Question

please do question 1-3

1-3 Corporate versus Individual Taxation. What are the differences in income tax treat- ment of corporations and individuals for the items below? a. Dividends received b. Classification of deductions c. Charitable contribution limitations d. Net capital gain treatment e. Capital loss deduction f. Capital loss carryovers and carrybacks g. Gain on sale of depreciable realty 1 4 7 n .

Answer 1

Q. no.	Question	Individual	Corporates
a	Dividend received	Not taxable in the hands of the individuals receiving tax from corporates	Dividend received from investments in other avenues. Journal entry: Cash a/c Dr    Dividend income a/c Cash is an asset that increases with dividend received and therefore, debit. Dividend received is an income so credit.
B	Classifications of deductions	Amount is reduced from subtracting from taxable income of the individual taxpayer. Only allowable deductions under the Income Tax Act are deducted from the taxable income. E.g. Investment in National Pension Scheme.	Corporate tax is reduced by subtracting the deduction from taxable income. For e.g. salaries of employees.
C	Charitable Contribution Limitations	Charitable contributions under section 80G of Income Tax Act, 1961 qualifies for deduction from taxable income, thus reducing taxes of an individual. Any contribution in cash or cheque qualifies for deduction. Any contribution made in cash exceeding Rs. 10000/- do not receive any deduction.	Charitable contribution made by a company qualifies for a deduction from the taxable income. The slab of deduction ranges from 50-100%. Any contribution to a charity in cash exceeding amount Rs. 2000/- does not qualify for a deduction.
d	Net capital gain treatment	Capital Gains in India is segregated into Short term capital gain (STCG) and long-term capital gain (LTCG). STCG is any gain from assets held for less than 24 months and 12 months for financial securities. Gain from any other assets held more than 24 months is LTCG. STCG is taxed as per the income tax slab rate of the individual. LTCG is charged a tax of flat 20%.	Tax on LTCG from transfer of equity shares of amount exceeding Rs. 100000 – 10%. Tax on other LTCG- 20% Tax on STCG on transfer of listed shares in a company – 15% Tax on other STCG – Corporate tax rate.
E	Capital Loss deduction	Capital loss can be off set using capital gains. However, only long-term gain can offset long term loss.	Set off and carry forward to future gains but capital losses can only be adjusted with capital gains and under no other heads of income.
f	Capital loss carryovers and carrybacks	Capital loss incurred cannot be set off with income from any other heads. It can be only set off with a capital gain or carried forward to future years. The tax treatment is at par with loss on capital gain.	Since, April 2019, the long-term capital gain loss can be set off and exempted from payment of tax.
g	Gain on sale of depreciable realty	If within 2 years of sale of the depreciable realty, the individual invests in a residential property, then exemption from tax on gain can be claimed.	For a company, the asset real estate is used for business purpose. Therefore, the gain on sale of the depreciable realty is considered as a short-term gain and does not qualify for an exemption under section 50 of Income tax Act, 1961. However, if the holding period of the realty is more than 24 months and it qualifies as a long-term asset then by the provisions of section 54 F of IT Act, 1961, the company is eligible to claim an exemption.