Corporate Tax has become mandatory for several countries, and most are introducing this tax. Recently UAE has made corporate Tax effective, similarly other countries US, India, France, Qatar, Kuwait and Oman have also implemented corporate tax into their taxation policy.
Thus, it is imperative we begin this article by defining what is corporate tax and who is liable to pay this. Further, we shall mention key points relating to corporate tax.
Definition of Corporate Tax
“A tax levied on a company's net income is known as corporation tax.”
Who is entitled to pay Corporate Tax?
Companies that are registered in India under the Companies Act 1956, whether they are private or public, are required to pay corporate tax. Domestic businesses are subject to a 30% tax for the assessment year 2014–15.
A corporate is a business entity that has a distinct legal entity from its stockholders. According to the Income-tax Act, both domestic and international enterprises are required to pay corporate tax. While a foreign business is only taxed on the revenue produced within India, that is, the money that is being accrued or received in India, a domestic firm is taxed on its whole income.
The following categories of corporations can be categorised for the purposes of calculating taxes under the Income Tax Act:
- Domestic Company: Domestic companies include those that are registered under the Indian Companies Act as well as those that are registered abroad but have their whole control and management in India. Private and public corporations are both considered to be domestic companies.
- Foreign Company: A foreign company is one that has management and control situated outside of India and is not registered under the Indian Companies Act.
Before learning about tax rates and how taxes are applied to corporate profits, it is important to understand the many forms of income that corporations may generate. These incomes are:
- Profits earned from the business
- Capital Gains
- Income from renting a property
- Income from other sources like dividends, interest etc.
Things you need to know about filing an income tax return
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The deadline for submitting a tax return
Companies, even those that are international, are required to file their income tax returns annually by October 30. Even if the business was founded within the same fiscal year, it must still submit its income tax return for that time period by October 31.
Forms for the corporation to file tax returns
ITR 6: All businesses must submit their returns using Form ITR 6, with the exception of those seeking deductions under Section 11. ITR 7: Using Form ITR 7, all businesses registered under Section 8 of the 2013 Companies Act must submit their returns.
Tax Audit
A class of businesses are required by the Income Tax Act to have their accounts audited and to submit the audit report to the IT department with their Income Tax return. The audit in question is a tax audit. Eligible enterprises must also submit this tax audit report by the deadline of September 30. Corporate tax regulations are a vast sea of requirements that all businesses must abide by. For this purpose, it is imperative for companies to hire tax audit professionals.
You may also look for tax consultants who will guide you through all the procedures of filing tax returns and provide insights on corporate tax.
How Can Corporate Tax Be Saved?
Here are additional actions that can be performed to reduce corporate tax. These totally depend on how the management of the business develops its tax-saving plan. Additionally, a corporation can reduce taxes in the following three ways:
1. Effective Management of Expenses
It's important to keep accurate records of overhead expenses and wages paid out. Unorganised labour is used by many enterprises around the world, making it essential to keep up-to-date on costs related to labour and production.
2. Equity Valuation
Stocks can be valued at their Net Realizable Value (NRV) rather than cost. This may prevent over-valuing a stock and reduce the taxable income from capital gains if the company has a shorter shelf life or is less well-known.
3. Making Use of Deductions
Corporations trying to reduce their corporate taxes may find that good management of expenses is essential. The most efficient ways to control taxable revenue may be through deductions, tax refunds, and good expense management.
Ending note
This blog puts down the key details of the corporate tax regime and hints at the importance of tax professionals in the same purview. Finding excellent tax audit professionals can be tiresome, but it’s not impossible.
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