Page 132 - DCOM508_CORPORATE_TAX_PLANNING

Unit 5: Computation of Taxable Income of Companies

The venture capital company, the venture capital fund or the person responsible for Notes
making payment of the income on behalf of such company or fund shall furnish, within
such time as may be prescribed, to the person receiving such income and to the prescribed
income-tax authority, a statement in the prescribed form and manner, giving details of the
nature of the income paid during the financial year and such other relevant details as may

be prescribed.

5.6 Keywords

Dividend Distribution Tax (DDT): It is the tax levied by the Indian Government on companies
according to the dividend paid to a company’s investors.

Domestic company: Its 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.

Employees Stock Option Plan (ESOP): It is a plan through which a company awards Stock
Options to the employees based on their performance.
Foreign company: It is a company whose control and management are situated wholly outside
India, and which has not made the prescribed arrangements for declaration and payment of
dividends within India.
Fringe Benefit Tax (FBT): It is a tax payable by companies against benefits that are seen by

employees but cannot be attributed to them individually.
Limited Liability Partnership (LLP): It is a partnership in which some or all partners depending
on the jurisdiction have limited liability.
Venture Capital Undertaking (VCU): It means a domestic unlisted company which is engaged in
the business for providing services, production or manufacture of article or things.
Venture Capital: It is a term coined for the capital required by an entrepreneur to venture into
something new, promising and unconventional.

Wealth tax: It is a tax based on the market value of assets that are owned. These assets include,

but are not limited to, cash, bank deposits, shares, fixed assets, private cars, assessed value of real
property, pension plans, money funds, owner occupied housing and trusts.

Zero tax company: It is a business that shows a book profit and pays dividends to investors but
does not pay taxes.
5.7 Review Questions

1. How will you find the residential status of a company?

2. Explain the main sources of income of a company.

3. Mention, in detail, the expenses which are allowable as deductions while computing the
taxable income of a company.
4. Write a short note on important corporate taxes paid by companies in India.

5. Discuss the steps in computation of taxable income of companies.
6. What are zero tax companies? Explain with the help of an example.

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