Wht is the new service tax rate onward July 2008?

Question

Wht is the new service tax rate onward July 2008?

Answer 1

For Service Tax in India, read http://mytaxes.in/index.php?topic=14.0

Answer 2

Recently passed tax legislation reduces the company tax rate to 30% from the start of the 2008-09 income year, and makes a number of consequential changes which affect:

    * the payment of provisional tax

    * imputation

    * formulas and other rates connected to the CTR.

How we are managing the changes

We have established a project team to manage the changes required by the new legislation. The team is:

    * establishing policy and processes to implement the legislation

    * updating affected systems, returns, forms, guides, and online information

    * informing you about the changes.

Summary of the changes

Below is a summary of the changes for companies, and where to get more detailed information to help you prepare for those changes.

When the new tax rate becomes payable

Use the new CTR when calculating your company's income tax payable for the 2008-09 income year onward. The first payment to which the new rate applies is the first provisional tax instalment for 2008-09.

Exception

The rules apply from 1 April 2008 for some portfolio investment entities (PIEs).

Business structure changes

The CTR change may prompt you to consider changing your business structure. Get advice from your professional advisor or tax agent if you're considering:

    * incorporation, or

    * changing your balance date.

In either case, you'll need to comply with a range of rules and accounting adjustments.

Widely-held savings vehicles

The tax rate for certain widely-held savings vehicles is also reduced to 30%, aligning it with the new CTR.

Provisional tax

When you use the Standard option to work out your provisional tax payments for the 2009 and 2010 income years, based on your income from a year to which the 33% tax rate applied, you should use the revised formulas to avoid overpaying. For more details, see:

    * the updated Provisional tax guide (IR289) (available from early 2008)

    * Tax Information Bulletin Volume 19, No 6 (July 2007), page 35.

Imputation and foreign dividend payments (FDPs)

The reduction in the CTR also affects the use of both imputation and FDP credits. The range of specific changes will be detailed in the updated Imputation guide (IR274) (available April 2008).

    * The maximum ratio of imputation/FDP credits that can be attached to dividends is determined by the CTR, so reduces to 30:70 (ie you can now attach a maximum of $30 of credits to every $70 of dividends).

    * A rate changeover window, which expires on 31 March 2010, prevents this change in ratio causing your company or its shareholders a tax disadvantage. During this time you can choose to use up any credits relating to tax paid at 33% by attaching them at up to 33:67, the previous maximum ratio.

    * If you choose to continue attaching credits to dividends at 33:67, you need to track the relevant tax rate for entries in your ICA/FDP account. If you over-allocate credits during the 2008-09 or 2009-10 tax years, penalties are also affected by special transitional rules.

    * Always complete only a single return for each imputation year, even if both tax rates are involved. The return forms are being adjusted to accommodate the additional information you'll be asked to provide.

    * The new CTR also limits the tax credit you can claim for any imputation/FDP credits your company receives to 30% of your income, from the 2008-09 income year and onward - even if the credits were imputed at over 30:70. However, you still credit the full amount to your imputation credit account (ICA) or FDP account.

    * If you pay qualifying company election tax (QCET) after 17 May 2007, this will be credited to your ICA. You need to pay any distribution of the profits that you made before becoming a qualifying company with imputation credits attached. The dividend will be subject to tax at the shareholders' marginal tax rate.

Related rate and calculation changes

    * The QCET rate reduces to 30%, if you elect to become a qualifying company for the 2008-09 income year onward.

    * The tax rate for foreign dividend payments (FDP), previously known as "foreign dividend withholding payments", reduces to 30% from the 2008-09 income year onward.

    * Company branch equivalent tax accounts (BETA) and conduit account 2007-08 year end balances are adjusted.

    * Two foreign investor tax credits (FITC) formulas will apply during the rate changeover window for imputation ratios.

    * The maximum prescribed investor rate (PIR) that a portfolio investment entity (PIE) investor can elect reduces to 30% from 1 April 2008.

    * Apart from a small number of savings vehicles, the tax rate for resident withholding tax (RWT) on dividends has not changed: it remains at 33%. This means that, if dividends are imputed at the new 30:70 ratio, you need to withhold RWT from the dividend payment to bring the total tax component up to 33%.

hope this helped u!!!!!!!!