Direct Tax Amendments for May 2019/Nov 2019 Examinations - Part 1



The exam importance of Direct Tax Amendments ranges between 20 marks to 40 marks. As a student, one cannot ignore the amendments made by relevant Finance Act. Also, it is often observed that students are not able to handle the questions on amendments effectively during exam hours.

Below listed are the major issues faced by the students while dealing with Direct Tax Amendments.

  1. From where to study these amendments?
  2. How do I gain in-depth understanding on these amendments?
  3. How paper-setter will test the amendments?
  4. What shall I write in the examination?

Don't worry, I am not going to elaborate all these issues.

However, I have planned a series of articles focusing important amendments backed by “Brainstorming Practical” so that majority of the above difficulties can be ruled out.

Amendment in Section 10(12A): Effective from A.Y. 2019-20.


Sec.

Eligible Assessee

Nature of Income

Conditions/Definitions/Comments

10(12A)

Employee Assessee {Amendment by FA 2018}

40% of total amount payable to him is exempt.

  1. Such amount is payable at the time of closure of his account under NPS or opting out of the pension scheme referred to in section 80CCD.
  2. If above amount has been received by nominee on death, then as per proviso to 80CCD(3), nothing shall be taxed in the hands of nominee.

Effect of Amendment:

Earlier benefit of exemption under section 10(12A) was made available to employees only. Now, it has been extended to every assessee who opts out of NPS.


Brainstorming

Practical 1

Mr. Suresh, an employee of ECO POWER LTD contributed Rs.5,00,000 to New Pension System (NPS) since few years and claimed deduction under section 80CCD. Mr. Suresh was in need of money and therefore, planning to make partial withdrawal of Rs. 2,00,000 from the contribution made by him. Discuss taxability, if any.What would have been your answer if he decided to opt out of NPS and received Rs. 11,00,000?(4 Marks)

Practical 2

Suppose in the above problem, Mr. Suresh is a self-employed person. Discuss taxability, if any, under both the possibilities i.e. partial withdrawal and opting out of the scheme. (4 Marks)

Be ready with your answers. I will post the final answers in next article.





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About the Author

Managing Partner

Mr. Mehul Thakker is a Fellow Member of the Institute of Chartered Accountants of India. He is a rank holder in the examinations conducted by ICAI. Expert in the field of Direct Taxes, and conducts advisory and appellate work. Authored three books onPractical aspects of Finance Act, 2003, 2008 and 2009 Authore ... Read more


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