SHORT

ANSWERS

SUBMITTED TO: PROF.K.K.BAJPAI

SIMRAN GUPTA
MBA (FC) 4 SEM
ROLLNO.8131051
QUESTION NO.1
SHORT NOTES OF
A dividend tax is a tax imposed by a jurisdiction on dividends paid by a corporation to
its shareholders (stockholders). The primary tax liability is that of the shareholder, though a
tax obligation may also be imposed on the corporation in the form of a withholding tax. In
some cases the withholding tax may be the extent of the tax liability in relation to the
dividend. A dividend tax is in addition to any tax imposed directly on the corporation on its
profits. Some jurisdictions do not tax dividends.
To avoid a dividend tax being levied, a corporation may distribute surplus funds to
shareholders by way of a share buy-back. These, however, are normally treated as capital
gains, but may offer tax benefits when the tax rate on capital gains is lower than the tax rate
on dividends. Another potential strategy is to for a corporation not to distribute surplus funds
to shareholders, who benefit from an increase in the value of their shareholding. These may
also be subject to capital gain rules. Some private companies may transfer funds to
controlling shareholders by way of loans, whether interest-bearing or not, instead of by way
of a formal dividend, but many jurisdictions have rules that tax the practice as a dividend for
tax purposes, called a “deemed dividend”

Tax Planning
Tax Planning is an activity conducted by the tax payer to reduce the tax liable upon him/her
by making maximum use of all available deductions, allowances, exclusions, etc. feasible
under law. In other words, it is the analysis of a financial situation from the taxation point of
view. The objective behind tax planning is insurance of tax efficiency. Tax planning allows all
elements of the financial plan to function in sync to deliver maximum tax efficiency.

Tax planning is critical for budgetary efficiency. A reduced tax liability and maximized the
ability of retirement plans.

Tax planning is a term that stands for calculated application of tax laws, so as to effectively
manage a person’s taxation. Leading to avail the tax benefits as per the law and in
accordance with the interest of the nation and its people.

Tax management:---

Every assessee liable to pay tax needs to manage his/her taxes. Tax management relates to
management of finances for payment of tax, assessing the advance tax liability to pay tax in
time. Tax management has nothing to do with planning to save tax it is just related with
operational aspect of payment of tax i.e. while managing his taxes a person ensures that
he/she is making timely payment of taxes without running out of the money and he is
complying with all the provisions of the law.

Tax management means, the management of finances, for the purpose of paying tax.
~The objective of Tax Management is to comply with the provisions of Income Tax Law and
its allied rules

~Tax Management deals with filing of Return in time, getting the accounts audited, deducting
tax at source etc.

~Tax Management relates to Past ,. Present, Future.

Past – Assessment Proceedings, Appeals, Revisions etc.

Present – Filing of Return, payment of advance tax etc.

Future – To take corrective action

~Tax Management helps in avoiding payment of interest, penalty, prosecution .

~Tax Management is essential for every assessee.

Elements of Tax Management

●Reduce adjusted gross income

●Increase the amount of tax deductions

●Appropriate use of tax credits

●Tax Planning for Retirement Plans

QUESTION NO.2

Tax Evasion: Tax Evasion is an illegal way to minimize tax liability through fraudulent
techniques like deliberate under-statement of taxable income or inflating expenses. It is an
unlawful attempt to reduce one’s tax burden. Tax Evasion is done with a motive of showing
fewer profits in order to avoid tax burden. It involves illegal practices such as making false
statements, hiding relevant documents, not maintaining complete records of the
transactions, concealment of income, overstatement of tax credit or presenting personal
expenses as business expenses. Tax evasion is a crime for which the assesse could be
punished under the law.

Tax Avoidance: Tax avoidance is an act of using legal methods to minimize tax liability. In
other words, it is an act of using tax regime in a single territory for one’s personal benefits to
decrease one’s tax burden. Although Tax avoidance is a legal method, it is not advisable as
it could be used for one’s own advantage to reduce the amount of tax that is payable. Tax
avoidance is an activity of taking unfair advantage of the shortcomings in the tax rules by
finding new ways to avoid the payment of taxes that are within the limits of the law. Tax
avoidance can be done by adjusting the accounts in such a manner that there will be no
violation of tax rules. Tax avoidance is lawful but in some cases it could come in the
category of crime.

Features and differences between Tax evasion, Tax avoidance:

1. Nature: Tax planning and Tax avoidance is legal whereas Tax evasion is illegal
 2. Attributes: Tax planning is moral. Tax avoidance is immoral. Tax evasion is illegal and
objectionable.

3. Motive:  Tax planning is the method of saving tax .However tax avoidance is dodging of
tax. Tax evasion is an act of concealing tax.

4. Consequences: Tax avoidance leads to the deferment of tax liability. Tax evasion leads to
penalty or imprisonment.

5. Objective: The objective of Tax avoidance is to reduce tax liability by applying the script of
law whereas Tax evasion is done to reduce tax liability by exercising unfair means. Tax
planning is done to reduce the liability of tax by applying the provision and moral of law.

6. Permissible: Tax planning and Tax avoidance are permissible whereas Tax evasion is not
permissible.

 Tax liability of an individual can be reduced through 3 different methods- Tax

Planning, Tax avoidance and Tax evasion. All the methods are different and
interchangeable.
 Tax planning and Tax avoidance are the legal ways to reduce tax liabilities but Tax
avoidance is not advisable as it manipulates the law for one’s own benefit. Whereas tax
planning is an ideal method.

QUESTION NO.3

SHORT NOTES OF :-
What is Exempt Income?
Exempt income refers to certain types or amounts of income not subject to federal income
tax. Some types of income may also be exempt from state income tax. The IRS determines
which types of income are exempt from federal income tax as well as the circumstances for
each. Congressional action plays a role as well, as what is exempted and the threshold
amounts are often tweaked or changed entirely.

What is Agricultural Income?

In India, agricultural income refers to income earned or revenue derived from sources that
include farming land, buildings on or identified with an agricultural land and commercial
produce from a horticultural land. Agricultural income is defined under section 2(1A) of the
Income Tax Act, 1961. According to this Section, agricultural income generally means: (a)
Any rent or revenue derived from land which is situated in India and is used for agricultural
purposes. (b) Any income derived from such land by agriculture operations including
processing of agricultural produce so as to render it fit for the market or sale of such
produce. (c) Any income attributable to a farm house subject to satisfaction of certain
conditions specified in this regard in section 2(1A). (d) Any income derived from saplings or
seedlings grown in a nursery shall be deemed to be agricultural income.
 Income tax rebate is a word that is employed in various senses, all of which signify a
reduction in tax liability. On the one hand, the term has gained popularity after the recent
provisions of Section 87A of the Income Tax act in India, which allow for a tax sop of up to
Rs.12,500 for persons with gross taxable incomes not exceeding Rs.5 lakh. On the other hand,
persons keeping tabs on their income tax refund status, often refer to the term rebate as a
refund. Likewise, rebates also signify the deductions available through Sections such as 80C,
80D and 24B.
To help you get a grip on the matter, here’s everything that you need to know about an income tax
rebate.

What is Income Tax Rebate and How does It Work?

In the most generic sense, a tax rebate is a refund that you are eligible for in case the taxes you pay
exceed your liability. For instance, in case your tax liability amounts to Rs.30,000 but your FD issuer
pays the Government on your behalf a TDS amounting to Rs.40,000 then you qualify for a rebate or
refund.

Provisions for a tax rebate are specified Section 237 of the IT Act. The refund is initiated by the
Income Tax Department and you can get information about the quantum of refund you qualify for at
the time of carrying out income tax filing.
Tax Rebate under Section 87A

Section 87A of the Income Tax Act provides a rebate that helps you lower your income tax payment.
For the financial year 2019-20 or assessment year 2020-21, you, as a resident individual, can obtain a
rebate of up to Rs.12,500 if your gross taxable income, post deductions, is not in excess of Rs.5 lakh.
So, incase income tax payment amounts to Rs.10,000, Section 87A provides you a rebate of that
amount. This rebate is given before the addition of the 4% cess.
The tax relief made available through Section 87A can be revised from time to time and so, its good
to know what is the rebate in Income Tax offered for a particular financial year.

As the name suggests, advance tax refers to paying a part of your taxes before the
end of the financial year. Also called ‘pay-as-you-earn’ scheme, advance tax is the
income tax payable if your tax liability is more than Rs 10,000 in a financial year. It
should be paid in the year in which the income is received. By paying in advance,
you help the government and also yourself by not finding it hard to pay the whole tax
at one go at the end. This way, if your advance tax liability for the financial year 2017-
18 has exceeded Rs 10,000, you are expected to pay it in the same financial year.
 The deadlines are: at least 15 per cent of the liability on or before June 15, 45 per
cent by September 15, not less than 75 per cent by December 15 and the whole
amount of the tax calculated, by March 15 of each financial year. If the estimate of
one’s income changes as the instalments progress, the advance tax payable can be
increased or reduced accordingly. Any amount paid up to March 31 will also be
accepted as advance tax for that financial year.

QUESTION NO.4
Summing the Biggest Differences between Direct and Indirect Tax

Here is a table pointing out the biggest direct vs. indirect tax differences-

Context Direct Tax Indirect Tax

1. Imposed on Income and profits All the goods and
services
2. Who pays Individuals and businesses End-consumers
3. How much Depends on income and profits Same for everyone
4. Transferability Not transferable Transferable
5. Tax Evasion Possible Not possible
6. Nature Progressive Regressive
7. Collections Complex Convenient
8. Common Income tax and securities transaction tax GST, excise duty, and
examples VAT

QUESTION NO.5

Amidst economic crisis across the globe, India has posed a beacon of hope with ambitious
growth targets, supported by a bunch of strategic undertakings such as the Make in India
and Digital India campaigns. The Goods and Services Tax (GST) is another such undertaking
that is expected to provide the much needed stimulant for economic growth in India by
transforming the existing base of indirect taxation towards the free flow of goods and
services. GST is also expected to eliminate the cascading effect of taxes. India is projected to
play an important role in the world economy in the years to come. The expectation of GST
being introduced is high not only within the country, but also within neighboring countries
and developed economies of the world.

Benefits of GST to the Indian Economy

 Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and
Excise.

 Less tax compliance and a simplified tax policy compared to current tax structure.

 Removal of cascading effect of taxes i.e. removes tax on tax.

  Reduction of manufacturing costs due to lower burden of taxes on the manufacturing
sector. Hence prices of consumer goods will be likely to come down.

 Lower the burden on the common man i.e. public will have to shed less money to buy
the same products that were costly earlier.

 Increased demand and consumption of goods.

 Increased demand will lead to increase supply. Hence, this will ultimately lead to rise
in the production of goods.

 Control of black money circulation as the system normally followed by traders and
shopkeepers will be put to a mandatory check.

 Boost to the Indian economy in the long run.

These are possible only if the actual benefit of GST is passed on to the final consumer. There
are other factors, such as the seller’s profit margin, that determines the final price of goods.
GST alone does not determine the final price of goods.

How will GST impact the Indian Economy?

 Reduces tax burden on producers and fosters growth through more production.
The current taxation structure, pumped with myriad tax clauses, prevents
manufacturers from producing to their optimum capacity and retards growth. GST
will take care of this problem by providing tax credit to the manufacturers.

 Different tax barriers, such as check posts and toll plazas, lead to wastage of
unpreserved items being transported. This penalty transforms into major costs due to
higher needs of buffer stock and warehousing costs. A single taxation system will
eliminate this roadblock.

 There will be more transparency in the system as the customers will know exactly
how much taxes they are being charged and on what base.

 GST will add to the government revenues by extending the tax base.

 GST will provide credit for the taxes paid by producers in the goods or services chain.
This is expected to encourage producers to buy raw material from different
registered dealers and is hoped to bring in more vendors and suppliers under the
purview of taxation.

 GST will remove the custom duties applicable on exports. The nation’s
competitiveness in foreign markets will increase on account of lower costs of
transaction.
 QUESTION NO.6
TAX DEDUCTED AT SOURCE (TDS)
 
Introduction

The concept of TDS was introduced with an aim to collect tax from the very source of
income. As per this concept, a person (deductor) who is liable to make payment of specified
nature to any other person (deductee) shall deduct tax at source and remit the same into the
account of the Central Government. The deductee from whose income tax has been
deducted at source would be entitled to get credit of the amount so deducted on the basis of
Form 26AS or TDS certificate issued by the deductor.
 
Rates for deduct of tax at source

Taxes shall be deducted at the rates specified in the relevant provisions of the Act or the
First Schedule to the Finance Act. However, in case of payment to non-resident persons, the
withholding tax rates specified under the Double Taxation Avoidance Agreements shall also
be considered

 TDS Rates
 Withholding Tax Rates

 Tax Rates DTAA v. Income-tax Act

 
How to pay Tax Deducted/Collected at source?
Tax deducted or collected at source shall be deposited to the credit of the Central
Government by following modes:

 1) Electronic mode: E-Payment is mandatory for

o a) All corporate assesses; and
o b) All assesses (other than company) to whom provisions of section
44AB of the Income Tax Act, 1961 are applicable.
 2) Physical Mode: By furnishing the Challan 281 in the authorized bank branch

QUESTION NO.7

E-WAY BILL
While online generation of e-way bills has put a check on harassment and corruption by tax
authorities and helped in standardising processes across the country, it is also leading to
various complications. Ever since the introduction of the e-way bill rules, stakeholders have
been debating issues relating to compliance. This article highlights a few of the concerns
around the generation of e-way bills.
1. Consequences of non-compliance by transporters:
One of the crucial issues faced by industry is assigning the responsibility for
generating the e-way bill. According to the law, the onus is clearly on the consignor or
consignee who is responsible for the movement of goods of value exceeding 50,000
 INR. However, the responsibility for generating the e-way bill may be passed on
to transporters in cases where goods have to start from the transporter’s location for
onward movement and transportation details are not known.

In such a situation, Part A of the e-way bill pertaining to details of goods is to be filled

by the consignor or consignee, and Part B is assigned to the transporter for filling
vehicle details. Any non-compliance in the generation of the e-way bill will result in the
interception and detention of goods belonging to the consignor or consignee and
imposition of fines and penalties. Even when the e-way bill is generated by the
transporter, the repercussions of non-compliance have to be borne by the owner of
the goods in the form of confiscation of goods and imposition of fines/penalties. At a
later stage, the details of e-way bills are matched and reconciled with the outward
details reported by the suppliers in their returns (Form GSTR-1). Such requirements
have raised concerns among owners of goods as the lack of trained resources at the
transporter level increases the likelihood of non-compliance.

2. Ex-works movement:
Where the movement of goods take place under an ex-works contract, the title of
goods typically gets transferred to the buyer at the factory gate. In such cases, it is the
buyer who causes the movement of goods by engaging the transporter and who is
required to generate the e-way bill. However, it may not be practically possible for the
buyer to generate e-way bills in all cases due to non-registration in the seller state,
availability of vehicle details, etc. Though an unregistered person can enrol himself as
a ‘citizen’ for e-way bill generation, achieving 100% compliance in such cases may be
challenging. The buyer can therefore enter into a contract with the transporter for
the generation of e-way bills. However, the consequences of non-compliance by
the transporter will still have to be borne by the buyer.

3. Reverse movement:
Reverse movement of goods due to rejection/non-acceptance by the buyer also needs
to be accompanied by an e-way bill. Rejections are an inherent and recurrent part of
any business transaction. Under the pre-GST regime, such goods were generally
moved using an endorsed copy of the original invoice. Under the present GST regime,
the generation of an e-way bill at the customer’s location is posing challenges for the
business as it may not be practical in all cases. In such situations, businesses are
finding it difficult to meet the compliance requirements.
In order to achieve supply chain efficiencies without any disruptions, partnering
with transporters for compliance will become imperative for businesses. Nonetheless, as a
safeguard against any future liability arising due to non-compliance by the transport partner,
businesses will have to exercise greater control and closely monitor the operations of
transporters. Indeed, businesses may even consider auditing and validating the processes of
transporters. Automating the process of matching e-way bill details generated
by transporters with their outward supplies at regular intervals can be another way of
identifying the gaps and streamlining compliance.
With the implementation of the e-way bill for inter-state movement from 1 April 2018 and for
intra-state movement in a staggered manner latest by 1 June 2018, the tax authorities are
expected to swing into action and start imposing checks. Hence, businesses need to
carefully take into account compliance requirements related to e-way bills and ensure
adherence to the same. Fixing appropriate responsibilities and providing for remedial
measures under their contracts with relevant stakeholders are indispensable steps on this
journey.
QUESTION NO.8
The GSTN or the Goods and Services Tax Network, is a non-government, non-
profit organisation. The GSTN manages the GST portal which takes care of
everything related to GST in India. The network is made to track down the
financial transactions and this provides the taxpayers all the services they
require.

GSTN Structure

51% of the shares in GSTN are owned by the private players and the rest 49% is
owned by the Government. The Goods and Services Tax Network is chaired by
Navin Kumar.

The Key Features of GSTN

It is one the most complex IT initiative and here are some of the key features of
GSTN: –

 It is a Trusted National Information Utility

GSTN is a trusted National Information Utility, that is quite reliable when it

comes to the matters related to smooth functioning of GST in India.

 It takes care of complex transactions

GST is a tax that depends on destination from where it is collected. The

computation of IGST can be a tedious task considering the volume of the
transactions that happens all over India. For a strong flow between SGST and
CGST, there is a dire need of a strong managing body like GSTN.

 It safeguards the information

The government will have a say in the matters related to GSTN, as it would be a
necessary step in order to keep the information about the taxpayers safe and
secure. The Central Government has the control over the composition of
 the Board, mechanisms of Special Resolution and Shareholders Agreement, and
agreements between the GSTN and other state governments.

Basic Functions of GSTN

The Goods and Services Tax Network will handle the following things: –

 Payments and Refunds

 Various Returns
 Registrations
 Invoices

What is GSTIN?

Goods and Services Tax Identification Number is a unique identification which is

provided to the taxpayer once they register themselves with the GST Portal.

A corporate tax, also called corporation tax or company tax, is a direct tax imposed by a

jurisdiction on the income or capital of corporations or analogous legal entities. Many
countries impose such taxes at the national level, and a similar tax may be imposed at state
or local levels. The taxes may also be referred to as income tax or capital
tax. Partnerships are generally not taxed at the entity level. A country's corporate tax may
apply to:

 corporations incorporated in the country,

 corporations doing business in the country on income from that country,
 foreign corporations who have a permanent establishment in the country, or
 corporations deemed to be resident for tax purposes in the country.
QUESTION NO.9
Company income subject to tax is often determined much like taxable income for individual
taxpayers. Generally, the tax is imposed on net profits. In some jurisdictions, rules for taxing
companies may differ significantly from rules for taxing individuals. Certain corporate acts,
like reorganizations, may not be taxed. Some types of entities may be exempt from tax.
Countries may tax corporations on its net profit and may also tax shareholders when the
corporation pays a dividend. Where dividends are taxed, a corporation may be required
to withhold tax before the dividend is distributed.
The tax incidence is uncertain.
QUESTION NO.10
Explain how tax liability of an assessee is determined with reference to his residence?

 In India, the residential status or the residence of an assessee determines the scope
of the income and the amount of income tax he/she is liable to pay.
 The residential status is calculated every year and a person can reside in more than
one country at the same time.

 The liability varies depending on various factors such as the country of residence and
whether the person is an ordinary or non-ordinary resident of India.

LONG
ANSWERS
Long answers
QUESTION NO.1 What is tax deducted at source?
Ans: For quick and efficient collection of taxes, the Income-tax Law has incorporated a
system of deduction of tax at the point of generation of income. This system is called as “Tax
Deducted at Source”, commonly known as TDS. Under this system tax is deducted at the
origin of the income. Tax is deducted by the payer and is remitted to the Government by the
payer on behalf of the payee.
The provisions of deduction of tax at source are applicable to several payments such as
salary, interest, commission, brokerage, professional fees, royalty, contract payments, etc. In
respect of payments to which the TDS provisions apply, the payer has to deduct tax at
source on the payments made by him and he has to deposit the tax deducted by him to the
credit of the Government.
What are the payments covered under the TDS mechanism and the rates for
deduction of tax at source?
Ans: Tax is deductible at source at the rates given in table (infra). If PAN of the deductee is
not intimated to the deductor, tax will be deducted at source by virtue of section
206AA either at the rate given in the table or at the rate or rates in force or at the rate of 20
per cent, whichever is higher. Further, under section 94A(5), if payment or credit is made or
given to a deductee who is located in a notified jurisdictional area, tax is deductible at the
rate given in the table or at the rate of 30 per cent, whichever is higher.
Is there any minimum amount upto which tax is not deducted?
Ans: The Income-tax Act has prescribed a different threshold limit for deduction of tax at
source under various sections. If the expenditure incurred/payment made during the year is
below the threshold limit, then there is no requirement to deduct tax at source.
The threshold limit for deduction of tax at source under various sections is as follows:

S. Particulars Section Threshold limit

No.

1. No deduction of tax at source from 192 If net taxable income is less than
salaries the maximum amount which is
not chargeable to tax (i.e. Rs.
2,50,000 for an individual other
than senior citizen, Rs. 3,00,000
for Senior Citizens and Rs.
5,00,000 for Super Senior
Citizens)

1A. No TDS from payment of 192A If taxable premature withdrawal

accumulated balance of provident amount is less than Rs. 50,000.
 fund account due to an employee

2. No TDS from interest paid on 193 If amount of interest paid during

debentures issued by a company in the financial year does not
which public are substantially exceed Rs. 5,000
interested. Provided interest is paid by
account payee cheque to resident
individual or HUF

3. No TDS from interest paid on 8% 193 If amount of interest paid or likely

Saving (Taxable) Bonds 2003 or to be paid during the financial
7.75% Savings (Taxable) Bonds, year does not exceed Rs. 10,000
2018 (applicable from A.Y 2019-20) to
resident persons

3A. No TDS from interest on 6.5% Gold 193 If bonds held by other than non-
bonds, 1977 or 7% Gold bonds, 1980 resident individual (or behalf of
paid to resident individual any other person) and makes
declaration to the payer that the
nominal value of such bonds
does not exceed Rs. 10,000 at
any time during the period to
which interest relates.

4. No TDS from dividend paid by Indian 194 If aggregate amount of dividend

company by an account payee paid or credited during the
cheque to individual financial year does not exceed
Rs. 5000.

5. No TDS from interest other than on 194A If amount of interest paid or

securities paid by a banking company credited on time deposit during
or co-operative society engaged in the financial year exceeds Rs
carrying on the business of banking 10,000 (*) (for all type of
payee)/Rs 50,000 (from
01/04/2018 if payee is resident
senior citizen)
(*) w.e.f. 01/04/2019, the
threshold limit is increased from
Rs. 10,000 to Rs. 40,000.

6. No TDS from interest on any deposit 194A If amount of interest paid or

with a post office under Senior credited on time deposit during
Citizens Saving Scheme Rules, 2004( the financial year exceeds Rs
Notified scheme) 10,000 (*) (for all type of
payee)/Rs 50,000 (from
01/04/2018 if payee is resident
senior citizen)
(*) w.e.f. 01/04/2019, the
threshold limit is increased from
Rs. 10,000 to Rs. 40,000.

7. No TDS from interest other than on 194A If amount of interest paid or

securities if payer is any other person credited on time deposit during
other than post office or banking the financial year exceeds Rs
 company or co-operative society 5,000.
engaged on the banking.

8. No TDS from Lottery / Cross Word 194B If amount paid during the financial
Puzzles year does not exceed Rs. 10,000.

9. No TDS from winnings from horse 194BB If amount paid during the financial
races year does not exceed Rs. 10,000.

10. No TDS to contractor to resident 194C a) If sum paid/credited to a

person contractor in a single payment
does not exceed Rs. 30,000
b) If sum paid/credited to
contractor in aggregate does not
exceed Rs. 1,00,000 during the
financial year (Rs. 1,00,000 w.e.f.
01/06/2016)

11. No TDS from insurance commission 194D If amount paid or credited during
paid or payable during the financial the financial year does not
year to resident person exceed Rs. 15,000

12 No TDS from sum payable under a 194DA If amount paid or payable during
life insurance policy (including bonus) the financial year is less than Rs.
to a resident person (w.e.f. 01-10- 1 lakh.
2014)

13. No TDS from payments made out of 194EE If amount of payment or

deposits under NSS aggregate amount of payments in
financial year is less than Rs.
2,500. In case of payment is
received by legal heirs no tax
shall be deducted.

14. No TDS from commission paid on 194G If amount of income the financial
sale of lottery tickets year does not exceed Rs. 15,000

15. No TDS from payment of commission 194H If amount paid or credited during
or brokerage the financial year does not
exceed Rs. 5,000 (Rs. 15,000
w.e.f. 01/06/2016). Further no tax
to be deducted from commission
payable by BSNL/ MTNL to their
Public call office franchisees.

16. No TDS on payment of rent in respect 194-I If amount paid or credited during
of any land or building, furniture or the financial year does not
fittings or plant and machinery to a exceed Rs. 1,80,000 (Rs.
resident person 2,40,000 w.e.f. 01/04/2019).
No tax deductions shall be made
under this section if rent is paid to
a business trust, being a real
estate investment trust, in respect
of any real estate asset, referred
 to in section 10(23FCA), owned
directly by such business trust.

17. No TDS on payment of consideration 194-IA If consideration paid or payable

for purchase of an immovable for transfer of an immovable
property(other than agriculture land) property is less than Rs. 50
to a resident transferor Lakhs.

17A. No TDS on payment of rent of any 194-IB If amount of rent does not exceed
land or building or both by an Rs. 50,000 for a month or part of
individual/HUF [whose books of a month.
account are not required to be audited
under section 44AB to resident
person.

18. No TDS on payment of fee for 194J If amount paid or credited during
professional services, fee for technical the financial year does not
services, royalty, any sum referred to exceed Rs. 30,000
in section 28(va) to a resident person .

19. No TDS from income in respect of 194K If the amount of income paid or
units payable to resident payable exceeds Rs. 5,000
during the financial year
.

20. No TDS on payment of 194LA If such sum amount does not

compensation/enhanced exceed Rs. 2,50,000 during a
compensation on compulsory financial year.
acquisition of immovable property
(other than Agricultural Land) to a
resident person

21. No TDS is required to be deducted on 194M If the aggregate amount paid or

sum payable to a person with respect credited during the financial year
to contractual work, commission, does not exceed Rs. 50 lakhs
brokerage or for professional services

22. No TDS is required to be deducted on 194N If the aggregate amount

the amount withdrawn in cash from withdrawn does not exceed Rs. 1
any account crore during the previous year.
However, the threshold limit shall
be Rs. 20 lakh if the person, has
not filed return of income (ITR) for
three previous years immediately
preceding the previous year in
which cash is withdrawn, and the
due date for filing ITR under
section 139(1) has expired.

23. No TDS from payment to participants 194O If amount paid or payable

of e-commerce Resident Individual or HUF during
the financial year does not
exceed Rs. 5 Lakhs
QUESTION NO.2 What Is Capital Structure?
Ans. The capital structure is the particular combination of debt and equity used by a
company to finance its overall operations and growth. Debt comes in the form of bond issues
or loans, while equity may come in the form of common stock, preferred stock, or retained
earnings. Short-term debt is also considered to be part of the capital structure.

KEY TAKEAWAYS

 Capital structure is how a company funds its overall operations and growth.

 Debt consists of borrowed money that is due back to the lender, commonly with
interest expense.
 Equity consists of ownership rights in the company, without the need to pay back any
investment.
 The Debt-to-Equity (D/E) ratio is useful in determining the riskiness of a company's
borrowing practices.
Understanding Capital Structure
Both debt and equity can be found on the balance sheet. Company assets, also listed on the
balance sheet, are purchased with this debt and equity. Capital structure can be a mixture of
a company's long-term debt, short-term debt, common stock, and preferred stock. A
company's proportion of short-term debt versus long-term debt is considered when analyzing
its capital structure.

When analysts refer to capital structure, they are most likely referring to a firm's debt-to-
equity (D/E) ratio, which provides insight into how risky a company's borrowing practices are.
Usually, a company that is heavily financed by debt has a more aggressive capital structure
and therefore poses greater risk to investors. This risk, however, may be the primary source
of the firm's growth.

Debt is one of the two main ways a company can raise money in the capital markets.
Companies benefit from debt because of its tax advantages; interest payments made as a
result of borrowing funds may be tax deductible. Debt also allows a company or business to
retain ownership, unlike equity. Additionally, in times of low interest rates, debt is abundant
and easy to access.

Equity allows outside investors to take partial ownership in the company. Equity is more
expensive than debt, especially when interest rates are low. However, unlike debt, equity
does not need to be paid back. This is a benefit to the company in the case of
declining earnings. On the other hand, equity represents a claim by the owner on the future
earnings of the company.

Measures of Capital Structure

Companies that use more debt than equity to finance their assets and fund operating
activities have a high leverage ratio and an aggressive capital structure. A company that
pays for assets with more equity than debt has a low leverage ratio and a conservative
capital structure. That said, a high leverage ratio and an aggressive capital structure can
also lead to higher growth rates, whereas a conservative capital structure can lead to lower
growth rates.

 
It is the goal of company management to find the ideal mix of debt and equity, also referred
to as the optimal capital structure, to finance operations.

Analysts use the debt-to-equity (D/E) ratio to compare capital structure. It is calculated by
dividing total liabilities by total equity. Savvy companies have learned to incorporate both
debt and equity into their corporate strategies. At times, however, companies may rely too
heavily on external funding, and debt in particular. Investors can monitor a firm's capital
structure by tracking the D/E ratio and comparing it against the company's industry peers.

QUESTION NO.3 Section – 80-IBA : Deductions in respect of profits and gains from housing

projects
Ans .80-IBA. (1) Where the gross total income of an assessee includes any profits and gains
derived from the business of developing and building housing projects, there shall, subject to
the provisions of this section, be allowed, a deduction of an amount equal to hundred per
cent of the profits and gains derived from such business.
(2) For the purposes of sub-section (1), a housing project shall be a project which fulfils the
following conditions, namely:—
(a) the project is approved by the competent authority after the 1st day of June, 2016, but on
or before the 31st day of March, 2019;
(b) the project is completed within a period of 80[three] years from the date of approval by
the competent authority:
Provided that,—
(i) where the approval in respect of a housing project is obtained more than once, the project
shall be deemed to have been approved on the date on which the building plan of such
housing project was first approved by the competent authority; and
(ii) the project shall be deemed to have been completed when a certificate of completion of
project as a whole is obtained in writing from the competent authority;
(c) the 81[built-up] area of the shops and other commercial establishments included in the
housing project does not exceed three per cent of the aggregate 81[built-up] area;
(d) the project is on a plot of land measuring not less than—
(i) one thousand square metres, where the project is located within the cities of Chennai,
Delhi, Kolkata or Mumbai 82[or within the distance, measured aerially, of twenty-five
kilometres from the municipal limits of these cities]; or
(ii) two thousand square metres, where the project is located in any other place;
(e) the project is the only housing project on the plot of land as specified in clause (d);
(f) the 81[built-up] area of the residential unit comprised in the housing project does not
exceed—
(i) thirty square metres, where the project is located within the cities of Chennai, Delhi,
Kolkata or Mumbai 82[or within the distance, measured aerially, of twenty-five kilometres
from the municipal limits of these cities]; or
(ii) sixty square metres, where the project is located in any other place;
(g) where a residential unit in the housing project is allotted to an individual, no other
residential unit in the housing project shall be allotted to the individual or the spouse or the
minor children of such individual;
(h) the project utilises—
(i) not less than ninety per cent of the floor area ratio permissible in respect of the plot of
land under the rules to be made by the Central Government or the State Government or the
local authority, as the case may be, where the project is located within the cities of Chennai,
Delhi, Kolkata or Mumbai 82a[or within the distance, measured aerially, of twenty-five
kilometres from the municipal limits of these cities], or
(ii) not less than eighty per cent of such floor area ratio where such project is located in any
place other than the place referred to in sub-clause (i); and
(i) the assessee maintains separate books of account in respect of the housing project.
(3) Nothing contained in this section shall apply to any assessee who executes the housing
project as a works-contract awarded by any person (including the Central Government or the
State Government).
(4) Where the housing project is not completed within the period specified under clause (b)
of sub-section (2) and in respect of which a deduction has been claimed and allowed under
this section, the total amount of deduction so claimed and allowed in one or more previous
years, shall be deemed to be the income of the assessee chargeable under the head “Profits
and gains of business or profession” of the previous year in which the period for completion
so expires.
(5) Where any amount of profits and gains derived from the business of developing and
building housing projects is claimed and allowed under this section for any assessment year,
deduction to the extent of such profit and gains shall not be allowed under any other
provisions of this Act.
(6) For the purposes of this section,—
(a) “built-up area” means the inner measurements of the residential unit at the floor level,
including projections and balconies, as increased by the thickness of the walls, but does not
include the common areas shared with other residential units, including any open terrace so
shared;
Following clause (a) shall be substituted for the existing clause (a) of sub-section (6) of
section 80-IBA by the Finance Act, 2017, w.e.f. 1-4-2018 :
(a) “carpet area” shall have the same meaning as assigned to it in clause (k) of section 2 of
the Real Estate (Regulation and Development) Act, 2016 (16 of 2016).
(b) “competent authority” means the authority empowered to approve the building plan by or
under any law for the time being in force;
(c) “floor area ratio” means the quotient obtained by dividing the total covered area of plinth
area on all the floors by the area of the plot of land;
(d) “housing project” means a project consisting predominantly of residential units with such
other facilities and amenities as the competent authority may approve subject to the
provisions of this section;
(e) “residential unit” means an independent housing unit with separate facilities for living,
cooking and sanitary requirements, distinctly separated from other residential units within the
building, which is directly accessible from an outer door or through an interior door in a
shared hallway and not by walking through the living space of another household.
QUESTION NO.4 One of the most important decisions to make when
starting a business is the legal form (sole proprietorship,
corporation, limited liability company, etc.) in which you will operate.
And as your business grows, you may want to change forms to
accommodate more owners, a different capital structure, or shield your
growing wealth from business liability. Be sure to weigh the tax
considerations associated with the business type you choose.
 
Choosing an Incorporation Type
You have many choices when it comes to incorporating a business, including:
Sole proprietorship tax considerations
The business and the owner are legally the same. From the IRS's perspective,
the business is not a taxable entity. Instead, all of the business assets and
liabilities and income are treated as belonging directly to the business owner.
General partnership tax considerations
As with sole proprietorships, the business and the owners (two or more) are
legally the same. A partnership is not a taxable entity under federal law. There is
no separate partnership income tax, as there is a corporate income tax. Instead,
income from the partnership is taxed to the individual partners, at their own
individual tax rates. For tax purposes, all of the income of the partnership must
be reported as distributed or “passed-through” to the partners, who will then be
taxed on it through their individual returns.
Limited liability company (LLC) tax considerations
A separate legal entity created by a state filing. Under state laws, LLC owners
are given the liability protection that was previously afforded only to owners of a
corporation (shareholders). Now, LLCs are treated like partnerships for federal
tax purposes (unless they elect to be treated like a corporation, which most
don’t). LLCs have “pass-through” taxation, which means that no tax on the LLC’s
income is paid at the business level. Income/loss is instead reported on the
personal tax returns of the owners, and any tax due is paid at the individual
level. Keep in mind, even though LLCs are treated as partnerships for federal tax
purposes, the same is not always true for state tax purposes.
C corporation tax considerations
A separate legal entity created by a state filing. The C corporation, also called
the "regular" corporation, is subject to corporate income tax. Income earned by
a C corporation is normally taxed at the corporate level using the corporate
income tax rates. C corporation income is also subject to what is called “double
taxation,” when the income of the business is distributed to the owners in the
form of dividends, because dividends are taxable. Tax is paid first by the
corporation on its income and then again by the owners on the dividends
received. If the owner draws a salary from the corporation, that salary is also
subject to income tax (and FICA).
S corporation tax considerations
A separate legal entity created by a state filing. The S corporation is a
corporation that has filed a special election with the IRS to be treated like a
partnership (or LLC) for tax purposes. Therefore, S corporations are not subject
to corporate income tax. Instead, their income is subject to what is often called
“pass-through” taxation, where the income or loss of the business is passed
through the company to the owners (shareholders). Having pass-through
taxation means that S corporation income is not subject to double taxation like C
corporation income.
As you can imagine, there are significant income tax consequences that flow
from each of these choices. Don't forget to weigh the tax issues against the non-
tax issues, such as which business form will best help you to operate and grow
the business or is easier for you to pass to your heirs.
Taxation comparison table
Is business
Business Entity separate
Taxation Tax forms filed with the IRS
type from
owners?
Schedule C or Schedule
Sole Income/loss reported by C-EZ to Form 1040,
No
Proprietorship owner Individual Income Tax
Return
Form 1065, Return of
Partnership Income (info
General Income/loss reported by
No only) and Form 1040,
Partnership owners
Individual Income Tax
Return
Form 1065, Return of
Partnership Income (info
Income loss/reported by
LLC Yes only) and Form 1040,
owners
Individual Income Tax
Return
Corporate tax paid. Second Form 1120, Corporation
tax paid by owners if Income Tax Return
corporate income is Dividend income
C Corporation Yes
distributed to owners in the reported on Form 1040,
form of dividends (double Individual Income Tax
taxation). Return
Form 1120S, Income Tax
Return for S Corporation
Income/loss reported by
S Corporation Yes (info only) and Form
owners
1040, Individual Income
Tax Return

QUESTION NO.5 What factors are important to be considered while starting a

business? Explain.

Ans .Business firms encounter some basic problems while starting a business.
Various decisions have to be taken regarding the business while, starting it. Some of
the basic factors to be considered while starting a business are as follows (i)
Selection of Line of Business The first thing to be decided by any entrepreneur of a
new business is the nature and type of business to be undertaken. One should enter
an industry which is in growth phase and thus has a higher possibility of profits.
Technical knowledge and interest the entrepreneur has for producing a particular
product is also important in this regard. (ii) Size of the Firm Size of the firm refers to
the scale of its operation. Business can be started at a large scale if the entrepreneur
is confident that the demand for the proposed product is likely to be high over time
and he has the necessary skills and capital for business. Business should be started
at a small or medium scale if the market conditions are uncertain and risks are high.
(iii) Form of Ownership There are various forms of ownership in a business
organization like sole proprietorship, partnership or a joint stock company. The choice
of the suitable form of ownership will depend on such factors as the capital
requirements, liability of owners, division of profit, transferability of interest and so on.
(iv) Location of Business Enterprise Plant location is an important factor to be
considered at the start of the business. Availability of raw materials and labour; power
supply and services like banking, transportation, communication, warehousing, etc,
are important factors while making a choice of location. (v) Financing Decisions
Financing is concerned with providing the necessary capital for starting as well as for
continuing the proposed business. Capital is required for investment in fixed assets
and current assets. Proper financial planning must be done to determine the
requirement, source and allocation of funds. (vi) Physical Facilities Availability of
physical facilities including machines and equipment, building and supportive services
is a very important factor to be considered at the start of the business. The decision
relating to this factor will depend on the nature and size of business, availability of
funds and the process of production. (vii) Plant Layout Plant layout refers to a layout
plan showing the arrangement of physical facilities such as machines and equipments
for production. It should be drawn by the entrepreneur after deciding about the scale
of operation and physical facilities to be acquired. (viii) Competent and Committed
Employees In present time, the most crucial resource for a business is the human
resource. Every business depends on the competence and commitment of its work
force to perform various activities so that physical and financial resources are
converted into desired outputs in an efficient and effective manner. (ix) Tax Planning
Every business has to pay certain taxes as levied by the government. Tax planning
and management for reducing tax liability as far as possible is acceptable both legally
and ethically. The entrepreneur must consider in advance the tax liability under
various tax laws and its impact on business decisions. (x) Launching the Enterprise
After the decisions relating to the above mentioned factors have been taken, the
entrepreneur can go ahead with actual launching of the enterprise which would mean
mobilizing various resources, fulfilling necessary legal formalities, starting the
production process and initiating the sales promotion campaign.