QUICK REVISION OF CORPORATE TAX PLANNING:SOLE PROPRIETORSHIP AND TAX PLANNING AND REQUISITE FEATURES OF TAX PLANNING

• QUICK REVISION OF CORPORATE TAX PLANNING
  
  CORPORATE TAX PLANNING
• CONTENTS:

1. PREVIOUS PAPER
2. SOLE PROPRIETORSHIP AND TAX PLANNING
3. REQUISITE FEATURES OF TAX PLANNING

• SECTION A

1. WHAT ARE THE MAIN OBJECTIVE OF TAX PLANNING? WHAT STEPS WOULD YOU TAKE TO ACHIEVE THE OBJECTIVE OF TAX PLANNING?
2. WHAT ARE THE MAJOR ISSUES IN TAX PLANNING FOR LOCATION OF A NEW BUSINESS ORGANIZATION? HOW WOULD YOU RESOLVE THESE ISSUES?
3. WHAT DO YOU MEAN BY INFRASTRUCTURAL PROJECTS? WHAT ARE THE MAJOR TAX CONSIDERATION AND INCENTIVES FOR INFRASTRUCTURAL PROJECTS.
4. WHAT ARE THE REQUISITES FOR DEMERGER OF COMPANIES. EXPLAIN THE TAX INCENTIVES AVAILABLE FOR DEMERGER OF COMPANIES.

• SECTION -B

1. WHAT DO YOU MEAN BY DIVIDEND DECISION? WHAT ARE THE MAJOR ISSUES IN DIVIDEND DECISIONS. HOW WOULD YOU DEAL WITH THEM
2. WHAT ARE THE TAX ISSUED DECIDING WHETHER  TO MAKE OR BUY THE PRODUCT? HOW WOULD YOU SOLVE THE ISSUE?
3. WHAT DO YOU MEAN BY DESIGNING OF COMPENSATION PACKAGE?EXAMINE THE MAJOR TAX CONSIDERATION IN DESIGNING OF COMPENSATION PACKAGE?
4. WHAT DO YOU MEAN BY ADVANCE PAYMENT OF TAX? EXPLAIN THE PROVISIONS OF INCOME TAX ACT,1961 RELATING TO ADVANCE PAYMENT OF TAX.

• SECTION C

1. TAX AVOIDANCE
2. EXEMPTION
3. FREE TRADE ZONES
4. TAXATION OF SOLE PROPRIETORSHIP
5. AMALGAMATIONS
6. INTER CORPORATE DIVIDEND
7. OWN OR LEASE DECISIONS
8. SHUT DOWN OR CONTINUE DECISIONS
9. INDIAN COMPANY
10. DEDUCTION OF TAX AT SOURCE

• MEANING OF SOLE PROPRIETORSHIP

1. IN THIS FORM OF ORGANIZATION ONE PERSON IS ALL IN ALL, HE CONTRIBUTES THE WHOLE OF THE CAPITAL AND BEARS FULL RISK WITH UNLIMITED LIABILITY.
2. NO DISTINCTION BETWEEN PERSONAL ASSETS AND BUSINESS ASSETS FOR THE PAYMENT OF DEBT
3. MANAGEMENT CAPACITY IS LIMITED
4. THE CONTINUITY OF RUNNING HIS BUSINESS IS DEPENDENT ON HIS WELL BEING
5. NO GOVERNMENT CONTROL
6. SOLE PROPRIETORSHIP AND SOME SPECIAL TAX PROVISIONS
7. ASSESSED AS INDIVIDUAL( IN THE NAME  OF THE OWNER) UNDER THE INCOME TAX ACT 1961, INCOME OF THE SOLE PROPRIETOR IS TAXABLE AS BUSINESS INCOME OF THE OWNER.
8. HE IS NOT REQUIRED TO HAVE SEPARATE PERMANENT ACCOUNT NUMBER FOR HIS SOLE PROPRIETOR CONCERN
9. HIS BUSINESS INCOME FROM SUCH PROPRIETARY BUSINESS SHALL BE INCLUDED IN HIS TOTAL INCOME ALONG WITH OTHER INCOME LIKE SALARY,HOUSE PROPERTY,CAPITAL GAIN AND OTHER SOURCES
10. THE SCOPE OF TOTAL INCOME OF SOLE PROPRIETOR DEPENDS UPON THE RESIDENTIAL STATUS
11. SECTION 6 OF THE INCOME TAX ACT,1961 PROVIDES RULES FOR THE DETERMINATION OF RESIDENTIAL STATUS. HE MAY BE

1. ORDINARY RESIDENT
2. NOT ORDIANRY RESIDENT
3. NON RESIDENT

• SOLE PROPRIETORSHIP AND SOME SPECIAL TAX PROVISIONS

1. WHILE CALCULATING BUSINESS INCOME ANY REMUNERATION I.E SALARY,FEES,BONUS,COMMISSION ETC PAID /PAYABLE TO THE OWNER IS NOT ALLOWED AS BUSINESS EXPENDITURE
2. NO DEDUCTION OF INTEREST ON LOAN OR ON CAPITAL IS ALLOWED AS BUSINESS EXPENDITURE
3. IF THE SPOUSE OF THE OWNER PROVIDES ANY LOAN TO THE BUSINESS OF THE OWNER THEN REASONABLE INTEREST ON LOAN IS ALLOWED AS BUSINESS EXPENDITURE PROVIDED THE SPOUSE PROVES TO THE SATISFACTION OF THE ASSESSING OFFICER THAT THE LOAN WAS PROVIDED OUT OF THE RESOURCES BELONGING TO THE SPOUSE.
4. INTEREST ON LOAN TAKEN FROM ANY THEIR FAMILY MEMBERS CAN BE TREATED AS BUSINESS EXPENDITURE
5. SOLE PROPRIETORSHIP AND SOME SPECIAL TAX PROVISIONS
6. NO DEDUCTION FOR THE RENT OF OWNED PREMISES
7. RELAXED LIABILITY TO DEDUCT TAX AT SOURCE:
8. UNDER SECTION 194 C,A SOLE PROPRIETOR IS NOT UNDER THE OBLIGATION TO DEDUCT TAX AT SOURCE OUT OF PAYMENT TO BE MADE TO ANY RESIDENT CONTRACTOR FOR CARRYING OUT ANY WORK IN PURSUANCE OF CONTRACT.. SIMILARLY HE IS RELAXED UNDER SECTION 194 A-,194 H AND 194 J
9. BUT HE IS REQUIRED TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENT ONLY IF THE BOOKS ARE REQUIRED TO BE AUDITED UNDER SECTION 44AB
10. ALLOW ABILITY OF CERTAIN SPECIAL DEDUCTION UNDER SECTION 80

• TAX PLANNING OF SOLE PROPRIETORSHIP

1. SIMILAR TO TAX PLANNING FOR INDIVIDUAL. AS SOLE PROPRIETOR IS ASSESSED THROUGH OWNER
2. EMPLOYING FAMILY MEMBERS IN THE BUSINESS:AS SALARY IS NOT PERMITTED TO SOLE PROPRIETOR. HE CAN EMPLOY FAMILY MEMBERS AND PAY REASONABLE SALARY/COMMISSION/BONUS/FEES TO THEM TO THE NATURE OF WORK ALLOCATED
3. BORROW MONEY FROM THE FAMILY MEMBERS AT REASONABLE RATE OF INTEREST
4. APPLY TAXABLE INCOME FOR PERSONAL PURPOSES ( INVESTMENT AND EXPENSES) TO CLAIM DEDUCTION:-
5. DEDUCTION UNDER 80 C
6. CAN CLAIM DEDUCTION UNDER 80 CCC,80CCD,80 D AND 80DD
7. TAX PLANNING
8. CLAIM INCOME BASED DEDUCTIONS UNDER SECTION 80: IN RESPECT OF CERTAIN INCOME EARNED. SUCH INCOME MAY BE IN THE FORM OF PROFIT AND GAINS EARNED FROM CERTAIN BUSINESS OR CERTAIN OTHER INCOMES SUCH AS ROYALTY INCOME OR INTEREST ON DEPOSITS IN SAVING ACCOUNT
9. TAX PLANNING IN THE LIGHT OF CLUBBING PROVISIONS:MUST ANALYSE THE PROVISIONS

• MEANING OF TAX PLANNING

1. TAX PLANNING IS ARRANGEMENT OF ONE’S FINANCIAL AFFAIRS IN SUCH A WAY THAT THE BURDEN OF TAXATION ON THE ASSESS IS REDUCED TO THE MINIMUM WITHOUT VIOLATING IN ANY WAY THE LEGAL PROVISIONS.IN TAX PLANNING MAXIMUM ADVANTAGE IS TAKEN OF ALL TAX EXEMPTIONS,DEDUCTIONS,CONCESSIONS,REBATES AND ALLOWANCES OTHER RELIEF OR BENEFITS PERMITTED UNDER THE ACT
2. CAN BE EXERCISED ONLY IF IT IS PROVIDED UNDER THE TAXATION LAW
3. TAX PLANNING IN RELATION TO CORPORATE SECTOR IS TERMED AS CORPORATE TAX PLANNING
4. THE KEY OBJECTIVE IN CORPORATE TAX PLANNING IS TO IDENTIFY THE MAIN FACTORS IN THE ORGANIZATION’S STRUCTURE THAT DICTATE THE OPPORTUNITIES FOR TAX EFFICIENCIES
5. UNDER INCOME TAX ACT 1961.MANY TAX BENEFITS/CONCESSIONS HAVE BEEN PROVIDED TO COMPANIES.
6. CORPORATE TAX PLANNING AIMS TO STRUCTURE THE BUSINESS IN SUCH A WAY TO MINIMIZE BOTH IN CURRENT AND FUTURE INCOME TAX LIABILITIES
7. ENABLE MANAGERS TO CONSIDER THEIR DECISIONS AFTER ANALYZING TAX CONSEQUENCES.

• AREA OF TAX PLANNING
• FOR SETTING UP OF NEW BUSINESS:

1. FORM OF ORGANIZATION/OWNERSHIP PATTERN
2. LOCATIONAL DECISIONS
3. NATURE OF BUSINESS

• FOR EXISTING BUSINESS ENTITIES:-

1. FINANCIAL MGMT DECISIONS
2. OPERATIONAL MGMT DECISIONS
3. CORPORATE RESTRUCTURING DECISIONS
4. FOREIGN COLLABORATION AND JOINT VENTURE AGREEMENTS
5. INTERNATIONAL BUSINESS TRANSACTIONS

• REQUISITES OF SUCCESSFUL PLANNING

1. THE LAW RELATING TO INCOME TAX IS ONE OF THE MOST COMPLICATED LAW OF INDIA. THE SUCCESS CORPORATE TAX PLANNER SHOULD HAVE KNOWLEDGE OF THE PROVISIONS OF INCOME TAX ACT 1961,RULES FRAMED THESE UNDER AND NOTIFICATION AND CIRCULAR ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES
2. INCOME TAX ACT 1961:-INCOME TAX ACT IS COMPREHENSIVE ACT WHICH CONSISTS OF 298 SECTIONS AND MANY SUBSECTIONS GROUPED UNDER XXIII CHAPTERS ALONG WITH XIV SCHEDULE. THE ACT CONTAINS DETAILED PROVISIONS REGARDING APPLICABILITY,BASIS OF CHARGE,RESIDENTIAL,STATUS,HEADS OF INCOME,CLUBBING PROVISIONS,SET OFF LOSSES,EXEMPTIONS AND ASSESSMENTS PROCEDURES ETC
3. REQUISITES OF SUCCESSFUL PLANNING
4. INCOME TAX RULES 1962: RULES ARE PREPARED BY THE CENTRAL BOARD OD DIRECT TAXES. DEALS WITH  PROCEDURAL PART OF THE VARIOUS ASPECTS OF INCOME TAX. RULES ARE MADE APPLICABLE BY WAY OF NOTIFICATION IN THE OFFICIAL GAZETTE OF INDIA
5. ANNUAL FINACE ACT:-IS AN IMPORTANT PIECE OF LEGISLATION THAT UPDATES OR AMENDS THE INCOME TAX ACT 1961. IT GIVES EFFECT TO THE FINANCIAL PROPOSAL OF THE GOVERNMENT FOR THE RELEVENT YEAR
6. CIRCULARS AND CLARIFICATIONS ISSUED BY THE CBDT: BINDING ON THE INCOME TAX DEPARTMENT
7. PERARED FOR RETROSPECTIVE AMENDMENTS

8. REQUISITES OF SUCCESSFUL PLANNING
9. KNOWLEDGE OF OTHER ALLIED LAWS
10. KNOWLEDGE OF METHODS OF TAX PLANNING:-

1. DETERMINATION OF RESIDENTIAL STATUS
2. SELECTION OF SUITABLE FORM OF ORGANIZATION
3. CAPITAL STRUCTURE DECISIONS
4. DIVERSIFICATION OF THE BUSINESS ACTIVITY
5. OWN OR LEASE
6. OPTIMUM CLAIM OF EXPENSES TO REDUCE THE TAX LIABILITY