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Comparative study

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by

Chathuranga Marasinghe

on 4 August 2014

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Transcript of Comparative study

Introduction
India is the second-most populous country with over 1.2 billion people, and the most populous democracy in the world.
It Bounded by the Indian Ocean on the south, the Arabian Sea on the south-west, and the Bay of Bengal on the south-east.
it shares land borders with Pakistan to the west, China, Nepal, and Bhutan to the north-east; and Burma and Bangladesh to the east.
India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies.

Individual Income Tax
Definition of person

Sri Lanka
Includes,
• an Individual,
• a company-include public corporations
• a body of Person(such as clubs, associations, Institutions, societies,
or any local or public authorities, a receiver, trustee, executor and an agent,
• a government. Not include partnership


India
Includes,
• an individual
• a Hindu undivided family
• a company,
• a firm
• an association of persons or a body of individuals,
• a local authority, and
• every artificial juridical person, not falling within any of the preceding sub-clauses.

Residency

Sri Lanka
Presence 183 days or more in Sri Lanka during the tax year

India
Presence 182 days or more in India during the tax year


Sources of Income

Sri Lanka
• Profits from employment
• Profit from trade, business, profession or vocation
• Profit from property
• Dividend Income
• Interest Income
• Rent Income
• Charges or annuities
• Winning from lottery, betting or gambling

Tax calculation

Sri Lanka
Sources of Income
Statutory Income
Add: Child Income
Total Statutory Income
Less: Deductions under sec 32
Assessable Income
Less: Deductions under sec 33
Taxable Income
Gross Income tax payable
Less: Tax credits
Net Income tax payable

India
Sources of Income
Less: Deductions under sec 80
Total Income
Income tax payable
Add: Education Cess 2%, secondary and higher education Cess 1%
Total Income tax payable

Corporate Tax
Tax Rate

Sri Lanka
For a resident Company income up to 5million 12%. Income over 5million 28%.

India
Resident Company 32.45%
Non- resident company 42.02%

Depreciation Rate

Sri Lanka
• Building - 10%
• General Plant & machinery - 15%
• Motor Vehicle – 15%
• Computers including Software -60%
• Furniture - 10%
• Patents, Know-how, copyrights, licenses etc. - 25%

India
• Building - 10%
• General Plant & machinery – 33.33%
• Motor Vehicle – 20%
• Computers including Software - 25%
• Furniture - 20%
• Patents, Know-how, copyrights, licenses etc. - 10%

Comparative study on Income tax practices of Sri Lanka with India
Group Presentation
India
• Income from Salary
• Income from House property
• Income from Business or Profession
• Income from capital gains
• Income from other sources

Tax rates

Sri lanka
0 – 300000 0
First 500000 4%
Next 500000 8%
Next 500000 12%
Next 500000 16%
Next 500000 20%
Balance 24%
India
0 – 200000 0
200001 – 500000 10%
500001 – 1000000 20%
1000001- No limit 30%

exemptions
Age bellow 60- INR 200000
Age between 60-80 INR250000
Age over 80- INR 500000



Tax exemption

Sri Lanka
LKR 600000 from divisible profit

India
Not specific exemption

Tax Rate

Sri Lanka
Partnerships are taxed at 8% on the divisible profit

India
Tax rates on partnership firm is 30%.Capital Gains and Education Cess 2% should be deduct
Conclusion
India is the second largest population country in the world. But Sri Lanka is very less population country.
India population: 1.2 billion
Tax payment proportion: 2.77%
Sri Lanka population: 20 million
Tax payment proportion: 4.48%
Based on the both tax system we can say Sri Lankan income tax system is simple and not more burden to the people.
Indian tax rates and exemptions are differing for different age people. Therefore tax calculation is somewhat complex. Their tax rates also higher than the Sri Lanka.
Finally we can say there are no more differences between Sri Lankan and Indian Income tax practices, although Indian tax practices are somewhat complex than Sri Lanka.

Recommendations
Indian tax rates are higher but tax system is not simple Therefore tax rates should be increased by simplifying the tax system.
Different tax rates should be not based on age wise. It is more suitable based on Income level. Therefore income level should be categorized and rates, exemptions should be based on that.
In India tax payable rate is low. There should be a good mechanism for identifying the actual income of the people and should motivate them to pay tax voluntarily.
Income tax act should be amendment due to the current economic situations and requirements.
Lower tax income is mainly based on low income of the people. Therefore the income of the people should be increased. Based on that government policies should she modify.

Thank You...
Partnership Tax
Full transcript