The company that owns the Zomato and Blinkit brands, Eternal, announced on 19 October that the Uttar Pradesh tax authorities had issued a demand order for goods and services tax (GST) along with more than INR 128 crore in applicable interest and penalties. The Deputy Commissioner, State Tax, Lucknow, Uttar Pradesh, issued a demand order about the overuse of input tax credits and the underpayment of output taxes for the April 2023–March 2024 period, together with associated interest and penalties. Eternal stated that it will appeal the order to the proper authority since it feels it has a compelling argument on its grounds.
Eternal to Challenge the Order
The order was issued in accordance with Section 74 of the Central GST and Uttar Pradesh GST Acts, per the filings made with the BSE and National Stock Exchange. The corporation has been accused by the tax administration of underpaying output tax and overusing input tax credits. Eternal Limited declared in its disclosure that it would challenge the order and that it was confident in its legal position.
“The company will be appealing the order before the proper authority because we think we have a strong case on merits,” the business said. Investors were reassured by the food delivery and restaurant aggregator platform, which had previously changed its name from Zomato to Eternal Limited, that it does not anticipate any financial consequences from this event. This shows that the business is optimistic about getting a good result from the appeals process.
IT Department Putting a Scanner on E-Commerce
In order to ensure GST compliance, Indian tax officials have been closely monitoring e-commerce and service platforms at the time of the order. The large penalty amount, which is equivalent to the initial tax demand, is said to represent the authority’s assessment that the infraction was serious. The impact of this revelation on investor sentiment towards the company, which has been striving for consistent profitability in recent quarters, will be widely monitored by market analysts.
Quick Shots
•Eternal
receives a GST demand and penalty order worth ₹128 crore from Uttar Pradesh tax authorities.
•Alleged
overuse of input tax credits and underpayment of output taxes for April
2023–March 2024.
•Issued
under Section 74 of Central GST & UP GST Acts by Deputy Commissioner,
State Tax, Lucknow.
•Eternal
plans to appeal, citing a strong legal case on merits.
•Company
assures investors it does not expect any financial impact from the order.
•Indian
tax authorities are increasingly scrutinizing e-commerce and service
platforms for GST compliance.
•The penalty amount matches the
initial tax demand, signaling a serious infraction assessment.
According to reports, Apple is urging the Centre to loosen income tax regulations pertaining to the ownership of “high-end” iPhone equipment that the massive tech company supplies to its contract manufacturers. According to sources who spoke to Reuters, Apple executives have been in discussions with Indian officials in recent months to change the law to exempt the corporation from paying taxes for owning the equipment.
According to the article, the business is concerned that the taxes will impede its ability to expand in the nation in the future. For example, Foxconn and Tata, Apple’s contract manufacturers in India, have invested billions of dollars to establish facilities there.
However, the acquisition of these expensive tools for iPhone production accounts for millions of those costs. The report also asserted that contract manufacturers are limited in their ability to provide funds. Changes to the legacy law will make it easier for Apple to grow. India can raise its level of international competitiveness.
Apple Finds Income Tax Act, 1961 is the Biggest Issue
The Income Tax Act of 1961, which views foreign ownership of industrial equipment as a “business connection”, is at the heart of the controversy. As a result, Apple’s iPhone profits are allegedly subject to national taxes.
The article further stated that if Apple changes its “business practices” in the nation without persuading the central government to amend the tax regulations governing foreign ownership of equipment used in India, the corporation may be subject to billions of dollars in additional taxes.
According to reports, a top Indian official stated that talks were still going on and that it is a “tough call” because Apple’s expanded investments are “equally important. “Investments are needed in India. We must come up with a solution,” the official continued. The government apparently seems wary, though, because any modifications to the income tax regulations may make it less sovereign to tax a foreign corporation.
Apple on an Expansion Spree in India
This development coincides with the Cupertino-based titan’s aggressive expansion of its domestic production capability. As part of this, it started manufacturing the most recent iPhone 17 series in India as soon as it was released.
According to reports earlier this month, Apple exported a record $10 billion worth of iPhones from India between April and September, a 75% increase over the $5.71 billion it exported during the same period last year. As trade tensions between Washington, DC, and Beijing flare, the business intends to move all of its iPhone assembly from the US to India by early next year. The corporation is increasing iPhone manufacture in India at the same time as the export.
Foxconn’s new Bengaluru facility and Tata Electronics’ Hosur plant both started production in April of this year, bringing the big tech giant’s Indian manufacturing network to five locations. Foxconn has invested INR 15,000 Cr to strengthen its operations in the state and support internal R&D activities, according to a statement made a few days ago by Tamil Nadu’s industries minister, TRB Rajaa.
Quick
Shots
•Apple urges India to amend tax laws
affecting ownership of high-end iPhone production equipment.
•Current Income Tax Act, 1961 treats
foreign-owned industrial equipment as a “business connection,” subjecting
Apple to national taxes.
•Apple claims these taxes hinder
expansion and increase operational costs for contract manufacturers like
Foxconn and Tata.
•Talks with Indian officials ongoing,
but government cautious about modifying tax rules for foreign companies.
After InGovern Research Services identified INR 4,717 crore in contested tax liabilities, ongoing royalties, and related-party transactions, LG Electronics India’s INR 11,607 crore IPO (Initial Public Offering) is being investigated. The advising company added that the Korean parent will maintain 85% control after listing, noting that a poor decision in these procedures might severely reduce future earnings or necessitate remedies.
Findings of the InGovern
With all proceeds going straight to the parent firm and no new funds being collected for expansion, the IPO, which is a 100% offer-for-sale by Korean promoter LG Electronics Inc., is set to close today, October 9, at 5 p.m. According to InGovern, LGEIL has revealed contingent liabilities totalling INR 4,717 crore, which accounts for 73% of its total net worth.
The main source of these obligations is contested income tax, excise, and service tax claims. Citing current appeals before appellate forums and legal guidance, the advice also stated that the company has not made provisions for these proceedings.
LG India Faces Contingent Liability of INR 315 Cr
Transfer pricing on royalties and payments for technical services to the promoter account for a sizable amount of tax disputes. InGovern emphasised that royalties they pay to the promoter under the terms of the licence agreement or in other circumstances could be subject to regulatory scrutiny or action. Royalties alone accounted for INR 315 crore of LG India’s potential liabilities as of the IPO filing; this amount may increase as a result of regulatory reviews.
The advice firm also pointed out that, without shareholder consent, the Korean parent company may increase royalties from domestic production by up to 5% of yearly consolidated turnover. Over the last three years, royalty outflows have historically varied from 1.63% to 1.90% of revenue; this structure may have an impact on margins in the absence of scrutiny by minority investors.
InGovern cautioned that LG Electronics Inc. would lose its ability to produce and market under the LG brand and that operations would be seriously disrupted if it terminated or changed the perpetual licence agreement with six months’ notice.
Multiple Legal Agreements Between LG India and Other LG Entities
The promoter would have effective control over board decisions and related-party transactions when LG Electronics retains 85% of its Indian unit following the IPO. “The promoter may take into account the interests of its subsidiaries and affiliates that may not align with minority shareholders,” according to InGovern.
The Korean parent company, LG India, and other LG Group companies have a number of licensing, technical service, and framework agreements that result in continuous governance exposure. Concerns regarding transparency and transfer pricing were raised by the advising company when it stated that “no independent benchmarking study or third-party pricing review for royalty payments is presented.”
LG India’s IPO is a pure offer-for-sale that only benefits the promoter, even though the company reported INR 24,367 crore in revenue and INR 2,203 crore in net profit for FY25 with a debt-free balance sheet. InGovern concluded by stating that careful thought should be given to the governance issues surrounding related-party transactions and contingent liabilities.
Quick Shots
•InGovern flags INR 4,717 crore in disputed tax,
royalty, and related-party risks.
•Tax, excise, and service tax disputes form 73% of
LG India’s net worth.
•IPO proceeds go entirely to Korean parent LG
Electronics Inc.; no fresh funds raised for expansion.
•INR 315 crore liability linked to royalty payments
and technical service fees to the parent firm.
The majority of the suggestions made by the Parliamentary Select Committee, which was led by BJP MP Baijayant Panda, were incorporated into the Revised Income Tax Bill 2025, which Union Finance Minister Nirmala Sitharaman introduced in the Lok Sabha on August 11, 2025.
Background of the Revised Bill
The revised bill seeks to improve fairness and clarity in the nation’s income tax system, streamline India’s tax rules, and lower litigation for people and MSMEs. In the midst of opposition clamour, the introduction was made. Sitharaman stated that the amendments were required to accurately express the legislative content when he tabulated the measure. In order to prevent confusion, the previous bill was withdrawn, she added.
Commenting on the move, Suraj Aiar, Founder & CEO, QWR said, “The revised Income Tax (No. 2) Bill, 2025 by Finance Minister Sitharaman represents a much-needed shift in India’s fiscal structure toward transparency, fairness and future-readiness. By reducing complexity including halving the number of sections and mandating faceless, digital-first assessments, the reforms showcase a modern, taxpayer-centric approach that is both timely and strategic.”
“For startups especially in the AI and XR space, these changes go beyond being just the procedural updates, instead they represent a strong foundation for ease of compliance, scalable innovation and trust. At QWr, we believe that this new bill will act as a growth enabler, empowering more entrepreneurs to focus on building, not bureaucratising,” he added.
Key Changes in the New Income Tax Law
“There are corrections in the nature of draughting, alignment of phrases, consequential changes, and cross-referencing,” she said. According to the Finance Minister, the revised draft aims to bring the law into compliance with current regulations while enhancing justice and clarity.
Now, lawmakers will have access to a single, revised version that incorporates all recommended modifications. The Parliamentary Select Committee’s 285 recommendations have been incorporated into the updated draft. It aims to rectify past inadequacies, streamline tax procedures, and possibly alter the nation’s income tax structure.
How the Bill Benefits Taxpayers and MSMEs
Panda claims that the new law will help individual taxpayers and MSMEs avoid needless litigation, simplify India’s decades-old tax system, and lessen legal ambiguity. With over 4,000 modifications and more than five lakh words, the present Income Tax Act, which was passed in 1961, is extremely complicated.
Panda pointed out that the new measure makes the legislation much easier for regular taxpayers to read and comprehend by simplifying it by almost 50%. The committee pointed out several draughting mistakes and recommended changes to clear up any confusion. Slabs and rates have all been changed in the updated law to benefit all taxpayers.
Key Changes in the New Income Tax Law
According to the administration, the new structure will significantly lower middle-class taxes, giving them more discretionary income and encouraging investment, savings, and consumption. The Income Tax Bill, 2025, which was first presented in the Lok Sabha on February 13 to replace the current Income Tax Act, 1961, was formally withdrawn by the government last week.
Why the Old Version Was Withdrawn?
The Centre had stated that it would present a modified version of the New Income Tax Bill that included recommendations from the 31-member Select Committee of the Parliament after dropping the previous version.
After abandoning the first version of the New Income Tax Bill, the Centre had promised to create a revised version that incorporated suggestions from the 31-member Select Committee of the Parliament.
Quick
Shots
•Union
Finance Minister Nirmala Sitharaman introduced the Revised Income Tax Bill
2025 in the Lok Sabha on August 11, 2025.
•Aims
to improve fairness, clarity, and streamlining of India’s tax rules, reduce
litigation for individual taxpayers and MSMEs, and replace the Income Tax
Act, 1961.
•The
earlier bill (introduced on Feb 13, 2025) was withdrawn to correct drafting
errors, align phrases, and avoid confusion
Zinka Logistics Solutions, the parent company of logistics giant BlackBuck, has received two tax notifications amounting to INR 14.2 crore. This encompasses a demand of INR 10.02 crore from the Assistant Commissioner of Commercial Taxes (Audit), Bengaluru, for the period from April 2020 to March 2021, and a demand of INR 4.18 crore from the Office of the Deputy Commissioner of Income Tax (TDS). The initial order, given on February 24, 2025, concerns the company purportedly misappropriating input tax credit (ITC) under GST amounting to INR 10.02 crore, as stated by BlackBuck in an exchange filing.
The notice states that the total tax liability is INR 2.88 crore under IGST, INR 3.56 crore under CGST, and INR 3.56 crore under KGST. Furthermore, the corporation has been mandated to remit an interest of INR 7.67 crore and a penalty of INR 1.02 crore.
Company’s Response
The logistics company stated in a separate exchange filing that the Income Tax agency had issued a tax demand for default for short-deduction/non-remittance of TDS totalling INR 4.18 Cr (with interest). According to BlackBuck, the firm feels it has a good argument on the grounds of both rulings. An appeal against the order will be submitted by the corporation to the relevant body. BlackBuck is a B2B marketplace for intercity full truckload (FTL) transportation that was founded in 2015 by Rama Subramaniam, Chanakya Hridaya, and Rajesh Yabaji, both of whom were graduates of IIT Kharagpur. Through its tech-enabled platform, it instantly links truck drivers with companies that need to ship.
BlackBuck’s Financial Outlook
After going public in November of last year, the company’s consolidated net loss increased 145% from INR 19.57 Cr in the previous quarter to INR 48.03 Cr in Q3 FY25. In Q3, however, it incurred INR 69.44 Cr in share-based payment expenses and INR 8.45 Cr in IPO expenses. The business would have reported a profit of INR 29.86 Cr from ongoing operations if not for these extraordinary factors. Meanwhile, its operating revenue increased 41% from INR 80.86 Cr in Q3 of FY25 to INR 113.98 Cr.
How BlackBuck Operates?
More than 93% of BlackBuck’s income comes from contract trucking. Additionally, it offers clients telemetry services that allow them to follow all trucks in real time, keeping an eye on their shipment during the entire process. Additionally, BlackBuck has a partnership with banks and marketers of petroleum goods for which it serves as an agent. It collects a commission for handling the management and distribution of radio frequency identification (RFID) tags.
The remaining amount of operating revenue is generated by these supplementary services. In exchange for business from the trucks it rents, the corporation receives a commission of roughly 15–25%. Its platform features truck services that are appropriately described, and its job is to match clients with trucks in an intelligent manner based on the needs of each individual. The heart of every invention is logistics.
The UPI limit for tax payments has been suggested to be raised from INR 1 lakh to INR 5 lakh by the Reserve Bank of India (RBI). The increase in the cap will allow taxpayers to swiftly settle their increased tax obligations. In most cases, there are no extra fees associated with payments made using UPI. This does not apply when paying taxes using a debit or credit card. There has been a prior instance of the RBI raising the cap. The central bank increased the ceiling on some payments, like those to hospitals and schools, to 5 lakh rupees in December 2023.
There is a limit of up to INR 1 lakh per transaction for conventional UPI, according to NPCI. The maximum transaction limit for certain UPI categories is 2 lakh, while for IPOs and the Retail Direct Scheme, it is 5 lakh. Other categories include Capital Markets, Collections, Insurance, and Foreign Inward Remittances.
The Statement on Development and Regulatory Policies states that UPI has become the most preferred payment method because of its user-friendly characteristics. At this time, INR 1 lakh is the maximum amount that may be transferred using UPI. Periodically, the Reserve Bank reviews and enhances the restrictions for a few categories based on the various use cases. These categories include capital markets, initial public offering subscriptions, loan collections, insurance, medical and educational services, and more. It has been determined to increase the ceiling for tax payments using UPI from INR 1 lakh to INR 5 lakh per transaction since both direct and indirect tax payments are frequent, high-value, and prevalent. “
The Impact of the New Limit on People’s Ability to Pay Taxes
During a fiscal year, a person must pay their income tax, property tax, advance tax, and other related taxes. Depending on one’s income, the tax amount can be higher. It will be easier to pay both direct and indirect taxes with the increased UPI limit.
This is because a user needs an active bank account, a mobile number associated with that account, and an app that supports UPI in order to make a transaction using UPI. After creating a UPI ID, users can pay using the app by inputting a 4- or 6-digit PIN.
Additional UPI Announcements
Not only has the RBI announced the implementation of delegated payments via UPI, but they have also raised the UPI ceiling for tax payments to INR 5 lakh. Delegated UPI payments would enable one user to authorise another user to use their bank account to establish a restriction on UPI transactions, according to the release.
Essentially, this means that one person can grant access to their bank account for UPI payments to another person, for example, a family member. It is believed that this product will increase the penetration and use of digital payments nationwide. Prompt and comprehensive instructions will be sent out soon.
Ancient practices such as tithing or the offering of first fruits may be regarded as the precursor of the income tax. However, they lacked precision and were not based on the concept of a net increase. As civilization progressed, taxes were based on other factors like wealth, social position and ownership of the means of production.
The modern concept of income tax is based on a pre-supposition of a money-economy, accurate accounting and a general understanding of receipts, expenses and profits and an orderly society with reliable records. Hence, income tax can be defined as a tax imposed on individuals, commonly known as tax-payers, in respect of the income or profits earned by them.
In India, most taxpayers know about and take advantage of the INR 1.5 lakh deduction that is available under Section 80C. However, there are many other tax-saving opportunities that can help if further reducing taxes paid.
National Pension Scheme (NPS) Under Section 80CCD (1B)
Over and above the benefit that can be claimed by Section 80C, additional tax can be saved by investing up to INR 50,000 in NPS. This investment can increase the total deduction to be claimed to INR 2 lakh
Share of Instruments in Gross Household Saving
Interest Component of Home Loan Under Section 24
The interest component of a home loan can be claimed as a tax deduction under Section 24 of the Income Tax Act. A maximum amount of INR 2 lakh can be claimed on the interest payment on a home loan for a self-occupied property. If the residential property is not self-occupied and rented or deemed to be rented, the entire interest amount can be claimed as a tax deduction as there is no maximum limit has been prescribed. If the residential property is not self-occupied due to reasons of employment, business or profession, a maximum tax deduction amount of INR 2 lakh can be claimed under section 24.
Interest Repayment for First-Time Home Owners Under Section 80EE
This is applicable for first-time homeowners who do not have any other residential property on the date their home loan is sanctioned from a financial institution. Such homeowners can claim a tax deduction of up to INR 50000 under Section 80EE. This tax deductible amount is over and above the INR 2 lakh available under Section 24. Rules applying to claim this amount as a tax deduction specify that the total value of the residential property must be less than INR 50 lakh and the loan value should not exceed INR 35 lakh. This section was initially introduced in 2013-14 and was available for only two years before being re-introduced in 2016-17. This particular tax benefit is applicable till the loan amount is repaid with the annual limit capped at INR 50000.
Premiums Paid on Health Insurance Under Section 80D
The tax incentive for Section 80D allows for tax deductions the total amount that is paid as the premium amount for health insurance as well as the expenses that are incurred towards healthcare. Depending on the people and their age, who are included under the insurance coverage the limit to claim tax deductions can range from INR 25000, INR 50000, INR 75000 or INR 1 lakh.
Interest Earned From Savings Bank Account Under Section 80TTA
Section 80TTA allows all individual taxpayers and HUF to claim tax deductions on the interest earned from savings bank accounts in banks or banking companies, savings accounts in post offices or savings accounts in cooperative societies involved in the banking business. The maximum amount that can be claimed from all savings accounts is INR 10000. Interest earned above this limit is considered as ‘Income from Other Sources’ and is taxable. For senior citizens who are taxpayers, Section 80TTB is applicable which was introduced on April 1, 2018, and carries a lower tax implication on the interest income. Under Section 80TTB, up to INR 50000 can be claimed as a deduction.
Medical Expenses for Disabled Dependent Under Section 80DD
This tax deduction has been offered to help taxpayers take care of dependent disabled family members. These dependents are defined as spouses, children, parents or siblings. Disabilities covered under this policy include blindness, low vision, locomotor disability, hearing impairment, mental retardation, mental illness, autism and cerebral palsy. The following medical expenses can be claimed as tax deductions –
Expenses incurred towards medical treatment, nursing, training, rehabilitation of a dependent with a disability
Amount paid as premium for an insurance policy designed for such cases and satisfying the conditions mentioned in the law
The amount that can be claimed varies on the degree of the disability of the dependent. Up to INR 75000 can be claimed as a tax deduction annually if the dependent suffers at least 40% of any specified disability. A severe disability of 80% or more in a dependent allows the taxpayer to claim up to INR 1.25 lakh. A medical certificate from qualified institutions must be submitted by taxpayers to claim such tax deductions.
Treatment of Specified Diseases Under Section 80DDB
A taxpayer suffering from diseases like cancer, neurological diseases like dementia, motor neuron diseases, Parkinson’s or AIDS entailing expensive treatment costs can avail of tax deductions under Section 80DDB. The amount that can be claimed as a deduction is INR 40000 or the actual amount, whichever is lower. For senior citizens who are taxpayers or dependents, this limit is increased to INR 1 lakh.
Amount Paid as Rent With No HRA Payment Under Section 80GG
An individual taxpayer who does not receive HRA as a salary component or is self-employed can claim tax deductions towards rent up to INR 60000 annually under Section 80GG. The conditions for availing such tax deductions do not include taxpayers who own a house but live in rented accommodations within the same city or living in rented accommodations in another city and claiming deductions under Section 24 for repayment of home loan interest.
Repayment of Education Loan Under Section 80E
Students availing of education loans to pursue higher education are eligible to claim tax benefits on the repayment of the interest component under Section 80E. This deduction is available on taking an education loan from financial institutions and not from relatives or other family members. The tax deductions can be claimed from the year the repayment of the loan begins for seven consecutive years or until the interest is paid in full, whichever is earlier. There is no limit to the deduction claimed on the interest amount repayment.
Donations Made to Charitable Institutions Under Section 80CCC
Donations made to approved charitable institutions are eligible for tax deduction claims with appropriate supporting documents like a stamped receipt from the trust or institution, complete address, name of the trust and the PAN card number of the trust or institution. A tax deduction of 50% or 100% can be claimed depending on the charitable institution to which the donation is made. However, the total donation amount should not exceed a maximum of 10% of the adjusted gross total income of the taxpayer. The four ways in which donations can be categorized to claim the deduction are –
Donations to the National Defence Fund set up by the central government can be claimed as a 100% deduction without any qualifying limit
Donations to Jawaharlal Nehru Memorial Fund or the Prime Minister’s Drought Relief Fund can be claimed as a 50% deduction without any qualifying limit
Donations with 100% deduction subject to 10% of adjusted gross total income such as Government or any approved local authority, institution or association to be utilized for the purpose of promoting family planning
Donations with a 50% deduction subject to 10% of adjusted gross total income such as any institution which satisfies conditions mentioned in Section 80G(5)
Conclusion
These tax saving instruments can be a huge help for taxpayers to save on income tax and reduce income liability. This income, can then, be utilized towards investment and growing savings.
FAQ
Which is the best tax-saving instrument in India?
The following are the best Tax-Saving Instruments you can use
Equity Linked Savings Scheme (ELSS)
Public Provident Funds (PPF)
Senior Citizen Savings Scheme (SCSS)
Sukanya Samriddhi Yojna (SSY)
Tax Saver Fixed Deposit (FD)
National Pension Scheme (NPS)
National Savings Certificates (NSC)
Unit Linked Insurance Plans (ULIP)
How to save tax for 12 LPA?
Tax Deductions under Section 80(C) can help you to reduce your taxes. You can invest in PPF, EPF, ELSS, NSC and others to save taxes.
How can I save tax smartly?
Under Section 80C you can save your tax and these are the scheme which comes in 80C
Equity-Linked Savings Scheme: Equity Linked Savings Schemes are a type of mutual fund with a lock-in period of three year
Senior Citizen Savings Scheme
National Pension System
Term Life insurance premium
Public Provident Fund
National Savings Certificates
Tax-saving FDs
Home loan repayment
How much income is tax-free?
If your income is below ₹2.5 lakhs, you do not have to file Income Tax Returns (ITR).
The power of a Human Mind is astonishing. Just by looking at the past few inventions, one can understand, what the human mind is capable of. In the present age, everything is possible with just a simple click, from shopping to dating. It wouldn’t be wrong to say that we are carrying the whole world in our pockets, thanks to technological advancement. One of the biggest contributors to carrying the world in our pockets is Apple Inc.
The world’s biggest technology company that deals with electronics and computer software first started its journey in 1976. It was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne.
Till 2011 Steve Jobs was the CEO of the technology giant. Later in that year, after the death of Steve Jobs, Tim Cook took the charge of Apple. These are just basic facts that almost everyone knows about Apple. Let’s come to the point that makes this article interesting.
Regardless of how much money we make, taxes are very painful for all of us. But on the one hand, people like you and me sincerely pay our taxes. On the other side, there are companies like Apple, and Google that evaded their taxes by billions of dollars.
The question is what is this genius tax-evasion strategy and how do they escape the strict laws of governments? Let’s try to understand by using Apple as a case study.
With great powers, comes great responsibility, and so do pay taxes to the government of the country they live in. Apple being the biggest tech company is not an exception. It is bound to pay a large sum of amount to the Government in the form of taxes.
Just like other businesses, Apple is also not that fond of paying billions of bucks in taxes but has no choice but to be responsible to the country. Somehow, Apple used a tactic to avoid paying billions to the Government. Well, the secret is, not so secret. Apple transfers most of its profit to tax haven countries and thus takes advantage of loopholes, the US Government has in its tax-paying system.
“Play by the rules, but be ferocious”– Phil Knight
As part of its tax avoidance strategy, Apple uses its ‘subsidiaries’ in Tax havens. Now, to understand this more deeply, first let’s try with the term, Tax Haven.
True to its name, the term ‘Tax Haven’ is used for all those countries that offer, foreign investors the to pay minimal and sometimes even no taxes for their businesses. This is basically a good scheme for the investors to avoid paying taxes to the actual country the individual or business belongs to. Another attractive part of this ‘heaven’ is that they occasionally offer financial secrecy to the investors.
Some of the top Tax havens are:
Ireland
Netherlands
Switzerland
Panama
Bermuda
The Cayman Islands
Luxembourg
The Tactics Apple Uses For Tax Avoidance
Every time Apple has stated that it has always played by the rules and has paid taxes to the Government as per the laws. In fact, it considers itself the largest taxpayer in the world. This is somewhat true, in 2017, Apple stated that it had paid over $35 billion dollars in the last three years. However, that amount wasn’t able to make even a small dent in the revenue of Cook’s led multinational company. How?
Well, the strategy is to transfer their profit, obtain domestically to Tax Haven countries. Apple uses Ireland and Luxembourg as its ‘Haven’ to get away from paying the lump sum.
Agreement Between Ireland and Apple
Apple has been operating in Cork, Ireland since 1980 for its overseas operations, and they also set up a manufacturing plant in Holyhill, above Cork.
In 1990, when Apple’s market share was crumpling worldwide, they wanted to save money. Apple’s CEO John Sculley signed a deal with the Irish government. In 1990, Apple’s team met with the Irish government and drafted an arrangement for how much tax it paid in the country.
Since then, Apple has been the largest employer in Cork, Ireland, where they had an upper hand. Apple disclosed to the Irish government that the firm is examining its worldwide operations and Apple desires to establish a profit margin on its Irish operations.
Based on the financial data from 1989, Apple showed $751 million dollars in revenue and $270m in net profit per year. Apple also showed that these profits were made mainly through its technology, marketing, and manufacturing.
They told the Irish government that they only manufacture in Ireland. Therefore, they should not be taxed on the other two elements of business: marketing and technology. Apple has been in Ireland for 10 years and if they do not strike a deal, they will go somewhere else.
Apple’s revenue generated from India, Europe, and the Middle East is taxed in Ireland
The Irish government agreed to the deal offered by Apple in 1991 to tax only certain elements of the business. This made Apple’s taxes suddenly drop to 12.5%, compared to the US (21%). All of Apple’s revenue generated from India, Europe, and the Middle East is taxed in Ireland.
But an investigation by the EU revealed that Apple has paid only 1% or 0.5% taxes instead of 12.5%. They also accused the Irish government of collusion with Apple, because Ireland does not want Apple the largest employer in the country to leave Ireland.
Apple’s Strategy of Creating Two Subsidiaries
Apple’s operation strategy before 2017
Apple created two subsidiaries in Ireland, “Apple sales International“to hold rights of Apple intellectual property to sell and under a “cost-sharing agreement” with Apple Inc. to manufacture outside of South and North America named “Apple Operations Europe“. The Head office of these companies is on paper only and they are controlled by board members mainly based in the US.
Now, these two companies yearly only pay for research and development to Apple Inc. in America. By doing this Apple sales International kept all the revenues and profits generated from India, Europe, and the Middle East.
In 2011, According to US Senate, Apple sales International recorded a profit of $22 billion. But under the agreement with the Irish government only $50 million were taxed and it kept decreasing until 2014.
Before 2017, the US tax system doesn’t put taxes on the profit obtained from the multinational company’s foreign subsidiaries unless they are transferred to the parent company as dividends (changed in 2017). Which is, while compared with the foreign country taxes, is way much higher.
There is a term called ‘Deferred Tax’, which means the income tax that a company will pay in the near future instead of paying immediately, which might be a big shock to the bank balance.
Apple has taken that advantage by transferring over 70% of its domestically obtained profit to the tax haven, thus putting those profits in the deferred tax category of the company.
As per a report from 2017, Apple was avoiding paying almost $78 billion dollars of taxes at that. In Ireland, Apple had three subsidiaries, which played a significant role in the game of Tax Avoidance.
Unfortunately, this game has not been a smooth ride for the technology giant. It has to face some consequences for its tax avoidance strategy.
In 2013 an investigation revealed that two of the subsidiaries of Apple in Ireland are formed in a way that has helped them in avoiding paying taxes to both the country, U.S. and Ireland.
On 29 August 2016 European Commission declared that Apple has used Ireland, and had received illegal tax benefits from the country.
The European Commission instructs Apple to pay almost $15 billion dollars along with interest to Ireland for not confiding with the rules and not paying proper taxes.
The Irish Government took the side of the tech giant and stated that no tax law has been violated.
In the month of November of the same year, Tim Cook appealed against the instruction.
In 2018, Apple paid around €14.3 billion in back taxes and interest that was due to Ireland. The money was held in an Escrow fund.
Present Condition of Apple and Taxes
After a long battle with the European Commission, in July 2020, the European General Court gave a decision in favor of Apple and the Irish Government.
This automatically became good news for the Technology giant as it does not have to pay a huge amount. At present, the European Commission has decided to appeal again, and this time in front of the highest court, the Court of Justice of the European Union (CJEU).
Conclusion
The bigger the business, the bigger will be the risk. Apple Inc. is not an exception here. As stated before, the human mind is amazing. Companies like Apple will always find a way to deal with complicated matters in legal and sharp ways.
FAQ
What is the revenue of Apple?
As of 2022, Apple has reported its revenue in the USA was 99.8 billion U.S. dollars. While global revenue reported by Apple was 365.82 billion U.S. dollars in 2022.
Who Is The CEO Of Apple?
Since August 2011, Tim Cook is the CEO of Apple.
Which is the best Tax Haven?
Cayman Island is considered the best country as Tax Haven.
A Chartered Accountant can guide you not only to prepare your taxes and other regulatory standards but at multiple levels of business formation. Their knowledge of key corporate areas such as laws, accounting and taxation, contracts, and so on can be invaluable when strategizing, applying for bank loans, maintaining accounts, installing software, determining subsidies, and so on.
As a result, discussing with a CA while strategizing a startup can be extremely useful as it enables one to gain insight on key issues early on instead of being stuck later. CA professionals in India can assist you in developing the ideal accounting framework for your business.
A CA can forecast fiscal estimates based on analyzing the industry for a similar item and the government’s tax regime due to his/her knowledge and experience. They can use the key players and in-depth insights to assist their customers in increasing their profitability from the start.
Corporate Formation and Legislative Framework
There are numerous forms of registration, such as corporate entities, LLPs, or businesses, as well as sole traders or proprietorships. Each is governed by a separate law. Registration is subject to various regulatory laws, ensuring compliance, and tax rules, which a CA can effortlessly explain and help you determine what is the right approach for your business.
You must register your business with the Companies registry as a component of the startup authorization phase if it’s a Private Ltd. or LLP or simply a partnership. Filling out forms and giving details to the Ministry of Corporate Affairs to initiate your business legally is also part of the startup registration. As a result, a CA or a virtual CA is the ideal advisor to assist you with the registration.
Furthermore, if you’re starting a Private Ltd. Firm, you’ll need documents like the MOA or AOA, and if you’re starting a partnership or LLP, you’ll need the Alliance deed. CA can create such documents skillfully.
Accounting and Financial Assistance
To fill out the necessary paperwork and register the firm, a startup involves careful accounting and financial assistance. As a result, a CA can assist you in managing your firm’s stock holdings, cash flows, forecasts, and financial records.
The CA is necessary for startups that want to enroll as a Private Ltd. Firm. They will assist and will also record all of your stock ownership info and money transfers as needed for a Private Ltd. Firm.
Aid You in Obtaining Finance or an Overdraft
Realizing that a CA is in charge of your paperwork and loan approval process improves your probability of gaining credit. They will be aware of all aspects your bank may have about income and expenses forecasts and can help you choose the right loan and rate of interest.
How Can a CA Help Your Firm Sustain Itself?
When a startup begins to hire, a CA is essential. As a manager, you could begin with as few as 1 or 2 staff. However, it is vital that you adhere to all tax regimes for your teams, such as TDS, Labor Regulations, and Salary Clauses.
A CA can be your ultimate source, helping you comprehend salary payable modes for your staff, as well as the dos and don’ts of declaring payouts to lawfully save taxable income.
They can also help you with the company’s income estimates, predicted financial statements, or project reviews that you might need when filing agreements or applying for finances. Thus, in today’s technologically advanced world, taxation and laws governing business operations are critical and must be strictly adhered to. It is critical that you document standard tax returns by the Ita. As a result, a CA can assist you with a variety of compliances and filings.
As your company expands, so will your accounting books. It is critical to adhere to classic financial reporting to keep all card payment systems intact. A CA will provide you with proper guidance and handle your acct book following the required standards.
Furthermore, as your firm grows, you will be bound to keep track of your records for filing with the IRS and yearly reporting with the company’s registry. If your company’s attrition reaches a certain limit, you will undoubtedly require the services of an accredited auditor to report your ITR returns & conduct tax audits.
Another required conformance filing is a process that must be abided by all businesses, large and small. It is also vital to comprehend your financials, which is primarily the responsibility of a CA. As a result, it is critical that you select the ideal CA from the ranked CAs in India for your firm to profit and work efficiently.
Should You Hire a CA?
Good counselling and advice define the progress of a startup from conception to verification, whether your firm is registered or not. After investing heavily, it is critical to managing your book of accounts for your firm to thrive. Thus, as your firm progresses ever since its registration and onset, a skilled CA will not only deliver you proper accounting records of your firm but will also assist you in understanding the stock ownership and investment structure in your firm.
A decent virtual CA, accessible 24/7, is needed to inform you through all levels, be it paying the due taxes as per Income Tax rules or rescuing the firm from any undesired taxes. A CA can assist you in understanding all other statutes’ rules, statutory provisions, your firm’s policies, and work history.
You can also hire a virtual CA. While there are many virtual CAs, it is critical to pick the suitable one. Because CAs oversee critical parts of your business, it is always advisable to hire the best online chartered accountants. Having several CAs can wreak havoc on your books.
Although you may pick the finest from the shortlist CAs in India, it’s a good idea to pick virtual CAs who are available 24/7 and are also cost-effective. As a result, hire a CA from the first day you intend to register your official company to the day you put your vision into action.
Chartered accountants entities can also assist you with complex tax provisions that, if overlooked, can result in significant penalties. They will also portray your lawsuit in front of tax officials and courts at your behest. They can provide you with any information you require regarding such formalities.
Furthermore, they help you in a variety of business areas such as obtaining a digital signature, guiding you during an official review of your firm, alerting you before any disparity is discovered by the assessor or tax supervisor, govt grants and sanctions, and so on.
In conclusion, a CA can help your brand prosper, so consulting with a CA is a must in the long run.
FAQs
How can a CA help in business?
A CA can help you reduce taxes, manage your finances, prepare a business plan, and can help you connect with other established businessmen.
What is the role of CA in a startup?
A CA helps a firm to increase its profits and assists the firm in registration and filing taxes while the founder focuses on the important aspects of the business.
The majority of people in this country, as well as in any other country, earn money through regular jobs that pay hourly wages or regular paychecks. Distinct countries have different laws, yet they all have the same basic structure. The wealthy find a means to avoid paying them. Despite the fact that ordinary individuals are taxed, data show that the vast majority of millionaires and billionaires either do not pay any taxes or pay very little.
People with regular jobs in the United States are taxed at rates ranging from 10% to 37%. Regular wage earners in India are taxed at rates ranging from 0% to 30%. This, however, does not apply to the rich. But how do they manage to pay nearly nothing and avoid facing legal action?
Despite the fact that regulations are in place to make high earners pay more taxes in proportion to their income, the exceedingly wealthy are always exempt. In this article, we’ll look at what the wealthy and their lawyers do to avoid paying high taxes.
Rich people do not keep their money in banks or make it readily accessible. They manage their wealth in a unique way compared to regular people. They invest their money in stocks or real estate, which are not taxed until they are sold.
As a result, the wealthy keep getting richer as their assets appreciate in value, but they do not pay taxes on them. For example, Jeff Bezos, the former CEO of Amazon, pays nearly no taxes because the majority of his wealth is invested in Amazon stocks, which are not taxed until he sells them.
2. Living Off Loans To Avoid Taxes
Borrowed money is not taxable because it is not considered income. And the wealthy take advantage of it. They use their stock shares to obtain large loans from banks and use them to fund their lifestyles because selling the equities would result in paying taxes on them. Elon Musk, the CEO of Tesla, for example, takes out loans with his stock as collateral. That’s how he keeps his lifestyle, and because the money he borrows cannot be taxed, Elon avoids paying taxes.
3. Charity And Donations
Many wealthy people believe in giving back to the community and donating large sums of money, but not all of them have the greatest interests at heart. Most of them do it just to avoid paying taxes. Conservation easements are one way the wealthy have exploited the tax.
Most of the tax paid by rich people might be recovered when they give to charity. When they choose to give away their earnings to charities, they can practically avoid paying tax at all.
4. Lawyers To Avoid Paying Taxes
Wealthy people hire lawyers who specialise in avoiding high taxes and preserving their assets. These lawyers take a gigantic cut, but they make certain that their clients don’t lose money in taxes.
Rich people use their influence and ties to push for measures that exclude them from paying taxes. They bribe legislators and maintain strong connections with them so that they can later use them to avoid paying taxes. Tax lawyers assist their clients since they are familiar with the tax rules and can readily uncover loopholes to save money for their clients.
5. Stepped-Up Basis Loophole
Most regular people are unaware of the world’s largest tax loophole, known as stepped-up basis. This is how the family’s riches stay in the family and taxes are avoided. For those who are unaware, this means that when stocks are passed on to an heir after death, the successor will only pay tax on the profit earned after they inherited the stock. As a result, there is no tax on earlier gains, which is how wealthy families maintain their wealth.
The rich have found several ways to not pay their taxes properly and save millions and billions of dollars. Many live off loans, and many invest in stocks and other assets that cannot be taxed until sold. Charities and donations are also being used by rich folks to get tax relief.
Rich people also hire tax lawyers to assist them in identifying loopholes in order to avoid paying taxes and save their clients money. Billionaires use their influence and connections to tweak the laws and promote laws that benefit them.
President Biden has proposed several proposals, including the elimination of a stepped-up basis and an increase in the tax rate from 20% to 39.6%, which would apply to people earning more than $1 million USD per year.
FAQs
How do the rich avoid taxes?
Rich people hire lawyers to find loopholes and save taxes. Tax havens are also one of the most popular ways to avoid tax.
What are the tax loopholes for the rich?
Capital Gains Tax is one of the most common loopholes used by the rich.
