In budget 2009 TDS rates are sought to be amended from 1.10.2009
Section 194C – Payment to Subcontractor
1% in case of Individual or HUF & 2% in case of others.
Section 194I – Rent
2% in case of machinery and 10% in case of land or building.
New Section – 206AA
A new section 206AA is being inserted to ensure PAN compliance.
It provides that any person who is entitled to receive any sum or income or amount on which tax is deductible under Chapter XVIIB shall furnish his PAN to the person responsible for deducting such tax.
If there is a failure, then tax has to be deducted at the higher of the following rates:
(i) At the rate specified in the relevant provisions of this Act; or
(ii) At the rate or rates in force; or
(iii) At the rate of 20%.
So PAN is being made mandatory independently.
Now the question is on payment to foreign companies for whom TDS may be payable, if they do not have PAN should we deduct TDS at the highest rates? Most of them will not have PAN, so what will be the implications? Should they go in for PAN?
Sunday, July 26, 2009
MAT - Minimum Alternate Tax - 115JB Income Tax Act, 1961
Section 115JB of Income Tax Act, 1961 sets out provision for calculation of Minimum Alternate tax.
If a company whose tax payable works out to less than 15% (amended in Finance Act, 2009 from 10%) of book profit then the company has to pay tax at 15% of book profit. For example if a company has Rs.100 crores as taxable income and its liability is to pay 33.99% tax (after adding surcharge) which works out to Rs.33.99 crores. However if for this company the book profit is Rs.600 crores and 15% of this Rs.600 crores is Rs.90 crores. Then the company is liable to pay Rs.101.97 crores (effective rate of MAT is 16.95% after adding surcharge and cess on 15%) as income tax and not Rs.33.99 crores.
For purpose of arriving at book profit section 115JB comes out with specific guidelines for addition, and ofcourse creates innumerable complications.
To add to these set of complications in this budget of 2009-10 a new amendment has been carried out in section 115JB retrospectively from 1.4.2001 (to negate a Supreme court judgement in CIT Vs HCL Comnet Systems and Services Ltd. (2008) 305 ITR409), under which “any amount set aside as a provision for diminution in the value of any asset would also be added back for calculation of book profit” – meaning thereby any provision for bad debts would require to be added back while calculating book profit.
Question which comes to every one’s mind is – why give all the exemptions, and then try to tax companies which avail of these exemptions? Is this efficient tax administration? On top of taxing allowing them to avail credit of this tax for next 10 years when they have actual taxable income more than 15% of book profit!!
Are these value additions!! I have serious doubts as this leads to innumerable interpretations and takes time away from the courts.
If a company whose tax payable works out to less than 15% (amended in Finance Act, 2009 from 10%) of book profit then the company has to pay tax at 15% of book profit. For example if a company has Rs.100 crores as taxable income and its liability is to pay 33.99% tax (after adding surcharge) which works out to Rs.33.99 crores. However if for this company the book profit is Rs.600 crores and 15% of this Rs.600 crores is Rs.90 crores. Then the company is liable to pay Rs.101.97 crores (effective rate of MAT is 16.95% after adding surcharge and cess on 15%) as income tax and not Rs.33.99 crores.
For purpose of arriving at book profit section 115JB comes out with specific guidelines for addition, and ofcourse creates innumerable complications.
To add to these set of complications in this budget of 2009-10 a new amendment has been carried out in section 115JB retrospectively from 1.4.2001 (to negate a Supreme court judgement in CIT Vs HCL Comnet Systems and Services Ltd. (2008) 305 ITR409), under which “any amount set aside as a provision for diminution in the value of any asset would also be added back for calculation of book profit” – meaning thereby any provision for bad debts would require to be added back while calculating book profit.
Question which comes to every one’s mind is – why give all the exemptions, and then try to tax companies which avail of these exemptions? Is this efficient tax administration? On top of taxing allowing them to avail credit of this tax for next 10 years when they have actual taxable income more than 15% of book profit!!
Are these value additions!! I have serious doubts as this leads to innumerable interpretations and takes time away from the courts.
Reverse Mortgage
Reverse Mortgage
Reverse mortgage is a model created for securing income for senior citizens, utilizing asset in his possession. The operation of this scheme is quite simple. Senior citizen who is the owner of a house can mortgage his house with a bank and either avail a loan either as a lumpsum amount or deferred payment on a periodic basis (monthly / quarterly / yearly). This amount can be either utilized to pay off old debts or to manage running expenses.
This mortgage amount should be repaid if the senior citizen decides to sell his home. Otherwise on his death the bank will sell this property and recover the mortgage amount. There is an option left with the inheritors of this property, they can settle the mortgage and retain the house
This is an excellent tool for senior citizens to have liquidity as well as retain their asset. However till now this scheme has met with limited success in India, due to lack of awareness and Indian culture of passing on property and not debt to the next generation.
Reverse mortgage is a model created for securing income for senior citizens, utilizing asset in his possession. The operation of this scheme is quite simple. Senior citizen who is the owner of a house can mortgage his house with a bank and either avail a loan either as a lumpsum amount or deferred payment on a periodic basis (monthly / quarterly / yearly). This amount can be either utilized to pay off old debts or to manage running expenses.
This mortgage amount should be repaid if the senior citizen decides to sell his home. Otherwise on his death the bank will sell this property and recover the mortgage amount. There is an option left with the inheritors of this property, they can settle the mortgage and retain the house
This is an excellent tool for senior citizens to have liquidity as well as retain their asset. However till now this scheme has met with limited success in India, due to lack of awareness and Indian culture of passing on property and not debt to the next generation.
Saturday, July 25, 2009
Appointment of Whole Time / Managing Director
Section 269 of the Companies Act provides for appointment of Whole Time Director.
Section 316 of the Companies act prohibits a person to be Managing or Whole Time Director in more than one company. If he desires to be a Managing Director in another Company then the company should pass a special resolution in the board meeting for such appointment and all directors present in the meeting should provide their consent. At times Central Government by order permint any person to be appointed as Managing Director in more than 2 companies if they are satisfied and it is necessary for the companies proper working to have a common managing director (ie) companies in the same group can have one managing director.
Section 316 of the Companies act prohibits a person to be Managing or Whole Time Director in more than one company. If he desires to be a Managing Director in another Company then the company should pass a special resolution in the board meeting for such appointment and all directors present in the meeting should provide their consent. At times Central Government by order permint any person to be appointed as Managing Director in more than 2 companies if they are satisfied and it is necessary for the companies proper working to have a common managing director (ie) companies in the same group can have one managing director.
Should I File Return if taxable income below taxable limit
Section 139(1)(b) states that any person having a taxable income to file returns.
Section 139(1)(b) also states that even though a person does not have taxable income but is in possession of any of the following :
1) An immovable property
2) A car
3) A cellular Phone
4) Has travelled to a foreign country on his own expense
5) Has a credit card (not a "add-on" card)
6) is a member of a club whose entrace fees is more than Rs.25000
Should file a return.
So check your stauts and file the return as required by law.
Section 139(1)(b) also states that even though a person does not have taxable income but is in possession of any of the following :
1) An immovable property
2) A car
3) A cellular Phone
4) Has travelled to a foreign country on his own expense
5) Has a credit card (not a "add-on" card)
6) is a member of a club whose entrace fees is more than Rs.25000
Should file a return.
So check your stauts and file the return as required by law.
Friday, July 24, 2009
Gift Tax in India - Section 56(2)(vii) of Income Tax Act, 1961
Gift Tax in India a brief run down
History
Gifts were taxed under The Gift tax Act, 1958 which was made in-operational from 1.10.1998. In the finance act 2004 a new section 56(2)(v) was introduced in the Income Tax Act, 1961, under which Gift if they are more than Rs.25,000 are taxable as “Income from Other Sources”. For the period 1.9.2004 to 1.4.2006 this was applicable. From 1.4.2006 Gift worth more than Rs.50,000 were taxed as “Income from Other Sources” under section 56(2)(vi) of The Income Tax Act, 1961.
Features of Gift Tax
History
Gifts were taxed under The Gift tax Act, 1958 which was made in-operational from 1.10.1998. In the finance act 2004 a new section 56(2)(v) was introduced in the Income Tax Act, 1961, under which Gift if they are more than Rs.25,000 are taxable as “Income from Other Sources”. For the period 1.9.2004 to 1.4.2006 this was applicable. From 1.4.2006 Gift worth more than Rs.50,000 were taxed as “Income from Other Sources” under section 56(2)(vi) of The Income Tax Act, 1961.
Features of Gift Tax
- This provision applies only to individuals and HUF (Hindu Undivided Family) (ie) only these category of assesses need to pay Gift Tax.
- Gifts from Relatives are 100% exempt – meaning this provision applies only for gifts from non relatives. Relative means :
o Spouse of the individual;
o Brother or sister of the individual;
o Brother or sister of the spouse of the individual;
o Brother or sister of either of the parents of the individual;
o Any lineal ascendant or descendant of the individual;
o Any lineal ascendant or descendant of the spouse of the individual; and
o Spouse of the person referred to in clauses (ii) to (vi).
- Gifts received at the time of marriage from a relative or non relative is exempted
- Gifts received under these special circumstances from non relatives are also exempt. The Special circumstances are as under
o Gift received under a Will or by way of inheritance;
o Gift in contemplation of death of the donor;
o Gift from any local authority;
o Gift from any fund or foundation or university or other educational institution or hospital or any trust or any institution referred to in Section 10(23C); and
o Gift from any trust or institution, which is registered as a public charitable trust or institution under Section 12AA.
- Gifts in kind are exempted upto 1.10.2009 (ie) only gift received in cash was taxed upto 1.10.2009 – from 1.10.2009 a new section has been introduced 56(2)(vii) in The Income Tax Act, 1961 under which the following gifts exceeding value of Rs.50,000 are also taxable
(i) immovable property being land or building or both;
(ii) shares and securities;
(iii) jewellery;
(iv) archaeological collections;
(v) drawings;
(vi) paintings;
(vii) sculptures; or
(viii) any work of art;
Income Tax Returns - AY 2009-10
Want help to file income tax returns ITR1 & ITR2, a simple and efficient way to do is to log into Economic times website http://economictimes.indiatimes.com/etonlinetaxfile.cms they have a online free software which helps you fill in ITR1 or ITR2 as per your requirement and also allows you to print the forms.
This online form is very user friendly and I can guarantee that you can finish your returns in 30 minutes.
Please have a try "Happy Income tax Returns!!"
This online form is very user friendly and I can guarantee that you can finish your returns in 30 minutes.
Please have a try "Happy Income tax Returns!!"
Section 26A of Customs Act, 1962 – Refund of Import Customs Duty on Defective imported goods
Chapter IV of Finance (No.2) Bill, 2009 has proposed a new section 26A in The Customs Act, 1962. This new amendment proposes to refund the import customs duty on rejected imported goods. Refund of import duty will be allowed if :
a. the imported goods are found to be defective or not in conformity with the specifications and they should not have been reworked or repaired or used after import
b. the defect / wrong specification should be identified to the satisfaction of the Assistant or Deputy Commissioner of Customs
c. the importer should not claim any drawback on this import
d. the goods should be exported back or destroyed in presence of proper officer or abandoned it at customs within 30 days of approval by Assistant or Deputy Commissioner
e. Application for refund should be made within 6 months of the relevant date (ie) the date on which exported or destroyed or abandoned.
This is a welcome provision, as hitherto the importers were losing the customs duty when they received defective materials.
a. the imported goods are found to be defective or not in conformity with the specifications and they should not have been reworked or repaired or used after import
b. the defect / wrong specification should be identified to the satisfaction of the Assistant or Deputy Commissioner of Customs
c. the importer should not claim any drawback on this import
d. the goods should be exported back or destroyed in presence of proper officer or abandoned it at customs within 30 days of approval by Assistant or Deputy Commissioner
e. Application for refund should be made within 6 months of the relevant date (ie) the date on which exported or destroyed or abandoned.
This is a welcome provision, as hitherto the importers were losing the customs duty when they received defective materials.
Special Additional Tax - Uttar Pradesh VAT
Uttar Pradesh State Government in order to augment revenue from VAT has issued a Notification No.K.A.NI-2-1169 dated 29.05.2009 directing payment of a new tax “Special Additional Tax” of 0.5% for Schedule 2 items (VAT 4%) and “Special Additional Tax” of 1% for Schedule 5 items (VAT 12.5%). This “Special Additional Tax” SAT is payable from 1.6.2009 and should be shown separately in the invoice as this SAT is eligible for VAT credit.
Governments are caretakers of people and the society and hence they are the best judges to decide on quantum of revenue required, but when they act with a little or no planning is what affects the business community at large. The notification for the new tax was issued on 29.05.2009 which is a Friday to be implemented from 1.6.2009 which is a Monday.
We being honest tax payers will like to follow all regulations to the last word. But a new tax, a separate line item in the invoice, is it possible to change over the weekend? Further this notification was issued and there was no publicity for the same, we have to come to know from our lawyers? What is the necessity to carry out this amendment with just 2 days lead time? Can not the Government plan ahead or can it not give 1 month notice and commence from 1.7.2009.
These short notice changes leave companies scurrying for changes in their software, working methods. These days with network softwares like SAP it is not easy to change it has its own lead time and cost involved.
Tax authorities please take note of these practical difficulties before changing legislations.
Governments are caretakers of people and the society and hence they are the best judges to decide on quantum of revenue required, but when they act with a little or no planning is what affects the business community at large. The notification for the new tax was issued on 29.05.2009 which is a Friday to be implemented from 1.6.2009 which is a Monday.
We being honest tax payers will like to follow all regulations to the last word. But a new tax, a separate line item in the invoice, is it possible to change over the weekend? Further this notification was issued and there was no publicity for the same, we have to come to know from our lawyers? What is the necessity to carry out this amendment with just 2 days lead time? Can not the Government plan ahead or can it not give 1 month notice and commence from 1.7.2009.
These short notice changes leave companies scurrying for changes in their software, working methods. These days with network softwares like SAP it is not easy to change it has its own lead time and cost involved.
Tax authorities please take note of these practical difficulties before changing legislations.
Tuesday, July 7, 2009
Indian Union Budget 2009-10 Significant Changes
1. Personal Income tax rates have gone down by 3% (10% surcharge removed), so tax will be lower by Rs.10,000 per month (GBP 140 per month)
2. Income tax exemption limit increased by Rs.25,000 for senior citizens and by Rs.10,000 for all others
3. Deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability being raised from the present limit of Rs.75,000 to Rs.1 lakh.
4. No change in corporate tax rates
5. Wealth tax exemption limit increased from Rs.15 lacs to Rs.30 lacs from 1.4.2010
6. Uniform GST (Goods and service tax) will be introduced from 1.4.2010 – so one tax all over India (simplification?)
7. No change in excise or customs duties – so no change in price of products at the moment – some small cosmetic changes (corrections) have been carried out
8. FBT abolished (Fringe Benefit Tax) – but to see from when this has been removed. We have paid advance tax in June – how to get refund?
9. Service tax unchanged – Service tax levied introduced on movement of goods through rail, inland waterways, Legal advice & consultancy (from a firm & not individual practisioners), Cosmetic and Plastic surgeries
10. MAT – Minimum Alternate tax increased from 10% to 15% - there are companies which show profit in the books, but show loss to the taxman – due to various exemptions, these companies are taxed using this MAT. Companies are crying hoarse on this as their tax goes up.
2. Income tax exemption limit increased by Rs.25,000 for senior citizens and by Rs.10,000 for all others
3. Deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability being raised from the present limit of Rs.75,000 to Rs.1 lakh.
4. No change in corporate tax rates
5. Wealth tax exemption limit increased from Rs.15 lacs to Rs.30 lacs from 1.4.2010
6. Uniform GST (Goods and service tax) will be introduced from 1.4.2010 – so one tax all over India (simplification?)
7. No change in excise or customs duties – so no change in price of products at the moment – some small cosmetic changes (corrections) have been carried out
8. FBT abolished (Fringe Benefit Tax) – but to see from when this has been removed. We have paid advance tax in June – how to get refund?
9. Service tax unchanged – Service tax levied introduced on movement of goods through rail, inland waterways, Legal advice & consultancy (from a firm & not individual practisioners), Cosmetic and Plastic surgeries
10. MAT – Minimum Alternate tax increased from 10% to 15% - there are companies which show profit in the books, but show loss to the taxman – due to various exemptions, these companies are taxed using this MAT. Companies are crying hoarse on this as their tax goes up.
Thursday, July 2, 2009
Remittances to Non Residents - Section 195 - Form 15CB & 15CA
Remittances to Non Residents – Section 195
Vide file No.142/19/20007-IPL Ministry of Finance has issued revised procedures for furnishing information regarding remittances being made to non residents.
This revised procedure comes into effect from 1.7.2009, which states as follows :
Form 15CB – the remitter of funds should get a certificate from an auditor in Form 15CB
Form 15CA – is to be filled in and transmitted electronically in website http://www.tin-nsdl.com/
Form 15CA should contain details as contained in Form 15CB
As soon as form 15CA is transmitted, this form 15CA should be printed, this print out will contain an automatically generated acknowledgement number.
Form 15CA should be signed by the authorized signatory and should be submitted in duplicate along with form 15CB to RBI through authorized dealer (bank)
RBI / Authorised dealer will forward one copy to the income tax Assessing Officer
Instructions for filling up form 15CA & form 15CB are available in website http://www.incometaxindia.gov.in/
Format of Form 15CA & Form 15CB are available in website http://www.tin-nsdl.com/
Vide file No.142/19/20007-IPL Ministry of Finance has issued revised procedures for furnishing information regarding remittances being made to non residents.
This revised procedure comes into effect from 1.7.2009, which states as follows :
Form 15CB – the remitter of funds should get a certificate from an auditor in Form 15CB
Form 15CA – is to be filled in and transmitted electronically in website http://www.tin-nsdl.com/
Form 15CA should contain details as contained in Form 15CB
As soon as form 15CA is transmitted, this form 15CA should be printed, this print out will contain an automatically generated acknowledgement number.
Form 15CA should be signed by the authorized signatory and should be submitted in duplicate along with form 15CB to RBI through authorized dealer (bank)
RBI / Authorised dealer will forward one copy to the income tax Assessing Officer
Instructions for filling up form 15CA & form 15CB are available in website http://www.incometaxindia.gov.in/
Format of Form 15CA & Form 15CB are available in website http://www.tin-nsdl.com/
Tax Reforms - GST Rollout
Union Government as part of providing stimulus to the manufacturing sector reduced excise duty from 14.42% to 10.3% and then subsequently to 8.24%. Whether this has the desired effect on the economy with increased demand due to lower prices of manufacturing products is debatable as there was no substantial changes in economic growth. On the other hand lower excise duty has affected revenue of the Central government as lower collections on excise front has increased fiscal deficit for the year. With union budget around the corner on 6th of July there is lot of talk on increasing excise duties again. I do not think this increase in excise duty will affect manufacturing industries as price increase due to increase in excise duty will not have a negative effect on demand and consumption as this will be quite marginal to an effect of 2% to 4%.
The challenge facing manufacturing industry due to these frequent tax changes is changes in their software handling billing, accounting, legal compliance etc. There will be a huge transactional cost on this front and this again will have to be passed on to the consumers.
Last month the UP government introduced a new component in their VAT tax called SAT of 0.5% over and above the VAT rates. This needed immediate change in software of all manufacdturing companies, again added to costs.
Urgent need of today is not tinkering with tax rates but tax reforms in a large scale like immediate implementation of GST so that tax management is simple and cost efficient for corporates and they do not pass on this cost to consumers.
Tax Reforms will bring down costs and not Tax Tinkering.
The challenge facing manufacturing industry due to these frequent tax changes is changes in their software handling billing, accounting, legal compliance etc. There will be a huge transactional cost on this front and this again will have to be passed on to the consumers.
Last month the UP government introduced a new component in their VAT tax called SAT of 0.5% over and above the VAT rates. This needed immediate change in software of all manufacdturing companies, again added to costs.
Urgent need of today is not tinkering with tax rates but tax reforms in a large scale like immediate implementation of GST so that tax management is simple and cost efficient for corporates and they do not pass on this cost to consumers.
Tax Reforms will bring down costs and not Tax Tinkering.
Wednesday, July 1, 2009
New TDS Changes Notification 31/2009
Government of India, Ministry of Finance, issued Notification No.31/2009 dated 25.3.2009 amending provisions of Rules 30, 31, 31A and 31AA of the Income tax Rules, 1962. The salient features of this notification are as follows.
1. Electronic payment of tax is compulsory. Online payment through RBI or SBI or any authorised bank allowed. Debit and Credit card payment also allowed.
2. A new Form 17 has been notified (instead of the earlier form No.281). This form has among other things space for a “UTN” (Unique Transaction number) which is generated automatically for every TDS deduction online. This UTN has to be mentioned in form 16 or 16A to claim deduction
3. TDS certificates should be issued in the new notified form 16 or form 16A (as required). The new notified forms have space for “UTN” and this number is compulsory to be mentioned in form 16 / form 16A
4. A new TDS compliance statement in 24C should be filed quarterly, 15th July, 15th October, 15th January and 15th June for the quarter ending March 31st.
5. Statements in form 24Q (Salary), 27Q (Foreigners), 27Q (all other TDS) should hereinafter filed annually on or before 15th July following the financial year
Effective Date of this notification was earlier set at 1.4.2009 which was postponed to 1.7.2009. However Press Release dated 30.06.2009 has postponed indefinitely operation of this notification.
1. Electronic payment of tax is compulsory. Online payment through RBI or SBI or any authorised bank allowed. Debit and Credit card payment also allowed.
2. A new Form 17 has been notified (instead of the earlier form No.281). This form has among other things space for a “UTN” (Unique Transaction number) which is generated automatically for every TDS deduction online. This UTN has to be mentioned in form 16 or 16A to claim deduction
3. TDS certificates should be issued in the new notified form 16 or form 16A (as required). The new notified forms have space for “UTN” and this number is compulsory to be mentioned in form 16 / form 16A
4. A new TDS compliance statement in 24C should be filed quarterly, 15th July, 15th October, 15th January and 15th June for the quarter ending March 31st.
5. Statements in form 24Q (Salary), 27Q (Foreigners), 27Q (all other TDS) should hereinafter filed annually on or before 15th July following the financial year
Effective Date of this notification was earlier set at 1.4.2009 which was postponed to 1.7.2009. However Press Release dated 30.06.2009 has postponed indefinitely operation of this notification.
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