Double taxation is the imposition of two or more taxes on the same income (in the case of income taxes),

asset (in the case of capital taxes), orfinancial transaction (in the case of sales taxes). It refers to taxation by two or more countries of the same income, asset or transaction, for example income paid by an entity of one country to a resident of a different country. The double liability is often mitigated by tax treaties between countries.
When an Indian businessman makes a profit or some other type of taxable gain in another country, he may be in a situation where he will be required to pay a tax on that income in India, as well as in the country in which the income was made! To protect Indian tax payers from this unfair practice, the Indian government has entered into tax treaties, known as Double Taxation Avoidance Agreement (DTAA) with 65 countries, including U.S.A, Canada, U.K, Japan, Germany, Australia, Singapore, U.A.E, and Switzerland. DTAA ensures that India's trade and services with other countries, as well the movement of capital are not adversely affected. Capital gain tax rates Under Section 90 and 91 of the Income Tax Act, relief against double taxation is provided in two ways: Unilateral Relief Under Section 91, the Indian government can relieve an individual from double taxation irrespective of whether there is a DTAA between India and the other country concerned. Unilateral relief may be offered to a tax payer if:

1.
2. 3. 4.

The person or company has been a resident of India in the previous year. The same income must be accrued to and received by the tax payer outside India in the previous year. The income should have been taxed in India and in another country with which there is no tax treaty. The person or company has paid tax under the laws of the foreign country in question.

Bilateral Relief Under Section 90, the Indian government offers protection against double taxation by entering into a DTAAwith another country, based on mutually acceptable terms. Such relief may be offered under two methods:

1.
2.

Exemption method This ensures complete avoidance of tax overlapping. Tax credit method This provides relief by giving the tax payer a deduction from the tax payable in India.

3. Opponents of double taxation assert that it is damaging to the economy. They state that double taxation imposes unfortunate consequences for those who choose to save and invest. Opponents of double taxation often argue that eliminating it, in all its forms, will spur the economy on, leading to an increase in jobs, improved salaries, and much better living standards. 4. Some people argue that double taxation of corporations isnt really a problem at all. They hold that a corporation is a legally separate entity from its shareholders. They cite the fact that shareholders are afforded certain levels of protection from liability in terms of damages caused by a corporation. They assert that a corporation is an entirely separate taxpayer from its shareholders, concluding that the same taxpayer is not taxed twice on the same asset or earnings.

Mat
he concept of Minimum Alternate Tax (MAT) was introduced in the direct tax system to make sure that companies having large profits and declaring substantial dividends to shareholders but not paying tax to the Govt by taking advantage of the various incentives and exemptions provided in the Income-tax Act, pay a fixed percentage of book profit as minimum alternate tax. Though there has been a consistent demand from companies from various sectors for its removal, the Government continues with this tax. Looking at the proposed provisions of DTC, it appears that the Government is very clear that it wants to continue with MAT.
The concept of Minimum Alternate Tax (MAT) was introduced in the direct tax system to make sure that companies having large profits and declaring substantial dividends to shareholders but who were not contributing to the Govt by way of corporate tax, by taking advantage of the various incentives and exemptions provided in the Income-tax Act, pay a fixed percentage of book profit as minimum alternate tax. Section 115JB, inserted by the Finance Act, 2000 has cast a responsibility on the chartered accountant to certify that the book profit has been computed in accordance with the provisions of the Income-tax Act. He has also to certify the income-tax payable by the company. Go through the example given below, u will understand the provision clearly.

1. Every company required to compute tax both under the income tax and under sec 115 JB 2. Profit computed under the income tax is called regular profit and the tax under this method is called regular tax 3. profit computed under sec 115jb is called Book profit and the tax computed is called MAT. 4. every year a company required to compute the tax under the both methods and required to pay higher of those. 5. the company which has paid the MAT in any year can carryforward to the next subsequent years to setoff against the tax liability in which it pays the regular tax. 6. However a company is not required to compute its book profit and pay the MAT in the in year in which it has its regular profit itself nil or loss . For eg see @ column , where MAT has not been paid. But the MAT paid in the earlier years is eligilble to be carryforward. 7. there are some conditions how much MAT can be carryforward and how much MAT can be utilized to sett of f the tax MAT CREDIT AVIALMENT TO THE EXTENT OF THE MAT PAID EXCESS OF THE REGULAR TAX CAN BE TAKEN AS CRDIT AND CAN BE CARRY FORWORD TO THE NEXT SUBSEQUENT YEARS . See the eg : column # where the regular tax is 10, but the MAT is 40, so to the extent of the higher of the MAT paid over and above the regular tax means 40-10 = 30 is taxken as credit.

MAT CREDIT UTILISATION

Lower of the follwing is available for utilization of the credit (i)MAT credit (ii) The extent of the higher of the regular tax paid over and above MAT Eg: see column $

Regular tax is 100 MAT is 30 The extent of the higher of regular tax over and above the MAT is 100 30 = 70 MAT Credit avalialability is 80 So lower of the above is70 So now 70 can be sett of against the regular tax and only the remaining balance.Rs. 30 is to be paid

Note: In any case Govt gets A Minimum of Tax from the company. Except the situation where the companies regular profit it self is nill or loss.

ew Banking Cash Transaction Tax, would be applicable for withdrawal of Rs 25,000 and above on a single day from current and other non-savings accounts in the banks for individuals and Hindu Undivided Families from the 1st June 2005. The savings accounts have been totally exempted from the 0.1 per cent tax on cash withdrawal. For business accounts, the 0.1 per cent tax would be applicable for any withdrawal beyond Rs one lakh on a single day. The Central Board of Direct Taxes (CBDT) has clarified that multi transactions of cash withdrawals from an account or receipt of cash on encashment of term deposits or deposits in the name of the same person on any single day will be treated as one transaction. A three stage reporting system will be in place for the 300 odd scheduled banks collecting the tax. Firstly, each bank branch will have to maintain a transaction wise record -- which will include, among other things, the account number, name and address of the person and the value of the banking cash transaction tax. Bank branches will not have to report these details to the IT department unless called for. In the second stage, scheduled banks will have to furnish a monthly return form listing out just the number of taxable banking transactions entered into by each branch and the amount collected in a month. The first report such will be given by banks on July 31, this year on a

computer medium. In the third stage, banks will furnish an annual return (or a summary) of all the taxable banking transactions. The first such report will be given on July 31, 2005.
Effective 01Jun05, a banking cash transaction tax will be charged @ 0.1% on every transaction on any single day being withdrawal of cash from an account (other than savings account) or being receipt of cash on any single day on encashment of one or more term deposits, whether on maturity or otherwise exceeding the following: Account maintained by Amount exceeding (Rs.) Individual or HUF Others 50,000 1,00,000

Taxpayers will not have to pay levy on withdrawal of cash from banks with the government withdrawing the Banking Cash Transaction Tax (BCTT) from today. The government had introduced 0.1 per cent BCCT in 2005 on cash withdrawals of more than Rs 50,000 (individuals) and Rs 1,00,000 for others in a single day from non-savings bank account maintained with any scheduled bank. The tax has been withdrawn from April 1 following an announcement made by the then Finance Minister P Chidambaram in his budget speech for 2008-09, sources said. In his Budget speech, Chidamabram had said, The BCTT has served a very useful purpose in enlarging the information system of the Income Tax Department. Since the information is also being gathered through other instruments introduced in the last few years, I propose to withdraw this tax with effect from April 1, 2009. The levy was introduced in 2005 to track unaccounted money and trace its source and destination. Though BCTT was not introduced with the intention of revenue generation, the levy, as per the revised estimates, contributed to the exchequer Rs 600 crore during 2008-09. The BCCT collection was Rs 550 crore for 2007-08.

ervice Tax is a form of indirect tax imposed on specified services called "taxable services". Service tax cannot be levied on any service which is not included in the list of taxable services. Over the past few years, service tax been expanded to cover new services. The objective behind levying service tax is to reduce the degree of intensity of taxation on manufacturing and trade without forcing the government to compromise on the revenue needs. The intention of the government is to gradually increase the list of taxable services until most services fall within the scope of service tax. For the purpose of levying service tax, the value of any taxable service should be the gross amount charged by the service provider for the service rendered by him. Service Tax was first brought into force with effect from 1 July 1994. All service providers in India, except those in the state of Jammu and Kashmir, are required to pay a Service Tax in India. Initially only three services were brought under the net of service tax and the tax rate was 5%. Gradually more services came under the ambit of Service Tax. The rate of tax was increased from 5% to 8% w.e.f 14 May 2003. From 10 September 2004 the rate of Service Tax was enhanced to 10% from 8%. Besides this 2% education cess on the amount of Service Tax was also introduced. In the Union Budget of India for the

year 2006-2007, service tax was increased from 10% to 12%. On February 24, 2009 in order to give relief to the industry reeling under the impact of economic recession, The rate of Service Tax was reduced from 12 per cent to 10 per cent. Some of the major services that come under the ambit of Service Tax are: Telephone Stockbroker General Insurance Advertising agencies Courier agencies Consulting engineers Custom house agents Steamer agents Clearing & forwarding agents Air travel agents Tour operators Rent-a-Cab Operators Manpower recruitment Agency Mandap Keepers Architects Interior Decorators Management Consultants Practicing Chartered Accountants Practicing Company Secretaries Practicing Cost Accountants Real Estates Agents/Consultants Credit Rating Agencies Private Security Agencies Market Research Agencies Underwriters Agencies Scientific and technical consultancy services Photography Convention Telegraph Telex Facsimile Online information and database access or retrieval Video-tape production Sound recording Broadcasting Insurance auxiliary activity Banking and other financial services Port Authorised Service Stations Leased circuits Services Auxiliary services to life insurance Cargo handling Storage and warehousing services Event Management

Cable operators Beauty parlours Health and fitness centres Fashion designer Rail travel agents Dry cleaning services Commercial vocational institute, coaching centres and private tutorials Technical testing and analysis (excluding health & diagnostic testing) technical inspection and certification service Maintenance & repair services Commission and Installation Services Business auxiliary services, namely business promotion and Support services (excluding on information technology services) Internet caf Franchise Services Out door Caterers service Airport Services Transport of Goods by Air Services Business Exhibition Services Intellectual Property Services Opinion Poll Services TV or Radio Programme Services Survey and Exploration of Minerals Services Travel Agent's Services other than Rail and Air travel agents Forward Contract Services Transport of goods through pipe line or other conduit Service Site preparation & clearance Services Dredging Services Survey & Mapmaking Services Cleaning Services Membership of Clubs & Associations Packaging Services Mailing list compilation & Mailing Service

State and local income taxes are imposed in addition to Federal income tax. State income tax is allowed as a deduction in computing Federal income tax, subject to limitations for individuals. Some localities impose an income tax, often based on state income tax calculations. Forty-three states and many localities in the United States impose an income tax on individuals. Forty-seven states and many localities impose a tax on the income of corporations.[1] State income tax is imposed at a fixed or graduated rate on the taxable income of individuals, corporations, and certain estates and trusts. The rates vary by state. Taxable income conforms closely to Federal taxable income in most states, with limited modifications.
[2]

The states are prohibited from taxing

income from Federal bonds or other obligations. Most do not tax Social Security benefits or interest income from obligations of that state. Several states require different lives and methods be used by businesses in computing the deduction fordepreciation. Many states allow a standard deduction or some form of itemized deductions. States allow a variety of tax credits in computing tax. Each state administers its own tax system. Many states also administer the tax return and collection process for localities within the state that impose income tax.

State tax rules vary widely. Those states imposing a tax on income compute the tax as a tax rate times taxable income as defined by the state. The tax rate may be fixed for all income levels and taxpayers of a certain type, or it may be graduated, that is, the tax rates on higher amounts of income are higher than on lower amounts. Tax rates may differ for individuals and corporations. Most states conform to Federal rules for determining:     gross income, timing of recognition of income and deductions, most aspects of business deductions, characterization of business entities as either corporations, partnerships, or disregarded.

Gross income generally includes all income earned or received from whatever source, with exceptions. The states are prohibited from taxing income from Federal bonds or other obligations.[3] Most states also exempt income from bonds issued by that state or localities within the state, as well as some portion or all of Social Security benefits. Many states provide tax exemption for certain other types of income, which varies widely by state. The states imposing an income tax uniformly allow reduction of gross income for cost of goods sold, though the computation of this amount may be subject to some modifications. Most states provide for modification of both business and non-business deductions. All states taxing business income allow deduction for most business expenses. Many require thatdepreciation deductions be computed in manners different than at least some of those permitted for Federal income tax purposes. For example, many states do not allow the additional first year depreciation deduction. Most states tax capital gain and dividend income in the same manner as other investment income. In this respect, individuals and corporations not resident in the state generally are not required to pay any income tax to that state with respect to such income. Some states have alternative measures of tax. These include analogs to the Federal Alternative Minimum Tax in 14 states,
[4]

as well as measures for corporations not based on income, such as capital stock taxes

imposed by many states.

Income tax is self assessed, and individual and corporate taxpayers in all states imposing an income tax must file tax returns in each year their income exceeds certain amounts determined by each state. Returns are also required by partnerships doing business in the state. Many states require that a copy of the Federal income tax return be attached to at least some types of state income tax returns. The time for filing returns varies by state and type of return, but for individuals in many states is the same (typically April 15) as the Federal deadline . Every state, including those with no income tax, has a state taxing authority with power to examine (audit) and adjust returns filed with it. Most tax authorities have appeals procedures for audits, and all states permit taxpayers to go to court in disputes with the tax authorities. Procedures and deadlines vary widely by state. All states have a statute of limitationsprohibiting the state from adjusting taxes beyond a certain period following filing returns. All states have tax collection mechanisms. States with an income tax require employers to withhold state income tax on wages earned within the state. Some states have other withholding mechanisms, particularly with respect to partnerships. Most states require taxpayers to make quarterly payments of tax not expected to be satisfied by withholding tax. All states impose penalties for failing to file required tax returns and/or pay tax when due. In addition, all states impose interest charges on late payments of tax, and generally also on additional taxes due upon adjustment by the taxing authority.