Tax And Regulatory Services

Understanding The Tax Scenario In India

Simply put, tax in India comes majorly in 2 forms: Direct tax and indirect tax. Direct tax in India majorly deals with income tax, which is further segregated into individual tax (be it for Indian citizens or expatriate employees), corporate tax, as well as the underlying compliance matters for both. For any business getting incorporated as a company in India, tax planning is something which should be done in the early stages itself to create a tax-efficient business structure – the importance of which we’ll discuss in detail below.

Tax Planning In India For Businesses – The Need And The Outcome

Most tax consultants or tax advisors in India undertake tax and regulatory procedures as a practice to deal with income tax, routine tax filing/tax compliance or helping with tax litigation, at best. But then again, here’s where we segregate ourselves from most tax consultants.

Our pro-active involvement in our clients’ business stems from the idea that a growing economy has the propensity to undergo various changes from a tax and regulatory aspect, something which businesses must be wary about. Tax planning – as an effective measure to plan ahead and think of a long-term marathon as compared to a short-term sprint, helps us do exactly that. As a market which is seeing active Government intervention to increase the business-friendliness within the economy, we aim to safeguard companies from a tax standpoint so that they can focus on the macro aspects of the business, while letting us do the heavy lifting in terms of tax strategy well as regulatory compliance.

And on the technical side of things, our tax and regulatory services include offerings with regards to different aspects of taxation in India, where we provide advisory and services in terms of:

 

  1. Corporate Tax
  2. International Tax And Transfer Pricing
  3. Regulatory And Compliance Services
  4. Global Mobility Services
  5. Lower Withholding Tax Certificate

These 4 services are further divided into a 3-pronged approach wherever deemed necessary, which involves provision of advisory, undertaking compliance and audit as well as assisting in tax litigation.

 

Coinmen’s Tax And Regulatory Services – Key Offerings At A Glance

Starting off with our tax advisory services, we offer the following services:

  • Opinion on complex tax issues
  • Tax planning
  • Review of tax strategy vis-à- vis business strategy
  • Merger and acquisition services
  • Corporate reorganization
  • Group restructuring
  • Promoter stake enhancement & delisting
  • Financial structuring
  • Divestment advisory
  • Tax due diligence
  • Transfer pricing services
  • Tax structuring
  • International tax advisory
  • Profit and cash repatriation planning
  • Opinion on complex withholding tax issues
  • Tax treaty issues

 

As part of tax compliance procedures, our services include:

  • Assisting in advance tax computations
  • Withholding compliances
  • Income tax returns & other compliance matters
  • Obtaining registrations with tax authorities
  • Assistance in preparation of transfer pricing documentation for penalty protection
  • Obtaining registrations for non-residents with FRRO, PAN, etc.
  • Compensation structuring for tax efficiency
  • Tax computation for tax withholding, advance tax & tax filing purposes
  • Making routine compliances
  • Indirect tax advisory covering tax efficient operating models
  • Obtaining necessary clarifications/approvals from RBI or other regulatory authorities
  • Assistance in complying with various reporting requirements under exchange control regulations

 

As part of our audit and tax litigation services, we undertake:

  • Representation before authorities for tax audits
  • Support in preparation of tax litigation strategy
  • Liaising with counsels for representation before high-level litigation authorities
  • Representation before transfer pricing authorities for tax audit
  • Support in preparation of tax litigation strategy
  • Liaising with counsels for representation before high-level litigation authorities

Frequently Asked Questions (FAQs) in Tax And Regulatory Services

What is the rate of income tax or what are the tax slabs for domestic companies in India for AY 2020-21?

As for Financial Year 2019-20 (or Assessment Year 2020-21), the corporate tax rate in India varies for certain kind of companies and the distinction has been made clear recently via Indian tax laws, in an attempt to make the tax system more streamlined.

For domestic companies/corporates opting for Section 115BAA, i.e., not seeking any particular form of incentives/benefits/exemptions as stated in the said section, the said companies will be taxed at a flat rate of 22% with an applicable surcharge (10%) and education cess (4%) added to this rate, making the effective tax rate to be 25.17%.
As per section 115BAB, new manufacturing companies, set up/incorporated on or after October 1st, 2019 and commencing manufacturing activity up to 31st March 2023 will be taxed at a rate of 15%. The surcharge will be 10% for these companies, with education cess being same across the board at 4%.

Moreover, companies set up/registered on or after March 1st, 2016 in certain manufacturing capacity per section 115BA are also liable to be taxed at the rate of 25%.

Besides the above, all domestic companies/corporates will be taxed at a flat rate of 25% if their total turnover is less than INR 400 crore in FY 2017-18, otherwise they’ll be taxed at 30%. Further, if net income of the companies/corporates is above INR 1 Crore and up to INR 10 Crore, the rate of surcharge will be 7% and above INR 10 Crore, the rate of surcharge will be 12%. The education cess remains at 4%.

What is the rate of income tax or what are the tax slabs for LLP and partnership?

Partnership firms and LLPs (Limited Liability Partnerships) are liable to be taxed at the rate of 30% for FY 2019-20 (AY 2020-21).

There will be a surcharge of 12% of taxable income if net income exceeds INR 1 crore. However, the surcharge shall be subject to marginal relief (where income exceeds INR 1 crore, the total amount payable as income tax and surcharge shall not exceed the total amount payable as income tax on total income of INR 1 crore by more than the amount of income that exceeds INR 1 crore).

Health and Education Cess will be 4% of income tax, plus the surcharge.

What factors affect short-term capital gains?

For starters, it is important to understand what is implied by capital gains. In India, if the sale of any capital asset such as immovable property, listed/unlisted shares, equity, jewelry, mutual funds, etc. results in an income, such income is liable to be taxed under the head if capital gain as per the provisions of the Income Tax Act in India.

There are two types of capital gains – Long-term capital gains and short-term capital gains, which are taxable in the hands of assessee at different rates. The short-term capital gains arise on account of sale of short-term capital assets.
For the purpose of determining whether the assets are short-term capital assets or long-term capital assets, we are required to verify the period of holding of such capital assets. The holding period for a capital asset to be qualified as a short-term capital gain ranges from a period of 1 year to 3 years, based on the kind of capital asset you’re holding. The same along with rates of taxes applicable on such sale of assets are discussed below:

– Securities (other than units) listed on a recognized stock exchange, units of equity-oriented funds/units of UTI, zero coupon bonds, etc. if held for less than or equal to 12 months qualify as short-term capital gains and are liable to be taxed at 15%

– Unlisted shares, land or building or both, if held for less than or equal to 24 months qualify as short-term capital gains and are taxed as per slab rates

– Units of debt-oriented funds, unlisted securities (other than shares), and other capital assets if held for less than or equal to 36 months qualify as short-term capital gains and are taxed as per slab rates

There are also some exceptions to the above rule viz, where the gain arising on account of transfer of assets, which forming a part of block of assets on which depreciation has been allowed under the Income Tax Act, then irrespective of period of holding, such gain is taxable as short-term capital gain. Also, the capital gains arising on account of transfer of an undertaking under slump sale are deemed to be short term capital gains when the undertaking is ‘owned and held’ for less than or equal to 36 months immediately before the date of transfer.

Individuals, HUFs, & Firms (Other than LLPs) ITR Forms – 1, 2, 3, 4

For Individuals, HUFs, & Firms (Other than LLPs)
ITR Forms – 1, 2, 3, 4

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For Corporate Tax Payers ITR Forms – 6

For Corporate Tax Payers
ITR Forms – 6

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Non-Corporate Tax Payers including LLPs ITR Forms – 5,7

For Non-Corporate Tax Payers including LLPs
ITR Forms – 5,7

Download PDF

Reporting Partners

Vikrant Suri - Partner - Coinmen Consultants LLP

Vikrant Suri
Co-Founder and Partner
Experience: 15 years
Specializes in Direct Tax Matters
Former Manager, EY India (TRS)

vikrant@coinmen.com
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Nitin Garg

Nitin Garg
Co-Founder and Partner
Experience: 15 years
Specializes in Transfer Pricing
Former Manager, EY India (TRS)

nitin@coinmen.com
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