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Income Tax Laws – I Sukhpreet Kaur, Lovely Professional University

Notes Unit 11: Computation of Taxable Income of Companies

CONTENTS
Objectives
Introduction

11.1 Computation of Taxable Income of Companies – An Overview
11.1.1 Taxable Income of Companies
11.1.2 Steps in Computation of Taxable Income of Companies

11.2 Minimum Alternative Tax (MAT)
11.3 Tax on Distributed Profits of Domestic Company
11.4 Tax on Dividend and Income Received from Venture Capital Companies
11.5 Summary
11.6 Keywords

11.7 Review Questions
11.8 Further Readings

Objectives

After studying this unit, you will be able to:

Discuss the computation of taxable income of Companies
Explain the concept of Minimum Alternative Tax (MAT)
Elucidate the Procedure for Computation of MAT under Section 115JB
Describe the treatment of tax on distributed profits of Domestic Company

Access the tax on dividend and income received from Venture Capital Companies

Introduction

Taxable income refers to the amount of income that is used to calculate an individual’s or a
company’s income tax due. Taxable income is generally described as gross income or adjusted
gross income minus any deductions, exemptions or other adjustments that are allowable in that
tax year. Taxable income is also generated from appreciated assets that have been sold or
capitalized during the year and from dividends and interest income. Income from these sources
is generally taxed at a different rate and calculated separately by the tax entity.

Company whether Indian or foreign is liable to taxation, under the Income Tax Act, 1961.
Corporation tax is a tax which is levied on the incomes of registered companies and corporation.
However, for the purpose of taxation, companies are broadly classified as domestic company
which is a company formed and registered under the Companies Act, 1956 or any other company
which, in respect of its income liable to tax, under the Income Tax Act, has made the prescribed
arrangement for declaration and payments within India, of the dividends payable out of such
income. A domestic company may be a public company or a private company and a foreign
company which is a company whose control and management are situated wholly outside India,

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