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Amendments to Income Tax Act, 1961 Budget 2009 document sample
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------------------------------------------------------- A. D. KOTHARI & CO
CHARTERED ACCOUNTANTS
UNION BUDGET 2009
AMENDMENTS AT A GLANCE
INCOME TAX ACT, 1961
Section 2(15) – Charitable Purpose
Upto Assessment Year 2008-09, Expenditure made
for:
a) Relief of Poverty,
b) Education,
c) Medical Relief and
d) Other objects of general Public Utility were
considered as made for Charitable Purpose.
From Assessment Year 2009-10, any expenditure
made for:
e) "preservation of environment (including
watersheds, forests and wildlife)
f) “preservation of monuments or places or objects
of artistic or historic interest,"
will also be treated an expense made for "Charitable
Purpose".
Section 2(23) – Limited Liability Partnership
Under the Income Tax Act, 1961, Firms, Partners and
Partnership under Limited Liability Partnership Act,
2008 shall now be treated on the same lines as Firms,
Partners and Partnership under Indian Partnership Act,
1932.
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CHARTERED ACCOUNTANTS
Sec 2(29BA) – “Manufacture” term defined
For the first time, the term "Manufacture" is defined.
From Assessment Year 2009-10, "Manufacture" shall
mean
Any change in a non-living physical object or article or
thing,—
(a) resulting in transformation of the object or article
or thing into a new and distinct object or article or
thing having a different name, character and use; or
(b) bringing into existence of a new and distinct object
or article or thing with a different chemical
composition or integral structure;';
Section 10(10C) and Section 89 – Voluntary
Retirement Scheme
Exemption u/s. 10(10C) and relief u/s 89 cannot be
claimed/availed for the same amount received by an
Employee under VRS Scheme.
Section 10(23C) –Medical and Education
Institutions
From Assessment Year 2009-10, time Limit for
Application for Exemption from Income Tax is
extended upto 30th September of the succeeding
Financial Year.
Section 10A and 10B – Extension of Time for
Exemption
Deduction under section 10A and 10B will now be
available upto Assessment Year 2011-12. Earlier this
exemption was available up to Assessment Year 2010-
11.
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CHARTERED ACCOUNTANTS
Section 17(2)(vi) - Perquisites
From Assessment Year 2010-11, the value of any
specified security or sweat equity shares allotted or
transferred, directly or indirectly, by the employer, or
former employer, free of cost or at concessional rate
to the employee will now be treated as Perquisite.
Section 17(2)(vii) - Perquisites
From Assessment Year 2010-11, any sum paid above
Rs 100000 towards superannuation fund will be
treated as Perquisite and taxed in the hands of
Employee.
Section 17(2)(viii) - Perquisites
From Assessment Year 2010-11, any other fringe
benefit or amenity as may be prescribed will be
treated as Perquisite and taxed in the hands of
Employee.
Section 35(2AD) – Scientific Research
A weighted deduction of 150% on expenditure
incurred toward approved Scientific research was
available to selected class of Manufacturing.
From Assessment Year 2010-11, this deduction will be
available on approved research undertaken by all
Manufacturer except those items specified in the
Eleventh Schedule.
Section40(b)(v) – Remuneration to Partners
From Assessment Year 2010-11 Deduction in respect
of Remuneration to Partners of Partnership Firm
carrying on Business or Profession has been increased
to the following limits:
First Rs 300000 of 90% of Book Profit or Rs
Book Profit or in case 150000, whichever is more.
of Loss
Balance amount of 60% of Book Profit
Book Profit
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CHARTERED ACCOUNTANTS
Section 40A(3A) – Cash payment to
Transporter
Any payment made above Rs 20000 otherwise than by
account payee cheque or demand draft will be
disallowed as expenses.
From 1st October, 2009 cash limit of Rs 20000 for
payment made for plying, hiring or leasing goods
carriages has been increased to Rs 35000.
Section 44AD – New section substituted.
Option Available for all business (except
transporter) having Turnover below Rs 40
Lakhs. – Applicable if Books of Accounts are
not maintained
From Assessment Year 2011-12, Individuals, HUF and
Firm (except Limited Liability Firms) having Business
and turnover or Gross Receipts of less than Rs 40
Lakhs will have the option to compute their Income @
8% on such Turnover or Gross Receipts.
If the assessee computes income under this section,
then no expenditure (except interest and remuneration
to Partners in case of Partnership Firm) will be allowed
as deduction.
No exemption u/s 10A, 10AA, 10B and 10BA and
deductions under section 80 will be allowed.
The assessee is not required to maintain the books of
accounts.
The assessee is not required to pay Advance Tax.
If the assessee claims the Income lower than 8% of
Turnover or Gross Receipts, then Books of Accounts
will have to be maintained and the same has to be
audited.
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------------------------------------------------------- A. D. KOTHARI & CO
CHARTERED ACCOUNTANTS
Section 44AE – Taxation of Transporters
From Assessment 2011-12, presumptive Income of
Goods Carriage owner having less then 10 goods
Carriage shall be calculated as under:
a) For Heavy Goods Vehicle - Rs 5000 per month or
part thereof,
b) For other then Heavy - Rs 4500 per month or
Goods Vehicle part thereof.
OR
Amount claimed to be actually earned, whichever is
higher.
Section 44AF – Taxation of Retailers
Benefit to Retailer to compute Income @ 5% of Gross
Turnover has been withdrawn with effect from
Assessment Year 2011-12. They can opt for
presumptive tax u/s 44AD explained above.
Section 49A(2AA) – Cost of Security/Sweat
Equity Capital in certain cases
From Assessment Year 2010-11, in case of any
Specified Security or sweat equity shares is acquired
by an employee at free of cost or at concessional rate
and the difference between Fair Market Value and cost
is treated as perquisite u/s 17(2), then the cost of
such asset for the purpose of Capital Gains shall be
calculated at the Fair Market Value on the date of
acquisition.
Section 50C – Capital Gains on Land or
Building
With effect from 1st October, 2009, the consideration
received or receivable on transfer of any Land or
building or both shall be the value assessed or
assessable under the Stamp Duty Act or the
consideration whichever is higher.
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CHARTERED ACCOUNTANTS
Section 56– Gifts received in Kind
With effect from 1st October, 2009, any gifts received
(exceeding Rs 50000/-) in kind will also be treated as
gift and taxed in the hands of recipient (except gift
received from relatives).
In case of transfer of Immovable Property without
adequate consideration, the difference between the
Stamp Duty Valuation and the Consideration will be
treated as Income in the hands of Transferee.
In case of transfer of Movable Property (as defined the
section) without adequate consideration, the difference
between the Fair Market Valuation and the
Consideration will be treated as Income in the hands
of Transferee.
Section 56 and 57 and 145A– Interest
received on Compensation or Enhanced
Compensation
From Assessment Year 2010-11, any interest received
on compensation or enhanced compensation shall be
treated as Income under the head "Income from other
sources" on Cash Basis. Flat 50% of such income can
be claimed as deduction.
Section 80CCD – Deduction in respect of
amount deposited in Pension Scheme
From Assessment Year 2009-10, all individuals will
now be eligible for deduction on account of amount
invested in pension scheme notified by the Central
Government.
Section 80DD – Increase in Deduction.
From Assessment Year 2010-11, the limit of deduction
towards maintenance and medical treatment of
dependent relative with severe disability has been
increased from Rs 75000 to Rs 100000.
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CHARTERED ACCOUNTANTS
Section 80E(3)(c) – Change in Definition of
Higher Education
From Assessment Year 2010-11, Interest paid on Loan
taken from Banks, Notified Financial Institute or an
Approved Charitable Institute to pursue any course
after SSC Exam or equivalent Exams by an Assessee,
being an individual, for himself, his Spouse or his
Children shall be deductible. Previously this deduction
was available to selected Courses only.
Section 80GGB and 80GGC – Donation to
Electoral Trust.
From Assessment Year 2010-11, any donation given
by any person (except Local Authority and every
Artificial Juridical Person) to an Electoral Trust will be
deductible under this Section.
Section 115BBC – Donation received from
Anonymous Donor
From Assessment Year 2010-11, any anonymous
Donation received by a trust in excess of a) 5% of the
total Income or b) Rs 100000/- whichever is higher
will be taxed at 30%. The balance Total Income
remaining after the sum calculated above will be taxed
at normal rate applicable to that trust.
Section 115JA – Minimum Alternate Tax
Any amount debited to Profit and Loss Account
towards Diminution in the value of Assets has to be
added while calculating “Book Profit” for Calculation of
Minimum Alternate Tax with effect from 1st April 1998.
Section 115JAA– Minimum Alternate Tax -
Set off of Tax Credit
From Assessment Year 2010-11, Carry forward and
Setoff of MAT will now be allowed upto 10 Years
(previously this limit was 7 years)
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------------------------------------------------------- A. D. KOTHARI & CO
CHARTERED ACCOUNTANTS
Section 115JB– Minimum Alternate Tax –
MAT increased to 15% from Assessment Year 2010-
11.
Section 115O – Dividend Distribution Tax
While calculating the amount on which Dividend
Distribution Tax is to be paid, amount of any dividend
paid to New Pension System Trust will be excluded.
Section 115WE and 115WM – FBT abolished
Fringe Benefit Tax is abolished with effect from
Assessment Year 2010-11.
Section 139A – Permanent Account Number
(PAN) Compulsory
Now all statement relating to TDS/TCS should mention
the PAN No of Deductee/Buyer compulsorily
Section 140 – Authority to Sign Return of
Income in case of Limited Liability
Partnership.
In case of a Limited Liability Partnership, Designated
partner will have the authority to sign the Return of
Income. In absence of Designated Partner or where no
partner is designated, any partner can sign the Return
of Income.
Section 147 - Income escaping Assessment
The Assessing Officer now have the power to assess or
reassess the income which has escaped assessment,
and such issue comes to his notice subsequently in the
course of the proceedings under this section, even if
the reasons for such issue has not been recorded in
the notice.
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------------------------------------------------------- A. D. KOTHARI & CO
CHARTERED ACCOUNTANTS
Section 167C - Recovery of amount
outstanding from Limited Liability
Partnership
If any amount of Tax is due from the LLP and cannot
be recovered, then all the Partners shall be jointly and
Severally liable for such outstanding Tax unless the
Partner proves that the non recovery is not because of
any gross neglect, misfeasance or breach of duty on
his part in relation to the affairs of the limited liability
partnership.
Section 194C – TDS on payments made to
Contractor.
With effect from 1st October, 2009
A) No TDS is to be deducted on payments made for
plying, hiring and leasing of goods carriages if PAN No
is furnished by the payee.
B) TDS will be deducted @ 1% on all contracts with
Individual and HUF Contractor and @ 2% on other
contractors.
Section 194I – TDS on payments made
towards Rent.
With effect from 1st October, 2009
New rates of TDS on Rent:
In case of Plant and Machinery given on Rent - 2%
In case of Land and Building - 10%
Section 200(3) – Quarterly TDS Returns
From 1st October, 2009, Quarterly Return of TDS is
done away with. New dates will be prescribed later.
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CHARTERED ACCOUNTANTS
Section 200A and Section 201 – Assessment
of TDS Returns
Assessment of TDS Returns will be made for every
year. An Intimation will be send within 1 year from the
end of the Financial year in which the Return is filed
after making adjustments of any mistake apparent on
record, interest amount payable, if any.
The Assessment stated above will have to be made:
1. Within 2 years from the end of Financial Year in
which the Return of TDS is submitted.
2. Within 4 years from the end of Financial Year in
which the payment is made or Credit given in TDS
return is not submitted.
Section 206AA
1. If any person entitled to receive any sum or
income or amount, on which tax is deductible
under Chapter XVIIB (hereafter referred to as
deductee) has not furnished his Permanent Account
Number to the person responsible for deducting
such tax (hereafter referred to as deductor), then
tax shall be deducted at the higher of the following
rates, namely:—
(i) at the rate specified in the relevant
provision of this Act; or
(ii) at the rate or rates in force; or
(iii) at the rate of twenty per cent
2. Any declaration furnished by the deductee to the
deductor to deduct less or no tax will not be
considered as valid if PAN is not mentioned in the
declaration and tax has to be deducted @ 20% or
higher rate.
3. TDS Certificate should not be issued if PAN is not
furnished to the deductor.
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------------------------------------------------------- A. D. KOTHARI & CO
CHARTERED ACCOUNTANTS
4. All Bills, Vouchers, Correspondence and other
documents issued by the deductee should mention
his PAN.
5. If the PAN given by the deductee is invalid, then
the tax has to be deducted at 20% or higher rate.
Section 206C – Quarterly TDS Returns
From 1st October, 2009, Quarterly Return of TDS is
done away with. New dates will be prescribed later.
Section 208 – Advance Tax Payment
Advance Tax will now have to be paid if the total Tax
liability for the year exceeds Rs 10000/-. Earlier the
limit was of Rs 5000/-.
Section 246A and Section 253 – Appeal
against the order of Assessing Officer in
certain case lies with the Appellate Tribunal.
An order u/s 143(3) passed by the Assessing Officer
while giving effect to the directions of Dispute
Resolution Penal is appealable with the Appellate
Tribunal.
Section 282 – Means of Communication
With effect from 1st October, 2009 any
correspondence, notice or summons made through E-
mail or authorised courier will now be considered as a
valid means of communication and will be binding on
the Assessee.
Section 271- Penalty
With effect from 1st June, 2007, if the assessee
declares that any assets found in the course of search
initiated u/s 132 pertains to any assessment year for
which Return of Income is not filed, then penalty u/s
271(1)(c) (towards concealment of Income or
furnishing inaccurate particulars of income) can be
leviable.
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CHARTERED ACCOUNTANTS
Section 281B – Power of Assessing Officer to
provisionally attaché property curtailed
The power of the Assessing Officer to provisionally
attach any property of the assessee during the course
of any proceedings has been curtailed as with
retrospective effect from 1st April 1988 whereby the
Assessing Officer cannot exercise such power during
the period when any assessment or reassessment has
been stayed by any court or by an injunction of any
court.
Section 282B – Document Identification
Number
From 1st October, 2010.
All notice, order, letter or correspondence issued by
any Income Tax Authority shall bear a Document
Identification Number.
All document, letter or any correspondence received
by any Income Tax Authority shall be given an
Document Identification Number.
If any of the above correspondence does not have a
Document Identification Number, then it will be
treated as Invalid.
Section 293C – Power of the Income Tax
Authority to withdraw any approval granted
Any Income Tax Authority will now have the power to
withdraw any approval granted to the assessee after
giving reasonable opportunity to the assessee even if
the authority to withdraw such approval is not granted
in that particular provision.
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CHARTERED ACCOUNTANTS
WEALTH TAX ACT, 1957
Basic exemption limit has been increased from Rs 15
Lakhs to Rs 30 Lakhs.
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CHARTERED ACCOUNTANTS
SERVICE TAX
Compiled by CA Jayprakash Tiwari
Sec 65(19) – Service of Production
(Jobwork) on Non-excisable goods
Service of Production (Job work) on Non-excisable
goods will now be chargeable to Service Tax under the
head “Business Auxiliary Services”.
Sec 65(101) – Sub-Broker exempted.
Registered sub-Brokers are now exempted from
Service Tax.
Sec 65(105)(zzzp) – Transportation by Rail -
Taxable
Transportation service provided by the Government
Railways in relation to transport of goods by rail, is
proposed to be chargeable to service tax.
Sec 65(105)(zzzze) – Onus of Payment of
Service tax for the right to use Information
Technology shifted.
Previously with regards to services in relation to
information technology software, the onus for payment
of service tax liability rested with the acquirer of right
to use information technology as mentioned in clause
(zzzze) points (v) & (vi) of section 65. This has been
rectified retrospectively w.e.f 16th May, 2008, to shift
the onus of payment of service tax to provider of right
to use information technology.
Even though this provision has retrospective effect,
any action taken by anyone till the President gives her
accent to the Finance Bill, will be considered valid.
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CHARTERED ACCOUNTANTS
Sec 65(105)(zzzzk) – cosmetic or plastic
surgery now taxable
Services in relation to cosmetic or plastic surgery
(excluding cosmetic or plastic surgery undertaken to
restore or reconstruct anatomy or functions of body
affected due to congenital defects, developmental
abnormalities, degenerative diseases, injury or
trauma) are proposed to be charged to service tax.
Sec 65(105)(zzzzl) Transportation through
Sea Route
Transport of Coastal Goods, National Waterways and
through Inland Water is now taxable.
Sec 65(105)Clause (zzzzm): Legal services
made taxable.
Services provided by a business entity (excluding
individuals) to any other business entity (excluding
individual) in relation to advice, consultancy or
assistance in any branch of law are proposed to be
made chargeable to service tax.
The service provided by way of appearance before any
court, tribunal or authority shall not amount to taxable
service.
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