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Taxability of Private Limited Company



Every Company is mandatorily required to comply with Company Law Compliances and Income Tax provisions for smooth functioning of the business. The basic taxation provisions relating to Private Limited Companies have been summarized below:

Income Tax Return

ITR – 6 is applicable to Private Limited Companies.

Tax Rate

Tax will be payable at a flat rate of 30% plus Education Cess. Surcharge will be payable at 5% if the net income exceeds Rs.1 crore for the Financial Year 2011-12.

Advance Tax

Companies are required to pay advance tax in quarterly installments on the following dates:

  • On or before 15 June – not less than 15% of tax payable
  • On or before 15 September – not less than 45% of tax payable
  • On or before 15 December – not less than 75% of tax payable
  • On or before 15 March – not less than 100% of tax payable

Alternate Minimum Tax

Companies are liable to Alternate Minimum Tax on the adjusted total income (that is, on book profit) if regular income-tax on total income is less than the Alternate Minimum Tax. The following rates are applicable for Financial Year 2011 – 12

  • If the book profit does not exceeds Rs.1crore – 19.06%
  • If the book profit exceeds Rs.1crore – 20%

Audit Requirements

  • Statutory audit is mandatory in case of every private limited company. In other words, book of accounts are required to be audited under the Companies Act, irrespective of quantum of revenue, losses, profits, capital expenditure.
  • Tax Audit is mandatory in case sales, turnover or gross receipts of a business exceed Rs.60lacs in the previous year relevant to the assessment year.
  • The due date of getting the books of accounts audited is September 30 with duly filled up and signed form No. 3CD and 3CA by an independent Chartered Accountant.
  •  Every private limited company is compulsory required to maintain books of accounts to show the true and fair view of the financial statements.
  • If a company liable to audit fails to get his accounts audited before the specified date or fails to furnish a tax audit report to the proper tax officer then penalty u/s 271B is attracted. The amount of penalty shall be one-half per cent of total sales / gross turnover or Rs.150000/- whichever is lower.

Company Law Compliances

Company law compliances can be categorized in two heads.

Annual compliance filing – Compliances which are required to be made once in a year. These includes the following e-forms:

  • Form 23AC       : For filing Balance Sheet by all Companies
  • Form 23ACA     : For filing Profit & Loss Account by all Companies
  • Form 20B            : For filing Annual Return by Companies having share capital
  • Form 66              : For filing Compliance Certificate by Companies having paid up capital of Rs.10lakh – Rs.2crore
  • Form 21 A            : For filing Annual Return by Companies not having share capital

Other Compliance filing – Compliances which are required to be made from time to time on various events. Some of them includes:

  • · Change in Authorized / Paid up Capital of the Company.
  • · Allotment of new shares / transfer of shares / invitation to subscribe for shares.
  • · Issue of shares to the Directors / employees of the Company.
  • Change in composition of the Board of Directors.
  • · Appointment of Managing / whole time Director and payment of remuneration.
  • · Payment of remuneration to Director / his relative / firm of the Director etc. are contracting with any of the above.
  • · Loans to Directors / Members or to firms / companies where they are partner / members respectively. Giving loans to Companies under same management.

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About: 

Alok Patnia founded Taxmantra.com, an expert in tax advisory & compliance. He is a Chartered Accountant having prior exposure with Ernst & Young & KPMG.

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