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Monday, April 18, 2011

GIFT TAX IN INDIA

Gift tax in India is synchronized by the Gift Tax Act which was constituted on April 1, 1958. As per the Gift Act 1958, all gifts in excess of ` 25,000, in the form of cash, draft, check or others, received from one who doesn't have blood relations with the recipient, were taxable. However, with effect from October 1, 1998, gift tax got demolished and all the gifts made on or after the date were free from tax. But in 2004, the act was again revived partially. A new provision was introduced in the Income Tax Act 1961 under section 56 (2). According to it, the gifts received by any individual or Hindu Undivided Family (HUF) in excess of ` 50,000 in a year would be taxable.

According to the law, individuals can receive gifts from the following sources:
  • Relatives or Blood Relatives
  • At the time of Marriage
  • As inheritance
  • In contemplation of death
Though Gift Act 1958 was not initially applicable to Jammu & Kashmir, however the current clubbing provisions in the Income Tax Act 1961 would be applicable to gifts of movable properties in the said state as well.

Gifts Exempted from Tax

Gifts are exempted from India gift tax in the following cases:
  • The gift was given by a blood relative, irrespective of the gift value.
  • Immovable properties located outside the country.
  • Individual: is an Indian citizen, who is originally a resident of India, or
  • No-individual is resident of India during the year of gift
  • Out of balance gift by NRI (Non-Resident Indian) in his Non-resident account.
  • Foreign currency gift of convertible foreign exchange, remitted from overseas by an NRI to a resident relative.
  • Foreign exchange asset gifted by NRI to his/her relatives.
  • Special Bearer Bonds, 1991.
  • Saving certificates issued by the Central Government (notified as exempted).
  • Capital Investment Bonds up to ` 10,00,000 per year.
  • Relief Bonds gifts by an original subscriber.
  • Gifts of Certain bonds from the NRI to his/her relatives, which are subscribed in foreign currency (specified by the Central Government).
  • Gift to government or any local authority.
  • Gifts to any charitable institutions.
  • Gifts to notified temples, churches, mosques, gurudwaras and other places of worship.
  • Gift to children for educational purpose (Reasonable amount).
  • Gifts by an employer to its employees in the form of bonus, gratuity or pension.
  • Gifts under will.
  • Gifts in contemplation of death.

Thursday, April 14, 2011

Now you can claim Income Tax deduction for fines Paid to RTO


Now you can claim income-tax deduction for fines paid to the RTO that are compensatory in nature. In a recent order, Income-tax Appellate Tribunal, (ITAT) has held that fines paid to RTO is an allowable expenditure under the Income-tax Act.
According to the provisions of the Income-tax Act, if a person is penalised for violating a law, the penalty paid for the offence is not allowable as expenditure for the purpose of computing his income under the Income-Tax Act. The rationale behind this principle is that the income-tax law should not be seen supporting or encouraging people to violate the laws of the land

Friday, February 11, 2011

Health Insurance Policy switching to another Insurance co Possible w.e.f 01.07.2011


Generally speaking, health insurance policies have specific exclusions for pre-existing diseases for a specified period of cover during the initial years. However, it has been observed that in cases where policyholder wishes to switch from one insurer to other, they do not gain any credit for the period of cover with previous insurer. Consequently the insured is tied to the insurer which is detrimental to competition. This places in policyholder at a distinct disadvantage.
2. In order to address this, the Authority is satisfied that the following guidelines on the portability of health insurance policies shall be allowed in the manner prescribed in this guideline. This circular is issued in exercise of powers conferred upon the Authority under section 14(1) of the IRDA Act, 1999 to protect the interests of the policyholders and to regulate, promote and ensure the orderly growth of the insurance industry.
3. All insurers issuing health insurance policies shall allow for credit gained by the insured for pre-existing condition(s) in terms of waiting period when he/she switches from one insurer to another or from one plan to another, provided the previous policy has been maintained without break.
For example if under a previous policy, the condition was excluded from coverage for two years and under a new plan with a different insurer the exclusion period for the same condition is three years, the new health insurance policy can only exclude the condition from coverage for one extra year.
4. This credit (in terms of waiting period) would be limited to the sum assured (including bonus) under the previous policy.
5. The insurers shall strictly comply with Regulation 4(6) of IRDA (Protection of policyholders’ interests) Regulations, 2002 in accepting the proposals when the policyholder is switching from one insurer to other.
6. If the policy results into discontinuance because of any delay by the insurer in accepting the proposal, the insurer shall not treat the policy as discontinuance and shall allow portability.
7. Insurers shall clearly draw the attention of the policyholder in the policy contract and the promotional material like prospectus, sales literature etc. that:
i. all health insurance policies are portable;
ii. policyholder should initiate action to approach another insurer, to take advantage of portability, well before the renewal date to avoid any break in the policy coverage due to delays in acceptance of the proposal by the other insurer.
8. All insurers are hereby directed that the entire database including the claim details of the policies, where the policyholders has opted for portability, shall be shared with their counterparts, if requested by the counterpart within seven working days of such request by the counterpart.
9. All applications for the portability shall be acknowledged by the insurers within three working days.
10. This shall be applicable for all existing contracts and new contracts with effect from 1st July, 2011.

Thursday, February 10, 2011

S. 271 (1) (c) penalty ca S. 271 (1) (c) penalty cannot be imposed even for making unsustainable claims |


The assessee claimed deduction u/s 36 (1) (iii) for interest paid on loan taken for purchase of shares. The AO disallowed the interest u/s 14A and levied penalty u/s 271 (1) (c) on the ground that the claim was unsustainable. The penalty was deleted by the appellate authorities. On appeal by the department to the Supreme Court, HELD dismissing the appeal:

(i) S. 271 (1) (c) applies where the assessee “has concealed the particulars of his income or furnished inaccurate particulars of such income”. The present was not a case of concealment of the income. As regards the furnishing of inaccurate particulars, no information given in the Return was found to be incorrect or inaccurate. The words “inaccurate particulars” mean that the details supplied in the Return are not accurate, not exact or correct, not according to truth or erroneous. In the absence of a finding by the AO that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271(1)(c).



(ii) The argument of the revenue that “submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income” is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature.

(iii) The law laid down in Dilip Shroff 291 ITR 519 (SC) as to the meanings of the words “conceal” and “inaccurate” continues to be good law because what was overruled in Dharmendra Textile Processors 306 ITR 277 (SC) was only that part in Dilip Shroff where it was held that mens rea was an essential requirement for penalty u/s 271 (1)(c).

Monday, February 7, 2011

I-T dept introduces new number for taxpayers for tax filing



Taxpayers will now have to procure a 'new number' for filing returns and making any communication with the Income Tax department.

The unique Document identification number (DIN), on the lines of numbers like PAN and TAN, will be quoted on "every" income tax-related communication, including returns to be filed next year for the financial year 2010-11.

According to the new guidelines brought out by the Central Board of Direct Taxes (CBDT), the DIN will be mandatory "in respect of every notice, order, letter or any correspondence" with the department, by the taxpayers.

The 'Aykar Sampark Kendras' will hand out the DIN from this month.

Assesses will not be put to any trouble, as the numbers will be generated and allotted by the department itself.

I-T officials will also be allotted the numbers in order to streamline the process, the official said, adding, the number has to be produced thereon for every activity with the department.

Taxpayers and tax collectors are currently required to quote Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) among others when returns are filed with the department.

According to section 282B of the Income Tax Act that deals with DIN, if the document sent to the tax authority does not bear this unique computer-generated number then "such document, letter or any correspondence shall be treated as invalid and shall be deemed never to have been received."

DIN is aimed at bringing more transparency in tax administration as the whole exercise involves a number of documents and proformas.

Apart from regular filing of taxes, a taxpayer deals with the department for various other financial services, which DIN will help to ease.

Wednesday, January 26, 2011

Revised Return - Concealment of Income u/s 271(1)(c)

Revised Return - Concealment of Income u/s 271(1)(c)

ITR(Trib) Vol 7 Part 4 dated 24-01-2011

ITR : Volume 330 : Part 4 Issue dated 24-01-2011

INCOME TAX REPORTS (ITR) HIGHLIGHTS

ISSUE DATED 24-1-2011
Volume 330 Part 4



SUPREME COURT JUDGMENTS


>>> MAT : Interest can be charged on tax calculated on book profits for failure to pay advance tax : Joint CIT v. Rolta India Ltd. p. 470

HIGH COURT JUDGMENTS


>>> Brought forward unabsorbed loss and deficiencies of earlier years to be adjusted first before granting special deduction u/ss 80-I and 80HH : Modi Nagar Paper Mills Ltd. v. Deputy CIT (All) p. 405


>>> Requirement of filing audit report along with return only wef 1-7-1995 : Failure for earlier years : Penalty cannot be imposed : S. V. Pathak and Co. v. N. C. Tewari, CIT (Bom) p. 410


>>> Additional Director competent to issue warrant of authorisation : Sunil Dua v. CIT (Delhi) p. 413


>>> Inclusion of jewellery proper where genuineness of Will not proved : Sunil Dua v. CIT (Delhi) p. 413


>>> Deposits not huge amounts : Explanation of assessee to be accepted : Sunil Dua v. CIT (Delhi) p. 413


>>> Concurrent finding by authorities that amount disclosed in audit reports, balance-sheets and regular returns of income : Finding of fact : CIT v. Modern Engineering Works (Delhi) p. 416


>>> Payee showing amount in its return and paying tax : Reassessment proceedings quashed : CIT v. Rainee Singh (Delhi) p. 417


>>> Settlement of cases : Notice u/s 142(1) based on material discovered during search operation not valid : Smt. Neeru Agarwal v. UOI (All) p. 422


>>> Mere change in sub-heading in books of account : Not entitled to make additions u/s 41 : CIT v. Auto Kashyap India P. Ltd. (Delhi) p. 435


>>> NBFC : Interest on intercorporate deposit not received for more than six months : Interest does not accrue : CIT v Vasisth Chay Vyapar Ltd. (Delhi) p. 440


>>> Receipts from freight and insurance packing charges, sales tax set off and gross service income : Ninety per cent. to be excluded from profits of business : CIT v. Dresser Rand India P. Ltd. (Bom) p. 453


>>> Interest on deposits not allowable : CIT v. Dresser Rand India P. Ltd. (Bom) p. 453


>>> Purchase of immovable property by Central Government : Valuation whether as on date of agreement with original allottee or with assignee or as on date of determination : Matter remanded : R. N. Soin and Sons P. Ltd. v. Appropriate Authority (Delhi) p. 455


>>> Interest on loans obtained by assessee to settle liability of its sister concern to retain business premises of assessee allowable : CIT v. Neelkanth Synthetics and Chemicals P. Ltd. (Bom) p. 463


>>> Tribunal finding investments not belonging to assessee but to family members as well : Finding of fact : CIT v. Chandulal Chhugani (Chhattisgarh) p. 467


>>> Assessee trust having imparting education as one of its objects entitled to registration u/s 12A : Director of I. T. v. Garden City Educational Trust (Karn) p. 480

STATUTES AND NOTIFICATIONS


>>> Rules :

Special Economic Zones (Sixth Amendment) Rules, 2010
p. 5


>>> C. B. D. T. Circulars :

Circular No. 5 of 2010 : Corrigendum
p. 5

Circular No. 8 of 2010, dated 13th December, 2010.-Income-tax deduction from salaries during the financial year 2010-11 under section 192 of the Income-tax Act, 1961
p. 22


>>> Notifications :

Income-tax Act, 1961 : Notifications under section 35(1)(ii)/(iii) : Scientific research associations
p. 19

Income-tax Act, 1961 : Notification under section 35AC(1) Expln., clause (b) : Eligible projects or schemes
p. 75

Income-tax Act, 1961 : Notification under section 80-IB(10)(a), (b) : Scheme for slum redevelopment
p. 19

Income-tax Act, 1961 : Notification under section 90 : Avoidance of double taxation and mutual administrative assistance in tax matters among Governments of SAARC Member States
p. 6

NEWS-BRIEFS


>>> I. T. Dept. to process more than 40 lakh cases to avoid refund chaos

The Income-tax Department will process more than 40 lakh refund cases before April this year.

The Department has streamlined the process as the statutory time limit to process the return and issue refund in the financial year 2009-10 is March 31 and almost 49 lakh such cases worth crores of rupees are pending with the Department.

However, a number of such refunds have been processed already.

"The Department is hopeful of dispatching all these returns by March this year. Cases where the addresses are recorded incorrect, Permanent Account Number (PAN) is wrong and incorrect particulars of bank accounts result in backlogs," a senior I-T officer said.

Many refunds will be sent back to the taxpayers through the Refund Banker Scheme, which is operational in a number of cities with the help of State Bank of India (SBI), they said.

An I-T officer said the Finance Ministry has asked the Central Board of Direct Taxes (CBDT) to expedite the process and the Board has subsequently instructed the Department to process the refunds on a "prompt" basis.
[Source : www.economictimes.com dated January 13, 2011]


>>> Prospects look good to raise the exemption limit on savings

To give some relief to common man battling rising prices, the Finance Minister is expected to raise the exemption limit on annual savings of an individual in the upcoming Budget.

The savings exemptions may be raised in the Union Budget 2011-12 from the present Rs. 1 lakh. In 2010-11, the Finance Ministry allowed an additional exemption of Rs. 20,000 for investment in long-term infrastructure bonds.

The Minister is expected to raise the Rs. 1 lakh exemption limit by another Rs. 20,000 in the Union Budget in February, a Cabinet Minister told. Besides pushing up the savings rate, this would align the current income-tax regime towards the proposed Direct Taxes Code (DTC).

"This year is going to be an year of consolidation towards DTC," a top official in the Finance Ministry had said recently. In the DTC, the Government has proposed tax exemption on annual savings of up to Rs. 1.5 lakh.

The tax exemptions for savings is received under section 80C of the Income-tax Act while the special window of Rs. 20,000 investment in infrastructure bonds is available under section 80CCF. The tax exemption for savings limit of Rs. 1 lakh when increased, will give an additional cushion to the common man who is grappling with price rise already.

"The deduction under section 80CC of Rs. 1 lakh was prescribed long back keeping in view the fact that there are very limited exemptions to deductions available to a common taxpayer. It makes a strong case to increase the level under section 80C to provide some tax relief and also increase potential for long term retiral savings," said a partner from a tax consultancy firm.
The savings of Indian households was Rs. 7,34,653 crore in 2007-08, of which over 55%, or Rs. 4,06,630 crore, is in bank deposits, according to the latest RBI figures. Bank deposits as defined by RBI, includes co-operative and non-credit societies. There has been a consistent shift in household savings away from physical assets towards financial assets.
[Source : www.financialexpress.com dated January 14, 2011]


>>> Pre-budget fears over banning fake NGOs

The demand for a ban on fake non-governmental organisations and a tax regime to identify them in the forthcoming Budget have come from none other than the NGOs themselves.

In a pre-budget interactions with Finance Minister, NGOs pleaded for reining in fake organisations, ostensibly floated for the welfare of the vulnerable sections of society.

They said any kind of tax concessions given to NGOs should be conditional on the assessment of their work.

However, for the genuine NGOs they wanted modifications in the proposed Direct Taxes Code, which is scheduled to replace the Income-tax Act from April 1, 2012.

A former SEBI Chairman who represented Jaipur Foot, said organisations asked for restructuring of DTC proposals.

Currently, NGOs registered under certain sections of the Income-tax Act get various kinds of tax concessions.

However, the Direct Taxes Code bill proposes that charitable and not-for-profit organisations (NGOs) will be allowed a basic exemption of Rs. one lakh and any income over it will be liable to 15 per cent. tax.

The Bill also proposes to tax anonymous donations for NGOs at the rate of 30 per cent. as against the rate of 15 per cent. applicable to other donations.

The 30 per cent. tax will fall on the donations above Rs. one lakh or five per cent. of total donations received by the NGO, whichever is higher.

NGOs also called for green budget that will address the issue like climate change, terming nuclear energy as false solution and coal as dirty option.

"If India as a country is serious about giving energy to all, then we need to think beyond false solutions like nuclear energy and dirty options like coal and invest in decentralized renewable energy," NGO Greenpeace said.
[Source : www.financialexpress.com dated January 16, 2011]


>>> I-T Dept. searches triggering alarm over food prices

The Income-tax Department surveyed business premises of big onion and vegetable traders in U. P., Maharashtra and few other States to detect hoarding and illegal profiteering.

IT sources said the officials of the Income-tax Department began an early morning operation of checking and obtaining the account books and ledgers of large wholesale onion traders based in Delhi and NCR.

Meanwhile, traders in Maharashtra's Nashik and adjoining onion-growing areas went on two-day strike against I-T raids and disrupted supply to traders from other States who are being forced to sell the vegetable at "below the cost price".

The Finance Minister had earlier said I-T raids in the premises of different traders have also helped in reducing onion prices.

There has been a "dip in onion prices in some States after I-T search," he had said. Food inflation has crossed over 18 per cent. for the week ended December 25 due to high rates of onion and other items.

Due to crop damage in key growing States, the country's total onion production is expected to decline by 12.5 per cent. to 10.5 million tonnes this year against 12 million tonnes in 2009-10, according to research body National Horticultural Research and Development Foundation (NHRDF).
[Source : www.economictimes.com dated January 10, 2011]


>>> Trade Union calls for changes to enhance tax exemption

Tax Amid skyrocketing prices, Central trade unions are all set to press the Finance Ministry for raising income-tax exemption limit to Rs. 3 lakh from existing Rs. 1.6 lakh in the 2011-12 Budget, in their meeting scheduled for Wednesday.

Besides this, the unions would ask to universalise and strengthen public distribution system and rationalise tax, duty and cess on petroleum products, with a view to reduce burden on people.

"We have unanimously decided that all nine central trade unions would ask the Finance Minister to enhance income-tax exemption limit to Rs. 3 lakh," All India Trade Union Congress Secretary said.

He said, "The common man is reeling under the price rise situation and would ask the Finance Minister for universalising of PDS and rationalisation of taxes on petroleum products including petrol, diesel and cooking gas."

The central trade unions, he said, would also ask the Ministry to enlarge the ambit of Employees Provident Fund (EPF) scheme by reducing threshold limit of 20 employees to 10.

At present, only those private establishments which have 20 or more employees come under this EPF scheme. Reducing the threshold limit to 10 would help covering 45-50 lakh more workers under this mandatory social security scheme, he added.

The Employees' Provident Fund Organisation's apex body Central Board of Trustees have already approved the reduction in threshold limit to 10 long back. But this move is awaiting Finance Ministry's approval.

The union members would also press for making EPFO's Employee Pension scheme more sustainable, by fixing the minimum pension at Rs. 1,000 per month. Besides this, they will also ask for restoring benefits like pension withdrawal by workers under EPS.

They would express their reservations against allowing foreign direct investment in multi-brand retail and further disinvestment of public companies. They would also ask for not allowing industrial house in banking business.
[Source : www.financialexpress.com dated January 11, 2011]