MF0012 – TAXATION MANAGEMENT

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ASSIGNMENT

 

 

 

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

 

Q.1 Explain the concept of tax planning and the factors to be considered in tax planning. Give the difference between tax planning and tax evasion.

 

Ans : Concept of tax planning :

 

Logical analysis of a financial situation or plan from a tax perspective, to align financial goals with tax efficiency planning. The purpose of tax planning is to discover how to accomplish all of the other elements of a financial plan in the most tax-efficient manner possible. Tax planning thus allows the other elements of a financial plan to interact more effectively by minimizing tax liability. Tax planning encompasses many different aspects, including the timing of both income and purchases and other expenditures, selection of investments and

 

 

Q.2 Explain the process of tax payment.

 

Ans : Explanation of whole process of tax payment through Individuals :

 

Tax constitutes a major form of revenue for most of the Governments across the world. Taxes are levied and spent by the government for the development of the country like infrastructure, healthcare, defence etc. Taxes can be categorized into two broad categories namely direct tax and indirect tax. A tax paid directly by the person on whom it is levied is known as direct tax. Taxes where the person paying and the person whom it is levied upon are two different people are an indirect tax

 

Partnerships :

 

Partnership firm is subjected to taxation under

 

 

 

Q. 3 Write short notes on:

Capital gain

Cost of acquisition

Cost of improvement

Expenditure on transfer

Transfer

 

Ans : Capital gain:

 

A capital gain is a profit that results from a disposition of a capital asset, such as stock, bond or real estate, where the amount realized on the disposition exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price. Conversely, a capital loss arises if the proceeds from the sale of a capital asset are less than the purchase price.

Capital gains may refer to “investment income” that arises in relation to real assets, such as property; financial assets, such as shares/stocks or bonds; and intangible assets.

 

Cost of acquisition:

 

 

 

Q.4 Explain the computations of Tax in two aspects given below:

Tax provision for Computation of Total income of firms

Computation of partnership firms’ book profit.

 

Ans : Steps to be explained for the computation of total income of firms :

 

The steps in which the Total Income, for any assessment year, is determined are as follows:

 

1. Determine the residential status of the assesses to find out which income is to be included in the computation of his Total Income.

2. Classify the income under each of the following five heads. Compute the income under each head after allowing the deductions prescribed for each head of income.

 

(a) Income from Salaries

 

Salary/Bonus/Commission, etc.

Taxable Allowance

Value of Taxable perquisites

 

 

 

 

Q.5 Explain the service tax law in India. Give the concept of negative list.

 

Ans : Service tax laws in India :

 

Generally, the liability to pay service tax has been placed on the ‘service provider’. However, in respect of the taxable services notified under Sec.68(2) of the Finance Act,1994, the service tax shall be paid by such person and in such manner as may be prescribed at the rate specified in Sec.66 of the Act and all the provisions of Chapter-V shall apply to such person as if he is the person liable for paying the service tax.

The following services have been notified under Sec.68(2) of Finance Act,1994:

the services,-

(i)  in relation to telecommunication service;

 

(ii)  in relation to general insurance business;

 

 

 

 

Q.6 Identify and explain the major considerations in capital structure planning. Explain two approaches in dividend policy and factors affecting dividend decisions.

 

Ans : Major considerations in capital structure planning :

 

There are three major considerations in capital structure planning, i.e. risk, cost of capital and control, which help the finance manager in determining the proportion in which he can raise funds from various sources.

 

A. Risk:

 

Risk is of two kinds, i.e. financial risk and business risk. Here we are concerned primarily with the financial risk. Financial risk is also of two types:

 

1. Risk of Cash Insolvency:

 

As a firm raises more debt, its risk of cash insolvency

 

 

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