By Accommodation Times News Service
By CA Vimal Punmiya
- An amendment had been made in Section 36 of the Income Tax Act providing that
The tax paid by the assesses in respect of new tax called Commodities Transaction Tax (CTT) entered in the course of his business during previous year shall be allowable as deduction, if the Income arising from such taxable commodity transaction is included in the income computed under the head Profit & Gains from Business or Profession. (w.e.f. 1st April 2014.
- A new section 32AC is introduced in the Income Tax Act to provide that where an assessee, being a Company-
(a) Is engaged in the business of manufacturing of an article or thing; and
(b) Invests a sum of more than Rs. 100 crore in new assets (plant or machinery) during the period beginning from 1st April, 2013 and ending on 31st March 2015 then the assessee shall be allowed-
(i) for A.Y. 2014-15 a deduction of 15% of aggregate amount of actual cost of new assets acquired and installed during the F.Y. 2013-14 if the cost of such assets exceeds Rs. 100cr.
(ii) For A.Y. 2015-16, a deduction of 15% of aggregate amount of actual cost of new assets acquired and installed during the period beginning on 1st April 2013 and ending on 31st March 2015, as reduced by the deduction allowed in the A.Y. 2014-15. (w.e.f. 1st April 2014)
- In order to avail the tax incentive, the terminal date for being eligible to claim tax holiday by power generating, distributing or transmitting companies U/s 80IA is extended by further period of 1 year i.e. 31st March 2014 (w.e.f. 1st April 2014)
- In order to provide relief to the lower income tax bracket a tax rebate of Rs.2000/- p.a. is introduced for the residential individual with total income upto Rs. 5 Lakhs. (w.e.f. 1st April, 2014)
- U/s 24 of the Income Tax Act an additional one time deduction of up to Rs. 100,000/- introduced for individuals in respect for interest payable to a specified financial institution on housing loan sanctioned in FY 2013-14. The deduction available in F.Y. 2013-14 and to the extent un-utilized in FY 2014-15.The loan is sanctioned by the financial institutions during the period beginning on 1st April 2013 and ending on 31st March, 2014 subject to conditions:
(i) The amount of loan sanctioned for the acquisition of the residential house property does not exceed Rs. 25 lakhs ;
(ii)The value of the residential house property does not exceed Rs.40,00,000/-;
(iii) The assessee does not own any residential house property on the date of the sanction of the loan.
- Contributions made to schemes of Central and State Government similar to Central Government health schemes is also eligible for Section 80D of the Income Tax Act. (w.e.f. 1st April 2014)
- Any income by the way of contribution from a depository, of the Investor Protection
Fund set up by the depository in accordance with the regulations prescribed by SEBI will also be exempted subject to the same conditions as applicable in respect of exemption to an Investor Protection Fund set up by recognized stock exchange.
If any amount which is not taxed in any previous year of such fund, shared with depository will be taxable in the previous year in which such amount is shared with depository in the hand of fund. (w.e.f. 1st April 2014)
- Donations made u/s 80G to National Children’s Funds is also eligible for 100% deduction.
- The Specified Undertaking of Unit Trust of India (SUUTI) has been wounded up and is succeeded by a new company National Financial Holdings Company Limited (NFHCL) which is exempted by an amendment u/s 10 in respect of its income accruing, arising or received on or before 31st March 2014.(retrospectively from 1st April 2013)
- The taxability of gross dividends u/s 115BBD received by an Indian Company from a specified foreign company (in which it has share holding of 26% or more) of Income Tax Act at the rate of 15% is further extended for one more year i.e. F.Y. 2013-14 subject to the same conditions (w.e.f. 1st April 2014)
- For computation of DDT, the amount of dividend declared by the Domestic Company will be reduced by the following amounts of dividend, if any, received by it during the financial year –
a. Dividend received from domestic company if –
(i) the dividend is received from its subsidiary (i.e. in which it holds more than 50 percent of equity shares);
(ii) the subsidiary has paid DDT payable under section 115-O of the Act
b. Dividend received from foreign company (effective from 1 June 2013) if –
(i) the dividend is received from its subsidiary (i.e. in which it holds more than 50 percent of equity shares);
(ii) the tax on such dividend is payable by the domestic holding company under section 115BBD of the Act.
c. Dividends paid to any person for and on behalf of a New Pension System Trust.
- In order to facilitate subscription by a non-resident in the long term Infrastructural Bonds issued by an Indian Company in India, section 194LC has been amended.
Where a non- resident deposits foreign currency in a designated bank account which is solely used for the purpose of deposit of money in foreign currency and when such money after conversion in rupees is utilized for the subscription of a long term Infrastructural Bond issued by an Indian Company then such borrowings by the company shall be deemed to be in Foreign currency and the interest will be taxed at a concessional rate of 5%.
- A new Chapter XII-EA has been introduced were Securitization trust to be exempt from tax. (Amendment w.e.f. 1st June,2013.)
Applicable to: Securitization vehicles set up as a trust whose activities are regulated either by SEBI or RBI. Income from such activities will be exempt from tax.
- STT is levied on the value of taxable securities transactions as follow
|Total Income||Rates||Payable By|
|Until 31 May 2013||From 1
|Purchase/Sale of equity shares (delivery based)||0.1%||0.1%||Purchaser/Seller|
|Purchase of units of equity-oriented mutual fund (delivery based)||0.1%||NIL||Purchaser|
|Sale of units of equity-oriented
mutual fund (delivery based)
|Sale of equity shares, units of
equity-oriented mutual fund (non delivery
|Sale of an option in securities||0.017%||0.017%||Seller|
|Sale of an option in securities, where option is exercised||0.125%||0.125%||Purchaser|
|Sale of a futures in securities||0.017%||0.01%||Seller|
|Sale of unit of equity oriented fund to the Mutual Fund||0.25%||0.001%||Seller|
(Amendment w.e.f. 1st June,2013.)
- Under the provision of the section 115R, Infrastructure Debt fund set up as Non –Banking Finance Company the interest payment made by fund to a non resident investor will be taxable at a concessional rate of 5%. (w.e.f. 1st June 2013)
- Sections 14A & 14B of the wealth Tax Act contains provisions for facilitating filing of annexure-less returns of net wealth in electronic form by certain class of Income Tax assessee. (w.e.f. 1st June 2013)
- Time limit for obtaining approval by private Provident Fund Trusts from Provident Fund authorities to retain recognition under the Act has been extended up to 31 March 2014.
- Existing VCFs/VCCs regulated by the SEBI (Venture Capital Funds) Regulations, 1996 will continue to avail pass-through status so that investors are directly taxable on the income on an accrual basis.
VCF / VCC registered with SEBI as Category I Alternative Investment Fund under the Alternative Investment Funds Regulations granted pass through status subject to the following conditions:
- Such Alternative Investment Funds is not listed on a recognised stock exchange;
- Not less than two-thirds of its investible funds are invested in unlisted equity or equity-linked instruments of a venture capital undertaking;
- No investment has been made by such Alternative Investment Funds in a VCU which is an associate company.
The amendment to be take effect retrospectively from financial 2012-13.
- Investment in Rajiv Gandhi Equity Saving Scheme(RGESS) is Eligible investments for the purpose of sec.80CCG.
- listed units of equity oriented funds is also eligible for the purpose of Sec.80CCG in addition to listed equity shares.
- Benefit of deduction under Sec.80CCG available to resident individuals having gross total income up to INR 1.2 million per annum as compared to INR 1 million per annum. Deduction under Sec.80CCG can be availed for three consecutive years (previously one year) from the year in which eligible investments were first acquired
UNFAVOURABLE POINTS OF BUDGET 2013 – 14 ON DIRECT TAXATION
- There is no change in the in personal as well as corporate tax slab rates.
- Surcharge have been introduced and will be levied at the rate of 10% Individual firm, HUF, Co-operative societies and local authorities if the taxable income exceeds Rs. 1 Crore.
- In case of a Domestic company if the income exceeds 1crore but does not exceed Rs.10 crore then the surcharge levied on them is at the rate of 5%. However if the Income exceeds Rs. 10 crore then the rate of surcharge to be levied is at the rate of 10%.Surcharge on DDT for domestic company increased to 10 percent from 5 percent.
- In case of a Non-Domestic company if the income exceeds 1crore but does not exceed Rs.10 crore then the surcharge levied on them is at the rate of 2%. However if the Income exceeds Rs. 10 crore then the rate of surcharge to be levied is at the rate of 5%.
- A new tax called Commodity Transaction Tax is to be levied on taxable commodities transaction entered into a recognized association. As defined “Taxable Commodity Transaction” means a transaction of sale of commodity derivative in respect of commodities, other than agricultural commodities, traded in recognized associations.
Tax proposed to be levied at the rate, given in the table below, on taxable commodities transactions undertaken by the seller as indicated here under:
|Sr No.||Taxable commodities transaction||Rate||Payable by|
|Sale of commodity derivative||0.01%||Seller|
This tax is proposed to be levied from the date of the Chapter VII of the Finance Bill, 2013 comes into force by the way of notification in the Official Gazette by the Central Government.
- The following incomes in the case of non-resident are taxed at special rates on a gross basis: (w.e.f. 1st April 2014)
|Royalty||For Agreements entered into:
–– On or after 1 April 1961 but before 1
April 1976 – @ 50%
–– On or after 1 April 1976 – @ 25 % (previous 10%)
|Fees for Technical Services||For Agreements entered into:
1. On or after 1 March 1964 but before
1 April 1976 – @ 50%
2. On or after 1 April 1976 – @ 25 % (previous 10%)
- The Permissible Premium rate u/s 10D increased from 10% to 15% of this sum assured by relaxing eligibility conditions of Life Insurance policies for persons suffering from disability and certain ailments. (w.e.f. 1st April 2014).
- Income of Securitisation Trust regulated by SEBI / RBI to be tax-exempt. Income distributed to bear distribution tax at 25 percent (Individual / HUF) and 30 percent (others) and be tax-exempt for investors.
- Penalty in case of failure to pay additional income tax an interest @ 1% will be levied for every month or part of the month on amount of additional income tax not paid within the specified time limit
- Section 194-IA introduced.
In order to have a reporting mechanism of transactions in the real estate sector and also to collect tax at the earliest point of time, tax is to be deducted at 1 percent on sale of Land or building exceeding Rs.50 Lakhs. However Agricultural land is excluded from the same. (Amendment w.e.f. 1st June,2013)
- Amendment in the provisions of Section 10(10D):(Amendment w.e.f. 1st April, 2014)
A keyman insurance policy which has been assigned to any person during its term, with or without consideration, shall continue to be treated as a keyman insurance policy.
- A new Chapter XII-DA Unlisted domestic company buying back the shares from shareholders subject to additional income-tax at the rate of 20percent on distributed income. Income arising to the shareholder as a result of such buy back to be exempt from tax..(w.e.f. 1st June 2013).
- A new section 43CA has been inserted wherein Consideration for transfer of land and building (being stock in trade) to be taken as per stamp duty value as on date of agreement for sale.
If the date of agreement for transfer and the date of registration of transfer are not the same-then the stamp duty value will be taken as on the date of agreement for transfer. However this exception shall apply only in those cases where the amount of consideration for the transfer has been received by any mode other than cash on or before the date of agreement. (w.e.f. 1st April 2014).
- A new amendment has been introduced under the provisions of section 56(2)(vii) wherein Immovable property received for an inadequate consideration.
And if the consideration for which the said immovable property is received is less than stamp duty value by Rs.50,000 or more, then the difference between the stamp duty value and the inadequate consideration shall be taxable in the hands of individual or HUF as Income from other sources.
If the date of agreement for transfer and the date of registration of transfer are not the same-then the stamp duty value will be taken as on the date of agreement for transfer. However this exception shall apply where amount has been received by any mode other than cash on or before the date of agreement (Amendment w.e.f. 1st April, 2014)
- Rationalization of tax on distribution of income by the mutual funds has beenintroduced.
- All types of funds (other than equity oriented funds) will be taxed at the rate of 28.325 percent (inclusive of applicable surcharge and education cess) where distribution is made to individual and HUF
- Infrastructure Debt Fund set up as Mutual Fund will be taxed at the rate of 28.325 percent (inclusive of applicable surcharge and education cess)
- Income distributed by Mutual Fund under Infrastructural Debt Fund Scheme to non -resident investor at the rate of 5.665 percent (inclusive of applicable surcharge and education cess) of income distributed. (Amendment w.e.f. 1st June, 2013)
- No deduction u/s 80 GGB and 80GGC if contribution made in cash. (Amendment w.e.f. 1st April, 2014)
- “Tax due” for the purpose of recovery u/s167C and 179 the tax due will include penalty, interest and any sum payable under the Act. (Amendment w.e.f. 1st June, 2013)
- Deduction u/s 80JJA shall be available to the extent of 30% of additional wages paid to new regular workmen only to an Indian company engaged in manufacturing of goods. Further it shall not be applicable where a factory is hived off or transferred from another existing entity or acquired by the assessee company as a result of amalgamation with another company.
- All the foreign investors will have to produce tax residency certificates (TRC) of their base nation to claim benefits under the Double Taxation Avoidance Treaty from April 1, 2013. It is a necessary but not a sufficient condition to claim the tax treaty benefit. The TRC to be obtained by an assessee, not being a resident in India, from the Government of the country or the specified territory, shall contain the name of the assessee, status as to whether it is an individual or company, its nationality and country wherein it is registered or incorporated.
Besides, the TRC should also have the tax identification number of the assessee, its residential status for the purposes of tax, period for which the TRC is applicable and address of the assessee during that period. (w.e.f. 1st April, 2014)
- Amendment as regards existing liability: wherein the existing liability does not include advance tax payable. (Amendment w.e.f. 1st June, 2013)
- Return of income shall be regarded as ‘defective’ if the self assessment tax together with interest, if any, has not been paid on or before the date of furnishing return of income. (Amendment w.e.f. 1st June, 2013)
- There is an amendment in the section 142(2A) of the Income Tax Act,
The Expression “nature and complexity” of the accounts has been made wider which is as under:
“If at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts or specialized nature of business activity of the assessee, and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief Commissioner or the Commissioner, direct the assessee to get his accounts audited by an accountant and to furnish a report of such audit” (w.e.f.1st June, 2013).
Therefore, The Tax Authorities can direct special third party audit in cases relating to the volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions or specialized nature of business activity of the taxpayer. This amendment to be applicable from 1 June 2013.
- In respect of deduction for bad debts written off in case of specified banks an financial institutions, the deduction to be allowed only if the write-off exceeds the credit balance in the provision for bad and doubtful debt account relating to all types of advances i.e. rural as well as urban branches. (Amendment w.e.f. 1stApril, 2014)
- Distance and population criteria redefined for determining agricultural land and capital asset for the Act and urban land for wealth tax
- In the backdrop of the recommendation of the Expert Committee and Industry at large, the provisions of GAAR modified and made operative from financial year 2015-2016 as against financial year 2013-2014. Key highlights of modifications are as under:
• An arrangement to be treated as an impermissible avoidance arrangement only if the main purpose is to obtain tax benefit as against the earlier provision where one of the main purpose to obtain tax benefit resulted in such classification.
• Factors like time period of the arrangement, payment of taxes (directly o indirectly) and exit route to be relevant but not sufficient from commercial substance perspective.
• An arrangement deemed to lack commercial substance if it has no significant effect on the business risks or net cash flows of any party to the arrangement other than tax benefit attached.
• The Approving Panel to now comprise of a Chairperson who is current or ex judge of a High Court, one member of Indian Revenue Service not below the rank of Chief Commissioner of Income-tax and another member to be of an academic or scholar having special knowledge of matters, such as direct taxes, business accounts and international trade practices.
• The directions issued by the Approving Panel to be binding on the assessee as well as the tax authorities without any right to appeal. Appeal against assessment and reassessment orders passed on directions of the Approving panel to lie directly before the Tribunal.
• The two separate definitions of ‘associated person’ and ‘connected person’ combined into one inclusive definition.
- In computing the taxable income, State Government Undertaking to be ineligible to deduct any royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge levied exclusively by or any amount appropriated directly or indirectly by the State Government.
- Exclusion of time in computing period of limitation for completion of assessment and reassessment.
Amendment in Section 153, Explanation 1, clause (iii):
Time to be excluded is as follows:
Period commencing from the date on which the Assessing Offiicer directs the assessee to get his accounts audited and ending on the date on which the assessee furnishes the audit report.
Where such direction is challenged before the Court , ending with the date on which the order setting aside such direction is received by the Commissioner.
Amendment in Section 153, Explanation 1, clause (vii),
Time to be excluded is as follows:
Commencing from: The date on which a reference or first reference for exchange of information is made by an authority under an agreement referred to in section 90 or section 90A and
Ending on: The date on which such information requested is lat received by the Commissioner.
A period of one year, whichever is less.
Similar amendments are proposed in Section 153B of the income Tax Act relating to time limit for completion of search assessment. (Amendment w.e.f. 1st June, 2013)
- Penalty u/s 271FA for non filing of Annual Information Return. (Amendment w.e.f. 1st April, 2014)
Section 285BA mandates furnishing of AIR by specified persons in respect of specific transactions within the time prescribed under Sub-section (2).
Amendment in Section 271FA : If a person who is required to furnish an annual information return, fails to do so within the specified time under Sub-section (1) of Section 285BA, then he shall be liable to pay a penalty of Rs.100 per day during which the failure continues.
Amendment u/s 271FA :
Sub-section 5 of Section 285BA: The Assessing Officer issues notice to the assessee who has not filed the AIR before the due date.
If a person fails to furnish the return of income within the time specified u/s 285BA(5), he shall be liable to pay a penalty of Rs.500 for every day during which the failure continues,
Beginning from: The day immediately following the day on which the time specified in the notice for furnishing the return expires.