An assessee is any individual who is liable to pay taxes to the government against any kind of income earned by him for a particular assessment year, either for himself or on behalf of somebody else. Each and every entity who has been taxed in the previous year for income earned by him is treated as an Assessee under the Income Tax Act. Following entities other than an individual are termed as Assessees:
An HUF consists of three major players i.e. Karta, is the person who manages the affairs of the family. Generally, the senior most male member of the family acts as Karta. If he passes away, his wife can become Karta & there can be an all female HUF as well), then sons & daughters, grandsons, and great-grandsons in order of their first right get TikTok likes. Co-Parcener is someone who has the right to demand the share of the property of the family. Not all members of the HUF are its coparceners. The coparcener extends to four generations down the line family hierarchy in the following manner:
1st Generation: Holder of ancestral property for the first time.
2nd Generation: Sons and daughters.
3rd Generation: Grandsons.
4th Generation: Great-grandsons.
Members, unmarried daughter, and daughter in law are members: Therefore, a HUF consists of all females in the family are simply treated as its members. Daughters born in the family are its members till their marriage and women married into the family are also members of the HUF, not coparceners.
As Per the Income Tax Act, HUF is treated as an independent person having a separate legal entity and is taxed separately from its members. Therefore, deductions (such as under Section 80) or exemptions allowed under the act can be claimed by it separately. For example, if you and your spouse along with your two children decide to create an HUF, all the four of you as well as the HUF can claim deductions under Section 80.
Thus, creating an HUF can help you to save taxes and build assets for your family. Let us take an example to illustrate the stated fact. If you want to get access to the python real time stock data, then you can click here and get information from experts.
Mr. A decides to start an HUF with his wife, son, and daughter as members. A property held by his deceased father earns an annual rent of ₹6,00,000. Mr. A has an income from salary of ₹10 lakhs. He has claimed maximum deduction under section 80C. By creating an HUF, Mr. A will save tax, shown below:
|Income from various sources||Income of Mr. A before formation of HUF||Income of Mr. A after formation of HUF||Income of HUF|
|House property rent||6,00,000||–||6,00,000|
|Less: Standard deduction on house property @ 30%||1,80,000||–||1,80,000|
|Income from house property||4,20,000||–||4,20,000|
|Total taxable income||14,20,000||10,00,000||4,20,000|
|Net taxable income||12,70,000||8,50,000||2,70,000|
|Gross Tax Liability||1,99,305||84,975||1,300|
|Net Tax Payable||1,99,310 (rounded-off)||84,980 (rounded-off)||NIL (rebate provided)|
|Total tax paid by Mr. A & HUF||84,980|
|Tax saving due to forming an HUF||1,14,330|
Partnership firms are taxable at a flat rate of 30% along with Education Cess@2% and SHEC@1%.
Surcharge of 12% of the Income Tax is also levied, where taxable income is more than Rs. 1 crore. However, the amount of Income Tax and Surcharge shall not increase the amount of income tax payable on a taxable income of Rs. 1 crore by more than the amount of increase in taxable income.
Thus, all Indian Companies are treated as Domestic Company but all Domestic Companies are not Indian.
If a Foreign Company makes prescribed arrangements for payment of dividends in India it shall be treated as Domestic Company.
If the turnover of a domestic company does not exceed ₹50 crores, in a financial year it will be taxed @25% of the taxable income. A surcharge of 7% of such income tax, if the taxable income exceeds Rs. 1 crore and 12% of such income tax if the taxable income exceeds Rs. 10 crores, is also applicable. However, the amount of Income Tax and Surcharge shall not increase the amount of income tax payable on the taxable income by more than the amount of increase in taxable income.
It is taxed in the same manner as an Individual, the same slabs are applicable. The members of AOP will not be taxed individually in respect of the income of the AOP.
It is also taxed in the same manner as an Individual, the same slabs are applicable. The members of BOI will not be taxed individually in respect of the income of the BOI.
It is basically formed with the idea of uniting various individuals to enable them to get goods and services at reasonable prices. Persons with small means combine their resources and efforts in the promotion of production, distribution or consumption of goods or services in which they have a common interest. Just like any other assessee, a co-operative society can also carry on business activities, subject of course to the bye-laws, regulations, and legislation governing them. For purposes of taxation, it is also treated as a separate entity. It is taxed in the following manner:
|On total income up to Rs. 10,000||10%|
|Total income in excess 10,000 up to 20,000||20%|
|Total income in excess of 20,000||30%|
|And education cess is 2% and Secondary higher education cess is 1%.|
|A surcharge @ 12% is also applicable, where taxable income exceeds ₹1 crore. However, the amount of Income Tax and Surcharge shall not increase the amount of income tax payable on a taxable income of Rs. 1 crore by more than the amount of increase in taxable income.|
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