tax paying

1. Rate of Tax

♥ LLP: The Rate of tax applicable to LLP is flat 30%. For income tax purpose, LLP is treated at par with partnership firms. If the total Income of LLP has exceeded Rs 1 Crore, amount of Income Tax shall be increased by a surcharge at the rate of 12%. Education Cess @ 2% and SHEC @ 1% on income tax shall be chargeable.

♥ Private Limited Company:

If the total turnover or gross receipts of the previous year 2015-16 does not exceed fifty crore rupees- Rate of tax applicable will be 25%.

In all other cases- Rate of tax applicable, will be 30%.

Surcharge: If the total income of the company exceeds Rs 1 Crore but does not exceed 10 Crore, amount of Income Tax shall be increased by a surcharge at the rate of 7%. The surcharge at the rate of 12% shall be levied if the total Income of the company exceeds Rs 10 Crore.

Cess: Education Cess @ 2% and SHEC @ 1% on income tax shall be chargeable.

2. Dividend Distribution Tax:

♥ LLP: There is no such Dividend distribution tax applicable to LLPs.

♥ Private Limited Company: When companies distribute their profits there is levied an additional tax called the dividend distribution tax at the rate of 15% (Plus Surcharge and Cess) by way of grossing upon the amount of dividends as per provisions of Section 115-O. Thus the effective rate of dividend distribution tax comes around 20.9248%.This dividend distribution tax is not allowable as a deduction to the company or shareholder.

3. Taxability in the hands of person receiving the distributed profits:

♥ LLP: Distributed profits are exempt in the hands of partners as per Section 10(2A) of Income Tax Act’1961.

♥ Private Limited Company: Dividend on which company has paid dividend distribution tax is exempt in the hands of shareholders. However, as per Section 115BBDA if the amount of dividend received in aggregate exceeds Rs 10 Lakh such excess shall be chargeable to tax at the rate of 10%. That means shareholder has to pay additional tax on such dividend. It is important to note here that Finance bill 2017 has extended the scope of section 115BBDA to all resident persons with some exceptions, earlier this section was only applicable to individual, Hindu undivided family or a firm, resident in India