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The Indian Tax Authority is the Income Tax Department (ITD), their website is here. Each region in India has a regional Income Tax Office.
For expats the most common form of business structure in Australia is a private limited company (company). Such a company requires a minimum of two directors, and a minimum paid up capital of Rs100,000. The business income is taxed at the corporate tax rate. Another possible choice is a sole proprietorship, however with these your liability extends to your own personal assets, and the business income is taxed at your individual marginal rate.
All Indian companies must be registered with the Registrar of Companies. You can do this by completing Form No1, No18 and No32 which are available via links from here. Once you have registered you will receive a Certificate of Incorporation and can operate as a company from the date of incorporation. You will have to register for tax and apply for a Permanent Account Number (PAN). Non-residents apply using form 49AA or 49A depending on status. The application fees which can be paid in various forms. There is a guide to filling out form 49AA here, and one for 49A here, and instructions are available here. You will also have to obtain a ten digit Tax Account Number (TAN) if your company is going to deduct of collect tax (for instance from employees). The application is made on Form 49B which is available via a link from here.
The Indian tax year for companies runs from 1 April to 31 March. Indian resident companies are liable for corporate income tax on their worldwide income and capital gains. Non-resident companies are generally only liable for corporate income tax on their Indian source income and gains.
The way the corporate tax system works is that the income earned in one tax year is fully payable in the following year, known as the Assessment Year (AY). For a new business the income earned from the date of incorporation until the following 31 March will be taxed in the AY which follows.
The tax rate for domestic companies is 30% plus an Education Cess of 3% of the tax payable, giving an overall rate of 30.90%. If the taxable income exceeds RS10m but is less than Rs100m there is a surcharge payable of 5% of the tax payable. Above Rs100m the surcharge is 10%.
Foreign companies are taxed at a rate of 40% plus an Education Cess of 3% of the tax payable, giving an overall rate of 41.2%. Their surcharge is 2% for between Rs10m and Rs100m, and 5% above Rs100m.
In India capital gains are treated differently depending on the length of time an asset has been held. Short term gains on assets held for less than 36 months (12 months for certain stocks and shares) are treated as ordinary income and taxed as such. Long term gains on assets held for longer than 36 months (12 months for certain stocks and shares) are generally taxed at 20% (after adjustment for inflation).
Companies whose accounts are not required to be audited must file their Indian corporate income tax returns by 31 July for income earned in the previous tax year. For companies whose accounts are required to be audited the deadline is extended to 30 September. Electronic filing is compulsory for companies with audited accounts, and optional for all other companies.
Corporate tax is collected under a self-assessment system. Companies are required to calculate and pay their own tax in quarterly instalments, beginning on 15 June. The amount they pay is calculated by estimating their earnings for the year. There is also a final balancing tax payment (if applicable) which must be made once the actual amount due is calculated. This must be paid prior to filing their return. Penalties apply for late payment of tax.
Sections in TAXATION IN INDIA:
» Overview of Tax Issues for Expats in India
» Employment Taxation for Expats in India
» Business Taxation for Expats in India
» Investment Taxation for Expats in India
» Tax Treaty Considerations for Expats in India
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If you are considering moving to India or are soon to depart, you can find helpful information and advice in the Expat Briefing dedicated Indian section including; details of immigration and visas, Indian forums, Indian event listings and service providers in India.
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