Published On: Thu, May 19th, 2016

Simplified Reforms of Income Tax Laws & Other Developments of Housing Industry

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By Accommodation Times News Service

By CA Vimal Punmiya

Latest Reforms to Simplify Income Tax Laws and Procedures for Filing of Returns and Other Developments Related To Housing Industry

  1. High Level Committee to be formed & to be chaired by the Revenue Secretary and consist of Chairman, CBDT and an expert from outside. This committee will oversee any fresh case where the Assessing Officer proposes to assess or reassess the income in respect of indirect transfers by applying the retrospective amendment.
  2. Scrutiny proceeding is now bifurcated into two category. One is limited scrutiny proceeding and another one is complete scrutiny proceeding. It will increase the productivity of work under department and big time relief to assessee.
  3. To reduce the litigation CBDT has issued a number of Circulars for withdrawing or not pressing of appeals on settled issues relating to the subjects listed below:

a)      Non applicability of Rule 9A of the Income-tax Rules 1962 in case of abandoned feature films.

b)      Measurement of the distance for the purpose of section 2(14)(iii)(b) of the Income-tax Act for the period prior to assessment year 2014-15.

c)      Interest from non-statutory liquidity ratio (non-SLR) securities.

d)      Allowability of employer’s contribution to funds for welfare of employees in terms of section 43(b) of the Income-tax Act.

e)      TDS under section 194A of the Act on interest on fixed deposit made on the directions of the courts.

f)       Recording of satisfaction note under section 158BD/153C of the Income-tax Act.

g)      Non levy of penalty u/s 271(1) (c) wherein additions/disallowances were made under normal provisions of Income-tax Act 1961 but tax was levied under MAT provisions under section 115JB/115JC, for cases prior to A.Y. 2016-17.

h)      Clarification on taxability of surplus arises on transfer of shares as capital gain or business head.

  1. For reducing the litigation CBDT enhance the monetary limit for filing the appeal by Department as under:-
    Appellate Forum      Amount
a)      Before ITAT Rs.10,00,000/-
b)      Before High Court Rs.20,00,000/-
c)      Before Supreme Court Rs.25,00,000/-

 

  1. Online assessment proceeding were also initiated under digitalization scheme.
  2. Department accept the Indian tradition and during search proceeding gold upto 500 grams for married lady, 250 grams for unmarried lady and 100 grams for men cannot be seized by department.
  3. For making friendly environment between department and assessee, officers are arranging public meeting for understanding the grievance of assessee, awareness of tax law and increasing the tax base.
  4. To avoid harassment to assessee by High Pitch assessment a new “HIGH PITCH ASSESSMENT” committee is formed which will look into the high pitch issue take the decision. This is an additional forum and not an appeal forum.
  5. Voluntary disclosure of undisclosed income scheme:- Domestic tax payer can disclosed his undisclosed income under this income tax disclosure scheme and liable for payment of total tax @ 45% (30% income tax  + 7.5% Krishi surcharge + 7.5% penalty). Declaring person will not be prosecuted and no scrutiny proceeding will be conducted. Disclosing Window period will be 01/06/2016 to 30/09/2016. Scheme is also applicable on wealth tax.
  6. First time home buyer will get additional Rs.50,000/- deduction for house purchase having worth of Rs.50 lakh but loan will not exceed Rs.35 lakh.
  7. Limit of deduction under sec 87A has been increased from Rs.2,000 to Rs.5,000 giving an additional benefit of Rs.3,000 to assessee’s whose income is less than Rs. 5,00,000/- . The impact will be that the person having income less than Rs.5 lakh will not required to pay tax upto income of Rs.3,00,000/-. Almost 2 Crore assessee will be benefited by this announcement.
  8. Reform in 80GG:-Salaried person having No house and No H.R.A will be allowed an exemption of Rs.60,000 p.a. in this regard as compared to earlier of Rs.24,000 p.a.
  9. Section 44AD:- Presumptive taxation applicability limit were increased to Rs. 2 crore of turnover as compared to 1 Crore earlier without making any change in the earlier rate of income @ 8%. This will lead a great relief to assessee and assessee will not be required to get his books of account audited and maintaining detail books of account. Now this benefit was also extended to Professionals having receipt of Rs.50,00,000/- with the income rate of 50%. Earlier it is provided to businessman only and not professional. But once the scheme is opted, then the assessee has to offer income under this scheme for 5 years. If in any one year, income is not offered as per this section, then for next 5 years assessee will not be eligible for availing benefit of this scheme.
  10. Tax audit limit u/s 44AB is also increased to Rs.2 Crore for business and to Rs.50 lakh for profession.
  11. Deduction of 100% profit from housing project approve between June 2016 to March 2019 if the project completes within 3 years from approval with the condition that area of flat is 30 sq.mtr in 4 metro cities and 60 sq.mtr. in other cities.
  12. To achieve the “MAKE IN INDIA” tax holiday exemption is given to start-up business. Income of 3 years will be 100% exempt out of 5 years.
  13. Holding period for determining the long term period of unlisted shares the period now reduced to 2 years as against the earlier 3 years.
  14. Annuity fund given to legal heir of pensioner will not be taxable.
  15. Exemption limit of annual contribution by employer to superannuation fund increased to Rs.1.5 lakh as against the 1 lakh of earlier.
  16. Standard deduction of 30% in house property will be allowed on unrealized rent also.
  17. Holding period of asset will be counted from the date of agreement fixing the amount of consideration and not from the date of registration of agreement.
  18. One time scheme for dispute resolution for pending retrospective tax amendment cases. Case will be withdrawn if the tax arrears will pay. No interest and penalty will be levied.
  19. Big relief to Non-resident not having PAN number. Earlier if no PAN than TDS @30% now NRI can provide the alternate ID, then the TDS will be applicable at the applicable rate.
  20. First time in the tax provisions the assessing officer is accounted for delay in giving the effect of order of appellant authorities. If the effect of appellant tribunal not given within 90 days, then the rate of interest on refund will be given @ 9%.
  21. New Dispute Resolution Scheme to be introduced. Assessee can settle his case when appeal is pending before CIT(A) by paying the disputed tax and interest upto date of assessment order. And No penalty will be levied if the disputed tax up to 10 lakh. And Cases with disputed tax exceeding 10 lakh to be subjected to 25% of the minimum of the imposable penalty. Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty and tax interest on quantum addition.
  22. For waiver of interest & penalty petition u/s 273A & 273A(4) can be made to CBDT.
  23. Now the discretion of AO for levy of penalty in range of 100% to 300% abolished.  Straight rate of penalty @ 50% of tax in cases where income has been under-reported & 200% in cases where facts have been misreported. Remission of penalty in certain cases where taxes are paid and no appeal is to be filed.
  24. As roadmap given in Budget 2015-16 for reduction of corporate tax. First step is taken by lowering the corporate income tax rate from 30% to 29% for the corporate having the turnover less than Rs.5 Crore.
  25. Income tax department also now contribute to achieve the dream of DIGITAL INDIA by making the assessment in digital form. For this initiation 7 major cities are selected.
  26. Mandatory for the assessing officer to grant stay of demand once the assesse pays 15% of the disputed demand, while the appeal is pending before Commissioner of Income-tax (Appeals). It is very great relief to assessee and reduce the harassment of the assessee for coercive recovery by AO for achieving their tax collection targets.
  27. Time limit of one year for disposing petitions of the tax payers seeking waiver of interest and penalty.
  28. Disallowance will be limited to 1% of the average monthly value of investments yielding exempt income, but not exceeding the actual expenditure claimed under rule 8D of Section 14A of Income Tax Act.
  29. Rationalize the TDS provision so the funds of assessee will not block due to TDS. The revise limits are as under:-

Measures for TDS / TCS Rationalisation

 

Sec.

Heads Existing Threshold

Limit

Proposed

Threshold

Limit

192A Payment of accumulated balance due to an employee  in EPF 30,000 50,000
194BB Winnings from Horse race 5,000 10,000
194C Payments to Contractors Aggregate annual limit of 75,000 Aggregate annual limit of 1,00,000
194LA Payment of Compensation on acquisition of certain Immovable Property 2,00,000 2,50,000
194D Insurance commission 20,000 15,000
194G Commission on sale of lottery tickets 1,000 15,000
194H Commission or brokerage 5,000 15,000

 

Present

Section

Heads Existing Rate of

TDS (%)

Proposed Rate of TDS (%)
194DA Payment in respect of Life Insurance Policy 2% 1%
194EE Payments in respect of NSS Deposits 20% 10%
194D Insurance commission 10% 5%
194G Commission on sale of lottery tickets 10% 5%
194H Commission or brokerage 10% 5%
194K Income in respect of Units To be omitted w.e.f

01.06.2016

 
194L Payment of Compensation on acquisition of Capital Asset To be omitted w.e.f

01.06.2016

 

 

  1. No TDS will be deducting on rent on self certification if income does not exceed maximum amount not chargeable to tax.
  2. Issuances of Lower rate deduction of TDS via online were also initiated.
  3. Return cannot be treated as defective only because self-assessment or interest thereon not paid before the date of furnishing return.
  4. Belated return now can be revised before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
  5. The following change in the time limit to complete assessment under various sections
Section Existing time limit Amended time limit
143 – Assessment 2 years 21 months
144 – Best Judgment Assessment 2 years 21 months
147 – Re-assessment 1 year for the end of the financial year in which notice under section 148 was served 9 months for the end of the financial year in which notice under section 148 was served
Completion of fresh assessment pursuant to order u/s. 254 or 263 or 264 1 year for the end of the financial year 9 months for the end of the financial year in
Period for given effect to an order u/s. 250 or 254 or 260 or 262 or 263 or 264 or 245D(4) Nil 3 months from the end of the month in which order is passed or received. For cases pending as on 01/06/2016 time limit is proposed to be extended till 31/03/2017

 

Section Existing time limit Amended time limit
Assessment, reassessment, or re-computation is made consequence to give effect to any finding or direction under section 250, 254, 260, 262, 263, 264 Nil 12 months from the end of the month in which order is received.
147 – in case of a partner of a firm Nil 12 months from the end of months in which the assessment order of the firm is passed. In case of pending cases as on 01.06.2016, then till 31/03/2017 or 12 months from the end of the month in which order in case of the firm is passed, whichever is later.

 

 


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