by Addressing specific problems on the computation of total income for companies involves understanding the framework of the Income Tax Act, 1961, in India. Although providing detailed computations for hypothetical situations without specific data can be challenging.
For a comprehensive illustration, let’s assume a simplified scenario for a domestic company:
Basic Framework for Computation of Total Income for Companies:
Gross Total Income (GTI):
Calculate the gross total income by aggregating the income from various sources under the five heads of income, which are:
- Income from Salaries (not applicable for companies directly, but salaries paid to employees affect business income)
- Income from House Property (e.g., rental income)
- Profits and Gains of Business or Profession
- Capital Gains (short-term and long-term)
- Income from Other Sources (interest, dividends, etc.)
Allowable Deductions:
Deduct allowable expenses and depreciation related to business operations, investments, and other deductible expenses under sections 30 to 43D of the Income Tax Act. This includes specific deductions available under sections 80C to 80U (if applicable).
Set-off and Carry Forward of Losses:
Apply provisions for the set-off and carry forward of losses from previous years if applicable and permissible under the Act.
Simplified Example:
Let’s consider a hypothetical company, XYZ Pvt. Ltd., with the following financial details for the fiscal year:
Revenue from operations: ₹50,00,000
Rental income from property: ₹2,00,000
Interest received on fixed deposits: ₹1,00,000
Profit from the sale of a capital asset (held for more than 24 months): ₹5,00,000
Business expenses (including salaries, rent, utilities): ₹30,00,000
Depreciation: ₹4,00,000
Investment in eligible securities under section 80C: ₹1,50,000
Step 1: Calculate Gross Total Income (GTI)
Business Income: ₹50,00,000 (Revenue) – ₹30,00,000 (Expenses) – ₹4,00,000 (Depreciation) = ₹16,00,000
House Property Income: ₹2,00,000
Capital Gains: ₹5,00,000
Other Sources (Interest): ₹1,00,000
GTI = ₹16,00,000 (Business) + ₹2,00,000 (House Property) + ₹5,00,000 (Capital Gains) + ₹1,00,000 (Other Sources) = ₹24,00,000
Step 2: Deduct Allowable Deductions
Deduction under section 80C for investments: ₹1,50,000
Step 3: Compute Total Income
Total Income =
GTI – Deductions = ₹24,00,000 – ₹1,50,000 = ₹22,50,000
Tax Computation
The tax on the total income would then be calculated according to the prevailing corporate tax rates for that financial year, plus cess and surcharge if applicable.
