Corporate Income Tax Planning and Advisory

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Corporate Income Tax Planning and Advisory Services

Looking for innovative solutions for your complicated corporate tax problems??

Welcome to Enterslice’s Corporate Income Tax Consultancy Services. At Enterslice, we have a competent team of legal experts and experienced income tax experts who will cater to our client's specific needs by analyzing their tax history and evaluating their expenditures to ensure effective corporate tax planning. Our team is dedicated to providing you with simplified Corporate Income Tax Advisory Services to ensure your compliance with the latest laws, bylaws, amendments, and circulars of the Income Tax Department. We aim to provide timely tax advisory and planning services to minimize your tax burden. Our diverse experience in dealing with clients from national and international bases gives us an edge and a better understanding of ensuring effective tax planning for you.

Overview of Corporate Income Tax Planning and Advisory

Effective Tax Planning is a sine qua non for the corporate entities to minimize their liability and maximize their returns to ensure financial propriety. In India, Corporate Entities are taxed under the Income Tax Act of 1961. Corporate income tax planning is of paramount importance for businesses across the globe. It not only ensures compliance with tax laws but also contributes to the company’s financial health in umpteen ways. In an era of the digital world, where corporate entities are being continuously monitored by the Income Tax Department, corporate tax advisory services have gained immense importance. Legal Experts and tax professionals can simplify the filing of income tax returns and minimize the deductions and liability of corporate entities through their corporate tax planning and advisory services.

Need for Corporate Income Tax Planning

Increased savings

Minimise tax liability by making use of tax saving options and claiming deductions under Section 80C to 80U of the Income Tax Act, 1961.

Making productive long-term investments

Corporate Tax Planning leads to effective financial planning and debt management. This would further increase the chances of the company to deal with any economic crisis or recession.

Regulatory and Legal compliance

Corporate Tax Planning facilitates regulatory compliance, which leads to the company's sustainable growth.

Corporate Income Tax Planning

Corporate Income Tax

Corporate Income Tax is the tax levied on the income of the company in India. It is imposed on both domestic and foreign companies under different tax slabs. Corporate Income Tax is levied after the deduction of expenses (which includes employees' salaries, administrative expenses, etc.), deductions claimed, and company profits.

Who has to pay the Corporate Income Tax??

Corporate Income Tax is levied on both domestic companies and foreign companies under the Income Tax Act of 1961. Domestic Companies are charged corporate income tax on their full income, whereas foreign companies are charged on their income received or accrued in India.

Domestic Company

Section 2(22A) of the Income Tax Act, 1961 defines a domestic company as an entity that is liable to pay income tax in respect of all its business transactions taking place in India. All the income taxable of such a company occurs within the geographical territory of India. Domestic companies are registered under the Companies Act, 1956.

Foreign Company

Section 2(23A) of the Income Tax Act, 1961 defines a foreign company as a company that is not a domestic company. In common parlance, it can be considered as a company whose headquarters is not in India and one that has a multinational presence. These companies are not registered under the Companies Act of 1956.

Services offered by Enterslice in Corporate Income Tax Planning and advisory

Our Corporate Income Tax Planning Services and Advisory include a comprehensive outline for your business needs. Let us help you create a strong foundation for the success of your business.

  • Our team of experts at Enterslice will help you stay up to date with the latest corporate income tax laws and the latest amendments to the Income Tax Act, 1961, also ensuring compliance with the latest circulars and notifications of the Income Tax Department about the income tax.
  • Since every corporate client has a unique problem, we at Enterslice aim to develop tailor-made solutions for our clients to address their corporate income tax concerns and provide them with efficient tax planning and advisory services.
  • Legal Consultancy on corporate income tax matters.
  • We help our clients by taking preventive steps to ensure compliance and to avert the likelihood of the occurrence of future risks.
  • Full assistance in complying with the latest notifications and circulars about income tax, as advertised by the Income Tax Department.
  • Compliance with the latest circulars of SEBI, IRDAI, and RBI about anti-money laundering guidelines.
  • Tax Planning and Guidance on tax exemption options under Section 80C, 80D of Income Tax Act, 1961.
  • Analysing the tax history of the entity and individual for tailor-made tax planning and advisory.
  • Filing of Income Tax Returns for individuals, partnerships, Limited Liability Partnerships (LLP) and other companies.
  • Representation before the tax authorities by our proficient legal associates if required.
  • Assistance in e-filing of income tax returns.
  • Effective and Smart Corporate Tax Planning
  • Corporate Tax optimization through smart investment schemes
  • Corporate Income Tax Risk management

Corporate Income Tax Planning Services

Tax Risk Management

Our experts at Enterslice identify the tax risks of your entity related to international taxation and transfer pricing and help you minimize them. Effective tax management would lead to increased savings and making productive long-term investments. Many companies in India hire unorganized labour, which leads to difficulty in maintaining records. As a result, deductions for claiming labour and production costs are difficult to analyze. We will ensure that your tax returns are filed on time and that there are no last-minute hassles and errors.

Tax Litigation Support

Since tax disputes are time-consuming and costly affairs, our team at Enterslice shall provide you with cost-effective corporate tax consultancy services and legal representation before tax authorities if required. We provide you with tax litigation strategy and liaison with counsels for representation before high-level authorities. This would help in minimizing the fines that may be imposed upon you and the multiplicity of disputes arising in a legal forum. We monitor amendments in tax laws and circulars and update our services then and there so that our workforce is equipped with the latest knowledge.

Tax Strategy & Optimization

To form a smart tax strategy, you require several considerations like income, expense, and investments of the company. At Enterslice, we understand your business needs, and based on that, we provide you with a tailor-made corporate tax planning service package to reduce your tax liabilities and maximize your savings. Our services include the computation of capital gains for mergers and acquisitions, review of tax strategy, business model restructuring, advice on withholding tax, and corporate regulatory compliances.

Corporate Income Tax Advisory Services

Cost-effective- We at Enterslice provide cost-effective tax advisory services related to cross-border transactions concerning M&A agreements, filing tax returns, analysis of changes in tax treaties, analysis of Base Erosion and Profit Shifting (BEPS) measures, analysis of equalization levy, analysis of General Anti Avoidance Rules (GAAR), and analysis of Place of effective management rule (POEM) for determining tax residential status of a company.

Need-Based- Our modus operandi is to look at the needs of the business irrespective of their size and presence and provide them with tailor-based solutions based on the Indian tax system. Good tax planning involves investment in qualified securities. And we provide you with regular updates and reports concerning your tax planning activities.

Professional Expertise- Our team of experts at Enterslice shall help you with restructuring tax strategies, regulatory compliances, company health check analysis, and advising on recent laws or amendments and their effect on corporate entities. By taking our services, you will be able to take your businesses to achieve new heights and goals.

Significance of Corporate Income Tax Planning

  • Corporate Tax Planning allows businesses to minimize their tax burden, thereby freeing up the essential capital for investment and expansion of business across other sectors. This would, in turn, lead to increased profitability.
  • Effective corporate tax planning ensures effective financial decentralization and effective allocation of resources. This would lead to long-term benefits and would prevent any likelihood of financial shock for the company.
  • Corporate Tax Planning leads to effective financial planning and debt management. This would further increase the chances of the company dealing with any economic crisis or recession.
  • Corporate Tax Planning leads to ethical decision-making and decreases the NPAs (Non-Performing Assets) of the company, which would further decrease the twin balance sheet syndrome of the corporate entities along with a decrease in the number of insolvency cases at NCLT (National Company Law Tribunal).
  • Effective tax planning enhances the credit rating score of the company, which promotes investor confidence in the future credentials of the company.

Corporate Tax Due Diligence Services

Corporate Tax Due Diligence refers to the comprehensive evaluation of the company's corporate taxes. Tax due diligence aims to review all the company's taxes by their proper calculation, along with all the company's pending tax disputes. It is important to note that the motive of tax due diligence is not to under-report the company's taxes.

necessary paperation in tax compliance includes copies of all tax returns like income tax returns and sales tax of the last 3 to five years, information about any pending tax audit of the company, information related to any net operating loss (NOL), and any correspondence with tax authorities.

Company Tax Planning in India

The laws governing the companies in India are a bit difficult to comprehend. Under the Income Tax Act of 1961, companies registered under the Companies Act can claim various tax rebates through effective tax planning.

The main behind company tax planning in India is to reduce the company's liability and maximise its savings, which could, in turn, be used for long-term investments.

There are many advantages of effective tax planning, which include expense analysis, monitoring of marketing costs and sales, and smart budget planning.

Depreciation & Deduction

Deductions

Under Section 32 of the Income Tax Act, 1961, income tax assessee can claim for deductions. The Income Tax Act permits deduction on taxes in case of depreciation of tangible or intangible assets. Tangible Assets are those which can be touched. For instance, machinery. Intangible assets are those assets that can’t be touched. For instance, patents, copyrights, and licenses. Depreciation refers to the wear and tear or the decrease in the monetary value of tangible or intangible assets. This section is governed under Rule 5 of the Income Tax Rules, 1962.

Block of Assets

Deductions allowed under Section 32 of the Income Tax Act, 1961 are in case of assets owned by businesses involved in the production or distribution of electricity and in case of a block of assets as defined under Section 2(11) of the Income Tax Act. A block of assets is a group of assets in respect of which the same percentage of depreciation is to be applied.

Restrictions under Deduction

Restrictions in respect of deductions under Section 32 of the Income Tax Act, 1961, are permitted in some cases. For instance, if a motor car is manufactured outside India and has been acquired by the owner from 28 February 1975 to 1 April 2001 or if the real cost of the machinery is deducted by the central government over one or more years under section 42 of the Income Tax Act, 1961. As per the 2016 amendments introduced in section 32 of the Income Tax Act, 1961 vide Finance Act of 2015, deduction of fifty per cent of the outstanding amount under section 32 of the Income Tax Act, 1961 is allowed subject to the conditions that the assessee must own the asset, it must be used during the business activity, and it must be used during the immediate preceding financial year.

Sources of the Taxable Corporate Income

  1. Capital gains

    It refers to the income earned from the company’s capital assets. Capital Assets are those assets that have a lifespan of more than one year. For instance, properties and machinery come under the ambit of the company's capital assets. Capital Assets can be classified as short-term capital assets and long-term capital assets. Short-term capital assets are owned by the assessee for more than 36 months from the date of transfer. On the other hand, the long-term capital assets are owned by the assessee for less than 36 months from the date of the transfer.

  2. Profits from the business

     Profits refer to the income of the company when its total revenue exceeds its total expense. The profits of the company are taxable under the Income Tax Act of 1961.

  3. Income from other Heads

    The income derived by the company by renting out its property comes under the head of “income from house properties”. In contrast, the income from the other head includes income from dividends, interests, etc.

Domestic Companies Tax Liability under IT Act, 1961

  1. Corporate Tax

    On domestic companies having a total turnover not exceeding INR 400 Crores, the tax at the rate of 25% shall be levied. For any other domestic company, tax at the rate of 30% shall be levied.

  2. Surcharge and Cess

    An additional surcharge at the rate of 7% of such income shall be levied if total income exceeds 1 Crore Rupees but is less than 10 Crore rupees. A surcharge at the rate of 12% of such income shall be levied if total income exceeds 10 Crore Rupees. Health and Education Cess is calculated and charged at the rate of 4% of such income tax and surcharge.

  3. Minimum Alternate Tax (MAT)

    It is the tax payable by the domestic company if the total income of the company is less than 15% of the book profit. However, in the case of a company, being a unit of an International Financial Services Centre, the MAT shall be levied at the rate of 9% (inclusive of surcharge and cess).

  4. Special Tax Rates

    These tax rates are charged at the rate of 25% under Section 115BA. Under Section 115 BAA, tax at the rate of 22% is charged along with a surcharge at the rate of 10%, and a minimum alternate tax is exempted. Under Section 115 BAB, tax at the rate of 15% is charged along with a surcharge at the rate of 10%, and a minimum alternate tax is exempted.

Foreign Companies Tax Liability under IT Act, 1961

Corporate Tax

The Corporate Income Tax Rate for foreign companies charged on royalties is at the rate of 50%, whereas it is charged at the rate of 40% from other sources of income.

Surcharge

A surcharge at the rate of 2% shall be levied if the total income exceeds one crore rupees but does not exceed ten crore rupees. On the other hand, a surcharge at the rate of 5% shall be levied if the total income exceeds ten crore rupees.

Health and Education Cess

The health and education cess is calculated at the rate of four per cent of income payable.

Minimum Alternate Tax (MAT)

It is the tax payable by the foreign company if the total income of the company is less than 15% of the book profit. However, in case of a company not being a permanent establishment in India or opts for a presumptive taxation scheme under Section 44B, Section 44BB, section 44BBA, and Section 44BBB, minimum alternate tax (MAT) shall be exempted.

Corporate Income Tax Planning

Corporate Tax Planning refers to the logical analysis and strategizing of one's financial portfolio to improve the long-term investments of the corporate entity. Effective and Smart Corporate tax planning leads to smart corporate governance and enhances the credit rating of the company, which further makes the company more investor-friendly. For instance, if a person named "X" deposits an amount of INR 85000/- in his NPS (National Pension Scheme) Account to derive tax benefits, then it is known as tax planning. The following factors affect the Corporate Income Tax Planning in India-

  • Inflation rate in the economy
  • Cost of implementation
  • Discount Rate
  • Current Legal position
  • Income Tax Slabs
  • The resident status of the assessee
  • ROI(Return on investment)

Objectives of Corporate Income Tax Planning

Effective corporate tax planning helps in adhering to current notifications, circulars, and amendments of the Income Tax Department. It helps prevent tax evasion and comes under the ambit of SFIO (Serious Fraud Investigation Office). It also prevents unnecessary litigation and waste of time by ensuring legal and regulatory compliance. It boosts investor confidence and promotes a healthy economy. Furthermore, it has a spillover effect on the economy in the form of generating employment and promoting CSR (Corporate Social Responsibility) Initiatives.

Types of Tax Planning

Short-Range Tax Planning

In this tax planning, tax plans are created every year to meet the specific aims and objectives. They are usually made at the end of the financial year.

Long-Range Tax Planning

In this tax planning, tax plans are made by keeping a long-term vision in mind. They are usually made at the start of the financial year.

Permissive and Purposive Tax Planning

Tax planning that is permissible under the Income Tax Act of 1961 is known as permissive tax planning. Meanwhile, purposive tax planning is done to ensure maximum benefits to the assessee through a smart selection of investments.

Calculation of Depreciation

Depreciation is calculated on the written-down value of the asset (WDV) of the block of assets. Depreciation is equal to the written-down value multiplied by the rate of the depreciation.

Depreciation leads to tax savings and can be used as an effective tool for corporate income tax planning. It also helps to evaluate the assets of the company and throw light on their usefulness, which can impact the investment of the company in the long run. Although the Companies can claim depreciation under section 32 of the Income Tax Act, 1961, they cannot claim any additional depreciation under section 32(1) (ii) of the act.

Corporate Income Tax Advisory

Corporate Income Tax advisory refers to the consultancy services or the advice provided by legal experts to its clients to ensure maximum benefits, claim maximum exemptions, and ensure full regulatory compliance with the current income tax regime.

For instance, if there is a person named "Y" with an annual income of INR 30 lakhs. He wants to claim maximum tax exemption legally for his disclosed income, so he approaches a corporate tax consultant who advises him on corporate tax planning in the form of-Diversification of investments – in the form of property, gold, stocks, and mutual funds, timely filing of ITR (Income Tax return) and to keep up with the SEBI circulars pertaining to compliances related to the stock market.

Tax Rebates for Corporate Entities

The Corporate Entities in India are eligible for some tax rebates. On Capital Gains, the entities are taxed at a rate of 15 % or 20% or exempted under Section 54D, 54G, 54GA, et al. Donations to charitable organizations under Section 80G may be exempted in the bracket of 50-100%. Corporate entities can claim for depreciation under Section 32 of the Income Tax Act, 1961. The company's dividends are also eligible for tax rebates.

Why Choose Enterslice for Corporate Income Tax Advisory?

  • Our Expert Team at Enterslice has a good understanding of income tax laws and, therefore, can help you by providing apt legal advice to ensure timely filing and compliance.
  • Enterslice Group has a global presence in 100+ jurisdictions, namely India, the United States of America, Singapore, etc. We thereby provide our clients with standardized and high-quality Corporate Income Tax Advisory Services along with the International Tax Advisory Services.
  • Our team of competent Legal Consultants and proficient tax experts cater to the needs of our 10000+ client base by providing them with cutting-edge Income Tax planning and advisory services.
  • Cost-effective corporate income tax and advisory services by Enterslice to minimize your corporate tax liability and maximize your deductions.
  • Prompt response in advisory services to minimize our clients' stress.
  • 97% client satisfaction in tax planning and advisory                                         

What is a Good Tax Planning?      

  • Invest in qualified securities to receive tax benefits
  • Give accurate and up-to-date tax records to the Income Tax authorities.
  • The focus is to save tax, not to evade tax
  • Don’t procrastinate
  • Make timely investments
  • File tax returns on time
  • Explore options for tax savings

Frequently Asked Questions

Both domestic and foreign companies are mandated, under the Income Tax Act of 1961, to pay the corporate income tax based on the income earned under the business head of the given act in the preceding financial year.

Tax deductions under Capital Gains, donations to charitable organizations, dividends, and depreciation can be claimed under the Income Tax Act of 1961.

ITR 6 and ITR 7 have to be filed by the companies.

The Due Date for filing an Income Tax Return is on or before 31st July.

No, a Tax audit is mandatory only for those companies whose turnover and sales exceed INR 1 Crore in the preceding financial year.

Under Section 44AA of the Income Tax Act, 1961, any entity engaged in business has to maintain regular books of account. However, under the Presumptive Taxation Scheme, small taxpayers are exempted from maintaining the regular books of account. It comes under section 44AD, Section 44ADA, Section 44AE, Section 44BB and Section 44BBB.

 

Any person engaged in the business of plying, hiring, or leasing goods or carriages and the person should not own more than 10 carriages at any time during the financial year.

The surcharge is an additional tax levied on an income tax. It can be used for any purpose.

Cess is also an additional tax on tax. However, it can be used only for a specific purpose. For instance, health and education cess charged on the companies under the Income Tax Act of 1961.

It is the minimum amount of tax that the corporate companies have to pay to the government. It is charged at the rate of 15% of book profit under Section 115JB of the Income Tax Act, 1961.

MAT, or Minimum Alternate Tax, is charged to corporate entities, whereas AMT or Alternative Minimum Tax, applies to persons/entities other than corporate entities.

Equalization levy is charged at the rate of 6% on e-commerce operators for services like online advertisements under Section 167(2) of the Finance Act.

Yes, it is mandatory to maintain books of account. In case of failure to do so, a penalty of INR 25,000 may be imposed under Section 271A under the Income Tax Act, 1961.

It is a loan advanced by the financial institution that has remained overdue for more than 90 days.

 

It refers to the compliance with laws, regulations, and notifications related to financial matters by the company or an individual.

It is an economic situation whereby the banks are overstressed due to higher amounts of NPAs or bad loans, and the corporate companies are so severely leveraged that they can’t pay back their loans.

As a result of this syndrome, the Insolvency and Bankruptcy Code, 2016, was introduced in India to either revive the sick companies or to wind up their operations.

Tax Evasion refers to an illegal way of concealing your source of income through fraudulent practices. As a result of tax evasion, the PMLA Act, 2002, i.e., the Prevention of Money Laundering Act, was brought by the Central government.

Although both terms refer to concealing sources of your income, tax evasion uses illegal and fraudulent methods to evade taxes, whereas tax avoidance uses legal methods to avoid paying taxes.

For instance, tax avoidance is done by claiming deductions under the Income Tax Act of 1961. Another example can be buying and selling property within a year to avoid capital gains tax.

Concerning the provisions of Section 271(C) of the Income Tax Act, 1961, the penalty for tax evasion can range between 100% to 300% of the tax liability not paid by the assessee.

Some of the popular corporate tax planning strategies include reallocation of expenses, using tax rebates and deductions under the Income Tax Act of 1961, investing in tax-free bonds or securities, and knowing the latest laws and compliances.

 

No, it is not necessary to hire a corporate tax consultant for the same. However, it is advised to hire a consultant to ensure compliance with the laws, as it is a cost-effective way to minimize your tax liabilities and maximize your interests.

When the same income is taxed twice by different countries, it is known as double taxation. To avoid this, countries sign bilateral DTAAs, i.e. Double Taxation Avoidance Agreements.

Tax Management is part of tax planning. Tax management refers to compliance with the Income Tax Act, 1961, and Income Tax Rules.

Corporate tax advisory services include advice concerning corporate tax returns and legal and regulatory compliances thereof.

Countries where taxes are at the lower end of the bracket are called tax haven countries. Example- Switzerland, Cayman Islands. Corporate Entities often indulge in tax evasion and money laundering by depositing their money in these tax havens due to lower or no tax compliance and resorting to round-tripping of funds. As a result, many countries revoked their double taxation avoidance agreement treaties to avoid money deposition in tax haven countries.

Corporate tax planning and services are sine qua non for the efficient functioning of the company. It has a spillover effect on the economy through the minimization of litigation cases about tax disputes, boosts investor confidence, and helps in the long-term growth of the company.  

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