16.Taxation Structure in India (Part - 2) Flashcards
What is a surcharge?
A surcharge is a tax on tax imposed by the government to address inequality in society. It is usually applied to individuals with higher earnings.
What are the surcharge rates for individuals in India based on income?
*Rs 50 lakhs - 1 Crore: 10% surcharge
*1 Crore - 2 Crore: 15% surcharge
*2 Crore - 5 Crore: 25% surcharge
*More than 5 Crore: 37% surcharge
What are the surcharge rates for corporates in India based on income?
For Domestic Companies:
*Income Rs 1 Crore - 10 crore: 7% surcharge
*Income more than Rs 10 crore: 12% surcharge
For Foreign Companies:
*Income Rs 1 Crore - 10 crore: 2% surcharge
*Income more than Rs 10 crore: 5% surcharge
What is a cess?
A cess is a temporary levy imposed by the government for a specific objective. It may be withdrawn once the objective is achieved.
What is the current cess applied by the government of India?
Currently, a 4% health and education cess is applied on individuals and corporations in India.
What is Securities Transaction Tax (STT)?
Securities Transaction Tax (STT) is a tax imposed by the government on transactions in the stock market.
When was Securities Transaction Tax (STT) introduced in India?
Securities Transaction Tax (STT) was introduced in the 2004-05 Union Budget and came into effect from 1 October 2004.
What is the current rate of Securities Transaction Tax (STT) on equity shares?
The current rate of Securities Transaction Tax (STT) on equity shares purchased on a delivery basis is 0.1%.
What are short-term capital gains?
Short-term capital gains refer to the profits earned on shares held for a period of less than 1 year.
What is the current tax rate on short-term capital gains?
Currently, the tax rate on short-term capital gains is 15%.
What are long-term capital gains?
Long-term capital gains refer to the profits earned on shares held for a period of more than 1 year.
What is the current tax rate on long-term capital gains?
Currently, the tax rate on long-term capital gains is 10%.
What is the difference between short-term shares and long-term shares?
Short-term shares are held for a period of less than 1 year, while long-term shares are held for a period of more than 1 year.
What is Minimum Alternate Tax (MAT)?
Minimum Alternate Tax (MAT) is a concept introduced in the direct tax system to ensure that companies with large profits, but not paying sufficient corporate tax due to exemptions and incentives, pay a fixed percentage of book profits as tax.
When was Minimum Alternate Tax (MAT) introduced?
Minimum Alternate Tax (MAT) was introduced in 1986.
What is the basis for applying Minimum Alternate Tax (MAT)?
Minimum Alternate Tax (MAT) is applied on the book profits of a company.
What is the current rate of Minimum Alternate Tax (MAT)?
The current rate of Minimum Alternate Tax (MAT) is 15%.
What is tax planning?
Tax planning refers to the legal strategies employed by individuals or organizations to reduce their tax liabilities by utilizing the tax exemptions and benefits provided by the government.
What was the problem with taxes before 1986?
Taxes were levied at every stage of production, resulting in double taxation and ‘tax on tax’ issues.
What was introduced in 1986 to address the problem of double taxation?
The MODVAT (Modified Value Added Tax) system was introduced in 1986 to avoid multiple taxes accumulating in the final prices of goods.
How does MODVAT work?
Under MODVAT, traders can set off the taxes or duties paid on raw materials or pre-sale purchases. Excise is levied on the final value, and a rebate is given on inputs.
What replaced MODVAT in 2005?
In 2005, VAT (Value Added Tax) was introduced, which levies tax only on the value addition made in the product.
Was the VAT system completely free of double taxation?
No, the VAT system still had some issues with double taxation.
What tax system was introduced in 2017 to address the shortcomings of VAT?
In 2017, the Goods and Services Tax (GST) was introduced as a comprehensive tax system to overcome the problems of previous tax systems.
