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Taxation of other forms of business entities

Taxation of other forms of business entities

Every business entity adopts some form of business organisation to carry out business activities as success and growth of business depends a great deal on the choice of the form of business organisation. Apart from corporates, there are other forms of business entities namely Co-operatives, Joint Venture, Small Scale Industries and Trusts. All these forms have their own specialised areas of operating and organising business activities. These are also subjected to taxation in a manner similar to corporates under the Income Tax Act, 1961 or other Indian laws as prescribed to be suitable for the purpose of taxation. But there are certain variations in tax provisions relating to each of them due to differences in the form of their organisation. Besides, small scale industries are provided some deductions and exemptions in order to promote their growth and development. Also, trusts that have been set up for various charitable and religious purposes are also subjected to some exemptions under the Income Tax Act.

A 'trust' is an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by the owner, or declare and accepted by him, for the benefit of another, or of another and the owner.

'Joint Venture'(JV) is defined as a contractual agreement formed between two or more parties, with each party contributing their equity share, in order to undertake an economic activity which is subjected to joint control.

A 'Co-operative organisation' is a society which has as its objectives the promotion of the interests of its members in accordance with the principles of cooperation. It is a voluntary association of ten or more members residing or working in the same locality, who join together on the basis of equality for the fulfillment of their economic or business interest. The basic feature which differentiates the co-operatives from other forms of business ownership is that its primary motive is service to the members rather than making profits.

'Small Scale Industries' are the units in which investment in fixed assets in plant and machinery whether held on ownership terms on lease or on hire purchase does not exceed Rs.1crore or Rs.10 million, subject to the condition that the unit is not owned, controlled or subsidiary of any other industrial undertaking.


Other Categories

Taxation of Individuals
Who is liable to pay income tax
Sources of Income
Income from Salaries
Income from Capital Gains
Income from House property
Income from Profits & gains of business or profession
Income from other sources
Taxation of Partnerships
Customs Duties (Import Duty and Export Tax)
Wealth Tax
Taxation of Corporates
Taxation of Agents
Excise Duty
Permanent Account Number (PAN)
Taxation of other forms of business entities
Taxation of Trusts
Taxation of Small Scale Industries
Joint Venture Companies
Cooperative Societies
Taxation of Representative offices
Service Tax
Value Added Tax (VAT)


India has a well developed tax structure. The power to levy taxes and duties is distributed among the three
tiers of Government, in accordance with the provisions of the Indian Constitution. The main taxes/duties that
the Union Government is empowered to levy are:- Income Tax (except tax on agricultural income,
which the State Governments can levy), Customs duties, Central Excise and Sales Tax and Service Tax. The principal taxes levied by the State Governments are:- Sales Tax (tax on intra-State sale of goods), Stamp Duty (duty on transfer of property), State Excise (duty on manufacture of alcohol), Land Revenue (levy on land used for agricultural/non-agricultural purposes), Duty on Entertainment and Tax on Professions & Callings. The Local Bodies are empowered to levy tax on properties (buildings, etc.), Octroi (tax on entry of goods for use/consumption within areas of the Local Bodies), Tax on Markets and Tax/User Charges for utilities like water supply, drainage, etc.

In the wake of economic reforms, the tax system in India has under gone a radical change, in line with the
liberal policy. Some of the changes include:- rationalization of tax structure; progressive reduction in peak
rates of customs duty; reduction in corporate tax rate; customs duties to be aligned with ASEAN levels;
introduction of value added tax; widening of the tax base; tax laws have been simplified to ensure better compliance. Tax policy in India provides tax holidays in the form of concessions for various types of investments. These include incentives to priority sectors and to industries located in special area/ regions. Tax incentives are available also for those engaged in development of infrastructure.