Page 114 - DCOM508_CORPORATE_TAX_PLANNING

Unit 5: Computation of Taxable Income of Companies
Gopika Juneja, Lovely Professional University

Unit 5: Computation of Taxable Income of Companies Notes

CONTENTS

Objectives
Introduction
5.1 Computation of Taxable Income of Companies
5.1.1 Residential Status of a Company
5.1.2 Taxable Income of Companies
5.1.3 Steps in Computation of Taxable Income of Companies
5.2 Minimum Alternative Tax (MAT)
5.2.1 When a Company has to Pay MAT
5.2.2 Preparing the Annual Accounts
5.2.3 Calculating Book Profi t
5.2.4 MAT Credit
5.2.5 Procedure for Computation of MAT under Section 115JB

5.3 Tax on Distributed Profits of Domestic Company
5.3.1 Basis of Charge
5.4 Tax on Dividend and Income Received from Venture Capital Companies
5.5 Summary
5.6 Keywords
5.7 Review Questions
5.8 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
Calculate 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
capitalised 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.

LOVELY PROFESSIONAL UNIVERSITY 109