Saturday, 4 January 2020

Unit 10: Tax Consideration in Specific Managerial Decisions

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Unit 10: Tax Consideration in Specific Managerial Decisions


Managerial decision may be defined as a systematic approach to formulate strategies for positioning the business in relation to its environment to ensure continued success and offer security from surprises.


The make-or-buy decision is the act of making a strategic choice between producing an item internally (in-house) or buying it externally (from an outside supplier).


Make-or-buy decision can be strategic or tactical and may involve parts, capital items, services of every type and a wide range of items supporting industrial operations (e.g., castings, tools, spare parts, etc.)
An entity’s non-financial assets can be acquired either through outright purchase or leasing arrangements.


Export financing is often a key factor in a successful sale.


For employees of large Indian and multinational companies, benefits go beyond salaries to include lifestyle perks such as company accommodation or club membership.

Unit 10: Tax Consideration in Specific Managerial Decisions
The Tax is levied by the department of Central Board of Direct Taxes (CBDT), acting as a part of Ministry of Finance as governed by the Income Tax Act 1961.


Fringe Benefit Tax (FBT) is a tax levied on perquisites-or fringe benefits -provided by an employer to his employees, in addition to the cash salary or wages paid and was introduced in India in the year 2005-2006.


Remuneration planning refers to minimisation of the employees’ tax liability.


Salary restructuring as the process of redesigning your salary in such a way that it results in minimisation of total tax liability.


Allowances: Money that a company or government agency provides to an employee for a specific purpose, such as transportation, healthcare costs or a flexible spending account.

Buy or Lease Decision: Business decision that compares the cost and benefits of a lease arrangement with the cost of a purchase.

Employees Remuneration: Employee remuneration refers to the reward or compensation given to the employees for their work performances.

Fringe Benefit Tax (FBT): It is a tax levied on perquisites-or fringe benefits -provided by an employer to his employees, in addition to the cash salary or wages paid.

Fringe benefit: It is a form of pay (including property, services, cash or cash equivalent) in addition to stated pay for the performance of services.

Make-or-buy decision: It is the act of making a strategic choice between producing an item internally (in-house) or buying it externally (from an outside supplier).

Managerial decision: It may be defined as a systematic approach to formulate strategies for positioning the business in relation to its environment to ensure continued success and offer security from surprises.

Perquisites: The term perquisite is defined to signify some benefit in addition to the amount that may be legally due by way of contract of services rendered.

Remuneration planning: It refers to minimisation of the employees’ tax liability.

Salary restructuring: It is the process of redesigning your salary in such a way that it results in minimisation of total tax liability.

Stock Options: An option in which the underlier is the common stock of a corporation, giving the holder the right to buy or sell its stock, at a specified price, by a specific date which is also called equity option.


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