A business organization held by a small bunch of people is termed as a ‘Private Limited Company. And it is owned by the ‘shareholders’. Every type of start-up and business entity with high growth chooses the ‘private company’ as the appropriate business structure.
It works as a government recognition under the Companies Act of 2013 in India. Here, the Ministry of Corporate Affairs is the governing body, best called as MCA. The taxation conditions for a Private Limited Company in India will be discussed in this article.
What does Taxation for a Private Limited Company imply?
A tax authority can impose a tax on all the Private Limited Companies. Here, both central and state government plays a prominent role in deciding about the taxes. So, to rationalize the taxation process and determine transparency in the nation, the central and state governments have introduced several policy regulations.
Here, one such new reform was the Goods and Services Tax (GST), which simplified the tax regime on the sale and legal distribution of goods and services in the country.
How many types of Taxation are there for Private Limit Companies in India?
The taxes are the mandated reform that is needed to be taken care of by the organization itself, the taxes are as follows:
- Corporate tax
This tax is based on the profit gained from the ‘business’.
- Income tax
Governments levy a tax on all financial income generated by all entities under their jurisdiction, including individuals and enterprises.
- Property tax
This is entitled to be paid by the property owner. On the value of the land, it is ‘calculated’.
- Capital Gains Tax
These taxes are levied on capital gains derived by businesses from the sale of specific assets, such as stocks and agreements.
- Sales Tax
It is known as a consumption tax imposed by the government on the sale of goods and services. It also can be in the form of VAT (Value Added Tax) or say, in the form of Goods and Services Tax (GST), even a state sales tax, or an exercise tax even.
- Inheritance Tax
The property owner is responsible for paying it. This is estimated based on the land’s worth.
What does an ‘Income of a Company’ mean?
Let us detail the types of income before understanding the rates of all the taxes:
- Capital Gains
- Profits earned from Private Limited Company
- Income from all other resources like interest, dividends, and many more
- Income from Renting the Property
What is the Tax Rate for Pvt LTD Company for the assessment Year 2022-2023?
- Tax Rate For Domestic Company if the turnover is > Rs.400 crore
|Income Slab||% of Tax||Surcharge|
|Up to 1 Crore||30%||Nil|
|Above 1 Crore but up to 10 crore||3,00,000 +30 %||7%|
|Above 10 Crore||3,00,00,000 +30 %||12%|
Health & Education Cess is fixed @4% on all the income slabs.
- Tax Rate For Domestic Company if the turnover is < Rs.400 crore
|Income Slab||% of Tax||Surcharge|
|Up to 1 Crore||25 %||Nil|
|Above 1 Crore but up to 10 crore||2,50,000 +25 %||7%|
|Above 10 Crore||2,50,00,000 +30 %||12%|
The listed Tax benefits for Private Limited Company in Jaipur (India)
- Salary to Founders/Directors – Being the founder or director of the company, he/she also looks for ways to earn maximum profit here. It is pre-decided that the profit sharing will be taken by the Directors ‘only’.
- Sitting fees to the Director: Here, a company probably has to pay fees to the Director for attending the board. Even the Director’s sitting fees should not be more than Rs.1,00,000/- which is decided by the BOD.
- Rent Expenses: If the company’s registration address is rented in the name of a director or a relative, the rent may be recorded in the books. Even one can keep track of one’s rent expenses and take advantage of all the tax breaks whenever you want.
- Preliminary Expenses: These are incorporation expenses that are needed to work on before and after the Pvt Ltd Company Incorporation. These are needed to be paid by the founder of the Organisation in the form of professional charges for the creation of OA and MOA, fees paid to the Registrar, stamp duty, and many more.
Note: With proper documentation handling, one can save on these ‘taxes’.
- Capitalizing capital assets and Depreciation: If a corporation buys assets that will provide revenue for longer than a year, it is a good investment. It is shown as an expense. Instead of the profit and loss statement, it must be shown on the balance sheet. Due to the asset’s useful life, it should be depreciated on the balance sheet. As a result, we can defer tax benefits until later years.
- Salary of ‘Family Members’: Even family members or relatives help in doing business works free of cost. As a good tax planner in Alonika, we can provide calculative expenses that have to be recorded in the books of the company. So, indirectly the gain has gone into your hands with all the exemption of that expense from the taxable income of the designated company.
- Director’s Vehicle Expense: The automobile is utilised for business utilizes such as travel and meetings. Not only is fuel charged as a business expense, but so is vehicle repair and maintenance. The Tax benefits necessitate adequate paperwork and planning, and we can save between 22 and 30 percent on taxes.
- Entertainment Expenses: As per the Professional Chartered Professionals, these are the general and exciting expenses incurred in celebrating the success with the family and partners or friends. And it must be recorded properly in the books of accounts to get a flat 30% discount and save the tax at the same rate.
Applicable Income Tax Return Form for Private Limited Company
Every year on or before 30th October is the return date for income tax returns of companies including the foreign companies as well. Remember, if the company came into existence until the same financial year, it would have to file an income tax return for that particular for that period on or before 31st October. The ITR 6 tax returns are to be filled by the ORGANISATION.
KEY TAKE AWAY
A Private Limited Company is legally constituted with limited responsibility and legal protection for its stockholders, but its ownership is restricted. The term “company” refers to a legal entity. It is endowed with numerous legal rights, obligations, powers, and responsibilities.
Paying taxes in a Private Limited Firm is one of the most important tasks a company has. True, we cannot and must not avoid paying taxes, but certain tax planning procedures can be implemented with the goal of obtaining additional monetary benefits.
Having an understanding of the benefits associated with Private Limited Company registration in Jaipur – we at Alonika have been assisting customers with start-ups and business entities and handling their tax payments nation widely.