Tax Masters

02/02/2017

23/06/2015

New ITR Form ITR-1, ITR-2, ITR-2A & ITR-4S released by Income tax department for filing a return of A.Y 2015-16

23/05/2015

Income Tax – Exemption to Educational Institution
QUEEN'S EDUCATIONAL SOCIETY Vs. COMMISSIONER OF INCOME TAX
Income Tax Act, 1961, Section 10(23C) (vi) – Income Tax Rules, 1961, Rule 2CA – Educational Institution – Income Tax Assessment – Grant of Exemption – Withdrawal of exemption – Judgments of the Punjab and Haryana which quashed the orders passed by the Chief Commissioner of Income Tax withdrawing the exemption granted under Section 10(23C)(iv) of the Act approved – Consequently, Revenue’s appeals from the Punjab and Haryana High Court’s judgment dated 29.1.2010 and the judgments following it liable to be dismissed – Reiterated that the correct tests which have been culled out in the three Supreme Court judgments, namely, Surat Art Silk Cloth, Aditanar, and American Hotel and Lodging, would all apply to determine whether an educational institution exists solely for educational purposes and not for purposes of profit – In addition it is added that the 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down – Further, it is of great importance that the activities of such institutions be looked at carefully – If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn – Made clear that revenue is at liberty to pass fresh orders if such necessity is felt after taking into consideration the various provisions of law contained in Section 10(23C) read with Section 11 of the Income Tax Act.

20/05/2015

Finance Bill is now an Act, date for levy of 14% service tax to be notified
President Parana Mukherjee has given his assent to the Finance Bill, 2015. It means various provisions such as the new taxation norms and merger of the Forward Market Commission with the Securities and Exchange Board of India, besides others, will now be part of an Act and will be implemented accordingly.
Service Tax
However, assent by the President with effect from May 14 does not mean that one can start levying service tax at the rate of 14 per cent immediately. The Finance Ministry will notify the date for implementation of the new rate. New date could be July 1 and till the new date is notified, service tax will continue to be levied at the rate of 12.36 per cent (inclusive of education cess).
Service tax is levied on all services, except those on the negative list. Over half of the services that attract service tax also have abatement which means tax will be levied only on a portion of the total value. For example, air-conditioned restaurants charge service tax on 40 per cent of the bill amount, which is 4.944 per cent. This will change to 5.6 per cent from the date notified for higher service tax rate.
Finance Minister Arun Jaitley in his Budget speech announced hiking of the rate of service tax to 14 per cent from 12 per cent plus education cesses. It was also said the ‘Education Cess’ and ‘Secondary and Higher Education Cess,’ will be subsumed in the revised rate of service tax. It means there will not be any cess over and above 14 per cent. But there is no change in the abatement rules. This means the percentage of value to be taxed will remain the same, but the effective rate of tax will go up.
Income Tax Benefit
With the enactment of the Finance Bill, various tax benefit provisions such as a) increase in the limit of deduction in respect of health insurance premium to Rs. 25,000 from Rs. 15,000 (for senior citizens the limit will stand increased to Rs. 30,000 from the existing Rs. 20,000); b) additional deduction of Rs. 25,000 for the differently-abled; and c) Rs. 50,000 investment in the New Pension Scheme (over and above the Rs. 1.50-lakh deduction available under Section 80C of the Income Tax Act), beside others, will have legal backing. All these will be deemed to have come into force on the 1st day of April, 2015.
Merger of FMC with SEBI
The enactment also formalises the way forward for the merger of the commodity market regulator, FMC, with the capital market regulator, SEBI. Now, the Government will notify various dates for implementation of various processes of the merger. It is expected that the entire merger process will be completed in 6-12 months
Under the new mechanism, a commodity derivative broker will get three months’ time to get a registration from the SEBI. Currently, they are not required to register with FMC. SEBI also intends to put in place a stricter regulatory regime for commodity derivative participants. The current system of separate registration by a financial intermediary for commodity trading will continue for at least the “next few years.”
Post-merger, all the recognised associations (read commodity exchanges) providing trading facility in derivatives trading will be deemed to be recognised stock exchanges under the Securities Contracts (Regulation) Act, 1956. These exchanges will be given enough time to become eligible to start trading in equity or currency derivatives. However, being eligible does not mean one can lay claim to providing any new trading platform. It will be a discretionary power of SEBI to give approval for starting anything new. However, post-merger, SEBI will not regulate spot trading as well as the warehousing corporation.

19/05/2015

Service tax will change from 1st June 2014 and will be 14%.
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13/05/2015

Why GST is a crucial litmus test for the government

As GST Constitutional Amendment Bill, which will facilitate rolling out of the country's biggest indirect tax reform since 1947, is coming up for discussion in the Rajya Sabha this week (along with Land Bill which is being presented in the Lok Sabha), the Narendra Modi government is facing perhaps the biggest litmus test over since it came into power. While clearing of the GST Bill at the Upper House will help the government list it as one of its major achievements during its one-year tenure, failure to get the Bill pass the strong facade of the Upper House would effectively dampen the government's efforts to usher in its much-talked about reforms agenda and paint itself as a growth-oriented regime.

The problem is that as a constitutional amendment bill, GST needs support of two-thirds of the Upper House for which the government will need the support of the Opposition parties. While it has the support of parties such as Trinamool Congress, Samajwadi Party and the Biju Janata Dal, whether the Congress—which has 68 members in the 244-member Upper House—will pull the rug from under its feet is a query that is troubling the government. The Congress has already asked for resignation of transport minister Nitin Gadkari following a CAG report alleging financial irregularities by Purti Group, in which Gadkari owns a stake. It also insists that the Bill must be sent to a select committee for further examination.

The government hopes that despite its reservations against the Bill in the current form, the Congress will at least abstain from voting, helping it pass through the hurdle at the Upper House. Besides, the acquittal of former Tamil Nadu chief minister J Jayalalithaa by a special bench of the Karnataka High Court on Monday may encourage AIADMK (it has 11 members in the Upper House), which has not been hitherto in favour of the Bill, to change stance and provide the government a breather by supporting the Bill at the Upper House.

The GST, which was recommended by the Kelkar Committee appointed by the NDA Government in 2003, has been debated for more than 12 years. Recommendations related to GST formed part of Budget Speech of UPA government in 2006. After a series of debates and scrutiny by many panels, in March 2011, the UPA introduced the 115th amendment to the Constitution to make GST a reality. After several rounds of consultations, the Bill was cleared by Lok Sabha, the Lower House, last week.

GST, in essence, is a value added tax to be levied on both goods and services, except for a list of exempted goods and services, at both the centre and state level. It will replace the plethora of indirect taxes including service tax, central excise duty, additional excise and customs duties, central surcharges and cesses, state VAT, state sales tax, entertainment tax not levied by local bodies, luxury tax, taxes on lottery, betting and gambling, tax on advertisements and state cesses and surcharges related to supply of goods and services, thus transforming the labyrinthine patchwork of taxes to a lean, streamlined process.

Besides simplifying tax system, enhancing compliance and boost tax revenues for both the centre and states, GST will reduce tax outflow in the hands of the consumers.

It will also reduce paperwork needed to remitting taxes and simplify accounting complexities for businesses. A simple taxation system is also expected to make several sectors, including manufacturing and infrastructure, more competitive.

In its present form it will comprise central and state GSTs which will be legislated, levied and administered separately.

Initially certain goods including crude petroleum, diesel, petrol, natural gas, aviation turbine fuel and alcohol for human consumption will be kept out of the GST's purview, as sharing tax over these goods has been a point of contention between the centre and states. States will have the power to levy taxes on these items, except in the ca

06/05/2015

Income Tax Changes made in Finance Bill,2015 by Lok Sabha -

Finance Bill, 2015 was passed in Lok Sabha on 30.04.2015 with certain amendments via notice of amendment dated 30.04.2015.

some amendment in the provisions related to direct tax

1. Mat Exemption to Foreign Companies:

In the original bill it was provided to only FII. Therefore, the Finance Bill, 2015 as passed by Lok Sabha proposes to provide relief from MAT to foreign companies as well. Capital gains from transfer of securities, interest, royalty and FTS accruing or arising to foreign company has been proposed to be excluded from chargeability of MAT if tax payable on such income is less than 18.5%. Further, expenditures, if any, debited to the profit loss account, corresponding to such income shall also be added back to the book profit for the purpose of computation of MAT.

2. MAT exemption on notional gain arising on transfer of share of SPV.
A new clause is proposed to be inserted to re-compute the gains from transfer of said units (as referred to in point (c) above) which shall be added back for computation of MAT. It is proposed that the amount of gain from transfer of said units shall be computed by taking into account the cost of shares exchanged with units or the carrying amount of the shares at time of exchange where such shares are carried at a value other than the cost through profit & loss account.
Accordingly, notional loss arising from transfer of asset or notional loss arising from change in carrying amount of said units and actual loss from transfer of said units shall be added back to the book profit for the purpose of computation of MAT.

3. Deduction under Section 80D in case of individual.

The Finance Bill, 2015 as presented originally omitted to propose amendment to clause (a) and clause (b) of sub-section (2) of Section 80D to enable assessee to claim deduction of Rs. 25,000 instead of Rs. 15,000. However, sub-section (4) of Section 80D was amended to allow deduction of Rs. 30,000 instead of Rs. 25,000 if individual or his family member or any of his parent is a senior citizen or very senior citizen.

4. Residential Status of a Company.

The Finance Bill, 2015 as presented earlier proposed to amend Section 6 to provide that a company shall be said to be resident in India if its place of effective management, at any time in that year, is in India. In other words, the concept of Control or Management (wholly in India) is replaced with Place of Effective Management (at any time in India).
Thus, the Finance Bill, 2015 as passed by the Lok Sabha has proposed to omit the words ‘at any time’ which shall have effect that a company shall be deemed to be resident in India if its place of effective management is in India.

5. Filing of return is mandatory if assessee has foreign assets
The Finance Bill, 2015 as passed by the Lok Sabha has proposed mandatory filing of return by a person, being a resident other than not ordinarily resident in India, who at any time during the previous year:
(a) holds, as a beneficial owner or otherwise, any asset (including financial interest in any entity) located outside India or has signing authority in any account located outside India; or
(b) is a beneficiary of any asset (including any financial interest in any entity) located outside India.
However, filing of return shall not be mandatory under this proviso for an individual, being a beneficiary of any asset (including any financial interest in any entity) located outside India, if income arising from such an asset is includible in the income of the person who is beneficial owner of such an asset.

6. Subsidies are no longer capital receipts.

To end the dispute, it is proposed to amend the definition of ‘Income’ under Section 2(24) in the Finance Bill, 2015 as passed by the Lok Sabha.
A new sub-clause (xviii) is proposed to be inserted in Section 2(24) to provide that assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assesse [other than one considered under Explanation 10 to Section 43(1)] would be included in assessee’s income.
Thus, any subsidy which is not reduced from the actual cost of the asset in view of provisions of Explanation 10 to Section 43(1) shall be taxable as revenue receipts of the assessee.

7. Bad debts could be claimed without writing off debt in books of account.

In order to remove this anomaly, it is proposed in the Finance Bill, 2015 as passed by the Lok Sabha that bad-debts could be claimed without writing off in books of account if the amount of debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof becomes irrecoverable or of an earlier previous year on the basis of income computation and disclosure standard notified under section 145(2) without recording the same in the accounts.
Thus, Section 36(vii), once again, proposed to be amended to get back to original position (i.e., the position that stood till Assessment Year 1988-89) but to a limited extent

8. Interest on loan taken for acquisition of an asset could only be capitalized till the asset is first put to use.

The Finance Bill, 2015 as passed by Lok Sabha proposes to remove this distinction in allowability of interest in case of existing business and in case of extension of existing business. It proposes to remove the words “for extension of existing business or profession” from proviso to Section 36(1)(iii). Thus, it is proposed that interest on borrowings used for acquisition of asset till the asset is put to use shall not be allowed as deduction in any case.
9. Determination of period of holding and cost of acquisition in case of shares acquired on redemption of GDRs.

It is proposed that cost of acquisition of shares acquired by a non-resident on redemption of GDRs shall be the price of such shares as prevailing on any recognized stock exchange on the date on which a request for redemption is made by the assessee.

10. Additional Depreciation and Investment Allowance allowed to industries set-up in Bihar and West Bengal.

The Finance Bill, 2015 as presented on February 28, 2015 proposed to allow higher additional depreciation at the rate of 35% (instead of 20%) in respect of the actual cost of new machinery or plant acquired and installed by a manufacturing undertaking or enterprise set-up in the notified backward area of the State of Andhra Pradesh and the State of Telangana.
The Finance Bill, 2015 as passed by the Lok Sabha proposes to extend the benefit of additional depreciation and investment allowance to the manufacturing undertaking or enterprise set-up in the notified backward area of State of Bihar and State of West Bengal as well.

04/05/2015

It’s that time of year when most of you leave behind your worries and take off on a well-deserved break. Alongside, you should also carefully plan to make the most of your LTA.

17/04/2015

ITR Forms No. 1,2 and 4S for FY 2014-15 and A/Y 2015-16 notified.

Details of Big Changes in New ITR

ITR-1

1) Introduction of furnishing Aadhar Card Number in ROI. Which will be used for EVC system.

Introduction of EVC for verification of return of income filed as an option to send ITR-V to CPC, Bangalore.

2) Details of all bank accounts with Bank name, IFSC Code, Name of Joint Holder, if any, Account number, Account balance as on 31.03.2015 mandatory to be provided. Even those accounts which are closed during the year.

ITR-2

1) Introduction of furnishing Aadhar Card Number in ROI. Which will be used for EVC system introduced as mentioned above.

2) Details of Foreign Travel made if any (For resident and nonresident both) includes, Passport No, Issued at, name of country, number of times traveled and expenditure

3) Details of utilization of amount deposited in capital gain account scheme for years preceding to last two assessment years. Particulars asked include year of utilization, amount utilized, amount underutilized lying idle in capital gain account scheme till the date of filing of return of income.

4) In case of LTCG & STCG not chargeable to tax to Non-resident on account of DTAA benefit, It is required to furnish Country name, Article of DTAA, TRC obtained or not?,

5) For Non-resident, Income from other sources, If any income chargeable to tax at special rate provided in DTAA, It is now required to provide details of Name of Country, Relevant article of DTAA, Rate of Tax, Whether TRC obtained or not?, Corresponding rate of tax under income tax act.

6) Details of all bank accounts with Bank name, IFSC Code, Name of Joint Holder, if any, Account number, Account balance as on 31.03.2015 mandatory to be provided. Even those accounts which are closed during the year.

7) In schedule FA- Foreign assets disclosure, Following details added.

a) Foreign Bank accounts details: It is now further require to furnish Account number, account opening date, Interest/income accrued from such account, If any along with details of head of income and schedule under which such income is shown, if offered to tax in India.

b) In similar manner, details of income from Financial interest in any entity outside India along with details of income offered to tax in ITR-2 from such income.

c) Similar disclosure requirement is also required for Immovable property outside India, capital asset held outside India, trust held outside India

ITR-4S

1) Introduction of furnishing Aadhar Card Number in ROI. Which will be used for EVC system introduced as mentioned above.

2) Details of all bank accounts with Bank name, IFSC Code, Name of Joint Holder, if any, Account number, Account balance as on 31.03.2015 mandatory to be provided. Even those accounts which are closed during the year.

28/02/2015

Budget Updates 2015 - Transport allowance to be increased from 800 to 1600