INSTRUCTIONS FOR FILLING UP RETURN OF NET WEALTH (FORM BB)

18th July 2014

INSTRUCTIONS FOR FILLING UP RETURN OF NET WEALTH (FORM BB)
(To be detached before filing the return in a paper form)
This form is to be filled up by all wealth-tax assessees [individual, Hindu Undivided Family (HUF) or company]. This form is applicable for assessment years 2014-15 and subsequent years.
These notes are meant to help you in filling up this return form. They are not a substitute for law. Notes are given only in respect of items that need some explaining.
GENERAL
Ø   Every individual or HUF or company, whose net wealth exceeds the maximum amount which is not chargeable to wealth tax is obligated to furnish his return of net wealth.
Ø   This is an annexure-less return and shall not be accompanied by a statement showing the computation of the tax payable on the basis of the return, or proof of the tax and interest paid, or any document or copy of any account or form of report of valuation by registered valuer required to be attached with the return of net wealth under any provisions of the Wealth-tax Act, 1957. In case return is filed in paper form, all such documents enclosed with the return will be detached and returned to the person filing the return.
Ø   This return shall be furnished electronically under digital signature. However, for assessment year 2014-15, an individual or a Hindu Undivided Family to whom the provisions of section 44AB of the Income-tax Act, 1961 are not applicable may furnish this return in paper form. From the assessment year 2015-16 and subsequent assessment years, this return form shall be furnished by all assessees electronically under digital signature.
Ø   All Parts and Columns must be filled in the manner provided hereunder. If any Part or column does not apply, please mention NA (Not Applicable) and do not put any mark or symbol.
Ø   In case of return filed in paper form, if space provided under any item of the Return Form is found insufficient, then give the computation in respect of such item on separate sheet(s) using the columns indicated for the purpose under the said item in the Return Form and attach that to the Return. The sum totals of such computation done should be indicated in the columns provided under the relevant item in the Return Form. Similarly, any other information asked for in this Form, which cannot be completely furnished on account of paucity of space, may be furnished on a separate sheet.
Ø   Sections referred in these instructions are the sections of the Wealth-tax Act, 1957 and references to rules are references to the rules of the Wealth-tax Rules, 1957.
BRIEF SCHEME OF THE LAW
Computation of net wealth
Ø   Value of an asset, for an assessment year is to be declared as on the valuation date. Valuation date in relation to an assessment year under the Wealth-tax Act, 1957 means the last day of the previous year as defined in section 3 of the Income-tax Act, 1961. Thus, for the Assessment Year 2014-15, the valuation date will be 31.3.2014.
Ø   Value of an asset, other than cash, is to be determined on the basis of the rules in Schedule III to the Wealth-tax Act, 1957.
Ø   In the computation of net wealth including net wealth of other persons includible in assessee’s net wealth on the valuation date, the assessee is to furnish in the given columns details of all immovable and movable property held by him and held by any other person which are includible in his/her net wealth of the valuation date.


Ø   Details of immovable properties mentioned in section 2(ea) of the Wealth-tax Act, 1957 held by the assessee or by any other person includible in his/her net wealth on the valuation date are:-
(i)   Any building or land appurtenant thereto (hereinafter referred to as “house”) whether used for residential or commercial purposes or for the purpose of maintaining a guest house or otherwise including a farm house situated within twenty-five kilometers from local limits of any municipality (whether known as Municipality, Corporation or by any other name) or a Cantonment board, but does not include –
(1)  a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than ten lakh rupees
(2)  any house for residential or commercial purposes which forms part of stock-in-trade;
(3)   Any house which the assessee may occupy for the purposes of any business or profession carried on by him.
(4)  any residential property that has been let out for a minimum period of the three hundred days in the previous year;
(5)  Any property in the nature of commercial establishments or complexes;
“Urban land” means land situate—
(i)   in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or
(ii)   in any area within the distance, measured aerially,—
(I)    not being more than two kilometers, from the local limits of any municipality or cantonment board referred to in sub-clause (i) and which has a population of more than ten thousand but not exceeding one lakh; or
(II) not being more than six kilometers, from the local limits of any municipality or cantonment board referred to in sub-clause (i) and which has a population of more than one lakh but not exceeding ten lakh; or
(III)    not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in sub-clause (i) and which has a population of more than ten lakh,
The definition of urban land excludes the following:
(A)    Land classified as agricultural land in the records of the Government and used for agricultural purposes;
(B)    Land on which construction of a building is not permissible on account of any law or the time being in force;
(C)    Land occupied by any building which has been constructed with the approval of the appropriate Authority.
(D)   Unused land held by the assessee for industrial purposes for a period of two years from the date of its acquisition by him;


(E)   Any land held by the assessee as stock-in-trade for a period of ten years from the date of its acquisition by him; and
ØDetails of assets belonging to any other person but includible in net wealth of the assessee:
(i)       Assets transferred to certain relatives or to other persons for the benefit of those relatives or assets transferred under revocable transfer. [Section 4(1)(a)(i), 4(1)(a)(iii), 4(1)(a)(v), 4(1)(a)(vi)].
(ii)     Assets held by a minor child not being a married daughter of such individual except assets acquired by the minor child from his income referred to in the proviso to subsection (IA) of section 64 of the Income-tax Act, and held on the valuation date. Where the marriage subsists, these assets are includible in the hands of the parent, whose net wealth is greater, and where the marriage does not subsist, in the net wealth of the parent maintaining the minor child.
(ii)      “Assets held by a physically or mentally handicapped minor child as specified in section 80U of the Income-tax Act, will not be clubbed with the net wealth of the parent.”
(iii)    Interest of a minor child admitted to the benefits of partnership in the assets of a firm. [Section 4(1)(b)]
(iv)    Individual property of assessee converted into the property of Hindu Undivided Family after 31.12.1969. [Section 4(1A)].
(v)    Moneys gifted by means of book entries [Section 4(5A)].
Ø  Clause (m) of section (2) of the Wealth-tax Act provides that only debts which have been incurred in relation to the assets assessable to wealth-tax will be allowed to be deducted in computing the net wealth.
Ø  Under the provisions of section 6, in the case of an individual who is not a citizen of India or of an individual or Hindu Undivided Family not resident in India or resident but not ordinarily resident in India, or of a company not resident in India during the year ending on the valuation date, the value of assets located outside India is not to be included in the net wealth.
Ø  All sheets must be signed by the assessee.
PAGEWISE SCHEME OF THIS FORM
SHEET – 1
Ø  Part A-GEN (Personal Information, Filing Status):
ü  It is compulsory to quote PAN.
ü  Use block letters only throughout to fill in this form.
ü  Please tick þappropriate box.
ü  State the section under which the return is filed. In case of revised return, please furnish Receipt No. and date of filing.
Ø  Part B-NW (Computation of net wealth): Against items 1 to 5, transfer the appropriate figures from the appropriate items of applicable schedules, as indicated.
Ø  Part B-TNW (Computation of tax liability on net wealth): Mention amount payable against item 5 and refundable amount against item 6. As the refund, if any, shall be directly deposited into the


bank account of the assessee, it is mandatory to furnish the requested details of bank account against item 7.
SHEET – 2
Ø  Part B-TP (Details of Tax and Interest paid): Furnish the correct BSR Code of the bank branch, date of deposit (in the DD/MM/YYYY format) and Challan Serial Number as mentioned in challan.
Ø  VERIFICATION: Read the instructions below the verification carefully before signing it. Fill allthe relevant columns in the verification. Give the place and date as indicated.
Ø  Schedule IP (Immovable Property):
ü  Furnish the details of all immovable properties, mentioned in section 2(ea)(i) or section 2(ea)(v), held by the assessee whether located in or outside India. Value of immovable property should be declared as per the relevant rules of Schedule III to the Wealth-tax Act, 1957.
ü  In Sl. No.1, 2 and 3, furnish complete description, address including of all immovable properties.
ü  In Sl. No.4, indicate the value of the immovable property as calculated on the basis of provisions of the relevant rules of Schedule III to the Wealth-tax Act, 1957.
ü  In Sl. No.5, indicate the amount of debts owed, if any, separately in relation to each of the immovable property.
ü  In Sl. No.7, 8 and 9, in case of valuation by registered valuer, furnish the name of registered valuer, registration number of the valuer and the date of report of the valuer.
Ø  Schedule MP [Movable Property (other than jewellery, etc.)]: Furnish the value as per the relevant rules of the Schedule III to the Wealth-tax Act, 1957 and debt owed in relation to motor cars, referred to in section 2(ea)(ii), yacht, etc. referred to in section 2(ea)(iv) and cash in hand referred to in section 2 (ea)(vi).
SHEET – 3
Ø  Schedule JE (Jewellery, etc.):
ü  Furnish the details of all items of jewellery, bullion, etc. referred to in section 2(ea)(iii) in this schedule.
ü  In Sl.No.1 to 5, furnish the complete description, weight, etc. of precious metal and precious or semi precious stone.
ü  In Sl.No.6 to 8, furnish the value of jewellery as per as per the relevant rules of the Schedule III to the Wealth-tax Act, 1957.
ü  As per rule 18(2) of the Schedule III to the Wealth-tax Act, 1957 the return of net wealth is required to be supported by a statement in the prescribed form, if the value of the jewellery on the valuation date does not exceed Rs. 5 lakhs or the report of the registered valuer in the prescribed form, if the value of the jewellery on the valuation date exceeds Rs. 5 lakh.
ü  The statement or the valuation report as mentioned in Rule 18(2) of Schedule III to the Wealth-tax Act, 1957 is not required to be furnished along with the return but the details of valuation report i.e. the name of registered valuer, registration no. of the valuer and the date of report are required to be filled in Sl.No. 9 to 11.


Ø  Schedule INW (Includible net wealth of other person): Mention the name of the person, relationship, PAN, value, etc. in respect of assets belonging to any other person but includible in the net wealth of the assessee.
Ø  Schedule IFA [Interest held in the assets of a firm or association of persons (AOP) as a partner or member thereof]:
ü  Furnish following details in respect of interest held as partner in a firm or as a member of an AOP:-
(i)      Name and address of each firm in which interest is held as a partner.
(ii)    Name and address of each firm(s)/AOP(s) in which interest is held as a member.
(iii)    PAN of Firm(s)/AOP(s)
(iv)  Name of other partners/Members
(v)    Assessee’s Profit Sharing Ratio in percentage.
(vi)   The value of the interest in the firm or AOP is to be determined as per relevant rule of Schedule III to the Wealth-tax Act, 1957.
(vii)Debt owed, if any, in relation to meet interest is to be shown separately for each firm(s)/AOP(s).
ü  The value of the interest of a minor child in the assets of a firm in which he is admitted to the benefit of partnership in such a firm is to be included in the assessee’s net wealth under the provisions of the proviso to section 4(1)(b), should also be indicated at (i) above.
Ø  Schedule ACE [Assets referred to in section 2(ea) which are claimed as exempt under section 5]: Furnish the details of assets exempt under section 5 of the Wealth-tax Act, 1957. These are as under:-
(a)     Any property held by the assessee under trust or other legal obligation for any public purpose of a charitable or religious nature in India.
(b)    The interest of the assessee in the coparcenary property of any HUF of which the assessee is a member, since the asset is already liable to tax in the hands of the HUF.
(c)    Any one building which was in the occupation of a Ruler, which before the commencement of the Constitution (Twenty-sixth) Amendment was declared as his official residence.
(d)     Jewellery in the possession of a Ruler, not being his personal property, and recognised by the government as his heirloom or which the Board had recognised as his heirloom at the time of his first assessment to wealth-tax.
(e)     Moneys and value of assets, or the value of assets acquired by a person of India origin or citizen of India who was residing outside India if he returns to India with the intention of permanently residing in India. The exemption is provided for a period of seven successive assessment years commencing with the assessment year next following his return to India.
(f)     In case of individual or HUF, one house or part of a house or a plot of land comprising an area of five hundred square meters or less.


SHEET – 4
Ø  Schedule OPR (Other properties):
ü  This schedule is to be filled only by an individual or a HUF. A company is not required to fill this schedule.
ü  In this schedule, furnish the complete details of all immovable and movable property held by the assessee, as on the valuation date, other than the following:
a.     assets which are liable for Wealth tax Act, 1957, the details of which are already required to be furnished in other schedules of this return form.
b.    assets claimed as exempt under section 5, the details of which are required to be furnished in Schedule ACE;
c.     assets located outside India and are excluded under section 6 based on the citizenship or residential status of the assessee; or
d.     assets being part of business or profession which is subject to audit under section 44AB of the Income-tax Act, 1961.

Section 54/54F exemption restricted to investment in one residential house only

Section 54/54F exemption restricted to investment in one residential house only
Proposed amendment by FB,2014 on Section 54/54F exemption is now end all disputes  regarding Capital gain investment. These amendments will take effect from 1st April, 2015 and will accordingly apply in relation to assessment year 2015-16 and subsequent assessment years.
Proposed Amendment
The Finance Bill, 2014 proposes to restrict the benefits under sections 54 and 54F for investment in purchase or construction of one residential house in India. Following two changes are proposed in section 54F:
(a)  Benefit under section 54F shall be allowed only for investment in one residential house; and
(b)  Such benefit shall not be allowed if investment is made in purchase or construction of a residential house which is situated outside India.

Judicial Rulings
Various Tribunals and High Courts have allowed exemptions to assessee under sections 54 and 54F for investment in multiples houses. The exemptions under sections 54 and 54F were introduced to encourage people to invest in new residential houses for the purpose of their self-occupation. These exemptions were not contemplated to incentivize the taxpayers purchasing the residential accommodations as a part of their investment portfolio.The proposed amendment would overcome the following legal precedents:
Exemption under section 54 is available when two flats are purchased and combined to make them one residential unit. Section 13 of the General Clauses Act was referred to which states that whenever the singular is used for a word, it is permissible to include the plural – CIT v. D. Ananda Basappa [2009] 180 Taxman 4 (Kar.).
The expression ‘a residential house’ should be understood in a sense that the building should be of residential nature and ‘a’ should not be understood to indicate a singular number – CIT v. Smt. K.G. Rukminiamma [2010] 8 taxmann.com 121/[2011] 196 Taxman 87(Kar.).
Four residential flats constituted ‘a residential house’ for the purpose of section 54 of the Act – Dr. Smt. P.K. Vasanthi Rangarajan v. CIT [2012] 23 taxmann.com 299/209 Taxman 628 (Mad.).
The fact that residential house consists of several independent units cannot be permitted to act as an impediment to allowance of deduction under section 54/54F of the Income-tax Act – CIT v. Gita Duggal [2013] 30 taxmann.com 230/214 Taxman 51 (Delhi).
Purchase of 2 flats adjacent to one another having a common meeting point would fulfil the requirement of exemption provisions of section 54 of the Income-tax Act – CIT v. Syed Ali Adil [2013] 33taxmann.com 212/215 Taxman 283 (AP).
The Tribunal’s decisions on allowability of deductions under section 54F for investment made outside India:

In Vinay Mishra v. Asstt. CIT [2013] 30 taxmann.com 341/141 ITD 301 (Bang.) it was held that a residential property acquired outside India is also eligible for exemption under section 54.
However, in Leena J.Shah v. Asstt. CIT [2006] 6 SOT 721 (Ahd.) it was held that for availing of exemption under section 54 the property acquired/constructed must be within India.

Finance Bill, 2014-Overview of changes in Direct taxes



 Finance Bill, 2014-Overview of changes in Direct taxes
Finance Bill, 2014-Overview of changes in Direct taxes
Rates of Income-tax
Additional Resource Mobilisation Measures
Measures to Promote Socio-economic Growth
Relief and Welfare Measures
Widening of Tax Base and Anti Tax Avoidance Measures
Rationalisation Measures
1.Rates of income-tax in respect of income liable to tax for the assessment year 2014-2015
Same as those laid down in Part III of the First Schedule to the Finance Act, 2013, for the purposes of computation of “advance tax”, deduction of tax at source from “Salaries” and charging of tax payable in certain cases
2.Rates for deduction of income-tax at source during the financial year 2014-2015 from certain incomes other than“Salaries”.
Specified in Part II of the First Schedule to the Bill(The rates for all the categories of persons will remain the same as those specified in Part II of the First Schedule to the Finance Act, 2013, for the purposes of deduction of income-tax at source during the financial year 2013-2014)
3. Rates for deduction of income-tax at source from “Salaries”, computation of “advance tax” and charging of
Income-tax in special cases during the financial year 2014-2015.
The rates for deduction of income-tax at source from “Salaries” during the financial year 2014-2015 and also for computation of “advance tax” payable during the said year in the case of all categories of assessees have been specified in Part III of the First Schedule to the Bill.
The salient features of the rates specified in the said Part III——-Refer Appendix 1
4.Dividend and Income Distribution Tax
Section 115-O :For the purposes of determining the tax on distributed profits payable in accordance with the section 115-O, any amount by way of dividends referred to in sub-section (1) of the said section, as reduced by the amount referred to in sub-section (1A) [referred to as net distributed profits], shall be increased to such amount as would, after reduction of the tax on such increased amount at the rate specified in sub-section (1), be equal to the net distributed profits.
Section 115-R: For the purposes of determining the additional income-tax payable in accordance with sub-section (2) of the said section, the amount of distributed income shall be increased to such amount as would, after reduction of the additional income-tax on such increased amount at the rate specified in sub-section (2), be equal to the amount of income distributed by the Mutual Fund.
w.e.f.1st October, 2014.
5.Long-term Capital Gains on debt oriented Mutual Fund and its qualification as Short-term capital asset
Amendment in section clause (42A) of section 2 so as to provide that an unlisted security and a unit of a mutual fund (other than an equity oriented mutual fund) shall be a short-term capital asset if it is held for not more than thirty-six months.
w.e.f. 1st April, 2015
6.Tax on long-term capital gains on units
Section 112: Amendment in the provisions of section 112 so as to allow the concessional rate of tax of ten per cent. on long term capital gain to listed securities (other than unit) and zero coupon bonds.
w.e.f. 1st April, 2015
7.Taxation Regime for Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (Invit)
A specific taxation regime for providing the way the income in the hands of Taxation Regime for Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (Invit is to be taxed and the taxability of the income distributed by such business trusts in the hands of the unit holders of such trusts.
(i) The listed units of a business trust, when traded on a recognised stock exchange, would attract same levy of securities transaction tax (STT), and would be given the same tax benefits in respect of taxability of capital gains as equity shares of a company i.e., long term capital gains, would be exempt and short term capital gains would be taxable at the rate
of 15%.
(ii) In case of capital gains arising to the sponsor at the time of exchange of shares in SPVs with units of the business trust, the taxation of gains shall be deferred and taxed at the time of disposal of units by the sponsor. However, the preferential capital gains regime (consequential to levy of STT) available in respect of units of business trust will not be available to the sponsor in respect of these units at the time of disposal. Further, for the purpose of computing capital gain, the cost of these units shall be considered as cost of the shares to the sponsor. The holding period of shares shall also be included in the holding period of such units.
(iii) The income by way of interest received by the business trust from SPV is accorded pass through treatment i.e., there is no taxation of such interest income in the hands of the trust and no withholding tax at the level of SPV. However, withholding tax at the rate of 5 per cent. in case of payment of interest component of income distributed to non-resident unit holders, at the rate of 10 per cent. in respect of payment of interest component of distributed income to a resident unit holder shall be effected by the trust.
(iv) In case of external commercial borrowings by the business trust, the benefit of reduced rate of 5 per cent. tax on interest payments to non-resident lenders shall be available on similar conditions, for such period as is provided in section 194LC of the Act.
(v) The dividend received by the trust shall be subject to dividend distribution tax at the level of SPV but will be exempt in the hands of the trust, and the dividend component of the income distributed by the trust to unit holders will also be exempt.
(vi) The income by way of capital gains on disposal of assets by the trust shall be taxable in the hands of the trust at the applicable rate. However, if such capital gains are distributed, then the component of distributed income attributable to capital gains would be exempt in the hands of the unit holder. Any other income of the trust shall be taxable at the maximum marginal rate.
(vii) The business trust is required to furnish its return of income.
(viii) The necessary forms to be filed and other reporting requirements to be met by the trust shall be prescribed to implement the above scheme.
w.e.f. 1st October, 2014.
8.Investment Allowance to a Manufacturing Company
Extension of extend deduction available under section 32AC of the Act for investment made in plant and machinery up to 31.03.2017.
Deduction under section 32AC of the Act shall be allowed if the company on or after 1st April, 2014 invests more than Rs.25 crore in plant and machinery in a previous year.
Assessee who is eligible to claim deduction under the existing combined threshold limit of Rs.100 crore for investment made in previous years 2013-14 and 2014-15 shall continue to be eligible to claim deduction under the existing provisions contained in sub-section (1) of section 32AC even if its investment in the year 2014-15 is below the proposed new threshold limit of investment of Rs. 25 crore during the previous year.
w.e.f. 1st April, 2015
9.Extension of the sunset date under section 80-IA for the power sector
With a view to provide further time to the undertakings to commence the eligible activity to avail the tax incentive, it is proposed to amend the section 80-IA to extend the terminal date for a further period up to 31st March, 2017 i.e. till the end of the 12th Five Year Plan.
w.e.f. 1st April, 2015
10.Deduction in respect of capital expenditure on specified business
-Section 35AD investment-linked tax  for the purposes of the “specified business”
Include two new businesses as “specified business”
(a) laying and operating a slurry pipeline for the transportation of iron ore;
(b) setting up and operating a semiconductor wafer fabrication manufacturing unit, if such unit is notified by the Board in accordance with the prescribed guidelines.
– insert sub-section (7A) in section 35AD to provide that any asset in respect of which a deduction is claimed and allowed undersection 35AD, shall be used only for the specified business for a period of eight years beginning with the previous year in which such asset is acquired or constructed.
– Amendment in  section 35AD so as to provide that where any deduction has been availed of by the assessee on account of capital expenditure incurred for the purposes of specified business in any assessment year, no deduction under section 10AA shall be available to the  assessee in the same or any other assessment year in respect of such specified business.
As a consequence of this amendment, section 10AA is also proposed to be amended so as to provide that no deduction under section 35AD shall be available in any assessment year to a specified business which has claimed and availed of deduction under section 10AA in the same or any other assessment year.
w.e.f. 1st April, 2015
11.Raising the limit of deduction under section 80C
Raising the limit of deduction allowed under section 80C from the existing Rs. 1 lakh to Rs.1.5 lakh. In view of the same, consequential amendments are proposed in sections 80CCE and 80CCD of the Act.
w.e.f. 1st April, 2015
12.Deduction from income from house property
Amendment in the second proviso to clause (b) of said section 24, so as to increase the limit of deduction on account of interest in respect of property referred to in sub-section (2) of section 23 to two lakh rupees.
w.e.f. 1st April, 2015
13.Concessional rate of tax on overseas borrowing
Amendment in section 194LC to extend the benefit of this concessional rate of withholding tax to borrowings by way of issue of any long-term bond, and not limited to a long term infrastructure bond(concessional rate of withholding tax will now be available in respect of borrowings made before 1st day of July, 2017(earlier 1st July 2015)
Section 206AA of the Act provides for levy of higher rate of withholding tax in case the recipient of income does not provide permanent account number to the deductor. An exception from applicability of section 206AA in respect of payment of interest on long-term infrastructure bonds eligible for benefit under section 194LC is currently provided in sub-section (7) of this section.
w.e.f. 1st October, 2014.
14.Reduction in tax rate on certain dividends received from foreign companies
Section 115BBD Foreign dividends received in financial year 2014-15 and subsequent financial years shall continue to be taxed at the lower rate of 15%.
15.Roll back provision in Advance Pricing Agreement Scheme
Section 92CC: Amendment of the Act to provide roll back mechanism in the APA scheme. The APA may, subject to such prescribed conditions, procedure and manner, provide for determining the arm’s length price or for specifying the manner in which arm’s length price is to be determined in relation to an international transaction entered into by a person during any period not exceeding four previous years preceding the first of the previous years for which the advance pricing agreement applies in respect of the international transaction to be undertaken in future.
w.e.f. 1st October, 2014.
16.Characterisation of Income in case of Foreign Institutional Investors
any security held by foreign institutional investor which has invested in such security in accordance with the regulations made under the SEBI Act, 1992 would be treated as capital asset only so that any income arising from transfer of such security by a Foreign Portfolio Investor (FPI) would be in the nature of capital gain.
w.e.f. 1st April, 2015
 [
17.Alternate Minimum Tax
Section 115 JC: Amendment in  Section 115 JC so as to provide that total income shall be increased by the deduction claimed under section 35AD for purpose of computation of adjusted total income.The amount of depreciation allowable under section 32 shall, however, be reduced in computing the adjusted total income.
w.e.f. 1st April, 2015
18.Taxability of advance for transfer of a capital asset
Inserted a new clause (ix) in sub-section (2) of section 56 to provide for the taxability of any sum of money,received as an advance or otherwise in the course of negotiations for transfer of a capital asset. Such sum shall be chargeableto income-tax under the head ‘income from other sources’ if such sum is forfeited and the negotiations do not result in transfer of such capital asset.
A consequential amendment in clause (24) of section (2) is also being made to include such sum in the definition of the term ‘income’.
w.e.f. 1st April, 2015
19.Tax deduction at source from non-exempt payments made under life insurance policy
A new section in the Act to provide for deduction of tax at the rate of 2 per cent. on sum paid under a life insurance policy, including the sum allocated by way of bonus, which are not exempt under section 10(10D) of the Act.
 In order to reduce the compliance burden on the small tax payers, it has also been proposed that no deduction under this provision shall be made if the aggregate sum paid in a financial year to an assessee is less than Rs.1,00,000/-.
w.e.f. 1st October, 2014.
 [
Refer Appendix 2


Appendix 1
A.    Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person.
Upto Rs.2,50,000                                                                 Nil.
Rs. 2,50,001 to Rs. 5,00,000                                                10 per cent.
Rs. 5,00,001 to Rs. 10,00,000                                              20 per cent.
Above Rs. 10,00,000                                                            30 per cent.
B.    In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year,—
Upto Rs.3,00,000                                                                 Nil.
Rs. 3,00,001 to Rs. 5,00,000                                                10 per cent.
Rs. 5,00,001 to Rs.10,00,000                                               20 per cent.
Above Rs. 10,00,000                                                            30 per cent.
C.     in the case of every individual, being a resident in India, who is of the age of eighty years or more at anytime during the previous year,—
Upto Rs. 5,00,000                                                                Nil.
Rs. 5,00,001 to Rs. 10,00,000                                              20 per cent.
Above Rs. 10,00,000                                                            30 per cent.
 Appendix 2- Rationalisation Measures

20.Signing and verification of return of income
Amendment in section 140 of the Act so as to provide that the return shall be verified by the persons specified therein. The manner of verification of return is prescribed under section 139 of the Act.
w.e.f. 1st October, 2014.
21.Rationalisation of taxation regime in the case of charitable trusts and institutions
The existing provisions of section 11 of the Act provide for exemption to trusts or institutions in respect of income derived from property held under trust and voluntary contributions subject to various conditions contained in the said section. The primary condition for grant of exemption is that the income derived from property held under trust should be applied for the charitable purposes, and where such income cannot be applied during the previous year, it has to be accumulated in the modes prescribed and applied for such purposes in accordance with various conditions provided in the section. If the accumulated income is not applied in accordance with the conditions provided in the said section, then such income is deemed to be taxable income of the trust or institution.
Section 13 of the Act provides for the circumstances under which exemption under section 11 or 12 in respect of whole or part of income would not be available to a trust or institution.
The sections 11, 12, 12A, 12AA and 13 constitute a complete code governing the grant or withdrawal of registration and its cancellation, providing exemption to income, and also the conditions under which a charitable trust or institution needs to function in order to be eligible for exemption. They also provide for withdrawal of exemption either in part or in full if the relevant conditions
are not fulfilled.
Several issues have arisen in respect of the application of exemption regime in cases of trusts or institutions in respect of which clarity in law is required.
The first issue is regarding the interplay of the general provision of exemptions which are contained in section 10 of the Act vis.-a-vis. the specific and special exemption regime covered in sections 11 to 13. As indicated above, the primary objective of providing exemption in case of charitable institution is that income derived from the property held under trust should be applied and utilised for the object or purpose for which the institution or trust has been established. In many cases it has been noted that trusts or institutions which are registered and have been claiming benefits of the exemption regime do not apply their income, which is derived from property held under trust, for charitable purposes. In such circumstances, when the income becomes taxable, then a claim of exemption under general provisions of section 10 in respect of such income is preferred and tax on such income is avoided. This defeats the very objective and purpose of placing the conditions of application of income etc. in respect of income derived from property under trust in the first place.
Sections 11, 12 and 13 are special provisions governing institutions which are being given benefit of tax exemption, it is therefore imperative that once a person voluntarily opts for the special dispensation it should be governed by these specific provisions and should not be allowed flexibility of being governed by other general provisions or specific provisions at will. Allowing such flexibility has undesirable effects on the objects of the regulations and leads to litigations.
Similar situation exists in the context of section 10(23C) which provides for exemption to funds, institution, hospitals, etc. which have been granted approval by the prescribed authority. The provision of section 10(23C) also have similar conditions of accumulation and application of income, investment of funds in prescribed modes etc.
Therefore, it is proposed to amend the Act to provide specifically that where a trust or an institution has been granted registration for purposes of availing exemption under section 11, and the registration is in force for a previous year, then such trust or institution cannot claim any exemption under any provision of section 10 [other than that relating to exemption of agricultural income and income exempt under section 10(23C)]. Similarly, entities which have been approved or notified for claiming benefit of exemption under section 10(23C) would not be entitled to claim any benefit of exemption under other provisions of section 10 (except the exemption in respect of agricultural income).
The second issue which has arisen is that the existing scheme of section 11 as well as section 10(23C) provides exemption in respect of income when it is applied to acquire a capital asset. Subsequently, while computing the income for purposes of these sections, notional deduction by way of depreciation etc. is claimed and such amount of notional deduction remains to be applied for charitable purpose. Therefore, double benefit is claimed by the trusts and institutions under the existing law. The provisions need to be rationalised to ensure that double benefit is not claimed and such notional amount does not get excluded from the condition of application of income for charitable purpose.
In view of the above, it is also proposed to amend the Act to provide that under section 11 and section 10(23C), income for the purposes of application shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under these sections in the same or any other previous year.
w.e.f. 1st April, 2015

22.Clarification in respect of section 10(23C) of the Act
Amendment in section 10(23C) by inserting an Explanation that if the Government grant to a university or other educational institution, hospital or other institution during the relevant previous year exceeds a percentage (to be prescribed) of the total receipts (including any voluntary contributions), of such university or other educational institution, hospital or other institution, as the case may be, then such university or other educational institution, hospital or other institution shall be considered as being substantially financed by the Government for that previous year.
w.e.f. 1st April, 2015

23.Cancellation of registration of the trust or institution in certain cases
Amendment in section 12AA of the Act to provide that where a trust or an institution has been granted registration, and subsequently it is noticed that its activities are being carried out in such a manner that,—
(i) its income does not enure for the benefit of general public;
(ii) it is for benefit of any particular religious community or caste (in case it is established after commencement of the Act);
(iii) any income or property of the trust is applied for benefit of specified persons like author of trust, trustees etc.; or
(iv) its funds are invested in prohibited modes,
then the Principal Commissioner or the Commissioner may cancel the registration if such trust or institution does not prove that there was a reasonable cause for the activities to be carried out in the above manner.
w.e.f. 1st October, 2014.
24.Anonymous donations under section 115BBC
Amendment in section 115BBC to provide that the income-tax payable shall be the aggregate of the amount of income-tax calculated at the rate of thirty per cent on the aggregate of anonymous donations received in excess of five per cent of the total donations received by the assessee or one lakh rupees, whichever is higher, and the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the aggregate of the anonymous donations which is in excess of the five per cent of the total donations received by the assessee or one lakh rupees,as the case may be.

w.e.f. 1st October, 2014.

Maximum exemption limit raised to Rs. 2.5 lakhs for an individual

Maximum exemption limit raised to Rs. 2.5 lakhs for an individual

July 10, 2014

1:10 PMThursday
Clean energy cess increased from Rs 50/tonne to Rs 100/tonne
1:09 PMThursday
Excise duty hiked on aerated waters with sugar content
1:07 PMThursday
Basic rates of customs duty @ 10%, excise duty @ 12% and service tax @ 12% remains intact!
1:05 PMThursday
Cigarettes, Cigars, Pan Masala, Gutka – to attract more excise duty !
1:05 PMThursday
Sugary carbonated drinks to get dearer
1:02 PMThursday
Footwear to go cheaper – excise duty reduced from 12% to 6%
1:01 PMThursday
TV sets, Solar power units, computers, oil products, soaps becomes cheaper
1:00 PMThursday
Cigarettes and other tobacco products shall be costlier
12:58 PMThursday
Excise duty on footwear reduced
12:58 PMThursday
Customs duty cut to nil on import of LCD, LED Panels below 19 inch
12:56 PMThursday
Govt. reduces basic customs duty on LCD/LED telivisions
12:56 PMThursday
Customs duty reduced on certain types of coals
12:55 PMThursday

Income of funds from portfolio investments shall be deemed as capital gains

Controversy over categorization of income of foreign investors funds as capital gains or business income shall end with this proposal.

12:54 PMThursday
Imported electronics goods to cost more. A cess to be introduced
12:54 PMThursday
Portfolio income of FIIs to be to be treated as capital gains
12:53 PMThursday
Govt to provide investment allowance at 15% for 3 years to manufacturing company investing more than Rs 25 crore
12:53 PMThursday
Import duty on steel increased from 5% to 7.5%
12:51 PMThursday
To boost manufacturing sectors – customs duty reduced on certain inputs such as fatty acids, etc.
12:51 PMThursday
10 year tax holiday for power companies starting production and distribution on or before March 31, 2017
12:50 PMThursday
FM starts Indirect tax proposals
12:49 PMThursday
Govt. shall considers pubic comments received on DTC
12:46 PMThursday
Multiple year data can be used for comparability for TP study: FM
12:45 PMThursday
Road map for APA schemes to be introduced
12:44 PMThursday
Concessional rate of 5% on interest extended to all types of bonds
12:43 PMThursday
No sunset date for concessional rates for foreign dividends
12:43 PMThursday
Concessional rate of tax on dividend from foreign subsidiaries continues
12:43 PMThursday
15% allowance to manufacturing companies investing Rs 20 crores in plant and machinery
12:42 PMThursday
Investment Linked deductions extended to two more sectors
12:41 PMThursday

No change in tax rates for corporate tax payers

Maximum exemption limit for an individual increased to Rs. 2,50,000 from existing Rs. 2,00,000. Senior citizen can avail maximum exemption limit for Rs. 3,00,000.

12:40 PMThursday
Deduction for Interest on Housing Loan increased to Rs. 2,00,000
12:40 PMThursday
Investment limit under Sec. 80C increased to Rs. 1.5 Lacs
12:39 PMThursday
Senior Citizen are not liable to pay tax on income upto Rs. 3,00,000
12:39 PMThursday
Maximum exemption limit raised to Rs. 2.5 lakhs for an individual
12:38 PMThursday
Proposes to retain tax target proposed in interim budget
12:37 PMThursday
FM Starts tax proposals
12:37 PMThursday
Rs 100 crore for training of sports persons for upcoming Asian Games.
12:35 PMThursday
FM announces “Arun Prabha” channel for NorthEast region; will be 24/7 channel.
12:31 PMThursday
Rs. 1,000 crores to improve Rail Connectivity
12:30 PMThursday
Rs. 500 crores to support Displaced Kashmiri Migrants
12:29 PMThursday
Proposes establishment of Sports University in Manipur
12:24 PMThursday
National Police Memorial to be constructed
12:21 PMThursday
Rs 229,000 crore allocated for Defence in contrast to 2,24,000 in interim budget
12:19 PMThursday
Special small saving scheme to be introduced for the education of girl child: Arun Jaitley
12:15 PMThursday
Increasing NPA in public sector banks is a matter of concern: FM
12:14 PMThursday
FM porposes one demat account for all financial products
12:14 PMThursday
Taxation issues for foreign funds with Indian managers to be clarified – FM
12:12 PMThursday
Accounting Standards for Banks and Insurance sector would be notified seperately
12:12 PMThursday
FM Proposes liberalization of ADR/GDR regime
12:11 PMThursday
Uniform KYC norms for entire financial sector: FM
12:09 PMThursday
Rs 500 crore for solar power development project in Tamil Nadu and Rajasthan
12:09 PMThursday
Revisions of rate of Royalty for State Government will be undertaken soon
12:08 PMThursday
New airports to be developed through PPP mode in tier-II and tier-III cities
12:07 PMThursday
Investment in road highways to the tune of Rs 37,887 crore
12:05 PMThursday
Slum development to be included in Corporate Social Responsibility activities.
12:04 PMThursday
Allahabad-to-Haldia Ganga waterway project announced
12:04 PMThursday
Road Sector needs huge amount of investment: Jaitley
12:01 PMThursday
Focus on encouraging entrepreneurship – especially in rural sector and for SMEs!
12:00 PMThursday
Committed to revive Special Economic Zones: Jaitley
12:00 PMThursday
Proposes establishment of export promotion mission
11:59 AMThursday
Rs. 10,000 crores allocated to encourage start-up entities
11:59 AMThursday
Better infrastructure and facilitation proposed in manufacturing sector to promote exports..
11:57 AMThursday
MSME are backbone of Indian Economy: FM
11:56 AMThursday
All stake holders for export to be brought under one umbrella: FM
11:54 AMThursday
Rs. 100 crores for organic farming developments
11:53 AMThursday
Govt to provide finance to 5 lakh landless farmers through NABARD: FM
11:53 AMThursday
Continues existing interest subvention schemes for farmers
11:52 AMThursday
Committed to sustaining 4% growth in agriculture, extend credit to joint farming groups
11:51 AMThursday
Funds set up to boost Long Term Investment in agriculture
11:51 AMThursday
Allocation of funds for increasing Warehousing Capacity
11:48 AMThursday
National Adaptation Fund for climate change
11:47 AMThursday
Arun Jaitley takes a ‘five-minute break’ from budget speech. House adjourned
11:46 AMThursday
Market tumbles with Arun Jaitley’s Budget
11:45 AMThursday
Allocates Rs. 400 crores to incentivise the development of low cost housing
11:41 AMThursday
Rs 100 crore for Metro in Lucknow and Ahmedabad.
11:35 AMThursday
Four more IITs to be set up
11:35 AMThursday
Five more IIMs to be set up
11:32 AMThursday
Online courses given emphasize, Rs. 100 crores proposed for this
11:31 AMThursday
Rs 150 crores for the Home Ministry to spend on women’s safety
11:29 AMThursday
Uproar in Parliament over proposal for creation of new states
11:28 AMThursday
Safe drinking water shall be provided to rural areas in next three years: FM
11:27 AMThursday
Women’s safety: Rs 100 crores provided for Beti Bachcao, Beti Padhao Yojana
11:27 AMThursday
Support for Rural Housing continues in current year with Rs. 8,000 crores: FM
11:26 AMThursday
Rs. 100 crores provided for Rural entrepreneurship programme
11:26 AMThursday
FM announces schemes for disabled persons in the country.
11:25 AMThursday
Rs 200 crore set aside to support Sardar Patel statue installtion: FM
11:24 AMThursday
Committee to be set up on how to invest these unclaimed amounts and invest for benefits of senior citizens: FM
11:24 AMThursday
These unclaimed amounts belong to senior citizens: FM
11:24 AMThursday
Large no. of amount lying unclaimed in PPF and saving accounts: FM
11:17 AMThursday
Total sanitation shall be achieved by 2019: FM
11:17 AMThursday
Irrigations facilities to be improved to reduce dependence on rains: FM
11:16 AMThursday
FM proposes measures to encourage development of smart cities
11:15 AMThursday
To boost Tourism e-visas to be introduced in phased manner
11:14 AMThursday
FM raises FDI in defense up from 26 to 49 % with Indian management and control.
11:13 AMThursday
Banking system to be further strengthen
11:12 AMThursday
FDI in manufacturing sector – Sale through retail sector and e-commerce platform without any additional approval: FM
11:11 AMThursday
FDI in insurance sector increased to 49%
11:10 AMThursday
Constitution of more benches of Advance Ruling, FM assures
11:10 AMThursday
FM in favour of Enlarging scope of SetCom
11:09 AMThursday
Transfer Pricing is the major area of litigation: FM
11:08 AMThursday
Indirect transfer cases will be scrutinized by high level committee to be constituted by CBDT
11:07 AMThursday
We are committed to provide certain tax laws which are tax payer friendly: FM
11:06 AMThursday
Government will not bring any retrospective amendment which is unfair to the tax payers: FM
11:06 AMThursday
I assure that Government will fair with the state government: FM
11:06 AMThursday
Matter discussed with the State and will bring final solution for GST this year: FM
11:06 AMThursday
Debate over GST issue must come to an end: FM says
11:05 AMThursday
BJP Government is dedicated to Minimum Government and Maximum Governance: FM
11:04 AMThursday
We have to take bold steps to enhance Indian economy: FM
11:03 AMThursday
Iraq crises leaving behind impact on oil prices: FM says
11:03 AMThursday
Decline of fiscal deficit were mainly achieved by reduction in expenditure: FM says
11:02 AMThursday
We can’t go on spending today which shall be financed by tax of future day: FM
11:00 AMThursday
People have voted for a change. India desires to grow: FM
11:00 AMThursday
Reducing the fiscal deficit is the aim of current Government: Arun Jaitley says

10:59 AMThursday
My aim is to lay down broad policies: FM







Last update 12.48 AM

Budget  2014-15: Income tax highlights
Ø  Investment limit under Sec. 80C increased to Rs. 1.5 Lacs
Ø  Senior Citizen are not liable to pay tax on income upto Rs. 3,00,000
Ø  Maximum exemption limit raised to Rs. 2.5 lakhs for an individual
Ø  Multiple year data can be used for comparability for TP study
Ø  Road map for APA schemes to be introduced
Ø  Concessional rate of 5% on interest extended to all types of bonds
Ø  No sunset date for concessional rates for foreign dividends
Ø  Concessional rate of tax on dividend from foreign subsidiaries continues
Ø  15% allowance to manufacturing companies investing Rs 20 crores in plant and machinery
Ø  Investment Linked deductions extended to two more sectors

Ø  No change in tax rates for corporate tax payers

Changes in tax return forms for A/Y 2014-15


Changes in tax return forms for A/Y 2014-15


Return form**
Changes in tax return forms for A/Y 2014-15
ITR 1, 2, 3, 4, 5, 6, 7
Matching Concept: Unclaimed TDS/TCS of earlier year can be claimed in current year
Certain provisions of TDS (including TCS) require deduction of tax at source at the time of payment or at the time of credit, whichever occurs earlier. Resulting advance payments are also subjected to TDS. Old ITR form did not have any mechanism to carry forward the excess TDS, thus, taxpayers were required to show the entire TDS as a deduction and claim refund of excess TDS. To fix the issues, the Schedule TDS/TCS introduces two new columns:
(a)
Unclaimed TDS/TCS brought forward
Financial Year in which deducted/collected
Amount brought forward
(b)
TDS/TCS being claimed this year from amount brought forward or from TDS/TCS of current financial year.
ITR 3, 4, 5, 6, 7
Transactions with Cyprus, being a non-co-operative tax jurisdiction, to be reported in ITR Forms
Every transaction entered into with a person located in jurisdiction notified in section 94A shall be reported in new ITR forms. Central Government has notified ‘Cyprus’ for the purposes of section 94A for not providing the information requested for by Indian tax authorities under ‘Exchange of Information’ provisions of treaty between India and Cyprus. With notification of Cyprus as non-co-operative tax jurisdiction, the following ramifications shall follow:
An assessee entering into a transaction with a person in Cyprus shall be treated as associated enterprises and the transaction shall be treated as an ‘International Transaction’. Consequently, transfer pricing regulations and maintenance of documentations shall be made applicable.
No deduction in respect of any payment made to any financial institution in Cyprus shall be allowed, unless the assessee furnishes an authorization allowing for seeking relevant information from the said financial institution.
No deduction in respect of any other expenditure or allowance arising from the transaction with a person located in Cyprus shall be allowed unless the assessee maintains and furnishes the prescribed information.
If any sum is received from a person located in Cyprus, the onus would be on the assessee to explain the source of such money in the hands of such person or in the hands of the beneficial owner. In case of his failure to do so, the amount shall be deemed to be the income of the assessee.
Any payment made to a person located in Cyprus shall be liable for withholding tax at the rate of 30% or a rate prescribed in the Act, whichever is higher.
ITR 1, 2, 3, 4, 5, 7
Initiative for Speedy refund of taxes: Refund to be credited to bank account only
Earlier taxpayers had an option to claim refund of tax through cheque or credit into its bank account.
As per new forms, facility of getting refund via cheque has been dispensed with and assessee shall get credit of refund of taxes directly into his bank account.
ITR 5, 6
Unique Identification Numbers issued by MCA to be reported in ITR Forms:
Domestic Company or LLP shall mention a unique Corporate Identity Number (CIN)/LLP identification number (‘LLPIN’) issued by the MCA in the tax return filed in new ITR form.
CIN/LLPIN is allotted on and from the date mentioned in the certificate of incorporation of a company/LLP, which shall be a distinct identity for the company/LLP.
CIN/LLPIN is allotted to create unique identity of each and every company/LLP incorporated in India.
DIN issued by MCA to each Director shall be reported in return filed by a corporate assessee. DIN is a unique identity number allotted to an individual who intends to be appointed as director of a company or is an existing director of a company. There is a prohibition on obtaining more than one DIN.
Designated partner identification number (DPIN) is issued by MCA to each designated partner and has to be reported in return filed by a LLP. DPIN is a unique identity number allotted to an individual who intends to be appointed as designated partner of LLP or is an existing partner of LLP. There is a prohibition on obtaining more than one DPIN.
ITR 6
Buy-back of shares to be reported by closely held company
Unlisted companies, as part of tax avoidance scheme, were resorting to buy-back of shares instead of payment of dividends. Consequently, such companies were avoiding payment of Dividend Distribution Tax and capital gains tax, as shareholders were either not chargeable to tax on such buy-back of shares or were taxable at a lower rate.
In order to curb such practice a new Chapter XII-DA was inserted by the Finance Act, 2013, to provide that the consideration paid by the company for purchase of its own unlisted shares which is in excess of the sum received by the company at the time of issue of such shares (distributed income) will be charged to tax. The company would be liable to pay additional income-tax at 20% of the distributed income paid to the shareholders. In this case, the income arising to the shareholders from such buy-back would be exempt.
Thus, a new Schedule BBS is inserted wherein a domestic company shall report all shares which were bought back from its shareholders during the year.
ITR 6
Liability for MAT of Insurance, Electricity and Banking Co. being governed by special Acts
The Finance Act, 2012 substituted section 115JB(2) to provide that Insurance, Banking or Electricity company shall prepare its profit and loss account for the relevant previous year in accordance with the provisions of the Act governing such company. Such amendment put an end to litigations which provided that MAT provisions would not be applicable in case of companies which were not required to prepare financial statements as per Schedule VI of the Companies Act, 1956.
Accordingly, a new row is added in Schedule MAT which seeks response from the taxpayer (being a banking, insurance or electricity co.) whether profit and loss account is prepared in accordance with the provisions of the Act governing such company.
ITR 4
Furnish PAN of debtor responsible for bad-debts
Every person claiming deduction of bad debts is required to specify PAN of the debtor, if available, responsible for bad debts. This requirement is specified if quantum of bad debts is Rs. 1 lakh or more.
Such requirement was already available in old Forms of ITR 5 and ITR 6. It is now introduced in ITR 4.
Information on Advance Pricing Agreements (‘APA’)
ITR 2, 3, 4
Modified return filed under section 92CD to give effect to APA
Section 92CD was inserted by the Finance Act, 2012 with effect from July 1, 2012 to provide a framework for APA. Section 92CD(1) provides that a person who has entered into the APA shall furnish a modified return in accordance with and limited to the APA, if prior to the date of entering into the APA, any return of income has been furnished under section 139.
In new ITR Form an option is given to choose return filed under section 92CD. This option was already available in old ITR forms 5, 6 and 7, but now introduced in ITR Forms 2, 3 and 4.
ITR 2, 3, 4, 5, 6, 7
Date of APA
An assessee is required to report date of APA if return was filed under section 92CD after entering into the APA.
Upgraded computation sheet for Capital Gains
ITR 2, 3, 4, 5, 6
New Schedule on Capital Gains provides for a detailed mechanism for computation of capital gains. Major takeaways from Schedule CG are as under:
New form provides additionally for computation of short-term capital gains in following cases:
(a)
Sale of land or building or both as per provisions of section 50C, i.e., full value of consideration viz-a-viz stamp valuation
(b)
Sale of securities by FIIs which is taxable as per provisions of section 115AD
New form provides additionally for computation of long-term capital gains in following cases:
(a)
Sale of land or building or both as per provisions of section 50C, i.e., full value of consideration viz-a-viz stamp valuation
(b)
Sale of bonds or debentures (other than capital indexed bonds issued by Government)
(c)
Sale of bonds or GDRs by a non-resident which is taxable as per provisions of section 115AC
(d)
Sale of securities by FIIs which is taxable as per provisions of section 115AD
The Schedule CG in ITR forms of earlier years could not allow computations of capital gains from individual assets, especially land and building, thereby making it difficult for the taxpayers to correlate the exemptions with rollover of investments. With more categorization, the claim for exemptions would be easier to compute and claim.
Capital gains, short-term and long-term, are taxable at different rates so the ITR forms add more rows for taxability of such capital gains at different rates.
Details for intra-head adjustments under section 70 shall be provided along with computation of capital gains under the Schedule CG.
New cells inserted to obtain more specific information:
ITR 4, 5, 6
Expenditure disallowable under sections 36 and 37
The New ITR forms require taxpayers to provide specific information to the extent possible. Accordingly, it inserts new cells to disclose expenditures which are disallowable under specific provisions of the Income-tax Act as under:
(a)
Amount of contribution to a pension scheme referred to in section 80CCD [section 36(1)(iva)]
(b)
Amount of securities transaction paid in respect of transaction in securities, if such income is not included in business income [36(1)(xv)]
(c)
Expenditure of capital nature [section 37(1)]
(d)
Expenditure laid out or expended wholly and exclusively not for the purpose of business or profession [section 37(1)]
Privilege or license fee or royalty paid by State Undertaking to State Government
Disputes have arisen during assessment of some State Government undertakings as to whether any sum paid by way of privilege fee, license fee, royalty, etc., levied or charged by the State Government exclusively on its undertakings are deductible or not for the purposes of computation of income of such undertakings?
Therefore, a new sub-clause (iib) has been inserted in section 40(a) to provide that any amount paid by way of fee, charge, etc., which is levied exclusively on, or any amount appropriated directly or indirectly, from a State Government undertaking, by the State Government, shall not be allowed as deduction for the purposes of computation of income of such undertakings under the head ‘Profits and gains of business or profession’.
Deemed Income under section 43CA
The Finance Act, 2013 has introduced a new section 43CA which provides that stamp duty value shall be considered for the purpose of computation of income under the head ‘Profits and Gains of Business or Profession’ in respect of transactions relating to land or building or both. Any deemed income, i.e., excess of stamp duty value over actual sales consideration, if any, shall be reported in new ITR Form.
Intra-head adjustments:
Details for intra-head adjustments under section 70 shall be provided along with computation of business profits under the Schedule BP.
Sections 10A and 10AA deductions
Entities claiming exemptions under sections 10A and 10AA shall provide the relevant Assessment Years in which eligible units began manufacturing or production.
ITR 2, 3, 4, 5, 6
Income chargeable at different rates to be reported specifically
Some incomes are taxable at a concessional rate or at a flat rate. New cells have been inserted to disclose these incomes and tax thereon separately. Taxability of certain incomes at special rates under sections 115AD, 115AB, 115AC, 115AD, etc., shall be reported in Schedule SI. Example: Short-term capital gains taxable at 15%, 30% or at normal rate, long-term capital gains taxable at 10% or 20%, etc.
ITR 4
Date of furnishing audit reports under sections 92E and 115JC
Person who is liable to furnish following audit reports is required to mention the date of furnishing of such reports.
1.
Report under section 92E – Every taxpayer who has entered into an international transaction or specified domestic transaction is required to obtain a report from an accountant and furnish such report on or before the specified date. The audit report under section 92E is required to be furnished electronically.
2.
Report under section 115JC – Every person who is liable to pay Alternative Minimum Tax(‘AMT’) shall obtain a report from an accountant, certifying that the adjusted total income and the AMT have been computed in accordance with the provisions of this Chapter and furnish such report on or before the due date of furnishing of return of income under section 139(1).
Old ITR Forms 5 and 6 already had a column to fill in the date of furnishing of report under sections 92E and 115JC/115JB.The column is now introduced in ITR 4.
ITR 4
Separate disclosure of sums paid to non-residents
Following payments to non-residents need separate disclosure:
(1)
Compensation in case of non-resident employees,
(2)
Commission,
(3)
Royalty,
(4)
Professional/consultancy fees/Fee for technical services, and
(5)
Interest.
Old Forms of ITR 5 and ITR 6 already had this option. However, ITR 4 now seeks this information.
ITR 1, 2, 3, 4
Rebate under section 87A
The Finance Act, 2013 inserted section 87A which provides rebate to resident individuals whose total income does not exceed Rs. 5,00,000. The amount of rebate will be 100% of income-tax or Rs. 2,000, whichever is less.
An option is provided under new Form for availing of rebate under section 87A.
ITR 5
 Private discretionary trust
A ‘Discretionary Trust’ is a trust where trustees have discretion over the use of its income and capital. It gives trustee the power to decide which beneficiary would receive the funds and up to what extent.
In new ITR 5, a new category of ‘Private discretionary trust’ is included. Such trust can now file return of income in new ITR 5.
Filing of Return by a Trust
ITR 7
A. Mention Registering Authority and relevant provision
In addition to name of the project/Institution and nature of activity, New ITR 7 requires trust to mention its registration no., registering authority and section number under which it is claiming exemption in respect of project or Institution being run by it.
B. Accumulation of income for charitable or religious purpose
Where 85% of the income is not applied for charitable purposes by a trust then it has an option to accumulate or set apart such income for future application. However, trust has to file an application electronically to the AO before the due date of filing of return to avail of such option.
Such accumulation of income shall be reported by the trust in new Form ITR 7.
C. Voluntary Contributions
A new ‘Schedule VC’ has been inserted in new Form ITR 7 for reporting of various voluntary donations received by the trust. Every trust shall report nature of donation along with its quantum as under:
(1)
Local voluntary donations (Corpus and non-corpus)
(2)
Foreign Contributions (Corpus and non-corpus)
(3)
Anonymous donation
**
Form No.ITR-1 SAHAJ: For individual having income from salary & interest
Form No.ITR-4S: For individuals/HUFs having income from presumptive business
Form No.ITR-2: For individual & HUF not having income from Business or Profession
Form No.ITR-3: For individual & HUF being partner in firms and not carrying out business or profession under any proprietorship business
Form No.ITR-4: For individual/HUFs having income from a proprietorship business or profession
Form No.ITR-5: For firms, AOPs, BOIs and LLP
Form No.ITR-6: For Company other than claiming exemption u/s 11

Form No.ITR-7: For persons including companies required to furnish return u/s 139(4A), 139(4B),139(4C),139(4D)

Salaried employees whose exempted income(LTA/C, HRA, other allowance etc.) exceed Rs. 5000, file tax return in ITR-2

Salaried employees whose exempted income(LTA/C, HRA, other allowance etc.) exceed Rs. 5000, file tax return in ITR-2

Salaried employees whose exempted income(LTA/C, HRA, other allowance etc.) exceed Rs. 5000 should file their Income tax return in Form ITR-2 and give details in prescribed reporting format of ITR-2.

Particulars of Sch S, Part_B of ITR-2 for A/Y 2014-15 for your reference. 
 
 
Schedule S
Details of Income from Salary (Fields marked in RED should not be left Blank)
Name of Employer
PAN of Employer (optional)
Address of employer
Town/City
Pin code
State
(Select)
1
Salary (Excl all exempt/ non-exempt  allowances, perquisites ,profit in lieu of sal as they are shown separately below)
1
0
2
Allowances exempt under section 10 (Not to be included in 7 below)
i
Travel concession/assistance received [(sec. 10(5)]
2i
0
ii
Tax paid by employer on non-monetary perquisite [(sec. 10(10CC)]
2ii
0
iii
Allowance to meet expenditure incurred on house rent [(sec. 10(13A)]
2iii
0
iv
Other allowances
2iv
0
3
Allowances not exempt (refer Form 16 from employer)
3
0
4
Value of perquisites (refer Form 16 from employer)
4
0
5
Profits in lieu of salary (refer Form 16 from employer)
5
0
6
Deduction u/s 16 (Entertainment allowance by Government and tax on employment)
6
0
7
Income chargeable under the Head ‘Salaries’ (1 + 3 + 4 + 5 – 6)
7
0
Total
0

A Company and an assessee being individual or HUF who is liable to audit u/s 44AB are required to file Wealth tax return electronically under digital signature

Announcement on https://incometaxindiaefiling.gov.in/ dated 03/07/2014
A Company and an assessee being individual or HUF who is liable to audit u/s 44AB are required to furnish form BB(Return of Net Wealth) electronically under digital signature for assessment year 2014-15 and onwards.


Last update on Wealth tax return

Wealth-tax return :Mandatory e-filing except by Individual/HUF not liable to tax audit

Refer < NOTIFICATION NO.32/2014 [F.NO.143/1/2014-TPL]/SO 1576(E)DATED 23-6-2014_WEALTH-TAX (FIRST AMENDMENT) RULES, 2014 – SUBSTITUTION OF RULE 3 AND INSERTION OF FORM BB>
In exercise of the powers conferred by clause (ba) and clause (bb) of sub-section (2) of section 46 read with section 14A and section 14B of the Wealth-tax Act, 1957 (27 of 1957), the Central Board of Direct Taxes hereby makes the following rules further to amend the Wealth-tax Rules, 1957, namely:—
1. (1) These rules may be called the Wealth-tax (First Amendment) Rules, 2014.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Wealth-tax Rules, 1957 (hereinafter referred to as the “said rules”),—
(i) for rule 3, the following rule shall be substituted, namely:—
“3. FORM OF RETURN OF NET WEALTH.—(1) The return of net wealth referred to in section 14 shall—
(a) in respect of assessment year 2013-14 and earlier assessment years in the case of individuals, Hindu undivided families and companies, be in Form BA and shall be verified in the manner specified therein.
(b) in respect of the assessment year 2014-15 and any other subsequent assessment year in the case of individuals, Hindu undivided families and companies be in Form BB and shall be verified in the manner specified therein.
(2) Subject to the provisions of sub-rule (3), for the assessment year 2014-15 and any other subsequent assessment year, the return of net wealth referred to in sub-rule (1) shall be furnished electronically under digital signature.
(3) In case of individual or Hindu undivided family to whom the provisions of section 44AB of the Income-tax Act, 1961 (43 of 1961) are not applicable, the return of net wealth referred to in sub-rule (1) may be furnished for assessment year 2014-15 in a paper form.
(4) The return of net wealth required to be furnished in Form BB shall not be accompanied by a statement showing the computation of the tax payable on the basis of the return, or proof of the tax and interest paid, or any document or copy of any account or form of report of valuation by registered valuer required to be attached with the return of net wealth under any provisions of the Act.
(5) The Director General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing the returns in the manners specified in sub-rule (2).”
3. In the said rules, in Appendix, after Form BA, the following Form shall be inserted; namely :—
RETURN OF NET WET WEALTH
[See rule 3(1)(b) of Wealth-tax Rules, 1957]
Download from link

One mobile number or email ID can be used for a maximum of 10 user accounts as the Primary Contact- Mobile Number and Email ID in e-Filing

One mobile number or email ID can be used for a maximum of 10 user accounts as the Primary Contact- Mobile Number and Email ID in e-Filing.
Refer Press release
SECTION 139 OF THE INCOME-TAX ACT, 1961 – RETURN OF INCOME – UPDATION AND VALIDATION OF TAXPAYER EMAIL ID AND MOBILE NUMBER FOR THEIR E-FILING ACCOUNT
PRESS RELEASEDATED 4-7-2014
A valid Email ID and Mobile Number has to be registered/updated on the e-filing website of the Income Tax Department so that direct communication with taxpayer can be possible. For details, taxpayers can logon to: https://incometaxindiaefiling.gov.in/eFiling/Portal/StaticPDF/Update_Contact_Details.pdf)
The Department will send separate One Time Passwords (OTP) also referred as PIN on the mobile and email provided by the taxpayer. The OTPs have to be entered by the taxpayer after logging into their e-filing account to authenticate the same. The OTPs will remain valid for 24 hours within which the taxpayer has to complete the process. For ‘Foreign/ NRI’ taxpayers, the OTP validation of the email ID would be sufficient.
Validation of email and mobile numbers has been introduced to facilitate taxpayers as in many cases incorrect emails and mobile numbers have been provided and taxpayers did not receive important communication from the Department. Further, it has been observed that in many cases taxpayers are not able to reset their password since the new temporary password from the Department may be sent to their registered email which may be different from the taxpayer’s personal email, e.g. email of their intermediary.
This is a one-time process to validate the mobile number and email ID. However, whenever the taxpayer changes the Mobile Number or email ID in their Profile, the process will be repeated to ensure that the particulars provided are correct. Further, this validation will ensure that Department can send an OTP for resetting the password used for Login in case the taxpayer has forgotten the password.
One mobile number or email ID can be used for a maximum of 10 user accounts as the Primary Contact- Mobile Number and Email ID in e-Filing. This is to ensure that family members and related business concerns (not exceeding 10 separate users) not having personal email or mobile can be covered under a common email or mobile, but in general taxpayers should have their own unique email ID and Mobile registered with the Department.
The taxpayer can enter any other person’s email or mobile number in addition, as a Secondary Contact (without any restriction on the number of user accounts linked as a Secondary Contact). Using “Profile Settings → My Profile” the taxpayer can select to include the Secondary Contact to also receive emails, alerts etc.
It is advised that the emails and SMS from the Income tax Department may be included in the ‘safe list’ or ‘white list’ to prevent the communications from the Department from being blocked or rejected or sent to Spam folder. Taxpayers are also advised not to share their user-id and password of their e-filing account with others to prevent un-authorized access. Taxpayers can reset their password using the ‘Forgot Password?’ link while logging in to their e-filing account and by providing the necessary details.
The Department requests the cooperation of all taxpayers for completing this validation process at the earliest for a smooth and convenient return filing process.

Dear friends,


Please Update your  all contact & email id  on tax site for  using tax site utilities (26 AS view, 
tax filings).


Find below extract of  announcement:

Announcement dated 19/06/2014 on https://incometaxindiaefiling.gov.in/(Important announcement 
for Tax payers for updating contact details in e-Filing Portal)
Dear Tax Payers,
Income-Tax Department uses the registered contact details (Mobile number & E-mail ID) for all communications related to e-Filing. It is mandatory that all tax payers must have a valid contact details registered in e-Filing portal.
It is noticed that many registered users are not having authenticated contact details in e-Filing or may have provided details of other persons for convenience. This prevents the Department from interacting directly with taxpayers on their personal email and Mobile.
Further, it has been observed that in many cases taxpayers are not able to reset their password since the email communication from the Department may be sent to their registered email or Mobile which may be different from the taxpayer’s personal email or mobile.

Hence, it is requested that all the e-Filing users may immediately update and authenticate their correct contact details so that the communication can be sent to the valid Mobile number and E-mail ID

The process of updating and authenticating the contact details are below.

New User : 

Provide the correct Mobile Number and Email ID during the Registration in the e-Filing portal, Activation link would be sent to the registered E-mail ID and a One Time Password (OTP also called PIN) is sent to the registered Mobile Number. User needs to Click on the Link provided in the E-mail and enter the OTP received in the mobile number for Successful activation of the registered user in e-Filing portal

Registered user:    

After the user logs in to the e-filing account, there will be a pop-up requesting After the user logs in to the e-filing account, there will be a pop-up requesting
the user to update the current Mobile number and E-mail ID. The user should update their personal Mobile number and Email so that the updated contact particulars are registered with the Department or confirm that the Mobile number and email ID already registered is their valid personal contacts.

Upon submitting the details, Department would immediately send OTPs (PIN1 & PIN2) to new mobile number and Email ID. The respective PINs-PIN1 and PIN2 received through Mobile number and E-mail ID should be entered by them in the respective input fields to authenticate that the email ID and mobile are correct. Upon successful validation the Mobile number and email ID would be updated in the taxpayer’s profile and the process would be complete.
The PIN1 and PIN2 would be valid only for the session – so taxpayers are advised not to close the webpage till PINs are entered and validated. In case of any difficulty or delay, the taxpayer can log in again and follow the same process to update the current contact details

Note: Taxpayers are advised to follow the process mentioned above in the interest of the security of their e-filing account and to directly receive communication from the Department about status of processing and issue of refunds etc.
This is a one-time process to validate the mobile number and email ID. However, whenever the taxpayer changes the Mobile Number or email ID in their Profile, the process will be repeated to ensure that the particulars provided are correct.
One mobile number or email ID can be used for a maximum of 4 user accounts as the Primary Contact- Mobile Number and Email ID in e-Filing. This is to ensure that family members (not exceeding 4 separate users) not having personal email or mobile can be covered under a common email or mobile, but in general taxpayers should have their own unique email ID and Mobile registered with the Department.
The taxpayer can enter any other person’s email or mobile number in addition as a Secondary Contact (without any restriction on the number of user accounts linked as a Secondary Contact). Using “Profile Settings My Profile” the taxpayer can select to include the Secondary Contact to also receive emails, alerts etc.
Include the emails and SMS from the Income tax Department in the ‘safe list’ or ‘white list’ to prevent the communications from the Department from being blocked or rejected or sent to Spam folder.
As a best practice, please update and authenticate the current contact and address details under “Profile Settings My Profile” after login to eFiling portal.

e-filing of reports u/s 10AA, 44DA, 50B and 115VW w.e.f April 1, 2014

e-filing of reports u/s 10AA, 44DA, 50B and 115VW w.e.f April 1, 2014 & substitution of forms ITR-3,ITR-4, ITR-5, ITR-6 & ITR-7

NOTIFICATION NO.28/2014 [F.NO.142/2/2014-TPL]/SO 1418(E)DATED 30-5-2014
In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:—
1. (1) These rules may be called the Income-tax (6th Amendment) Rules, 2014.
(2) They shall be deemed to have come into force with effect from the 1st day of April,
2014.
2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), in rule 12, in sub-rule(2), in the proviso,—
(a)   after the expression “section 10A”, the expression “section 10AA” shall be inserted;
(b)   after the expression “section 44AB”, the expression “section 44DA, section 50B” shall be inserted;
(c)   for the expression “or section 115JB”, the expression “section 115JB or section 115VW” shall be substituted.
3. In the said rules, in Appendix-II, for FORM ITR-3, FORM ITR-4, FORM ITR-5, FORM ITR-6 and FORM ITR-7, the following FORMS shall respectively be substituted, namely:—

ITR-3
INDIAN INCOME TAX RETURN
[For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship]
(Please see rule 12 of the Income-tax Rules, 1962)
(Also see attached instructions)
ITR-4
INDIAN INCOME TAX RETURN
(For individuals and HUFs having income from a proprietary business or profession)
(Please see rule 12 of the Income-tax Rules, 1962)
(Also see attached instructions)

ITR-5
INDIAN INCOME TAX RETURN
[For firms, AOPs and BOIs]
(Please see Rule 12 of the Income-tax Rules, 1962)
(Also see attached instructions)

ITR-6
INDIAN INCOME TAX RETURN
[For Companies other than companies claiming exemption under section 11]
(Please see rule 12 of the Income-tax Rules, 1962)
(Also see attached instructions)
ITR-7
INDIAN INCOME TAX RETURN
[For persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D)]
(Please see rule 12 of the Income-tax Rules, 1962)
(Also see attached instructions for guidance)

Download new forms 
[Notification No. 28/2014, F.No.142/2/2014-TPL]
(Gaurav Kanaujia)
Director to the Government of India
Note.- The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii) vide notification number S.O.969(E), dated the 26th March, 1962 and last amended by Income-tax (5th Amendment) Rules, 2014 vide notification S.O. No.1297 (E) dated 16 May, 2014.

Significant changes in the proposed Direct Taxes Code, 2013



Significant changes in the proposed Direct Taxes Code, 2013
The Income-tax Act was passed in 1961 and has been amended every year through the Finance Act. The Wealth-tax Act was passed in 1957 and has also been amended many times. Numerous amendments have rendered the two Acts incomprehensible to the average taxpayers. Besides, there have been several policy changes due to change in economic environment, complexity in the market, increasing sophistication of commerce, and development of information technology. There has also been a multitude of judgments (at times conflicting) rendered by the courts at different levels. This necessitated drafting of a Code to consolidate and amend the law relating to all direct taxes. Accordingly, a draft Code along with a concept paper was released on 12th August, 2009 inviting suggestions from the public. The Code sought to consolidate and amend the law relating to all direct taxes so as to establish an economically efficient, effective and equitable direct tax system which would facilitate voluntary compliance and also reduce the scope for disputes and minimize litigation.
Having considered the suggestions received from various stake holders a revised discussion paper was released on 15th June, 2010. Thereafter, taking into account the suggestions which were accepted by the Government, the Direct Taxes Code Bill, 2010 was introduced in the Lok Sabha on 30th August, 2010. The Bill was referred to the Standing Committee on Finance (SCF) on 9th September, 2010 for examination and report thereon. The SCF presented its report to the Speaker, Lok Sabha in March, 2012. The report contains general recommendations in Part-I and deals with specific clause wise recommendations in Part-II. A large number of recommendations of the SCF along with other suggestions which were forwarded at the examination stage have been accepted by the Government. Further, the Kelkar
Committee in its report on ‘Road Map for fiscal consolidation’ submitted to the
Government in September, 2012 made the following observations on the Bill:-
“The Direct Taxes Code Bill, 2010 which intends to revamp the law relating to direct taxes is likely to result in considerable unacceptable losses on a continuing basis. Given the low tax-GDP ratio and the existing fiscal crisis, there is absolutely no fiscal space for such large revenue loss. Therefore, the Direct Taxes Code Bill, 2010 should be comprehensively reviewed before it is enacted into law for implementation.”
Since the Direct Taxes Code Bill, 2010 was introduced in the Parliament, amendments were carried out in the Income-tax Act, 1961 and the Wealth-tax Act, 1957 through Finance Acts, 2011, 2012 & 2013. These amendments were consistent with the policy laid down in the DTC Bill, 2010. Incorporating these amendments in the DTC Bill, 2010 would require a large number of official amendments making the Bill incomprehensible and the legislative process cumbersome. Hence, it was decided to revise the Direct Taxes Code incorporating all the amendments and presenting it as a fresh Bill. Accordingly, a new revised Direct Taxes Code was drafted.


Recommendations of SCF which are proposed to be accepted
Out of 190 recommendations made by the SCF, 153 are proposed to be accepted wholly or with partial modifications. In addition to the recommendations forming part of the report, 61 suggestions forwarded by the SCF at the discussion stage have also been accepted for incorporation in the revised Code. Some of the recommendations of the SCF which are proposed to be accepted are as under:-
(i)                 Simplicity and comprehensibility of both structure and content thereby making the statute more user friendly.
(ii)              Ensuring tax buoyancy by tapping high capacity/income and evasion prone segments.
(iii)            Re-orienting departmental resources towards high-capacity as well as avoidance/evasion prone categories/sectors.
(iv)            Modernisation and computerisation of all tax operations; equipping the department with men and material to carry out the tasks assigned.
(v)               Moderation in tax rates for individual taxpayers with emphasis on voluntary compliance.
(vi)          Deductions for individual taxpayers to be focused on long term needs like social security.
(vii)          The age for senior citizens may be relaxed from 65 years to 60 years.
(viii)       Area base incentives may be considered on investment linked basis. However, the general principle should be that all incomes and profits are to be taxed and exemptions, if any, should be treated as a dynamic variable, by ensuring that each exemption serves an economic purpose.
(ix)             Smooth transition to investment linked incentives with focused coverage.
(x)               Maintaining uniformity in ‘grandfathering’ provisions so that the available benefits for different categories under the existing Income-tax Act are phased out in a uniform and non-discriminatory manner ensuring smooth transition to DTC provisions.
(xi)             The definition of the term ‘place of effective management’ for the purposes of determination of residency of companies may be modified as the definition in the DTC Bill, 2010 is not very clear and provides room for uncertainty.
(xii)          Clause 5(1)(d) read with Clause 5(4)(g) and Clause 5(6) of DTC Bill, 2010 seek to tax income of a non-resident arising from indirect transfer of capital assets situated in India. The Committee recommended that exemption should be provided for transfer of small share holdings as application of these provisions in such cases will cause hardship.
(xiii)        For the purposes of taxation of income under the head ‘Income from house property’ a distinction should be made between commercial and non-commercial renting of properties. The concept of unrealised rent should also be built in as is the position under the existing Income-tax Act.
(xiv)        For the purposes of deduction in respect of interest on loan taken for self occupied house property, the loan given by the employer should also qualify for this concession.


(xv)           Tax neutrality may be provided on conversion of a partnership firm under the Partnership Act, 1932 into a limited liability partnership or a company.
(xvi)        Where compensation is received on compulsory acquisition of an investment asset, the period for acquiring the new asset for the purpose of relief from capital gains should be reckoned from the date of receipt of such compensation.
(xvii)      With a view to provide smooth transition from IT Act to Direct Taxes Code, provision be made for treatment of losses remaining to be carried forward and set off as per the provisions of the existing Income-tax Act on the date on which DTC comes into effect.
(xviii)   The non-profit organisation may be given an option to adopt either the cash system or accrual system of accounting for computing their income under the Code.
(xix)         The Income-tax Act provides for carry forward of tax paid on book profit (MAT credit). A provision may be made in the DTC Bill for carry forward of unutilised MAT credit under the IT Act, on the date on which the DTC comes into force.
(xx)           The General Anti Avoidance Rules may be reviewed to bring more clarity and precision to the scope of the provisions. The onus of proof should rest on the tax authority invoking GAAR. The constitution of the panel approving GAAR should be reviewed. The taxpayers may also be permitted to obtain an advance ruling to determine whether a transaction would attract GAAR.
Recommendations of the SCF which have not been incorporated in the proposed DTC, 2013
The recommendations of the SCF which were not in harmony with the broad taxation policy of the Government have not been incorporated in the revised Code. Some of the main recommendations of the SCF which have not been incorporated in the revised Code are mentioned below along with the reasons for their non-acceptance:-
·        Tax slab for Personal Income Tax (PIT): SCF has recommended revised tax slabs as (a) 0-3 lakhs – Nil; (b) 3-10 lakh – 10%; (c) 10-20 lakh – 20%; (d) beyond 20 lakh – 30%: The recommendation is not acceptable as it will result in huge revenue loss. The total revenue loss on account of recommended changes in PIT slabs and removal of cess works out to Rs. 60,000 crore approximately.
·        The rate of tax for life insurance companies may be kept at 15% instead of the proposed 30%: Under the Income-tax Act, tax on a life insurance company is levied at the rate of 12.5% of the surplus generated in the profit and loss account of the company based on actuarial valuation. In the Code, the tax base for a Life Insurance Company is limited to the surplus generated for the company in the shareholders account while the surplus determined in the policyholders’ account (technical account) is not taxable. Therefore, rate of tax on such companies is aligned with that applicable to other companies, that is 30 per cent.


·        Exemption limit to be linked to the consumer price index: It is not practicable to link exemption limit to the consumer price index for a number of reasons. First, it is not clear why the Consumer Price Index should be the base and not the Wholesale Price Index. Further complications may arise if the base of the index or the commodity basket changes. Second, it would lead to changes which are not multiples of whole numbers. Third, indexing the slabs to inflation index is not a comprehensive approach as the slab structure is dependent on a number of factors including other reliefs given to a taxpayer, potential revenue loss to the Government, number of taxpayers who would go out of the tax net etc.
·  Abolition of Securities Transaction Tax (STT): The recommendation is not acceptable as STT is required to regulate day trading. Further, the rate of STT has already been reduced significantly by Finance Act, 2013.
·      Levy of Dividend Distribution Tax on policy holder’s investments may negatively impact the insurance industry:With a view to provide parity in treatment of insurance products and mutual fund products, the Code proposes to levy Income Distribution Tax on equity linked insurance products on the lines of equity oriented mutual funds. For a life insurance company, only the surplus determined in the shareholder account would be taxed. This will benefit the policy holders as it would leave more money in the policy holder’s account. Further, in respect of life insurance products, that is, where the premium paid or payable for any of the years does not exceed 10% of the capital sum assured, any amount including bonus will not be subjected to tax. Besides, pure life insurance products are also outside the tax ambit.
·      Deduction for CSR expenditure in backward regions and districts: The CSR expenditure cannot be allowed as a business deduction as it is an application of income. Allowing deduction for CSR expenditure would imply that the government would be contributing one third of this expenditure as revenue foregone.
Other significant changes in the Code
Taking into account, the report of the SCF and the amendments carried out in the Income-tax Act, 1961 and the Wealth-tax Act, 1957 which are consistent with the policy laid down in the Bill, the revised Code has been drafted. While drafting the revised Code, a comprehensive review of the provisions of DTC Bill, 2010 was also carried out in the light of the observations made by the Kelkar Committee in its report on ‘Road Map for fiscal consolidation’. Some of the other changes in the revised Code, which are based on a comprehensive review of the DTC Bill, 2010 and reflect the broad policy of the Government, are as under:-
·        Taxation of ‘Income from house property’: The income from a house property, which is not used for business or commercial purposes, will be


taxed under the head ‘income from house property’. The income from house property shall be the gross rent as reduced by the specified deductions. The gross rent shall be higher of the contractual rent or the presumptive rent. The presumptive rent shall be the annual value or rental value (without giving any deduction) fixed by the local authority for the purposes of levy of property tax. In a case where no such value is fixed by the local authority, the presumptive rent shall be the amount for which the property might reasonably be expected to be let from year to year.
·         Change in base of Wealth-tax: The DTC Bill, 2010 captured only unproductive assets for levy of wealth-tax. This substantially reduced the base for wealth-tax. To keep the base wide, the revised Code captures all assets for wealth-tax, whether physical or financial, thereby removing the distinction between physical and financial assets, which discriminated against those taxpayers who are conservative and put their money in physical assets. Wealth-tax is proposed to be levied on individuals, HUFs and private discretionary trusts at the rate of 0.25%. The threshold for levy of wealth-tax in the case of individual and HUF shall be Rs.50 crores.
·         Additional tax @10 per cent on recipient of dividend (liable to Dividend Distribution Tax) exceeding one crore rupees: Under the Income-tax Act as well as in the DTC Bill, 2010, the dividend distribution tax is to be levied at the rate of 15%. This favours high net worth taxpayers who pay only a fraction of their earnings as tax on their investments in the capital market. The draft DTC proposes to remove this anomaly by levy of 10% additional tax on the resident recipient if the total dividend in his hand exceeds Rs.1 crore.
·         Rationalisation of provisions related to non-profit organisations: The provisions for taxation of non-profit organisations (NPO) has been rationalised by taxing their surplus at a concessional rate of 15%, allowing basic exemption limit of Rs.1 lakh and permitting all capital expenditure as a revenue outgoing. The draft Code does not provide for specific modes of investments. An NPO would be free to make its investments, other than the limited prohibited modes of investments. Consequently, specific deduction for accumulation and the provision for carry forward of deficit are proposed to be removed.
·         Settlement Commission: Settlement Commission has not achieved the intended purpose of early settlement of cases and additional revenue realisation. At the same time, the backlog of cases has reduced the efficacy of search and survey actions. Accordingly, the draft Code does not provide for the machinery of Settlement Commission.
·         Weighted deduction for scientific research: DTC Bill, 2010 provides for weighted deduction of 175% to the donor on any donation made by it to the specified institutions to be utilised by them in scientific research. Weighted


deduction of 200% is also provided for in-house scientific research. Since, the weighted deduction reduces the actual expenditure on research and there is significant potential for its misuse, the revised Code provides for weighted deduction of 150% for in-house scientific research and 125% to the donor on any donation made by it to the specified institutions.
·         35 per cent tax rate for individual/ HUF having income exceeding Rs. 10 crore: With a view to maintain overall progressivity in levy of income-tax, the revised Code provides for a fourth slab for individuals, HUFs and artificial juridical persons. In their case if the total income exceeds Rs.10 crore, it is proposed to be taxed at the rate of 35%.
·         Ring-fencing of losses from business availing investment linked incentive: The policy of the Government has been to broaden the tax base and the strategy for broadening the base essentially comprises of three elements (i) to minimize exemptions as they erode the tax base (ii) to reduce the number of ambiguities in the law, and (iii) checking of erosion of tax base through tax evasion. Accordingly, the profit linked and area based deductions were replaced by investment linked deductions for businesses specified in the Eleventh, Twelfth and Thirteenth Schedules of the DTC Bill, 2010. The basic principle of investment linked incentive is that the taxes are payable by a business after it recoups its capital investment. However, to protect the tax base it is necessary to ring fence losses from such businesses, otherwise profits of even the existing businesses can be potentially wiped out. Accordingly, the revised Code provides for ring fencing of losses from specified businesses. However, in the case of business re-organisation, where there is unabsorbed loss in the years preceeding the re-organisation, such loss will be allowed to the successor in respect of such business.

Taxation of indirect transfer of assets: The DTC Bill, 2010 provides for a 50% threshold of global assets to be located in India for taxation of income from indirect transfer in India. This threshold is too high. There could be a situation that a company has 33.33% assets in three countries but it will not get taxed anywhere. Accordingly, the revised Code provides for a threshold of 20% of global assets to be located in India for taxation of income from indirect transfer in India. Besides, exemption is provided for transfer of small share holdings (upto 5%) outside India.