Tax is an essential exercise in any nation. The wealth collected from taxation is used in activities that enhance the interests of a nation such as defense, social welfare programs, infrastructure, and so on. India is no exception to this rule, with the income tax department having been formed in the year 1860.
Taxation applies to almost all walks of life, including corporate India. Organizations have a different set of taxes and regulations they are obliged to follow as per the rules of the government. The act responsible for taxation in India is the Income Tax Act, 1961, which lays down rules for the levying, administration, and recovery of income tax in the country. Taxation can also be a tricky process, given that various penalties can be imposed on defaulters.
Taxes and Corporate India
Corporate India and organizations are no exception to taxation within the country as well. Taxes are applicable at the organizational as well as the individual level as well. As of April 1st, 2019, there have been changes to the corporate tax rates depending on the kind of organization.
| Company/ Organization Type | New Corporation Tax Rate | Additional Benefit/Requirements |
| Corporations or organizations that are not seeking any incentives/exemptions | 22% (earlier 30%) + applicable cess and surcharge. Effective corporate tax rate of 25.17% | No Minimum Alternative Tax is payable by these companies |
| Corporations that are seeking incentives/exemptions | Remains unchanged at 30% | The MAT rate is reduced to 15% from earlier level of 18.5% |
| Brand-new Manufacturing Companies | 15% (earlier 25%) | The new manufacturing company should have been incorporated on or before the month of October 2019. They must start production before March 2023 |
Given that taxation is a process that must be meticulously done to avoid penalties, organizations can land in a lot of trouble. In this regard, payroll service providers can help with handling those processes.
Payroll Taxes
Employees are also required to pay taxes, also known as payroll taxes, but this depends on the salary slabs that they are currently on. Calculating taxes is also an exercise that requires precision, which is precisely why many organizations are preferring to outsource the entire process to payroll processing solutions and online payroll services for small business.
Payroll taxes are a primary method of taxing employees. They broadly fall under two categories:
- Deductions from salary
- Taxes paid by the employee in lieu of employee wages.
These taxes are calculated according to the salary slabs that are given below. The 2020 budget, however, has made some revisions to the current pay slabs:
| Salary Bracket/ Slab | Taxation Percentage |
| Up to Rs 2.5 lakh | NIL |
| Rs 2.5 lakh to Rs 5 lakh | 5% (A rebate of Rs 12,500 is available under section 87A) |
| Rs 5 lakh to Rs 7.5 lakh | 10% |
| Rs 7.5 lakh to Rs 10 lakh | 15% |
| Rs 10 lakh to Rs 12.5 lakh | 20% |
| Rs 12.5 lakh to Rs 15 lakh | 25% |
| Rs 15 lakh and above | 30% |
Another aspect of taxation is the major laws and acts that govern how taxation is carried out. Are the laws and acts that act as a framework for taxation in India when it comes to taxing employees. Some of the major laws and act that are responsible for payroll taxes include:
- Minimum Wages Act, 1948
- (ESI Act) Employees’ State Insurance Act, 1948
- EPFO (Employee Provident Fund Organization), 1952
- Contract Labour Regulation and Abolition act, 1972
- Payment of the Gratuity Act, 1972
Benefits of outsourcing taxation processes
Most organizations are beginning to outsource the process of taxation due to various benefits such as
- Reduction of cost, effort and time
- Reduction of errors
- Access to experts and the best software
- Better Security
TalentPro helps their client even in their Taxation Process. Contact us today to know more.
