Unit 4: Company taxation & procedural compliance
Income Tax Law & Practice notes · PTU syllabus (BCOM 403-18)
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Unit summary
Companies pay corporate tax, and every taxpayer must comply with procedures — TDS, advance tax, returns and assessments. This unit covers tax rates and special provisions for companies, collection and recovery of tax, TDS and TCS, advance tax, assessment procedures, appeals, revisions, settlement of cases, penalties and e-filing.
After this unit you can
- Explain the tax rates and special provisions for companies
- Explain TDS, TCS and advance tax
- Explain the types of assessment and e-filing of returns
- Explain appeals, revisions, settlement and penalties
PTU syllabus topics
- Tax and special provisions for companies
- collection and recovery of tax
- TDS and TCS
- advance tax
- assessment procedure
- appeals
- revisions
- settlement of cases
- penalties
- e-filing
Paid by
Payer deducts at source
The taxpayer directly
When
At the time of payment
In instalments during the year
Example
Salary, interest, rent
Business income, capital gains
Purpose
Collect tax as income arises
Pay tax as you earn
Topic 1
Taxation of companies
| Company | Tax rate (before surcharge and cess) |
|---|---|
| Domestic company — Section 115BAA (no exemptions/incentives) | 22% (+10% surcharge) — effective about 25.17% |
| New manufacturing company — Section 115BAB (set up after Oct 2019, production by March 2024) | 15% (+10% surcharge) — about 17.16% |
| Domestic company with turnover up to ₹400 crore (normal provisions) | 25% |
| Other domestic companies (normal provisions) | 30% |
| Foreign company | 35% (reduced from 40% from AY 2025-26) |
- Minimum Alternate Tax (MAT, Section 115JB): if normal tax is less than 15% of book profit, MAT applies; MAT credit carried forward for 15 years; not applicable to companies opting for 115BAA/115BAB.
- Dividend: taxed in shareholders' hands; companies deduct TDS (10% above ₹10,000 per shareholder from FY 2025-26). Section 80M avoids cascading on inter-corporate dividends.
- Buy-back: from 1 October 2024, the amount received on buy-back is taxed as dividend in shareholders' hands.
- Carry forward of losses on change in shareholding (Section 79): closely held companies lose carry-forward if beneficial shareholding changes by more than 49% (relaxed for start-ups).
Topic 2
Collection and recovery: TDS, TCS and advance tax
Tax deducted at source (TDS)
The payer deducts tax at the time of payment or credit, deposits it with the government and issues a certificate; the payee claims credit (Form 26AS / AIS).
| Section | Payment | Rate (illustrative) |
|---|---|---|
| 192 | Salary | Average rate of tax |
| 194A | Interest other than on securities | 10% (bank interest above ₹50,000 / ₹1 lakh for seniors) |
| 194C | Contractors | 1% (individual/HUF), 2% (others) |
| 194H | Commission or brokerage | 2% |
| 194I | Rent | 2% (plant), 10% (land/building) above ₹50,000 a month |
| 194J | Professional / technical fees | 10% / 2% |
| 194Q | Purchase of goods above ₹50 lakh | 0.1% |
- Due dates: deposit by the 7th of the next month (30 April for March); quarterly returns (24Q for salary, 26Q others); certificates Form 16 / 16A.
- Higher TDS (Section 206AA) at 20% if no PAN.
Tax collected at source (TCS — Section 206C)
Collected by the seller from the buyer on specified goods — scrap, forest produce, minerals, motor vehicles above ₹10 lakh, foreign remittances under LRS (above ₹10 lakh), overseas tour packages.
Advance tax (Sections 207–211)
Payable when the estimated tax liability (after TDS) is ₹10,000 or more; senior citizens without business income are exempt.
| Due date | Cumulative instalment |
|---|---|
| 15 June | 15% |
| 15 September | 45% |
| 15 December | 75% |
| 15 March | 100% |
- Presumptive taxpayers (44AD/44ADA) pay 100% by 15 March.
- Interest: Section 234A (late return), 234B (shortfall below 90% of assessed tax), 234C (deferment of instalments) — 1% per month.
- Recovery (Sections 220–232): demand notice; if unpaid within 30 days, assessee in default — attachment of salary, bank accounts, property; interest under Section 220(2).
Topic 3
Assessment procedure and e-filing
- Return of income (Section 139): due dates — 31 July for non-audit individuals; 31 October for audited cases; 30 November for transfer pricing cases. Belated return (139(4)) and revised return (139(5)) up to 31 December; updated return (139(8A)) within 48 months with additional tax.
- ITR forms: ITR-1 (Sahaj), ITR-2, ITR-3, ITR-4 (Sugam), ITR-5, ITR-6, ITR-7.
Summary assessment (143(1))
Processing by CPC for arithmetical errors and incorrect claims
Scrutiny assessment (143(3))
Detailed examination after notice under 143(2); faceless
Best judgement assessment (144)
When the assessee fails to comply
Income escaping assessment (147–148A)
Reassessment within time limits
Search assessment (153A–153D / Chapter XIV-B)
After search and seizure
Protective assessment
When the correct taxpayer is unclear
- Faceless assessment (Section 144B): no physical interface; automated allocation of cases to assessment units across India.
- E-filing: on the income-tax portal using PAN as user ID; verify within 30 days through Aadhaar OTP, net banking, DSC or by sending ITR-V to CPC Bengaluru.
- Annual Information Statement (AIS) and Form 26AS show TDS, high-value transactions — taxpayers should reconcile before filing.
Topic 4
Appeals, revisions, settlement and penalties
- 1Assessing Officer's order
- 2Commissioner (Appeals) / Joint Commissioner (Appeals)
Appeal within 30 days (Form 35)
- 3Income Tax Appellate Tribunal (ITAT)
Within 60 days (Form 36) — final fact-finding authority
- 4High Court
On a substantial question of law within 120 days
- 5Supreme Court
Special leave petition / certificate of fitness
- Revision by the Principal Commissioner: Section 263 — order erroneous and prejudicial to revenue (within 2 years); Section 264 — revision in favour of the assessee on application (within 1 year).
- Settlement of cases: the Income Tax Settlement Commission was abolished from 1 February 2021 and replaced by the Interim Board for Settlement for pending cases; Dispute Resolution Committee (Section 245MA) for small taxpayers; Vivad se Vishwas schemes (2020, 2024) for settling pending appeals.
- Rectification of mistakes (Section 154) within 4 years.
Penalties and prosecution
| Section | Default | Penalty |
|---|---|---|
| 234F | Late filing of return | ₹5,000 (₹1,000 if income up to ₹5 lakh) |
| 270A | Under-reporting of income | 50% of tax on under-reported income |
| 270A | Misreporting of income | 200% of tax |
| 271A | Failure to maintain books | ₹25,000 |
| 271B | Failure to get accounts audited | 0.5% of turnover (max ₹1.5 lakh) |
| 271C / 271H | Failure to deduct TDS / file TDS return | Amount of TDS / ₹10,000–1,00,000 |
| 272B | Failure to obtain or quote PAN | ₹10,000 |
- Prosecution (Sections 275A–280D) for wilful evasion, false statements, failure to pay TDS.
- Immunity (Section 270AA) from penalty under 270A (under-reporting) if tax is paid and no appeal is filed.
Key terms
- MAT
- Minimum alternate tax at 15% of book profit
- TDS
- Tax deducted by the payer at the time of payment or credit
- Advance tax
- Tax paid in instalments during the year in which income is earned
- Scrutiny assessment
- Detailed examination of a return by the Assessing Officer
- ITAT
- Income Tax Appellate Tribunal, the final fact-finding authority
Quick revision
- Companies: 22% (115BAA), 15% (115BAB), 25%/30% normal, 35% foreign; MAT 15%.
- TDS deposited by the 7th; quarterly returns; Form 16/16A.
- Advance tax: 15%, 45%, 75%, 100% by 15 June, Sept, Dec, March.
- Assessments: 143(1), 143(3), 144, 147; faceless.
- Appeals: CIT(A) → ITAT → High Court → Supreme Court; penalties under 270A.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.What is Section 115BAA?
- Q2.What is MAT?
- Q3.State the due dates of advance tax instalments.
- Q4.What is TCS?
- Q5.What is a best judgement assessment?
- Q6.What is the penalty for under-reporting of income?
Long-answer questions
- Q1.Explain the tax rates and special provisions applicable to companies.
- Q2.Explain the provisions relating to TDS, TCS and advance tax.
- Q3.Explain the types of assessment and the procedure of e-filing returns.
- Q4.Explain the appellate structure, revision and penalties under the Income-tax Act.
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