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TMI BlogFinance Bill 2012- proposed amendments and need to simplify section 80G. (With thanks by professionals for undesired complexity in provisions)X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Bill 2012- proposed amendments and need to simplify section 80G. (With thanks by professionals for undesired complexity in provisions) - By: - CA DEV KUMAR KOTHARI - Income Tax - Dated:- 1-4-2015 - - Complex provisions: The Income-tax Act contains major of provisions which are very complex and difficult to understand even by people especially literate in law and even those who specialise tax laws. For example, I refer to definition of relative in S. 56 and provisions of S.80G . Both these provisions concerns common people at large and both are very complex. I receive many calls from relatives and friend about to whom one can give gift as eligible relative or receive gift from eligible relative, and in most of time we ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to refer to definition of relative, which is illogical to some extent. Many provisions are affecting common man in day to day affairs. However, such provisions are also very difficult. For example, S. 80G has been drafted in such a manner that it is difficult to understand or remember implications of provisions. The section provides many complex aspects, drafted in very complex language, which can be simplified by proper classification under different head. For example: Donations which are eligible for deduction @100% Donations which are eligible for deduction @ 50% Donations which are subject to limitations of 10% of eligible Gross Total Income, Donations which are not subject to limitations of 10% of eligible Gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Income (EGTI), Eligible Gross Total Income(EGTI) What is not allowed in case of companies and, under which circumstances? The above aspects can be drafted in an easy to understand manner bu proper classification of type of donations which are eligible for deduction equal to 100% or 50%. And which are also subject to limitations of 10% of Gross Total Income (GTI or eligible GTI)) Why deduction from GTI instead of from income under any head: Many donations are eligible for deductions @100% and those are mainly concerned with funds, or institutions established and / or controlled by government. We also find some type of donations which can be claimed under head income from business or profession as well as deduction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Chapter VIA, if assessee has no income from business or profession. In fact some donations , payments or contributions in nature of donations, can results into business loss which can be carried forwarded. Therefore, it is clear that such donations are also akin to an expenditure or loss. Therefore, donations which are eligible for deductions equal to 100% and which mainly concerns welfare of public at large and are controlled by government, can be allowed as eligible deduction from income of an assessee falling u Under nay head of income without any other limitation. Proposal in FB 2015 : The clause no 21 contains proposal to amend S.80G. The proposed clause and note on it is reproduced below with highlights added for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easy understanding of crucial aspects: Amendment of section 80G. 21. In section 80G of the Income-tax Act ,- (A) in sub-section (1), in clause (i),- (I) after the words, brackets, figures and letters sub-clause (iiihj) or , the words, brackets, figures and letters sub-clause (iiihk) or sub-clause (iiihl) or shall be inserted; (II) after the words, brackets, figures and letters sub-clause (iiihl) or , as so inserted, the words, brackets, figures and letters sub-clause (iiihm) or shall be inserted with effect from the 1st day of April, 2016; (B) in sub-section (2), in clause (a),- (I) after sub-clause (iiihj), the following sub-clauses shall be inserted, namely:- (iiihk) the Swachh Bharat Kosh, set up b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Central Government, other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013;( 18 of 2013) or (iiihl) the Clean Ganga Fund, set up by the Central Government , where such assessee is a resident and such sum is other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013; or ( 18 of 2013); (II) the following sub-clause shall be inserted with effect from the 1st day of April, 2016, namely:- (iiihm) the National Fund for Control of Drug Abuse constituted under section 7A of the Narcotic Drugs and Psychotropic Substances Act, 1985;( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61 of 1985) or . Notes on Clauses: Clause 21 of the Bill, seeks to amend section 80G of the Income-tax Act relating to deduction in respect of donations to certain funds, charitable institutions, etc. Under the existing provisions of the aforesaid section, an assessee is allowed a deduction from his total income in respect of donations made by him to certain funds and charitable institutions. The deduction is allowed at the rate of hundred per cent. of the amount of donations made to certain funds and institutions formed for a social purpose of national importance, like the Prime Ministers National Relief Fund, National Foundation for Communal Harmony etc. It is proposed to amend sub-section (1) and sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (2) of the said section so as to provide for a deduction of hundred per cent. in respect of the sum donated by an assessee to the Swachh Bharat Kosh set up by the Central Government, other than the sum spent by such assessee in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013 . It is further proposed to amend sub-section (1) and sub-section (2) of the said section so as to provide for a deduction of hundred per cent . in respect of the sum donated by a resident assessee to the Clean Ganga Fund set up by the Central Government , other than the sum spent by such assessee in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act, 2013. These amendments will take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015- 16 and subsequent years. It is further proposed to amend sub-section (1) and sub-section (2) of the said section so as to provide hundred per cent. deduction in respect of donations made to the National Fund for Control of Drug Abuse constituted under section 7A the Narcotics Drugs and Psychotropic Substances Act, 1985. These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016- 17 and subsequent years. Observations of author: Donations to (a) Swachh Bharat Kosh, and (b) Clean Ganga Fund both se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t up by the Central Government will be eligible for deduction of 100% and donations made during current fiscal year ending 31.03.2015 shall also be eligible for deduction in assessment year 2015-16. However payment made from SCR fund by companies will not be eligible for deduction. Deduction in respect of donations made to the National Fund for Control of Drug Abuse constituted under section 7A the Narcotics Drugs and Psychotropic Substances Act, 1985 shall also be eligible for 100% deduction but payment made on or after 01.04.15 will only be eligible. In this case even contribution from CSR fund may be allowable, provided such contribution are eligible / or made eligible for utilisation of CSR. The new eligible contributions sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be subject to limitation of 10% of EGTI. Request for simplification: Honourable Finance Minister is requested to start exercise of simplification of provisions by amending provisions relating to donations covered by S. 80G and substitute the section by making different classes of donations (100%, 50%, with or without limit of 10% EGTI, with or without constraints about CSR etc.) under specific sub-sections instead of making more complex sub-section (1) and (2) and other provisions by referring to various clauses in provisions. Furthermore, allowability under any head of income, instead of from GTI can be considered to start simplification exercise. Author feels that honourable Shri Arun Jaitley , who is one of top lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned lawyer of India can apply his brain to simplify the legal provisions. However, unfortunately, it seems that even under his guidance, the provisions are being made more complex. For another example, S. 269SS and 269T were amended by the Finance (no.2) Bill 2014 w.e.f. 01.04.2015 allowing payment by electronic means of banking system. This has now given tool to tax authorities to impose hefty penalty if a payment is made even by NEFT/ RTGS / Bank transfer to a registered bank account etc. for earlier period. In fact, as law stands, authority can take stand that amendment w.e.f. 01.04.2015 means that any Receipt / payment made on or before 31.03.2014 otherwise than a/c payee cheque or a/c payee bank draft constitute violation of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 269SS and 269T . Thanks from law and allied professionals: We, people belonging to law and allied professions must convey our sincere thanks to him and his predecessors who have made laws complex day by day, and increased scope of un-necessary disputes, hence work for lawyers , CA, CS and CMA. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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