 10 lakhs by Rs.41040 annually.The following table shows the changes in the corporate tax rates with the implementation of the new direct tax code (DTC).ParticularsIncome Tax Act, 1961Original DTCRevised DTCDomestic Company33.22%25%30%Foreign Company42.23%25%30%Branch lettuce Tax15%15% categorical19.93% on Book take in0.25% / 2% of Gross Assets0.25% / 2% of Gross AssetsDividend Distribution Tax16.61%15%15% wealthiness Tax1% on Net wealth exceeding Rs. 3mn0.25% on Net Wealth exceeding Rs. 5 mn1% on Net wealth exceeding Rs10 mn collective tax rate was reduced from 33 to 30%.Residential spotCompanies incorporated in India atomic number 18 domestic companies and resident.Only those foreign companies atomic number 18 to be treated resident whose place of effective management is partially or wholly in India.Income from EmploymentAnother change in the new Direct tax code is in terms of replace EEE (Exempt-Exempt-Exempt) to EET (Exempt- Exempt-Taxed). These changes mean that till accumulation of income, withdrawal will be exempt otherwise it is taxed.The following table shows a comparison of the EEE and proposed EET systemEEE chthonian Income Tax Act, 1961EET infra DTCProviding incentive in the investment funds year fillip in the form of deductions from gross taxable income in the investment yearNo tax on income from this investmentNo tax on income on the investmentNo Tax on the maturity of the investmentTax is levied on the amount withdrawnEET was proposed to deal with the shortage of resources with India. Also, In India since savings form a major part of the ea rnings, taxation would jock in solving the problem of dealing with the debt accumulated with the government activity.MATThe amendments tercet to capital intensive industries to pay MAT even in case of book losses. The changes will break down to increased efficiency and utilization of the summations.Wealth Tax BenefitsThe new direct tax code also proposed changes colligate to wealth tax calculations.ParticularsIncome Tax Act,1961New Direct Tax CodeThreshold LimitRs. 30 lakhsRs. 50 CroreTax Rate0.25%1%Wealth Tax includes calculation of financial assets fixed deposits, corporate bonds, sh atomic number 18s, which are done at cost or at market price, whichever is lower. Companies are not supposed to pay wealth tax anymore.Capital GainsThe following are the changes according to the new direct tax codeThe structure of long-term capital gain and short-term capital gain tax is replaced with the uniform system as capital gains were at present to be taxed at the marginal tax rate as per that applicable to the assesse.The period of retention has no bearing on the Tax liability of the assesse.Securities transaction tax concept is to be removed.Business loss and loss from capital gains can be carried forward for an indefinite time period as per this new DTC. Loss beneath capital gain can also be adjusted against income from capital gains. cobblers lastNew DTC introduced a stable and effective system for the FIIs. However, at that place were two opposite view points about it. DTC was criticised on accounts of the fact that the new amendments may not be beneficial to the investors and FIIs, for whom in the first place they were proposed. On the other hand, the concessions or relaxations would lead to loss of revenue.India still need the Direct Tax CodeNov 01 2015This article is from MINT and was published on Nove,01,2015. In 2015 budget, DTC was removed giving the explanation that a lot of nourishment have already been considered or merged in the Income Tax A ct, 1961.The finance minister, gave up the provision of reducing the corporate tax to 25% in the years to come. But further cuts on tax rate would require the Direct Tax Code.The requirement of direct tax code if matte today because a simpler version of tax structure is required in India as it leads to the growth of the economy. A tax consultant feels that an efficient tax system reduces tax avoidance and evasion.An article from the economic times acknowledgment that when Direct Tax code was proposed in 2011 to be implemented from the FY 2012-2013. approximately of the provisions of the DTC as mentioned in the summary of article were not recognized by the government, which were as followsWidening of Tax slabs.Increase in basal exemption bound.Securities transaction Tax not to be abolished.Direct Taxes Code Revised bill makes avoiding tax tougher for foreign companiesWed, Apr 02 2014This is another article from the theme MINT. This is a case of Vodafone group versus the suprem e court and happened because of the original provisions of the proposed DTC and hence after this certain provisions were revised. The revised provision could help in reducing the incidences in which the foreign companies avoid taxes. This case happened when Vodafone group decided to acquire Hutchison to become Vodafone India.Original DTCRevised DTC50% of total assets in India, then income from such a transaction would be taxed20% of total assets in India, then income from such a transaction would be taxedIn a case, previously of Vodafone, the supreme court gave the judgement that if the shares are transferred by a foreign company having a subsidiary in India, from one non-resident person to another, is not considered a transfer of a capital asset and hence and so any income from such transaction would not attract tax.However, when Vodafone International Holdings (British Company) acquired Hutchinsons (again a foreign company) Indian subsidiary. The government intervened on the rulin g of the supreme court that the transactions which derives its value substantially from the assets set in India1 are to be taxed.At present, section 9 of the income tax Act does not provide any threshold as to what is the subject matter of substantially deriving value from assets located in India. Though this now brings in clarity, lowering the threshold from 50% to 20% will lead to many more indirect transfer cases coming below the tax ambit.2Due to the need of a variety of changes to be required in the original DTC, revised DTC was proposed in 2013 KEY CHANGES IN THE REVISED manoeuver TAXES CODE 2013An indirect share transaction will be conceivable to be taxed in India if 20% of the assets are based in India.New tax slab introduced individuals earning more than Rs10 crore a year to be taxed at 35%.No changes in other tax slabs for individuals age for senior citizens relaxed to 60 years from 65 years. Levy an additional 10% tax on the recipient of dividend payments if the divi dend income exceeds Rs1 crore.Financial assets included under the ambit of wealth tax as compared to only physical assets at present.Rationalization of provisions connect to non-profit organizations.Ring-fencing of losses from business availing investment linked incentives.Provision of settlement outfit removed.3One of the provisions of the new Direct Tax code is the abolition of the securities Transaction Tax (STT). This will help companys in reduction of tax as STT was a tax paid while purchasing shares. Since this was a part of the amount paid to the broker that cost would also be lessened. Further, the reduction in the corporation tax rates from 30% to 25% would reduce the tax burden on the companies.The changes in the provision of MAT may have negative effect on the companies that are asset based companies. The investments by corporates would be reduced.The change of provisions in terms of Income from employment that is a change from EEE to EET is expected to increase costs. EET has an increase in the limit and the following are the two points related to itSavings on the amount of Rs. 2lakhs invested.Income on this invested is exempted from tax.Further, DTC proposes the reduction in the tax rates for LTCG and STT. This would lead to an increase in the trades in securities market.Article 2 Personal Income Tax Structure in India An Evaluationby Dr. Radha GuptaThe article is from January 2013. An attempt is do wherein the ain tax structure in India is reviewed and the issues and amendments required to lessen the tax burden on the lower income groups are highlighted. Research is carried out for the same by using descriptive and exploratory techniques of research.Tax slabs and the rates were higher(prenominal) during the period under test in this paper and the need for its rationalisation was felt. The characteristics of a good tax system include a change in the national income corresponding to a high response in tax revenue. Further tax revenue has i n total ternary components on which it depends tax rate, tax base and national income.There were third main objectives behind undertaking this study by Dr. Gupta and they are as followsTo see the arc of Indian personal tax structureTo see the present government agency and estimate the future trendsBased on the study, in conclusion suggesting ways to improve or rationalize the structure if need be.The study was undertaken with respect to the common tax payers. The time span under study is 12 financial years from 2000-01 to 2011-12. The study has five broad elements makeup and comparative analysis of Income exempted from tax.Composition of Total Tax liability of general tax payer for period under review.Composition of growth rate of tax burden.Composition of tax liability on different income Slabs.Conclusion and Suggestions.41) Composition and Comparative Analysis of Income Exempted from TaxTax free Income for Male, pistillate and Senior CitizenFinancial YearMaleFemaleSenior Citizen2000 01Rs. 50,000Rs. 50,000Rs. 50,0002001 02Rs. 50,000Rs. 50,000Rs. 50,0002002 03Rs. 50,000Rs. 50,000Rs. 50,0002003 04Rs. 50,000Rs. 50,000Rs. 50,0002004 05Rs. 50,000Rs. 50,000Rs. 50,0002005 06Rs. 50,000Rs. 50,000Rs. 50,0002006 07Rs. 100,000Rs. 135,000Rs. 185,0002007 08Rs. 110,000Rs. 145,000Rs. 195,0002008 09Rs. 150,000Rs. 180,000Rs. 225,0002009 10Rs. 160,000Rs. 190,000Rs. 240,0002010 11Rs. 160,000Rs. 190,000Rs. 240,0002011 12Rs. 180,000Rs. 190,000Rs. 250,000The table consists of the data from the highlights of budget in the newspaper. The table shows that patronage increase in the cost of living, the tax exemption limit remained constant for fist six years. From the seventh year, there has been an increase in trend but that was found not to be in line with the increase in prices. Also, from the financial year 2011-12, a new moderate was introduced Very senior citizen citizens of more than 80 years of age. Tax exemption limit for this year is Rs. 500,000. One n otable finding under the first head was that, the amount of tax exemption limit was directly proportional to the number of individuals falling under each category or age limit.2) Composition of Tax Liability for General Tax Payers for Period under Review As can be seen from the table showing trend of tax rates and tax liability, the trend for first and second slab category is increasing. Thus, it was indicated that those falling in these two slabs were paying higher taxes as compared to those in the third slab. And so, a need was felt to bring about changes in the prevailing structure. Furthermore, because of the inflationary trend in the country, people falling under these two tax slabs feel that their sustainability is being impacted and on the other, affect their willingness to pay tax.The following table shows the trend of tax liability for 12 financial years under review4) Composition of growth rate of Tax burdenThe following table shows the growth in the tax liability of the different income groups. So, when it comes to the lower and middle income group to pay taxes, look at the growth they feel burdened and so a reason requiring changes in the tax administration. 4) Composition of Tax Liability on antithetical Slabs Tax liability with respect to different slabs was calculated. It was found that the maximum amount of people, based on income, fall in the first two categories and they form the middle-income group. Also, the tax payers whose income fall in all slabs belong to the higher income group.Tax weight on General Tax Payer of Different SlabsFYTax burden on First SlabTax burden on southward SlabTax burden on Third Slab2000 2005Rs. 1,000Rs. 18,000Rs.2250002005 2007Rs. 5000Rs. 20000Rs. 1950002007- 2008Rs. 4000Rs. 20000Rs. 1950002008 2009Rs. 15000Rs. 40000Rs. 1500002009 2010Rs. 14000Rs. 40000Rs. 1500002010 2011Rs. 34000Rs. 60000Rs. 600002011 2012Rs. 32000Rs. 60000Rs. 60000There has been a growth in the tax rates and tax liability for those fal ling in the first slab and so they are increasingly being burdened. This comes to the point out lower income group is paying more tax liability as compared to other tax payers. Thus, a reform is required in the personal income tax structure.When it comes to the middle-income group tax payers, they are also bearing the tax liability burden as compared to the third slab group. The difference between the first slab group and second slab group is that the rate with which their tax liability is increasing is less as compared to the first slab bracket. Because of this difference, there is the violation of Equity pattern of taxation given by Adam Smith. So, another reason financial support the requirement of the change in the tax structure and making it more equitable. This would also ensure that the practices of tax avoidance and tax evasion are lessened.5) CONCLUSION AND SUGGESTIONSDr. Gupta comes to the concluding points based on the research she did that despite of the fact that tax payers are aware that the tax collected by the government is used for the welfare of the people only, yet because of the findings and reasons found above, there have been increasing incidences of Tax avoidance and Tax evasion. This also affects the economic situation of the country. So, policies are to be changed and tax rates to be administered properly. A way to reduce the burden on the first two slabs is that the tax slabs can be fewer and should fair and equitable.Cairn India vs GovernmentThere is a gap between what government has to say and the work the tax section does. One notable difference was highlighted in case of Cairn India, where despite of having said that there would be no retrospective amendments in tax laws, the government demanded company with the same. Retrospective demands are said to be there only in case of the need to increase revenues, as there could be an urgent requirement for some social cause or infrastructural development. Thus, revenue forecasts are t o be realistic and desirable. The targets are to be realised and looked after by the transfer pricing officers and they have to ensure that there is no incidence of tax evasion.Article 3 Indian Tax Structure- An Analytical Perspectiveby Nishant Ravindra Ghuge and Dr Vivek Vasantrao KatdareIndia has a well-defined taxation structure and it is divided into three tiers. This paper attempts to bring out the changes that the Indian Tax structure has gone through in a move to becoming an ideal tax structure. Further, it highlights the issues and problems that prevail in the structure and still needs to undergo further changes to get rid of the problems. The problems prevailing are the tax avoidance, black money and reliance on indirect taxation system. The study is done based on the data collected from the sites of the government. It goes over to excuse the various types of direct taxes and indirect taxes and the pros and cons of each. This paper is from September, 2015.The following ar e the three tiersThe main taxes that the union government levy Income Tax, Customs duty, sales tax, excise tax duty and service tax.The main taxes that the situate government levy Intra- reconcile tax on goods, stamp duty, land revenue, agricultural tax, Tax on professions and Duty on Entertainment.Local bodies levy taxes Octroi, Tax on properties and markets, tax on utilities.Due to the liberalization since 1991, the following are the changes noted that the tax structure in India had undergoneRationalization of tax structure.Progressive reduction in peak rates of customs duty.Reduction in corporate tax rate.Customs duty aligned with ASEAN levels.Introduction of VATWidening of tax base5There are two types of taxes direct and indirect taxes.Direct TaxesTaxes which are paid directly to the authority who imposes it by the tax payer and are levied on profits and income. The list includes the following Taxes on income, corporation tax, intimacy tax, gift tax, estate duty, wealth tax, agricultural tax, expenditure tax, land revenue, Hotel value tax.Indirect TaxesTaxes which are not paid directly to the authority who imposes it by the tax payer and are levied on goods and services. The list includes the following state excise duty, customs duty, Entertainment tax, service tax, taxes on purchase of sugarcane, General sales tax, Union excise duty, tax on electricity, Stamp and adaptation fees.In this study, certain research paper were reviewed and the results are presented thereof. Three papers were as followsTaxation laws of India Overview and fiscal analysis written by Kumat in 2014.Tax structure in India and its effect on Corporate various(prenominal) written by Jha in 2013.Tax system reforms in India operation and challenges ahead written by Rao in 2005.6All the three papers mentioned above suggests the followingCoordinated tax consumption system.Focus on the decreasing the reliance on indirect taxes and levy direct taxes more on the upper income g roup tax payers.Transfer pricing to be abolished.Analysis of the Indian Tax StructureThe following table shows the amount of direct taxes and indirect taxes collected by the government for period under reviewYear2010-112011 122012 132013 14Revenue receipt Direct Tax45822.09501394.92574680.54679297.56Revenue Receipt Indirect Tax820843.26966495.511151867.991353191.51