Amendment in section 80G for Renewal of Approval – Circular 7/2010
Dear all Professional friends,
With effect from 1st October, 2009 the requirement of periodical renewal of approval under section 80G is being dispensed with. All trusts whose approval expires on or after 1st October, 2009 have to apply for approval again.
Their approval will continue to be valid in perpetuity unless withdrawn.
Those trusts, whose approval expires prior to 1st October, 2009 have to apply once for renewal of their approval.
Tuesday, April 12, 2011
Monday, April 11, 2011
LIMITS ENHANCED FOR DISCLOSURE OF PARTICULARS OF EMPLOYEES UNDER 217(2A) OF COMPANIES ACT 1956
LIMITS ENHANCED FOR DISCLOSURE OF PARTICULARS OF EMPLOYEES UNDER 217(2A) OF COMPANIES ACT 1956
The Ministry of Corporate Affairs has vide notification dated 31st March 2011 enhanced the limits for the purpose of disclosure of particulars of employees in Directors Report as requisite under Section 217 (2A) read with Companies (Particulars of Employees) Rules, 1975 from the existing limit of Rs. 24 lakh/ year/ Rs. 2 lakh per month to Rs. 60 lakh per year/ Rs. 5 lakh per month and by such notification also covers Government Companies for such disclosures. By such notification, the amended rules may be called as Companies (Particulars of Employees) Amendment Rules, 2011.
The effect of the notification shall require the Companies including Government Companies to include a statement showing the name of every specified employee of the Company in their Board Report pursuant to Section 217 (2A) of the Companies Act 1956 read with Companies (Particulars of Employees) Amendment Rules, 2011 which provides:
(i) If employed throughout the financial year, was in receipt of remuneration for that year which, in aggregate, was not less than Rs. Sixty Lakh for the year: or
(ii) If employed for a part of the financial year, was in receipt of remuneration for any part, of that year, at a rate which, in the aggregate was not less Rs. Five Lakh per month.
The Ministry of Corporate Affairs has vide notification dated 31st March 2011 enhanced the limits for the purpose of disclosure of particulars of employees in Directors Report as requisite under Section 217 (2A) read with Companies (Particulars of Employees) Rules, 1975 from the existing limit of Rs. 24 lakh/ year/ Rs. 2 lakh per month to Rs. 60 lakh per year/ Rs. 5 lakh per month and by such notification also covers Government Companies for such disclosures. By such notification, the amended rules may be called as Companies (Particulars of Employees) Amendment Rules, 2011.
The effect of the notification shall require the Companies including Government Companies to include a statement showing the name of every specified employee of the Company in their Board Report pursuant to Section 217 (2A) of the Companies Act 1956 read with Companies (Particulars of Employees) Amendment Rules, 2011 which provides:
(i) If employed throughout the financial year, was in receipt of remuneration for that year which, in aggregate, was not less than Rs. Sixty Lakh for the year: or
(ii) If employed for a part of the financial year, was in receipt of remuneration for any part, of that year, at a rate which, in the aggregate was not less Rs. Five Lakh per month.
TDS is not applicable on the interest paid by co-operative banks to the shareholders on their deposits.
If a depositor is a shareholder of the co-operative bank TDS is not at all applicable for his deposits, irrespective of any amount. In all other cases Form 15H/ 15G required to be submitted for exemption of TDS. More importantly.
TDS is not all applicable irrespective of the amount of share capital held by the shareholder in the co-operative bank.
TDS is not all applicable irrespective of the amount of share capital held by the shareholder in the co-operative bank.
How to Avoid TDS
How to Avoid TDS?
If two persons are asked about income tax law in India, you will get four opinions. This is specially true when it comes to tax deduction at source (TDS). There is nothing as knotty and tangled as the provisions on TDS.
Before looking at ways to avoid TDS, let us see the three types of incomes received by a resident Indian investor that attract the TDS provisions: interest earned on securities, interest other than interest on securities, and income in respect of mutual fund and Unit Trust of India (UTI) units.
Interest earned on securities
A debenture issued by a company held by an investor is most likely to be categorized under this head. On the debenture, TDS is deductible on the interest, either during the time of actual payment of such interest or during the time of credit of such interest payable to the account of the payee, whichever happens earlier. TDS payment on a debenture can be avoided if the interest earned on the debenture on which interest is to be paid is listed and the interest payer is also a listed company and if the interest paid/payable during that financial year is not in excess of Rs. 2,500 and the interest earned is paid as an account payee cheque. If it is felt by such investors that tax on their total income from all sources for the year is likely to be nil, and they want the interest on securities to be received without any deduction of TDS, they have to fill up the form 15F and file a declaration with the company that is paying them the interest. False declaration should be avoided at all cost, which many investors might want to use to avoid deduction of tax even as their total income is more than the taxable limit. In such a case the investor willfully is making a false statement which amounts to an intentional breach of law. Thus the investor is liable to be prosecuted and punished on conviction.
Interest earned other than interest on securities
Besides interest on securities, any other type of interest, such as company deposits, is also liable for deduction of TDS, except when the payer is an HUF or an individual. TDS is applicable either during the time of actual payment of the interest or during credit of such interest, whichever happens earlier. 20 per cent of gross interest is the rate at which TDS is deducted if the receiver is a domestic company and 10 per cent of the gross interest at which TDS is deductible if the receiver is a non-corporate resident.
Avoiding TDS: No TDS is deductible on the interest earned from some of the government certificates and deposit schemes like, KVP(Kisan Vikas Patras), NSS(National Savings Certificates) and IVP(Indira Vikas Patras), the post office recurring deposit scheme, time deposit and monthly income accounts. Also, There is NO TDS applicable on the amount of interest paid/ payable by co-operative society engaged in banking business or institutions other than a bank during a financial year if that amount is less than Rs 2,500. In the case of time deposits, also called fixed Deposits, with a bank or a financial institution dealing in Home loans like HDFC, no TDS is applicable if the interest payable from that branch for the year does not exceed Rs.10,000/-.
Depositors quite often try to circumvent this rule by distributing their deposits across different branches so that the interest in a particular branch in a single financial year is not in excess of Rs. 10,000/-. No TDS is applicable on interest earned on recurring deposits and saving bank accounts. TDS is also not applicable on the interest paid by co-operative banks to the shareholders on their deposits.
If for a financial year an investor feels that tax on his income from all sources may be nil, he can file a declaration through form 15H, which may then be submitted to the interest paying institution so that no TDS is deducted.
Income Earned from UTI/MFs
There is no TDS applicable to all earnings from income from UTI and MFs.
If two persons are asked about income tax law in India, you will get four opinions. This is specially true when it comes to tax deduction at source (TDS). There is nothing as knotty and tangled as the provisions on TDS.
Before looking at ways to avoid TDS, let us see the three types of incomes received by a resident Indian investor that attract the TDS provisions: interest earned on securities, interest other than interest on securities, and income in respect of mutual fund and Unit Trust of India (UTI) units.
Interest earned on securities
A debenture issued by a company held by an investor is most likely to be categorized under this head. On the debenture, TDS is deductible on the interest, either during the time of actual payment of such interest or during the time of credit of such interest payable to the account of the payee, whichever happens earlier. TDS payment on a debenture can be avoided if the interest earned on the debenture on which interest is to be paid is listed and the interest payer is also a listed company and if the interest paid/payable during that financial year is not in excess of Rs. 2,500 and the interest earned is paid as an account payee cheque. If it is felt by such investors that tax on their total income from all sources for the year is likely to be nil, and they want the interest on securities to be received without any deduction of TDS, they have to fill up the form 15F and file a declaration with the company that is paying them the interest. False declaration should be avoided at all cost, which many investors might want to use to avoid deduction of tax even as their total income is more than the taxable limit. In such a case the investor willfully is making a false statement which amounts to an intentional breach of law. Thus the investor is liable to be prosecuted and punished on conviction.
Interest earned other than interest on securities
Besides interest on securities, any other type of interest, such as company deposits, is also liable for deduction of TDS, except when the payer is an HUF or an individual. TDS is applicable either during the time of actual payment of the interest or during credit of such interest, whichever happens earlier. 20 per cent of gross interest is the rate at which TDS is deducted if the receiver is a domestic company and 10 per cent of the gross interest at which TDS is deductible if the receiver is a non-corporate resident.
Avoiding TDS: No TDS is deductible on the interest earned from some of the government certificates and deposit schemes like, KVP(Kisan Vikas Patras), NSS(National Savings Certificates) and IVP(Indira Vikas Patras), the post office recurring deposit scheme, time deposit and monthly income accounts. Also, There is NO TDS applicable on the amount of interest paid/ payable by co-operative society engaged in banking business or institutions other than a bank during a financial year if that amount is less than Rs 2,500. In the case of time deposits, also called fixed Deposits, with a bank or a financial institution dealing in Home loans like HDFC, no TDS is applicable if the interest payable from that branch for the year does not exceed Rs.10,000/-.
Depositors quite often try to circumvent this rule by distributing their deposits across different branches so that the interest in a particular branch in a single financial year is not in excess of Rs. 10,000/-. No TDS is applicable on interest earned on recurring deposits and saving bank accounts. TDS is also not applicable on the interest paid by co-operative banks to the shareholders on their deposits.
If for a financial year an investor feels that tax on his income from all sources may be nil, he can file a declaration through form 15H, which may then be submitted to the interest paying institution so that no TDS is deducted.
Income Earned from UTI/MFs
There is no TDS applicable to all earnings from income from UTI and MFs.
What are the rules for deducting tax on fixed Deposit? When do the banks deduct TDS on a fixed deposit ?
TDS Information
What are the rules for deducting tax on fixed Deposit?
When do the banks deduct TDS on a fixed deposit? :
TDS (Tax Deducted at Source)
People prefer to deposit their savings in time deposits as such deposits earn higher rate of interest than normal savings account. However, they face the problem of TDS (Tax Deducted at Source) by banks for fixed deposits.
In Income Tax law, one of sources of the income is "Interest Income" and thus directions issued by income tax authorities have to be followed by all bankers.
What are the rules for deducting tax on fixed Deposit? When do the banks deduct TDS on a fixed deposit? :
Banks deduct tax (TDS), if the total interest earned on all your time deposits in the bank is greater than Rs.10000/- during a financial year. The tax liability for the purpose of TDS is determined at the branch level. Whenever the bank pays an interest on your fixed deposits, it checks it for TDS eligibility. If it qualifies, the TDS is deducted. TDS is also deducted on interest accrued (but not yet paid) at the end of the financial year viz. 31st March every year. The rate at which TDS is deducted varies according to the category of account holders
At present no interest income is exempted from tax (earlier interest income upto Rs.12000/- per year was exempted under Section 80L of the Income Tax Act). However, in certain conditions, no TDS is deducted on the interest earned on fixed deposits, e.g. (a) if the total interest earned on the deposit in a financial year is upto Rs.10000/-.
As per present income tax guidelines, banks are required to deduct tax at source (TDS) on deposits if the total interest earned on all your fixed deposits in a bank is more than Rs.10000 in a financial year. (As per these guidelines even if a fixed deposit is in the name of a minor TDS is deducted). However, the depositors can claim the credit for such TDS in their income tax returns. (In case of minors, this credit for TDS can be claimed by the person who manages the minor's income.
Remember, now a day as and when a bank pays an interest on the fixed deposits, it checks whether the account is exempted from TDS. If it is not exempted, then TDS is deducted. You should also remember that TDS is deducted even on interest accrued (but not yet paid) at the end of the financial year i.e. 31st March every year.
In case of resident individual and HUF, TDS is deducted at a rate of 10% (thus total deduction is at the rate of 10.0%). Thus, the present applicable rates are :
Resident Individuals & HUF Tax Rate Surcharge Education Cess TOTAL
Payment upto 10 lacs 10% ---- 0% 10.00%
If one feels that your total interest income for the year will not fall within overall taxable limits, then one should inform his / her bank not to deduct TDS on deposit, by submitting a form as per the provisions of the Income Tax Act. The forms required for different categories have been listed below:
Category of Account Form Required
Individual - Srcitiges 15H
Trusts 15AA
Individual - other 15G
Remember that : -
(a) You have to obtain [earlier 15AA Form ] certificate from the Assessing Officer of Income Tax department.
(b) Even if you submit the 15H / 15AA /15G Form, the tax which has already been deducted by way of TDS during the year prior to submission of 15H Form, is usually not refunded by the banks as they are under obligation to deposit this TDS within a time bound period. . However Certificates will be issued to the customers which can be used while filing his/her tax return.
· 15H/15AA Forms are valid only for the particular financial year in which they are issued.
· Usually banks ask that a fresh15H form is needed to be furnished for each deposit that is placed with the Bank
However, if the depositor furnishes form 15H/ 15G (which is available free of cost from all banks) and therein declares he / she does not have tax liability at all, the bank will not deduct any TDS from the interest earned by the depositor.
Thus, the above, in a nutshell indicates that if the interest income from a bank branch is more than Rs.10000/- (and you have not submitted form 15H), the Bank will deduct the TDS. For any TDS deducted by the bank, it will issue a Form 16A which can be used; while filing the income tax returns.
Thus, in case you do not want the TDS to be deducted, you can split your Bank Deposits in two or more Banks or branches so that the total interest earned at one branch is less than Rs.10,000/-. (However, remember this does not mean that income earned from such deposits is exempted from income tax. You have to club all such interest income and add to your other income, and pay the tax while filing the income tax return.)
TDS provisions are not applicable to 'A' class shares holders of the Bank
What are the rules for deducting tax on fixed Deposit?
When do the banks deduct TDS on a fixed deposit? :
TDS (Tax Deducted at Source)
People prefer to deposit their savings in time deposits as such deposits earn higher rate of interest than normal savings account. However, they face the problem of TDS (Tax Deducted at Source) by banks for fixed deposits.
In Income Tax law, one of sources of the income is "Interest Income" and thus directions issued by income tax authorities have to be followed by all bankers.
What are the rules for deducting tax on fixed Deposit? When do the banks deduct TDS on a fixed deposit? :
Banks deduct tax (TDS), if the total interest earned on all your time deposits in the bank is greater than Rs.10000/- during a financial year. The tax liability for the purpose of TDS is determined at the branch level. Whenever the bank pays an interest on your fixed deposits, it checks it for TDS eligibility. If it qualifies, the TDS is deducted. TDS is also deducted on interest accrued (but not yet paid) at the end of the financial year viz. 31st March every year. The rate at which TDS is deducted varies according to the category of account holders
At present no interest income is exempted from tax (earlier interest income upto Rs.12000/- per year was exempted under Section 80L of the Income Tax Act). However, in certain conditions, no TDS is deducted on the interest earned on fixed deposits, e.g. (a) if the total interest earned on the deposit in a financial year is upto Rs.10000/-.
As per present income tax guidelines, banks are required to deduct tax at source (TDS) on deposits if the total interest earned on all your fixed deposits in a bank is more than Rs.10000 in a financial year. (As per these guidelines even if a fixed deposit is in the name of a minor TDS is deducted). However, the depositors can claim the credit for such TDS in their income tax returns. (In case of minors, this credit for TDS can be claimed by the person who manages the minor's income.
Remember, now a day as and when a bank pays an interest on the fixed deposits, it checks whether the account is exempted from TDS. If it is not exempted, then TDS is deducted. You should also remember that TDS is deducted even on interest accrued (but not yet paid) at the end of the financial year i.e. 31st March every year.
In case of resident individual and HUF, TDS is deducted at a rate of 10% (thus total deduction is at the rate of 10.0%). Thus, the present applicable rates are :
Resident Individuals & HUF Tax Rate Surcharge Education Cess TOTAL
Payment upto 10 lacs 10% ---- 0% 10.00%
If one feels that your total interest income for the year will not fall within overall taxable limits, then one should inform his / her bank not to deduct TDS on deposit, by submitting a form as per the provisions of the Income Tax Act. The forms required for different categories have been listed below:
Category of Account Form Required
Individual - Srcitiges 15H
Trusts 15AA
Individual - other 15G
Remember that : -
(a) You have to obtain [earlier 15AA Form ] certificate from the Assessing Officer of Income Tax department.
(b) Even if you submit the 15H / 15AA /15G Form, the tax which has already been deducted by way of TDS during the year prior to submission of 15H Form, is usually not refunded by the banks as they are under obligation to deposit this TDS within a time bound period. . However Certificates will be issued to the customers which can be used while filing his/her tax return.
· 15H/15AA Forms are valid only for the particular financial year in which they are issued.
· Usually banks ask that a fresh15H form is needed to be furnished for each deposit that is placed with the Bank
However, if the depositor furnishes form 15H/ 15G (which is available free of cost from all banks) and therein declares he / she does not have tax liability at all, the bank will not deduct any TDS from the interest earned by the depositor.
Thus, the above, in a nutshell indicates that if the interest income from a bank branch is more than Rs.10000/- (and you have not submitted form 15H), the Bank will deduct the TDS. For any TDS deducted by the bank, it will issue a Form 16A which can be used; while filing the income tax returns.
Thus, in case you do not want the TDS to be deducted, you can split your Bank Deposits in two or more Banks or branches so that the total interest earned at one branch is less than Rs.10,000/-. (However, remember this does not mean that income earned from such deposits is exempted from income tax. You have to club all such interest income and add to your other income, and pay the tax while filing the income tax return.)
TDS provisions are not applicable to 'A' class shares holders of the Bank
E-Filing of Service Tax Return is not mandatory for all...
E-Filing of Service Tax Return is not mandatory ...
Compulsory E-filing of ST returns by specified assessees....
General Clarifications Regarding E-Filing
Service Tax Returns are mostly filed, manually by the assessee or their representative. In this era of Internet and e-governance, the government has introduced a facility for the electronic filing of Service Tax Returns, which is known as E-Filing.
E-Filing of Service Tax Return is not mandatory, it is an option provided to the assessee. Returns of Service Tax can also be filed in a regular manner i.e. Manually by the assessee if he opts not to avail E-Filing facility. However, the government is encouraging the service providers, to file the returns using the e-filing facility. Every Service Tax Office has a help centre to assist the Service Providers in case of any difficulty faced in filing such returns .
However, E-filing of service tax return is mandatory effective from
01-04-2010 in case the assessee has paid a total Service Tax of rupees ten lakhs or more including the amount paid by utilization of CENVAT credit, in the preceding financial year, is required to file the return electronically under sub-rule (2) of Rule 7 of the Service Tax Rules, 1994. (Service TaxNotification No. 1/2010 – ST dated the 19th February, 2010)
In any case if assessee does not succeed in filing of return electronically or in case of e-filing is unable to generate acknowledgement number, he should file manual return to avoid penal provisions.
Prerequisites for E-filing are very basic. Assessee is required to possess :
15 digit Service Tax Payer Code i.e. Popularly known as Service Tax Registration No. based on PAN allotted by Income Tax Department. In case, if assessee is not having PAN Based 15 digit Registration No., he can use temporary 15 digit no. given by the department.
Computer having Internet Connection
Valid E-mail Address
Java Enabled Browser i.e. Internet Explorer 6.0 and above or Netscape Navigator 5.0 and above or Mozilla Firefox 3.0 and above.
Step by Step Procedure for E-filing of Service Tax Return
(a) Returns can be prepared and filed on line by selecting the ‘File Return’ option under RET module after logging into the ACES
(b) All validations are thrown up during the preparation of the return in this mode and the status of the return filed using the online mode is instantaneously shown by ACES.
(c) Returns can also be prepared and filed off-line. Assessee downloads the Offline return preparation utility available at http://www.aces.gov.in (Under Download)
(d) Prepares the return offline using this utility. The return preparation utility contains preliminary validations which are thrown up by the utility from time to time.
(e) Assessee logs in using the User ID and password.
(f) Selects RET from the main menu and uploads the return. Instructions for using the offline utilities are given in detail in the Help section, under ‘Download’ link and assessees are advised to follow them.
(g) Returns uploaded through this procedure are validated by the ACES before acceptance into the system which may take up to one business day. Assessee can track the status of the return by selecting the appropriate option in the RET sub menu. The status will appear as “uploaded” meaning under process by ACES, “Filed” meaning successfully accepted by the system or “Rejected” meaning the ACES has rejected the return due to validation error. The rejected returns can be resubmitted after corrections.
(h) Once the Central Excise returns are filed online in ACES or uploaded to the system using the off-line utility, the same can not be modified or cancelled by the assessee. The Service Tax returns, however, can be modified once as per rules up to 90 days from the date of filing the initial return.
(i) Self-assessed CE returns, after scrutiny by the competent officer, may result into modification. Both the ‘Original’ and the ‘Reviewed’ return can be viewed by the assessee online.
During e-filing of return the assessee must file details as mentioned in Form ST – 3 and that of duty paying challans. A key number and acknowledgment would be generated by the system along with a copy of Form ST when return is completely submitted.
In continuation of its efforts for trade facilitation, CBEC has rolled-out a new centralized, web-based and workflow-based software application called Automation of Central Excise and Service Tax (ACES) in all 104 Commissionerates of Central Excise, service Tax and large Tax Payer Units (LTUs) as on 23rd December, 2009. ACES is a Mission Mode project (MMP) of the Govt. of India under the national e-governance plan and it aims at improving tax-payer services, transparency, accountability and efficiency in the indirect tax administration in India. This application has replaced the current applications of SERMON, SACER, and SAPS used in Central Excise and Service Tax for capturing returns and registration details of the assessees and hence, in supercession of the CBEC Circular No.791/24/2004-CX. dated 1.6.2004 and CBEC Circular No. ST 52/1/2003 dated 11.03.2003, this revised circular is being issued.
It has automated the major processes of Central Excise and Service Tax - registration, returns, accounting, refunds, dispute resolution, audit, provisional assessment, exports, claims, intimations and permissions. It is divided into the following modules:
1) Access Control of Users (ACL)
2) Registration (REGN): Registration of assessees of Central Excise & Service Tax including on-line amendment.
3) Returns (RET): Electronic filing of Central Excise & Service Tax Returns
4).CLI: Electronic filing of claims, intimations and permissions by assessees and their processing by the departmental officers
5) Refund (REF): Electronic filing of Refund Claims and their processing
6) Provisional Assessment (PRA): Electronic filing of request for provisional assessment and its processing by the departmental officers.
7) Assessee Running Account
8) Dispute Settlement Resolution (DSR): Show Cause Notices, Personal Hearing Memos, Adjudication Orders, Appellate and related processes.Assessee Running Account
9) Audit Module
10) Export Module for processing export related documents
BENEFITS OF E-FILING FOR ASSESEE:
1) Reduce Physical Interface with the Department
2) Save Time
3) Reduce Paper Work
4) Online Registration and Amendment of Registration Details
5) Electronic filing of all documents such as applications for registration, returns [On-line and off-line downloadable versions of ER 1,2,3,4,5,6, Dealer Return, and ST3], claims, permissions and intimations; provisional assessment request, export-related documents, refund request
6) System-generated E-Acknowledgement
7) Online tracking of the status of selected documents
8) Online view facility to see selected documents
9) Internal messaging system on business-related matters
Automation of Central Excise and Service Tax (ACES), is a right step to curb corruption
Compulsory E-filing of ST returns by specified assessees....
General Clarifications Regarding E-Filing
Service Tax Returns are mostly filed, manually by the assessee or their representative. In this era of Internet and e-governance, the government has introduced a facility for the electronic filing of Service Tax Returns, which is known as E-Filing.
E-Filing of Service Tax Return is not mandatory, it is an option provided to the assessee. Returns of Service Tax can also be filed in a regular manner i.e. Manually by the assessee if he opts not to avail E-Filing facility. However, the government is encouraging the service providers, to file the returns using the e-filing facility. Every Service Tax Office has a help centre to assist the Service Providers in case of any difficulty faced in filing such returns .
However, E-filing of service tax return is mandatory effective from
01-04-2010 in case the assessee has paid a total Service Tax of rupees ten lakhs or more including the amount paid by utilization of CENVAT credit, in the preceding financial year, is required to file the return electronically under sub-rule (2) of Rule 7 of the Service Tax Rules, 1994. (Service TaxNotification No. 1/2010 – ST dated the 19th February, 2010)
In any case if assessee does not succeed in filing of return electronically or in case of e-filing is unable to generate acknowledgement number, he should file manual return to avoid penal provisions.
Prerequisites for E-filing are very basic. Assessee is required to possess :
15 digit Service Tax Payer Code i.e. Popularly known as Service Tax Registration No. based on PAN allotted by Income Tax Department. In case, if assessee is not having PAN Based 15 digit Registration No., he can use temporary 15 digit no. given by the department.
Computer having Internet Connection
Valid E-mail Address
Java Enabled Browser i.e. Internet Explorer 6.0 and above or Netscape Navigator 5.0 and above or Mozilla Firefox 3.0 and above.
Step by Step Procedure for E-filing of Service Tax Return
(a) Returns can be prepared and filed on line by selecting the ‘File Return’ option under RET module after logging into the ACES
(b) All validations are thrown up during the preparation of the return in this mode and the status of the return filed using the online mode is instantaneously shown by ACES.
(c) Returns can also be prepared and filed off-line. Assessee downloads the Offline return preparation utility available at http://www.aces.gov.in (Under Download)
(d) Prepares the return offline using this utility. The return preparation utility contains preliminary validations which are thrown up by the utility from time to time.
(e) Assessee logs in using the User ID and password.
(f) Selects RET from the main menu and uploads the return. Instructions for using the offline utilities are given in detail in the Help section, under ‘Download’ link and assessees are advised to follow them.
(g) Returns uploaded through this procedure are validated by the ACES before acceptance into the system which may take up to one business day. Assessee can track the status of the return by selecting the appropriate option in the RET sub menu. The status will appear as “uploaded” meaning under process by ACES, “Filed” meaning successfully accepted by the system or “Rejected” meaning the ACES has rejected the return due to validation error. The rejected returns can be resubmitted after corrections.
(h) Once the Central Excise returns are filed online in ACES or uploaded to the system using the off-line utility, the same can not be modified or cancelled by the assessee. The Service Tax returns, however, can be modified once as per rules up to 90 days from the date of filing the initial return.
(i) Self-assessed CE returns, after scrutiny by the competent officer, may result into modification. Both the ‘Original’ and the ‘Reviewed’ return can be viewed by the assessee online.
During e-filing of return the assessee must file details as mentioned in Form ST – 3 and that of duty paying challans. A key number and acknowledgment would be generated by the system along with a copy of Form ST when return is completely submitted.
In continuation of its efforts for trade facilitation, CBEC has rolled-out a new centralized, web-based and workflow-based software application called Automation of Central Excise and Service Tax (ACES) in all 104 Commissionerates of Central Excise, service Tax and large Tax Payer Units (LTUs) as on 23rd December, 2009. ACES is a Mission Mode project (MMP) of the Govt. of India under the national e-governance plan and it aims at improving tax-payer services, transparency, accountability and efficiency in the indirect tax administration in India. This application has replaced the current applications of SERMON, SACER, and SAPS used in Central Excise and Service Tax for capturing returns and registration details of the assessees and hence, in supercession of the CBEC Circular No.791/24/2004-CX. dated 1.6.2004 and CBEC Circular No. ST 52/1/2003 dated 11.03.2003, this revised circular is being issued.
It has automated the major processes of Central Excise and Service Tax - registration, returns, accounting, refunds, dispute resolution, audit, provisional assessment, exports, claims, intimations and permissions. It is divided into the following modules:
1) Access Control of Users (ACL)
2) Registration (REGN): Registration of assessees of Central Excise & Service Tax including on-line amendment.
3) Returns (RET): Electronic filing of Central Excise & Service Tax Returns
4).CLI: Electronic filing of claims, intimations and permissions by assessees and their processing by the departmental officers
5) Refund (REF): Electronic filing of Refund Claims and their processing
6) Provisional Assessment (PRA): Electronic filing of request for provisional assessment and its processing by the departmental officers.
7) Assessee Running Account
8) Dispute Settlement Resolution (DSR): Show Cause Notices, Personal Hearing Memos, Adjudication Orders, Appellate and related processes.Assessee Running Account
9) Audit Module
10) Export Module for processing export related documents
BENEFITS OF E-FILING FOR ASSESEE:
1) Reduce Physical Interface with the Department
2) Save Time
3) Reduce Paper Work
4) Online Registration and Amendment of Registration Details
5) Electronic filing of all documents such as applications for registration, returns [On-line and off-line downloadable versions of ER 1,2,3,4,5,6, Dealer Return, and ST3], claims, permissions and intimations; provisional assessment request, export-related documents, refund request
6) System-generated E-Acknowledgement
7) Online tracking of the status of selected documents
8) Online view facility to see selected documents
9) Internal messaging system on business-related matters
Automation of Central Excise and Service Tax (ACES), is a right step to curb corruption
Which section 194 H or 194C for TDS on payment to Clearing & Forwarding Agents ?
Combined reading of provisions of sections 194C and 194J vis-a-vis C.B.D.T. Circular No. 720 makes it abundantly clear that payment made
to the C and F Agents, was for the services which was predominantly for "carrying out work", inter alia, relating to storage despatch, transportation, loading and unloading of goods, etc. Thus, deducted tax at source under section 194C of the Act.
to the C and F Agents, was for the services which was predominantly for "carrying out work", inter alia, relating to storage despatch, transportation, loading and unloading of goods, etc. Thus, deducted tax at source under section 194C of the Act.
Is Sitting Fee Paid to Director Taxed as Salary or Income From Other Sources ?
Sitting fees received by the director on attending the board meeting is taxable under which head . If on sitting fees TDS has been deducted
under 194J ie professional will it be taxed under salary or other source.
There has to be employer & employee relationship for treating a receipt by a person from from another person as salary.
Sitting fee is received by a director for attending meeting of the Board, or a committee thereof, attended by him.
By virtue of sub-section (2) of Section 198 of the Companies Act, such sitting fee paid to directors shall not be reckoned for the purpose of calculating Directors Remuneration.In fact ,Rule 10-B of Companies (Central Governments) General Rules and Forms, 1956 provides that companies having a paid-up capital and free reserves of Rs. 10 crores or above or companies having a turnover of Rs. 50 crores or above can pay sitting fees not exceeding Rs. 20,000 and other companies can pay sitting fees up to Rs. 10,000.
Therefore the sitting fee received by a director has to be taxed under the head “income from other source “ and not salary.
There is no provision for TDS on sitting fees payment and certainly not u/s 194J of the I T Act
under 194J ie professional will it be taxed under salary or other source.
There has to be employer & employee relationship for treating a receipt by a person from from another person as salary.
Sitting fee is received by a director for attending meeting of the Board, or a committee thereof, attended by him.
By virtue of sub-section (2) of Section 198 of the Companies Act, such sitting fee paid to directors shall not be reckoned for the purpose of calculating Directors Remuneration.In fact ,Rule 10-B of Companies (Central Governments) General Rules and Forms, 1956 provides that companies having a paid-up capital and free reserves of Rs. 10 crores or above or companies having a turnover of Rs. 50 crores or above can pay sitting fees not exceeding Rs. 20,000 and other companies can pay sitting fees up to Rs. 10,000.
Therefore the sitting fee received by a director has to be taxed under the head “income from other source “ and not salary.
There is no provision for TDS on sitting fees payment and certainly not u/s 194J of the I T Act
DIN - MCA plans online DIN allotment
Ministry of Corporate Affairs have issued circular asking all Directors Identification Number (DIN) holders who have not given their PAN , to file PAN by 31st July 2011 . It has also stated that following fields will now be mandatory in DIN-1 form
1. Name of the Applicant
2. Father’s name of Applicant
3. Date of Birth
4. Income Tax permanent Account Number
5. Passport in case of all foreign nationals
Saturday, April 9, 2011
ICAI - CPE HOURS(01-01-2011 to 31-12-2013)
CPE hours requirements for various categories of members of the Institute for the Block period of 3 years (01-01-2011 to 31-12-2013)
All the members who are holding Certificate of Practice (except those members who are residing abroad), unless exempted, are required to:
a) Complete at least 90 CPE credit hours in each rolling three-year period of which 60 CPE credit hours should be of structured learning.
b) Complete minimum 20 CPE credit hours of structured learning in each year.
All the members who are not holding Certificate of Practice or are residing abroad (whether holding Certificate of Practice or not), unless exempted, are required to:
(a) Complete at least 45 CPE credit hours of structured/unstructured learning in each rolling three-year period
(b) Complete minimum 10 CPE credit hours of structured/unstructured learning in each year.
All the members (above 60 years of age) who are holding Certificate of Practice, unless exempted, are required to:
a) Complete at least 70 CPE credit hours (structured/unstructured) in each rolling three-year period.
b) Complete minimum 10 CPE credit hours of structured/ unstructured in the first year i.e. 2011
c) Complete minimum 20 CPE credit hours of structured/ unstructured in the second and third year i.e. 2012 & 2013.
All the members (above 60 years of age) who are not holding Certificate of Practice are required to:
a) Complete at least 35 CPE credit hours (structured/unstructured) in each rolling three-year period.
b) Complete minimum 5 CPE credit hours of structured/ unstructured in the first year i.e. 2011
c) Complete minimum 10 CPE credit hours of structured/ unstructured in the second and third year i.e. 2012 & 2013.
All the members who are holding Certificate of Practice (except those members who are residing abroad), unless exempted, are required to:
a) Complete at least 90 CPE credit hours in each rolling three-year period of which 60 CPE credit hours should be of structured learning.
b) Complete minimum 20 CPE credit hours of structured learning in each year.
All the members who are not holding Certificate of Practice or are residing abroad (whether holding Certificate of Practice or not), unless exempted, are required to:
(a) Complete at least 45 CPE credit hours of structured/unstructured learning in each rolling three-year period
(b) Complete minimum 10 CPE credit hours of structured/unstructured learning in each year.
All the members (above 60 years of age) who are holding Certificate of Practice, unless exempted, are required to:
a) Complete at least 70 CPE credit hours (structured/unstructured) in each rolling three-year period.
b) Complete minimum 10 CPE credit hours of structured/ unstructured in the first year i.e. 2011
c) Complete minimum 20 CPE credit hours of structured/ unstructured in the second and third year i.e. 2012 & 2013.
All the members (above 60 years of age) who are not holding Certificate of Practice are required to:
a) Complete at least 35 CPE credit hours (structured/unstructured) in each rolling three-year period.
b) Complete minimum 5 CPE credit hours of structured/ unstructured in the first year i.e. 2011
c) Complete minimum 10 CPE credit hours of structured/ unstructured in the second and third year i.e. 2012 & 2013.
For salaried taxpayers - INCOME TAX HAPPY RETURNS
INCOME TAX HAPPY RETURNS
For salaried taxpayers, while the employer deducts the tax at source, it is important to collect all the tax deducted at source (TDS) certificates for income other than salary to be mentioned while filing the income tax (I-T) returns. Though the Finance Bill, 2011, has proposed that filing of tax return may not be required “for certain persons as may be notified” in the case of salaried taxpayers, where there is no other source of income, the government is yet to notify the persons who qualify for this.For individuals, the Saral II form is a simple two-page form and is meant to simplify filing the tax return. For example, a person owning a house that is self-occupied or rented can report the income/loss from the property in Saral II, unlike earlier where a separate form was required to be filled, mentioning details such as address of the property, name and PAN of the tenant. Similarly, as per I-T guidelines, TDS is to be paid on interest income on term deposits if the total interest income during a financial year exceeds Rs.10,000, and income from dividends accruing from shares and mutual funds, and these need to be mentioned while filing returns in the Saral II form under the head “income from other sources”. The Saral II form has made it mandatory to give details of all high transactions expenses like credit card purchases of R2 lakh-plus, deposit of cash over R10 lakh in savings bank account, purchase of shares of R1 lakh and above and purchase of mutual funds of R2 lakh and above. However, Saral II, is not applicable for income/loss from more than one property, brought-forward loss from house property and income from lottery or horse. In such cases, the taxpayer will have to file the detailed tax return form No 4.The I-T department has also made the filing process simpler where one can file it in person, electronically or through authorised intermediaries. For filing online, one needs to download the return preparation software from https://incometaxindiaefiling.gov.in, fill the return offline and generate an XML file. Then one should go to the IT department website and register by filling the basic details such as name, PAN, date of birth, etc, and create a user ID and password and upload the XML file. Once successfully uploaded, one needs to take a printout of the acknowledgment details that would be displayed. If the return is not digitally signed, the taxpayer needs to take a printout of ITR-V and send it to the I-T department in Bangalore. Anassessee does not have to submit the original Form 16 or rent receipt or certificate of the total interest and principal paid from the housing finance company in case of a housing loan. The I-T department forms internal guidelines every year for selection of assessment cases and if the return is selected for an audit, the income tax officer may require some additional information to verify the authenticity of the taxable income as stated by theassessee in the return filed. At times the assessee may also be asked to appear in person for furnishing the additional information. For example, the I-T official may ask for the Form 16 showing the details of gross salary paid and taxes deducted. The official can even ask for rent receipts and the rent agreement with the landlord if any rent exemption is claimed. The department can also ask for details of savings bank interest, where theassessee will have to produce copies of bank statements showing the interest amount. It is also necessary to collect the certificate of the total interest and principal paid from the housing finance company in case of a housing loan. Interestingly, there is some relief for senior citizens and small taxpayers on scrutiny. In a recent press note, the government has mentioned that during financial year 2011-12, cases of senior citizens and small taxpayers filing income tax returns in ITR-1 and ITR-2 will be subject to scrutiny only where the the I-T department is in possession of credible information. The release clarifies that senior citizens would be individual taxpayers who are 60 years and above, and small taxpayers would be individual taxpayers whose gross total income, before availing deductions under Chapter VI A, does not exceed R10 lakh per annum. – www.financialexpress.com
For salaried taxpayers, while the employer deducts the tax at source, it is important to collect all the tax deducted at source (TDS) certificates for income other than salary to be mentioned while filing the income tax (I-T) returns. Though the Finance Bill, 2011, has proposed that filing of tax return may not be required “for certain persons as may be notified” in the case of salaried taxpayers, where there is no other source of income, the government is yet to notify the persons who qualify for this.For individuals, the Saral II form is a simple two-page form and is meant to simplify filing the tax return. For example, a person owning a house that is self-occupied or rented can report the income/loss from the property in Saral II, unlike earlier where a separate form was required to be filled, mentioning details such as address of the property, name and PAN of the tenant. Similarly, as per I-T guidelines, TDS is to be paid on interest income on term deposits if the total interest income during a financial year exceeds Rs.10,000, and income from dividends accruing from shares and mutual funds, and these need to be mentioned while filing returns in the Saral II form under the head “income from other sources”. The Saral II form has made it mandatory to give details of all high transactions expenses like credit card purchases of R2 lakh-plus, deposit of cash over R10 lakh in savings bank account, purchase of shares of R1 lakh and above and purchase of mutual funds of R2 lakh and above. However, Saral II, is not applicable for income/loss from more than one property, brought-forward loss from house property and income from lottery or horse. In such cases, the taxpayer will have to file the detailed tax return form No 4.The I-T department has also made the filing process simpler where one can file it in person, electronically or through authorised intermediaries. For filing online, one needs to download the return preparation software from https://incometaxindiaefiling.gov.in, fill the return offline and generate an XML file. Then one should go to the IT department website and register by filling the basic details such as name, PAN, date of birth, etc, and create a user ID and password and upload the XML file. Once successfully uploaded, one needs to take a printout of the acknowledgment details that would be displayed. If the return is not digitally signed, the taxpayer needs to take a printout of ITR-V and send it to the I-T department in Bangalore. Anassessee does not have to submit the original Form 16 or rent receipt or certificate of the total interest and principal paid from the housing finance company in case of a housing loan. The I-T department forms internal guidelines every year for selection of assessment cases and if the return is selected for an audit, the income tax officer may require some additional information to verify the authenticity of the taxable income as stated by theassessee in the return filed. At times the assessee may also be asked to appear in person for furnishing the additional information. For example, the I-T official may ask for the Form 16 showing the details of gross salary paid and taxes deducted. The official can even ask for rent receipts and the rent agreement with the landlord if any rent exemption is claimed. The department can also ask for details of savings bank interest, where theassessee will have to produce copies of bank statements showing the interest amount. It is also necessary to collect the certificate of the total interest and principal paid from the housing finance company in case of a housing loan. Interestingly, there is some relief for senior citizens and small taxpayers on scrutiny. In a recent press note, the government has mentioned that during financial year 2011-12, cases of senior citizens and small taxpayers filing income tax returns in ITR-1 and ITR-2 will be subject to scrutiny only where the the I-T department is in possession of credible information. The release clarifies that senior citizens would be individual taxpayers who are 60 years and above, and small taxpayers would be individual taxpayers whose gross total income, before availing deductions under Chapter VI A, does not exceed R10 lakh per annum. – www.financialexpress.com
ITAT Can Still Extend Stay Beyond 365 Days: Special Bench
ITAT Can Still Extend Stay Beyond 365 Days: Special Bench
Tata Communications Ltd vs. ACIT (ITAT Mumbai – Special Bench)
Despite Third Proviso to s. 254(2A), Tribunal has power to extend stay beyond 365 days if delay not attributable to assessee
The Third Proviso to s. 254(2A), as amended w.e.f. 1.10.2008, provides that if the appeal filed by the assessee is not disposed off within the period of stay granted by the Tribunal (which cannot exceed 365 days), the order of stay shall stand vacated even if the delay in disposing of the appeal is not attributable to the assessee. The assessee filed a stay application requesting stay of demand for penalty of Rs. 369 crores. On the expiry of 365 days of stay, the assessee asked for extension of stay relying on the Tribunal’s order in Ronak Industries where, stay had been granted beyond 365 days relying on the judgement of the Bombay High Court in Narang Overseas 295 ITR 22 (Bom). As it was felt by the Tribunal that the reliance in Ronak Industries on Narang Overseas was misplaced in view of the amendment to the Third proviso to s. 254(2A) w.e.f. 1.10.2008, the question whether the Tribunal had jurisdiction to extend stay beyond 365 days referred to the Special Bench. HELD by the Special Bench:
Tata Communications Ltd vs. ACIT (ITAT Mumbai – Special Bench)
Despite Third Proviso to s. 254(2A), Tribunal has power to extend stay beyond 365 days if delay not attributable to assessee
The Third Proviso to s. 254(2A), as amended w.e.f. 1.10.2008, provides that if the appeal filed by the assessee is not disposed off within the period of stay granted by the Tribunal (which cannot exceed 365 days), the order of stay shall stand vacated even if the delay in disposing of the appeal is not attributable to the assessee. The assessee filed a stay application requesting stay of demand for penalty of Rs. 369 crores. On the expiry of 365 days of stay, the assessee asked for extension of stay relying on the Tribunal’s order in Ronak Industries where, stay had been granted beyond 365 days relying on the judgement of the Bombay High Court in Narang Overseas 295 ITR 22 (Bom). As it was felt by the Tribunal that the reliance in Ronak Industries on Narang Overseas was misplaced in view of the amendment to the Third proviso to s. 254(2A) w.e.f. 1.10.2008, the question whether the Tribunal had jurisdiction to extend stay beyond 365 days referred to the Special Bench. HELD by the Special Bench:
XBRL - FAQ
FAQs on XBRL
• What is XBRL?
• Who developed XBRL?
• What are the advantages of XBRL?
• Who can benefit from using XBRL?
• What is the future of XBRL?
• Does XBRL benefit the comparability of financial statements?
• Does XBRL cause a change in accounting standards?
• What are the benefits to a company from putting its financial statements into XBRL?
• How does XBRL work?
• How do companies create statements in XBRL?
What is XBRL?
XBRL is a language for the electronic communication of business and financial data which is revolutionizing business reporting around the world. It provides major benefits in the preparation, analysis and communication of business information. It offers cost savings, greater efficiency and improved accuracy and reliability to all those involved in supplying or using financial data. XBRL stands for eXtensible Business Reporting Language. It is already being put to practical use in a number of countries and implementations of XBRL are growing rapidly around the world.
Who developed XBRL?
XBRL is an open, royalty-free software specification developed through a process of collaboration between accountants and technologists from all over the world. Together, they formed XBRL International which is now made up of over 650 members, which includes global companies, accounting, technology, government and financial services bodies. XBRL is and will remain an open specification based on XML that is being incorporated into many accounting and analytical software tools and applications.
What are the advantages of XBRL?
XBRL offers major benefits at all stages of business reporting and analysis. The benefits are seen in automation, cost saving, faster, more reliable and more accurate handling of data, improved analysis and in better quality of information and decisionmaking. XBRL enables producers and consumers of financial data to switch resources away from costly manual processes, typically involving time-consuming comparison, assembly and re-entry of data. They are able to concentrate effort on analysis, aided by software which can validate and process XBRL information. XBRL is a flexible language, which is intended to support all current aspects of reporting in different countries and industries. Its extensible nature means that it can be adjusted to meet particular business requirements, even at the individual organization level.
Who can benefit from using XBRL?
All types of organizations can use XBRL to save costs and improve efficiency in handling business and financial information. Because XBRL is extensible and flexible, it can be adapted to a wide variety of different requirements. All participants in the financial information supply chain can benefit, whether they are preparers, transmitters or users of business data.
What is the future of XBRL?
XBRL is set to become the standard way of recording, storing and transmitting business financial information. It is capable of use throughout the world, whatever the language of the country concerned, for a wide variety of business purposes. It will deliver major cost savings and gains in efficiency, improving processes in companies, governments and other organisations.
Does XBRL benefit the comparability of financial statements?
XBRL benefits comparability by helping to identify data which is genuinely alike and distinguishing information which is not comparable. Computers can process this information and populate both pre defined and customised reports.
Does XBRL cause a change in accounting standards?
No. XBRL is simply a language for information. It must accurately reflect data reported under different standards – it does not change them.
What are the benefits to a company from putting its financial statements into XBRL?
XBRL increases the usability of financial statement information. The need to re-key financial data for analytical and other purposes can be eliminated. By presenting its statements in XBRL, a company can benefit investors and other stakeholders and enhance its profile. It will also meet the requirements of regulators, lenders and others consumers of financial information, who are increasingly demanding reporting in XBRL. This will improve business relations and lead to a range of benefits.
With full adoption of XBRL, companies can automate data collection. For example, data from different company divisions with different accounting systems can be assembled quickly, cheaply and efficiently. Once data is gathered in XBRL, different types of reports using varying subsets of the data can be produced with minimum effort. A company finance division, for example, could quickly and reliably generate internal management reports, financial statements for publication, tax and other regulatory filings, as well as credit reports for lenders. Not only can data handling be automated, removing time-consuming, error-prone processes, but the data can be checked by software for accuracy.
How does XBRL work?
XBRL makes the data readable, with the help of two documents – Taxonomy and instance document. Taxonomy defines the elements and their relationships based on the regulatory requirements. Using the taxonomy prescribed by the regulators, companies need to map their reports, and generate a valid XBRL instance document. The process of mapping means matching the concepts as reported by the company to the corresponding element in the taxonomy. In addition to assigning XBRL tag from taxonomy, information like unit of measurement, period of data, scale of reporting etc., needs to be included in the instance document.
How do companies create statements in XBRL?
There are a number of ways to create financial statements in XBRL:
• XBRL-aware accounting software products are becoming available which will support the export of data in XBRL form. These tools allow users to map charts of accounts and other structures to XBRL tags.
• Statements can be mapped into XBRL using XBRL software tools designed for this purpose
• Data from accounting databases can be extracted in XBRL format. It is not strictly necessary for an accounting software vendor to use XBRL; third party products can achieve the transformation of the data to XBRL.
• Applications can transform data in particular formats into XBRL. The route which an individual company may take will depend on its requirements and the accounting software and systems it currently uses, among other factors.
• What is XBRL?
• Who developed XBRL?
• What are the advantages of XBRL?
• Who can benefit from using XBRL?
• What is the future of XBRL?
• Does XBRL benefit the comparability of financial statements?
• Does XBRL cause a change in accounting standards?
• What are the benefits to a company from putting its financial statements into XBRL?
• How does XBRL work?
• How do companies create statements in XBRL?
What is XBRL?
XBRL is a language for the electronic communication of business and financial data which is revolutionizing business reporting around the world. It provides major benefits in the preparation, analysis and communication of business information. It offers cost savings, greater efficiency and improved accuracy and reliability to all those involved in supplying or using financial data. XBRL stands for eXtensible Business Reporting Language. It is already being put to practical use in a number of countries and implementations of XBRL are growing rapidly around the world.
Who developed XBRL?
XBRL is an open, royalty-free software specification developed through a process of collaboration between accountants and technologists from all over the world. Together, they formed XBRL International which is now made up of over 650 members, which includes global companies, accounting, technology, government and financial services bodies. XBRL is and will remain an open specification based on XML that is being incorporated into many accounting and analytical software tools and applications.
What are the advantages of XBRL?
XBRL offers major benefits at all stages of business reporting and analysis. The benefits are seen in automation, cost saving, faster, more reliable and more accurate handling of data, improved analysis and in better quality of information and decisionmaking. XBRL enables producers and consumers of financial data to switch resources away from costly manual processes, typically involving time-consuming comparison, assembly and re-entry of data. They are able to concentrate effort on analysis, aided by software which can validate and process XBRL information. XBRL is a flexible language, which is intended to support all current aspects of reporting in different countries and industries. Its extensible nature means that it can be adjusted to meet particular business requirements, even at the individual organization level.
Who can benefit from using XBRL?
All types of organizations can use XBRL to save costs and improve efficiency in handling business and financial information. Because XBRL is extensible and flexible, it can be adapted to a wide variety of different requirements. All participants in the financial information supply chain can benefit, whether they are preparers, transmitters or users of business data.
What is the future of XBRL?
XBRL is set to become the standard way of recording, storing and transmitting business financial information. It is capable of use throughout the world, whatever the language of the country concerned, for a wide variety of business purposes. It will deliver major cost savings and gains in efficiency, improving processes in companies, governments and other organisations.
Does XBRL benefit the comparability of financial statements?
XBRL benefits comparability by helping to identify data which is genuinely alike and distinguishing information which is not comparable. Computers can process this information and populate both pre defined and customised reports.
Does XBRL cause a change in accounting standards?
No. XBRL is simply a language for information. It must accurately reflect data reported under different standards – it does not change them.
What are the benefits to a company from putting its financial statements into XBRL?
XBRL increases the usability of financial statement information. The need to re-key financial data for analytical and other purposes can be eliminated. By presenting its statements in XBRL, a company can benefit investors and other stakeholders and enhance its profile. It will also meet the requirements of regulators, lenders and others consumers of financial information, who are increasingly demanding reporting in XBRL. This will improve business relations and lead to a range of benefits.
With full adoption of XBRL, companies can automate data collection. For example, data from different company divisions with different accounting systems can be assembled quickly, cheaply and efficiently. Once data is gathered in XBRL, different types of reports using varying subsets of the data can be produced with minimum effort. A company finance division, for example, could quickly and reliably generate internal management reports, financial statements for publication, tax and other regulatory filings, as well as credit reports for lenders. Not only can data handling be automated, removing time-consuming, error-prone processes, but the data can be checked by software for accuracy.
How does XBRL work?
XBRL makes the data readable, with the help of two documents – Taxonomy and instance document. Taxonomy defines the elements and their relationships based on the regulatory requirements. Using the taxonomy prescribed by the regulators, companies need to map their reports, and generate a valid XBRL instance document. The process of mapping means matching the concepts as reported by the company to the corresponding element in the taxonomy. In addition to assigning XBRL tag from taxonomy, information like unit of measurement, period of data, scale of reporting etc., needs to be included in the instance document.
How do companies create statements in XBRL?
There are a number of ways to create financial statements in XBRL:
• XBRL-aware accounting software products are becoming available which will support the export of data in XBRL form. These tools allow users to map charts of accounts and other structures to XBRL tags.
• Statements can be mapped into XBRL using XBRL software tools designed for this purpose
• Data from accounting databases can be extracted in XBRL format. It is not strictly necessary for an accounting software vendor to use XBRL; third party products can achieve the transformation of the data to XBRL.
• Applications can transform data in particular formats into XBRL. The route which an individual company may take will depend on its requirements and the accounting software and systems it currently uses, among other factors.
ICAI in collaboration with Microsoft brings to you original licensed* software suite which includes Windows 7 Enterprise Upgrade, Office 2010 Professi
The ICAI has worked out a model with Microsoft where one can Get Windows 7 Enterprise Upgrade, Office 2010 Professional Plus and Core Cals @ 799 + Taxes
Pl go to link
http://www.icai.org/parivartan/offer/
Pl go to link
http://www.icai.org/parivartan/offer/
SBI - Tax Audit
SBI scraps Proposal to appoint Single Tax Auditor for Whole Bank. Tax Audit to be done by Branch auditors as in earlier years.
Service Tax Rates From Year 2001 to Up to Date
Service tax rates for previous years and current years. The table will describe all the service tax rates from the year 2001 with period applicability.
Effective Dates ..... STax.Rate ........ EC ......SHC ...... Total
16-07-2001 to 13-05-2003 5% - - 5%
14-05-2003 to 09-09-2004 8% - - 8%
10-09-2004 to 17-04-2006 10% 2% - 10.2%
18-04-2006 to 11-05-2007 12% 2% - 12.24%
12-05-2007 to 23-02-2009 12% 2% 1% 12.36%
24-02-2009 onwards 10% 2% 1% 10.30%
Effective Dates ..... STax.Rate ........ EC ......SHC ...... Total
16-07-2001 to 13-05-2003 5% - - 5%
14-05-2003 to 09-09-2004 8% - - 8%
10-09-2004 to 17-04-2006 10% 2% - 10.2%
18-04-2006 to 11-05-2007 12% 2% - 12.24%
12-05-2007 to 23-02-2009 12% 2% 1% 12.36%
24-02-2009 onwards 10% 2% 1% 10.30%
PAN mandatory field in DIN eform 1
Now PAN of the Applicant will be a mandatory field in DIN eform 1
KEY POINTS - STATUTORY AUDIT OF BANKS
Break Even Date for NPA is 31.12.2010 for the year 2010-2011
§ Once an account has been classified as NPA, all the facilities granted to the borrower will be treated as NPA except in respect of Primary Agricultural Credit Societies (PACS)/Farmers Service Societies (FSS).
§ Overdue period starts immediately on expiry of due date, concept of ‘past due’ has already been dispensed with in past years.
§ Stock statements older than 3 months should not be considered
§ Interest on advances (accrued and outstanding) should be calculated as on 31st March (few banks charges interest on advances few days prior to 31st March which should not be considered)
§ Long outstanding entries (unexplainable and where there is no movement at all) in suspense account should be suggested for provisioning.
§ ‘NIL’ MOC Certificate should be issued even if there is no MOC
§ MOC should also be countersigned by Branch Manager (views of the BM if any has to be attached on a separate sheet duly signed by him)
§ Submit all the REPORTS including TAX AUDIT REPORTS & LFAR immediately on completion of Audit and before leaving the branch
§ Make a columnar list of documents to be submitted to branch/regional/zonal/other office before commencement of Audit. (it is advisable to get all documents in your custody duly signed by the Branch Manger at the beginning of Audit)
§ Must get CERTIFICATE OF ATTENDENCE signed by Branch Manager in duplicate before leaving the branch
§ Availability of security or net worth of borrower/guarantor should not be considered for the purpose of NPA recognition – it should always be based on recovery
§ 100% provision is required for assets which has become doubtful for more than 3 years i.e. NPA date on or before 31.03.2007.
§ To specifically report simultaneously to the CEO of the bank and regional office of the Dept of Banking Supervision RBI where the HO of the bank is situated, any matter susceptible to be fraud or fraudulent activity or any foul play in any transactions. Any deliberate failure on part of the Auditors should render himself liable for action. If amount of fraud involve Rs 1 Crore or more – central office of the Dept of Banking Supervision, RBI, Mumbai to be reported immediately.
§ Once an account has been classified as NPA, all the facilities granted to the borrower will be treated as NPA except in respect of Primary Agricultural Credit Societies (PACS)/Farmers Service Societies (FSS).
§ Overdue period starts immediately on expiry of due date, concept of ‘past due’ has already been dispensed with in past years.
§ Stock statements older than 3 months should not be considered
§ Interest on advances (accrued and outstanding) should be calculated as on 31st March (few banks charges interest on advances few days prior to 31st March which should not be considered)
§ Long outstanding entries (unexplainable and where there is no movement at all) in suspense account should be suggested for provisioning.
§ ‘NIL’ MOC Certificate should be issued even if there is no MOC
§ MOC should also be countersigned by Branch Manager (views of the BM if any has to be attached on a separate sheet duly signed by him)
§ Submit all the REPORTS including TAX AUDIT REPORTS & LFAR immediately on completion of Audit and before leaving the branch
§ Make a columnar list of documents to be submitted to branch/regional/zonal/other office before commencement of Audit. (it is advisable to get all documents in your custody duly signed by the Branch Manger at the beginning of Audit)
§ Must get CERTIFICATE OF ATTENDENCE signed by Branch Manager in duplicate before leaving the branch
§ Availability of security or net worth of borrower/guarantor should not be considered for the purpose of NPA recognition – it should always be based on recovery
§ 100% provision is required for assets which has become doubtful for more than 3 years i.e. NPA date on or before 31.03.2007.
§ To specifically report simultaneously to the CEO of the bank and regional office of the Dept of Banking Supervision RBI where the HO of the bank is situated, any matter susceptible to be fraud or fraudulent activity or any foul play in any transactions. Any deliberate failure on part of the Auditors should render himself liable for action. If amount of fraud involve Rs 1 Crore or more – central office of the Dept of Banking Supervision, RBI, Mumbai to be reported immediately.
Black Money
Its true that india's economy is spoiled by Black Money, Black money can be convereted into white by donations to PM funds, National emergency fund, Forming educational institutions and trusts, BUT MUST PAY TAX ALWAYS. NOTE :- AVOID TAX , BUT NEVER EVADE TAX.
eXtensible Business Reporting Language (XBRL)
XBRL) is an open technology standard which makes it possible to store business and financial information in a computer-readable format. Many countries and/or financial regulators have approved, or are in the process of implementing, requirements around XBRL as the electronic financial reporting standard. These include the US, Japan, UK, Netherlands, Australia & China to name a few.
On 1 April 2011, the Ministry of Corporate Affairs (MCA) in India posted a circular on its website requiring certain class of companies (Phase 1) to file balance sheets and profit and loss accounts for the year 2010-11 onwards by using XBRL. The financial statements required to be filed in XBRL format will be based upon the taxonomy on XBRL developed for the existing Schedule VI and non-converged accounting standards notified under the Companies (Accounting Standards) Rules, 2006.
As per the circular, the following class of companies will be considered as Phase 1 and will have to file their Financial Statements in XBRL from the year 2010-11:-
i. All companies listed in India and their subsidiaries, including overseas subsidiaries
ii. All companies having a paid up capital of Rs. 5 Crore and above or a turnover of Rs. 100 crore or above
This represents a significant change in the manner in which companies are required to share financial information with regulatory authorities. XBRL will facilitate the transmission of data in electronic form between companies and different regulatory agencies in India, and has the potential to increase comparability and transparency of financial information.
Companies have a short period of time – less than six months – to convert financial statements into the new format, which means that technology solutions need to be put in place very swiftly and finance teams need to swiftly get to grips with the XBRL terminology and taxonomy. Given the short timeframe, initial solutions are likely to be ‘bolt-on’ rather than ‘bottom up’ in nature.
We welcome the MCA’s circular on XBRL, and would look for immediate publication of the taxonomy and further clarification on a number of questions highlighted in this document to enable companies to put in place the necessary technology and processes to produce robust XBRL data.
In this document, we set out an overview of XBRL, why it is being implemented in India, the requirements of the circular, critical issues for companies in planning the production of XBRL data and some points that require further clarification by the MCA. Since these questions can only be conclusively answered by the MCA, companies are advised not to treat our perspectives as authoritative guidance. On critical issues, they should consult the MCA or take legal/ professional advice.
Phase 1 companies have a short time-frame to prepare for XBRL filing of 2010–11 financial statements
Introducing XBRL
XBRL is the financial and operational business reporting offshoot of eXtensible Markup Language (XML), which is a freely licensable, open technology standard (or vocabulary) used to exchange business information electronically. XML is the universally preferred data description language used to describe the storage, manipulation and exchange of data via the internet.
The basis for XBRL is a “tagging” process where each value, item, descriptor, etc., in the exchanged information can be given a unique set of tags to describe it. Using these tags, computer programs can read the data without human intervention. Tags are commonly used to exchange information, such as an account balance. XBRL leverages groups of tags in the form of a taxonomy, or classification system, to describe data for a particular audience.
XBRL is being positioned as the vocabulary of business and financial reporting. It is a way to “bar code” business information contained in general ledgers, income and cash flow statements, balance sheets, as well as text information included within the footnotes and other requirements of business reporting.
XBRL is:
An open technology standard for reporting and analyzing business and financial information
Software agnostic, or independent
Accounting framework neutral
XBRL is not:
A standardized chart of accounts
A way to require the reporting of specific information
A transaction level activity (although it can summarize general ledger transactions)
Automatically compliant with International Financial Reporting Standards – it only tags the existing financial data prepared under existing AS
Key takeaways
XBRL involves machine-readable tagged data (meta-data, or data about data) and is fast becoming the digital standard for communicating business and financial information.
Computers can treat XBRL data “intelligently” — applications can recognize the information in an XBRL document, select it, analyze it, store it and exchange it with other applications, and present it automatically in a variety of ways for users.
A useful analogy is to think of XBRL as “bar coding” — where applications can automatically identify each piece of data and specific information about it, such as value, type, currency, date, source and its relationships with other data.
How XBRL works
Instead of treating financial information as a block of text, XBRL provides a computer-readable tag to identify each individual item of data. Through the attachment of identifying tags to individual pieces of data, a business reporting document becomes “intelligent” data, allowing the exchange of business reporting data by encoding the information in a meaningful way. Computer applications can use the XBRL data to recognize the information in an XBRL document, select it, analyze it, store it, exchange it with other computers and present it in a variety of ways for users.
XBRL tags are defined and maintained in taxonomies which contain meta-data (data about data). Taxonomies are the basis for tagging financial and business information in XBRL. A taxonomy is an electronic classification system of tags defining thousands of business reporting concepts (including text) and their relationships.
The taxonomy provides organization and details for each concept, including the labels, definitions, accounting balance (i.e., debit or credit), presentation and summation information. A taxonomy for India based on the existing, non-converged Accounting Standards and existing Schedule VI to the Companies Act has already been developed by the MCA and we understand that it will be made available shortly.
An instance document is the end result of how a preparer creates XBRL data. It contains report information typically compiled from internal ERP or financial reporting systems that have been “marked up” or tagged in XBRL. Figures 1 and 2 below show the inter-relationships between the various elements of XBRL.
Companies will use the India taxonomy based on non-converged Accounting Standards and existing Schedule VI.
XBRL is extensible (i.e., can be extended) since a preparer can create, define and describe new tags unique to its particular circumstances, while otherwise maintaining the comparability of other information tagged using the standard taxonomy. XBRL was designed to be flexible and is intended to support aspects of electronic financial reporting across countries and industries.
Tagging financial data in XBRL is similar to the use of bar codes. The bar code was created to electronically identify different products. Similar to a bar code, applications that utilize XBRL data can automatically identify each piece of data and specific information about it, such as value, type, currency, date, source and its relationships with other data.
XBRL and the financial and business reporting supply chain
With increased interest in financial reporting “transparency” and the availability of advanced information technology tools, there is a greater focus now on supplying more information on a timely basis to external stakeholders. While the format in which this information needs to be supplied is evolving, there is an increasing need for information to be available in electronic formats.
Business reporting information supplied by one organization is often used as input for the processes of another organization. This process is often referred to as the information supply chain. The financial and business reporting information supply chain (see Figure 3) is a model that describes the information disclosure process, from the start of the transaction within the primary and support processes, to the use of reporting information by stakeholders. Given the changing demand for reporting information and the increasing opportunities in the field of information technology, the existing information supply chain should change substantially as a result of XBRL.
For example, in the “external” part of the information supply chain, once a company has published information, stakeholders, such as analysts and lenders, can use the information to form a picture of business performance during that reporting period. Depending on the interests of the stakeholders, the data supplied can be filtered and analyzed to obtain the desired information. As a result, analysts and lenders should spend less time on processing data and be able to invest more time in detailed and meaningful analyses through XBRL.
What are the benefits of XBRL for India?
The introduction of XBRL in India will increase the ability of different regulatory bodies to use the same electronic data set, without the need for manual re-keying of data or sending hard copies of documents to different bodies. For example, the same financial data with XBRL tagging can be filed with the Ministry of Corporate Affairs to meet Companies Act requirements, shared with SEBI and the BSE/NSE to meet listing requirements, provided to the company’s lending institutions, and uploaded to the company’s website so that shareholders can easily access it. Although there is no explicit mention of taxation in the MCA’s circular, the information may also be used by the direct and indirect tax boards and other regulatory bodies who currently require information in different formats. Once a company has put in place the taxonomy for these different bodies, the process to produce the information becomes more efficient.
Furthermore, companies can benefit from automation of data collection internally, depending on the existing IT systems in place. For example, data from different company divisions with different accounting systems can be assembled quickly, cheaply and efficiently. Once data is gathered in XBRL, different types of reports using varying subsets of the data can be produced with minimum effort. A company finance division, for example, could quickly and reliably generate internal management reports, financial statements for publication, tax and other regulatory filings, as well as credit reports for lenders. Not only can data handling be automated, removing time-consuming, error-prone processes, but the data can be checked by software for accuracy.
Whilst the introduction of XBRL in India may increase efficiency of sharing information with national regulators, it does not by itself help with the goal of achieving convergence of Accounting Standards with International Financial Reporting Standards. The MCA and ICAI’s efforts in this direction continue to be of vital importance to users and preparers.
Potential benefits of XBRL
Better Faster Cheaper
Accuracy No rekeying Automated
Accessibility Instant user access Software independent
Analysis More frequent updates Less effort to use
What are the learnings from other countries that have implemented XBRL?
Other countries such as the US and UK have already mandated XBRL filing or are in the process of doing so. Companies experienced some challenges in implementing XBRL. For example, inexperienced staff may make simple errors such as selecting different tags for the same item, creating extensions (new tags) when a tag already exists for that item, or tagging an item with the wrong directional sign (debit or credit). All this underlines the importance of trained staff performing the tagging process, having a robust audit trail to document the rationale for tag selection that can be followed in subsequent years, and a strong review process, possibly utilising one of the available software tools to facilitate the review. Some companies opted to obtain additional assurance from their auditors or advisors on the initial XBRL tagging in year one, to give management additional comfort over the correctness and completeness of the XBRL information.
Who is leading the XBRL initiative?
The XBRL movement is being governed by XBRL International; a not-for-profit consortium comprised of several working groups, and governed by a central steering committee comprised of elected members from the established jurisdictions. XBRL International includes approximately 25 established and provisional local jurisdictions, which focus on the progress of XBRL in their region. The steering committee coordinates the working groups and has responsibility for setting technical, financial and operational strategy within the organization. Workgroups have an international and jurisdictional focus. Over 650 entities worldwide are involved in the various XBRL jurisdictional organizations — including public accounting firms, technology companies, governmental entities, academia and other organizations.
India is now an established jurisdiction of XBRL International. A separate company, under Section 25 has been created, to manage the operations of XBRL India. The main objectives of XBRL India are:
To create awareness about XBRL in India
To develop and maintain Indian Taxonomies
To help companies adopt and implement XBRL.
Information technology changes
What kind of IT changes will be required in order to produce XBRL information?
There are a number of ways to create financial statements in XBRL:
Financial statements can be mapped into XBRL using XBRL software tools and applications designed for this purpose, i.e. outside of the existing accounting software.
XBRL-aware accounting software products may be utilized which will support the export of data in XBRL form. The software should allow users to map charts of accounts and other structures to XBRL tags as defined by different taxonomies, e.g. MCA taxonomy for Schedule VI.
Data from accounting databases can be extracted using third party products, outside of the existing software vendors, to achieve the transformation of the data to XBRL.
The route which an individual company may take will depend on internal and external requirements, accounting software and systems it currently uses, organizational structure, the number of subsidiaries that require XBRL data, among its other factors. Companies should carefully assess and consider the various available options before committing to a particular solution strategy.
Is any form of validation or assurance required on the XBRL format submitted information?
The circular does not explicitly require auditor (or any other third party) attestation or validation of the XBRL format information submitted. Clarity on this topic is critical as professional firms would need to prepare themselves internally accordingly as per the requirements of the XBRL standards.
Matters that need further clarification from the MCA
Coverage related
Financial information from which financial year should be considered to determine applicability of XBRL filing?
This issue is not specifically addressed in the circular. In the absence of any further guidance, it may make sense to assess the listing status and paid up capital criteria as at 31/3/2011 (or next balance sheet date) and turnover criteria for the financial year ended on the same date.
Where in doubt, for example a company whose turnover for 2009-10 was greater than Rs. 100 crore but 2010-11 turnover was below the threshold, we would recommend that entities err on the side of caution and prepare the requisite information in XBRL format.
Are subsidiaries, joint ventures & associates of phase 1 companies also required to file their financial statements using XBRL?
As per the circular all subsidiaries, including foreign subsidiaries, of companies listed in India are to file their financial statements using XBRL.
There is no specific mention of XBRL filing requirements for subsidiaries of companies qualifying under the other criteria, i.e. those with a paid up capital of Rs. 5 crore or above or a turnover of Rs. 100 crore or above.
Further the circular does not state any XBRL filing requirements for associates and/or joint ventures of companies covered in Phase 1.
It is suggested that companies obtain clarification from the MCA with regards to filing requirements for their subsidiaries, associates & joint ventures.
Taxonomy
What taxonomy should be utilized for XBRL reporting?
The circular requires that the financial statements required to be filed in XBRL format would be based upon the taxonomy on XBRL developed for the existing Schedule VI, as per the existing (non converged) Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006.
The taxonomy has not yet been released by the MCA but is expected to be issued shortly as per the circular.
In particular it should be noted that whilst a revised Schedule VI has recently been released by the MCA, which is applicable for the financial year 2011- 12 onwards, the XBRL taxonomy expected to be released is based on the current Schedule VI. This may result in a revised taxonomy being released for the next reporting period based on the new Schedule VI, resulting in companies effectively having to re-tag all their information as per the new requirements.
Will extensions to the taxonomy for company specific requirements be allowed?
The circular does not explicitly mention as to whether extensions to the base taxonomy may be allowed. We recommend that the MCA provide such guidance when releasing the taxonomy.
What taxonomy will be required for filing of financial statements of overseas subsidary?
The taxonomy is heavily dependent on the definitions and disclosures in Accounting Standards and Schedule VI. There would be additional disclosures required by Accounting Standards over and above those required by Schedule VI. Additionally there would be challenges if the subsidary’s financial statements are not prepared in English language. Companies would require guidelines from the MCA on this.
Filing requirements
Do complete financial statements, including disclosures, need to be filed or only the Balance Sheet and Profit & Loss account?
Broadly there are three implementation methodologies with regards to XBRL reporting which are explained as below:
i. Abridged taxonomy: This may require the reporting of only select information, say the profit & loss account and balance sheet numbers, using XBRL format.
ii. Financial only taxonomy: This may require the reporting of all financial related information, including those contained in the notes, using XBRL taxonomy. Non-financial information may be reported in a non-XBRL format.
iii. Complete taxonomy: This would require the tagging of all information using XBRL, and for which, a complete taxonomy would be released.
As can be noted from the above, the level of effort may vary significantly depending on the reporting requirements. The circular itself does not provide much clarity on this issue – however the taxonomy, when released, may provide further insights into the MCA requirements for Phase 1 companies.
When is the XBRL format filing deadline?
As per the circular, companies covered in Phase 1 are permitted to file upto 30 September 2011 without any additional filing fee.
Is XBRL format reporting an additional requirement or a replacement for existing reporting methodology?
The circular does not clarify as to whether, for companies covered in Phase 1, XBRL format reporting is an additional requirement or a replacement for existing reporting methodology. It is suggested that companies obtain further guidance from the MCA on this issue.
What is the XBRL information filing methodology to be followed?
The circular does not provide further guidance as to the filing methodology, i.e. upload process, of the requisite XBRL information. We would expect that the MCA provides further guidance on this important issue.
On 1 April 2011, the Ministry of Corporate Affairs (MCA) in India posted a circular on its website requiring certain class of companies (Phase 1) to file balance sheets and profit and loss accounts for the year 2010-11 onwards by using XBRL. The financial statements required to be filed in XBRL format will be based upon the taxonomy on XBRL developed for the existing Schedule VI and non-converged accounting standards notified under the Companies (Accounting Standards) Rules, 2006.
As per the circular, the following class of companies will be considered as Phase 1 and will have to file their Financial Statements in XBRL from the year 2010-11:-
i. All companies listed in India and their subsidiaries, including overseas subsidiaries
ii. All companies having a paid up capital of Rs. 5 Crore and above or a turnover of Rs. 100 crore or above
This represents a significant change in the manner in which companies are required to share financial information with regulatory authorities. XBRL will facilitate the transmission of data in electronic form between companies and different regulatory agencies in India, and has the potential to increase comparability and transparency of financial information.
Companies have a short period of time – less than six months – to convert financial statements into the new format, which means that technology solutions need to be put in place very swiftly and finance teams need to swiftly get to grips with the XBRL terminology and taxonomy. Given the short timeframe, initial solutions are likely to be ‘bolt-on’ rather than ‘bottom up’ in nature.
We welcome the MCA’s circular on XBRL, and would look for immediate publication of the taxonomy and further clarification on a number of questions highlighted in this document to enable companies to put in place the necessary technology and processes to produce robust XBRL data.
In this document, we set out an overview of XBRL, why it is being implemented in India, the requirements of the circular, critical issues for companies in planning the production of XBRL data and some points that require further clarification by the MCA. Since these questions can only be conclusively answered by the MCA, companies are advised not to treat our perspectives as authoritative guidance. On critical issues, they should consult the MCA or take legal/ professional advice.
Phase 1 companies have a short time-frame to prepare for XBRL filing of 2010–11 financial statements
Introducing XBRL
XBRL is the financial and operational business reporting offshoot of eXtensible Markup Language (XML), which is a freely licensable, open technology standard (or vocabulary) used to exchange business information electronically. XML is the universally preferred data description language used to describe the storage, manipulation and exchange of data via the internet.
The basis for XBRL is a “tagging” process where each value, item, descriptor, etc., in the exchanged information can be given a unique set of tags to describe it. Using these tags, computer programs can read the data without human intervention. Tags are commonly used to exchange information, such as an account balance. XBRL leverages groups of tags in the form of a taxonomy, or classification system, to describe data for a particular audience.
XBRL is being positioned as the vocabulary of business and financial reporting. It is a way to “bar code” business information contained in general ledgers, income and cash flow statements, balance sheets, as well as text information included within the footnotes and other requirements of business reporting.
XBRL is:
An open technology standard for reporting and analyzing business and financial information
Software agnostic, or independent
Accounting framework neutral
XBRL is not:
A standardized chart of accounts
A way to require the reporting of specific information
A transaction level activity (although it can summarize general ledger transactions)
Automatically compliant with International Financial Reporting Standards – it only tags the existing financial data prepared under existing AS
Key takeaways
XBRL involves machine-readable tagged data (meta-data, or data about data) and is fast becoming the digital standard for communicating business and financial information.
Computers can treat XBRL data “intelligently” — applications can recognize the information in an XBRL document, select it, analyze it, store it and exchange it with other applications, and present it automatically in a variety of ways for users.
A useful analogy is to think of XBRL as “bar coding” — where applications can automatically identify each piece of data and specific information about it, such as value, type, currency, date, source and its relationships with other data.
How XBRL works
Instead of treating financial information as a block of text, XBRL provides a computer-readable tag to identify each individual item of data. Through the attachment of identifying tags to individual pieces of data, a business reporting document becomes “intelligent” data, allowing the exchange of business reporting data by encoding the information in a meaningful way. Computer applications can use the XBRL data to recognize the information in an XBRL document, select it, analyze it, store it, exchange it with other computers and present it in a variety of ways for users.
XBRL tags are defined and maintained in taxonomies which contain meta-data (data about data). Taxonomies are the basis for tagging financial and business information in XBRL. A taxonomy is an electronic classification system of tags defining thousands of business reporting concepts (including text) and their relationships.
The taxonomy provides organization and details for each concept, including the labels, definitions, accounting balance (i.e., debit or credit), presentation and summation information. A taxonomy for India based on the existing, non-converged Accounting Standards and existing Schedule VI to the Companies Act has already been developed by the MCA and we understand that it will be made available shortly.
An instance document is the end result of how a preparer creates XBRL data. It contains report information typically compiled from internal ERP or financial reporting systems that have been “marked up” or tagged in XBRL. Figures 1 and 2 below show the inter-relationships between the various elements of XBRL.
Companies will use the India taxonomy based on non-converged Accounting Standards and existing Schedule VI.
XBRL is extensible (i.e., can be extended) since a preparer can create, define and describe new tags unique to its particular circumstances, while otherwise maintaining the comparability of other information tagged using the standard taxonomy. XBRL was designed to be flexible and is intended to support aspects of electronic financial reporting across countries and industries.
Tagging financial data in XBRL is similar to the use of bar codes. The bar code was created to electronically identify different products. Similar to a bar code, applications that utilize XBRL data can automatically identify each piece of data and specific information about it, such as value, type, currency, date, source and its relationships with other data.
XBRL and the financial and business reporting supply chain
With increased interest in financial reporting “transparency” and the availability of advanced information technology tools, there is a greater focus now on supplying more information on a timely basis to external stakeholders. While the format in which this information needs to be supplied is evolving, there is an increasing need for information to be available in electronic formats.
Business reporting information supplied by one organization is often used as input for the processes of another organization. This process is often referred to as the information supply chain. The financial and business reporting information supply chain (see Figure 3) is a model that describes the information disclosure process, from the start of the transaction within the primary and support processes, to the use of reporting information by stakeholders. Given the changing demand for reporting information and the increasing opportunities in the field of information technology, the existing information supply chain should change substantially as a result of XBRL.
For example, in the “external” part of the information supply chain, once a company has published information, stakeholders, such as analysts and lenders, can use the information to form a picture of business performance during that reporting period. Depending on the interests of the stakeholders, the data supplied can be filtered and analyzed to obtain the desired information. As a result, analysts and lenders should spend less time on processing data and be able to invest more time in detailed and meaningful analyses through XBRL.
What are the benefits of XBRL for India?
The introduction of XBRL in India will increase the ability of different regulatory bodies to use the same electronic data set, without the need for manual re-keying of data or sending hard copies of documents to different bodies. For example, the same financial data with XBRL tagging can be filed with the Ministry of Corporate Affairs to meet Companies Act requirements, shared with SEBI and the BSE/NSE to meet listing requirements, provided to the company’s lending institutions, and uploaded to the company’s website so that shareholders can easily access it. Although there is no explicit mention of taxation in the MCA’s circular, the information may also be used by the direct and indirect tax boards and other regulatory bodies who currently require information in different formats. Once a company has put in place the taxonomy for these different bodies, the process to produce the information becomes more efficient.
Furthermore, companies can benefit from automation of data collection internally, depending on the existing IT systems in place. For example, data from different company divisions with different accounting systems can be assembled quickly, cheaply and efficiently. Once data is gathered in XBRL, different types of reports using varying subsets of the data can be produced with minimum effort. A company finance division, for example, could quickly and reliably generate internal management reports, financial statements for publication, tax and other regulatory filings, as well as credit reports for lenders. Not only can data handling be automated, removing time-consuming, error-prone processes, but the data can be checked by software for accuracy.
Whilst the introduction of XBRL in India may increase efficiency of sharing information with national regulators, it does not by itself help with the goal of achieving convergence of Accounting Standards with International Financial Reporting Standards. The MCA and ICAI’s efforts in this direction continue to be of vital importance to users and preparers.
Potential benefits of XBRL
Better Faster Cheaper
Accuracy No rekeying Automated
Accessibility Instant user access Software independent
Analysis More frequent updates Less effort to use
What are the learnings from other countries that have implemented XBRL?
Other countries such as the US and UK have already mandated XBRL filing or are in the process of doing so. Companies experienced some challenges in implementing XBRL. For example, inexperienced staff may make simple errors such as selecting different tags for the same item, creating extensions (new tags) when a tag already exists for that item, or tagging an item with the wrong directional sign (debit or credit). All this underlines the importance of trained staff performing the tagging process, having a robust audit trail to document the rationale for tag selection that can be followed in subsequent years, and a strong review process, possibly utilising one of the available software tools to facilitate the review. Some companies opted to obtain additional assurance from their auditors or advisors on the initial XBRL tagging in year one, to give management additional comfort over the correctness and completeness of the XBRL information.
Who is leading the XBRL initiative?
The XBRL movement is being governed by XBRL International; a not-for-profit consortium comprised of several working groups, and governed by a central steering committee comprised of elected members from the established jurisdictions. XBRL International includes approximately 25 established and provisional local jurisdictions, which focus on the progress of XBRL in their region. The steering committee coordinates the working groups and has responsibility for setting technical, financial and operational strategy within the organization. Workgroups have an international and jurisdictional focus. Over 650 entities worldwide are involved in the various XBRL jurisdictional organizations — including public accounting firms, technology companies, governmental entities, academia and other organizations.
India is now an established jurisdiction of XBRL International. A separate company, under Section 25 has been created, to manage the operations of XBRL India. The main objectives of XBRL India are:
To create awareness about XBRL in India
To develop and maintain Indian Taxonomies
To help companies adopt and implement XBRL.
Information technology changes
What kind of IT changes will be required in order to produce XBRL information?
There are a number of ways to create financial statements in XBRL:
Financial statements can be mapped into XBRL using XBRL software tools and applications designed for this purpose, i.e. outside of the existing accounting software.
XBRL-aware accounting software products may be utilized which will support the export of data in XBRL form. The software should allow users to map charts of accounts and other structures to XBRL tags as defined by different taxonomies, e.g. MCA taxonomy for Schedule VI.
Data from accounting databases can be extracted using third party products, outside of the existing software vendors, to achieve the transformation of the data to XBRL.
The route which an individual company may take will depend on internal and external requirements, accounting software and systems it currently uses, organizational structure, the number of subsidiaries that require XBRL data, among its other factors. Companies should carefully assess and consider the various available options before committing to a particular solution strategy.
Is any form of validation or assurance required on the XBRL format submitted information?
The circular does not explicitly require auditor (or any other third party) attestation or validation of the XBRL format information submitted. Clarity on this topic is critical as professional firms would need to prepare themselves internally accordingly as per the requirements of the XBRL standards.
Matters that need further clarification from the MCA
Coverage related
Financial information from which financial year should be considered to determine applicability of XBRL filing?
This issue is not specifically addressed in the circular. In the absence of any further guidance, it may make sense to assess the listing status and paid up capital criteria as at 31/3/2011 (or next balance sheet date) and turnover criteria for the financial year ended on the same date.
Where in doubt, for example a company whose turnover for 2009-10 was greater than Rs. 100 crore but 2010-11 turnover was below the threshold, we would recommend that entities err on the side of caution and prepare the requisite information in XBRL format.
Are subsidiaries, joint ventures & associates of phase 1 companies also required to file their financial statements using XBRL?
As per the circular all subsidiaries, including foreign subsidiaries, of companies listed in India are to file their financial statements using XBRL.
There is no specific mention of XBRL filing requirements for subsidiaries of companies qualifying under the other criteria, i.e. those with a paid up capital of Rs. 5 crore or above or a turnover of Rs. 100 crore or above.
Further the circular does not state any XBRL filing requirements for associates and/or joint ventures of companies covered in Phase 1.
It is suggested that companies obtain clarification from the MCA with regards to filing requirements for their subsidiaries, associates & joint ventures.
Taxonomy
What taxonomy should be utilized for XBRL reporting?
The circular requires that the financial statements required to be filed in XBRL format would be based upon the taxonomy on XBRL developed for the existing Schedule VI, as per the existing (non converged) Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006.
The taxonomy has not yet been released by the MCA but is expected to be issued shortly as per the circular.
In particular it should be noted that whilst a revised Schedule VI has recently been released by the MCA, which is applicable for the financial year 2011- 12 onwards, the XBRL taxonomy expected to be released is based on the current Schedule VI. This may result in a revised taxonomy being released for the next reporting period based on the new Schedule VI, resulting in companies effectively having to re-tag all their information as per the new requirements.
Will extensions to the taxonomy for company specific requirements be allowed?
The circular does not explicitly mention as to whether extensions to the base taxonomy may be allowed. We recommend that the MCA provide such guidance when releasing the taxonomy.
What taxonomy will be required for filing of financial statements of overseas subsidary?
The taxonomy is heavily dependent on the definitions and disclosures in Accounting Standards and Schedule VI. There would be additional disclosures required by Accounting Standards over and above those required by Schedule VI. Additionally there would be challenges if the subsidary’s financial statements are not prepared in English language. Companies would require guidelines from the MCA on this.
Filing requirements
Do complete financial statements, including disclosures, need to be filed or only the Balance Sheet and Profit & Loss account?
Broadly there are three implementation methodologies with regards to XBRL reporting which are explained as below:
i. Abridged taxonomy: This may require the reporting of only select information, say the profit & loss account and balance sheet numbers, using XBRL format.
ii. Financial only taxonomy: This may require the reporting of all financial related information, including those contained in the notes, using XBRL taxonomy. Non-financial information may be reported in a non-XBRL format.
iii. Complete taxonomy: This would require the tagging of all information using XBRL, and for which, a complete taxonomy would be released.
As can be noted from the above, the level of effort may vary significantly depending on the reporting requirements. The circular itself does not provide much clarity on this issue – however the taxonomy, when released, may provide further insights into the MCA requirements for Phase 1 companies.
When is the XBRL format filing deadline?
As per the circular, companies covered in Phase 1 are permitted to file upto 30 September 2011 without any additional filing fee.
Is XBRL format reporting an additional requirement or a replacement for existing reporting methodology?
The circular does not clarify as to whether, for companies covered in Phase 1, XBRL format reporting is an additional requirement or a replacement for existing reporting methodology. It is suggested that companies obtain further guidance from the MCA on this issue.
What is the XBRL information filing methodology to be followed?
The circular does not provide further guidance as to the filing methodology, i.e. upload process, of the requisite XBRL information. We would expect that the MCA provides further guidance on this important issue.
Director Relatives (office or place of profit) Amendment Rules, 2011. Limit of Rs.50,000 increased.
Director Relatives (office or place of profit) Amendment Rules, 2011. Limit of Rs.50,000 increased to Rs.2,50,000.F No.17/75/2011-CLV , dated 6-4-2011.
Finance bill applicable from 8-4-2011.
President of India gives assent to Finance bill 2011 on 8-4-2011.Provisions applicable from passing of Finance bill applicable from 8-4-2011.
"Anna Hazare"
1. Who is Anna Hazare?
An ex-army man. Fought 1965 Indo-Pak War
2. What's so special about him?
He built a village Ralegaon Siddhi in Ahamad Nagar district,Maharashtra
3. So what?
This village is a self-sustained model village. Energy isproduced in the village itself from solar power, biofuel and wind mills.
In 1975, it used to be a poverty clad village. Now it is oneof the richest village in India.It has become a model for self-sustained, eco-friendly & harmonicvillage.
4. Ok,...?
This guy, Anna Hazare was awarded Padma Bhushan and is aknown figure for his social activities.
5. Really, what is he fighting for?
He is supporting a cause, the amendment of a law to curbcorruption in India.
6. How that can be possible?
He is advocating for a Bil, The Lok Pal Bill (The CitizenOmbudsman Bill), that will form an autonomous authority who will makepoliticians (ministers), beurocrats (IAS/IPS) accountable for their deeds.
8. It's an entirely new thing right..?
In 1972, the bill was proposed by then Law minister Mr.Shanti Bhushan. Since then it has been neglected by the politicians and someare trying to change the bill to suit thier theft (corruption).
7. Oh.. He is going on a hunger strike for that whole thingof passing a Bill ! How can that be possible in such a short span of time?
The first thing he is asking for is: the government shouldcome forward and announce that the bill is going to be passed.
Next, they make a joint committee to DRAFT the LOK PAL BILL.50% goverment participation and 50% public participation. Because you canttrust the government entirely for making such a bill which does not suit them.
8. Fine, What will happen when this bill is passed?
A LokPal will be appointed at the centre. He will have anautonomous charge, say like the Election Commission of India. In each and every state,Lokayukta will be appointed. The job is to bring all alleged party to trial incase of corruptions within 1 year. Within 2 years, the guilty will be punished.Not like, Bofors scam or BhopalGas Tragedy case, that has been going for last 25 years without any result.
9. Is he alone? Whoelse is there in the fight with AnnaHazare?
Baba Ramdev, Ex. IPS Kiran Bedi, Social Activist SwamiAgnivesh, RTI activist Arvind Kejriwal and many more.
Prominent personalities like Aamir Khan is supporting hiscause.
10. Ok, got it. What can I do?
At least we can spread the message. How?
Putting status message, links, video, changing profile pics.
At least we can support Anna Hazare and the cause foruprooting corruption from India.
At least we can hope that his Hunger Strike does not go invain.
At least we can pray for his good health.
An ex-army man. Fought 1965 Indo-Pak War
2. What's so special about him?
He built a village Ralegaon Siddhi in Ahamad Nagar district,Maharashtra
3. So what?
This village is a self-sustained model village. Energy isproduced in the village itself from solar power, biofuel and wind mills.
In 1975, it used to be a poverty clad village. Now it is oneof the richest village in India.It has become a model for self-sustained, eco-friendly & harmonicvillage.
4. Ok,...?
This guy, Anna Hazare was awarded Padma Bhushan and is aknown figure for his social activities.
5. Really, what is he fighting for?
He is supporting a cause, the amendment of a law to curbcorruption in India.
6. How that can be possible?
He is advocating for a Bil, The Lok Pal Bill (The CitizenOmbudsman Bill), that will form an autonomous authority who will makepoliticians (ministers), beurocrats (IAS/IPS) accountable for their deeds.
8. It's an entirely new thing right..?
In 1972, the bill was proposed by then Law minister Mr.Shanti Bhushan. Since then it has been neglected by the politicians and someare trying to change the bill to suit thier theft (corruption).
7. Oh.. He is going on a hunger strike for that whole thingof passing a Bill ! How can that be possible in such a short span of time?
The first thing he is asking for is: the government shouldcome forward and announce that the bill is going to be passed.
Next, they make a joint committee to DRAFT the LOK PAL BILL.50% goverment participation and 50% public participation. Because you canttrust the government entirely for making such a bill which does not suit them.
8. Fine, What will happen when this bill is passed?
A LokPal will be appointed at the centre. He will have anautonomous charge, say like the Election Commission of India. In each and every state,Lokayukta will be appointed. The job is to bring all alleged party to trial incase of corruptions within 1 year. Within 2 years, the guilty will be punished.Not like, Bofors scam or BhopalGas Tragedy case, that has been going for last 25 years without any result.
9. Is he alone? Whoelse is there in the fight with AnnaHazare?
Baba Ramdev, Ex. IPS Kiran Bedi, Social Activist SwamiAgnivesh, RTI activist Arvind Kejriwal and many more.
Prominent personalities like Aamir Khan is supporting hiscause.
10. Ok, got it. What can I do?
At least we can spread the message. How?
Putting status message, links, video, changing profile pics.
At least we can support Anna Hazare and the cause foruprooting corruption from India.
At least we can hope that his Hunger Strike does not go invain.
At least we can pray for his good health.
Exemptions for Investments:
Exemptions for Investments:
Section 80C
Exemption you can claim up to Rs. 1 lakh via:
(Employee Provident Fund (EPF), Public Provident Fund (PPF)- up to Rs.70,000 per annum, National Savings Certificate (NSC), 5-year bank fixed deposits, Life insurance policies, Equity-Linked Savings Schemes (ELSS), Unit Linked Insurance Plans (ULIPs), school fees, and home loan principal repayment.)
Additional Rs. 20,000 exemption for investment in Recognised Infrastructure Bonds under Section 80CCF
Section 80D
If you have taken a medical insurance plan for yourself, your spouse, dependant parents or children, you can claim deductions up to Rs 15,000 (and additional Rs.15,000 for your parents’ medical insurance) under Section 80D for the premiums paid. The limit now has been enhanced to Rs 20,000 for senior citizens on the condition that the premium is paid via cheque.
Section 80DD
Expenses on the medical treatment of a dependent with a disability qualifies for tax benefits under Section 80DD. In this case, deductions up to Rs. 50,000 or 75.000 can be claimed based on the severity.
Hope this will prove to be of some help.
Section 80C
Exemption you can claim up to Rs. 1 lakh via:
(Employee Provident Fund (EPF), Public Provident Fund (PPF)- up to Rs.70,000 per annum, National Savings Certificate (NSC), 5-year bank fixed deposits, Life insurance policies, Equity-Linked Savings Schemes (ELSS), Unit Linked Insurance Plans (ULIPs), school fees, and home loan principal repayment.)
Additional Rs. 20,000 exemption for investment in Recognised Infrastructure Bonds under Section 80CCF
Section 80D
If you have taken a medical insurance plan for yourself, your spouse, dependant parents or children, you can claim deductions up to Rs 15,000 (and additional Rs.15,000 for your parents’ medical insurance) under Section 80D for the premiums paid. The limit now has been enhanced to Rs 20,000 for senior citizens on the condition that the premium is paid via cheque.
Section 80DD
Expenses on the medical treatment of a dependent with a disability qualifies for tax benefits under Section 80DD. In this case, deductions up to Rs. 50,000 or 75.000 can be claimed based on the severity.
Hope this will prove to be of some help.
Existing DIN Holders to furnish their PAN by filing DIN - 4 E- Form by 31st day of May, 2011.
To furnish their PAN by filing DIN - 4 E- Form by 31st day of May, 2011, who have not furnished their PAN earlier at the time of obtaining DIN
Friday, April 8, 2011
Finance Bill, 2011 assented by President of India.
Finance Bill, 2011 assented by President of India : Act No.8, dated 8/4/2011 - , DATED 08-04-2011
Wednesday, April 6, 2011
Gold and Silver rates as on April 1, 2011 (Mumbai)
Gold and Silver rates as on April 1, 2011 (Mumbai)
Gold and Silver rates as on April 1, 2011 (Mumbai) :
Standard Gold Rs. 20,775;
Pure Gold Rs. 20,875;
Silver Spot Rs. 56,900 :
Source: Indian Express April 1, 2011
Gold and Silver rates as on April 1, 2011 (Mumbai) :
Standard Gold Rs. 20,775;
Pure Gold Rs. 20,875;
Silver Spot Rs. 56,900 :
Source: Indian Express April 1, 2011
Income-tax – Explanatory Notes to the provisions of the Finance Act, 2010 - Applicable for Assessment Year 2011-12
Income-tax – Explanatory Notes to the provisions of the Finance Act, 2010 -
Applicable for Assessment Year 2011-12
Income-tax : Explanatory Notes to the provisions of the Finance Act, 2010
Circular No. 1/2011 [F.No. 142/1/2011-SO(TPL)], dated 6-4-2011
AMENDMENTS AT A GLANCE
Section/Schedule/Particulars/Paragraph number
Finance Act
First Schedule – Rate Structure, 3.1-3.3-6
Income-tax Act
Section 2(15) – Change in the Definition of “charitable purpose”, 4.1-4.4
Section 9- Income deemed to accrue or arise in India to a non-resident, 5.1-5.4
Section 10AA – Computation of exempted profits in the case of units in Special Economic Zones (SEZs), 6.1-6.2
Section 12A – Cancellation of registration obtained under section 12A, 7.1-7.4
Section 35, Section 10(21) – Weighted deduction for scientific research and development, 8.1-8.8
Section 35AD – Investment linked deduction for specified businesses, 9.1.1-9.3.2
Section 40(a)(ia), Section 201, Section 271B – Disallowance of expenditure on account of non-compliance with TDS provisions, 10.1.1-10.2.3
Section 44AB, Section 44AD – Limit of turnover or gross receipts for the purpose of audit of accounts and for presumptive taxation, 11.1-11.5
Section 32, Section 47, Section 35DDA, Section 43, Section 47A, Section 49, Section 72A,
Section 115JAA – Conversion of a private company or an unlisted public company into a limited liability partnership (LLP), 12.1-12.9
Section 56 – Taxation of certain transactions without consideration or for inadequate consideration,13.1-13.7
Section 80C – Deduction in respect of long-term infrastructure bonds, 14.1-14.2
Section 80D- Deduction in respect of contribution to the Central Government Health Scheme (CGHS),15.1-15.4
Section 80-IB(10) – Deduction for developing and building housing projects, 16.1-16.5
Section 80-ID – Deduction of profits of a hotel or a convention centre in the National Capital Territory (NCT), 17.1-17.3
Section 115JB -Section Minimum Alternate Tax under Section 115JB, 18.1-18.3
Section 143- Centralised Processing of Returns, 19.1-19.4
Section 194B, 194BB, 194C, 194D, 194H, 194-I, 194J – Rationalisation of provisions relating to Tax Deduction at Source (TDS), 20.1-20.3
Section 203, Section 206C – Certificate of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), 21.1-21.3
Section 245A, Section 245C, Section 245D – Settlement Commission, 22.1-22.5
Section 256, Section 260A – Power of the High Court to condone delay in filing of appeals, 23.1-23.7
Section 282B- Document Identification Number, 24.1-24.2
First Schedule
Taxation of income of non-life insurance business, 25.1-25.5
1. Introduction
1.1 The Finance Act, 2010 (hereafter referred to as the Act) as passed by the Parliament, received the assent of the President on the 8th day of May, 2010 and has been enacted as Act No. 14 of 2010. This circular explains the substance of the provisions of the Act relating to direct taxes.
2. Changes made by the Act
2.1 The Act has,
(i) specified the rates of income-tax for the assessment year 2010-11 and the rates of income-tax on the basis of which tax has to be deducted at source and advance tax has to be paid during financial year 2010-11.
(ii) amended sections 2, 9, 10, 10AA, 12A, 32, 35, 35AD, 35DDA, 40(a)(ia), 43, 44AB, 47, 47A, 49, 56, 72A, 80C, 80D, 80-IB, 80-ID, 115JAA, 115JB, 143, 194B, 194BB, 194C, 194D, 194H, 194-I, 194J, 201, 203, 206C, 245A, 245C, 245D, 260A, 271B, 282B of the Income-tax Act, 1961;
(iii) Inserted a new section 80CCF of the Income-tax Act, 1961;
(iv) amended rules 5 of Part B of the First Schedule, rule 3 of Part A of the Fourth Schedule and Part B of Thirteenth Schedule of the Income-tax Act, 1961;
(v) amended sections 22A, 22D, 27 and 27A of Wealth-tax Act, 1957;
3. Rate structure
3.1 Rates of income-tax in respect of incomes liable to tax for the assessment year 2010-11
3.1-1 In respect of income of all categories of taxpayers liable to tax for the assessment year 2010-11, the rates of income-tax have been specified in Part I of the First Schedule to the Act. These rates are the same as those laid down in Part III of the First Schedule to the Finance (No.2) Act, 2009 for the purposes of computation of advance tax, deduction of tax at source from Salaries and charging of tax payable in certain cases during the financial year 2009-10.
The major features of the rates specified in the said Part I are as follows:
3.1-2 INDIVIDUAL, HINDU UNDIVIDED FAMILY, ASSOCIATION OF PERSONS, BODY OF INDIVIDUALS OR ARTIFICIAL JURIDICAL PERSON. – Paragraph A of Part I of the First Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authority and company) as under :-
Income chargeable to tax Rate of income-tax
Individual (other than individual woman resident in India and senior citizen resident in India), HUF, association of persons, body of individuals and artificial juridical person Individual woman, resident
in India and below the age of sixty-five years Individual senior citizen, resident in India, who is of the age of sixty- five years or more
Up to Rs. 1,60,000 Nil Nil Nil
Rs. 1,60,001 -
Rs. 1,90,000 10% Nil Nil
Rs. 1,90,001 -
Rs. 2,40,000 10% 10% Nil
Rs. 2,40,001 -
Rs. 3,00,000 10% 10% 10%
Rs. 3,00,000
-
Rs.5,00,000 20% 20% 20%
Rs.5,00,000 and above 30% 30% 30%
In the case of every individual, Hindu undivided family, association of persons or body of individuals, no surcharge shall be levied.
An additional surcharge called the Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed, in all cases. For instance, if the income-tax computed is Rs. 1,00,000, then the education cess of two per cent is to be computed on Rs. 1,00,000 which works out to Rs. 2,000. In addition, the amount of tax computed shall also be increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax. No marginal relief shall be available in respect of Education Cess.
3.1-3 CO-OPERATIVE SOCIETIES – In the case of every co-operative society, the rates of income-tax have been specified in Paragraph B of Part I of the First Schedule to the Act. The rates are as follows-
Income chargeable to tax Rate
Up to Rs. 10,000 10%
Rs. 10,001 – Rs. 20,000 20%
Exceeding Rs. 20,000 30%
No surcharge shall be levied. Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of tax computed. No marginal relief shall be available in respect of Education Cess.
3.1-4 FIRMS – In the case of every firm, the rate of income-tax of thirty per cent has been specified in Paragraph C of Part I of the First Schedule to the Act. No surcharge shall now be levied in the case of a firm.
Additional surcharge called the Education Cess on Income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed, in all cases. In addition, such amount of tax shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax computed at the rate of one per cent on the amount of tax, in all cases. No marginal relief shall be available in respect of Education Cess.
3.1-5 LOCAL AUTHORITIES – In the case of every local authority, the rate of income-tax has been specified at thirty per cent in Paragraph D of Part I of the First Schedule to the Act. No surcharge shall be levied. However, Education Cess on Income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of tax computed. No marginal relief shall be available in respect of Education Cess.
3.1-6 COMPANIES – In the case of a company, the rate of income-tax has been specified in Paragraph E of Part I of the First Schedule to the Act.
In case of a domestic company, the rate of income-tax is thirty per cent of the total income. The tax computed shall be enhanced by a surcharge of ten per cent in a case where such domestic company has total income exceeding one crore rupees.
In the case of a company other than a domestic company, royalties received from Government or Indian concern under an approved agreement made after 31-3-1961, but before 1-4-1976 shall be taxed at fifty per cent. Similarly, fees for technical services received by such company from Government or Indian concern under an approved agreement made after 29-2-1964, but before 1-4-1976, shall be taxed at fifty per cent. On the balance of the total income of such company, the tax rate shall be forty per cent. The tax computed shall be enhanced by a surcharge of two and one-half per cent only in the cases where such company has total income exceeding one crore rupees.
However, marginal relief shall be allowed in the case of every company to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over one crore rupees is limited to the amount by which the income is more than one crore rupees. Also, in the case of every company having total income chargeable to tax under section 115JB of the Income-tax Act and where such income exceeds one crore rupees, marginal relief shall be provided.
Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed, inclusive of surcharge in the case of every company. Also, such amount of tax and surcharge shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent of the amount of tax computed, inclusive of surcharge.
3.2 Rates for deduction of income-tax at source from certain incomes during the financial year 2010-11.
3.2-1 In every case in which tax is to be deducted at the rates in force under the provisions of sections 193, 194, 194A, 194B, 194BB, 194D and 195 of the Income-tax Act, the rates for deduction of income-tax at source during the financial year 2010-11 have been specified in Part II of the First Schedule to the Act. The rates for deduction of income-tax at source during the financial year 2010-11 will continue to be the same as those specified in Part II of the First Schedule to the Finance (No.2) Act, 2009.
3.2-2 SURCHARGE – The tax deducted at source in each case shall be increased by a surcharge for purposes of the Union as follows:-
(i) In the case of every individual, Hindu undivided family, association of persons and body of individuals, no surcharge shall be levied.
(ii) In the case of every artificial juridical person, no surcharge shall be levied.
(iii) No surcharge shall be levied on the amount of income-tax deducted in the case of a co-operative society and local authority
(iv) In the case of every firm and domestic company, no surcharge shall be levied.
(v) The surcharge on TDS shall be levied only on payments made to foreign companies. The rate of surcharge in such cases is 2.5 per cent of such income tax.
3.2-3 EDUCATION CESS – The additional surcharge, called the Education Cess on income-tax shall continue to be levied for the purposes of the Union at the rate of two per cent of income-tax and surcharge, if any, in the case of salary payments to residents and in the case of all payments to non-residents . For instance, if such tax is Rs. 1,00,000 and the surcharge is Rs. 10,000, then the education cess of two per cent is to be computed on Rs. 1,10,000 which works out to be Rs. 2,200.
In addition, the amount of tax deducted and surcharge shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent in all such cases. Thus in the earlier illustration, where the amount of tax deducted is Rs. 1,00,000, the surcharge is Rs. 10,000, the Education Cess of two per cent is Rs. 2,200, the said Secondary and Higher Education Cess will be computed on Rs. 1,10,000 which works out to be Rs. 1,100. The total cess in this case will amount to Rs. 3,300 (i.e., Rs. 2,200 + Rs. 1,100).
3.3 Rates for computation of advance tax, deduction of income-tax at source from Salaries and charging of income-tax in certain cases during the financial year 2010-11.
3.3-1 The rates for deducting income-tax at source from Salaries and computing advance tax during the financial year 2010-11 have been specified in Part III of the First Schedule to the Act. These rates are also applicable for charging income-tax during the financial year 2010-11 on current incomes in cases where accelerated assessments have to be made, e.g., provisional assessment of shipping profits arising in India to non-residents, assessment of persons leaving India for good during that financial year, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formed for short duration, etc. The rates are as follows:-
3.3-2 INDIVIDUAL, HINDU UNDIVIDED FAMILY, ASSOCIATION OF PERSONS, BODY OF INDIVIDUALS OR ARTIFICIAL JURIDICAL PERSON – Paragraph A of Part III of the First Schedule specifies the rates of income-tax in the case of every individual. Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authority and company). In the case of individuals, the basic exemption limit remains unchanged as Rs. 1,60,000. The exemption limit for every woman resident in India and below the age of 65 years of age also remains unchanged as Rs. 1,90,000. Further, the exemption limit for every individual resident in India and of the age of 65 years or more at any time during the previous year remains unchanged as Rs. 2,40,000. The tax slabs in all such cases have been widened.
The rates of tax during the financial year 2010-11 in the case of persons mentioned above are as follows:-
Income chargeable to tax Rate of income-tax
Individual (other than individual woman resident in India and senior citizen resident in India), HUF, association of persons, body of individuals and artificial juridical person Individual woman, resident
in India and below the age of sixty-five years Individual senior citizen, resident in India, who is of the age of sixty- five years or more
Up to Rs. 1,60,000 Nil Nil Nil
Rs. 1,60,001 -
Rs. 1,90,000 10% Nil Nil
Rs. 1,90,001 -
Rs. 2,40,000 10% 10% Nil
Rs. 2,40,001 -
Rs. 5,00,000 10% 10% 10%
Rs. 5,00,000
-
Rs.8,00,000 20% 20% 20%
Rs.8,00,000 and above 30% 30% 30%
No surcharge shall be levied in such cases.
The Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed. In addition, the amount of tax computed shall also be increased by an additional cess called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax. No marginal relief shall be available in respect of Education Cess.
3.3-3 CO-OPERATIVE SOCIETIES – In the case of every co-operative society, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Act. The rates are as follows-
Income chargeable to tax Rate
Up to Rs. 10,000 10%
Rs. 10,001 – Rs. 20,000 20%
Exceeding Rs. 20,000 30%
No surcharge shall be levied. Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of tax computed. No marginal relief shall be available in respect of Education Cess.
3.3-4 FIRMS – In the case of every firm, the rate of income-tax of thirty per cent has been specified in Paragraph C of Part III of the First Schedule to the Act. No Surcharge shall be levied. The Education Cess on Income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed. In addition, such amount of tax shall be further increased by an additional cess called Secondary and Higher Education Cess on income-tax computed at the rate of one per cent on the amount of tax, in all cases. No marginal relief shall be available in respect of Education Cess.
3.3-5 LOCAL AUTHORITIES – In the case of every local authority, the rate of income-tax has been specified at thirty per cent in Paragraph D of Part III of the First Schedule to the Act. No surcharge shall be levied. However, Education Cess on Income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of tax computed. No marginal relief shall be available in respect of Education Cess.
3.3-6 COMPANIES – In the case of a company, the rate of income-tax has been specified in Paragraph E of Part III of the First Schedule to the Act. In case of a domestic company, the rate of income-tax is thirty per cent of the total income. The tax computed shall be enhanced by a surcharge of seven and half per cent in a case where such domestic company has total income exceeding one crore rupees.
In the case of a company other than a domestic company, royalties received from Government or Indian concern under an approved agreement made after 31-3-1961, but before 1-4-1976 shall be taxed at fifty per cent. Similarly, in fees for technical services received by such company from Government or Indian concern under an approved agreement made after 29-2-1964, but before 1-4-1976, shall be taxed at fifty per cent. On the balance of the total income of such company, the tax rate shall be forty per cent. The tax computed shall be enhanced by a surcharge of two and one-half per cent in the case where such company has total income exceeding one crore rupees. However, marginal relief shall be allowed in the case of every company to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over one crore rupees is limited to the amount by which the income is more than one crore rupees.
However, Education Cess on Income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of tax computed including surcharge. No marginal relief shall be available in respect of Education Cess.
4. Change in the Definition of “charitable purpose”
4.1 For the purposes of the Income-tax Act, “charitable purpose” has been defined in section 2(15) which, among others, includes “the advancement of any other object of general public utility”.
4.2 However, “the advancement of any other object of general public utility” is not a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.
4.3 The absolute restriction on any receipt of commercial nature may create hardship to the organizations which receive sundry considerations from such activities. Therefore, section 2(15) has been amended to provide that “the advancement of any other object of general public utility” shall continue to be a “charitable purpose” if the total receipts from any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business do not exceed Rs.10 lakhs in the previous year.
4.4 Applicability – This amendment has been made effective retrospectively from 1st April, 2009 and will, accordingly, apply in relation to the assessment year 2009-10 and subsequent years.
5. Income deemed to accrue or arise in India to a non-resident
5.1 Section 9 provides for situations where income is deemed to accrue or arise in India. Vide Finance Act, 1976, a source rule was provided in section 9 through insertion of clauses (v), (vi) and (vii) in sub-section (1) for income by way of interest, royalty or fees for technical services respectively. It was provided, inter alia, that in case of payments as mentioned under these clauses, income would be deemed to accrue or arise in India to the non-resident under the circumstances specified therein. The intention of introducing the source rule was to bring to tax interest, royalty and fees for technical services, by creating a legal fiction in section 9, even in cases where services are provided outside India as long as they are utilized in India. The source rule, therefore, means that the situs of the rendering of services is not relevant. It is the situs of the payer or the situs of the utilization of services by the payer which will determine the taxability of such services in India. This was the settled position of law till 2007.
5.2 However, the Hon’ble Supreme Court, in the case of Ishikawajima-Harima Heavy Industries Ltd., Vs DIT (2007)[288 ITR 408], held that despite the deeming fiction in section 9, for any such income to be taxable in India, there must be sufficient territorial nexus between such income and the territory of India. It further held that for establishing such territorial nexus, the services have to be rendered in India as well as utilized in India. This interpretation was not in accordance with the legislative intent that the situs of rendering service in India is not relevant as long as the services are utilized in India. Therefore, to remove doubts regarding the source rule, an Explanation was inserted below sub-section (2) of section 9 with retrospective effect from 1st June, 1976 vide Finance Act, 2007. The Explanation sought to clarify that where income is deemed to accrue or arise in India under clauses (v), (vi) and (vii) of sub-section (1) of section 9, such income shall be included in the total income of the non-resident, regardless of whether the non-resident has a residence or place of business or business connection in India. However, the Karnataka High Court, in its judgement in the case of Jindal Thermal Power Company Ltd. vs DCIT (TDS), has held that the Explanation, in its present form, does not do away with the requirement of rendering of services in India for any income to be deemed to accrue or arise to a non-resident under section 9. It has been held that on a plain reading of the Explanation, the criteria of rendering services in India and the utilization of the service in India laid down by the Supreme Court in its judgment in the case of Ishikawajima-Harima Heavy Industries Ltd.(supra) remains untouched and unaffected by the Explanation.
5.3 In order to remove any doubt about the legislative intent of the aforesaid source rule, this Explanation has been substituted with a new Explanation to specifically state that the income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) of section 9 and shall be included in his total income, whether or not, (a) the non-resident has a residence or place of business or business connection in India; or (b) the non-resident has rendered services in India.
5.4 Applicability – This amendment has been made effective retrospectively from 1st June, 1976 and will, accordingly, apply in relation to the assessment year 1977-78 and subsequent years.
6. Computation of exempted profits in the case of units in Special Economic Zones (SEZs)
6.1 Section 10AA was inserted in the Income-tax Act by the Special Economic Zone Act, 2005 with effect from 10.2.2006. Through the Finance (No.2) Act, 2009, section 10AA(7) of the Income-tax Act, 1961 was amended and the words “by the undertaking” were substituted for “by the assessee” with effect from assessment year 2010-11 and subsequent assessment years. This was done as the existing formula was perceived to be discriminatory in so far as those assessees are concerned who have multiple units in both the SEZ and the domestic tariff area (DTA) vis-à-vis those assessees who were having units in only the SEZ. With a view to removing the anomaly, the provisions of sub-section (7) of section 10AA of the Income-tax Act were amended.
6.2 Applicability – In order to make the amendment effective for earlier years, a proviso to sub-section (7) has been inserted to provide that the provision of sub-section (7), as amended by Finance (No. 2) Act, 2009, is applicable to the assessment year 2006-07 and subsequent assessment years.
7. Cancellation of registration obtained under section 12A
7.1 Section 12AA provides the procedure relating to registration of a trust or institution engaged in charitable activities. Section 12AA(3) previously provided that if the activities of the trust or institution are found to be non-genuine or its activities are not in accordance with the objects for which such trust or institution was established, the registration granted under section 12AA can be cancelled by the Commissioner after providing the trust or institution an opportunity of being heard.
7.2 The power of cancellation of registration is inherent and flows from the authority of granting registration. However, judicial rulings in some cases have held that the Commissioner does not have the power to cancel the registration which was obtained earlier by any trust or institution under provisions of section 12A as it is not specifically mentioned in section 12AA.
7.3 Therefore, section 12AA has been amended to provide that the Commissioner can also cancel the registration obtained under section 12A as it stood before amendment by Finance (No.2) Act, 1996.
7.4 Applicability – This amendment has been made applicable with effect from 1st June, 2010 and shall accordingly apply for assessment year 2011-12 and subsequent assessment years.
8. Weighted deduction for scientific research and development
8.1 The existing provisions of section 35(1)(ii) of the Income-tax Act provide for a weighted deduction from the business income to the extent of 125 per cent of any sum paid to an approved scientific research association that has the object of undertaking scientific research or to an approved university, college or other institution to be used for scientific research. Further, under section 35(2AA) of the Act, weighted deduction to the extent of 125 per cent is also allowed for any sum paid to a National Laboratory or a university or an Indian Institute of Technology (IIT) or a specified person for the purpose of an approved scientific research programme.
8.2 In order to encourage more contributions to such approved entities for the purposes of scientific research, the Act has been amended to increase this weighted deduction from 125 per cent to 175 per cent.
8.3 Section 35(1)(iii) provide for a weighted deduction from business income to the extent of 125 per cent of any sum paid to an approved and notified university, college or other institution to be used to carry on research in social science or statistical research. Section 80GGA allows deductions for donations made to such association, universities, etc.
8.4 Under the existing section 10(21), exemption was granted in respect of the income of a scientific research association which was approved and notified under section 35(1)(ii). The university, college or other institutions which are approved either under section 35(1)(ii) or under section 35(1)(iii) also qualify for exemption of their income under section 10(23C) of the Act subject to specified conditions.
8.5 The associations which are engaged in undertaking research in social science or statistical research were not covered by the provisions of existing section 35(1) (iii). Such research associations were also not entitled to exemption in respect of their income.
8.6 Therefore section 35(1)(iii) of the Act has been amended so as to include an approved research association which has as its object undertaking research in social science or statistical research. Section 10(21) of the Act has also been amended so as to provide exemption to such associations in respect of their income. This exemption will be subject to the same conditions under which an approved research association undertaking scientific research is entitled to exemption in respect of its income. An amendment to include allowability of deductions for donations made to such associations has also been made.
8.7 Under the existing provisions of section 35(2AB) of the Income-tax Act, a company is allowed weighted deduction of 150 per cent of the expenditure (not being expenditure in the nature of cost of any land or building) incurred on scientific research on an approved in-house research and development facility. In order to further incentivise the corporate sector to invest in in-house research, the Act has been amended to increase this weighted deduction from 150 per cent to 200 per cent.
8.8 Applicability - These amendments have been made effective from 1st April 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
9. Investment-linked deduction for specified businesses
9.1.1 Investment-linked tax incentive, which was introduced by the Finance (No. 2) Act, 2009, allows 100 per cent deduction in respect of the whole of any expenditure of capital nature (other than on land, goodwill and financial instrument) incurred wholly and exclusively, for the purposes of the “specified business” during the previous year in which such expenditure is incurred. Such “specified business” includes the business of setting up and operating cold chain facilities, warehousing facilities for storage of agricultural produce and laying and operating a cross-country natural gas or crude or petroleum oil pipeline network.
9.1.2 The benefit of investment linked tax incentive under section 35AD has now been extended to the following specified businesses in addition to the existing businesses:-
(i) building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government and commencing operations on or after the 1st day of April, 2010;
(ii) building and operating, anywhere in India, a new hospital with at least one hundred beds for patients and commences operation on or after the 1st April, 2010;
(iii) developing and building a housing project under a scheme for slum re-development or rehabilitation framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed and commences operation on or after the 1st day of April, 2010.
9.2.1 Sub-section (3) of section 35AD has been substituted so as to provide that where a deduction under this section is claimed and allowed in respect of the specified business for any assessment year, no deduction shall be allowed under the provisions of Chapter VI-A under the heading “C.-Deductions in respect of certain incomes” in relation to such specified business for the same or any other assessment year. A similar amendment has been made in section 80A.
9.2.2 Applicability - These amendments have been made applicable with effect from 1st April, 2011 and will accordingly apply to the assessment year 2011-12 and subsequent assessment years.
9.3.1 The meaning of ‘common carrier capacity’ has been redefined for cross-country natural gas or crude or petroleum oil pipeline network on the basis of the regulations specified by the Petroleum and Natural Gas Regulatory Board.
9.3.2 Applicability - This amendment has been made applicable with retrospective effect from 1st April, 2010 and will accordingly apply to the assessment year 2010-11 and subsequent assessment years.
10. Disallowance of expenditure on account of non-compliance with TDS provisions
10.1.1 The existing provisions of section 40(a)(ia) of Income-tax Act provide for the disallowance of expenditure like interest, commission, brokerage, professional fees, etc. if tax on such expenditure was not deducted, or after deduction was not paid during the previous year. However, in case the deduction of tax is made during the last month of the previous year, no disallowance is made if the tax is deposited on or before the due date of filing of return.
10.1.2 The said section has been amended to provide that no disallowance will be made if after deduction of tax during the previous year, the same has been paid on or before the due date of filing of return of income specified in sub-section (1) of section 139.
10.1.3 Applicability - This amendment takes effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years.
10.2.1 Under the existing provisions of section 201(1A) of the Act, a person is liable to pay simple interest at one per cent for every month or part of month in case of failure to deduct tax or payment of tax after deduction.
10.2.2 In order to discourage the practice of delaying the deposit of tax after deduction, the Act has been amended to increase the rate of interest for non-payment of tax after deduction from the present one per cent to one and one-half per cent for every month or part of month.
10.2.3 Applicability - This amendment takes effect from 1st July, 2010.
11. Limit of turnover or gross receipts for the purpose of audit of accounts and for presumptive taxation
11.1 Under the existing provisions of section 44AB, every person carrying on business is required to get his accounts audited if the total sales, turnover or gross receipts in business exceed forty lakh rupees in the previous year. Similarly, a person carrying on a profession is required to get his accounts audited if the gross receipts in profession exceed ten lakh rupees in the previous year.
11.2 In order to reduce the compliance burden of small businesses and professionals, the Act has been amended to increase the threshold limit from forty lakh rupees to sixty lakh rupees in the case of persons carrying on business and from ten lakh rupees to fifteen lakh rupees in the case of persons carrying on profession.
11.3 In view of the above, the Act has also been amended to increase the maximum penalty, leviable under section 271B for failure to get accounts audited under section 44AB or to furnish a report of such audit, from one lakh rupees to one lakh fifty thousand rupees.
11.4. For the purpose of presumptive taxation under section 44AD, the Act has been amended to increase the threshold limit of total turnover or gross receipts from forty lakh rupees to sixty lakh rupees.
11.5 Applicability - These amendments take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
12. Conversion of a private company or an unlisted public company into a limited liability partnership (LLP)
12.1 The Finance (No. 2) Act, 2009 provided for the taxation of LLPs in the Income-tax Act on the same lines as applicable to partnership firms. Section 56 and section 57 of the Limited Liability Partnership Act, 2008 allow conversion of a private company or an unlisted public company (hereafter referred as company) into an LLP. Under the existing provisions of Income-tax Act, conversion of a company into an LLP had definite tax implications. Transfer of assets or shares held in the company by a shareholder on conversion attracted levy of capital gains tax. Similarly, carry forward of losses, unabsorbed depreciation, etc. was not available to the successor LLP.
12.2 Hence the Act has been amended, so that the transfer of assets or shares held in the company by a shareholder on conversion of a company into an LLP in accordance with section 56 and section 57 of the Limited Liability Partnership Act, 2008 shall not be regarded as a transfer for the purposes of capital gains tax under section 45, subject to certain conditions. These conditions are as follows:
(i) all assets and liabilities of the company become the assets and liabilities of the LLP;
(ii) the shareholders of the company become partners of the LLP in the same proportion as their shareholding in the company;
(iii) no consideration other than share in profit and capital contribution in the LLP arises to partners;
(iv) the erstwhile shareholders of the company continue to be entitled to receive at least 50 per cent of the profits of the LLP for a period of 5 years from the date of conversion;
(v) the total sales, turnover or gross receipts in business of the company [which are taxable under the head “Profits and gains of the business or profession”] do not exceed sixty lakh rupees in any of the three preceding previous years; and
(vi) no amount is paid, either directly or indirectly, to any partner out of the accumulated profit of the company for a period of 3 years from the date of conversion.
12.3 The Act has been amended to allow carry forward and set-off of business loss, unabsorbed depreciation and amortisation of expenditure incurred under voluntary retirement scheme to the successor LLP which fulfils the above mentioned conditions.
12.4 The Act has been amended to provide that if the conditions stipulated above are not complied with, the benefit availed by the company or by the shareholders, shall be deemed to be the profits and gains of the successor LLP or the shareholder of the predecessor company, as the case may be, chargeable to tax for the previous year in which the requirements are not complied with.
12.5 The Act has been amended to provide that the aggregate depreciation allowable to the predecessor company and successor LLP shall not exceed, in any previous year, the depreciation calculated at the prescribed rates as if the conversion had not taken place.
12.6 The Act has been amended to provide that the actual cost of the block of assets in the case of the successor LLP shall be the written down value of the block of assets as in the case of the predecessor company on the date of conversion.
12.7 It is also provided that the cost of acquisition of the capital asset for the successor LLP shall be deemed to be the cost for which the predecessor company acquired it.
12.8 The Act has been further amended to provide that the cost of acquisition of a capital asset being rights of a partner in successor LLP, shall be deemed to be the cost of acquisition to him of the share or shares in the company immediately before its conversion.
12.9 Credit in respect of tax paid by a company under section 115JB is allowed only to such company under section 115JAA. It is clarified that the tax credit under section 115JAA shall not be allowed to the successor LLP.
12.10 Applicability - These amendments take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
13. Taxation of certain transactions without consideration or for inadequate consideration
13.1 Under the previously existing provisions of section 56(2) (vii), any sum of money or any property in kind which is received without consideration or for inadequate consideration (in excess of the prescribed limit of Rs. 50,000/-) by an individual or an HUF is chargeable to income tax in the hands of recipient under the head ‘income from other sources’. However, receipts from relatives or on the occasion of marriage or under a will are outside the scope of this provision. The existing definition of property for the purposes of section 56(2)(vii) includes immovable property being land or building or both, shares and securities, jewellery, archeological collection, drawings, paintings, sculpture or any work of art.
13.2 These are anti-abuse provisions which were applicable only if an individual or an HUF is the recipient. Therefore, transfer of shares of a company to a firm or a company, instead of an individual or an HUF, without consideration or at a price lower than the fair market value was not attracted by the anti-abuse provision In order to prevent the practice of transferring unlisted shares at prices much below their fair market value, section 56 was amended to also include within its ambit transactions undertaken in shares of a company (not being a company in which public are substantially interested) either for inadequate consideration or without consideration where the recipient is a firm or a company (not being a company in which public are substantially interested). It is also provided to exclude the transactions undertaken for business reorganization, amalgamation and demerger which are not regarded as transfer under clauses (via), (vic), (vicb), (vid) and (vii) of section 47 of the Act.
13.3 Applicability -This amendment has been made effective from 1st June, 2010 and accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
13.4 The provisions of section 56(2) (vii) were introduced as a counter evasion mechanism to prevent laundering of unaccounted income. The provisions were intended to extend the tax net to such transactions in kind. The intent is not to tax the transactions entered into in the normal course of business or trade, the profits of which are taxable under specific head of income. Therefore, the definition of property has been amended to provide that section 56(2)(vii) will have application to the ‘property’ which is in the nature of a capital asset of the recipient and therefore would not apply to stock-in-trade, raw material and consumable stores of any business of such recipient.
13.5 In several cases of immovable property transactions, there is a time gap between the booking of a property and the receipt of such property on registration, which results in a taxable differential. Therefore clause (vii) of section 56(2) has been amended to provide that it would apply only if the immovable property is received without any consideration and to remove the stipulation regarding transactions involving cases of inadequate consideration in respect of immovable property.
13.6 Applicability – These amendments have been made effective retrospectively from 1st October, 2009 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years.
13.7 The definition of ‘property’ as provided under section 56 has been amended to include transactions in respect of ‘bullion’. This amendment has been made effective from 1st June, 2010 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
13.8 Section 142A(1) has been amended to allow the Assessing Officer to make a reference to the Valuation Officer for an estimate of the value of property for the purposes of section 56(2). This amendment has been made effective from 1st July, 2010 and accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
14. Deduction in respect of long-term infrastructure bonds
14.1 In tune with the policy thrust of promoting investment in the infrastructure sector, a new section 80CCF was inserted in the Income-tax Act to provide that subscription during the financial year 2010-11 made to long-term infrastructure bonds (as may be notified by the Central Government), to the extent of Rs. 20,000, shall be allowed as deduction in computing the income of an individual or a Hindu undivided family. This deduction will be over and above the existing overall limit of tax deduction on savings of upto Rs.1 lakh under section 80C, 80CCC and 80CCD of the Act.
14.2 Applicability – This amendment has been made applicable with effect from 1st April, 2011 and will apply only to the assessment year 2011-12.
15. Deduction in respect of contribution to the Central Government Health Scheme (CGHS)
15.1 Under the earlier provisions of section 80D, deduction in respect of premium paid towards a health insurance policy upto a maximum of Rs. 15,000 is available for self, spouse and dependent children. A further deduction of Rs. 15,000 is also allowed for buying an insurance policy in respect of dependent parents. The deduction is enhanced to Rs. 20,000 in both cases if the person insured is of age of 65 years or above.
15.2 The Central Government Health Scheme (CGHS) is a medical facility available to serving and retired Government servants. This facility is similar to the facilities available through health insurance policies.
15.3 Deduction from the total income has now been allowed in respect of any contribution made to CGHS by including such contribution under the provisions of section 80D. The deduction will be limited to the current aggregate as mentioned in the section.
15.4 Applicability - This amendment has been made applicable with effect from 1st April, 2011 and will accordingly apply to the assessment year 2011-12 and subsequent assessment years.
16. Deduction for developing and building housing projects
16.1 Under the existing provisions of section 80-IB(10), 100 per cent deduction is available in respect of profits derived by an undertaking from developing and building housing projects approved by a local authority before 31.3.2008. This benefit is available subject to, inter alia, the following conditions:
(a) the project has to be completed within 4 years from the end of the financial year in which the project is approved by the local authority.
(b) the built-up area of the shops and other commercial establishments included in the housing project should not exceed 5 per cent of the total built-up area of the housing project or 2,000 sq.ft. whichever is less.
16.2 To allow for extraordinary conditions due to the global recession and the resultant slowdown in the housing sector, the period allowed for completion of a housing project in order to qualify for availing the tax benefit under the section, has been increased from the existing 4 years to 5 years from the end of the financial year in which the housing project is approved by the local authority. This extension will be available for housing projects approved on or after 1.4. 2005 but on or before 31.3.2008.
16.3 Further, the norms for built-up area of shops and other commercial establishments in eligible housing projects have also been enhanced in order to enable basic facilities for the residents. The permissible built-up area of the shops and other commercial establishments which can be included in the eligible housing project is increased to three per cent of the aggregate built-up area of the housing project or 5000 sq. ft., whichever is higher. This benefit will be available to projects approved on or after 1.4.2005 but before 31.3.2008, which are pending for completion.
16.4 Applicability - These amendments have been made applicable with retrospective effect from 1stApril, 2010 and will accordingly apply to the assessment year 2010-11 and subsequent assessment years.
16.5 Vide Instruction No.4/2009 dated 30.6.2009, the Board has already clarified regarding deduction under section 80-IB(10) in respect of undertakings developing and building housing projects. It was clarified that the deduction can be claimed on a year-to-year basis where the assessee is showing profit from partial completion of the project in every year. In case it is found that the condition of completing the project within the specified time limit of 4 years as stated in section 80-IB(10) has not been satisfied, the deduction granted to the assessee in the earlier years should be withdrawn.
The conditions regarding the time-limit for completion of the project and for the permissible built up area of shops and other commercial establishments included in the housing project have been relaxed as indicated above. Accordingly, the deduction granted to an assessee in the earlier years should be withdrawn only if the revised conditions are not satisfied.
17. Deduction of profits of a hotel or a convention centre in the National Capital Territory (NCT)
17.1 Section 80-ID of the Income-tax Act provides for 100 per cent deduction for five years, of profits derived by an undertaking from the business of a two-star, three-star or four-star category hotel or from the business of building, owning and operating a convention centre located in the National Capital Territory of Delhi and the districts of Faridabad, Gurgaon, Gautam Budh Nagar and Ghaziabad, provided such hotel has started functioning or such convention centre is constructed during the period 1.4.2007 to 31.3.2010.
17.2 To provide some more time for these facilities to be set up in the light of the Commonwealth Games in October, 2010, clauses (i) and (ii) of section 80-ID have been amended to extend the date by which the hotel has to start functioning or the convention centre has to be constructed, from the existing 31stMarch, 2010, to 31st July, 2010.
17.3 Applicability - This amendment has been made applicable with effect from 1st April, 2011 and will accordingly apply to the assessment year 2011-12 and subsequent assessment years.
18. Minimum Alternate Tax under Section 115JB
18.1 Under the existing provisions of section 115JB of the Income Tax Act, a company is required to pay a Minimum Alternate Tax (MAT) on its book profit, if the income-tax payable on the total income, as computed under the Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2010, is less than such minimum. The amount of tax paid under section 115JB is allowed to be carried forward and set off against tax payable upto the tenth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under the provisions of section 115JAA.
18.2 Sub-section (1) of section 115JB has been amended to increase the MAT rate to eighteen per cent from the existing fifteen per cent.
18.3 Applicability - This amendment has been made applicable with effect from 1st April, 2011 and accordingly apply to the assessment year 2011-12 and subsequent assessment years.
19. Centralised Processing of Returns
19.1 Section 143 of the Income Tax Act, 1961 was amended vide Finance Act, 2008 and concept of Centralised Processing of Returns was introduced, so that all the returns are expeditiously processed and tax payable or refund due to assessee are determined in a definite frame. Under the existing provisions of section 143(1B), the Central Government was empowered, for the purposes of giving effect to the scheme of centralised processing of returns, to issue a notification relating to such processing of returns. Such a notification could be issued up to 31st March, 2010.
19.2 A Centralised Processing Centre has been set up where returns are being processed in batches. However, some more functionalities in the processing of returns may need to be added to make it a complete end-to-end process. Therefore, it is proposed to extend the time limit for issue of such notification under section 143 (1B) from 31st March, 2010 to 31st March 2011.
19.3 Consequential amendments on similar lines are proposed to be made in section 115WE of the Income-tax Act.
19.4 Applicability – These amendments are proposed to take effect retrospectively from 1st April, 2010.
20. Rationalisation of provisions relating to Tax Deduction at Source (TDS)
20.1 Under the scheme of deduction of tax at source as provided in the Income-tax Act, every person responsible for payment of any specified sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the Central Government within the specified time. However, no deduction is required to be made if the payments do not exceed prescribed threshold limits.
20.2 In order to adjust for inflation and also to reduce the compliance burden of deductors and taxpayers, the Act has been amended to raise the threshold limit for payments mentioned in sections 194B, 194BB, 194C, 194D, 194H, 194-I and 194J as under:
Sl.
No. Section Nature of payment Existing threshold
limit of payment
(Rupees) Amended threshold
limit of payment
(Rupees)
1 194B Winnings from lottery or crossword puzzle 5,000 10,000
2 194BB Winnings from horse race 2,500 5,000
3 194C Payment to contractors 20,000 (for a single transaction) Rs. 50,000 (for aggregate of transactions during financial year) 30,000 (for a single transaction) Rs. 75,000 (for aggregate of transactions during financial year)
4 194D Insurance commission 5,000 20,000
5 194H Commission or Brokerage 2,500 5,000
6 194-I Rent 1,20,000 1,80,000
7 194J Fees for professional or technical services 20,000 30,000
20.3 Applicability - These amendments take effect from 1st July, 2010.
21. Certificate of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS)
21.1 The existing provisions of section 203(3) of the Income-tax Act dispense with the requirement of furnishing of TDS certificates by the deductor to the deductee on or after 1st April, 2010. Similarly, under section 206C(5) of the Act, a collector of tax at source will also not be required to issue tax collection certificate to the person from whom tax has been collected on or after 1st April, 2010.
21.2 Considering the fact that the TDS/TCS certificate constitutes an important document for the deductee/collectee, the Act has been amended that the deductor/collector will continue to furnish TDS/TCS certificates to the deductee/collectee even after 1st April, 2010.
21.3 Applicability - These amendments take effect retrospectively from 1st April, 2010.
22. Settlement Commission
The conditions for filing of an application before the Settlement Commission and the time for disposal of an application by the Settlement Commission have been modified. The changes are as under:-
22.1 Under the existing provisions of section 245A (b), the term “case”, in relation to which an application can be made is defined as any proceeding for assessment of any person in respect of any assessment year or assessment years which may be pending before an Assessing Officer on the date on which an application is made to the Settlement Commission. However, it excluded, among others, proceedings for assessment or reassessment resulting from a search or as a result of requisition of books of account or other documents or any assets, initiated under the Act. The Act has been amended to include proceedings for assessment or reassessment resulting from search or as a result of requisition of books of account or other documents or any assets, within the definition of a “case” which can be admitted by the Settlement Commission. Explanation to section 245A (b) has been amended to specify the date on which the proceedings for assessment or reassessment shall be deemed to have commenced and concluded in the case of a person whose income is being assessed or reassessed as a result of search or as a result of requisition of books of account or other documents or any assets.
22.2 Under the existing provisions of section 245C of the Income-tax Act, an application could be filed before the Settlement Commission, if the additional amount of income-tax payable on the income disclosed in the application exceeds three lakh rupees. The proviso to section 245C has been substituted so as to provide that an application can be filed before the Settlement Commission, in cases where proceedings for assessment or reassessment have been initiated as a result of search or as a result of requisition of books of account or other documents or any assets, if the additional amount of income-tax payable on the income disclosed in the application exceeds fifty lakh rupees. It is further proposed that, in other cases, an application can be made before the Settlement Commission, if the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees.
22.3 Under the existing provisions of section 245D (4A) of the Income-tax Act, Settlement Commission shall pass an order within twelve months from the end of the month in which the application was made. Further, clause (ii) of sub-section (4A) has been amended so as to provide that the Settlement Commission, shall, in respect of an application filed on or after 1st June, 2007 but before 1st June, 2010, pass an order within the said period of twelve months. A new clause (iii) in sub-section (4A) has been inserted so as to provide that the Settlement Commission shall, in respect of an application made on or after 1st June, 2010, pass an order within eighteen months from the end of the month in which the application is made.
22.4 Consequential amendments have been made in section 22A and section 22D of the Wealth-tax Act to give effect to the above mentioned changes.
22.5 Applicability – These amendments have been made effective from 1st June, 2010.
23. Power of the High Court to condone delay in filing of appeals
23.1 The existing provisions of section 260A(2) provide that an appeal against the order of Income-tax Appellate Tribunal can be filed before the High Court within a period of one hundred and twenty days from the date of the receipt of the order by the assessee or the Commissioner. Sub-section (7) of section 260A of the Income-tax Act provides that the provisions of Code of Civil Procedure, 1908 (5 of 1908) shall, as far as may be, apply in the case of an appeal filed under this section before the High Court.
23.2 The Delhi High Court, while interpreting provisions of section 260A, has held that the High Court has the power to condone delay in filing of an appeal. However, Allahabad, Bombay, Kolkata, Guwahati and Chattisgarh High Courts have held otherwise. It has therefore been provided to retrospectively insert sub-section (2A) in section 260A of the Income-tax Act to specifically provide that the High Court may admit an appeal after the expiry of the period of one hundred and twenty days, if it is satisfied that there was sufficient cause for not filing the appeal within such period.
23.3 Consequential amendments on similar lines have been made in section 27A of the Wealth-tax Act.
23.4 Applicability – These amendments take effect retrospectively from 1st October, 1998.
23.5 Under section 256 of the Income-tax Act, the Income-tax Appellate Tribunal could refer a case to the High Court. In case where the Income-tax Appellate Tribunal refused to refer a case to the High Court, the assessee or the Commissioner were allowed to file an appeal before the High Court against such refusal of the Tribunal within a period of six months from the date on which he was served with an order of refusal. Sub-section (2A) in section 256 has been inserted retrospectively so as to empower the High Court to admit an application after the expiry of the period of six months, if it is satisfied that there was sufficient cause for not filing the same within such period.
23.6 Consequential amendments on similar lines have been made in section 27 of the Wealth-tax Act.
23.7 Applicability – These amendments take effect retrospectively from 1st June, 1981.
24. Document Identification Number
24.1 Section 282B (Allotment of Document Identification Number) is a new section inserted by the Finance (No. 2) Act, 2009 in the Income-tax Act with effect from 1st October, 2010. Under the provisions of this section, an income-tax authority is required to allot a computer generated Document Identification Number before issue of every notice, order, letter or any correspondence to any other income-tax authority or assessee or any other person and such number shall be quoted thereon. It also provides that every document, letter, correspondence received by an income-tax authority or on behalf of such authority, shall be accepted only after allotting and quoting of a computer generated Document Identification Number. In order to cover the entire gamut of services mentioned in section 282B on a pan-India basis, it would be essential to have the requisite infrastructure and facilities in place. Section 282B has been amended so as to provide that Document Identification Number will be required to be issued on or after 1st July, 2011.
24.2 Applicability – The amendment has been made effective from 1st October, 2010.
25. Taxation of income of non-life insurance business
25.1 Section 44 read with the First Schedule to the Income-tax Act provides the scheme of computation of income of insurance companies. According to Rule 5 of the said Schedule, the income of non-life insurance business is taken as ‘profit before tax and appropriations’ as per the profit and loss account of the company, prepared in accordance with the regulations made by the Insurance Regulatory Development Authority (IRDA), subject to certain adjustments.
25.2 The Finance (No. 2) Act, 2009 amended the First Schedule to provide that in case of non-life insurance business, appreciation of or gains on realisation of investments taken credit for in the accounts shall be treated as income and be included in the computation of the total income.
25.3 The appreciation in the value of investments, being in the nature of unrealized gain is not taken into account for determining profit or loss of non-life insurance business as per the IRDA regulations. The Act therefore has been amended to provide that the unrealized gains due to appreciation in the value of investments will not be included in the total income. Similarly, deduction will not be allowed for provision for losses due to diminution in the value of investments as this is not a realized loss.
25.4 It has also been provided that any gain or loss on realisation of investments shall be added or deducted for the purpose of computation of the total income, if the same is not already credited or debited in the profit and loss account.
25.5 Applicability - This amendment takes effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
Applicable for Assessment Year 2011-12
Income-tax : Explanatory Notes to the provisions of the Finance Act, 2010
Circular No. 1/2011 [F.No. 142/1/2011-SO(TPL)], dated 6-4-2011
AMENDMENTS AT A GLANCE
Section/Schedule/Particulars/Paragraph number
Finance Act
First Schedule – Rate Structure, 3.1-3.3-6
Income-tax Act
Section 2(15) – Change in the Definition of “charitable purpose”, 4.1-4.4
Section 9- Income deemed to accrue or arise in India to a non-resident, 5.1-5.4
Section 10AA – Computation of exempted profits in the case of units in Special Economic Zones (SEZs), 6.1-6.2
Section 12A – Cancellation of registration obtained under section 12A, 7.1-7.4
Section 35, Section 10(21) – Weighted deduction for scientific research and development, 8.1-8.8
Section 35AD – Investment linked deduction for specified businesses, 9.1.1-9.3.2
Section 40(a)(ia), Section 201, Section 271B – Disallowance of expenditure on account of non-compliance with TDS provisions, 10.1.1-10.2.3
Section 44AB, Section 44AD – Limit of turnover or gross receipts for the purpose of audit of accounts and for presumptive taxation, 11.1-11.5
Section 32, Section 47, Section 35DDA, Section 43, Section 47A, Section 49, Section 72A,
Section 115JAA – Conversion of a private company or an unlisted public company into a limited liability partnership (LLP), 12.1-12.9
Section 56 – Taxation of certain transactions without consideration or for inadequate consideration,13.1-13.7
Section 80C – Deduction in respect of long-term infrastructure bonds, 14.1-14.2
Section 80D- Deduction in respect of contribution to the Central Government Health Scheme (CGHS),15.1-15.4
Section 80-IB(10) – Deduction for developing and building housing projects, 16.1-16.5
Section 80-ID – Deduction of profits of a hotel or a convention centre in the National Capital Territory (NCT), 17.1-17.3
Section 115JB -Section Minimum Alternate Tax under Section 115JB, 18.1-18.3
Section 143- Centralised Processing of Returns, 19.1-19.4
Section 194B, 194BB, 194C, 194D, 194H, 194-I, 194J – Rationalisation of provisions relating to Tax Deduction at Source (TDS), 20.1-20.3
Section 203, Section 206C – Certificate of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), 21.1-21.3
Section 245A, Section 245C, Section 245D – Settlement Commission, 22.1-22.5
Section 256, Section 260A – Power of the High Court to condone delay in filing of appeals, 23.1-23.7
Section 282B- Document Identification Number, 24.1-24.2
First Schedule
Taxation of income of non-life insurance business, 25.1-25.5
1. Introduction
1.1 The Finance Act, 2010 (hereafter referred to as the Act) as passed by the Parliament, received the assent of the President on the 8th day of May, 2010 and has been enacted as Act No. 14 of 2010. This circular explains the substance of the provisions of the Act relating to direct taxes.
2. Changes made by the Act
2.1 The Act has,
(i) specified the rates of income-tax for the assessment year 2010-11 and the rates of income-tax on the basis of which tax has to be deducted at source and advance tax has to be paid during financial year 2010-11.
(ii) amended sections 2, 9, 10, 10AA, 12A, 32, 35, 35AD, 35DDA, 40(a)(ia), 43, 44AB, 47, 47A, 49, 56, 72A, 80C, 80D, 80-IB, 80-ID, 115JAA, 115JB, 143, 194B, 194BB, 194C, 194D, 194H, 194-I, 194J, 201, 203, 206C, 245A, 245C, 245D, 260A, 271B, 282B of the Income-tax Act, 1961;
(iii) Inserted a new section 80CCF of the Income-tax Act, 1961;
(iv) amended rules 5 of Part B of the First Schedule, rule 3 of Part A of the Fourth Schedule and Part B of Thirteenth Schedule of the Income-tax Act, 1961;
(v) amended sections 22A, 22D, 27 and 27A of Wealth-tax Act, 1957;
3. Rate structure
3.1 Rates of income-tax in respect of incomes liable to tax for the assessment year 2010-11
3.1-1 In respect of income of all categories of taxpayers liable to tax for the assessment year 2010-11, the rates of income-tax have been specified in Part I of the First Schedule to the Act. These rates are the same as those laid down in Part III of the First Schedule to the Finance (No.2) Act, 2009 for the purposes of computation of advance tax, deduction of tax at source from Salaries and charging of tax payable in certain cases during the financial year 2009-10.
The major features of the rates specified in the said Part I are as follows:
3.1-2 INDIVIDUAL, HINDU UNDIVIDED FAMILY, ASSOCIATION OF PERSONS, BODY OF INDIVIDUALS OR ARTIFICIAL JURIDICAL PERSON. – Paragraph A of Part I of the First Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authority and company) as under :-
Income chargeable to tax Rate of income-tax
Individual (other than individual woman resident in India and senior citizen resident in India), HUF, association of persons, body of individuals and artificial juridical person Individual woman, resident
in India and below the age of sixty-five years Individual senior citizen, resident in India, who is of the age of sixty- five years or more
Up to Rs. 1,60,000 Nil Nil Nil
Rs. 1,60,001 -
Rs. 1,90,000 10% Nil Nil
Rs. 1,90,001 -
Rs. 2,40,000 10% 10% Nil
Rs. 2,40,001 -
Rs. 3,00,000 10% 10% 10%
Rs. 3,00,000
-
Rs.5,00,000 20% 20% 20%
Rs.5,00,000 and above 30% 30% 30%
In the case of every individual, Hindu undivided family, association of persons or body of individuals, no surcharge shall be levied.
An additional surcharge called the Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed, in all cases. For instance, if the income-tax computed is Rs. 1,00,000, then the education cess of two per cent is to be computed on Rs. 1,00,000 which works out to Rs. 2,000. In addition, the amount of tax computed shall also be increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax. No marginal relief shall be available in respect of Education Cess.
3.1-3 CO-OPERATIVE SOCIETIES – In the case of every co-operative society, the rates of income-tax have been specified in Paragraph B of Part I of the First Schedule to the Act. The rates are as follows-
Income chargeable to tax Rate
Up to Rs. 10,000 10%
Rs. 10,001 – Rs. 20,000 20%
Exceeding Rs. 20,000 30%
No surcharge shall be levied. Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of tax computed. No marginal relief shall be available in respect of Education Cess.
3.1-4 FIRMS – In the case of every firm, the rate of income-tax of thirty per cent has been specified in Paragraph C of Part I of the First Schedule to the Act. No surcharge shall now be levied in the case of a firm.
Additional surcharge called the Education Cess on Income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed, in all cases. In addition, such amount of tax shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax computed at the rate of one per cent on the amount of tax, in all cases. No marginal relief shall be available in respect of Education Cess.
3.1-5 LOCAL AUTHORITIES – In the case of every local authority, the rate of income-tax has been specified at thirty per cent in Paragraph D of Part I of the First Schedule to the Act. No surcharge shall be levied. However, Education Cess on Income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of tax computed. No marginal relief shall be available in respect of Education Cess.
3.1-6 COMPANIES – In the case of a company, the rate of income-tax has been specified in Paragraph E of Part I of the First Schedule to the Act.
In case of a domestic company, the rate of income-tax is thirty per cent of the total income. The tax computed shall be enhanced by a surcharge of ten per cent in a case where such domestic company has total income exceeding one crore rupees.
In the case of a company other than a domestic company, royalties received from Government or Indian concern under an approved agreement made after 31-3-1961, but before 1-4-1976 shall be taxed at fifty per cent. Similarly, fees for technical services received by such company from Government or Indian concern under an approved agreement made after 29-2-1964, but before 1-4-1976, shall be taxed at fifty per cent. On the balance of the total income of such company, the tax rate shall be forty per cent. The tax computed shall be enhanced by a surcharge of two and one-half per cent only in the cases where such company has total income exceeding one crore rupees.
However, marginal relief shall be allowed in the case of every company to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over one crore rupees is limited to the amount by which the income is more than one crore rupees. Also, in the case of every company having total income chargeable to tax under section 115JB of the Income-tax Act and where such income exceeds one crore rupees, marginal relief shall be provided.
Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed, inclusive of surcharge in the case of every company. Also, such amount of tax and surcharge shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent of the amount of tax computed, inclusive of surcharge.
3.2 Rates for deduction of income-tax at source from certain incomes during the financial year 2010-11.
3.2-1 In every case in which tax is to be deducted at the rates in force under the provisions of sections 193, 194, 194A, 194B, 194BB, 194D and 195 of the Income-tax Act, the rates for deduction of income-tax at source during the financial year 2010-11 have been specified in Part II of the First Schedule to the Act. The rates for deduction of income-tax at source during the financial year 2010-11 will continue to be the same as those specified in Part II of the First Schedule to the Finance (No.2) Act, 2009.
3.2-2 SURCHARGE – The tax deducted at source in each case shall be increased by a surcharge for purposes of the Union as follows:-
(i) In the case of every individual, Hindu undivided family, association of persons and body of individuals, no surcharge shall be levied.
(ii) In the case of every artificial juridical person, no surcharge shall be levied.
(iii) No surcharge shall be levied on the amount of income-tax deducted in the case of a co-operative society and local authority
(iv) In the case of every firm and domestic company, no surcharge shall be levied.
(v) The surcharge on TDS shall be levied only on payments made to foreign companies. The rate of surcharge in such cases is 2.5 per cent of such income tax.
3.2-3 EDUCATION CESS – The additional surcharge, called the Education Cess on income-tax shall continue to be levied for the purposes of the Union at the rate of two per cent of income-tax and surcharge, if any, in the case of salary payments to residents and in the case of all payments to non-residents . For instance, if such tax is Rs. 1,00,000 and the surcharge is Rs. 10,000, then the education cess of two per cent is to be computed on Rs. 1,10,000 which works out to be Rs. 2,200.
In addition, the amount of tax deducted and surcharge shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent in all such cases. Thus in the earlier illustration, where the amount of tax deducted is Rs. 1,00,000, the surcharge is Rs. 10,000, the Education Cess of two per cent is Rs. 2,200, the said Secondary and Higher Education Cess will be computed on Rs. 1,10,000 which works out to be Rs. 1,100. The total cess in this case will amount to Rs. 3,300 (i.e., Rs. 2,200 + Rs. 1,100).
3.3 Rates for computation of advance tax, deduction of income-tax at source from Salaries and charging of income-tax in certain cases during the financial year 2010-11.
3.3-1 The rates for deducting income-tax at source from Salaries and computing advance tax during the financial year 2010-11 have been specified in Part III of the First Schedule to the Act. These rates are also applicable for charging income-tax during the financial year 2010-11 on current incomes in cases where accelerated assessments have to be made, e.g., provisional assessment of shipping profits arising in India to non-residents, assessment of persons leaving India for good during that financial year, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formed for short duration, etc. The rates are as follows:-
3.3-2 INDIVIDUAL, HINDU UNDIVIDED FAMILY, ASSOCIATION OF PERSONS, BODY OF INDIVIDUALS OR ARTIFICIAL JURIDICAL PERSON – Paragraph A of Part III of the First Schedule specifies the rates of income-tax in the case of every individual. Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authority and company). In the case of individuals, the basic exemption limit remains unchanged as Rs. 1,60,000. The exemption limit for every woman resident in India and below the age of 65 years of age also remains unchanged as Rs. 1,90,000. Further, the exemption limit for every individual resident in India and of the age of 65 years or more at any time during the previous year remains unchanged as Rs. 2,40,000. The tax slabs in all such cases have been widened.
The rates of tax during the financial year 2010-11 in the case of persons mentioned above are as follows:-
Income chargeable to tax Rate of income-tax
Individual (other than individual woman resident in India and senior citizen resident in India), HUF, association of persons, body of individuals and artificial juridical person Individual woman, resident
in India and below the age of sixty-five years Individual senior citizen, resident in India, who is of the age of sixty- five years or more
Up to Rs. 1,60,000 Nil Nil Nil
Rs. 1,60,001 -
Rs. 1,90,000 10% Nil Nil
Rs. 1,90,001 -
Rs. 2,40,000 10% 10% Nil
Rs. 2,40,001 -
Rs. 5,00,000 10% 10% 10%
Rs. 5,00,000
-
Rs.8,00,000 20% 20% 20%
Rs.8,00,000 and above 30% 30% 30%
No surcharge shall be levied in such cases.
The Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed. In addition, the amount of tax computed shall also be increased by an additional cess called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax. No marginal relief shall be available in respect of Education Cess.
3.3-3 CO-OPERATIVE SOCIETIES – In the case of every co-operative society, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Act. The rates are as follows-
Income chargeable to tax Rate
Up to Rs. 10,000 10%
Rs. 10,001 – Rs. 20,000 20%
Exceeding Rs. 20,000 30%
No surcharge shall be levied. Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of tax computed. No marginal relief shall be available in respect of Education Cess.
3.3-4 FIRMS – In the case of every firm, the rate of income-tax of thirty per cent has been specified in Paragraph C of Part III of the First Schedule to the Act. No Surcharge shall be levied. The Education Cess on Income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed. In addition, such amount of tax shall be further increased by an additional cess called Secondary and Higher Education Cess on income-tax computed at the rate of one per cent on the amount of tax, in all cases. No marginal relief shall be available in respect of Education Cess.
3.3-5 LOCAL AUTHORITIES – In the case of every local authority, the rate of income-tax has been specified at thirty per cent in Paragraph D of Part III of the First Schedule to the Act. No surcharge shall be levied. However, Education Cess on Income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of tax computed. No marginal relief shall be available in respect of Education Cess.
3.3-6 COMPANIES – In the case of a company, the rate of income-tax has been specified in Paragraph E of Part III of the First Schedule to the Act. In case of a domestic company, the rate of income-tax is thirty per cent of the total income. The tax computed shall be enhanced by a surcharge of seven and half per cent in a case where such domestic company has total income exceeding one crore rupees.
In the case of a company other than a domestic company, royalties received from Government or Indian concern under an approved agreement made after 31-3-1961, but before 1-4-1976 shall be taxed at fifty per cent. Similarly, in fees for technical services received by such company from Government or Indian concern under an approved agreement made after 29-2-1964, but before 1-4-1976, shall be taxed at fifty per cent. On the balance of the total income of such company, the tax rate shall be forty per cent. The tax computed shall be enhanced by a surcharge of two and one-half per cent in the case where such company has total income exceeding one crore rupees. However, marginal relief shall be allowed in the case of every company to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over one crore rupees is limited to the amount by which the income is more than one crore rupees.
However, Education Cess on Income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of tax computed including surcharge. No marginal relief shall be available in respect of Education Cess.
4. Change in the Definition of “charitable purpose”
4.1 For the purposes of the Income-tax Act, “charitable purpose” has been defined in section 2(15) which, among others, includes “the advancement of any other object of general public utility”.
4.2 However, “the advancement of any other object of general public utility” is not a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.
4.3 The absolute restriction on any receipt of commercial nature may create hardship to the organizations which receive sundry considerations from such activities. Therefore, section 2(15) has been amended to provide that “the advancement of any other object of general public utility” shall continue to be a “charitable purpose” if the total receipts from any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business do not exceed Rs.10 lakhs in the previous year.
4.4 Applicability – This amendment has been made effective retrospectively from 1st April, 2009 and will, accordingly, apply in relation to the assessment year 2009-10 and subsequent years.
5. Income deemed to accrue or arise in India to a non-resident
5.1 Section 9 provides for situations where income is deemed to accrue or arise in India. Vide Finance Act, 1976, a source rule was provided in section 9 through insertion of clauses (v), (vi) and (vii) in sub-section (1) for income by way of interest, royalty or fees for technical services respectively. It was provided, inter alia, that in case of payments as mentioned under these clauses, income would be deemed to accrue or arise in India to the non-resident under the circumstances specified therein. The intention of introducing the source rule was to bring to tax interest, royalty and fees for technical services, by creating a legal fiction in section 9, even in cases where services are provided outside India as long as they are utilized in India. The source rule, therefore, means that the situs of the rendering of services is not relevant. It is the situs of the payer or the situs of the utilization of services by the payer which will determine the taxability of such services in India. This was the settled position of law till 2007.
5.2 However, the Hon’ble Supreme Court, in the case of Ishikawajima-Harima Heavy Industries Ltd., Vs DIT (2007)[288 ITR 408], held that despite the deeming fiction in section 9, for any such income to be taxable in India, there must be sufficient territorial nexus between such income and the territory of India. It further held that for establishing such territorial nexus, the services have to be rendered in India as well as utilized in India. This interpretation was not in accordance with the legislative intent that the situs of rendering service in India is not relevant as long as the services are utilized in India. Therefore, to remove doubts regarding the source rule, an Explanation was inserted below sub-section (2) of section 9 with retrospective effect from 1st June, 1976 vide Finance Act, 2007. The Explanation sought to clarify that where income is deemed to accrue or arise in India under clauses (v), (vi) and (vii) of sub-section (1) of section 9, such income shall be included in the total income of the non-resident, regardless of whether the non-resident has a residence or place of business or business connection in India. However, the Karnataka High Court, in its judgement in the case of Jindal Thermal Power Company Ltd. vs DCIT (TDS), has held that the Explanation, in its present form, does not do away with the requirement of rendering of services in India for any income to be deemed to accrue or arise to a non-resident under section 9. It has been held that on a plain reading of the Explanation, the criteria of rendering services in India and the utilization of the service in India laid down by the Supreme Court in its judgment in the case of Ishikawajima-Harima Heavy Industries Ltd.(supra) remains untouched and unaffected by the Explanation.
5.3 In order to remove any doubt about the legislative intent of the aforesaid source rule, this Explanation has been substituted with a new Explanation to specifically state that the income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) of section 9 and shall be included in his total income, whether or not, (a) the non-resident has a residence or place of business or business connection in India; or (b) the non-resident has rendered services in India.
5.4 Applicability – This amendment has been made effective retrospectively from 1st June, 1976 and will, accordingly, apply in relation to the assessment year 1977-78 and subsequent years.
6. Computation of exempted profits in the case of units in Special Economic Zones (SEZs)
6.1 Section 10AA was inserted in the Income-tax Act by the Special Economic Zone Act, 2005 with effect from 10.2.2006. Through the Finance (No.2) Act, 2009, section 10AA(7) of the Income-tax Act, 1961 was amended and the words “by the undertaking” were substituted for “by the assessee” with effect from assessment year 2010-11 and subsequent assessment years. This was done as the existing formula was perceived to be discriminatory in so far as those assessees are concerned who have multiple units in both the SEZ and the domestic tariff area (DTA) vis-à-vis those assessees who were having units in only the SEZ. With a view to removing the anomaly, the provisions of sub-section (7) of section 10AA of the Income-tax Act were amended.
6.2 Applicability – In order to make the amendment effective for earlier years, a proviso to sub-section (7) has been inserted to provide that the provision of sub-section (7), as amended by Finance (No. 2) Act, 2009, is applicable to the assessment year 2006-07 and subsequent assessment years.
7. Cancellation of registration obtained under section 12A
7.1 Section 12AA provides the procedure relating to registration of a trust or institution engaged in charitable activities. Section 12AA(3) previously provided that if the activities of the trust or institution are found to be non-genuine or its activities are not in accordance with the objects for which such trust or institution was established, the registration granted under section 12AA can be cancelled by the Commissioner after providing the trust or institution an opportunity of being heard.
7.2 The power of cancellation of registration is inherent and flows from the authority of granting registration. However, judicial rulings in some cases have held that the Commissioner does not have the power to cancel the registration which was obtained earlier by any trust or institution under provisions of section 12A as it is not specifically mentioned in section 12AA.
7.3 Therefore, section 12AA has been amended to provide that the Commissioner can also cancel the registration obtained under section 12A as it stood before amendment by Finance (No.2) Act, 1996.
7.4 Applicability – This amendment has been made applicable with effect from 1st June, 2010 and shall accordingly apply for assessment year 2011-12 and subsequent assessment years.
8. Weighted deduction for scientific research and development
8.1 The existing provisions of section 35(1)(ii) of the Income-tax Act provide for a weighted deduction from the business income to the extent of 125 per cent of any sum paid to an approved scientific research association that has the object of undertaking scientific research or to an approved university, college or other institution to be used for scientific research. Further, under section 35(2AA) of the Act, weighted deduction to the extent of 125 per cent is also allowed for any sum paid to a National Laboratory or a university or an Indian Institute of Technology (IIT) or a specified person for the purpose of an approved scientific research programme.
8.2 In order to encourage more contributions to such approved entities for the purposes of scientific research, the Act has been amended to increase this weighted deduction from 125 per cent to 175 per cent.
8.3 Section 35(1)(iii) provide for a weighted deduction from business income to the extent of 125 per cent of any sum paid to an approved and notified university, college or other institution to be used to carry on research in social science or statistical research. Section 80GGA allows deductions for donations made to such association, universities, etc.
8.4 Under the existing section 10(21), exemption was granted in respect of the income of a scientific research association which was approved and notified under section 35(1)(ii). The university, college or other institutions which are approved either under section 35(1)(ii) or under section 35(1)(iii) also qualify for exemption of their income under section 10(23C) of the Act subject to specified conditions.
8.5 The associations which are engaged in undertaking research in social science or statistical research were not covered by the provisions of existing section 35(1) (iii). Such research associations were also not entitled to exemption in respect of their income.
8.6 Therefore section 35(1)(iii) of the Act has been amended so as to include an approved research association which has as its object undertaking research in social science or statistical research. Section 10(21) of the Act has also been amended so as to provide exemption to such associations in respect of their income. This exemption will be subject to the same conditions under which an approved research association undertaking scientific research is entitled to exemption in respect of its income. An amendment to include allowability of deductions for donations made to such associations has also been made.
8.7 Under the existing provisions of section 35(2AB) of the Income-tax Act, a company is allowed weighted deduction of 150 per cent of the expenditure (not being expenditure in the nature of cost of any land or building) incurred on scientific research on an approved in-house research and development facility. In order to further incentivise the corporate sector to invest in in-house research, the Act has been amended to increase this weighted deduction from 150 per cent to 200 per cent.
8.8 Applicability - These amendments have been made effective from 1st April 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
9. Investment-linked deduction for specified businesses
9.1.1 Investment-linked tax incentive, which was introduced by the Finance (No. 2) Act, 2009, allows 100 per cent deduction in respect of the whole of any expenditure of capital nature (other than on land, goodwill and financial instrument) incurred wholly and exclusively, for the purposes of the “specified business” during the previous year in which such expenditure is incurred. Such “specified business” includes the business of setting up and operating cold chain facilities, warehousing facilities for storage of agricultural produce and laying and operating a cross-country natural gas or crude or petroleum oil pipeline network.
9.1.2 The benefit of investment linked tax incentive under section 35AD has now been extended to the following specified businesses in addition to the existing businesses:-
(i) building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government and commencing operations on or after the 1st day of April, 2010;
(ii) building and operating, anywhere in India, a new hospital with at least one hundred beds for patients and commences operation on or after the 1st April, 2010;
(iii) developing and building a housing project under a scheme for slum re-development or rehabilitation framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed and commences operation on or after the 1st day of April, 2010.
9.2.1 Sub-section (3) of section 35AD has been substituted so as to provide that where a deduction under this section is claimed and allowed in respect of the specified business for any assessment year, no deduction shall be allowed under the provisions of Chapter VI-A under the heading “C.-Deductions in respect of certain incomes” in relation to such specified business for the same or any other assessment year. A similar amendment has been made in section 80A.
9.2.2 Applicability - These amendments have been made applicable with effect from 1st April, 2011 and will accordingly apply to the assessment year 2011-12 and subsequent assessment years.
9.3.1 The meaning of ‘common carrier capacity’ has been redefined for cross-country natural gas or crude or petroleum oil pipeline network on the basis of the regulations specified by the Petroleum and Natural Gas Regulatory Board.
9.3.2 Applicability - This amendment has been made applicable with retrospective effect from 1st April, 2010 and will accordingly apply to the assessment year 2010-11 and subsequent assessment years.
10. Disallowance of expenditure on account of non-compliance with TDS provisions
10.1.1 The existing provisions of section 40(a)(ia) of Income-tax Act provide for the disallowance of expenditure like interest, commission, brokerage, professional fees, etc. if tax on such expenditure was not deducted, or after deduction was not paid during the previous year. However, in case the deduction of tax is made during the last month of the previous year, no disallowance is made if the tax is deposited on or before the due date of filing of return.
10.1.2 The said section has been amended to provide that no disallowance will be made if after deduction of tax during the previous year, the same has been paid on or before the due date of filing of return of income specified in sub-section (1) of section 139.
10.1.3 Applicability - This amendment takes effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years.
10.2.1 Under the existing provisions of section 201(1A) of the Act, a person is liable to pay simple interest at one per cent for every month or part of month in case of failure to deduct tax or payment of tax after deduction.
10.2.2 In order to discourage the practice of delaying the deposit of tax after deduction, the Act has been amended to increase the rate of interest for non-payment of tax after deduction from the present one per cent to one and one-half per cent for every month or part of month.
10.2.3 Applicability - This amendment takes effect from 1st July, 2010.
11. Limit of turnover or gross receipts for the purpose of audit of accounts and for presumptive taxation
11.1 Under the existing provisions of section 44AB, every person carrying on business is required to get his accounts audited if the total sales, turnover or gross receipts in business exceed forty lakh rupees in the previous year. Similarly, a person carrying on a profession is required to get his accounts audited if the gross receipts in profession exceed ten lakh rupees in the previous year.
11.2 In order to reduce the compliance burden of small businesses and professionals, the Act has been amended to increase the threshold limit from forty lakh rupees to sixty lakh rupees in the case of persons carrying on business and from ten lakh rupees to fifteen lakh rupees in the case of persons carrying on profession.
11.3 In view of the above, the Act has also been amended to increase the maximum penalty, leviable under section 271B for failure to get accounts audited under section 44AB or to furnish a report of such audit, from one lakh rupees to one lakh fifty thousand rupees.
11.4. For the purpose of presumptive taxation under section 44AD, the Act has been amended to increase the threshold limit of total turnover or gross receipts from forty lakh rupees to sixty lakh rupees.
11.5 Applicability - These amendments take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
12. Conversion of a private company or an unlisted public company into a limited liability partnership (LLP)
12.1 The Finance (No. 2) Act, 2009 provided for the taxation of LLPs in the Income-tax Act on the same lines as applicable to partnership firms. Section 56 and section 57 of the Limited Liability Partnership Act, 2008 allow conversion of a private company or an unlisted public company (hereafter referred as company) into an LLP. Under the existing provisions of Income-tax Act, conversion of a company into an LLP had definite tax implications. Transfer of assets or shares held in the company by a shareholder on conversion attracted levy of capital gains tax. Similarly, carry forward of losses, unabsorbed depreciation, etc. was not available to the successor LLP.
12.2 Hence the Act has been amended, so that the transfer of assets or shares held in the company by a shareholder on conversion of a company into an LLP in accordance with section 56 and section 57 of the Limited Liability Partnership Act, 2008 shall not be regarded as a transfer for the purposes of capital gains tax under section 45, subject to certain conditions. These conditions are as follows:
(i) all assets and liabilities of the company become the assets and liabilities of the LLP;
(ii) the shareholders of the company become partners of the LLP in the same proportion as their shareholding in the company;
(iii) no consideration other than share in profit and capital contribution in the LLP arises to partners;
(iv) the erstwhile shareholders of the company continue to be entitled to receive at least 50 per cent of the profits of the LLP for a period of 5 years from the date of conversion;
(v) the total sales, turnover or gross receipts in business of the company [which are taxable under the head “Profits and gains of the business or profession”] do not exceed sixty lakh rupees in any of the three preceding previous years; and
(vi) no amount is paid, either directly or indirectly, to any partner out of the accumulated profit of the company for a period of 3 years from the date of conversion.
12.3 The Act has been amended to allow carry forward and set-off of business loss, unabsorbed depreciation and amortisation of expenditure incurred under voluntary retirement scheme to the successor LLP which fulfils the above mentioned conditions.
12.4 The Act has been amended to provide that if the conditions stipulated above are not complied with, the benefit availed by the company or by the shareholders, shall be deemed to be the profits and gains of the successor LLP or the shareholder of the predecessor company, as the case may be, chargeable to tax for the previous year in which the requirements are not complied with.
12.5 The Act has been amended to provide that the aggregate depreciation allowable to the predecessor company and successor LLP shall not exceed, in any previous year, the depreciation calculated at the prescribed rates as if the conversion had not taken place.
12.6 The Act has been amended to provide that the actual cost of the block of assets in the case of the successor LLP shall be the written down value of the block of assets as in the case of the predecessor company on the date of conversion.
12.7 It is also provided that the cost of acquisition of the capital asset for the successor LLP shall be deemed to be the cost for which the predecessor company acquired it.
12.8 The Act has been further amended to provide that the cost of acquisition of a capital asset being rights of a partner in successor LLP, shall be deemed to be the cost of acquisition to him of the share or shares in the company immediately before its conversion.
12.9 Credit in respect of tax paid by a company under section 115JB is allowed only to such company under section 115JAA. It is clarified that the tax credit under section 115JAA shall not be allowed to the successor LLP.
12.10 Applicability - These amendments take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
13. Taxation of certain transactions without consideration or for inadequate consideration
13.1 Under the previously existing provisions of section 56(2) (vii), any sum of money or any property in kind which is received without consideration or for inadequate consideration (in excess of the prescribed limit of Rs. 50,000/-) by an individual or an HUF is chargeable to income tax in the hands of recipient under the head ‘income from other sources’. However, receipts from relatives or on the occasion of marriage or under a will are outside the scope of this provision. The existing definition of property for the purposes of section 56(2)(vii) includes immovable property being land or building or both, shares and securities, jewellery, archeological collection, drawings, paintings, sculpture or any work of art.
13.2 These are anti-abuse provisions which were applicable only if an individual or an HUF is the recipient. Therefore, transfer of shares of a company to a firm or a company, instead of an individual or an HUF, without consideration or at a price lower than the fair market value was not attracted by the anti-abuse provision In order to prevent the practice of transferring unlisted shares at prices much below their fair market value, section 56 was amended to also include within its ambit transactions undertaken in shares of a company (not being a company in which public are substantially interested) either for inadequate consideration or without consideration where the recipient is a firm or a company (not being a company in which public are substantially interested). It is also provided to exclude the transactions undertaken for business reorganization, amalgamation and demerger which are not regarded as transfer under clauses (via), (vic), (vicb), (vid) and (vii) of section 47 of the Act.
13.3 Applicability -This amendment has been made effective from 1st June, 2010 and accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
13.4 The provisions of section 56(2) (vii) were introduced as a counter evasion mechanism to prevent laundering of unaccounted income. The provisions were intended to extend the tax net to such transactions in kind. The intent is not to tax the transactions entered into in the normal course of business or trade, the profits of which are taxable under specific head of income. Therefore, the definition of property has been amended to provide that section 56(2)(vii) will have application to the ‘property’ which is in the nature of a capital asset of the recipient and therefore would not apply to stock-in-trade, raw material and consumable stores of any business of such recipient.
13.5 In several cases of immovable property transactions, there is a time gap between the booking of a property and the receipt of such property on registration, which results in a taxable differential. Therefore clause (vii) of section 56(2) has been amended to provide that it would apply only if the immovable property is received without any consideration and to remove the stipulation regarding transactions involving cases of inadequate consideration in respect of immovable property.
13.6 Applicability – These amendments have been made effective retrospectively from 1st October, 2009 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years.
13.7 The definition of ‘property’ as provided under section 56 has been amended to include transactions in respect of ‘bullion’. This amendment has been made effective from 1st June, 2010 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
13.8 Section 142A(1) has been amended to allow the Assessing Officer to make a reference to the Valuation Officer for an estimate of the value of property for the purposes of section 56(2). This amendment has been made effective from 1st July, 2010 and accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
14. Deduction in respect of long-term infrastructure bonds
14.1 In tune with the policy thrust of promoting investment in the infrastructure sector, a new section 80CCF was inserted in the Income-tax Act to provide that subscription during the financial year 2010-11 made to long-term infrastructure bonds (as may be notified by the Central Government), to the extent of Rs. 20,000, shall be allowed as deduction in computing the income of an individual or a Hindu undivided family. This deduction will be over and above the existing overall limit of tax deduction on savings of upto Rs.1 lakh under section 80C, 80CCC and 80CCD of the Act.
14.2 Applicability – This amendment has been made applicable with effect from 1st April, 2011 and will apply only to the assessment year 2011-12.
15. Deduction in respect of contribution to the Central Government Health Scheme (CGHS)
15.1 Under the earlier provisions of section 80D, deduction in respect of premium paid towards a health insurance policy upto a maximum of Rs. 15,000 is available for self, spouse and dependent children. A further deduction of Rs. 15,000 is also allowed for buying an insurance policy in respect of dependent parents. The deduction is enhanced to Rs. 20,000 in both cases if the person insured is of age of 65 years or above.
15.2 The Central Government Health Scheme (CGHS) is a medical facility available to serving and retired Government servants. This facility is similar to the facilities available through health insurance policies.
15.3 Deduction from the total income has now been allowed in respect of any contribution made to CGHS by including such contribution under the provisions of section 80D. The deduction will be limited to the current aggregate as mentioned in the section.
15.4 Applicability - This amendment has been made applicable with effect from 1st April, 2011 and will accordingly apply to the assessment year 2011-12 and subsequent assessment years.
16. Deduction for developing and building housing projects
16.1 Under the existing provisions of section 80-IB(10), 100 per cent deduction is available in respect of profits derived by an undertaking from developing and building housing projects approved by a local authority before 31.3.2008. This benefit is available subject to, inter alia, the following conditions:
(a) the project has to be completed within 4 years from the end of the financial year in which the project is approved by the local authority.
(b) the built-up area of the shops and other commercial establishments included in the housing project should not exceed 5 per cent of the total built-up area of the housing project or 2,000 sq.ft. whichever is less.
16.2 To allow for extraordinary conditions due to the global recession and the resultant slowdown in the housing sector, the period allowed for completion of a housing project in order to qualify for availing the tax benefit under the section, has been increased from the existing 4 years to 5 years from the end of the financial year in which the housing project is approved by the local authority. This extension will be available for housing projects approved on or after 1.4. 2005 but on or before 31.3.2008.
16.3 Further, the norms for built-up area of shops and other commercial establishments in eligible housing projects have also been enhanced in order to enable basic facilities for the residents. The permissible built-up area of the shops and other commercial establishments which can be included in the eligible housing project is increased to three per cent of the aggregate built-up area of the housing project or 5000 sq. ft., whichever is higher. This benefit will be available to projects approved on or after 1.4.2005 but before 31.3.2008, which are pending for completion.
16.4 Applicability - These amendments have been made applicable with retrospective effect from 1stApril, 2010 and will accordingly apply to the assessment year 2010-11 and subsequent assessment years.
16.5 Vide Instruction No.4/2009 dated 30.6.2009, the Board has already clarified regarding deduction under section 80-IB(10) in respect of undertakings developing and building housing projects. It was clarified that the deduction can be claimed on a year-to-year basis where the assessee is showing profit from partial completion of the project in every year. In case it is found that the condition of completing the project within the specified time limit of 4 years as stated in section 80-IB(10) has not been satisfied, the deduction granted to the assessee in the earlier years should be withdrawn.
The conditions regarding the time-limit for completion of the project and for the permissible built up area of shops and other commercial establishments included in the housing project have been relaxed as indicated above. Accordingly, the deduction granted to an assessee in the earlier years should be withdrawn only if the revised conditions are not satisfied.
17. Deduction of profits of a hotel or a convention centre in the National Capital Territory (NCT)
17.1 Section 80-ID of the Income-tax Act provides for 100 per cent deduction for five years, of profits derived by an undertaking from the business of a two-star, three-star or four-star category hotel or from the business of building, owning and operating a convention centre located in the National Capital Territory of Delhi and the districts of Faridabad, Gurgaon, Gautam Budh Nagar and Ghaziabad, provided such hotel has started functioning or such convention centre is constructed during the period 1.4.2007 to 31.3.2010.
17.2 To provide some more time for these facilities to be set up in the light of the Commonwealth Games in October, 2010, clauses (i) and (ii) of section 80-ID have been amended to extend the date by which the hotel has to start functioning or the convention centre has to be constructed, from the existing 31stMarch, 2010, to 31st July, 2010.
17.3 Applicability - This amendment has been made applicable with effect from 1st April, 2011 and will accordingly apply to the assessment year 2011-12 and subsequent assessment years.
18. Minimum Alternate Tax under Section 115JB
18.1 Under the existing provisions of section 115JB of the Income Tax Act, a company is required to pay a Minimum Alternate Tax (MAT) on its book profit, if the income-tax payable on the total income, as computed under the Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2010, is less than such minimum. The amount of tax paid under section 115JB is allowed to be carried forward and set off against tax payable upto the tenth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under the provisions of section 115JAA.
18.2 Sub-section (1) of section 115JB has been amended to increase the MAT rate to eighteen per cent from the existing fifteen per cent.
18.3 Applicability - This amendment has been made applicable with effect from 1st April, 2011 and accordingly apply to the assessment year 2011-12 and subsequent assessment years.
19. Centralised Processing of Returns
19.1 Section 143 of the Income Tax Act, 1961 was amended vide Finance Act, 2008 and concept of Centralised Processing of Returns was introduced, so that all the returns are expeditiously processed and tax payable or refund due to assessee are determined in a definite frame. Under the existing provisions of section 143(1B), the Central Government was empowered, for the purposes of giving effect to the scheme of centralised processing of returns, to issue a notification relating to such processing of returns. Such a notification could be issued up to 31st March, 2010.
19.2 A Centralised Processing Centre has been set up where returns are being processed in batches. However, some more functionalities in the processing of returns may need to be added to make it a complete end-to-end process. Therefore, it is proposed to extend the time limit for issue of such notification under section 143 (1B) from 31st March, 2010 to 31st March 2011.
19.3 Consequential amendments on similar lines are proposed to be made in section 115WE of the Income-tax Act.
19.4 Applicability – These amendments are proposed to take effect retrospectively from 1st April, 2010.
20. Rationalisation of provisions relating to Tax Deduction at Source (TDS)
20.1 Under the scheme of deduction of tax at source as provided in the Income-tax Act, every person responsible for payment of any specified sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the Central Government within the specified time. However, no deduction is required to be made if the payments do not exceed prescribed threshold limits.
20.2 In order to adjust for inflation and also to reduce the compliance burden of deductors and taxpayers, the Act has been amended to raise the threshold limit for payments mentioned in sections 194B, 194BB, 194C, 194D, 194H, 194-I and 194J as under:
Sl.
No. Section Nature of payment Existing threshold
limit of payment
(Rupees) Amended threshold
limit of payment
(Rupees)
1 194B Winnings from lottery or crossword puzzle 5,000 10,000
2 194BB Winnings from horse race 2,500 5,000
3 194C Payment to contractors 20,000 (for a single transaction) Rs. 50,000 (for aggregate of transactions during financial year) 30,000 (for a single transaction) Rs. 75,000 (for aggregate of transactions during financial year)
4 194D Insurance commission 5,000 20,000
5 194H Commission or Brokerage 2,500 5,000
6 194-I Rent 1,20,000 1,80,000
7 194J Fees for professional or technical services 20,000 30,000
20.3 Applicability - These amendments take effect from 1st July, 2010.
21. Certificate of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS)
21.1 The existing provisions of section 203(3) of the Income-tax Act dispense with the requirement of furnishing of TDS certificates by the deductor to the deductee on or after 1st April, 2010. Similarly, under section 206C(5) of the Act, a collector of tax at source will also not be required to issue tax collection certificate to the person from whom tax has been collected on or after 1st April, 2010.
21.2 Considering the fact that the TDS/TCS certificate constitutes an important document for the deductee/collectee, the Act has been amended that the deductor/collector will continue to furnish TDS/TCS certificates to the deductee/collectee even after 1st April, 2010.
21.3 Applicability - These amendments take effect retrospectively from 1st April, 2010.
22. Settlement Commission
The conditions for filing of an application before the Settlement Commission and the time for disposal of an application by the Settlement Commission have been modified. The changes are as under:-
22.1 Under the existing provisions of section 245A (b), the term “case”, in relation to which an application can be made is defined as any proceeding for assessment of any person in respect of any assessment year or assessment years which may be pending before an Assessing Officer on the date on which an application is made to the Settlement Commission. However, it excluded, among others, proceedings for assessment or reassessment resulting from a search or as a result of requisition of books of account or other documents or any assets, initiated under the Act. The Act has been amended to include proceedings for assessment or reassessment resulting from search or as a result of requisition of books of account or other documents or any assets, within the definition of a “case” which can be admitted by the Settlement Commission. Explanation to section 245A (b) has been amended to specify the date on which the proceedings for assessment or reassessment shall be deemed to have commenced and concluded in the case of a person whose income is being assessed or reassessed as a result of search or as a result of requisition of books of account or other documents or any assets.
22.2 Under the existing provisions of section 245C of the Income-tax Act, an application could be filed before the Settlement Commission, if the additional amount of income-tax payable on the income disclosed in the application exceeds three lakh rupees. The proviso to section 245C has been substituted so as to provide that an application can be filed before the Settlement Commission, in cases where proceedings for assessment or reassessment have been initiated as a result of search or as a result of requisition of books of account or other documents or any assets, if the additional amount of income-tax payable on the income disclosed in the application exceeds fifty lakh rupees. It is further proposed that, in other cases, an application can be made before the Settlement Commission, if the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees.
22.3 Under the existing provisions of section 245D (4A) of the Income-tax Act, Settlement Commission shall pass an order within twelve months from the end of the month in which the application was made. Further, clause (ii) of sub-section (4A) has been amended so as to provide that the Settlement Commission, shall, in respect of an application filed on or after 1st June, 2007 but before 1st June, 2010, pass an order within the said period of twelve months. A new clause (iii) in sub-section (4A) has been inserted so as to provide that the Settlement Commission shall, in respect of an application made on or after 1st June, 2010, pass an order within eighteen months from the end of the month in which the application is made.
22.4 Consequential amendments have been made in section 22A and section 22D of the Wealth-tax Act to give effect to the above mentioned changes.
22.5 Applicability – These amendments have been made effective from 1st June, 2010.
23. Power of the High Court to condone delay in filing of appeals
23.1 The existing provisions of section 260A(2) provide that an appeal against the order of Income-tax Appellate Tribunal can be filed before the High Court within a period of one hundred and twenty days from the date of the receipt of the order by the assessee or the Commissioner. Sub-section (7) of section 260A of the Income-tax Act provides that the provisions of Code of Civil Procedure, 1908 (5 of 1908) shall, as far as may be, apply in the case of an appeal filed under this section before the High Court.
23.2 The Delhi High Court, while interpreting provisions of section 260A, has held that the High Court has the power to condone delay in filing of an appeal. However, Allahabad, Bombay, Kolkata, Guwahati and Chattisgarh High Courts have held otherwise. It has therefore been provided to retrospectively insert sub-section (2A) in section 260A of the Income-tax Act to specifically provide that the High Court may admit an appeal after the expiry of the period of one hundred and twenty days, if it is satisfied that there was sufficient cause for not filing the appeal within such period.
23.3 Consequential amendments on similar lines have been made in section 27A of the Wealth-tax Act.
23.4 Applicability – These amendments take effect retrospectively from 1st October, 1998.
23.5 Under section 256 of the Income-tax Act, the Income-tax Appellate Tribunal could refer a case to the High Court. In case where the Income-tax Appellate Tribunal refused to refer a case to the High Court, the assessee or the Commissioner were allowed to file an appeal before the High Court against such refusal of the Tribunal within a period of six months from the date on which he was served with an order of refusal. Sub-section (2A) in section 256 has been inserted retrospectively so as to empower the High Court to admit an application after the expiry of the period of six months, if it is satisfied that there was sufficient cause for not filing the same within such period.
23.6 Consequential amendments on similar lines have been made in section 27 of the Wealth-tax Act.
23.7 Applicability – These amendments take effect retrospectively from 1st June, 1981.
24. Document Identification Number
24.1 Section 282B (Allotment of Document Identification Number) is a new section inserted by the Finance (No. 2) Act, 2009 in the Income-tax Act with effect from 1st October, 2010. Under the provisions of this section, an income-tax authority is required to allot a computer generated Document Identification Number before issue of every notice, order, letter or any correspondence to any other income-tax authority or assessee or any other person and such number shall be quoted thereon. It also provides that every document, letter, correspondence received by an income-tax authority or on behalf of such authority, shall be accepted only after allotting and quoting of a computer generated Document Identification Number. In order to cover the entire gamut of services mentioned in section 282B on a pan-India basis, it would be essential to have the requisite infrastructure and facilities in place. Section 282B has been amended so as to provide that Document Identification Number will be required to be issued on or after 1st July, 2011.
24.2 Applicability – The amendment has been made effective from 1st October, 2010.
25. Taxation of income of non-life insurance business
25.1 Section 44 read with the First Schedule to the Income-tax Act provides the scheme of computation of income of insurance companies. According to Rule 5 of the said Schedule, the income of non-life insurance business is taken as ‘profit before tax and appropriations’ as per the profit and loss account of the company, prepared in accordance with the regulations made by the Insurance Regulatory Development Authority (IRDA), subject to certain adjustments.
25.2 The Finance (No. 2) Act, 2009 amended the First Schedule to provide that in case of non-life insurance business, appreciation of or gains on realisation of investments taken credit for in the accounts shall be treated as income and be included in the computation of the total income.
25.3 The appreciation in the value of investments, being in the nature of unrealized gain is not taken into account for determining profit or loss of non-life insurance business as per the IRDA regulations. The Act therefore has been amended to provide that the unrealized gains due to appreciation in the value of investments will not be included in the total income. Similarly, deduction will not be allowed for provision for losses due to diminution in the value of investments as this is not a realized loss.
25.4 It has also been provided that any gain or loss on realisation of investments shall be added or deducted for the purpose of computation of the total income, if the same is not already credited or debited in the profit and loss account.
25.5 Applicability - This amendment takes effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
Subscribe to:
Posts (Atom)
