According to finance, The primary objective of any tax law and its administration is to raise revenue for the purpose of funding Government expenditure.
The amount of revenue raised is primarily dependent on two factors,
a) Collective tax base.
b) Effective tax rates.
The determinants of these two factors are a range of measures which include special tax rates, exemptions, deductions, rebates, deferrals and credits. These measures are collectively called as ‘tax preferences’. They have an impact on Government revenues and also reflect a significant policy of the Government.
Points and Problems
According to latest data of world bank, India slip (below 2 rank) from 156 to 158 rank in “Starting a business” (out of 189 economies) and 156 rank on tax payment because of complication and high percentage of tax returns. This budget 2015 session Pixr8 is keeping track of important developments over tax ease for startups and comapnies.
The latest example of the problem is a slow pace of Make in India program where government still not solve out the problem of businesses to give them support and convert their dream into reality ( Read latest article from Deepak Parekh )
High tax rate for startups:
The new tax reforms are expected to boost revenue and make it easier to do business in India. Adopting policies in the same line as the Singapore tax regulations will definitely benefit the start-up industry on a large scale – wrote Mr. Ambrish Gupta (Founder of knowlarity) on ibnlive.
The Income-tax Department has received 618806 corporate returns online financial year 2012-13 [i.e. assessment year 2013-14]. In which
- 334109 companies (53.99 % ) reported 10,87,160 crore as profits before taxes and a total income (taxable income) of 7,49,901crore for the financial year 2012-13.
- 250865 companies (40.54 %) reported 3,58,896 crore as losses.
- 33832 companies (5.47 %) reported nil profit.
Below in picture most of the startups fall under profit range of 0 – 50 crores pay 23% to 27% tax comparison to multinational whom taxes are around 20% to 23% .
Over 2.5 Lakh profitable companies under 25%-30% tax rate:
Low tax rate of public companies [PSUs only] :
While the rate is lower than the statutory rate for both categories, the private sector companies pay a slightly larger proportion of their profits as tax than the public sector companies.
Conclusion: We hope this time Indian Government will look more around Indian companies (Low investment and high tax rate) growth besides heavy foreign investment (heavy investment and less tax rate).