Entity or conduit
A joint venture is not well defied in Indian law.
If it is established as a partnership evidenced by a deed specifying
the shares of the partners or incorporated as a company whose shares
are held by two or more parties, it is taxed in accordance with its
legal form (i.e., as a partnership or a company). Otherwise, a joint
venture may be treated as an association of persons for Indian tax
purposes, subject, in some cases, to a higher tax rate as explained
below.
If the shares of the venturers are determinate
and known since the inception of the venture, the taxable income of
the venture is subject to tax at the slab rates applicable to
individuals, except in the following cases.
1. If the taxable income of any venturer
(excluding that from the venture exceeds Rs 40,000, the taxable income
of the venture is subject to tax a flat rate of 40 percent.
2. If any venturer is a company liable to tax at a rate higher than 40
percent, that portion of the venture's income equal to the share of
the venturer company is subject to tax at the rate applicable to the
venturer company, and the balance is subject to tax at 40 percent.
If the shares of the ventueres are indeterminate
or unknown on the date of formation or any time thereafter, the
taxable income of the venture is subject to tax at 40 percent unless
any of the venturers is a company liable to tax at a rate higher than
40 percent, in which case the entire taxable income of the venture is
subject to tax at the higher rate applicable to the venturer company.
Under certain circumstances, the venturer's
pretax allocated share from the joint venture is aggregated with other
income to determine the tax payable on the other income. This has the
effect of pushing up the other income to higher tax brackets except in
the case of companies, which are subject to a flat rate.
Taxable income
The taxable income of a venture is determined in
the same manner as in a company. Interest and remuneration payable to
the venturers are treated as profit participations and added back in
arriving at the venture's taxable income.
Taxation of foreign venturer
A foreign venturer is taxed in the same manner as
Indian venturer, subject to the higher tax rate in the case of a
nonresident corporate venturer.
General Section
