Question

Explain the tax implications of each of the following forms of business:

a. Sole proprietor.

b. Partnership.

c. Corporation.

Answer 1

Tax implications of sole proprietor:

Sole proprietor is having less tax implications as compared to the partnership and corporations. Sole proprietor is always available with standard exemption limit based on the age of person

In india upto 60 years rs 250000 income is exempt

60-80 years rs 300000/- income is exempt

Above 80 years Rs 500000/- income is exempt.

In addition to above sole proprietor is also available with relief upto 500000/- of income i.e no taxes. Further sole proprietor is also eligilble for deductions of his personal/family insurance.

Nut shell sole proprietor and proprietors are treated as same and available with all the benifits of taxation as individual under same PAN no.

Partnership:

Partners are treated as saperate from partnership firm. Partnership firm is liable to pay taxes @30% on any income. No basic exemption limit is mention.

Profits received by partners from partnership are exempt in hands of partners to avoid double taxation.

Partnership firm has to take saperate PAN no for incometax purposes.

Partners are also personally liable to pay taxes in case of falure of partnership firm even though it has saperate legal entity.

corporations:

Corporations are liable for taxation at 25% to 30%

Companies also available with MAT tax rate option.

Companies are completely saperate from its ownes. Shareholders can not be personly sue for the default of the company. Their liability is limited to the extent of the share holder ng in the company only.