Finance Act, 1980--Explanatory notes on the provisions relating to direct taxes - Income Tax - 268/1980

Finance Act, 1980--Explanatory notes on the provisions relating to direct taxes Circular No. 268 Dated 28/4/1980 Introduction 1. The Finance Bill, 1980 as passed by Parliament, received the assent of the President on 25-3-1980 and has been enacted as Act 13 of 1980. This circular explains the substance of the provisions relating to income-tax contained in the Finance Act, 1980. 2. The Finance Act, 1980 has continued the existing rates of income-tax with certain modifications in the provisions of the Finance Act, 1979 and has also made three amendments to the Income-tax Act, 1961. RATE STRUCTURE Rates of income-tax 3.1 Section 2 of the Finance Act, 1980 deals with the rates of income-tax. 3.2 The rates of income-tax and surcharge for the assessment year 1980-81 in the case of all categories of taxpayers (corporate as well as non-corporate) will be the same as were specified in Part III of the First Schedule to the Finance Act, 1979 for the purpose of calculating or charging income-tax in certain cases, deducting income-tax from income chargeable under the head "Salaries" or payments referred to in section 80E(9) and computing "advance tax" during the financial year 1979-80. 3.3 The same rates will be applicable for the purposes of computation of "advance tax" and deduction of tax at source from "salaries" and retirement annuities payable to partners of registered firms engaged in specified professions during the financial year 1980-81 as also for the computation of the tax payable in certain cases where accelerated assessments are required to be made during that year. 3.4 The rates for deduction of income-tax and surcharge at source during the financial year 1980-81 from incomes, other than "salaries" and retirement annuities payable to partners of registered firms engaged in specified professions, will be the same as were specified in Part II of the First Schedule to the Finance Act, 1979 for deduction of income-tax and surcharge at source from such incomes during the financial year 1979-80. 3.5 Provisions relating to aggregation of net agricultural income with non-agricultural income for determining the tax payable by non-corporate taxpayers, other than registered firms, are being continued for the assessment year 1980-81 as also for payment of advance tax during the financial year 1980-81 subject, however, to the following modifications: (i) unabsorbed agricultural losses for the previous years relevant to the assessment years 1974-75 to 1979-80 will be set off against agricultural income for the previous year relevant to the assessment year 1980-81; and (ii) unabsorbed agricultural losses in the previous years relevant to the assessment years 1974-75 to 1980-81 will be taken into account in determining the net agricultural income for the purposes of payment of advance tax during the financial year 1980-81. [Section 2 of the Finance Act] AMENDMENTS TO INCOME-TAX ACT Exemption from tax of awards for service for alleviating the distress of the poor, the weak and the ailing - Section 10(17A) 4.1 Under clause (17A) of section 10 awards for literary, scientific and artistic work, as also for proficiency in sports and games, instituted by the Central Government or a State Government are exempted from income-tax. Likewise, exemption is available in respect of similar awards which are approved by the Central Government for the purposes of clause (17A) of section 10. 4.2 The Finance Act, 1980 has amended the provisions of clause (17A) of section 10 so as to extend the tax exemption to approved awards for outstanding work in alleviation of the distress of the poor, the weak and the ailing. This provision is intended to set at rest doubts about the taxability of the Nobel Prize awarded to Mother Theresa in recognition of her service to suffering humanity. 4.3 This provision has been made with effect from 1-4-1980. [Section 3(a) of the Finance Act] Exemption from tax on certain incomes of residents of Ladakh - Section 10(26A) 5.1 Under section 10(26A) income accruing or arising to any resident of Ladakh district from any source in that district or outside India is completely exempt from income-tax. The exemption is available only in the case of persons who were residents in Ladakh district in the previous year relevant to the assessment year 1962-63. Under the provision, as it stood prior to its amendment by the Finance Act, 1980, this exemption was available up to, and including, the assessment year 1979-80. 5.2 Section 10(26A) has been amended by the Finance Act, 1980 to revive this exemption for a further period of three years, i.e., for the assessment years 1980-81 to 1982-83. [Section 3(b) of the Finance Act] Exemption from tax of statutory corporations, bodies or associations set up for upliftment of scheduled castes and scheduled tribes - Section 10(26B) 6.1 Government have set up several organisations for the upliftment of scheduled castes and scheduled tribes. Their main objective is to ensure rapid socio-economic development of the scheduled castes and the scheduled tribes thereby ensuring gradual integration of their members in the mainstream of economic life. Such organisations constitute an extension of the activities of the Government and have been set up as an independent autonomous unit primarily with the object of giving them greater freedom of operation. 6.2 The Finance Act, 1980 has inserted a new clause (26B) in section 10 to provide for exemption from income-tax in respect of income derived by any body, institution or association wholly financed by the Central or State Government or by a statutory corporation, where such body, institution, association or corporation has been established or formed for promoting the interests of the members of the scheduled castes or the schedule's tribes. For the purpose of this clause, the expressions "scheduled castes" and "schedules tribes" have the meaning assigned to them in clauses (24) and (25), respectively, of article 366 of the Constitution. 6.3 This amendment takes effect retrospectively from 1-4-1972 and is, accordingly, applicable in relation to the assessment year 1972-73 and subsequent years. [Section 3(c) of the Finance Act]