Difference Between Joint Venture and Partnership

Budget 2024 Latest Update on Corporate Tax Rate

Finance Minister Nirmala Sitharaman has proposed a reduction in the corporate tax rate for foreign companies, bringing it down from 40% to 35% in the 2024 budget.

Subdivisions of Direct Taxes

Direct taxes in India are categorized as follows:

1. Personal Income Tax
   
   • Paid by individual taxpayers based on their income.
   • Taxed according to predefined slabs at different rates.
2. Corporate Income Tax (CIT)
   
   • Paid by domestic and foreign companies on their income earned in India.
   • The CIT is levied at rates specified by the Income Tax Act, subject to annual revisions in the Union Budget.

What is Pvt. Ltd. Tax Rate?

The Pvt. Ltd. tax rate refers to the corporate income tax rate applicable to private limited companies in India. Under the Income Tax Act, 1961, domestic companies are generally taxed at 30% on their total taxable income, with variations based on turnover and certain conditions.

For companies with a turnover of less than ₹400 crore, the tax rates are as follows:

• Turnover up to ₹1 crore: Taxed at 25%.
• Turnover between ₹1 crore and ₹10 crore: Taxed at 25% on profits exceeding ₹25 lakh, plus an additional ₹25 lakh.
• Turnover above ₹10 crore: Taxed at 30%.

A 4% Health and Education Cess is levied on the total tax payable.

Companies may also opt for a reduced tax rate of 22% under Section 115BAA, provided they forgo certain exemptions and deductions. This option also includes the surcharge and 4% cess.

Additionally, new manufacturing companies incorporated after October 1, 2019, can avail a 15% tax rate (plus surcharge and cess) under Section 115BAB, subject to specific conditions.

Corporate Income Tax Rate for AY 2022-23

The Corporate Income Tax Rate for the Assessment Year 2022-23 varies based on the company's turnover and the applicability of surcharge and cess. Here's a table summarising the effective tax rates:

For Companies with Turnover Above ₹400 Crore

For Companies with Turnover Below ₹400 Crore

Key Budget 2022 Updates

1. No Changes in Tax Rates: The corporate tax structure remained unchanged.

2. Updated Surcharge Cap for Cooperatives: Surcharge capped at 7% for cooperatives with income between ₹1 crore and ₹10 crore.

3. Set-Off for Losses in Case of Start-ups: Extended incorporation date for start-ups to claim tax holiday under Section 80-IAC to 31 March 2023.

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Income Tax Rate for Domestic Manufacturing Companies for AY 2022-23

New manufacturing companies incorporated in India on or after October 1, 2019, and commencing production before March 31, 2023, can avail a concessional tax rate for private limited companies of 15% under Section 115BAB. However, this is subject to certain conditions, such as:

• The company should be engaged in the business of manufacture or production of any article or thing
• It should not be formed by splitting up or reconstruction of an existing business
• It should not use any plant or machinery previously used in India (with certain exceptions)
• The option to avail Section 115BAB must be exercised in the first year of operation

The applicable tax rates for domestic manufacturing companies for the assessment year 2022–23 are outlined below:

Education Cess for Companies

Private limited companies are required to pay an education cess at the rate of 4% on the total income tax, including the applicable surcharge. Below is a detailed explanation of the corporate income tax rates for FY 2021–22 or AY 2022–23:

For companies with a turnover of up to ₹400 crore:

• Income up to ₹1 crore is taxed at 25%.
• Income exceeding ₹1 crore but up to ₹10 crore is taxed at 25% plus ₹25,00,000. A 7% surcharge applies.
• Income above ₹10 crore is taxed at 25% plus ₹2,50,00,000, with a 12% surcharge.

For companies with a turnover exceeding ₹400 crore:

• Income up to ₹1 crore is taxed at 30%.
• Income exceeding ₹1 crore but up to ₹10 crore is taxed at 30% plus ₹3,00,000. A 7% surcharge applies.
• Income above ₹10 crore is taxed at 30% plus ₹3,00,00,000, with a 12% surcharge.

The education cess of 4% is uniformly applicable to the total tax payable, including any surcharge, regardless of turnover.

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Income Tax Rate for Foreign Company

Foreign companies, i.e., those incorporated outside India but earning income from Indian sources, are taxed at a basic rate of 40% (plus applicable surcharge and cess). The surcharge is levied at 2% on income between ₹1 crore to ₹10 crores and 5% on income exceeding ₹10 crores.

It is important to note that foreign companies can avail beneficial provisions under the Double Taxation Avoidance Agreement (DTAA) between India and their country of residence to minimize their tax liability.

Minimum Alternate Tax for Company

The Minimum Alternate Tax (MAT) provisions apply to companies whose tax payable under the normal provisions of the Income Tax Act is less than 15% of their book profits. In such cases, MAT is levied at 15% (plus applicable surcharge and cess) of the book profits.

However, MAT is not applicable to companies opting for the concessional tax regimes under Section 115BAA and Section 115BAB. Further, the credit for MAT paid is allowed to be carried forward for 15 years to be set off against future tax liabilities.

H2 - How to Calculate Total Income for a Company?

To arrive at the taxable income for a private limited company, the following steps are involved:

The Corporate Income Tax Rate is then applied to this taxable income to determine the tax liability of the private limited company.

Returns Applicable for Domestic Company for AY 2022-23

Private limited companies are required to file their income tax returns annually. For the assessment year 2022-23, the following returns are applicable:

1. ITR-6: This return is applicable for companies other than those claiming exemption under Section 11 (income from property held for charitable or religious purposes).

2. ITR-7: This return is applicable for companies claiming exemption under Section 11.

The due date for filing the return is 31st October of the assessment year. However, for companies required to furnish a report in Form No. 3CEB under Section 92E (relating to international transactions), the due date is 30th November of the assessment year. Companies must also ensure timely compliance with advance tax payments, TDS/TCS obligations, and tax audit requirements (if applicable) to avoid penal consequences.

Domestic Company Tax Slab for AY 2024-25

For the Assessment Year (AY) 2024–25, the income tax rates for domestic companies depend on their turnover or gross receipts during the financial year (FY) 2020–21, as well as the tax provisions they choose to apply under specific sections of the Income Tax Act. The applicable rates are as follows:

• If the total turnover or gross receipts during FY 2020–21 do not exceed ₹400 crores:
  
  • Tax rate: 25%
• If the company opts for Section 115BA:
  
  • Tax rate: 25%
• If the company opts for Section 115BAA:
  
  • Tax rate: 22%
• If the company opts for Section 115BAB:
  
  • Tax rate: 15%
• For any other domestic company:
  
  • Tax rate: 30%

These rates are exclusive of surcharge and cess, which will be applied additionally based on the applicable income slabs.

Frequently Asked Questions

Product Mark

A product mark is a kind of trademark used exclusively on goods, helping consumers identify the origin of the product and ensuring its authenticity. It plays a crucial role in distinguishing one business's goods from another, contributing to brand recognition and reputation.

Product marks fall under trademark classes 1 to 34, which categorise various types of goods, including chemicals, machinery, and textiles. For example, the "Nike" logo on shoes is a product mark that signifies the brand's origin and quality. 

Service Mark

A service mark is a trademark used to distinguish one business's services from those offered by others. Unlike product marks, which apply to goods, service marks highlight the origin and quality of services, helping customers identify and trust a particular service provider.

These marks typically fall under trademark classes 35 to 45, covering various services such as advertising, financial services, and hospitality. For instance, the "Taj Hotels" emblem represents a service mark that signifies premium hospitality services. 

Collective Mark

A collective mark is a type of trademark used to identify goods or services offered by members of a group, association, or institution. It ensures that the products or services meet specific quality or ethical standards set by the organisation holding the mark.

These marks distinguish the collective efforts of a group rather than an individual business. For example, the Chartered Accountant (CA) designation in India serves as a collective mark in trademark, representing professionals certified by the Institute of Chartered Accountants of India (ICAI).

Certification Mark

A certification mark is a symbol used to certify that a product meets specific standards related to origin, material, quality, or manufacturing methods. It guarantees that the certified product complies with established benchmarks, regardless of the owner’s business.

Certification mark examples include the "ISI" mark on electrical appliances and the "Agmark" label on food products in India, both of which assure consumers of quality and safety. Such marks are commonly found on food, electronics, and toys.

Shape Mark

A shape mark protects the distinctive shape of a product, enabling consumers to associate it with a specific brand. It ensures that unique designs contributing to a product's identity remain exclusive to the brand. For instance, the iconic contour shape of Coca-Cola bottles and the unique design of Fanta bottles are classic examples of shape marks that enhance brand recognition and trust.

Pattern Mark

A pattern mark protects distinctive designs or patterns used on a product to set it apart from competitors. To qualify, the pattern must be unique and easily recognisable—generic or common patterns are often rejected. For example, the well-known Burberry check pattern on their clothing and accessories is a classic pattern mark that helps identify the brand.

Demonstrating the uniqueness of the pattern is essential for successful registration, as it ensures the design remains exclusive to the brand, reinforcing its identity in the market.

Sound Mark

A sound mark is a unique audio signature linked to a product or service, allowing consumers to identify its origin through sound. It plays a significant role in branding, often used as an audio mnemonic in advertisements. A well-known example in India is the IPL tune, which instantly evokes recognition of the Indian Premier League.

Arbitrary and Fanciful Trademarks

Arbitrary and fanciful trademarks are distinct categories that stand out for their unique qualities. A fanciful mark is a made-up term or word with no prior meaning, making it highly distinctive and easy to register. For example, "Google" and "Kodak" are fanciful marks, as these words were coined specifically for the brands and have no inherent connection to their respective products.

On the other hand, an arbitrary mark uses a commonly known word but has no direct relation to the product or service it represents. "Apple," for instance, is an arbitrary mark since it’s a well-known word but doesn’t link directly to computers or electronics. 

Geographical Indications (GI)

A Geographical Indication (GI) is not a type of trademark but a separate form of intellectual property protection. It denotes a product’s specific geographic origin and assures consumers of its quality or reputation linked to that region. GIs help preserve the uniqueness of products tied to their location. For example, "Darjeeling Tea" and "Banarasi Silk" are GIs that signify the products’ origins and qualities unique to those regions.

How to Choose the Right Type of Trademark?

1. Assess the Nature of Your Product/Service
   
   Determine the characteristics and qualities of your product or service. Understanding its nature helps in choosing the appropriate trademark type. For instance, if your product has a unique shape or design, a shape mark could be suitable. If your service stands out for its quality or reputation, a service mark might be more fitting.

2. Focus on Branding Goals and Industry Standards

Consider your branding goals—whether you aim to build recognition, guarantee quality, or differentiate your offering. Also, take into account industry practices.

For instance, if you're part of a group or association, a collective mark might be more suitable, whereas a certification mark may be necessary for products requiring quality assurance. Ensure that the trademark aligns with your long-term branding strategy.

3. Consult a Trademark Expert if Necessary

If you are uncertain about which trademark suits your business, it’s advisable to consult a trademark expert. They can assess your product or service and guide you on the best trademark type based on legal requirements and market needs. This ensures that your trademark selection is legally sound and provides optimal protection.

Examples of Trademarks in Action

1. Food Industry
   
   Pepsi uses a product mark that consists of its distinctive logo, which is instantly recognisable by its red, white, and blue colour scheme. This trademark is essential in helping customers identify the Pepsi brand in a competitive market filled with various soft drink options. The product mark not only includes the logo but also the unique design of its packaging, ensuring that every Pepsi product stands out on store shelves.

2. Fashion Industry

Louis Vuitton has trademarked its iconic monogram pattern as a pattern mark. This pattern, featuring the “LV” logo repeated across their products, is instantly recognisable worldwide. The distinctive design appears on bags, luggage, and other luxury accessories, making it a signature of high-end fashion.

By using this pattern mark, Louis Vuitton differentiates itself from other brands and maintains its status in the luxury market, ensuring that customers associate the design with quality and exclusivity.

3. Technology Industry
   
   The name Microsoft is a suggestive mark. It combines “microcomputer” and “software,” hinting at its products (software for small computers) without explicitly describing them. Suggestive marks require consumers to make a mental connection between the name and the product or service.

This type of trademark is distinctive while maintaining a subtle association with the brand's offerings, making it a powerful branding tool in the technology sector.

4. Hospitality Industry
   
   Marriott International uses a service mark to represent its brand and distinguish its services in the hospitality industry. The service mark covers not only the name “Marriott” but also its reputation for providing high-quality customer service, luxury, and a wide range of hospitality offerings.
   

From hotels to resorts, Marriott’s service mark assures customers of a consistent experience, helping the brand stand out in the competitive world of hotels and travel.

Frequently Asked Questions

Partnership Firm Registration

The registration of a partnership firm in India involves submitting an application to the Registrar of Firms in the respective state where the firm operates. While registration is optional, it is advised that the firm be registered to avail themselves of the benefits of legal rights and avoid future disputes.

The application for registration must be signed by all the partners or their agents. Once the application is verified, the Registrar of Firms records the partnership firm’s details in the Register of Firms and issues a Certificate of Registration. This certificate acts as an official recognition of the partnership firm.

The entire process is relatively simple and involves submitting basic documents, some of which we’ll discuss below.

Documents Required for Partnership Registration

When registering a partnership firm, you must provide a set of documents. These documents ensure that your firm is legally compliant and prepared for operations. Let's walk through each essential document you must submit during the registration process.

Partnership Deed

A partnership deed is a foundational document that outlines the mutual rights and obligations of the partners. While it’s technically possible to have an oral agreement, putting everything in writing helps avoid misunderstandings down the line. This document must be prepared on judicial stamp paper (available at your state’s registrar's office) and must be signed by all partners.

The partnership deed should cover important details such as:

• The name of the partnership firm and its partners
  
• The firm's registered office address
  
• Profit and loss-sharing ratios
  
• Capital contributions from each partner
  
• Duration of the partnership
  

Having this document in place not only protects the interests of each partner but also ensures smooth operation and decision-making within the business.

Documents of Firm

To register the firm, you'll need to provide the firm’s PAN card, which can be obtained by filing Form 49A on the NSDL website. The authorised partner can apply using their digital signature certificate, or you can opt to submit the physical documents to the nearest PAN processing centre.

You’ll also need to provide proof of address for the firm’s registered office. This could be:

• Rent agreement (if the office is rented)
  
• Utility bills like electricity, water, or gas (not older than 2 months)
  
• No Objection Certificate (NOC) from the landlord if the office is rented or from the owner if it’s owned by the firm
  

Documents of Partners

Each partner in the firm must submit their PAN card as proof of identity. If any partners don’t have a PAN card yet, it’s important to apply for one promptly. Additionally, partners must provide address proof like:

• Voter ID
  
• Aadhaar card
  
• Driving License
  
• Passport
  
• Utility bills (again, not older than two months)
  

These documents are required to verify the identity and address of all partners, ensuring everything is transparent and official.

Additional Documents for Registration

Along with the partnership deed and documents of the firm and partners, you’ll also need to submit the following:

• Affidavit: An affidavit certifying that all the details in the partnership deed and the supporting documents are accurate.
  
• ID and address proofs of both the firm and all partners must be provided during the registration process.
  

GST Registration

If your firm is involved in business transactions and earning above the prescribed GST limit, you’ll need to register for GST. The process requires submitting:

• The firm's PAN number
  
• Address proof of the firm
  
• Identity and address proofs of partners
  

The authorised signatory for GST registration must sign the application using a digital signature certificate or E-Aadhaar verification.

Related Read: Partnership Firm Tax Rate Explained

Current Bank Account

Once your firm is registered, opening a current bank account is a key step to keeping the firm’s finances in order. For the bank account, you'll need:

• Partnership deed
  
• Firm's PAN card
  
• Address proof of the firm
  
• Identity proofs of all partners
  
• Partnership registration certificate (if applicable)
  
• GST certificate (if applicable)
  
• Recent utility bills (not older than three months)
  
• Authorisation letter for the bank account signatory on the firm's letterhead
  

Related Read: Difference Between Partnership Firm and LLP

Conclusion

While the process of forming a partnership firm is straightforward, one important step that should never be overlooked is registration. Though it's not mandatory, registering your partnership firm brings numerous benefits that can protect your interests and help you navigate the complexities of business operations.

By registering your firm, you get the legal backing that validates your business structure, helping you build credibility with potential clients, suppliers, and financial institutions. It also ensures that you have access to the legal rights and protections available under the Partnership Act of 1932, which could prove essential if you need to resolve disputes or defend your business against legal challenges.

Take the time to ensure everything is in place, and your partnership firm will be poised to face challenges head-on and build a successful future.

Frequently Asked Questions