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TMI BlogNotes on clauses - Income-taxX X X X Extracts X X X X X X X X Extracts X X X X ..... during the financial year 2009-2010. Rates of deduction of tax at source during the financial year 2010-2011 from income other than "Salaries" Part II of the First Schedule to the Bill specifies the rates at which income-tax is to be deducted at source during the financial year 2010-2011 from income other than "Salaries". The rates are the same as those specified in Part II of the First Schedule to the Finance (No. 2) Act, 2009 for the purposes of deduction of income tax at source during the financial year 2009-2010. The amount of tax so deducted shall be increased by a surcharge at the rate of two and one-half per cent. in the case of a company other than a domestic company. In all other cases, no surcharge would be levied on the tax deducted at source. Rates for deduction of tax at source from "Salaries", computation of "advance tax" and charging of income-tax in special cases during the financial year 2010-2011 Part III of the First Schedule to the Bill specifies the rates at which income-tax is to be deducted at source from, or paid on, income under the head "Salaries" and also the rates at which "advance tax" is to be paid and income-tax is to be calculated or charged in spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crore rupees is proposed to be reduced to seven and one-half per cent. from the existing rate of ten per cent. Marginal relief will be provided. In case of a company other than a domestic company, the surcharge shall continue to be levied at the rate of two and one-half per cent. and subject to the same conditions as were applicable for the assessment year 2010-2011. In all other cases (including sections 115JB, 115-O, 115R, etc.) where surcharge at the rate of ten per cent. was applicable, the surcharge will be applicable at the rate of seven and one-half per cent. "Education Cess" at the rate of two per cent. and "Secondary and Higher Education Cess" at the rate of one per cent. shall continue to be levied in all cases covered under Part III of the First Schedule. In the cases covered under Part II of the First Schedule, there will be no levy of the Education Cess and Secondary and Higher Education Cess on tax deducted or collected at source in the case of a domestic company and any other person who is resident in India. Both the cesses would, however, continue to apply on tax deducted at source in the case of salary payments. These would also continue to be levied in the cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the total income of the non-resident, whether or not, the nonresident has a residence or place of business or business connection in India. It is proposed to substitute the said Explanation so as to provide 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 subsection (1) and shall be included in the total income of the nonresident, whether or not,- (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-resident has rendered services in India. This amendment will take effect, retrospectively, from 1st June, 1976 and will, accordingly, apply in relation to the assessment year 1977-1978 and subsequent years. Clause 5 of the Bill seeks to amend section 10 of the Income tax Act relating to incomes not included in total income. Under the existing provisions contained in clause (21) of the aforesaid section, in computing the total income of the previous year of any person, any income of a scientific research association for the time being approved for the purpose of clause (ii) of subsection (1) of section 35 is not included. It is proposed to amend clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order in writing cancelling the registration granted under clause (b) of sub-section (1). It is proposed to amend the said sub-section (3) so as to also provide for cancellation of registration where any trust or institution has obtained registration at any time under section 12A before its amendment. This amendment will take effect from 1st June, 2010. Clause 8 of the Bill seeks to amend section 32 of the Income tax Act relating to depreciation. The existing provisions contained in the aforesaid section provide that the aggregate depreciation allowable to the predecessor and successor business entities in case of succession or amalgamation shall not exceed in any previous year the deduction allowable at prescribed rates as if the succession or amalgamation had not taken place and such deduction shall be apportioned between the two entities in the ratio of the number of days for which the assets were used by them. It is proposed to make a reference of clause (xiiib) in the fifth proviso to sub-section (1) of the aforesaid section to provide that in case of succession of a private company or unlisted public company by limited liability partnership, the aggregate depreciation allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end sub-section (2AB) of the aforesaid section 35. The existing provisions contained in clause (1) of sub-section (2AB) of the said section provide for weighted deduction of one hundred and fifty per cent. of the expenditure incurred by a company on scientific research on an approved in-house research and development facility. It is proposed to amend the said clause (1) so as to enhance the said weighted deduction from one hundred and fifty per cent. to two hundred per cent. These amendments will take effect from 1st April, 2011, and will, accordingly, apply in relation to the assessment year 2011- 2012 and subsequent years. Clause 10 of the Bill seeks to amend section 35AD of the Income tax Act relating to deductions in respect of expenditure on specified business. Under the existing provisions of the aforesaid section, deduction in respect of expenditure of capital nature incurred, wholly or exclusively, during the year for a specified business is allowed. The expression "specified business" is defined in clause (c) of subsection (8) of the said section. The specified business, inter alia, includes the business of laying and operating a cross-country natural gas or crude or petro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laying and operating a cross-country natural gas or crude or petroleum oil pipeline network. Sub-clause (d) proposes to amend clause (c) of sub-section (8) of the aforesaid section so as to bring the business relating to building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government within the purview of "specified business". These amendments will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. Clause 11 of the Bill seeks to amend section 35DDA of the Income-tax Act relating to amortisation of expenditure incurred under voluntary retirement scheme. The existing provisions contained in the aforesaid section provide that where an assessee incurs any expenditure in any previous year by way of payment of any sum to an employee at the time of his voluntary retirement under any scheme of voluntary retirement, one-fifth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year and the balance shall be deducted in equal instalments for each of the four immediately succeeding previous years. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bill seeks to amend section 43 of the Income tax Act relating to definitions of certain terms relevant to income from profits and gains of business or profession. The existing provisions contained in Explanation 13 to clause (1) of the aforesaid section provide that the actual cost of any capital asset on which deduction has been allowed or is allowable under section 35AD shall be treated as 'nil' in specified circumstances. Sub-clause (a) proposes to make a reference of clause (xiiib) of section 47 in sub-clause (iii) of clause (b) of the said Explanation, to provide that in case of succession of a private company or unlisted public company by a limited liability partnership, the actual cost of capital assets on which deduction has been allowed under section 35AD to the predecessor company shall be taken as 'nil' in case of the successor limited liability partnership. Clause (6) of the aforesaid section defines the expression 'written down value'. Sub-clause (b) proposes to amend clause (6) of the aforesaid section by inserting a new Explanation 2C to the said clause (6) so as to provide that in case of succession of private company or unlisted public company by limited liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bill seeks to amend section 44BB of the Income tax Act relating to special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils. Under the existing provisions contained in sub-section (1) of the aforesaid section, income of a non-resident assessee who is engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils is computed at ten per cent. of the aggregate of the amounts paid or payable to the assessee or to any person on his behalf, whether in or out of India on account of the provisions of such services and facilities. The proviso to the said sub-section provides that the said sub-section shall not apply in a case where the provisions of section 42 or section 44D or section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections. It is proposed to insert the reference of "section 44DA" in the proviso to the said sub-section (1) so as to clarify that the provisions of section 44BB shall also not apply in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the limited liability partnership; (d) the aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than fifty per cent. at any time during the period of five years from the date of conversion; (e) the total sales, turnover or gross receipts in business of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed sixty lakh rupees; and (f) no amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of three years from the date of conversion. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. Clause 19 of the Bill seeks to amend section 47A of the Income tax Act relating to withdrawal of exemption in certain cases. It is proposed to amend the aforesaid section so as to inser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the amendment made vide sub-clause (b) of clause 21 of the Bill and will take effect from 1st June, 2010 and will, accordingly, apply to the assessment year 2011-2012 and subsequent years. Clause 21 of the Bill seeks to amend section 56 of the Income tax Act relating to income from other sources. Under the existing provisions contained in sub-clause (b) of clause (vii) of sub-section (2) of the aforesaid section, if an assessee being an individual or a Hindu undivided family receives any immovable property without consideration or for inadequate consideration, the value of the said property shall be treated as income in the hands of assessee and shall be liable to tax. It is proposed to substitute the aforesaid sub-clause (b) of clause (vii) of sub-section (2) of the aforesaid section so as to provide that clause (vii) of sub-section (2) of section 56 would apply only if the immovable property is received without any consideration and to remove the stipulation as regards inadequate consideration. This amendment will take effect retrospectively from 1st October, 2009, and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years. Under the existin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act, the accumulated loss and the unabsorbed depreciation of the predecessor company shall be deemed to be the loss or, as the case may be, allowance for depreciation of the successor limited liability partnership for the previous year in which business reorganisation was effected and the other provisions of the Act relating to set off and carry forward loss and allowance for depreciation shall apply accordingly. However, if the conditions stipulated in the proviso to clause (xiiib) of section 47 are not complied with, the set off of loss or allowance of depreciation which had been allowed shall be deemed to be the income chargeable to tax of the successor limited liability partnership for the previous year in which the conditions stipulated in the proviso to clause (xiiib) of section 47 are not complied with The existing provisions of clause (a) and clause (b) of sub-section (7) of the aforesaid section defines the expressions "accumulated loss" and "unabsorbed depreciation" respectively for the purpose of the aforesaid section. Sub-clause (b) proposes to substitute the said clauses (a) and (b) to redefine the expressions as under:- (a) "accumulated loss" means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to the assessment year 2011-2012 and subsequent years. Clause 24 of the Bill seeks to insert a new section 80CCF in the Income-tax Act relating to deduction in respect of subscription to long-term infrastructure bonds. It is proposed to insert a new section so as to provide that a sum of rupees twenty thousand in addition to the existing limit of rupees one lakh for tax savings under the Income-tax Act may be allowed as a specific deduction in computing the total income of an assessee being an individual or a Hindu undivided family if such sum is paid or deposited at any time during the previous year relevant to the assessment year beginning on 1st April, 2011 as subscription to long-term infrastructure bonds as may be notified by the Central Government. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012. Clause 25 of the Bill seeks to amend section 80D of the Income tax Act, relating to deduction in respect of health insurance premia. Under the existing provisions contained in clause (a) of subsection (2) of the aforesaid section 80D, the whole of the amount paid by any mode, other than cash, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shoud be completed within four years from the end of the financial year in which the housing project is approved by the local authority. It is proposed to increase the period for completion of a housing project, approved on or after 1st April, 2005, from four years to five years. Under the existing provisions contained in clause (d) of subsection (10) of the aforesaid section, the built-up area of the shops and other commercial establishments included in the housing project should not exceed five per cent. of the aggregate built-up area of the housing project or 2,000 square feet, whichever is less. It is proposed to revise the existing limit to three per cent. of the aggregate built-up area of the housing project or 5,000 square feet, whichever is higher. These amendments will take effect, retrospectively, from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years. Clause 28 of the Bill seeks to amend section 80-ID of the Income tax Act relating to deduction in respect of profits and gains from business of hotels and convention centres in specified area. The existing clause (i) of sub-section (2) of the aforesaid section pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to be the total income of the assessee and the tax payable for the relevant previous year shall be fifteen per cent. of such book profit. It is proposed to amend sub-section (1) of the aforesaid section to provide that if the income-tax payable on the total income as computed under the Income-tax Act in respect of any previous year relevant to the assessment year commencing on or after 1st April, 2011 is less than eighteen per cent. of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable for the relevant previous year shall be eighteen per cent. of such book profit. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. Clause 31 of the Bill seeks to amend section 115WE of the Income-tax Act relating to assessment. Under the existing provisions contained in sub-section (1B) of the aforesaid section, the Central Government may, save as otherwise expressly provided, for the purpose of giving effect to the scheme made under sub-section (1A) of that section, by notification in the Official Gazette, direct that any of the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may, save as otherwise expressly provided, for the purpose of giving effect to the scheme made under sub-section (1A) of that section, by notification in the Official Gazette, direct that any of the provisions of the Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in that notification. However, no direction is to be issued after 31st March, 2010. Sub-clause (a) proposes to extend the time limit from 31st March, 2010 to 31st March, 2011. This amendment will take effect retrospectively from 1st April, 2010. Under the existing provisions contained in proviso to sub-section (3) of the aforesaid section, the assessing officer is under obligation to intimate the Central Government or the prescribed authority any contravention of provisions of clause (21) of section 10, by the association referred to in the said clause. The provisions also state that the assessing officer shall not withdraw exemption under section 10 unless the intimation has been given by him to the prescribed authority and the approval granted to the association has been withdrawn. Sub-clause (b) proposes to amend the first prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to deduct income-tax. It is proposed to enhance the said limit from twenty thousand rupees for a single transaction to thirty thousand rupees and from fifty thousand rupees for the aggregate transactions during the financial year to seventy five thousand rupees. These amendments will take effect from 1st July, 2010. Clause 38 of the Bill seeks to amend section 194D of the Income tax Act relating to insurance commission. Under the existing provisions contained in the aforesaid section, no deduction of income-tax shall be made in a case where the amount of such income, or the aggregate of the amount of the income, relating to remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business, credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee does not exceed five thousand rupees. It is proposed to enhance the said limit from five thousand rupees to twenty thousand rupees. This amendment will take effect from 1st July, 2010. Clause 39 of the Bill seeks to amend section 194H of the Income-tax Act relating to commission or brokerage. Under the existing provisions contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch tax is actually paid and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200. It is proposed to amend sub-section (1A) of the aforesaid section so as to increase the interest chargeable under that sub-section from one per cent. to one and one-half per cent. for every month or part of a month for tax deducted but not paid. This amendment will take effect from 1st July, 2010. Clause 43 of the Bill seeks to amend section 203 of the Income tax Act relating to certificate for tax deducted. Under the existing provisions contained in sub-section (3) of the aforesaid section, where the tax has been deducted or paid in accordance with the provisions of Chapter XVII-B on or after 1st April, 2010, there is no requirement to furnish a certificate referred to in sub-section (1) or, as the case may be, under sub-section (2) of the aforesaid section, by the deductor to the deductee. It is proposed to omit the aforesaid sub-section (3) of section 203 of the Income-tax Act. This amendment will take effect retrospectively from 1st April, 2010. Clause 44 of the Bill seeks to amend section 206C of the Income tax Act relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proviso of the said section so as to provide that an application can be made before the Settlement Commission, in cases where proceedings for assessment or reassessment have been initiated as a result of search under section 132 or books of account, other documents or any assets requisitioned under section 132A, if the additional amount of income-tax payable on the income disclosed in the application exceeds fifty lakh rupees. It is further proposed to provide 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. These amendments will take effect from 1st June, 2010. Clause 47 of the Bill seeks to amend section 245D of the Income tax Act relating to the procedure on receipt of an application under section 245C. Under the existing provisions of sub-section (4A) of the aforesaid section, the Settlement Commission shall pass an order within twelve months from the end of the month in which the application was made. It is proposed to amend clause (ii) of the aforesaid sub-section so as to provide that the Settlement Commission shall, in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y equal to one-half per cent. of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or a sum of one lakh rupees, whichever is less. It is proposed to enhance the said limit from one lakh rupees to one lakh fifty thousand rupees. This amendment will take effect from 1st April, 2011, and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. Clause 51 of the Bill seeks to amend section 282B of the Income-tax Act relating to allotment of Document Identification Number. Under the existing provisions contained in the aforesaid section, the income-tax authority is required to allot a computer generated Document Identification Number before issue of every notice, order, letter or any correspondence issued by him 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 or 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. The provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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