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Income Tax Amendment Highlights: Major Amendments

JITENDRA 
on 01 March 2013

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a. Taxability of immovable property received for inadequate consideration: It is proposed to amend the provisions of clause (vii) of sub-section (2) of section 56 so as to provide that where any immovable property is received for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration, shall be chargeable to tax in the hands of the individual or HUF as income from other sources.

b. Expanding the scope of deduction and its eligibility under section 80CCG: It is further proposed to provide that the deduction under this section shall be allowed for three consecutive assessment years, beginning with the assessment year relevant to the previous year in which the listed equity shares or listed units were first acquired by the new retail investor whose gross total income for the relevant assessment year does not exceed twelve lakh rupees.

c. Computation of income under the head “Profits and gains of business or profession” for transfer of immovable property in certain cases: It is proposed to provide by inserting a new section 43CA that where the consideration for the transfer of an asset (other than capital asset), being land or building or both, is less than the stamp duty value, the value so adopted or assessed or assessable shall be deemed to be the full value of the consideration for the purposes of computing income under the head “Profits and gains of business of profession”.

d. Return of Income filed without payment of self- assessment tax to be treated as defective return: It is, therefore, proposed to amend the aforesaid Explanation so as to provide that the return of income shall be regarded as defective unless the tax together with interest, if any, payable in accordance with the provisions of section 140A has been paid on or before the date of furnishing of the return.

e. Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land): In order to reduce the compliance burden on the small taxpayers, it is further proposed that no deduction of tax under this provision shall be made where the total amount of consideration for the transfer of an immovable property is less than fifty lakh rupees.

f. Rebate of Rs 2000 for individuals having total income up to Rs 5 lakh: With a view to provide tax relief to the individual tax payers who are in lower income bracket, it is proposed to provide rebate from the tax payable by an assessee, being an individual resident in India, whose total income does not exceed five lakh rupees. The rebate shall be equal to the amount of income-tax payable on the total income for any assessment year or an amount of two thousand rupees, whichever is less. Consequently any individual having income up to Rs 2,20,000 will not be required to pay any tax and every individual having total income above Rs. 2,20,000/- but not exceeding Rs. 5,00,000/- shall get a tax relief of Rs. 2000/-.

g. Additional Income-tax on distributed income by company for buy-back of unlisted share: In order to curb such practice it is proposed to amend the Act, by insertion of new Chapter XII-DA, to provide that the consideration paid by the company for purchase of its own unlisted shares which is in excess of the sum received by the company at the time of issue of such shares (distributed income) will be charged to tax and the company would be liable to pay additional income-tax @ 20% of the distributed income paid to the shareholder. The additional income-tax payable by the company shall be the final tax on similar lines as dividend distribution tax. The income arising to the shareholders in respect of such buy back by the company would be exempt where the company is liable to pay the additional income-tax on the buy-back of shares.

h. Amendment in the definition of Capital Asset: It is proposed to amend item (b) of sub-clause (iii) of clause (14) of section 2 so as to provide that the land situated in any area within the distance, measured aerially (shortest aerial distance), (I) not being more than two kilometers, from the local limits of any municipality or cantonment board referred to in item (a)  and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh, shall form part of capital asset.

i. Penalty under section 271FA for non-filing of Annual Information Return: proposed to amend the aforesaid section so as to provide that if a person who is required to furnish an annual information return, as required under sub-section (1) of section 285BA, fails to furnish such return within the time prescribed under sub-section (2) thereof, the income-tax authority prescribed under sub-section (1) of the said section may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure continues.

j. CTT levied on non-agricultural commodities @0.01%: Further, it is proposed to amend section 36 of the Income-tax Act to provide that an amount equal to the commodities transaction tax paid by the assessee in respect of the taxable commodities transactions entered into in the course of his business during the previous year shall be allowable as deduction, if the income arising from such taxable commodities transactions is included in the income computed under the head “Profits and gains of business or profession”.

OTHER BULLET POINTS OF AMENDMENTS IN INCOME TAX:

a. New DTC bill to be tabled before end of Budget Session

b. In order to encourage substantial investment (Rs.100 crore) in plant or machinery: Deduction of 15% of aggregate amount of actual cost of new assets acquired

c. Rates of income-tax in respect of income liable to tax for the assessment year 2013-14 remains unchanged

d. Extension of the sunset date under section 80IA for the power sector

e. Rs 1 lakh additional Deduction in respect of interest on loan sanctioned during financial year 2013-14 for acquiring residential house property

f. Raising the limit of percentage of eligible premium for life insurance policies of persons with disability or disease

g. Domestic Cos to be subjected to surcharge on above Rs 10 Cr profits

h. Super-rich to be subjected to 10% surcharge on income above Rs 1 Crore

i. Section 87 has also been consequentially amended.

j. One hundred per cent deduction for donation to National Children’s Fund

k. Lower rate of tax on dividends received from foreign companies under section 115BBD

l. Removal of the cascading effect of Dividend Distribution Tax (DDT) under Section 115BBD

m. Deduction for contribution to Health Schemes similar to CGHS

n. Concessional rate of withholding tax on interest in case of certain rupee denominated long-term infrastructure bonds: Section 194LC

o. Enabling provisions for facilitating electronic filing of annexure-less return of net wealth

p. Rationalisation of tax on distributed income by the Mutual Funds

q. Disallowance of certain fee, charge, etc. in the case of State Government Undertakings

r. Clarification of the phrase “tax due” for the purposes of recovery in certain cases

s. Deduction for additional wages in certain cases

t. Clarification for amount to be eligible for deduction as bad debts in case of banks

With Warm Regards

CA Jitendra Lohia


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