INTRODUCTION OF CORPORATE CULTURE IN INDIA

Author :- Kirti Sharma

Indian Corporations especially those belonging to traditional business families, the concept of business is very traditional have shown remarkable resilience and capacity for adapting themselves to the changing industrial environment. But now a time has come when mere adaptive mixing of traditional and modern business practices may no longer suffice. Their Adaptive orientation may handicap them from thinking about radical solutions that are required to solve contemporary problems. The shift in govt. policies increasing alienation among middle level managers, the highly result oriented and active trade unionism and modern technological compulsions require a more open and participative corporate culture. Due to this the concept of corporates has developed. The govt authorities establish the provision related to tax that Tax is collected from the public in two ways one is Direct Taxes and other is Indirect Taxes. If we talk about the Direct Tax, it is levied on the income earn by the different type of business entities earn in a financial year. The different kind of tax payer has registered under the Tax department and they liable to pay the taxes according to the Tax slabs on the income earn by them. Like the Individual and Corporates or Companies being a taxpayer are not taxed at the same rate. Thus, Direct Taxes are again subdivided as:

Income Tax-This than tax is paid by those people who is comes under the criteria of the slab or those person or entity other companies registered under company law in India on the income earned by them. Such individual’s income are liable for taxed on the basis of slabs as prescribed by the income tax rule.

Corporate Tax: This tax is paid by those companies who is registered under companies Act 2013 or 1956, if any, in India on the net profit that it makes from businesses. It is taxed at a specific rate as prescribed by the income tax act subject to the changes in the rates every year by the Income tax department.

Concept of Corporate Tax?

The income earns by the corporates or companies who is registered under companies Act 2013.Such income is accountable for paying tax to the income tax division known as the corporate Tax. The income can be sorts in two parts. The tax collected from the individual income of the individual, HUFs, firm’s association of persons (AOP), Body of Individual (BOI), local authority, artificial Judicial persons is called personal Income Tax and the tax levied on the corporations are called corporate Tax

Several countries levy corporate Tax are also called as company Tax on the income of the company earn. Similar Tax may be levied at state or lower level. The Taxes May also be mentioned to as income tax or Capital Tax. The entities treated as partnerships are generally not taxed at the entity level. Maximum number of countries taxed all corporations’ burden business in the country on income from that country. Many countries tax all incomes of corporations organized in the country.

 Some Features of the Corporation Income Tax Policy in India Are Enumerated as Follows –

• On the commencement of Assessment year, the corporates are liable to pay income-tax on the net profit earns at a flat rate passes annually as prescribed by the Finance Act.

• There is tax holiday in respect of some new industries and export development incentives are also provided to some industries as prescribed by the Finance Act.

• The amount of tax paid by the Corporate is not deemed to have been paid on behalf of the shareholders and so, there is no question of any rebate being available to the shareholders in this regard.

• The corporates are under an obligation to deduct income tax at the prescribed rate out of the dividend payable to shareholders. Therefore, the income earned by a corporate is matter of double taxation; firstly, in the hands of the corporate and formerly in the hands of their shareholders once the amount received by the way of dividends.

• The income -tax so deducted at source (TDS) is adjustable against the tax liability of the shareholders. In case the tax liability is a smaller amount than the amount deducted at source, the surplus is refundable.

• The companies are liable to pay the tax on the entire amount retained earnings and distributed profit. Taxable income could be substantially different from the accounting profits, through various allowances and disallowances as prescribed by the Income Tax Act and Finance Act of relevant assessment year.

• In addition, several allowances, disallowances, rebates, deduction, etc., the rate of income tax also varies from companies to companies, depending upon whether the company is Indian company or foreign company. If it is an Indian Company then whether the total taxable income exceeds a certain level or not. Various variations and groupings of these factors are possible and each such combination leads to a different effective rate.

From the foregoing discussion, it is clear that as per Indian Policy regards to the corporation tax needs some more attention as per the current scenario of the economy and this is because of the corporate sector is the biggest sector for paying the tax to the income tax authorities.  Although it will be by way of (TDS) tax deduction at source or either by way of advance tax in respect of corporate income tax.  Nowadays policies of Tax in relation to corporation has becoming an object of criticism because it does not seem to have produced delaying effects in the growth of economy of India.

People still having faith in that the corporation income tax rates in India are one of the highest rates in the world. Several companies think  that the highest tax burden on companies is not due to the increased needs of the Exchequer to finance the ever increasing role of the State, but also due to the fact that the State can only collect this enormous amount of income from the compliant and nerveless corporate sector Emphasizing this, Raja Chelliah Committee on Taxation Reforms has pointed out, It is clear that company profits should be subjected to income-tax, it is tough to create a system of taxing corporate profits that would be appropriate from all the relevant points of view. Ideally, the mode of tax on company profits should be such as will distribute it between the different shareholders according to their particular profits as well as their share it in the profits of the corporation concerned. In practice, it is very difficult to attain this result when it is not possible to have a combined system of corporation income tax, it always results in double taxation on dividend income. The explanation may be found out also through the reduction in corporation income tax or incentives be provided for it at the shareholders level or by exempting the limited distributed profits from corporation income tax or by generous credit to the shareholders to the complete extent of tax paid by the company on its distributed profits.

Who is Liable to Pay?

The corporate tax is levied on the income earns by the corporation at the fixed rate as prescribed by the authorities. The corporate who is incorporated in India and having income from such business. If a company incorporated outside in India and having business operate in India. Such Company is liable to pay the tax on the income earn by the company. Like Indian Company and Foreign Company. Both the company under the provisions of the Indian Income-tax Act and Finance Act. Liable for paying Tax Though, the corporation tax has been defined by Article 306(6) of the constitution of India. Domestic Corporations- Means an establishment established in India and it is registered under Companies Act, 2013 of India is called as a Domestic Corporate. Although a foreign company can be considered as a domestic corporate if the Indian arm’s management and control is exclusively based in India.

Foreign Corporations- In case of Foreign Corporation, as the name suggests, a company that is situated abroad and not in India is called a foreign corporate. Again, if some part of a foreign company’s management and control is situated outside of India, then also it is called a foreign company. This difference is significant as domestic companies of India are charged corporate tax on their Total income while foreign corporations get charged tax only on the income which generate through their Indian processes only.

If we conclude that the concept of corporate tax which means that the corporate income constitutes one-fourth of the National Income.  Firstly, the buoyancy of corporate Taxation in relation to the corporate income were observed to be hovering around unity. Value of unity in buoyancy evaluations indicated that substantial discretionary revenue measures are needed to maintain corporate tax to GDP ratio. It calls for urgent requirement to improve the built-in flexibility of corporate taxation. In this Regards. The study observed that corporate Tax in relation to the public corporate sector was buoyant during the period. However, the private corporate sector it was not buoyant. Within private corporate sector, for selected non -Government financial public limited companies were very low. It can also be observed that overall corporate taxation system is no more progressive. The Alternative is to reform the existing corporate taxation system and move to a more neutral system of depreciation and eliminate other deduction.