Para 3.23.7 — MSO (Audit)

3.23.7 With regard to the determination of the divisible net proceeds of taxes on income in any financial year under Article 270(2) of the Constitution, the Comptroller and Auditor General has accepted the following assumptions as a reasonable basis for calculation:

(i) Although the Constitution treats Corporations Tax and Taxes on Income as distinct taxes, Corporation Tax is in practice levied under the same law and is administered by the same authority as Income Tax. Other forms of direct taxes, namely Estate Duty, Wealth Tax and Gift Tax are also levied and administered by the same authority. This arrangement presents difficulties in determining correctly and separately the cost of collection of either of these two taxes. These difficulties are resolved by assuming that a definite percentage of the total collection charges will be attributable to the collection of different individual taxes. All charges of collection are, in the first instance, booked under ‘2020-Collection of Taxes on Income and Expenditure’. At the end of the year, shares of these charges relating to other taxes are worked out as prescribed in

Note

(i) below that Major Head in the List of Major and Minor Heads of Account and transferred to the respective heads of accounts.

(ii) To arrive at the divisible amount, of which States will receive their prescribed percentage share, it is necessary to deduct from ‘Taxes on Income’ the proceeds of taxes on Union emoluments. Collections under this head less refunds can be readily ascertained from the accounts. However, in determining the amount to be retained by the Union Government under this head, due regard must be paid to the cost of collection. This cost should be assumed to be proportionate to the yield, after deducting refunds. A further deduction has to be made on account of the proceeds attributable to Union Territories at such percentage, as may be prescribed by the President, of so much of the net proceeds of Taxes on Income as does not represent the net proceeds of taxes payable in respect of Union emoluments.

What This Means

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

• 1Corporation Tax and Income Tax are administered under the same law by the same authority
• 2Collection costs are apportioned among different taxes using prescribed percentages
• 3Taxes on Union emoluments are deducted from the divisible pool
• 4Proceeds attributable to Union Territories are also deducted
• 5Estate Duty, Wealth Tax, and Gift Tax are also levied by the same authority
• 6The cost of collection for each tax is assumed proportionate to its yield minus refunds

Practical Example

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.