SOME HIGHLIGTHS OF DIRECT TAX CODE PRESENTED FOR DISCUSSION BY FINANCE MINISTER MR. PRANAB MUKHARJEE
1.THE INCOME TAX RATES IN DTC
- THE TAX RATE FOR INDIVIDUAL OTHER THAN WOMEN AND SENIOR CITIZENS
|
(1). Where the total income does not exceed Rs. 1,60,000.00
|
NIL
|
NIL
|
|
(2). Where the total income exceeds Rs. 1,60,000.00 but does not exceed Rs. 10,00,000.00
|
10 % of the amount by which the total income exceeds Rs. 1,60,000.00
|
10%
|
|
(3). Where the total income exceeds Rs.10,00,000.00 but does not exceed Rs.25,00,000.00
|
Rs. 84,000.00 Plus 20 Percent of the amount by which the total income exceeds Rs. 10,00,000.00
|
20%
|
|
(4). Where the total income exceeds Rs.25,00,000.00
|
Rs. 3,84,000.00 plus 30 percent of the amount by which the total income exceeds Rs.25,00,000.00
|
30%
|
- TAX RATE FOR WOMEN BELOW AGE OF 65 YEARS AT ANY TIME DURING THE FINANCIAL YEAR
|
(1). Where the total income does not exceed Rs. 1,90,000.00
|
NIL
|
NIL
|
|
(2). Where the total income exceeds Rs. 1,60,000.00 but does not exceed Rs. 10,00,000.00
|
10 % of the amount by which the total income exceeds Rs. 1,90,000.00
|
10%
|
|
(3). Where the total income exceeds Rs.10,00,000.00 but does not exceed Rs.25,00,000.00
|
Rs . 81,000.00 Plus 20 Percent of the amount by which the total income exceeds Rs. 10,00,000.00
|
20%
|
|
(4). Where the total income exceeds Rs.25,00,000.00
|
Rs. 3,81,000.00 plus 30 percent of the amount by which the total income exceeds Rs.25,00,000.00
|
30%
|
- IN CASE OF SENIOR CITIZEN
|
(1). Where the total income does not exceed Rs. 2,40,000.00
|
NIL
|
NIL
|
|
(2). Where the total income exceeds Rs. 2,40,000.00 but does not exceed Rs. 10,00,000.00
|
10 % of the amount by which the total income exceeds Rs. 2,40,000.00
|
10%
|
|
(3). Where the total income exceeds Rs.10,00,000.00 but does not exceed Rs.25,00,000.00
|
Rs . 76,000.00 Plus 20 Percent of the amount by which the total income exceeds Rs. 10,00,000.00
|
20%
|
|
(4). Where the total income exceeds Rs.25,00,000.00
|
Rs. 3,76,000.00 plus 30 percent of the amount by which the total income exceeds Rs.25,00,000.00
|
30%
|
2. GOOD BYE TO ASSESSMENT YEAR
The concept previous year and assessment year is creating the confusion in the mind of general assesses since long time so in the New direct tax code there is a Good-bye to concept of Assessment year:-
4.16 Under the 1961 Act, the income earned in a year is taxed in the next year. The year in which income is earned is termed as 'previous year' and the following year in which it is charged to tax is termed as 'assessment year'. For example if a person earns any income during the year beginning on 1 April 2006 and ending on 31 March 2007, then 2006-2007 will be the previous year and the income shall be assessed to tax in assessment year 2007-2008. The use of the two expressions has caused confusion in both compliance and administration. In order to simplify the provisions, the separate concepts of 'previous year' and 'assessment year' will be replaced by a unified concept of 'financial year'. The existing concept of assessment year will be done away with. Under the Code, all rights and obligations of the taxpayer and the tax administration will be with reference to the 'financial year'. This change will not change the existing system of deduction of tax at source and payment of advance tax in the year of earning of income and payment of self-assessment tax in the following year before filing of tax return. This proposal will simplify the existing provisions.
3. TAX AUDIT PROVISIONS IN NEW DIRECT TAX CODE
There was a curicity in the minds of CAs about the new provision of Tax audit in the New direct tax code let us see what is it ?
SECTION 84. Every person, who is required to keep and maintain books of accounts under section 83 shall get his accounts for the financial year audited if,-
(a) in a case where the person is carrying on any profession, the gross receipts of the profession exceed ten lakh rupeesin the financial year; and
(b) in a case where the person is carrying on any business, the total turnover or gross receipts, as the case may be, of the business exceed forty lakh rupees in the financial year.
(2) The audit of the accounts referred to in sub-section (1) shall be performed by an accountant and the report of audit obtained before the due date.
(3) The report of audit referred to in sub-section (2) shall be obtained in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.
(4) The provisions of sub-section (1) shall not apply to the business where the income there from is determined under Rule 1 of Table of the Fourteenth Schedule.
(5) A person shall be deemed to have complied with the provisions of sub-section (1), if the person (a) gets the accounts of his business audited as required by, or under, any other law before the due date; and (b) obtains by the due date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under subsection (3).
4. PRESUMPTIVE TAXATION
PRESEMPTIVE TAXATION UNDER THE NEW DIRECT TAX CODE
The provisions of presumptive taxation are given in the Fourteenth schedule of the DTC and I have compiled some of these provision for the benefit of the readers :- CA SUDHIR HALAKHANDI
|
S.NO.
|
NATURE OF BUSINESS
|
AMOUNT OF INCOME
|
CONDITIONS
|
|
1.
|
The Business of Plying , hiring or Leasing :-
(a).HEAVY GOODS VEHICLE
(b). LIGHT GOODS VEHICLE
|
Rs. 5000.00 PM for each vehicle.
Rs. 4500.00 PM for each vehicle
|
The Number of Heavy Goods vehicles owned by the assessee should not be more than 10.
The Number of Light Goods vehicles should not be more than 10.
|
|
2.
|
Any Business (Not profession-profession is excluded) Except business of Plying , hiring or leasing of Heavy and light Goods vehicle as mentioned in serial No.1 above
|
8% of total turnover or gross receipts.
|
The total turnover or gross receipts should be more than Rs. 1 crore.
|
|
3.
|
Business of Central Government Approved civil construction in connection with a turnkey power project
|
10% of the amount paid or payable to the assessee or to any person on his behalf in or out side India.
|
The assessee is a foreign company.
|
|
4.
|
Erection, testing or commissioning of plant and machinery with respect to a central Government approved turnkey power project.
|
10% of the amount paid or payable to the assessee or to any person on his behalf in or out side India.
|
The assessee is a foreign company.
|
|
5.
|
Business of providing services or facilities in connection with prospecting for or extraction or production of, mineral oil.
|
10% of the amount paid or payable to the assessee or to any person on his behalf in or out side India for services provided in India plus amount received or deemed to be received in India for services provided out side India.
|
The Assessee is a non resident.
|
|
6.
|
Business of supplying pant and Machinery on hire used, or to be used , in connection with prospecting for or extraction or production of, mineral oil.
|
10% of the amount paid or payable to the assessee or to any person on his behalf in or out side India for supplying pant and Machinery on hire used, or to be used in connection with prospecting for or extraction or production of, mineral oil in India plus amount received or deemed to be received in India for supplying pant and Machinery on hire used, or to be used in connection with prospecting for or extraction or production of, mineral oil out side India.
|
The Assessee is a non resident.
|
|
7.
|
Business of operation of ships (incl. an arrangement such as slot charter, space charter or joint charter).
|
7.5% of transportation charges on account of the carriage of passengers, live- stock, mail or goods.
|
The assessee is a Non resident.
|
|
8.
|
Business of operation air crafts (incl. an arrangement such as slot charter, space charter or joint charter).
|
5% of transportation charges on account of the carriage of passengers, live- stock, mail or goods.
|
The assessee is a Non resident.
|
The provisions of this section shall not apply to
(a) The business referred to in column 2 of the Table in rule (1) if,-
(i) the assessee keeps and maintains all the books of account and other documents referred to in section 85 in respect of the business regardless of anything to the contrary contained in that section;
(ii) the assessee gets his accounts audited and obtains a report of such audit as required under section 86 in respect of the business regardless of anything to the contrary contained in that section;
(iii) the accounts are correct and complete to the satisfaction of the Assessing Officer;
(iv) the income can be properly deduced from the accounts; and (v) the assessee produces the books of accounts and other documents before the Assessing Officer, as and when called for;
(b) any income which is derived from any special source.
5. SAVINGS BASED DEDUCTION
The limit mentioned is Rs. 3 Lakhs and please the system of taxing the will be based on EET – so the ghost of EET is alive once again
SEE THE DETIALS IN DISCUSSION PAPER REGARDING SAVINGS.
12..4 Tax incentives for savings have been rationalized so as to encourage net savings. Accordingly , in line with the best international practice in this regard, the Code proposes to introduce the ‘Exempt-Exempt-Taxation’ (EET) method of taxation of savings. Under this method, the contributions are exempt from tax (this represents the first 'E' under the EET method), the accumulation/accretions are exempt (free from any tax incidence) till such time as they remain invested (this represents the second ‘E’ under the EET method) and all withdrawals at any time are subject to tax at the applicable personal marginal rate of tax (this represents the ‘T’ under the EET method).
12.5 Based on the aforesaid EET principle, the Code provides for deduction in respect of contributions (both by the employee and the employer) to any account maintained with any permitted savings intermediary, during the financial year. This account will be required to be maintained with any permitted savings intermediary in accordance with the scheme framed and prescribed by the Central Government in this behalf. The permitted savings intermediaries will be approved provident funds, approved superannuation funds, life insurer and New Pension System Trust. The accretions to the deposits will remain untaxed till such time as they are allowed to accumulate in the account.
12.6 Any withdrawal made, or amount received, under whatever circumstances, from this account will be included in the income of the assessee under the head 'income from residuary sources', in the year in which the withdrawal is made or the amount is received. Accordingly, it will be subject to tax at the appropriate personal marginal rate.
12.7 Further, the Code also provides that the withdrawal of any amount of accumulated balance as on the 31st day of March, 2011 in the account of the individual in the Government Provident Fund (GPF), Public Provident Fund (PPF), the recognised provident funds (RPFs) and the Employees Provident Fund (EPF) under the Employees Provident Fund and Miscellaneous Act will not be subject to tax. In other words, only new contributions on or after the commencement of this Code will be subject to the EET method of taxation.
12.8 The permitted savings intermediaries would be required to be approved by the Pension Fund Regulatory and Development Authority (PFRDA). These intermediaries will, in turn, invest the amounts deposited with them in government securities, term deposits of banks, unit-linked insurance plans, annuity plans, bonds and securities of public sector companies, banks and financial institutions, bonds of other companies enjoying prescribed investment grade rating, equity linked schemes of mutual funds, debt oriented mutual funds, equity and debt instruments. The choice of instruments will, in some schemes, be with the investor and in some others with the trustees of the schemes. The pattern of investment by the latter will be as prescribed.
12.9 Further, the rollover of any amount received, or withdrawn, from one account with the permitted savings intermediary to any other account with the same or any other permitted savings intermediary will not be treated as withdrawal. Hence, such rollover will not be subject to tax.
12.10 The Government will also design a system of central record keeping by an independent agency which will serve as a depository of all information relating to investment and withdrawal from the various accounts maintained by the assessee with the permitted savings intermediaries.
12.11 An individual or HUF will also be allowed deduction foramount paid towards tuition fees for children.
12.12 The aggregate amount of deduction for payment into the account maintained with any permitted savings intermediary and for the amounts referred to in Para 12.11 above, shall not exceed rupees three hundred thousand.
I will share more with you friends , the study is going on .
Thanks
CA SUDHIR HALAKHANDI
CAclubindia
