SUMMER TRAINING REPORT

ON
ANALYSIS OF TAXATION POLICY AND THEIR IMPACT ON
SMALL BUSINESS

REPORT SUBMITTED TOWARS PARTIAL FULFILMENT

OF THE REQUIREMENT OF

BACHELOR OF COMMERCE

FROM

GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY

UNDER THE GUIDANCE OF: SUBMITTED BY:

MS. NISHA RAI ARMAN

Assistant professor Enrolment no.02516788821

B.COM(H) 3rd year (2021-2024)

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 Certificate

It is certified that the summer training report submitted in partial fulfillment of Bachelor of
commerce (Honors) to be awarded by G.G.S.I.P University, Delhi. By Arman
Enrollment No.02516788821 has been completed under the guidance and satisfactory to be
expected to the program

Name of the guide: Nisha Rai Signature

Designation: Assistant professor

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 ACKNOWLEDGEMENT

I express my sincere gratitude and thanks to MS. NISHA RAI for giving me an opportunity to
enhance my skill in my project. I am thankful for her guidance, patience and consummate
support. I extend my heartiest thanks to her for enlightening my path. Without her sincere advice,
this project has been impossible. Moreover, I would also like to thank the various people who
were involved with this project and gave me invaluable guidance in this regard. Without their
help, this project would not have been as comprehensive and detailed as it is. I also feel grateful
and elated in expressing my indebtedness to all those who have directly or indirectly helped me
in accomplishing this research

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 INDEX

SNO. PATICULAR PAGE NO.

1 Chapter 1 Introduction 5-23
Objective of study 24
Limitation of study 25
Review of literature 26-27
Research Methodology 28-29

2 Chapter 2 company profile 30-31

3 Chapter 3 Analysis and interpretation of data 32-34
4 Chapter 4 conclusion and recommendation 35-37
5 Annexure 38-40

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 CHAPTER 1

INTRODUCTION

Meaning of tax

A tax is a mandatory fee or financial charge levied by any government on an individual or an

organization to collect revenue for public works providing the best facilities and infrastructure.
The collected fund is then used to fund different public expenditure programs

Taxes are an important and largest source of income for the government. The government uses
the money collected from taxes for various projects for the development of the nation. The
Indian tax system is well structured and has a three-tier federal structure .The tax structure
consists of the central government, state governments, and local municipal bodies.
When it comes to taxes, there are two types of taxes in India – Direct and Indirect tax. The direct
tax includes income tax, gift tax, capital gain tax, etc while indirect tax includes value-added tax,
service tax, Good and Service tax, customs duty etc

Key Takeaways about tax

 Taxes are mandatory contributions collected by governments.

 The Internal Revenue Service (IRS) collects federal income taxes in the United States.
 There are many forms of taxes and most are applied as a percentage of a monetary
exchange (for example, when income is earned or a sales transaction is completed).
 Other forms of taxes, such as property taxes, are applied based on the assessed value of a
held asset.
 Understanding what triggers a tax situation can enable taxpayers to manage their
finances to minimize the impact of taxes.

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Taxation in India

Taxes in India are levied by the Central Government and the State Governments by virtue of
powers conferred to them from the Constitution of India. Some minor taxes are also levied by the
local authorities such as the Municipality

The authority to levy a tax is derived from the Constitution of India which allocates the power to
levy various taxes between the Union Government and the State Governments. An important
restriction on this power is Article 265 of the Constitution which states that "No tax shall be
levied or collected except by the authority of law" Therefore, each tax levied or collected has to
be backed by an accompanying law, passed either by the Parliament or the State Legislature.

India has abolished multiple taxes with passage of time and imposed new ones. A few of these
taxes include inheritance tax interest tax, gift tax, wealth tax etc. Wealth Tax Act, 1957 was
repealed in the year 2015. Direct Taxes in India were governed by two major
legislations, Income Tax Act, 1961 and Wealth Tax Act, 1957. A new legislation, Direct Taxes
Code (DTC), was proposed to replace the two acts. However, the Wealth Tax Act was repealed
in 2015 and the idea of DTC was dropped

Article 246 of the Indian Constitution, distributes legislative powers including taxation, between
the Parliament of India and the State Legislature. Schedule VII enumerates these subject matters
with the use of three lists:

 List - I entailing the areas on which only the parliament is competent to make laws,
 List - II entailing the areas on which only the state legislature can make laws, and
 List - III listing the areas on which both the Parliament and the State Legislature can make
laws upon concurrently.

Separate heads of taxation are no head of taxation in the Concurrent List (Union and the States
have no concurrent power of taxation).

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Type of tax in India

Taxation in India is majorly divided into Central and State Government taxes with two types of
taxes:

1. Direct Taxes

2. Indirect Taxes

While direct taxes are levied on your earnings in India, indirect taxes are levied on
expenses. The responsibility to deposit the direct tax liability lies with the earning party whether
individual, HUF or a company .Indirect taxes are collected majorly by the corporate and
businesses providing services and products. Thus, the responsibility to deposit indirect taxes lies
with these entities.

1. Direct tax
Direct taxes are imposed on corporate entities and individuals. These taxes cannot be
transferred to others. For individual taxpayers like you, the most important type of Direct
tax is the income tax. This tax is levied during each assessment year (1st April to
31stMarch). As per the Income Tax Act, 1961, it is mandatory for you to make income
tax payments if your annual income is above the minimum exemption limit. You can get
tax benefits under various sections of the Act. Before we talk about tax
benefits, it is important for you to understand the income tax slab.

Type of Direct tax

1. Income Tax

Income tax applies to any income of an Individual and HUF except capital gains and profits from
business and profession. Income tax is calculated as per the applicable slab rates for the
Assessment Year.

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 2. Capital Gains

Tax Capital gains tax applies to the profits from the sale of a capital asset only. The rate of tax on
capital gains depends on the type of capital gain.

3. Corporate Tax

The corporate tax applies to the businesses and entities filing their returns as a company. This is
also a slab rate depending on the turnover of the firm.

Indirect tax

It is defined as the tax levied not on the income, profit or revenue but the goods and services
rendered by the taxpayer. Unlike direct taxes, indirect taxes can be shifted from one individual to
another. Earlier, the list of indirect taxes imposed on taxpayers included service tax, sales tax;
value added tax (VAT), central excise duty and customs duty. However, with the implementation
of goods and services tax (GST) regime from 01 July 2017, it has replaced all forms of indirect
tax imposed on goods and services by the state and central governments. GST has not only been
reduced the physical interface but also lower the cost of compliance with the unification of the
indirect tax

What is Goods and service tax (GST?)

The Goods and Services Tax (GST) is a successor to VAT used in India on the supply of goods
and services. GST is a digitalized form of VAT where you can also track the goods & services.
Both VAT and GST have the same taxation slabs. It is a comprehensive, multistage, destination-
based tax: comprehensive because it has subsumed almost all the indirect taxes except a few
state taxes. Multi-staged as it is, the GST is imposed at every step in the production process, but
is meant to be refunded to all parties in the various stages of production other than the final
consumer and as a destination-based tax, it is collected from point of consumption and not point
of origin like previous taxes

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However, petroleum products, alcoholic drinks, and electricity are not taxed under GST and
instead are taxed separately by the individual state governments, as per the previous tax
system There is a special rate of 0.25% on rough precious and semi-precious stones and 3%
on gold. In addition access of 22% or other rates on top of 28% GST applies on several items
like aerated drinks, luxury cars and tobacco products.[3] Pre-GST, the statutory tax rate for most
goods was about 26.5%; post-GST, most goods are expected to be in the 18% tax range Goods
and services are divided into five different tax slabs for collection of tax: 0%, 5%, 12%, 18% and
28%. The tax came into effect from 1 July 2017 through the implementation of the One Hundred
and First Amendment of the Constitution of India by the Indian government. 1st July is
celebrated as GST Day. The GST replaced existing multiple taxes levied by the
central and state governments.

GST has simplified the indirect taxation for goods and services in India. With GST, instead of
five or six different taxes you only need to consider the following three (out of which only two
will apply)
:Central Goods & Services Tax (CGST)
State Goods & Services Tax (SGST)
 Integrated Goods & Services Tax (IGST)

CGST and SGST will apply when the sale is happening within the state. IGST applies to the
goods being sold between states. The Rate of GSTGST rates for different commodities and
services are announced by the GST council under the Central Board of Indirect Taxes and
Customs (CBIC). The average rate of GST in India is about 12%.Compared to the other
countries and economies around the world using GST the rates are on the lower side.

Before GST introduction in the Indian taxation system, the following indirect taxes could apply
to the goods and services in India
a) Excise Duty
b) Entertainment Tax
c) Value Added Tax (VAT, State)
d) Service Tax

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Difference between Direct and Indirect Tax

DIRECT TAX INDIRECT TAX

Applicable on income receipt Applicable on expense or sale of goods and
expense
Investment in specified instrument or spending No rebate for consumer however it could apply
on specific activity allow you to reduce direct to the sellers with turnover being the basis of it
tax on income
Paid by the person receving money directly to Paid by the person paying money but collect
the government the supplier
Three type of direct tax in india – income tax, Indirect tax in India include- GST, excise duty,
corporate tax and capital gain tax customer duty and VAT

Taxation policy in India

Taxation policy refers to the government's strategy and approach to collecting taxes from
individuals, businesses, and other entities within its jurisdiction. Taxation is a crucial aspect of
public finance, as it provides the government with the necessary funds to finance public services,
infrastructure, and other expenditures. Taxation policies are designed to achieve various
economic and social objectives, including revenue generation, income distribution, economic
stability, and the promotion of specific industries or activities

Key elements of taxation policy include:

1 )Tax rate and structure: Governments set tax rates on different types of income, such as
personal income, corporate profits, and consumption. The structure of the tax system may
involve progressive, regressive, or proportional tax rates.

2) Tax Base: The tax base is the amount of income, property, or goods subject to taxation.
Governments may broaden or narrow the tax base based on economic conditions and policy
objectives.

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3) Tax incentives and credit: Governments often use tax incentives and credits to promote
specific behaviors or industries. These can include credits for research and development,
investment, or renewable energy projects

4) Progressive: Some taxation systems aim to achieve a fair distribution of the tax burden by
implementing progressive tax rates, where higher-income individuals pay a higher percentage of
their income in taxes.

5) Simplicity and transparency: Governments strive for simplicity and transparency in tax
systems to make it easier for taxpayers to understand and comply with tax obligations. Complex
tax codes can lead to inefficiencies and increased compliance costs.

6) Social and environmental objectives: Taxation can be used to address social and
environmental issues. For example, taxes on certain goods or activities may be increased to
discourage harmful behavior or to fund programs addressing specific societal needs

7) Enforcement and compliance: A taxation policy includes measures to ensure compliance

with tax laws. This involves the enforcement of tax regulations, penalties for non-compliance,
and efforts to reduce tax evasion.

Importance of taxation policy

1) Generation: Taxation is a primary source of revenue for the government. It funds public
services, infrastructure development, education, healthcare, defense, and other essential
functions. Adequate revenue is essential for the government to meet its expenditure and
implement various welfare programs

2) Redistribution of wealth: Taxes, particularly progressive taxes, can be used to

redistribute wealth in society. By taxing higher incomes at higher rates, the government can
address economic inequality and promote a more equitable distribution of wealth.

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3) Fiscal policy tool: Taxation is a key instrument of fiscal policy. Governments can use
tax policies to stimulate or cool down the economy. For example, during periods of
economic downturn, the government may reduce taxes to encourage spending and
investment. Conversely, during times of high inflation, it may increase taxes to reduce
aggregate demand.

4) Encourage or discourage certain activity: Tax policies can be designed to

encourage or discourage certain economic activities. For instance, the government may
provide tax incentives for investments in specific sectors, research and development, or
renewable energy projects. Conversely, it may impose taxes on activities deemed harmful
to society, such as tobacco or alcohol consumption

5) Foreign investment and competiveness: The tax environment in a country

influences its attractiveness to foreign investors. A competitive and transparent tax
system can attract foreign direct investment, spur economic growth, and enhance the
global competitiveness of businesses based in the country.

6) Stimulate economic growth: A Well-designed tax policies can stimulate economic

growth by providing incentives for entrepreneurship, innovation, and investment. For
example, tax credits for research and development can encourage companies to invest in
new technologies and products.

7) Control inflation: with the help of taxation policy the government can control
inflation by adjusting indirect taxes and duties. By increasing taxes on certain goods and
services, it can reduce their demand and help control inflationary pressures

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Kind of taxable source in India and their rates

There are different tax rate in India for different individual and head of income and it differ in
time and government policy. In India tax has been divided into two parts as mentioned above the
tax rate. Individuals, trusts, businesses, and other entities are all subject to income tax. As a
result, there are numerous forms of income that can be taxed in India. Mentioned below are some
of the different types of taxable income in India-

1) Business income: Profits earned by businesses are also counted as taxable income. The tax
in this category is derived from the presumed or real income that the profession or business
may generate. However, it is only done once the permitted deductions have been adjusted.
Different rates apply to individual and corporate business income in the fiscal year 2022-23.
Individuals with business income will be taxed in accordance with tax slabs and rates for the
fiscal year 2023-24.

2) Salary or pension: Taxes are frequently levied on the base salary, allowances, and salary
profit in this category. The tax slab also applies to an individual's pension after retirement.
The tax slabs rates for FY 2022-23 differ based on the age of the individual earning a salary
or pension during the fiscal year.

3) Property Income: Owning: Many houses and renting them out is an easy method to

supplement your income. In such circumstances, however, revenue from house renting is

recognized as part of the taxpayer's income. As a result, this income is taxable at the income

tax slab rates for the fiscal year 2022-23.

4) Capital gain: capital Gains income can be generated by selling assets such as gold, real
estate, mutual funds units, stocks, debentures, and so on. It can be characterized as a long-
term or short-term capital gain depending on the type of asset and the earnings produced on it
over time

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5) Other Income: In India India, winnings from lotteries, horse races, and other similar
activities are taxable. However, under current tax legislation, these profits are taxed
separately rather than as part of the income slab rates for the fiscal year 2022-23

The tax rate in india of an individual is as follows -

Tax Slabs Under New And Old Regime

Old tax regime New tax regime
Tax slap Old Tax Rate Tax slap New Tax Rate
0 - 2.5 Lakh 0% 0 – 3 Lakh 0%
2.5 – 5 Lakh 5% 3 – 6 Lakh 5%
5 – 10 Lakh 20% 6 – 9 Lakh 10%
Above 10 Lakh 30% 9 -12 Lakh 15%
12 – 15 Lakh 20%
Above 15 Lakh 30%

Tax Slabs for Domestic Companies

Paticular Existing and New tax

old tax rate
regiment regiment
Company opts for section 115BAB (not covered in section 115BA 15%
and 115BAA) & is registered on/after October 1, 2019 and has
started manufacturing on/before 31st March 2023
Company opts for Section 115BAA , where the total income of a 22%
company has been calculated without claiming specified
deductions, exemptions, incentives, and additional depreciation
Company opts for section 115BA registered on/after March 1, 25%
2016, and is in the manufacture of any article or thing and does
not claim a deduction as specified in the section
Turnover/gross receipt of the company is less than Rs. 400 crores 25% 25%
in the previous year
Other Domestic Company 30% 25%

For a partnership firm income is taxable at 30%

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 Some Key Terms for filling income tax

1 Income tax return: An Income Tax Return (ITR) is a form primarily used for filing details
about your income and the applicable tax to the Income Tax Department of India. The Indian
income tax laws state that the IT return should be filed by every individual and business earning
an income. It assists in declaring taxable income, tax liability, and tax deductions claims

2) Income tax refund: An income tax refund is sanctioned when a taxpayer pays more duties
than their actual liability. It can be issued against different types of direct taxes, like self-
assessment tax, Tax Deducted at Source, foreign tax credit, advance tax, etc.

3) TDS: It refer as tax deducted at source it is basically a part of income that has been deducted
by a person for certain payment made by them

4) ITR Due Date: The due date for filing federal tax returns is the IT return last date without
incurring a late charge or extra charge. Taxpayers who file their returns after the due date must
incur interest and a levy under sections 234A and 234F. Last date to file Income Tax Return
(ITR) for Financial Year 2022-23 (Assessment Year 2023-24) without late fees is 31st July 2023.

5)GST Registration: it is the registration done by the firm for file income tax GST
registration has become mandatory for businesses with an annual turnover of Rs. 40 Lakh and
above. In the North East and Hill states, registration is compulsory for companies earning more
than Rs. 10 Lakh yearly revenue. The GSTIN registration process is relatively simple and will
hardly take between 2 and 6 working days to complete.

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Exemption on tax deduction

The tax deduction is a reduction of income that eventually lowers your tax liability
Deductions are expenses that you incur during the year and it can be subtracted from your total
income in order to calculate how much tax you need to pay. There are many
deductions that you can use to reduce your total income. Here are some of the most commonly
used ways for the tax deduction

1)House Rent Allowance - If you have a rented accommodation, you can get the tax benefit
under HRA. The amount exempted can be totally or partially exempted from income tax.

2. Medical Insurance Deduction - If you have brought a medical policy, the premium you paid
for the policy could save your tax as the amount is deducted from gross income (up to a limit).

3. Food coupons - Some employers may provide you with food coupons such as Sodexo. Such
meal coupons are tax-exempt up to a certain limit. The yearly exemption for food coupons is up
to Rs 26,400.

4. Section 80C, 80CC and 80CCD (1) - This is the most popular option and you must already
be using it to reduce your taxes. Under this, you can reduce your taxable income by putting your
money in tax saving investments.

Section 80C - Deductions on Investments You can claim a deduction of Rs 1.5 lakh
your total income under section 80C

Section 80-ccc- Insurance premium Deduction for Premium Paid for Annuity
Plan of LIC or Other Insurer

Section 80CCD – Pension Contribution Deduction for Contribution to Pension

Account

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 Section 80 TTA – Interest on Savings Deduction from Gross Total Income for
Account Interest on Savings Bank Account

Section 80E – Interest on Education Loan Deduction for Interest on Education Loan
for Higher Studies

Section 80EE – Interest on Home Loan Deductions on Home Loan Interest for
First Time Home Owners

Section 80D – Medical Insurance Deduction for the premium paid for
Medical Insurance

Special deduction for company

Companies in India are eligible for various deductions under the Income Tax Act,
1961. These deductions are available for specific expenses or investments incurred

1)Depreciation: Companies by the company. Here are some of the common

deductions available to companies: can claim depreciation on assets used in their
business, including buildings, machinery, vehicles, and furniture. The depreciation
deduction is allowed based on the prescribed rates and methods specified in the
Income Tax Act

2)Employee Expenses: Companies can claim deductions for salaries,

wages, bonuses, and other employee-related expenses incurred in the course
of business. However, certain employee benefits like contributions to the employee
provident fund (EPF) and employee state insurance (ESI) are not allowed as
deductions.

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3)Research and Development (R&D) Expenses: Companies engaged in scientific
research and development activities can claim deductions for R&D expenses. The
deduction is available for revenue and capital expenses related to R&D activities

4)Export Promotion Expenses: Companies can claim deductions for expenses

incurred in promoting export activities. This includes expenses for participation in
trade fairs, exhibitions, and overseas business development.

5) Charitable Contributions: Companies can claim deductions for

donations. Made to eligible charitable institutions or funds. The deduction is limited
to a specific
percentage of the company's profits.

6)Start-up Deductions: Start-up companies can avail themselves of certain

Deductions and incentives under the Start-up India initiative. These include a
deduction of 100% of profits for three out of the first ten years of operation,
subject to certain conditions.

8) Incentives for Special Economic Zones (SEZs): Companies operating in SEZs

can avail themselves of various tax incentives, including deductions on profit
derived from eligible business activities within the SEZ.

9)Deduction for Export Profit: Companies engaged in the export of goods or

services can claim a deduction for profits derived from such exports. The
deduction is available under certain conditions.

10)Deduction for Losses: Companies can carry forward and set off losses incurred
in previous years against future profits, subject to certain conditions and limitations.’

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 . Specific Disallowances for a Company

Under the Indian Income Tax Act, 1961, there are certain expenses and items that are disallowed
for deduction while computing the taxable income of a company. These disallowances are
intended to ensure that only genuine business expenses are claimed as deductions. Here are some
common disallowances for a company:

1) Personal Expenses: Any expenses that are of a personal nature or not incurred wholly and
exclusively for business purposes are generally disallowed. This includes expenses such as
personal travel, personal entertainment, and personal fines or penalties.

2) Dividend Distribution Tax: Dividend distribution tax paid by the company on the distribution
of dividends to shareholders is not allowed as a deduction.

3) Interest Expenses on Unauthorized Loans: Interest expenses incurred on loans or advances

taken from certain specified entities or persons, where the interest payment is not subject to
tax, may be disallowed.

4) Contributions to Political Parties: Contributions made by the company to political parties or

electoral trusts are disallowed as deductions.

5) Certain Taxes and Levies: Certain taxes and levies, such as wealth tax, gift
Securities transaction tax, are not allowed as deductions.

6) Fines and Penalties: Any fines or penalties imposed by regulatory authorities or court are

typically disallowed as deductions.

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Section 43C, 44 AD, 44AE, 44 AF

Section 43C of the Income Tax Act, 1961 provides a special provision for computing profits and
gains of a retail business. It applies to taxpayers engaged in the business of retail trading of
goods or merchandise. Under this provision, the taxable income of the retail business is
computed based on a percentage of the total turnover or gross receipts. The percentage is
determined by the Central Government and notified in the Official Gazette. The
objective is to simplify the tax computation process for retail businesses by providing a
presumptive basis for taxation.

Section 44AD Presumptive taxation scheme for certain businesses

Section 44AD offers a presumptive taxation scheme for eligible small businesses. It applies to
individuals, Hindu Undivided Families (HUFs), and partnerships (excluding LLPs) with a
turnover or gross receipts up to a specified limit.

Section 44AE Presumptive taxation scheme for goods carriage owners:

Section 44AE provides a presumptive taxation scheme for taxpayers engaged in the business of
plying, hiring, or leasing goods carriages. This provision applies to individual owners of goods
carriages (excluding partnership firms and companies)Under this scheme, the taxable income of
goods carriage owners is computed based on a deemed income per vehicle. The income per
vehicle is determined by the Central Government and notified in the Official Gazette. The
deemed income is considered the taxable income of the taxpayer, and they are not required
to maintain detailed books of accounts.

Section 44AF Presumptive taxation scheme for retail traders:

Section 44AF offers a presumptive taxation scheme for small retail traders. It applies to
individuals, HUFs, and partnerships (excluding LLPs) engaged in the business of retail trading of
specified goods. Under this scheme, eligible taxpayers can declare a percentage of their total
turnover or gross receipts as their taxable income. The specified percentage varies depending on
the nature of the business. Taxpayers opting for the presumptive taxation scheme under Section
44AF are not required to maintain detailed books of accounts.

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Section 44ADA Presumptive taxation scheme for professionals

Section 44ADA provides a presumptive taxation scheme for professionals such as doctors,
lawyers, architects, engineers, and accountants who have opted for the "specified professions
Under this scheme, eligible professionals can declare a certain percentage (50% of gross
receipts) as their taxable income, and they are not required to maintain detailed books of
accounts. This scheme simplifies the tax compliance process for professionals by providing a
presumptive basis for taxation.

Section 44BB Presumptive taxation scheme for non-resident persons engaged in the
business of exploration.

Section 44BB applies to non-resident taxpayers engaged in the business of providing services or
facilities in connection with the prospecting for, or extraction or production of, mineral oils.
Under this provision, the taxable income of non-resident taxpayers is computed at a prescribed
percentage (10%) of the amount received or receivable from such activities. This scheme
provides a simplified method for computing taxable income for non-resident taxpayers engaged
in the specified activities.

Section 44BBA Presumptive taxation scheme for non-resident sportsmen and sport
associations:

Section 44BBA applies to non-resident sportsmen and sports associations or institutions who
participate in sports events in India, Under this provision, a specified percentage (20%) of the
total income derived from participating in sports events in India is deemed to be taxable income.
This scheme simplifies the taxation process for non-resident sportsmen and sport associations by
providing a presumptive basis for taxation

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 Impact of taxation

Taxation can have a significant impact on small businesses, influencing their profitability, cash
flow, and overall operations. Here are some key ways in which taxation affects small businesses:

1)Cost of compliance: Small businesses often have limited resources, and complying with
complex tax regulations can be time-consuming and costly. They may need to hire accountants
or tax professionals to ensure accurate reporting and compliance with tax laws.

2) cash flow: Taxes, especially income taxes, can affect a small business's cash flow. Paying
taxes reduces the amount of cash available for daily operations, purchasing inventory, or making
investments in growth.

3) choice of business structure : The choice of business structure (sole proprietorship,

partnership, LLC, S corporation, Ccorporation) can significantly impact the tax obligations of a
small business. Each structure has different tax implications in terms of rates, deductions, and
liability.

4) Tax deduction : Small businesses can benefit from various tax deductions, such as those
related to business expenses, equipment depreciation, and healthcare costs for employees.
Understanding and maximizing these deductions can help reduce the overall tax burden.

5)Tax credit: Some governments offer tax credits to incentivize certain behaviors or activities.
Small businesses may be eligible for credits related to research and development, hiring certain
types of employees, or making energy-efficient upgrades.

6)Impact on pricing: The tax burden can influence the pricing strategy of a small business.
Higher taxes may lead to increased prices for goods and services to maintain profitability,
potentially affecting competitiveness in the market

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7)Employment and hiring: Payroll taxes and other employment-related taxes can affect a small
business's decision to hire additional employees. Understanding the tax implications of hiring
can influence staffing decisions.

8)Economic stimulus and changes in tax law: Changes in tax laws, including economic
stimulus packages, can have both positive and negative effects on small businesses. For example,
tax breaks or incentives may provide relief, while increases in tax rates could add to the financial
burden

9)Impact on investment and growth: Tax considerations can influence investment decisions
and growth strategies. Small businesses may evaluate the tax implications of expanding
operations, acquiring assets, or entering new markets.

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 Objective of the study

The objective of the study is mentioned as follows

1) In this project I get to know about the taxation policy of India

2) I get to know about the problem and solution regarding the policy
3) I get to know about the scope of tax in running the economy
4) I get to know about the changes in taxation policy
5) I get to know about different section and deduction mentioned in income tax act 1961

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 Limitation of the study

The limitation of the study is mentioned as follows

1) While collecting the data lot of time and cost has been wasted
2) The data collected in the project has limited scope
3) The data collected directly with individual so it may be influenced by the individual
4) While collecting the data there may be issue in the sample size
5) Collecting primary data often involves interacting with individuals, and ethical concerns
can arise.
6) The response rate can vary, leading to potential non-response bias. If certain groups are
more or less likely to respond, the sample may not accurately represent the entire
population
7) The accuracy and reliability of the data is not accurate

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 Literature Review

The literature review on analysis of taxation policy in India and their impact on small business is
taxation policy involves examining a variety of academic and professional sources to understand
the current state of knowledge, key theories, debates, and trends related to taxation policy. Below
is an example structure for a literature review on taxation policy:

1) Introduction: Briefly introduce the importance of taxation policy in economic and social
development.
Highlight the significance of understanding the literature on taxation policy for
policymakers, researchers, and practitioners.

2) Theoretical Framework: Explore key theories and models related to taxation policy,
such as the ability-to-pay principle, benefit principle, and the economic effects of
taxation.
Discuss the evolution of taxation theories over time and how they have influenced policy
decisions.

3) Objective of taxation: Examine the various objectives that taxation policy aims to
achieve, such as revenue generation, income redistribution, economic stabilization, and
resource allocation.Analyze how India prioritize and balance these objectives in their tax
systems

4) Tax system: Compare and contrast different types of taxation systems, including
progressive, regressive, and proportional tax systems.
Discuss the advantages and disadvantages of each system and how they impact income
distribution and economic efficiency.

5) Taxation and economic growth: Review studies and theories examining the relationship
between taxation and economic growth.

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 Discuss how different types of taxes (e.g., income taxes, consumption taxes) can impact
investment, savings, and overall economic development.

6) Taxation and social Equity: Explore the literature on how taxation policies can
contribute to or mitigate income inequality.
Discuss progressive taxation, targeted welfare programs, and other mechanisms designed
to address social equity concerns.

7) Taxation and Globalization: Investigate how globalization has influenced taxation

policies, including the rise of international tax competition and the challenges of taxing
multinational corporations.
Examine efforts to address tax evasion and avoidance in a globalized economy.

8) Tax Reform: major tax reforms implemented in different countries and their outcomes.
Discuss the factors that contribute to the success or failure of tax reform initiatives.

9) Challenges and criticism: Analyze common challenges and criticisms related to taxation
policy, such as tax evasion, administrative inefficiencies, and unintended consequences
Examine debates over the optimal tax rates and structures.

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 Research Methodology

Meaning of Research
Research in simple terms refers to search for knowledge. It is a scientific and systematic search
for information on a particular topic or issue. It is also known as the art of scientific
investigation. Several social scientists have defined research in different ways.

Objectives Of Research
The main aim of research is to find out the truth which is hidden and has not yet been
discovered. Although every research study has its own specific objectives, the research
objectives may be broadly grouped as follows
: 1. To gain familiarity with new insights into a phenomenon (i.e., formulative research
studies);
2. To accurately portray the characteristics of a particular individual, group, or a situation
(i.e., descriptive research studies)
3. To analyse the frequency with which something occurs (i.e., diagnostic research studies);
4. . To examine the hypothesis of a causal relationship between two variables (i.e.,
hypothesistesting research studies).

The data used in the data is project is primary Data

Primary data refers to original data that is collected directly from its source. It is information that
is gathered firsthand, rather than being obtained from secondary sources or existing data sets.
Primary data is typically collected for a specific research or investigative purpose and is
considered more reliable and relevant to the specific context in which it is collected

There are various methods for collecting primary data, including surveys, interviews,
observations, experiments, and direct measurements. Researchers collect primary data to address
specific research questions or objectives and to gain a deeper understanding of a particular
phenomenon.

28
Type of primary data used in the project

There are different type of primary data but in this project I have used questionnaire

A questionnaire is a research instrument consisting of a series of questions used for gathering

information from individuals. These questions can be open-ended or closed-ended and are
typically designed to collect specific data or opinions on a particular topic. Questionnaires are
commonly used in surveys, research studies, and various other data collection efforts to gather
quantitative or qualitative information from respondents

Sample design
An research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure.” In
fact, the research design is the conceptual structure within which research is conducted; it
constitutes the blueprint for the collection, measurement and analysis of data
As such the design includes an outline of what the researcher will do from writing the hypothesis and its
operational implications to the final analysis of data.
Features of good Research Design:
The important features of Research Design may be outlined as follows:
(i) The means of obtaining information;
(ii) The objective of the problem to be studied;
Sample size

Size of the sample refers to the number of items to be chosen from the universe to form a sample.
For a researcher, this constitutes a major problem. The size of sample must be optimum. An
optimum sample may be defined as the one that satisfies the requirements of representativeness,
flexibility, efficiency, and reliability.
In this project the sample size of the project is 30

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 CHAPTER 2
COMPANY PROFILE

Company Name: A.P Enterprise

Address: shop no.3, B91 Ground floor Kalkaji New Delhi – 110019

Email:[email protected]

Mobile No: 7669835319

A.P. Enterprise is PF consultancy firm that maintain all the records and statutory returns under
provident fund and E.S.I.C Labor law. It was established in the year 2011 by Deepak Kumar. It
is located at shop no.3, B91 Ground floor Kalkaji New Delhi – 110019. It provides consultancy
to different firm and different restaurant and their employees to how to manage their funds to
both firms and their employees. It provides consultancy to different individual also .it also
provide retirement funds benefit, gratuity benefit .It also maintain some of the detail and
accounts of employees. It reduces human resource cost to different firm as it also provide
consultancy to recruitment of employees. Committed to offering a fast and secure PF
Registration Services. Take advantage of these best investment plans for your future. We help
individuals to manage the salary tax-free to help both employer and employee. It help to submit
the complete EPF Withdrawal process. As the Provident Fund withdrawal procedure requires
members to submit various documents with respect to form 19 to the EPF. We take care of
everything and you don’t have to worry about any procedures. It assists registered employees
and their families who are eligible to get medical benefits and obstetric treatment, ambulance.
In this company it has provided consultancy to different firm and different restaurant one of the
restaurant that I came into notice is udupi restaurant

30
What I have worked

In this internship I was responsible for a variety of Accounts and HR-related tasks,
Which included
1. Assisting in the recruitment and selection process, which involved screening resumes,
Conducting initial interviews, and participating in the on boarding of new employees.
2. Providing support in maintaining employee records, ensuring their accuracy and
Confidentiality.
3. Assisting in organizing and facilitating employee training and development programs.
4. Collaborating with the HR team on various projects related to employee engagement,
Performance management and HR policy development.
5. Responding to employee inquiries and providing excellent customer service to our staff
Members.

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 CHAPTER3
DATA ANALYSIS

32
33
34
 CHAPTER 4
CONCLUSION

In conclusion, the taxation policy in India significantly impacts small businesses, playing a
pivotal role in shaping their operational landscape. While taxation is essential for government
revenue generation and economic development, it is crucial to strike a balance that supports the
growth of small businesses, which are the backbone of the Indian economy.

The impact of taxation on small businesses in India is multifaceted. On one hand, tax compliance
and burden can be challenging for small enterprises with limited resources and financial
capabilities. Complex tax structures and procedures may lead to increased compliance costs,
diverting precious resources away from business development and innovation.

However, it's important to note that the government has implemented various reforms and
initiatives to ease the tax burden on small businesses. Schemes such as the Goods and Services
Tax (GST) aim to simplify the taxation system and promote ease of doing business. Additionally,
exemptions and deductions provided for small businesses play a crucial role in supporting their
financial viability.

The effectiveness of taxation policies in India for small businesses also hinges on their
adaptability and responsiveness to economic changes. As the business landscape evolves, tax
policies need to be dynamic, ensuring that they foster growth, encourage entrepreneurship, and
address the unique challenges faced by small enterprises.

In the future, policymakers should continue to fine-tune taxation policies to create an

environment that fosters the growth of small businesses. Striking a balance between revenue
generation and providing a conducive environment for entrepreneurship is essential for
sustaining and enhancing the contribution of small businesses to India's economic development.
Collaboration between the government, industry stakeholders, and small business owners can
lead to more inclusive and effective tax policies that support the vibrant and diverse small
business ecosystem in India.
35
India's taxation policy plays a crucial role in shaping the country's economic landscape, revenue
generation, and social development. The effectiveness of the tax system depends on its ability to
strike a balance between revenue generation and promoting economic growth, while also
ensuring social equity.

In conclusion, a well-designed and transparent taxation policy is essential for fostering economic
development, attracting investments, and ensuring social welfare. Continuous efforts to simplify
tax structures, eliminate loopholes, and enhance compliance can contribute to a more efficient
and equitable tax system. Regular reviews and adaptations to changing economic conditions are
necessary to maintain the effectiveness of the taxation policy and to align it with the broader
goals of sustainable economic development in India. It is also crucial to consider the perspectives
of various stakeholders, including businesses, individuals, and the government, to create a tax
system that fosters economic growth and social welfare.

36
 BIBLIOGRAPHY

1) Gill, A. S., Mand, H. S., Sharma, S. P., & Mathur, N. (2012). Factors that influence financial
leverage of small business firms in India. International Journal of Economics and
Finance, 4(3), 33-45.

2) Rao, M. G. (2000). Tax reform in India: achievements and challenges. Asia Pacific
Development Journal, 7(2), 59-74.

3) Monsingh Peter, V., Kerr, I. A., & Thorpe, M. (2002). Tax Policy in India. Asian Journal of
Public Administration, 24(1), 111-138.

4) Burgess, R., & Stern, N. (1992). Tax reform in India (No. 2282-2019-4169).
5) Arya, N. K. (2023). An empirical analysis of tax buoyancy in India.
6) Baiardi, D., Profeta, P., Puglisi, R., & Scabrosetti, S. (2019). Tax policy and economic growth:
does it really matter?. International tax and public finance, 26, 282-316.

37
 Annexures

Q1) what is the primary direct tax levied on direct tax

a) Goods and Services Tax (GST)
b) Corporate Tax
c) Income Tax
d) Excise Duty

Q2) which government body is responsible for formulation and implementation of taxation
policy in India
a) Reserve Bank of India (RBI)
b) Ministry of Finance
c) Securities and Exchange Board of India (SEBI)
d) Ministry of Commerce and Industry

Q3) what is current GST applicatable to most goods and service tax in India

a) 5%
b) 12%
c) 18%
d) 28%

Q4) How does good and services tax impact small businesses

a) Simplifies the tax structure

b) . Increases compliance burden
c) Reduces paperwork
d) Exempts small businesses from taxation

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Q5) what is the turnover limit for small business to be exempted from GST registration
a) Rs. 10 lakhs
b) Rs. 20 lakhs
c) Rs. 30 lakhs
d) Rs. 40 lakhs

Q6) which form of business structure in India subjected to corporate tax

a) Sole Proprietorship
b) Partnership
c) . Limited Liability Partnership (LLP
d) Private Limited Company

Q7) How the introduction of the Goods and service tax affected the ease of doing business
for small enterprise
a) Increased ease of doing business
b) No significant impact
c) Decreased ease of doing
d) Not applicable to small enterprises

Q8) what is the standard corporate tax rate for domestic company in India
a) 15%
b) 22%
c) 25%
d) 30%

Q9) How does the tax incentives and deduction provided by the government impact small
business
a) Increase profitability
b) Encourage investment
c) . Reduce tax liability
d) All of the above

39
Q10) which tax is levied on the income earned by individual and business from the sale of
capital assets such as property or stock
a. Corporate Tax
b. Capital Gains Tax
c. Value Added Tax (VAT)
d. Excise Duty

40