Taxation For Managers - MBA453F CIA I Part A-Major Tax Changes in India and Kenya

Taxation for Managers – MBA453F
CIA I Part A- Major Tax Changes in India and Kenya
Submitted by :
Sandeep Pareek ( 1927722)
Submitted to:
Prof. CA Shankar & Dr.Aparna R. Hawaldar
School of Business & Management

Christ ( Deemed to be University)
September 2020
Major Recent changes in Indian Tax System :
1.Corporate Tax Rate Cut:
On September, 2019 Indian Finance Minister surprisingly announced to cut down the corporate tax rate
from 30% to 22% for those companies who don’t seek exemptions, Firms that do receive incentives or
exemptions will see their tax rate cut to 25% from 35%. Some new manufacturing firms will see their
corporate tax rate lowered to 15% from 25%.
Impact: These tax rate cut happened in effort to spur investment and boost growth in the country’s
flattening economy as well as it would boost the confidence level of corporates as they are paying less
tax compare to previous rates. Overall if we see there is positive impact on the economy and it would
boost the economy to much extent.
2.Faceless Income Tax Assessment:
So, to honour the honesty of Honest Tax Payers the income tax department started the Faceless Income
Tax Assessment system from 13th August 2020. so this facility comes under the Faceless Assessment
Scheme launched by Prime Minister of India.
Impact: The impact of this scheme would be very beneficial for the Assess as this will reduce the
burden of facing corrupt officers and it will eventually reduce the fear of department and Assess will
pay more taxes with free mind and no intervention from local officials will boost the tax collection.
3. Dividend Distribution Tax (DDT) abolishment:
With effect from 1st April, 2020 Dividend Distribution Tax (DDT) will be abolished and a traditional
system of taxation be followed wherein the shareholders / unit-holders are liable to pay tax on such
income at the applicable tax rate.
Impact: So, the overall impact of this would be on the high net worth individuals who hold dividend-
oriented investments as this will mean significant increase in overall tax incidence for such investors and
also no burden of tax on corporates announcing dividend that mean less compliance.
4. Startups ESOPs tax deferment:

In case of startups, Employees possess Employee stock options plan can defer paying tax up to 5 years
from the date of exercise, till the time they leave the startup, or until they sell their shares, whichever is
earlier.
Impact: It will benefit to all the promoters of start-ups in our country as they can easily leave or sell
start-up once it gets set and can defer the tax liability which will allow them to invest the amount in
other start-ups or business which would benefit our country.
5. Employer's contribution above Rs 7.5 lakh to EPF, superannuation funds, NPS becomes taxable:
Now the amount contributed by the employer to EPF,Superannuation funds and NPS above 7.5 lakhs
becomes taxable in the hands of employee.
Impact: Additional burden on the hands of employee and no deduction as expenses on the EPF and NPS
amount in the expense side of P&L account of employer means more profit and more tax to pay.
Major Recent changes in Kenyan Tax System :
1. 100% tax relief for gross income of up to KES24,000 per month:

The Government has proposed to extend 100% tax relief to persons earning gross monthly income of up
to KES24,000. This will provide additional disposable income of approximately KES1,600 per month to
the most vulnerable group in the society.
Impact: So the impact of this recent changes came into March, 2020 will be beneficial for those who are
earning to KES24,000 we can say the middle and poor class. They won’t have the burden of paying the
tax and that would help them to much extent.
2. Reduction of the Corporation Income Tax (CIT) rate from 30% to 25%:
The period to which the lower tax rate will be applied is not yet clear. For instance, companies with a
financial year (FY) end of December are required to pay their tax balance for FY 2019 by 30 April 2020. A
lower rate applied to FY 2019 would help reduce the tax balance payable and thus retain cash as
envisaged in the proposal. Installment taxes for FY 2020 would also be reduced if based on prior year.
However, companies that have already paid taxes and filed returns for FY 2019 would be disadvantaged.
If the proposal is meant to apply to FY 2020, it would be seen as deferring a relief that is needed
immediately.
Impact: A number of companies have already lost their key markets, some of which have been forced to
close down their operations. As such, the proposal may not be beneficial in the immediate term.
Therefore, the proposals should be sustained beyond the current crisis to assist in their recovery. A
period of three to five years should be reasonable.
3. Reduction of turnover tax:
The Government has proposed a reduction of Turnover Tax from 3% to 1% for all Micro, Small and
Medium Enterprises. This will boost the morale of Micro, Small and Medium Enterprises as they are
already facing so much due to the Covid-19 crisis.
Impact: This should bolster small traders who will be impacted by the pandemic. As 2% benefit is even
more for those who are suffering so kind of relief measure from the side of Kenyan Governement.
4. Highest PAYE bracket reduced to 25%:

Reduction of the highest personal income tax rate (Pay As You Earn) by 5% from 30% to 25%. The
implementation of the directive will require clarification of whether this will require an expansion of the
tax bands or if income in excess of KES35,473 per month will be subject to PAYE at 25%.
Impact: It is not yet clear from the proposals whether people earning income between KES24,000 and
KES47,059 per month will enjoy the tax relief other than the current normal tax relief. In our view, the
lower income bracket can be increased to KES24,000 to which tax rate of 0% will be applied and a
reduction of 5% applied to the tax rates imposed on the other income brackets. This will provide clarity
and ensure that all individual taxpayers are covered.
5. Decrease of the value-added tax rate from 16% to 14% with effect from 1 April 2020:
The government has reduced the VAT by 2% as VAT is indirect tax.
Impact: It would lower the cost of production and supply as it imposes on manufacturing produts and
transfer of same from one place to another.
Overall Conclusion:
If we see the economy of India and Kenya we can’t compare as India is a giant economy whereas Kenya
is small economy , but both the countries face too much due to Covid-19 pandemic .
Both countries reduced their Corporate tax to relief the corporates stressing due to covid-19 situations
whereas If we see the Indian government has introduced faceless assessment of Income Tax returns
while in Kenya still the system is same, if we see in India the high net worth individuals has to pay
Dividend Tax from now but in Kenya high earning individuals government has reduced their Tax rate by
5% it was 30% earlier to 25% now.
Kenya government has reduced VAT but here if we see even during the Covid-19 situation, government
had yet not gave any sign of relief in GST rates.
Reference:
http:www.incometaxindia.gov.in
http://www.kpmgglobal.com

Taxation For Managers - MBA453F CIA I Part A-Major Tax Changes in India and Kenya

Uploaded by

Copyright:

Available Formats

Taxation For Managers - MBA453F CIA I Part A-Major Tax Changes in India and Kenya

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Taxation For Managers - MBA453F CIA I Part A-Major Tax Changes in India and Kenya

Uploaded by

Copyright:

Available Formats

Taxation for Managers – MBA453F

CIA I Part A- Major Tax Changes in India and Kenya

School of Business & Management

1.Corporate Tax Rate Cut:

2.Faceless Income Tax Assessment:

4. Startups ESOPs tax deferment:

1. 100% tax relief for gross income of up to KES24,000 per month:

4. Highest PAYE bracket reduced to 25%:

You might also like