Transcript
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TAX Holidays & MAT for IT
Presentation Brief
Company Profile: Manufacturing and marketing mass consumption items
Target Audience: Middle level managers Topic: Tax holidays and MAT for IT
Objective: Basic concepts on Tax holidays and MAT in IT sector and relate
it to the company and business through the use of appropriate examples
MURUGANANDAM M
1011037
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TAX HOLIDAY AND MAT FOR ITTAX HOLIDAY AND MAT FOR IT
I T
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About me
Muruganandam M
Management Trainee
Business Development Department
Joined this organization on 1st August 2010
PGP in Management, IIM Bangalore Batch 2010
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Why Investment? Why are we investing a part of our earnings in instruments such as
Government Bonds
PPF
Government Infrastructure bonds
National Security Certificate
Equity linked Saving Schemes
ANSWER: TO SAVE TAX
Benefit? : More money in our pocket
More we invest, more the industry and economy grow
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Tax Holiday A tax holiday is a temporary reduction or elimination of a tax
A Tax slashing Device
Import Excise Duty, Custom duty
Sales Tax, Corporate Tax
Example:
Tax deductions of 100 percent of IT export profits.
100 % tax deduction for the IT investments in tier II and tier III cities
These benefits will differ industry to industry Condition:
Minimum investment of Rs. 1 Crore
Deductions under tax holiday
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Tax Holiday A tax holiday is a temporary reduction or elimination of a tax
A Tax slashing Device
Import Excise Duty, Custom duty
Sales Tax, Corporate Tax
Benefits:
Incentive for business investments
FDI Foreign Direct Investments
Stimulating growth in selected industry
Less 'pinch' on the pockets and a good fast growth of economy
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Tax Holiday - Information and Technology Sector Income Tax Holiday
STPI (Software Technology Parks ofIndia)
Key Benefits:
Income Tax holiday; Central Sales Tax reimbursement
100% customs duty exemption on imports of capital equipments
(Lease/Loan/Paid)
100% Depreciation on capital goods over a period of five years
Are we benefiting from this?
YES
New IT service company in STPI Hubli, to export
software to our companies in Europe and USA
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MAT - Minimum Alternate Tax Taxable income calculation
Companies Act
Income Tax Act
Minimum of this should be paid as Tax to Income tax department
Example:
We bought the following new items at the beginning of this financial year
computers worth Rs. 50000 Expected life is 5 years
Printers worth Rs. 30000 Expected life is 3 years
Companies Act - SLMmethod to calculate the depreciation expenses
Income Tax Act WDV method to calculate the depreciation expenses It allows 100% depreciation for these items
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Understanding MAT
BeforeMAT After MAT
Realized PROFIT 60000 58200
Companies Act, India Amt (Rs.) Income Tax Act, India Amt (Rs.)
Net Sales 500000 Net Sales 500000
Expenses 420000 Expenses 420000
Less Dep. Charge-Computer
= 50000/5
10000 Less Dep. Charge-Computer
= 50000*100%
50000
Less Dep. Charge Printer
=30000/3
10000 Less Dep. Charge Printer
=30000*100%
30000
Taxable Income 60000 Taxable Income 0
Tax payable at 30% 1800 Tax Payable 0
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Understanding MAT
Before MAT we paid Rs. 0 as Income Tax
After MAT we pay Rs. 1800 as Income Tax
Is government taking away our hard earned money???
Before MAT our profit
After MAT our profit
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Q & A
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