Understanding Expenditure Tax - Explained
What Is Expenditure Tax in India?
Expenditure tax in India is computed according to The Expenditure Tax Act of 1987 that governs all taxation-related processes associated with the chargeable expenditure that an individual incurs in certain hotels or restaurants.
This act defines chargeable expenditures provided that the charges are incurred in a hotel where the room rent is in excess of Rs.3,000 (per day), or the charges are incurred in a restaurant. An expenditure tax of 15% is collected from restaurants when it renders services deemed taxable and 10% of the charges incurred on payments made at a hotel.
As such a Chargeable Expenditure is defined under the Expenditure Tax Act, 1961 as an expenditure that refers to and includes any payment made to (or expenditure incurred in) the hotel which is connected to the provision of Accommodation that is either residential or otherwise, or accommodation in a hotel on hire or lease. A Chargeable expenditure does not include the following:
1.Payments made (expenditures incurred) in foreign exchange (before the 1st of October, 1992).
2.Payments made (expenditures incurred) by anyone within the purview of the Vienna Convention on Diplomatic Relations, 1961 or the Vienna Convention on Consular Relations, 1963.
3.Payments made (expenditures incurred) in any shop / office which is not owned or managed by the person who carries on the business of a hotel.
Other respective charges such as those for food, drinks, and other services cannot be used to cover up the actual charge of the room rental, etc. If there are discrepancies in this regard, the Assessing Officer will decide on what amounts need to be charged under the various headings in the itemized breakup of the bill. It should be noted that in the case of room rent charges in hotels, the Assessing Officer of the Income Tax Department has the power and freedom to deem whether the breakup of charges has been mentioned in the correct manner.
The expenditure tax definition is not a simple one; the concept of tax expenditure is that, government is giving back money to achieve certain social goals, like strengthening housing sector or industrial sector. Tax Expenditure are not direct spending by government. If it weren't for tax exemptions, the amount deducted would have belong to government itself. So essentially, the Government is not collecting money to be re-distributed later, but providing tax exemptions for good governance.
Tax expenditures are of different types there are those that arise from tax provisions that reduce the present value of taxable income through deferral allowances, or special exclusions, exemptions, or deductions from gross income. These can be incentives from the government to promote investment in certain sectors like housing or rural development, etc., others affect a households after-tax income more directly through tax credits or preferential rates for specific activities.
There are also implications on the budget. Subsidies and their impact on Indian Economy is well documented, and the expenditure tax is looked into that when the finance minister presents the Union Budget each year.
- Income Tax Return - What do you need to know?
- Benefits of E-Filing Your Tax Returns
- How to Make a Tax File Declaration to Your Employer
- All About Advance Tax in Detail
Income Tax Slab 2021-22
February 17, 2020
Income Tax Return Guide - Details You Should Know
November 07, 2016
Best Tax Saving Investment Options in 2022 (FY 2022-2023)
November 08, 2016
Subscribe to get the latest articles directly in your inbox
14 Best Investment Options In India
October 30, 2018
Short Term Investments: Top 11 Short Term Investment Options For 2022
November 08, 2016
Insurance vs Investment - Did You Get the Right Financial Plan?
November 05, 2018
Popular & Recent Articles
How to Plan for Retirement as Per your Age
"The thumb rule for retirement planning is - the earlier you start, the more you save. However, with age, your priorities change too. So, you need to factor in the cost of living in the present vis- a -vis future."
HDFC Life Insurance Company Limited. CIN: L65110MH2000PLC128245, IRDAI Reg. No. 101.
Registered Office: Lodha Excelus, 13th Floor, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011. Email: [email protected], Tel No: 1800-266-9777 (10 am to 7 pm). The name/letters “HDFC” in the name/logo of the company belongs to Housing Development Finance Corporation Limited (“HDFC Limited”) and is used by HDFC Life under an agreement entered into with HDFC Limited.
For more details on risk factors, associated terms and conditions and exclusions please read sales brochure carefully before concluding a sale.
|BEWARE OF SPURIOUS PHONE CALLS AND FICTIOUS/FRAUDULENT OFFERS
- term insurance plan
- savings plan
- ulip plan
- retirement plans
- health plans
- child insurance plans
- group insurance plans
- long term savings plan
- fixed maturity plan
- monthly income advantage plan
- income tax calculator
- pension calculator
- bmi calculator
- compound interest calculator
- term insurance calculator
- income tax
- tax saving investment options
- best investment plans
- benefits of term insurance calculator
- what is term insurance
- why to invest in life insurance
- tax planning for salaried employees
- how to choose best child insurance plan
- tips for buying retirement plan
- 1 crore term insurance
- importance of saving
- short term saving plans
- types of investment in india
- investment declaration