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Rates of Income Tax for A/Y 2013-2014 1. For an Individual (man or woman), resident in India who is of the age of 60 years or more at any time during the P/Y. [Senior Citizen] Upto ` 2,50,000 ` 2,50,001 to ` 5,00,000 ` 5,00,001 to ` 10,00,000 Above ` 10,00,000 Nil 10% 20% 30%
2. For individual (man or woman), resident in India who is of the age of 80 years at any time during the p/ y [Very Senior Citizen] Upto ` 5,00,000 ` 5,00,001 to ` 10,00,000 Above ` 10,00,000 Nil 20% 30%
3. Individuals (both man and woman), [other than those mentioned in above] HUF. Upto ` 2,00,000 ` 2,00,001 to ` 5,00,000 ` 5,00,001 to ` 10,00,000 Above ` 10,00,000 Nil 10% 20% 30%
Note:- In case of non-residents only general slab rate of 2,00,000 is applicable. Special rates of senior citizen and very senior citizen are applicable only for resident in India. Education Cess @ 2% and SHEC @ 1% on income tax shall be chargeable.
II.
EXEMPTIONS (Incomes which do not form part of Total Income) 1. Sec 10(48)- New section inserted
Any income of a foreign company on account of sale of crude oil will not be included in its total income, provided that the following conditions are fulfilled:(i) The crude oil is sold to any person in India. (Exemption applies only in respect of crude oil sale and not for other products such as natural gas, etc.) (ii) The income is received in Indian currency. (if received in any other currency then it is not exempt) (iii) The foreign company is not engaged in any other activity in India. Mischief: In the national interest, a mechanism has been devised to make payment to certain foreign companies in India in Indian currency for import of crude oil.
2. The Central Government has notified the following allowances and perquisites:
for serving Chairman or any other member, including retired Chairman or member of the Union Public Service Commission (UPSC), for the purpose of exemption under section 10(45) (i) the value of rent free official residence, (ii) the value of conveyance facilities including transport allowance, (iii) the value of leave travel concession.
III.
CA. AJAY JAIN, 9310167881 2 Budget 2012 Amendments 1. Allowance of expenditure even if TDS not deducted or deposited [Section 40(a)(ia)]
Where an assessee makes specified payments to a resident without deduction or deposition of TDS, he shall be allowed deduction if: Payment of taxes have been made by the payee; Payee has furnished his return of income u/s 139 taking into account such sum for computing his income. Therefore, any payment made to a resident shall be allowable as expenditure even if TDS has either not been deducted or not deposited to the credit of Central Government. Mischief:The above amendments are for the purpose of rationalizing section 40(a)(ia). It is also to be noted that the amendment has been made only in clause (ia) dealing with payments made to residents. Similar amendment has not been made in clause (i) dealing with disallowance on account of non-deduction/deposit of TDS to non-residents.
[Section 35CCC] An assessee who incurs any expenditure on agricultural extension project notified by CBDT shall be allowed deduction of 150% of such expenditure. An assessee claiming deduction in this section shall not be allowed any deduction under any other provisions of the Act. Mischief:The aforesaid provision has been inserted to encourage businesses to provide better and effective agriculture extension services, which play a critical role in enhancing the productivity in agriculture sector.
A company which claims deduction in this section shall not be allowed any deduction under any other provisions of the Act. Mischief:The amendment has been made to encourage the companies to invest on skill development projects in the manufacturing sector.
Mischief:The above amendments have been made to enhance investment linked benefit to the assessees and thus phase out profit based tax holidays.
(ii) Further, a deduction of 150% of the capital expenditure shall be available to the following businesses commencing on or after 1st of April, 2012 a. b. c. d. Setting up and operating a cold chain facility; Setting up and operating a warehousing facility for storage of agricultural produce; Building and operating a hospital with at least one hundred beds for patients; Developing and building a housing project under a scheme for affordable housing framed by the government, and e. production of fertilizer in India. Mischief:The enhancement of deduction for business of cold chain facility, warehouse for agriculture, hospital, housing projects and fertilizer would lead to consequent increase in the investment in these sectors. Affordable Housing, hospital and agriculture continue to be the focus of the government. Tax benefits have been enhanced to help these sectors. (iii) Where the assessee builds a hotel of two-star or above category and subsequently, while continuing to own the hotel, transfers the operation thereof to another person, he shall be deemed to be carrying on the specified business of building and operating hotel. Thus, he shall be eligible for deduction u/s 35AD.
Mischief:In service industries like hotels, a franchises business system exists where the hotel owner may get the hotel operated through an outsourcing arrangement. This amendment was introduced to clarify that such assessee would be eligible for deduction and to avoid litigation on the issue.
Mischief:The aforesaid amendment has been made to reduce the compliance burden on small businesses and on professionals
9. Due date for furnishing tax audit report under section 44AB shall be:
[Section 44AB] (i) 30th November If assessee has undertaken any international transaction or specified domestic transaction. (ii) 30thSeptember -
claims the FMV to be higher than its cost of acquisition and the Assessing Officer is of a different opinion, the same could be referred to a Valuation Officer. Mischief: If a property was acquired on or before 1st April, 1981 the assessee had an option of taking a higher FMV as on 1st April, 1981 as the cost of acquisition of such property and hence pay a lower capital gains tax. The transaction could not be questioned since the power of the Assessing Officer was limited to questioning a transaction where the value claimed by the assessee is less than the FMV. But now such variance can be questioned by assessing officer.
[Section 54B] Section 54B:- An HUF would now be eligible for claiming exemption from capital gains tax on transfer of agricultural land on fulfillment of specified conditions.
6. New exemption provision for capital gain arising from sale of residential house property:
[Section 54GB] Section 54GB:- A relief is provided from long term capital gains tax to an individual or an HUF on sale of a residential property (house or plot of land) in case where the assessee reinvests the sale consideration in the equity of a Small Enterprise (as per the Micro, Small and Medium Enterprises Act, 2006) which is utilized by the company for the purchase of new plant and machinery. Following conditions are required to be fulfilled: The investment in the new asset shall be made by the company within one year from the date of subscription in the equity shares. If the amount of net consideration subscribed as equity shares in the company is not utilized by the company for the purchase of new asset before the due date of filing of return by the individual or HUF, the unutilized amount shall be deposited under a deposit scheme.
If the equity shares of the company or the new asset acquired by the company are sold within a period of five years from the date of their acquisition, the amount of capital gain exempted earlier shall be deemed to be the income of the assessee chargeable under the head capital gains of the previous year in which such equity shares or such new assets are sold or otherwise transferred.
For the purposes of the section, the important definitions are as follows: (i) a) b) c) d) (ii) a) b) c) d) e) Eligible company for fresh investment It means a company incorporated in India; Engaged in the business of manufacture of an article or a thing; in which the assessee has more than 50% share capital and which qualifies to be a small or medium enterprise under the Micro, Small and Medium Enterprises Act, 2006; New Asset for investment - It means a new plant or machinery but does not include: any machinery or plant which was used either within or outside India by any other person; any machinery or plant installed in any office premises or any residential accommodation (including a guest-house); any office appliances (including computers or computer software); any vehicle; or any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head Profits and gains of business or profession of any previous year.
Mischief:-
The government had once announced National Manufacturing policy(NMP)2011, one of the goals of which is to incentivize investment in the Small and Medium Enterprises(SME) in the manufacturing sector. This Section is introduced to achieve this motive more efficiently.
(iii) Indian Railways Finance Corporation Ltd. (IRFCL), (iv) Housing and Urban Development Corporation Ltd.(HUDCL) and (v) Power Finance Corporation (PFC) to be issued during the financial year 2011-12, the interest on which would be exempt.
CA. AJAY JAIN, 9310167881 8 VI. DEDUCTION FROM GROSS TOTAL INCOME 1. Deduction in respect of LIP now restricted to 10%:
[ Section 80C]
Deduction u/s 80C shall be available only for the premium paid towards policies issued after 1-4-2012, if it does not exceed 10% of actual capital sum assured. Actual Capital Sum assured: minimum amount assured under the policy which may be received under the policy by any person Impact: Deduction of premium paid towards policies issued on or before 1-4-2012, will be available only to the extent the premium is not in excess of 20% of the actual capital sum assured.
Consequential amendment in its provisions to include its mode of payment: Payment for preventive health check up can be made by any mode including cash unlike the initial deduction Reducing the age of senior citizens from 65 to 60 years : The Finance Act, 2011 amended the effective age of a senior citizen being an Indian resident from sixty-five years of age to sixty years for the purposes of application of various tax slabs and rates of tax under the Income Tax Act, 1961 for income earned during the financial year 2011-12 (assessment year 2012-13). In order to make the effective age of senior citizens uniform across all the provisions of the Income Tax Act, it was decided to reduce the age for availing of the benefits by a senior citizen under the sections (sections 80D, 80DDB and 197A) from sixty-five years to sixty years.
iii.
Impact: In order to avail the deduction for donation of more than ` 10,000 payment shall be made in any mode other than cash.
5. Restriction on mode of payment of donation made for scientific research etc.: [Section 80GGA]
A new sub-section (2A) is inserted in Section 80GGA , which provides that no deduction shall be allowed under this section in respect of any sum exceeding ` 10,000 unless such sum is paid by any mode other than cash.
Notes: a. Meaning of Deposits: Refer to deposits (not being time deposits) in a savings account banks, cooperative banks and post office. b. Meaning of Time Deposits:
Table showing applicability or non-applicability of Sec 80TTA (i) (ii) (iii) (iv) (v) (vi) (vii) (viii ) Type of Interest received Interest on saving bank account Interest on cooperative saving bank account Interest on post office saving bank account Interest on fixed deposits Interest on company deposits Interest on term deposits Interest on time deposits Interest on bank account (assume it to be from saving A/C) Deduction u/s 80 TTA Yes Yes Yes No No No No Yes
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1.
Persons entitled
2. 3. 4. 5.
One time deduction @ 50% of the investment made but cannot exceed `25,000 Investment shall be locked in for a minimum period of 3 years from the date of acquisition. Deduction shall be withdrawn, and The amount of deduction shall be included in the income of the individual of the P/Y of non-compliance.
Impact: As per the amendment, the eligibility cut-off for carrying out the aforesaid activities has been extended by a period of one year i.e., up to 31 March 2013.
VII.
ASSSESSMENT PROCEDURES 1. Return filing is mandatory for persons having assets abroad
Proviso to Section 139(1):Any resident assessee, who is not required to furnish a return since his taxable income is below the basic exemption limit and who during the previous year has any asset (including any financial interest in any entity) located outside India, shall furnish on or before due date, a return in respect of his income or loss for the previous year is such form and verified in such manner and setting forth such other particulars as may be prescribed. Explanation 2 to Sec 139(1):All assessees who are required to obtain and file Transfer Pricing report (both international and specified domestic transaction) need to file their return of income by 30th November of the relevant assessment year.
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an individual or a HUF, being a resident, having assets (including financial interest in any entity) located outside India and required to furnish the return. However, digital signature is not mandatory for these taxpayers and they can also transmit the data in the return electronically and thereafter submit the verification of the return in Form ITR-V.
VIII.
ADVANCE TAX
IX.
TDS: 1. No interest :
201] [Section
A person, who fails to deduct tax on the sum paid to a resident shall not be deemed to be an assessee in default in respect of such tax if such resident i. has furnished his return of income; ii. has included such sum for computing income in such return of income; and iii. has paid the tax due on the income declared by him in such return of income, Further, the person is required to furnish a certificate to this effect from a Chartered Accountant in the prescribed form.
Any remuneration or fees or commission payable to a director of a company which is not in nature of salary, shall also be liable for tax deduction under the provisions of Section 194J.
X. RESIDENTIAL STATUS 1. Explanation to Section 9 :The transfer of all rights includes transfer of computer software irrespective of the
medium through which such right is transferred. (Applicable w.r.e.f June 1, 1976)
2. Explanation to Section 9:Royalty includes consideration in respect of any property or information, whether or not the possession or control of such property or information is with the payer; such right, property or information is used directly by the payer; the location of such property or information is in India.
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1976)
VODAFONE CASE Related to Amendments in chapter Residential Status & Capital Gain
Tax Dispute
Taxability over Capital Gains on an out of India transaction between 2 foreign companies (having non- resident status in India) on sale of investments consisting of shares of an Indian Company.
Amendments after the judgment Explanation in Section 9:- (Income deemed to accrue or arise in India)
An asset or a capital asset being any share or interest in a company registered outside India shall be deemed to be situated in India, if the share or interest derives its value substantially from the assets located in India. (Applicable w.r.e.f April 1, 1961) Explanation to Section 2(14): (definition of capital asset) Property includes and shall be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever.
Transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights have been characterized as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India.
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(a)following activities,
III.
Section 66B Charge of service tax on and after Finance Act, 2012 There shall be levied a tax @ 12% of the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another.
IV.
Section 66D - Negative list of services Important Note:As per announcement of ICAI dated 26.11.2012 only negative list is applicable for IPCE/PCE. Therefore exemptions under NN25/2012(mega exemptions) are not applicable. (1)Advertisement:
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advertisement in print media advertisement in public places, buildings, vehicles, cell phones, ATMs, internet aerial advertising advertisement on radio or television
(2)Bridges:
Not Covered in negative List :Service provided by any agency for collecting such toll charges
(3)Cabs :
Service of transportation of passengers by: a) a stage carriage b) railways in a non AC-Second class and lower c) metro, monorail or tramway d) inland waterways e) public transport for non tourism purpose in a vessel f) metered cabs or auto rickshaws.
Covered in of negative List : :Example such service Transmission or distribution of electricity: a) to represent home country in host country and promote friendly relations b) to negotiate with the Government of host country. Not Covered in negative List :a)
by an
a) installation of generator sets etc. by private contractors for distribution of electricity c c b) Charges collected by a developer or a housing society for distribution of electricity within a complex
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(6)Funeral:
Covered in negative List :a) b) Funeral, burial, crematorium or mortuary services Transportation of the deceased by any mode of transportation
Mortuary: A room where dead bodies are kept until they are buried or cremated. Burial: The ritual act of placing a dead person or animal into the ground
(7)Goods transportation:
Covered in negative List :( transportation of goods a) By road where consignment note is not issued like three wheeler etc. b) By an aircraft or a vessel from outside India to India, or c) By inland waterways 8) H o u s e
Not Covered in negative List :Services by way of transportation of goods: a) By a goods transportation agency where consignment note is issued or b) By a courier agency residential:
Covered in negative List :a) Covered Interest on loans or :advances Not indeposits, negative List
b)
renting of residential building (dwelling) for use as residence Sale or purchase of foreign currency amongst: (i) Banks, (ii) Authorized dealers, and (iii) Banks and such dealers
9) In te re st :
Not Covered in negative List :Service fee and processing charges related to money borrowed.
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facility where fun or recreation is provided by means of rides (jhule), gaming devices or bowling alleys in amusement parks, water parks, theme parks
1 1) K h et
Covered in negative List :Covered in of negative List :b) Supply farm labour.
Processes carried out at an agricultural farm to make it marketable. Renting of agro machinery. Betting, gambling or lottery e) Loading, unloading, packing, storage or warehousing of agricultural produce. Not Covered in negative List :- (application of scientific knowledge to agricultural through farmer f) Agricultural extension services. education or training) Services for organizing betting or gambling g) Services by any Agricultural Produce Marketing Committee or services provided by a commission agent for sale or purchase of agricultural produce.
c) d) a)
Agricultural operations.
1 2 )
Processes which modify the essential characteristics of a farm produce i.e. which makes the product marketable for the secondary market. Example of such products are potato chips, tomato ketchup.
L o t t e r y
: (13) Manufacture: (
Covered in negative List :Covered in negative List :Services by way of Any process amounting to manufacture of goods
1 4 )
Not Covered in negative List :a) pre-school education and education up to higher secondary school;
If excise duty not payable b) education for obtaining a qualification recognised by any law; c) approved vocational education course;
Qualification:
Meaning of vocational education course: Vocational Training Institute is an institute which gives skills to help the trainee to get job or start his own business after such training. But now exemption is not granted to all types of institutes. Exemption is granted only to industrial training institute (ITI) or recognised training centre.
(15) RBI:
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All services provided by Reserve Bank of India All services provided to Reserve Bank of India (unless otherwise exempt) a a
(Government): (1 7) Tr di n g of
Not Covered in negative List :a) Speed post, express parcel post life insurance and agency* services by
Department of post to non-government.
V.
Section 66F Principles of interpretation of specified descriptions of services or bundled services. (1) Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main service. Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. Subject to the provisions of sub-section (2), the taxability of a bundled service shall be determined in the following manner, namely: (a) if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character; (b) if various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax.
(2)
(3)
Explanation For the purposes of sub-section (3), the expression "bundled service" means a bundle provision of various services wherein an element of provision of one service is combined with an element
elements of provision of any other service or services.
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VI.
Section 67A - Date of determination of rate of tax, value of taxable service and rate of exchange The rate of service tax, value of a taxable service and rate of exchange, if any, shall be one as in force or as applicable at the time when the taxable service has been provided or agreed to be provided. For a currency when exchanged from, or to Indian Rupees (INR) For a currency, when exchanged from, or to , Indian Rupees (INR), the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India (RBI) reference rate for that currency at the time of exchange, multiplied by the total units of currency.
Example:- I US$ 1,000 are sold by a customer at the rate of `45 per US$. RBI reference rate for US$ is ` 45.50 for day. Value of taxable service = (RBI reference rate for $ - Selling rate for $) x Total Units. = `(45.50 45) x 1,000 = ` 0.50 x 1,000
The taxable value shall be `500.
Example:- II INR 70,000 is changed into Great Britain Pound (GBP) and the exchange rate offered is ` 70, thereby giving GBP 1,000.RBI reference rate for that day for GBP is `69. The taxable value shall be ` 1,000.