ASSESSMENT OF COMPANIES
COMPUTATION OF TAXABLE PROFIT WHERE PROFIT AND LOSS ACCOUNT IS AVAILABLE
The debit side of the profit and loss account consists of the expenses which have been incurred due during the accounting year whether paid or not. The expenses may be of capital nature or revenue nature. The credit side consists of income which are due during the accounting year whether received or not. The taxable profits are computed in the following manner:
Net Profit as per Profit and Loss Account
ADD
Inadmissible Expenses
1. Expenses which are inadmissible in computing taxable profit of business or profession but have been charged to profit and loss account, should be as such expenses have reduced the taxable profit. If an expenditure, charged to profit and loss account, is partly admissible and partly inadmissible, only the inadmissible part should be added back. Expenses not Relating to Business
2.
Expenses which are not related to business but charged to the profit and loss account are to be added back as such expenses have reduced the taxable profits For example, if expenses relating to house property or securities, etc. are found debited to the profit and loss account, such expenses should be added back. 3. Income Relating to Business
If any income relating to business or profession has not been credited to the profit and loss account, such income should be added because its exclusion had reduced the taxable profits. For example, if any recovery is made against a debt allowed as bad debts in earlier years, the amount so recovered is taxable income of the business.
LESS
1. Expenses R2elating to Business
Expenses which are related to business and which are also admissible as deductions but not charged to profit and loss account, should be deducted because such expenses will reduce the taxable profit.
2. Income not Relating to Business
Any income which does not relate to business but credited to the profit
and loss account, should be deducted. For example, if investment on securities, rent from house property or dividend, etc. are found credited to profit and loss account, such income should be deducted.
3. Allowable Depreciation as per Income Tax Rules
If the taxable income exceeds the total of deductions, it is taxable profit. If total deductions exceed the total income, it is loss. The above rules will be reversed if the profit and loss account discloses net loss instead of net profit.
ASSESSMENT OF COMPANIES
Assessment of a company is different from individuals in the following respects:
(a) The rate of income tax is different.
(b) No tax is chargeable if the total taxable income of an individual is less than Rs. 3,50,000. A company is liable to income tax even if its income is less than this amount.
RATES OF INCOME TAX FOR COMPANIES 2012
1. Rate of tax on the taxable income of a company for the tax and onwards is 35%
year
2. The total donation on which tax concession may be granted to a company should not exceed twenty percent of taxable income.
3. Where the taxpayer is a small company as defined in Section 2(59A), tax shall be payable at the rate of 25%.
4. In case of Modarba the rate of tax is 25%.
5. Dividend taxation @ 10% will not be applicable in respect of the inter- corporate dividend within the group of companies entitled to group taxation.
6. Tax on Property Income:
S. No.
Gross Amount of Rent
1. 2. Upto Rs. 4,00,000 Rs. 4,00,001 to Rs. 10,00,000
Rate of Tax
5% of the gross amount of rent Rs. Dfa Ho 20,000+ 7.5% of the amount exceeding Rs. 4,00,000
