Taxation

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about taxation 2011 direct and indirect

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Taxation

  1. 1. Project work Taxation cct
  2. 2. Indirect tax <ul><li>The term  indirect tax  has more than one meaning. </li></ul><ul><li>In the colloquial sense, an indirect tax (such as  sales tax , a specific tax [a tax per unit],  value added tax  (VAT), or  goods and services tax  (GST)) is a  tax  collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). The intermediary later files a tax return and forwards the tax proceeds to  government  with the return. In this sense, the term indirect tax is contrasted with a direct tax which is collected directly by government from the persons (legal or natural) on which it is imposed. Some commentators have argued that &quot;a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be.&quot; </li></ul><ul><li>An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products.Examples would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately the manufacturer transfers the burden of this duty to the buyer of the car in form of a higher price. Thus, an indirect tax is such which can be shifted or passed on. The degree to which the burden of a tax is shifted determines whether a tax is primarily direct or primarily indirect. This is a function of the relative  elasticity  of the supply and demand of the goods or services being taxed. Under this definition, even income taxes may be indirect. </li></ul><ul><li>The term indirect tax has a different meaning for U.S. constitutional law purposes: see  direct tax  and  excise . </li></ul>
  3. 3. Direct tax <ul><li>The term  direct tax  generally means a tax paid directly to the government by the persons on whom it is imposed. </li></ul><ul><li>in the general sense, a direct tax is one paid  directly  to the government by the persons ( juristic  or  natural ) on whom it is imposed (often accompanied by a tax return filed by the taxpayer). Examples include some  income taxes , some  corporate taxes , and  transfer taxes  such as estate (inheritance) tax and gift tax. In this sense, a direct tax is contrasted with an indirect tax  or &quot;collected&quot; tax (such as  sales tax  or  value added tax  (VAT)); a &quot;collected&quot; tax is one which is collected by intermediaries who turn over the proceeds to the government and file the related tax return. Some commentators have argued that &quot;a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be.&quot; </li></ul><ul><li>An 18th century writing about the tax explained: </li></ul>
  4. 4. <ul><li>“ The power of direct taxation applies to every individual, as congress under this government is expressly vested with the authority of laying a capitation or poll-tax upon every person to any amount. This is a tax that, however oppressive in its nature, and unequal in its operation, is certain as to its produce and simple in it collection; it cannot be evaded like the objects of imposts or excise, and will be paid, because all that a man hath will he give for his head. This tax is so congenial to the nature of despotism, that it has ever been a favorite under such governments. Some of those who were in the late general convention from this state, have long labored to introduce a poll-tax among us.The power of direct taxation will further apply to every individual, as congress may tax land, cattle, trades, occupations, &c. to any amount, and every object of internal taxation is of that nature, that however oppressive, the people will have but this alternative, either to pay the tax, or let their property be taken for all resistance will be vain. The standing army and select militia would enforce the collection. </li></ul>
  5. 5. Direct & Indirect Taxes 2011 <ul><li>Maintains tax exemption at Rs 1.60 lakh income a year </li></ul><ul><li>10% tax on income of Rs 1.6-10 lakh </li></ul><ul><li>20% on income over Rs 10 lakh up to Rs 25 lakh </li></ul><ul><li>30% on income beyond Rs 25 lakh </li></ul><ul><li>All direct taxes including FBT and income tax would be brought under one code. </li></ul><ul><li>Corporate Tax rate to be 25% against 30 per cent </li></ul><ul><li>Wealth Tax to be levied on wealth over Rs 50 crore </li></ul><ul><li>Abolition of Securities Transaction Tax </li></ul><ul><li>Re-introduction of long-term capital gains tax </li></ul><ul><li>Raising of tax deduction on savings to Rs 3 lakh </li></ul><ul><li>Retirement benefits be exempted from tax, only if saved in Retirement Benefits Account. </li></ul><ul><li>Budget 2011 should bring about clarity on taxability for lease transactions with respect to the consideration received on such transactions and it should be clarified that only the lease rent is liable to the service tax and not the lease premium. </li></ul><ul><li>It is expected that the Central Tax rate could be reduced to 1% from the existing rate of 2%, prior to the introduction of the already delayed GST. </li></ul>
  6. 6. Direct & Indirect Taxes 2010 <ul><li>Limits for Taxable Income : Current slab of Rs.1.6 lakhs for taxable income may be increase to Rs.2.5 lakhs for men </li></ul><ul><li>Increase in Gratuity Limit : The gratuity limit at the time of retirement may be increased to Rs.10 lakhs form the current Rs.3.5 lakhs </li></ul><ul><li>Decrease in Tax Rates Itself : Highest tax slab will be reduced to 25% only from 30% </li></ul><ul><li>Increase in Self Assessment Slab : Self assessment slab is currently at Rs.40 lakhs for professionals and business people. It will be increased to Rs.1 crore </li></ul><ul><li>To implement Direct Tax Code from April 1, 2011 </li></ul><ul><li>Likely roll-back in tax cuts on excise duties </li></ul><ul><li>Govt must look at reducing corporate tax rates </li></ul><ul><li>Must look for clearer tax reforms in 2011 </li></ul><ul><li>No impact on Marico since products are tax exempt </li></ul><ul><li>Widening of Tax net to include base not taxed earlier </li></ul><ul><li>To ensure tax evasion gets more difficult & expensive </li></ul><ul><li>Short-term revenue loss must not hold up tax reforms </li></ul><ul><li>Reforms needed in property, tax and import procedures </li></ul><ul><li>Tax benefits for companies which source from SMEs </li></ul><ul><li>States presently tax ATF at varying rates, going up to 16% </li></ul><ul><li>Allow power finance companies to float tax free bonds </li></ul><ul><li>Increase the income tax slab to drive consumption </li></ul><ul><li>Increase tax holiday period from 5 years to 10 years </li></ul><ul><li>Make LTC tax free every year vs for 2 years in block </li></ul><ul><li>Bring STPIs on par with SEZs on tax benefits </li></ul><ul><li>Exempt infra cos from 15% dividend distribution tax </li></ul><ul><li>Give a tax holiday to city gas distribution networks </li></ul><ul><li>Exempt power companies from 15% distribution tax </li></ul><ul><li>Allow power companies to isssue tax-free bonds </li></ul>
  7. 7. Service tax <ul><li>Service tax  is a part of Central Excise in  India .It is a  tax  levied on  services provided  in  India , except the State of  Jammu and Kashmir . The responsibility of collecting the tax lies with the  Central Board of Excise and Customs (CBEC). </li></ul><ul><li>The  Finance Minister of India ,  Pranab Mukherjee  in his  Budget  speech has indicated the government's intent of merging all taxes like Service Tax, Excise and VAT into a common Goods and Service Tax by the year 2011. To achieve this objective, the rate of Central Excise and Service Tax will be progressively altered and brought to a common rate.[ citation needed ] In budget presented for 2008-2009 It was announced that all Small service providers whose turnover does not exceed Rs10 lakhs need not pay service tax. </li></ul><ul><li>Circular No. 127/9/2010-ST, dated 16-8-2010 regarding Service tax on commercial training and coaching - Whether ‘donation' is ‘consideration'. A representation has been received seeking clarification whether donations and grants-in-aid received from different sources by a charitable Foundation imparting free livelihood training to the poor and marginalized youth, will be treated as ‘consideration' received for such training and subjected to service tax under ‘commercial training or coaching service'. 2. The matter has been examined. The important point here is regarding the presence or absence of a link between ‘consideration' and taxable service. It is a settled legal position that unless the link or nexus between the amount and the taxable activity can be established, the amount cannot be subjected to service tax. Donation or grant-in-aid is not specifically meant for a person receiving such training or to the specific activity, but is in general meant for the charitable cause championed by the registered Foundation. Between the provider of donation/grant and the trainee there is no relationship other than universal humanitarian interest. In such a situation, service tax is not leviable, since the donation or grant-in-aid is not linked to specific trainee or training. </li></ul>
  8. 8. Service tax forms <ul><li>FORM ST- 1 Application form for Registration  </li></ul><ul><li>  FORM ST- 2 Proforma of Registration Certificate   </li></ul><ul><li>FORM ST-3A Memorandum of Provisional Deposit </li></ul><ul><li>FORM ST- 4 Form of Appeal to Commissioner (Appeals) </li></ul><ul><li>FORM ST- 5 Form of Appeal to Tribunal </li></ul><ul><li>FORM ST- 6 Form of Memo of cross objection to Tribuanl </li></ul><ul><li>FORM ST- 7 Form of Application to Tibunal by Department  </li></ul><ul><li>FORM TR- 6 Challan Form for deposit of service tax </li></ul><ul><li>FORM AAR ( ST) Application for Advance Ruling </li></ul><ul><li>FORM ASTR -1 Application for filing a claim of rebate of service tax and cess paid on taxable services exported </li></ul><ul><li>FORM ASTR -2 Application for filing a claim of rebate of duty paid on inputs, service tax and cess paid on input services </li></ul><ul><li>  Vakalatnama For appointing a lawyer for hearing in court For appointing a lawyer for hearing in court </li></ul>
  9. 9. <ul><li>m ST – 1 </li></ul><ul><li>[Application form for   registration under Section 69 of the Finance Act, 1994 (32 of 1994)] </li></ul><ul><li>  </li></ul><ul><li>( Please tick appropriate box below ) </li></ul><ul><li>   </li></ul><ul><li>  </li></ul><ul><li>                         New Registration </li></ul><ul><li>   </li></ul><ul><li>  </li></ul><ul><li>                         Amendments  to information declared by the existing Registrant. </li></ul><ul><li>Registration Number in case of existing Registrant seeking Amendment  _____________ </li></ul><ul><li>1.         (a) Name of applicant   </li></ul><ul><li>                      (b) Address of the applicant  </li></ul><ul><li>                                                             2.              Details of Permanent Account Number (PAN) of the applicant </li></ul><ul><li>(a) Whether PAN has been issued by the Income Tax Department     </li></ul><ul><li>        Yes  No </li></ul><ul><li>(b)   If Yes, the PAN                  </li></ul><ul><li>                                                                     </li></ul><ul><li>(c)  Name of the applicant (as appearing in PAN)                            </li></ul><ul><li>           3.         (a) Constitution of applicant (Tick as applicable) </li></ul><ul><li>(i)      Proprietorship </li></ul><ul><li>  (ii)    Partnership                                                            </li></ul><ul><li>  (iii)   Registered Public Limited Company </li></ul><ul><li>  (iv)  Registered Private Limited Company         </li></ul><ul><li>  (v)    Registered Trust </li></ul><ul><li>  (vi)  Society/Cooperative society </li></ul><ul><li>  (vii) Others </li></ul><ul><li>             (b) Name, Address and Phone Number of Proprietor/Partner/Director </li></ul><ul><li>            (i)  Name </li></ul><ul><li>                      (ii)  Address </li></ul><ul><li>                                                                        (iii) Phone Number </li></ul><ul><li>           4.         Category of Registrant ( Please tick appropriate box ) </li></ul><ul><li>            (a)  Person liable to pay service tax </li></ul><ul><li>   </li></ul><ul><li>(i)  Service provider </li></ul><ul><li>   </li></ul><ul><li>(ii) Service recipient </li></ul><ul><li>   </li></ul><ul><li>(b)  Other person/class of persons </li></ul><ul><li>(i)  Input service distributor </li></ul><ul><li>   </li></ul><ul><li>             (ii) Any provider of taxable service whose aggregate value of taxable service in a financial year exceeds three lakh rupees  </li></ul>
  10. 10. <ul><li>5.(a)Nature of Registration  (Tick as applicable) </li></ul><ul><li>(i)  Registration of a single premise </li></ul><ul><li>   </li></ul><ul><li>(ii) Centralized Registration for more than one premises </li></ul><ul><li>(b) Address of Premises for which Registration is sought </li></ul><ul><li>            (i)  Name of Premises / Building </li></ul><ul><li>                       (ii) Flat/Door/Block No.                </li></ul><ul><li>                       (iii)   Road/Street/Lane  </li></ul><ul><li>                                 (iv) Village / Area / Lane  </li></ul><ul><li>                                 (v)  Block/Taluk/Sub-Division/Town  </li></ul><ul><li>                       (vi) Post office  </li></ul><ul><li>                       (vii)City/District  </li></ul><ul><li>                       (viii)State/Union Territory  </li></ul><ul><li>                       (ix) PIN  </li></ul><ul><li>                       (x) Telephone Nos.:   </li></ul><ul><li>                       (xi) Fax No.  </li></ul><ul><li>                       (xii)E-mail Address  </li></ul><ul><li>                        </li></ul><ul><li>(c) In case of application for Centralized Registration, furnish address of all the premises from where taxable services are provided or intended to be provided (FORMAT AS PER 5(b) ABOVE) </li></ul><ul><li>  </li></ul><ul><li>(d) In case of application for Input Service Distributor, furnish address of all the premises to which credit of input services is distributed or intended to be distributed (FORMAT AS PER 5(b) ABOVE) </li></ul><ul><li>  </li></ul><ul><li>6.                  Address of the premises or office paying service tax under centralised billing or centralised accounting under sub-rule (2) and (3A) of rule 4 of the Service Tax Rules, 1994. </li></ul><ul><li>      Address </li></ul><ul><li>  7.         Description of taxable services provided or to be provided by applicant </li></ul><ul><li>S.No.Description of serviceRelevant clause of section 65 of the Finance Act, 1994, to be indicated, if possible(1)(2)(3)   8.         Name, Designation and Address of the Authorized Signatory /Signatories : </li></ul><ul><li>                                                 DECLARATION </li></ul><ul><li>I, ___________________________________________hereby declare that the information given in this application form is true, correct and complete in every respect and that I am authorized to sign on behalf of the Registrant. </li></ul><ul><li>(a) For new Registration:    </li></ul><ul><li>I would like to receive the Registration Certificate by mail / by hand/ E-MAIL </li></ul><ul><li>(b) For amendments to information pertaining to existing Registrant: </li></ul><ul><li>Date from which amendments are made: _______________ </li></ul><ul><li>(Original existing Registration Certificate is required to be enclosed) </li></ul><ul><li>                                                (Signature of the applicant/authorized person with stamp) </li></ul><ul><li>Date: </li></ul><ul><li>Place: </li></ul><ul><li>  </li></ul><ul><li>ACKNOWLEDGEMENT </li></ul><ul><li>(To be given in the event Registration Certificate is not issued at the time of receipt of application for Registration) </li></ul><ul><li>I hereby acknowledge the receipt of your Application Form </li></ul><ul><li>(a)   For new Registration </li></ul><ul><li>(As desired, the New Registration Certificate will be sent by E-MAIL/ mail/handed over to you in person on______________) </li></ul><ul><li>      (b) For amendments to information in existing Registration </li></ul><ul><li>            (I hereby acknowledge receipt of original existing Registration Certificate) </li></ul><ul><li>  </li></ul><ul><li>                                                            Signature of the Officer of Central Excise                                                                         (with Name & Official Seal) </li></ul><ul><li>Date: </li></ul>
  11. 11. CLUBBING OF INCOME <ul><li>Generally an assessee is taxed in respect of his own income. But sometimes in </li></ul><ul><li>some exceptional circumstances this basic principle is deviated and the assessee </li></ul><ul><li>may be taxed in respect of income which legally belongs to somebody else. </li></ul><ul><li>Earlier the taxpayers made an attempt to reduce their tax liability by transferring </li></ul><ul><li>their assets in favour of their family members or by arranging their sources of </li></ul><ul><li>income in such a way that tax incidence falls on others, whereas benefits of </li></ul><ul><li>income is derived by them . So to counteract such practices of tax avoidance, </li></ul><ul><li>necessary provisions have been incorporated in sections 60 to 64 of the Income </li></ul><ul><li>Tax Act Hence, a person is liable to pay tax on his own income as well as income </li></ul><ul><li>belonging to others on fulfillment of certain conditions. </li></ul><ul><li>Inclusion of other’s Incomes in the income of the assessee is called Clubbing of </li></ul><ul><li>Income and the income which is so included is called Deemed Income. It is as per </li></ul><ul><li>the provisions contained in Sections 60 to 64 of the Income Tax Act. </li></ul>
  12. 12. Cases of clubbing <ul><li>Under the following circumstances, the income of other person is included in the </li></ul><ul><li>income of the assessee. We will be discussing each one of them in the pages to </li></ul><ul><li>follow. </li></ul><ul><li>10.2.1 TRANSFER OF INCOME WITHOUT TRANSFER </li></ul><ul><li>OF ASSET (SEC. 60) </li></ul><ul><li>Section 60 is applicable if the following conditions are satisfied: </li></ul><ul><li>• The taxpayer owns an asset </li></ul><ul><li>• The ownership of asset is not transferred by him. </li></ul><ul><li>• The income from the asset is transferred to any person under a settlement, </li></ul><ul><li>or agreement. </li></ul><ul><li>If the above conditions are satisfied, the income from the asset would be taxable </li></ul><ul><li>in the hands of the transferor </li></ul><ul><li>Illustration 10.1: Amitabh Bachan owns Debentures worth Rs 1,000,000 of ABC </li></ul><ul><li>Ltd., (annual) interest being Rs. 100,000. On April 1, 2005, he transfers interest </li></ul><ul><li>income to Sharukh Khan, his friend without transferring the ownership of these </li></ul><ul><li>debentures. Although during 2005-06, interest of Rs. 100,000 is received by </li></ul><ul><li>Sharukh Khan, it is taxable in the hands of Amitabh Bachan as per Section 60. </li></ul><ul><li>__________________________________________________________________ </li></ul><ul><li>10.2.2 REVOCABLE TRANSFER OF ASSETS (SEC 61) </li></ul><ul><li>‘ Revocable transfer’ means the transferor of asset assumes a right to re-acquire </li></ul><ul><li>asset or income from such an asset, either whole or in parts at any time in future, </li></ul><ul><li>during the lifetime of transferee. It also includes a transfer which gives a right to 144 </li></ul><ul><li>re-assume power of the income from asset or asset during the lifetime of </li></ul><ul><li>transferee. </li></ul><ul><li>If the following conditions are satisfied section 61 will become applicable. </li></ul><ul><li>• An asset is transferred under a “revocable transfer”, </li></ul><ul><li>• The transfer for this purpose includes any settlement, or agreement </li></ul><ul><li>Then any income from such an asset is taxable in the hands of the transferor and </li></ul><ul><li>not the transferee (owner) </li></ul>
  13. 13. <ul><li>10.2.3 INCOME OF SPOUSE </li></ul><ul><li>The following incomes of the spouse of an individual shall be included in the total </li></ul><ul><li>income of the individual: </li></ul><ul><li>____________________________________________ </li></ul><ul><li>10.2.3A REMUNERATION FROM A CONCERN IN </li></ul><ul><li>WHICH SPOUSE HAS SUBSTANTIAL INTEREST [SEC </li></ul><ul><li>64 (1) (ii)] </li></ul><ul><li>Concern – Concern could be any form of business or professional concern. It </li></ul><ul><li>could be a sole proprietor, partnership, company, etc. </li></ul><ul><li>Substantial interest - An individual is deemed to have substantial interest, if he </li></ul><ul><li>/she (individually or along with his relatives) beneficially holds equity shares </li></ul><ul><li>carrying not less than 20 per cent voting power in the case of a company or is </li></ul><ul><li>entitled to not less than 20 percent of the profits in the case of a concern other </li></ul><ul><li>than a company at any time during the previous year. </li></ul><ul><li>If the following conditions are fulfilled this section becomes applicable. </li></ul><ul><li>• If spouse of an individual gets any salary, commission, fees etc </li></ul><ul><li>(remuneration) from a concern </li></ul><ul><li>• The individual has a substantial interest in such a concern </li></ul><ul><li>• The remuneration paid to the spouse is not due to technical or </li></ul><ul><li>professional knowledge of the spouse. </li></ul><ul><li>Then such salary, commission, fees, etc shall be considered as income of the </li></ul><ul><li>individual and not of the spouse. </li></ul><ul><li>Note:-In the case of irrevocable transfer of asset , the income from such assets will be </li></ul><ul><li>deemed to be the income of the transferee (To whom the asset has been transferred), </li></ul><ul><li>provided that the transfer is not for the benefit of the spouse of the transferor. </li></ul><ul><li>___________________________________________________________145 </li></ul><ul><li>Illustration 10.2 - X has a substantial interest in A Ltd. and Mrs. X is employed </li></ul><ul><li>by A Ltd. without any technical or professional qualification to justify the </li></ul><ul><li>remuneration. In this case, salary income of Mrs. X shall be taxable in the hands </li></ul><ul><li>of X. </li></ul><ul><li>When both husband and wife have substantial interest </li></ul><ul><li>Where both the husband and wife have a substantial interest in a concern and </li></ul><ul><li>both are in receipt of the remuneration from such concern both the remunerations </li></ul><ul><li>will be included in the total income of husband or wife whose total income, </li></ul><ul><li>excluding such remuneration, is greater </li></ul>
  14. 14. <ul><li>_ </li></ul><ul><li>10.3.3B INCOME FROM ASSETS TRANSFERRED TO </li></ul><ul><li>SPOUSE [SEC. 64(1) (IV)] </li></ul><ul><li>Income from assets transferred to spouse becomes taxable under provisions of </li></ul><ul><li>section 64 (1) (iv) as per following conditions:- </li></ul><ul><li>• The taxpayer is an individual </li></ul><ul><li>• He/she has transferred an asset (other than a house property) </li></ul><ul><li>• The asset is transferred to his/her spouse </li></ul><ul><li>• The asset is transferred without adequate consideration. Moreover there is </li></ul><ul><li>no agreement to live apart. </li></ul><ul><li>If the above conditions are satisfied, any income from such asset shall be deemed </li></ul><ul><li>to be the income of the taxpayer who has transferred the asset. </li></ul><ul><li>Illustration 10.3 - X transfers 500 debentures of IFCI to his wife without </li></ul><ul><li>adequate consideration. Interest income on these debentures will be included in </li></ul><ul><li>the income of X. </li></ul><ul><li>When Section 64(i) (iv) is not applicable </li></ul><ul><li>On this basis of the aforesaid discussion and judicial pronouncements, section 64 </li></ul><ul><li>is not applicable in the following cases: </li></ul><ul><li>* If assets are transferred before marriage. </li></ul><ul><li>* If assets are transferred for adequate consideration. </li></ul><ul><li>* If assets are transferred in connection with an agreement to live apart. </li></ul><ul><li>* If on the date of accrual of income, transferee is not spouse of the </li></ul><ul><li>transferor. 146 </li></ul><ul><li>* If property is acquired by the spouse out of pin money (i.e. an allowance </li></ul><ul><li>given to </li></ul><ul><li>the wife by her husband for her dress and usual household expenses). </li></ul><ul><li>In the aforesaid five cases, income arising from the transferred asset cannot be </li></ul><ul><li>clubbed in the hands of the transferor </li></ul>
  15. 15. <ul><li>10.2.4 INCOME FROM ASSETS TRANSFERRED TO </li></ul><ul><li>SON’S WIFE [SEC. 64 (1) (VI)] </li></ul><ul><li>Income from assets transferred to son’s wife attract the provisions of section 64 </li></ul><ul><li>(1) (vi) as per conditions below:- </li></ul><ul><li>• The taxpayer is an individual. </li></ul><ul><li>• He/she has transferred an asset after May 31, 1973. </li></ul><ul><li>• The asset is transferred to son’s wife. </li></ul><ul><li>• The asset is transferred without adequate consideration. </li></ul><ul><li>In the case of such individuals, the income from the asset is included in the </li></ul><ul><li>income of the taxpayer who has transferred the asset. </li></ul><ul><li>___________________________________________ </li></ul><ul><li>10.2.5 INCOME FROM ASSETS TRANSFERRED TO A </li></ul><ul><li>PERSON FOR THE BENEFIT OF SPOUSE [SEC. 64 (1) </li></ul><ul><li>(VII)] 147 </li></ul><ul><li>Income from assets transferred to a person for the benefit of spouse attract the </li></ul><ul><li>provisions of section 64 (1) (vii) on clubbing of income. If: </li></ul><ul><li>• The taxpayer is an individual. </li></ul><ul><li>• He/she has transferred an asset to a person or an association of persons. </li></ul><ul><li>• Asset is transferred for the benefit of spouse. </li></ul><ul><li>• The transfer of asset is without adequate consideration. </li></ul><ul><li>In case of such individuals income from such an asset is taxable in the hands of </li></ul><ul><li>the taxpayer who has transferred the asset. </li></ul><ul><li>____________________________________________ </li></ul><ul><li>10.2.6 INCOME FROM ASSETS TRANSFERRED TO A </li></ul><ul><li>PERSON FOR THE BENEFIT OF SON’S WIFE [SEC. 64 </li></ul><ul><li>(1) (VIII)] </li></ul><ul><li>Income from assets transferred to a person for the benefit of son’s wife attract the </li></ul><ul><li>provisions of section 64 (1) (vii) on clubbing of income. If, </li></ul><ul><li>• The taxpayer is an individual. </li></ul><ul><li>• He/she has transferred an asset after May 31, 1973. </li></ul><ul><li>• The asset is transferred to any person or an association of persons. </li></ul><ul><li>• The asset is transferred for the benefit of son’s wife. </li></ul><ul><li>• The asset is transferred without adequate consideration. </li></ul><ul><li>In case of such individual, the income from the asset is included in the income of </li></ul><ul><li>the person who has transferred the asset. </li></ul><ul><li>____________________________________________ </li></ul><ul><li>10.2.7 INCOME OF MINOR CHILD (SEC. 64 (1A) </li></ul><ul><li>All income which arises or accrues to the minor child shall be clubbed in the </li></ul><ul><li>income of his parent (Sec. 64(1A), whose total income (excluding Minor’s </li></ul><ul><li>income) is greater. However, in case parents are separated, the income of minor </li></ul><ul><li>will be included in the income of that parent who maintains the minor child in the </li></ul><ul><li>relevant previous year. </li></ul><ul><li>Exemption to parent [Sec10 (32)] </li></ul><ul><li>An individual shall be entitled to exemption of Rs. 1,500 per annum(p.a.) in </li></ul><ul><li>respect of each minor child if the income of such minor as included under section </li></ul><ul><li>64 (1A) exceeds that amount. However if the income of any minor child is less 148 </li></ul><ul><li>than Rs. 1,500 p.a. the aforesaid exemption shall be restricted to the income so </li></ul><ul><li>included in the total income of the individual </li></ul>
  16. 16. <ul><li>When Section 64(1A) is not applicable </li></ul><ul><li>In case of income of minor child from following sources, the income of minor </li></ul><ul><li>child is not clubbed with the income of his parent. </li></ul><ul><li>• Income of minor child on account of any manual work. </li></ul><ul><li>• Income of minor child on account of any activity involving application of </li></ul><ul><li>his skill, talent or specialized knowledge and experience. </li></ul><ul><li>• Income of minor child (from all sources) suffering from any disability of </li></ul><ul><li>the nature specified under section 80U </li></ul>
  17. 17. Set off and carry forward losses under income tax act 78 <ul><li>Income tax  is a tax which is charged on the total  income  of the assessee and the income is computed head wise. The total of all head becomes the total income of the assessee. So sometimes in some heads there could be the loss, so it is reasonably set off to the other heads as to compute real income of the assessee and calculate the tax liability of the assessee. But the aggregation of income is a bit complex as it seems to. It’s not purely a mathematical calculation.  Income  taxact  contains certain provisions which do not allow certain losses at all, but allow some of them in particular manner and thus make the aggregation a legal concept. The complete process of aggregation of income is as follows. </li></ul><ul><li>Set off losses of current previous year: - under section 70 of income  tax loss  of one source, to be set off against the income of another source, falling under the same head. If there are several  sources of income  falling under any head of income, the loss from one source of income may be set off against the income from another source, falling under the same head of income. There are some exception to this rule like speculation loss, long term  capital gain , losses from head income from other sources, income from gambling and losses relating to exempted source. </li></ul><ul><li>Set off to be allowed against  taxable income  in a manner most beneficial to the assessee: - no particular mode of set off has been prescribed in income  tax law . So the assessee is entitled to claim a set off most beneficial to him [circular no 26 dated 7-7-1955]. </li></ul><ul><li>Inter head set off is mandatory: - loss of one source has to be set off against the profits of another source subject to the prescribed in this respect [CIT vs. Milling Trading Co. P ltd. (1995) 211 ITR 630(SC)]. </li></ul><ul><li>Partial set off not permissible: - intra head set off has to be done in full. Partial set off is not permissible. </li></ul><ul><li>Carry forward and set off losses: - losses which can’t be set off under the same head and thereafter under inter-head adjustments in accordance with law are carried forward and set off in accordance with following provisions </li></ul>
  18. 18. <ul><li>Business loss: - under section 72 of income tax the business losses can be carried forward for 8 assessments year immediately following the year for which was the loss occurs. The condition is continuity of the business, carry forward and set off to be allowed only in respect of taxable source, carry forward permissible to the same assessee. </li></ul><ul><li>Loss by inheritance: - where an individual succeeds the business of his predecessor by inheritance, the successor is entitled to carry forward the loss incurred by the predecessor. However, the total period of carry forward can’t exceed 8 assessment years. </li></ul><ul><li>Carried forward business losses can be set off against speculative profits. Unabsorbed business loss can be set off to a newly started business. Carried forward business loss can not be set off against the income under any other head for example salary, house property, capital gain, other sources etc. </li></ul><ul><li>Scope of business profits for setting off business losses: - carried forward business loss may be set-off against the profits earned from any business activity though such activity might have been classified under some other head of income [CIT vs. cocanarda radhaswami bank ltd. (1965) 57 ITR 306(SC). Similarly where shares of foreign company are held as stock in trade in trade, the carried forward business loss can be set off against dividend received on such shares, through the income of dividend is computed under other sources. </li></ul><ul><li>Rent earned by exploitation of business assets is also a business income for the purpose of set-off. If business income of the wife or minor child is included in the total income of the assessee under clubbing provisions. </li></ul><ul><li>Speculation loss: - According to section 73 of income tax act, law has applied different yard sticks for speculatio </li></ul>
  19. 19. Budget 2011 <ul><li>Direct Tax Code bill to be passed in 2011-12 </li></ul><ul><li>Tax rates - income limits extended for first slab for male and senior citizen: </li></ul><ul><ul><li>In case of Male </li></ul></ul><ul><ul><ul><li>Up to 1.8 Lakhs => 0% </li></ul></ul></ul><ul><ul><ul><li>Up to 5 Lakhs => 10% </li></ul></ul></ul><ul><ul><ul><li>Up to 8 Lakhs => 20% </li></ul></ul></ul><ul><ul><ul><li>Above 8 Lakhs => 30% </li></ul></ul></ul><ul><ul><li>In case of Female </li></ul></ul><ul><ul><ul><li>Up to 1.9 Lakhs => 0% </li></ul></ul></ul><ul><ul><ul><li>Up to 5 Lakhs => 10% </li></ul></ul></ul><ul><ul><ul><li>Up to 8 Lakhs => 20% </li></ul></ul></ul><ul><ul><ul><li>Above 8 Lakhs => 30% </li></ul></ul></ul><ul><ul><li>In case of Senior Citizens  ( Age reduced from 65 to 60 years) </li></ul></ul><ul><ul><ul><li>Up to 2.5 Lakhs => 0% </li></ul></ul></ul><ul><ul><ul><li>Up to 5 Lakhs => 10% </li></ul></ul></ul><ul><ul><ul><li>Up to 8 Lakhs => 20% </li></ul></ul></ul><ul><ul><ul><li>Above 8 Lakhs => 30% </li></ul></ul></ul><ul><ul><li>NEW: In case of Higher Senior Citizens  (Aged above 80 years) </li></ul></ul><ul><ul><ul><li>Up to 5 Lakhs => 0% </li></ul></ul></ul><ul><ul><ul><li>Up to 8 Lakhs => 20% </li></ul></ul></ul><ul><ul><ul><li>Above 8 Lakhs => 30% </li></ul></ul></ul><ul><li>Companies => Surcharge rate reduced from 7.5 to 5% </li></ul><ul><li>Minimum Alternate Tax rate changed from 18 to 18.5% </li></ul><ul><li>Salaried (Only) class shall be exempted from ITR filing (Sec: 139 (1C)) </li></ul>
  20. 20. <ul><li>Govt expects to earn Rs 4000 cr additional revenue from service tax. </li></ul><ul><li>Air-conditioned hospitals with more than 25 beds come under service tax regime. </li></ul><ul><li>Drive green: Duty on hybrid and electric cars, and batteries imported for them, reduced. </li></ul><ul><li>Ship owners can import spare parts duty-free. </li></ul><ul><li>Diapers and sanitary napkins to be cheaper: excise tax reduced from 10 to 1 per cent. </li></ul><ul><li>More services to will come into service tax net. </li></ul><ul><li>Stainless steel exempted from excise customs duty. </li></ul><ul><li>Pranab offers no new tax exemption limits for women. </li></ul><ul><li>Central excise duty rate remains unchanged at 10 per cent. </li></ul><ul><li>Air conditioners to become cheaper. </li></ul><ul><li>Service tax remains at 10 per cent. </li></ul><ul><li>Direct tax sops to cost exchequer Rs 11,500 cr. </li></ul><ul><li>Pranab turns to indirect tax provisions. </li></ul><ul><li>Pranab pegs plan expenditure at Rs 4.14 lakh crore. </li></ul><ul><li>Surcharge brought down from 7.5 per cent to 5 per cent for companies. </li></ul><ul><li>Personal tax exemption limit raised to Rs 1.8 lakh. </li></ul><ul><li>Senior citizen benefits to begin at 60 instead of 65. </li></ul><ul><li>Tax exemption limit raised from Rs 1.6 lakh to Rs 1.8 lakh. </li></ul><ul><li>Moderate and simple taxes are best, says Pranab. </li></ul><ul><li>Pranab sees fiscal deficit at 4.6 per cent. </li></ul><ul><li>  Non-tax revenue now at Rs 1,25,000 cr. </li></ul><ul><li>Indian rupee symbol will be introduced on keyboards in Unicode in keeping with 'international standards'. </li></ul><ul><li>Opposition jeers as Pranab talks of curbing corruption. </li></ul><ul><li>Pranab plans to roll out e-stamping in all states in three years. Only six states have introduced e-stamping so far. </li></ul><ul><li>Computerisation of commercial tax collection is helping taxpayers everywhere, says Pranab. </li></ul><ul><li>Pranab allocates Rs 8,000 cr for J&K, doubles grants to N-E states. </li></ul><ul><li>Tax governance has improved, says Pranab. </li></ul><ul><li>Aadhar unique ID scheme will help deliver social security better, says Pranab. </li></ul><ul><li>Easier service tax refunds expected to benefit SEZs. </li></ul><ul><li>Literacy mission to get Rs 21,000 cr. </li></ul><ul><li>Pranab plans five-point strategy to rein in black money. </li></ul><ul><li>Environment minister Jairam Ramesh applauds Pranab's announcement on 'environmental remedial projects'. </li></ul><ul><li>Metro projects will get support for speedy completion. </li></ul><ul><li>  Pranab announces Rs 5,000 cr for National Skill Development Council </li></ul>
  21. 21. <ul><li>Rural citizens to be encouraged to open bank accounts. </li></ul><ul><li>Rs 1 crore international award to mark Tagore's 150th birth anniversary. </li></ul><ul><li>Pranab announces grants for institutions across India. </li></ul><ul><li>40 lakh SC/ST students to benefit from new scholarships. </li></ul><ul><li>Secondary education to be vocationalised to improve employability of young people. </li></ul><ul><li>Govt plans to spend Rs 1.6 lakh crore on social projects, up by 17 per cent. </li></ul><ul><li>Anganwadi workers, NREGA workers will get higher wages. </li></ul><ul><li>Production of electric cars set to get a boost. </li></ul><ul><li>Food Security Bill being finalised, says Pranab. </li></ul><ul><li>National Mission for Hybrid Vehicles coming soon. </li></ul><ul><li>Rashtriya Krishi Vikas Yojana allocation to go up from Rs 6755 crore to Rs 7860 crore. </li></ul><ul><li>India has joined global drive for tax transparency, says Pranab. </li></ul><ul><li>Pranab talking about black money, and ways to curb it. </li></ul><ul><li>Mega power projects will be set up this year. </li></ul><ul><li>Pranab plans to encourage organic farming. </li></ul><ul><li>Divestment target for 2012 is Rs 40,000 cr. </li></ul><ul><li>Public-private partnership a success in infrastructure building, says Pranab. </li></ul><ul><li>'State governments should help in bringing down inflation.' </li></ul><ul><li>Inflation has affected supply chain, says Pranab. </li></ul><ul><li>Law minister Veerappa Moily sitting behind Pranab, listening to budget speech with attention. </li></ul><ul><li>1 per cent interest subvention on home loans of up to Rs 15 lakh. </li></ul><ul><li>Subvention for farmers who promptly repay their loans raised from 2 to 3 per cent. </li></ul><ul><li>Banks will step up direct lending to farmers, says Pranab. </li></ul><ul><li>Speaker Meira Kumar watches Pranab speaking with a beatific smile. </li></ul><ul><li>Rural infrastructure development fund corpus will be raised by Rs 180 billion. </li></ul><ul><li>Support for production of nutritious cereals like bajra, jowar, ragi. </li></ul><ul><li>Rs 300 cr to encourage vegetable production. </li></ul><ul><li>New companies bill to be introduced this session. </li></ul><ul><li>Pranab to set aside Rs 2000 cr for warehousing. </li></ul><ul><li>Private investments coming into agriculture. This has to be encouraged, says Pranab. </li></ul><ul><li>Rs 100 cr equity fund for microfinance companies. </li></ul><ul><li>Pranab announces more loans for minorities. </li></ul><ul><li>Capital infusion of Rs 20,157 cr in public sector banks. </li></ul><ul><li>RBI will issue new banking guidelines. </li></ul><ul><li>Support for women and self-help groups with a Rs 500 cr fund. </li></ul><ul><li>FII cap on coporate bonds raised by 20 billion dollars. </li></ul><ul><li>Foreign institutional investors can invest in mutual funds. </li></ul><ul><li>Pranab announces cash subsidies for urea and kerosene. </li></ul><ul><li>Kerosene and fertiliser subsidies will be 'directly transferred' to beneficiaries. </li></ul><ul><li>Fuel and foodgrains are subsidised, but much of the subsidy doesn't reach beneficiaries, laments Pranab. </li></ul><ul><li>RBI will step in to ease inflation. </li></ul><ul><li>Current account deficit is a concern.' </li></ul><ul><li>High prices: Traders making a killing, suggests Pranab. </li></ul><ul><li>Gap between wholesale and retail prices too wide to be acceptable, says Pranab. </li></ul><ul><li>Pranab invokes Indra, god of rains, and Lakshmi, goddess of wealth. </li></ul><ul><li>GDP at 8.6% </li></ul><ul><li>Agriculture growth at 5.4% </li></ul>
  22. 22. Highlights of Finance Budget 201011 <ul><li>National Social Security Fund created for workers in unorganised sector with allocation of Rs.1,000 crore </li></ul><ul><li>Government to give Rs.1,000 for each National Pension Scheme account opened by workers in the unorganised sector </li></ul><ul><li>Exclusive skill development programme for the textile sector </li></ul><ul><li>Fifty percent hike in allocation for schemes for women and child development </li></ul><ul><li>Rs.4,500 crore allocated for ministry of social justice and empowerment, a hike of 80 percent </li></ul><ul><li>Rs.2,600 crore allocated for ministry of minorities affairs </li></ul><ul><li>Rs.1,900 crore for Unique Identification Authority of India </li></ul><ul><li>Rs.147,344 crore allocated for defence </li></ul><ul><li>2,000 youth to be recruited in central paramilitary forces </li></ul><ul><li>Draft Food Security Bill prepared and will be put in the public domain </li></ul><ul><li>Allocation on primary education raised from Rs.26,800 crore to Rs.31,300 crore </li></ul><ul><li>Banking facilities to be provided to all habitations with a population of 2,000 and more </li></ul><ul><li>Rs.66,100 crore allocated for rural development in 2010-11; Rs.40,100 crore for National Rural Employment Scheme; RS.48,000 crore for Bharat Nirman </li></ul><ul><li>Rs.1,270 crore allocated for Rajiv Awas Yojna for slum dwellers, up from Rs.150 crore, an increase of 700 percent with the aim of creating a slum free India. </li></ul><ul><li>Forty-six percent of plan allocations in 2010-11 will be for infrastructure development </li></ul><ul><li>Coal Regulatory Authority to be set up to benchmark standards of performance </li></ul><ul><li>Allocation for new and renewable energy sector increased 61 percent from Rs.620 crore to Rs.1,000 crore in2010-11 </li></ul><ul><li>National Clean Energy Fund to be established </li></ul><ul><li>Rs.200 crore allocated as special package for Goa to prevent erosion and increase green cover </li></ul><ul><li>Government committed to growth of SEZs </li></ul><ul><li>Four-pronged strategy for growth of agricultural sector </li></ul><ul><li>Rs.200 crore to be provided in 2010-11 for climate-resilient agricultural initiative </li></ul><ul><li>Involvement of private sector in grain storage to continue for another two years </li></ul><ul><li>In view of drought and floods, debt repayment period extended to June 2010 </li></ul><ul><li>Five more mega food processing projects in addition to 10 existing ones </li></ul><ul><li>FDI flows in April-December 2009 $20.9 billion </li></ul><ul><li>FDI policy to be made more user-friendly with one comprehensive documen </li></ul>
  23. 23. <ul><li>Apex level financial stability council to be set up for banking sector </li></ul><ul><li>Indian Banking Association to give additional licences to private players </li></ul><ul><li>Provision for further capital for regional rural banks </li></ul><ul><li>Roadmap for reducing public debt in six months </li></ul><ul><li>Implementation of direct tax code from April 2011 </li></ul><ul><li>Government actively engaged in finalising structure of general sales tax regime; hopes to implement it from April 2011 </li></ul><ul><li>New fertiliser policy from April 2010; will lead to improved productively and more income for farmers </li></ul><ul><li>Economy stabilised in first quarter of 2009-10; strong rebound in second quarter; overall growth at 7.2 and could be higher when Q3 and Q4 are taken into account </li></ul><ul><li>Export figures for January encouraging </li></ul><ul><li>Hope to breach 10 percent growth mark in not too distant future </li></ul><ul><li>Government set in motion steps to bring down food inflation </li></ul><ul><li>Need to review stimulus package; need to make growth more broad-based </li></ul><ul><li>India has weathered global economic crisis well; Indian economy in far better position than it was a year ago. In 2009 Indian economy faced grave uncertainty; delay in southwest monsoon had undermined agricultural production </li></ul><ul><li>First challenge now is to quickly revert to 9 percent growth and then aim for double digit growth; need to make recovery more broad based </li></ul><ul><li>Second challenge is to make growth more inclusive; have to strengthen food security </li></ul><ul><li>Third challenge is to overcome weakness in government's public delivery mechanism; a long way to go in this </li></ul>

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