Today we are discussing the Types of Person and Its Taxability under Income Tax Act. Further also, we all must have heard the peoples’ saying that by forming a Company, LLP, HUF, Firm, can ‘save Tax’.  So what is this all Company, LLP, Firm and all.

Now, we begin with the understanding types of ” Person” as per income Tax,

As person Section 2(31) of Income Tax Act which define,

Section 2(31) of Income Tax Act

This are the Pillars of Income Tax Act, taxability based on the box under which you are falling. Further also we under stand the term in more one by one,

1. Individual

> Male/Female

> In case of Minor/Unsound Mind – Guardian or Manager

> Deceased Person – Legal Representative

E.g – Mr. Rakesh as Individual

2. HUF – (Hindu Undivided Family)

> Governed by Hindu law, consist of all males lineally descended from common ancestor and includes wives and daughters

> Member of HUF called as Co-Parceners. Further Son and Daughter of HUF have same right in Coparcenary Property.

> Arises from Status, no need of Contract.

E.g Kunal shah Huf consist of Father, Son, Daughter, Wife,

3. Company

> For the purpose this Act, Word Company has much wider connotation than Under Companies Act,

  • Indian Company defined under 2(26)
  • Body corporate incorporated by or under law of Country Outside India.
  • Any Body, Association incorporated or not, Indian or not, which declared by general or specific order of CBDT to be Company for such Assessment Year

> Divided in to Two parts 

Divided in to Two parts 

 E.g Reliance Industries ltd, Adani Ltd, Kalupur Bank

4. Firm

> Persons agree to share Profit of business carried by all or any of them acting for all. Individually known as Partners and collectively known as Firm.

> Term also includes LLP as define under Limited Liability Partnership Act, 2008.

E.g Aastha Realtor, Krishna Farm,

5. AOP

> Persons combine together for promotion of Joint Enterprise

> Must have common Purpose or action for formation of AOP.

BOI

> Status of person like Executors and Trustees

E.g Co-operative Society,  Trust

6. Local Authority

> Authority Legally entitled or entrusted by Government

>  Municipal Committee, District Board etc

7. Artificial Person

> Establish under specific Act or Legislation

> Covered all person not falling other like wise idol or deity

E.g ICAI, University,

Rate of Tax:-

> Individual/HUF/AOP/BOI

1. Taxed at Normal slab Rate 

Total Income Income Rate (Cess and Surcharge as Applicable)
Up to 2,50,000 Nil
2,50,000 To 5,00,000 5%
5,00,000 To 10,00,000 20%
More than 10,00,000 30%

 Notes:-

1. Exemption Limit for Senior Citizen is 3,00,000/- (60-80 Years)

2. Exemption Limit for Super Senior Citizen is 5,00,000/- (80+ Years)

3. Health and Education cess at 4%.

4. Standard Deduction up to Rs, 50,000/- from Salary Income

5. Rebate under 87A up to 12,500/- if Taxable income Less than Rs.5,00,000/-.(only for Resident individual)

> Firm/LLP

1. Rate is 30% (Cess and Surcharge as Applicable)

> Local Authority

1. Rate is 30% (Cess and Surcharge as Applicable)

> Co-Operative Society 

Total Income Income Rate (Cess and Surcharge as Applicable)
Up to 10000 10%
10,000 To 20,000 20%
More than 20,000 30%

> Company

1. For Previous Year 2019-20

If Turn Over or Gross Receipt is less than 400Cr. 25%
Other wise – Domestic Company 30%
Other than Domestic Company

– Royalty or FTS From Govt

– Other Income

 

50%

40%

2. For Previous Year 2020-21 

Sr. No. Particulars Tax Rate Effective Tax Rate MAT Conditions Optional to whom
1 Domestic Companies 22% 25.17% MAT shall not applicable Shall not avail any exemption/ incentive Company enjoying tax holiday subject to MAT @ 15%. However after that they can opt for this.
2 New Domestic Companies Manufacturing Industries (Incorporated after 1st Oct, 19) 15% 17.01% MAT shall not applicable Shall not avail any exemption/incentive NA

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