SURCHARGE ON INCOME TAX (WITH EXAMPLES)

Surcharge:

If the income exceeds Rs.1 crore, a surcharge at the rate of 12% is applicable on the income tax paid for the popular category of taxpayers, subject to marginal relief. Let’s look at the quantum of surcharge percentage applicable for various categories of taxpayers in India. This surcharge will be billed after computation of income tax.

 

Individuals, Partnership Firms, HUF, LLPs: If the income during a specific assessment year is Rs.1 crore or more, the surcharge on income tax is 12 percent.

  • Domestic companies (income more than Rs.1 crore but less than Rs.10 crores): surcharge on income tax is 7 percent.
  • Domestic companies (income more than Rs.10 crores): surcharge on income tax is 12 percent.

 

  • Foreign companies (income more than Rs.1 crore but less than Rs.10 crores): 2 percent on income tax is billed as surcharge.
  • Foreign companies (income more than Rs.10 crores):5 percent of income tax is billed as surcharge.

 

Domestic company [Section 2(22A)]:

A domestic company means an Indian company or any other company which in respect of its income, liable to tax under the Income-tax Act, has made the prescribed arrangements for the declaration and payment within India, of the dividends (including dividends on preference shares) payable out of such income.

Thus, all Indian Company are treated as Domestic Company but all Domestic Company are not Indian Company.

If a Foreign Company makes prescribed arrangements for payment of dividends in India it shall be treated as Domestic Company.

Foreign company [Section 2(23A)]:

Foreign company means a company which is not a domestic company, i.e. a company registered outside India in any other foreign country.

Rule 27.  :    Prescribed arrangement for declaration and payment of dividends within India.
The arrangements referred to in sections 194 and 236 to be made by a company for the declaration and payment of dividends (including dividends on preference shares) within India shall be as follows:

  1. The share-register of the company for all shareholders shall be regularly maintained at its principal place of business within India, in respect of any assessment year from a date not later than the 1st day of April of such year.
  2. The general meeting for passing the accounts of the previous year’s relevant to the assessment year and for declaring any dividends in respect thereof shall be held only at a place within India.
  3. The Dividend declared, if any, shall be payable only within India to all shareholder.
SURCHARGE ON INCOME TAX (WITH EXAMPLES)

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