PRESENTATION ON TAX PLANNING

WITH REFERRENCE TO SETTING UP A

NEW BUSINESS

PRESENTED BY:
GauriAnandBM09079
PRESENTED TO: Neha Sharma BM09124
Dr. Simmi Agarwal Pallavi Singh BM09134
Pooja BM09139
Pooja Chaturvedi BM09140
Pradeep Sharma
BM09142
 TAX PLANNING IN RESPECT OF LOCATION
POINT OF VIEW
There are certain locations, which are given special tax treatment. Some
of them are:
• 1. Full exemption under section 10A for ten years in the case of a newly
established industrial undertaking in free trade zone, etc
• 2. Full exemption under section 10AA for initial five years, 50% for
subsequent 5 years and further deduction of 50% for a period of 5 years in the
case of newly established units in special economic zones on or after 1-4-2005.
• 3. Full exemption under section 10B for 10 years in the case of a newly
established 100% export-oriented undertaking.
• 4. Deduction under section 80-1AB in respect of profits and gains by an
undertaking or an enterprise engaged in development of Special Economic
Zone.
• 5. Deduction under section 80-ICB in the case of newly set up industrial
undertaking in an industrially backward state or district.
• 6. Deduction under section 80-ICB in the case of newly set up industrial
undertaking or substantial expansion of an existing undertaking in certain
special category states.
 TAX PLANNING AND NATURE OF
BUSINESS
• Industry in general is to be owned by an
individual, or an HUF or a firm or a company or a
co-operative society or a trust.
• Incase of all these assesses who are carrying on
business, the income will be computed as per
provisions of section 28 to 44D.
• These assesses will be eligible for certain
exemptions/deductions which are specifically
allowed on the basis of the nature of business
carried by such assesses.
 DEDUCTION UNDER BUSINESS OF EXPORT OF
GOODS OR MERCHANDISE

A. Income of newly established industrial undertakings in

Free Trade Zones, etc. (Section 10A)
Essential conditions to claim deduction:
• It has begun or begins to manufacture or produce article or
things or computer software during the previous year relevant
to assessment year
a. 1981-82 or thereafter. In any free trade zone;
b. 1994-95 or thereafter, in any electronic hardware
technology park, or as the case may be, software technology
park; or
• It should not be formed by the splitting up or reconstruction of
a business already in existence.
• It should also not be formed by the transfer of machinery or
plant, previously used for any purpose, to a new business.

• The sale proceeds of articls or things or computer software

exported out of India should be received in, or brought into, India
by the assessee in convertible foreign exchange, wihin a period of
six months from the end of the previous year or, within such
further period as the competent authority may allow in his behalf.

• The exemption shall not be admissible unless the assessee

furnishes in the prescribed form (Form No. 56F), alongwith the
return of income, the report of a chartered accountant certifying
that the deduction has been correctly claimed in accordance with
the provisions of this section.
 B. Special provisions in respect of newly
established units in Special Economic Zones
(Section 10AA)
Essential conditions to claim deduction

i. It has begun or begins to manufacture or produce articles or things or

provide any service during the previous year relevant to any assessment
year commencing on or after 1-4-2006 in any Special economic Zones.
ii. It should not be formed by the splitting up or reconstruction of a
business already in existence.
iii. It should also be not formed by transfer of machinery or plant ,
previously used for any purpose , to a new business.
iv. The assessee should furnish in the prescribed form (form no. 56F),
along with the return of income , the report of a chartered accountant
certifying that the deductions has been correctly claimed in accordance
with the provisions of this sections.
 C. Special provisions in respect of newly
established 100% Export Oriented
Understandings (section 10 B)
Essential conditions to claim deductions:
(i) The undertaking should be an approved 100% export oriented
undertaking . It must be approved as a 100% EOU by the
Board appointed by the Central Govt. in this behalf.
(ii)It manufactures or produces any article or thing or computer
software

The other conditions for claiming deduction under this

section are same as are given under section 10A expect that
the report of the report of an accountant shall be furnished in
Form No. 56G instead of 56F.
 16  D Special provision in respect of export of
certain articles or things [Section 10BA]
 

1.General: Subject to the provisions of this section, a deduction of such

profits and gain as are driven by undertaking from the export out of
India of eligible article or things, shall be allowed from the total income
of the assessee:
However, where in computing the total income of the undertaking
for any assessment year, deduction under section 10A or section 10B
has been claimed, the undertaking shall not be entitled to the deduction
under this section.
2. Assessees who are eligible for deduction:
All assessees owing an undertaking which derives any profit and gains
from the export out of India of eligible articles or things.

3. Essential conditions to claim deduction: The deductions shall be available

to an undertaking, which fulfills the following conditions:

(a)It manufactures or produces the eligible articles or things without the use of
imported raw materials.
(b) It is not formed by splitting up, or the reconstruction, of a business already
in existence.
(c) It is formed by he transfer of any new business of machinery and plant
previously used for any purpose.
  (d) 90 percent or more of its sales during the previous relevant to
the assessment year are by way of exports of the eligible articles or
things.

(e) It employs twenty or more workers during the previous year in

the process of manufacture or production.

(f) The sale proceeds of the eligible articles or things exported out
of India are received in, or brought into, India by the assessee in
convertible foreign exchange with in a period of six months from the
end of previous year.
(g) The assessee should furnish in the prescribed form, along with
the return of income.

(h) The provision of subsection (8) and sub-section (10) of section

80 –IA shall, so far as may be, apply in relation to the undertaking
referred to in this section as they apply for the purposes of the
undertaking referred to in section 80- IA.
• Tax planning in respect of profits and gains from certain industrial
undertakings set up in Jammu & Kashmir [Section 80-IB]

The deduction under this section is inter alia available to an assessee whose
Gross Total Income includes any profits and gains derived from the
business of an industrial undertaking set up in Jammu & Kashmir.

A. Essential conditions for industrial undertaking [Section80-IB (2)]

(i) It is not formed by spilling up, pr the reconstruction, of a business

already in existence. However, this condition shall not apply to an industrial
undertaking, which is formed as a result of the re-establishment, or revival
of an undertaking, in circumstances specified u/s 33B.
(ii) It is not formed by the transfer to a new business of machinery or plant
previously used for any purpose. However, plant and machinery, already
used for any purpose, can be transferred to the new industrial undertaking,
provided value of such plant and machinery does not exceed 20% of the
total value of plant and machinery of the new industrial undertaking.

(iii) It manufactures or produces any article or thing, other than any article
or thing specified in the Eleventh Schedule.

(iv) The undertaking employs ten or more workers in a manufacturing

process carried on with the aid of power or employ twenty or more
workers in a manufacturing process carried on without the aid of power.

(v) The industrial undertaking begins to manufacture or produce articles

or things in Jammu & Kashmir before 1-4-2012.
BUSINESSES PROVIDING INFRASTRUCTURE FACILITIES

Essential conditions for deduction under section 80 –I A(4)(i)

1.The enterprise should carry on the business of- (a) developing, (b) operating and
maintaining, or (c) developing, operating and maintaining, any infrastructure facility.

1.The enterprise is owned by an Indian company or a consortium of such companies or

by an authority or a Board or a Corporation or any other body established or
constituted under any Central or State Act.

1.The enterprise has entered into an agreement with Central/State Government or a

local authority or any other statutory body for (a) developing, (b) operating and
maintaining, or (c) developing, operating and maintaining, any infrastructure facility.

1.The enterprise has started or starts operating and maintaining the infrastructural
facilities on or after 1-4-1995
Quantum and period of deduction
For 10 consecutive assessment years ------ 100%
Out of 20 years beginning with the year in which the undertaking or the enterprise
develops and begins to operate any infrastructure facility. 
For port, airport, inland waterways or inland port, out of 15 years instead of 20 years.

Profits of housing or other activities as part of Highway Project

 
Where housing or other activities are an integral part of the highway project and the
profits of which are computed on such a manner as may be prescribed,
• such profit shall not be liable to tax,

• if has been transferred to a special reserve account and

• the same is actually utilized for the highway project excluding housing and other
activities before the expiry of three years

•the amount remaining unutilized shall be chargeable to tax as income of the year in
which such transfer to reserve account took place.
 
 TELECOMMUNICATION INDUSTRY
Business income computed as per section 28 to 44D
Under Section 35Abb
Capital expenditure services for acquiring any right to operate telecommunication
either before the commencement of the business to operate telecommunication
services or threreafter any time during any previous year and for which payment has
actually been made to obtain a license remains in force.

Sale of License
a.Where the entire license is transferred:
1.If the sale proceeds and the deductions already allowed, are less than the cost of
acquisition, such deficiency shall be allowed as deduction in the year in which the
license is transferred.
2.If the aggregate deductions exceed the cost, the amount of such excess or the
aggregate of the deductions already allowed in the past, whichever is less, shall be
taxable as business income of the year.
b. Where a part of the license is transferred:
1.Where a part of license is transferred for a sum less then the written down value of
the total license, the balance amount not yet written off shall be allowed as deduction
in the balance number of equal installments.
2.If part of license is transferred for a sum exceeding the written down value of
license, the sale proceeds minus the written down value of the full license shall be
the profit from such sale.
Conditions for deduction available under Section 80 I A
undertaking which is engaged in providing telecommunication services etc.
1.The undertaking should have started or starts providing telecommunication service
whether basic or cellular, including radio paging, domestic satellite services or network
of trunking, broadband network and internet services.
2.It will be allowed to all assessees.
3.It should start providing telecommunication services at any time on or after 104-1995
but on or before 31-3-2005

Conditions referred in Section 80-I A(3)

1.Such undertaking shall not be formed by splitting up, or the reconstruction, of a
business already in existence. However, this condition shall not apply to an undertaking
which is formed as a result of the re-establishment or revival of an undertaking, in
circumstances specified in 33B.
2.It should not be formed by the transfer to a new business of machinery or plant
previously used for any purpose.

Quantum and period of deduction

For the first 5 consecutive assessment years ------ 100%
Subsequent5 conseutive assessment years ---------- 30%
Out of 15 years beginning with the year in which enterprise starts providing
telecommunication services.
 
 TEA, COFEE AND RUBBER INDUSTRY

Essential conditions for Tea Development Account, coffee Development Account and
Rubber Development Account Under Section 33AB and Rule 5 AC
1.engaged in the business of growing and manufacturing tea or coffee or rubber in India;
2.within six months from the end of the previous year or before the due date of furnishing
return of income whichever is earlier;
3.deposited with National Bank for Agriculture and Rural Development (NABARD)any
amount(s) in a special account maintained by the assessee with that bank in accordance
with and for the purpose specified in a scheme approved in this behalf by the tea board,
the coffee board or the rubber board; or
4.deposited any amount in the Deposit Account opened by the assessee in accordance
with and for the purpose specified in a scheme framed by the tea board, coffee board, or
the rubber board with the previous approval of the Central Government;
5.the assessee must get its accounts audited by a Charted Accountant and furnish the
report of such audit in form no.3 AC, along with the return of income.
 
Quantum of Deduction:
the amount(s) deposited in the schemes referred to above: or
40% of the profits of such business computed under the head profits and gains of business
or profession,
Whichever is less.
Agricultural Income
•In case of an assessee who is engaged in the business of growing and manufacturing tea,
coffee or rubber, the profits which are partially agricultural and partially non-agricultural.
•As agricultural income is exempt from tax and only non-agricultural income will be
treated as taxable business income, such profits are disintegrated as per Rule of Income
Tax Rules, 1962.
•As per rule 8, the first step is to compute the income of growing as well as
manufacturing tea under the head ‘profits or gains of business and profession’ after
claiming the deduction available under that head.

Income of Subsidy by Tea Board Under Section 10(30)

Any subsidy received from or through the Tea Board under any such scheme for
replantation or replacement of tea bushes or for rejuvenation or consolidation of areas
used for cultivation of tea as the Central Government may, by notification in the Official
Gazette specify, shall be exempt.
Subsidy received for same reason for rubber, coffee, cardomom or such other
commodity in India through concerned board is exempt under section 10(31)

The Central Government has since notified the following schemes for this clause:
•Replantation Subsidy Scheme of the Tea Board, as effective from 1-10-1968.
•Amended Replantation subsidy of the Tea Board, as effective from the 1-1-1970.
•Amended Replantation Subsidy scheme of the Tea Board, as effective from 1-1- 1972
 COMMERCIAL PRODUCTION/REFINING OF MINERAL OIL

Under Section 42

Conditions:
•Business consisting of the prospecting for or extraction or production of mineral oils
•The Central Government has entered into an agreement for the association or
participation of the Central Government or any person authorized by the Central
Government in such business.
•Such agreement has been laid on the Table of each House of Parliament.

Benefits:
• In case of infructous or abortive exploration, the expenditure incurred is allowed as
deduction in computation of the business profits of the assessee.
•Expenditure incurred, whether before or after the beginning of commercial
production, in respect of ‘any drilling activities or services’, or ‘any exploration
activities or services’, or physical assets used in connection with any of the two is
allowed as business deduction for computation of tax.
•Adequate allowance for the depletion of mineral oil in the mining area, is to be
allowed in the computation of the business income as per the agreement
Under section 80- I B

Deduction is allowed to industrial undertakings engaged in the production of mineral

oil if:
•Begins commercial production in any part of India.
•Begins commercial production before 1-4-1997 or on or after 1-4-1997 ,where the
undertaking is located in the North Eastern Region, and on or after 1-4-1997, where it
is located in any other part of India.
•An industrial undertaking engaged in the business of refining of mineral oil on or
after 1-10-1998 shall also be eligible for deduction under this section.
 
No deduction under this section shall be allowed in respect of such undertaking where
it begins refining of mineral oil on or after 1-4-2009, unless:
•It is wholly owned by a public sector company or any company in which a public
sector company or companies hold at least 49%of the voting rights,
•it is notified by the Central Government in this behalf on or before 31-5-2008, and
•it begins refining not later than the 31-3-2012.
 
Quantum and period of deduction
Deduction at 100% of eligible profits for 7 assessment years commencing from the
initial year.
BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER

Option to claim depreciation on basis of straight-line method

•Depreciation of assets acquired on or after 1-4-1997 shall be calculated at a percentage
specified in the Income Tax Rules on the actual cost thereof to the assessee.
•May at its option claim depreciation on basis of written down value method at the rate
prescribed for each block of assets if exercised as under:
1.In case of undertaking, which began to generate power prior to 1-04-1997, the option
must be exercised before the due date of filing the return of income under 139(1) for the
assessment year 1998-99.
2.In case the undertaking begins to generate power after 31-3-1997, the option must be
exercised before the due date of furnishing the return of income for the assessment year
relevant to the previous year in which it begins to generate power.

Conditions for Deduction under Section 80-IA (4)(iv)

It is an undertaking which:
•is set up in any part of India for the generation or generation and distribution of power
and operating (the period beginning on 1-4-1993 and ending on 31-3-2010),
•starts transmission or distribution by laying a network of new transmission or distribution
lines at any time during the period beginning on 1-4-1999 and ending on 31-3-2010. The
deduction in this case allowed only in relation to the profits derived from lying of such
network of new lines for transmission or distribution,
•undertakes substantial renovation and modernizations of the existing transmission or
distribution lines at any time during the period 1-4-2004 to 31-3-2010. “Substantial
renovation and modernization” shall mean an increase of plant and machinery by atleast
50% of the book value of such plant and machinery as on 1-4-2004
•Splitting up, or the reconstruction, of a business already in existence, does not form it.
Condition shall not be apply to an undertaking which is formed as a result of the
establishment or revival of an undertaking, in circumstances specified in 33B. [Section 80-
IA(3)(i)]
•It is not formed by the transfer to a new business of machineries plant previously used for
any purpose. [Section 80-IA(4_(ii)]. However, plant and machinery, already used for any
purpose, can be transferred to the new undertaking, provided value of such plant and
machinery of new undertaking. ( the building in which the undertaking carries on the
business should also be new is not essential).
Period of deduction [Section 80-IA920]
The deduction will be available for any ten consecutive assessment years out
of 15 years beginning with the year in which the undertaking generates power
or commences transmission or distribution of power.

Quantum of deduction
The quantum of deduction shall be 100%of the profits for the consecutive 10
assessment years.
 BUSINESS OF OPERATION OF AIRCRAFT

No special provisions except when a resident assessee is doing global business, the
income which accrues or arises outside India may be eligible for tax relief under
section 90/91.

Under Section 44BBA notwithstanding anything to the contrary contained in section

28 to 43 A, income of a non-resident be computed at a flat rate of 5% of:
•the amount paid or payable whether in India or out of India to the assessee or to any
person on his behalf on account of carriage of passengers, live-stock, mail, or goods
from anyplace in India, and
•the amount received or deemed to be received in India, on account of carriage of such
items from a place outside India

SHIPPING BUSINESS

Tax relief Under Section 90/91

Under Section 44BBA notwithstanding anything to the contrary contained in section

28 to 43 A, income of a non-resident be computed for sum equal to 7.5% of the
amount paid or payable whether in or out of India to the assessee or to any person on
his behalf, on account of carriage of passengers, livestock, mail, or goods shipped at
any port outside India
 Tax Planning in respect of
Venture Capital Section 10(23FB)
• Any income of a venture capital company or a venture capital fund set up to
raise funds for investments in a venture capital undertaking shall be exempt.
• Meaning of Venture Capital undertaking: It means such domestic
company whose shares are not listed in a recognized stock exchange in
India and which is engaged in the- Business of:
• A. Nanotechnology
• B. Information technology relating to hardware and software development
• C. Seed research and development
• D. Biotechnology
• E. Research and development of new entities in the pharmaceutical sector
• F. Production of biofuels
• G. Dairy or poultry industry
 Tax planning respect of business of collection
and processing of bio degradable waste

• This assesse is allowed a specified a soecial duration under section 80 JJA which
is under:
• Deduction in respect of profits and gains from business of collecting and
processing of bio degradable waste(section 80 JJA)
• Where the gross income of an assesse includes profits and gains derived from the
business of collecting and processing or treating of bio degradable waste for;
i. generating power
ii. producing bio fertilizers, bio pesticides or other biological agents
iii. producing bio gas
iv. organic manure
Quantum of deduction: The whole of such profits or gains shall be allowed in
such deduction for a period of five consecutive assessment years beginning with
the assessment year relevant to the previous year in which such business
commences.
 Tax planning in respect of income from
Mutual Fund

• This income of assesee is exempt under section 10(23D) as per

provision given below:
• Income of notified mutual funds(Section 10 (23D)) Subject to
the provisions any income of the following mutual funds shall
be exempt from tax:
i. a mutual fund registered under the SEBI Act, 1992 or
regulations made thereunder;
ii. such other notified Mutual Fund set up by a public sector
bank or a public financial institution or authorized by the RBI
and subject to such conditions as the Central Government
may, by notification in the Official Gazette, specify in this
behalf.
 Tax planning in respect of income from
Housing Projects
The assessee who is engaged in the business of housing projects is eligible for
deduction under section 80- IB(10)
•
Deduction available to understanding engaged in developing and building housing
projects( Section 80-IB(10)

Conditions to be satisfied:
i. allowed to all assessee
ii. it is allowed on account of housing project which is approved by a local
authority before 31-3-2007
iii. the project is on the size of the plot of land having an area of a minimum of
one acre
iv. the residential unit has a built up area not exceeding 1000 sq. ft., where such
residential unit is situated within the cities of Delhi or Mumbai or within
25 Kms of the municipial limit of these cities and 1500 sq.ft. at any other
place,
v. the undertaking commences development and construction of the housing
project on or after 1-10-1998 and the housing project is completed .
Quantum of Deduction: Deduction shall be available 100% of the profits
from such project.
 Tax planning in respect of business
of Civil Construction
The assessee, whose gross receipts from the business of
civil construction does not exceed Rs. 40 lakhs, can
presume his income to be 8% of such receipts and can
escape the burden of maintaining any books of
accounts and records of the expenses incurred to earn
such income. Further if such assessee is a firm it can
give 12% interest on capital and loan of the partners
and also pay remuneration to its working partners .
 Tax planning in respect of profits
of retail business
• The assessee who is engaged in the business of retail
trade is also advised to show his income at 5% of
gross turnover provided it does not exceed Rs. 40
lakhs unless his income is really lower than 5% of the
gross turnover , he will have to maintain books of
account and records of all expenses and get his
accounts audited under section 44AB