Advocate Akhilesh Kumar Sah
In the modern income-tax regime the ‘individual’ status is proving to be better option to assessees keeping in view the tax-saving instruments & tedious/ TDS provisions of income-tax & structure of tax as well as statutory provisions and laws like Indian Companies Act, 2013. However, the size of operations, requirements differ from assessee to assessee e.g. it is not possible for an individual or a firm to issue shares. The following table and details there under in brief give a glimpse of income-tax rates for resident individuals, BOI, HUF, AOP in A.Y. 2015-16 & betterment of ‘individual’ status, where there is basic exemption & tax, slab-wise:
|1.||Where the total income does not exceed Rs. 2,50,000||Nil|
|2.||Where the total income exceeds Rs. 2, 50,000 but does not exceed Rs. 5,00,000||10% of the amount by which the total income exceeds Rs. 2,50,000|
|3.||Where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000||Rs.25, 000 + 20 % of the amount the total income exceeds Rs. 5,00,000|
|4.||Where the total income exceeds Rs. 10,00,000 but does not exceed Rs. 1,00,00,000||Rs. 1,25,000 + 30% of the amount the total income exceeds Rs. 10,00,000|
|5.||Where the total income exceeds Rs. 1,00,00,000||Rs. 28,25,000 + 30% of the amount of which total income exceeds Rs. 1,00,00,000|
In case of senior citizens (men & women) having 60 years or more age they are not required to pay income-tax where their total income does not exceed Rs. 3,00,000. Also men and women of age 80 and above (termed as super senior citizens) there is tax exemption on total income upto Rs. 5,00,000. Rebate of Rs. 2,000 of tax is available according to section 87 A where total income as above does not exceeds Rs. 5,00,000. Surcharge @ 10% of income-tax is calculated (subject to marginal relief) where total income exceeds Rs. 1,00,00,000. 2% education cess on income-tax and also 1% higher education cess on income-tax as above is also computed. Basic rate for the ‘firms’ & domestic ‘companies’ is 30%. Also, there are calculations for surcharge @10% where total income exceeds Rs. 1,00,00,000 & also, 2% education cess on income-tax and also 1% higher education cess on income-tax as above is also computed . Companies and firms do not enjoy deductions available to individuals like 80C, 80D, 80DD, 80DDB, 8OU as enumerated under chapter VI-A Income Tax Act, 1961.
An individual can take advantage of deductions available to individuals under Chapter VI-A for example of section 80C, 80U, and can save taxes by investing in qualifying investments under this section like NSC, life insurance schemes, PPF while The advantage is not available to a firm, company. The fringe benefit tax was also not livable in ‘individual’ status. Many TDS (tax deducted at source) provisions e.g. under section 194 A. 194 H, 194J are not applicable to ‘individual’ assessees but these exemptions are subject to certain conditions laid down in this behalf.
Therefore, looking to the tax structure, various formalities to be done by firms and companies, ‘individual’ status seems to be better in this complicated tax-regime where penalties are prescribed for non-compliance of various provisions, Genuine/ Certain deductions in respect of expenditure in carrying of business by an individual, HUF, AOP, BOI, are, also, allowable to these status, while computing his/her/its income from business or profession. Also, an individual, HUF can prepare a balance sheet, profit & loss account in respect of his/her/its business or profession and of own, separately, comprising of overall assets & liabilities (including that of business or profession).
The formation expenses of firm, companies can be saved by making a proprietary individual concern.
The above is only a write-up/ study in brief and compulsion or the necessity and requirements may be different according to facts and circumstances of each case in respect of a status.