Direct and Indirect Taxation
Tax questions reward precise application of the Income-tax Act, 1961 and GST law to a fact pattern; you must identify the correct regime, rate and credit position before computing.
Direct tax
- Domestic companies can choose the concessional regime under section 115BAA (22% base rate) or 115BAB (15% for eligible new manufacturing). Surcharge is 10% and health and education cess 4%, giving effective rates of 25.168% and 17.16% respectively.
- A company opting for 115BAA cannot claim specified incentives, including additional depreciation, and cannot set off certain brought-forward losses attributable to those incentives; MAT under section 115JB does not apply.
- Capital gains: listed equity shares held over 12 months are long-term; post-July 2024 the LTCG rate is 12.5% without indexation and the section 111A STCG rate is 20%, subject to the annual exemption.
GST
- CGST and SGST apply to intra-state supplies; IGST applies to inter-state supplies. GST is levied on transaction value, and ITC is available only for business inputs, not blocked credits under section 17(5).
- ITC must be claimed by the due date of the return for September following the financial year, or the annual return, whichever is earlier.
Worked example
Total income ₹10 crore under section 115BAA. Tax at 22% = ₹2.20 crore; surcharge at 10% = ₹22 lakh; cess at 4% on ₹2.42 crore = ₹9.68 lakh; total ₹2,51,68,000, an effective rate of 25.168%. Under the normal regime the base rate would be 30% plus a 12% surcharge where income exceeds ₹10 crore, so the concessional regime is usually better only if the forgone deductions are worth less than the rate saving.
Traps
- Applying MAT after opting for 115BAA.
- Claiming ITC on blocked credits or without a valid tax invoice.
- Confusing composite supply with mixed supply; the principal supply determines the rate.
- Ignoring surcharge thresholds and marginal relief.