Requirement for maintaining books of account

Maintenance of accounts: [section 44AA and rule 6F]

A.In case of specified professions [Gross receipts exceeds Rs.150000…] : the followings books of accounts shall be maintained by a person carrying on the specified profession:-

i.A cash book;

ii.A journal, (in case of mercantile system of accounting);

iii.A ledger;

iv.carbon copies/ counterfoils of bills and receipts, serially numbered, issued by him, Provided that nothing in this clause shall apply in relation to sums not exceeding Rs.25;]

v.original bills and receipts issued to him [where such bills and receipts are not issued and the expenditure incurred does not exceed Rs.50, payment vouchers prepared and signed by him or adequate particulars of expenditure in the cash book]:

B.Other: the following persons shall maintain such books of account and other documents as may enable the A.O. to compute total income in accordance with the provisions of this Act:-

i.A person carrying on Specified professions, whose Gross receipts do not exceed Rs.150000 in any one of three previous years preceding to the current previous year. (in case profession is newly setup gross income is not likely to exceed in current previous year)

ii.A person carrying on other professions or business, whose Gross receipts exceed Rs.10 lakh or income from PGBP exceeds Rs.120000 in any one of three previous years preceding to the current previous year. (in case profession/ business is newly setup: likely to exceed in current previous year)

iii.A person to whom section 44AD or section 44AE or section 44AF [or section 44BB or section 44BBB], as the case may be, and he claims his income to be lower than the deemed profits under respective sections.

Note:
Ø Specified professions: legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, authorised representative and film artist

Ø Such books and documents shall be kept and maintained for a period of 6 years from the end of relevant A.Y.

Ø In case assessment reopened u/s 147 within the abovesaid period, then all the books etc shall be continue to be kept and maintained till the completing of assessment so reopened.

Penalty: A.O. or CIT (appeals) may direct to pay Rs.25000 as penalty. [section 271A]

TDS at a higher rate on all transactions not having PAN -PROVISION TO COME INTO EFFECT FROM 1ST APRIL 2010

TDS at a higher rate on all transactions not having PAN

PROVISION TO COME INTO EFFECT FROM 1ST APRIL 2010

A new provision relating to tax deduction at source (TDS) under the Income Tax Act 1961 will become applicable with effect from 1st April 2010. Tax at higher of the prescribed rate or 20% will be deducted on all transactions liable to TDS, where the Permanent Account Number (PAN) of the deductee is not available. The law will also apply to all non-residents in respect of payments / remittances liable to TDS. As per the new provisions, certificate for deduction at lower rate or no deduction shall not be given by the assessing officer under section 197, or declaration by deductee under section 197A for non-deduction of TDS on payments shall not be valid, unless the application bears PAN of the applicant / deductee.



All deductors are liable to deduct tax at the higher rate in all transactions not having PAN of the deductees on or after 1st April 2010. In order that there is no dispute regarding quoting / non-quoting of PAN or accuracy thereof, the law requires all deductees and dedutors to quote PAN of deductees in all correspondences, bills, vouchers and other documents sent to each other. All deductors are, therefore, advised to intimate their deductees to obtain and furnish their PAN so as to avoid TDS at a higher rate. All deductees, including non-residents having transactions in India liable to TDS, are advised to obtain PAN by 31st March 2010 and communicate the same to their deductors before tax is actually deducted on transactions after that date.



The procedure for obtaining PAN is simple, inexpensive and quick. Application for PAN can be filed in Form 49A to National Securities Depository Ltd. (NSDL) or Unit Trust of India Investor Services Ltd. (UTIISL) or their intermediaries. Non-residents can apply through the local embassy / consulate of India. Applications can also be filed, paid for or tracked online through the Internet on the following web-sites:-



http://incometaxindia.gov.in/

https://incometaxindiaefiling.gov.in/portal/index.jsp

http://www.tin-nsdl.com/

http://www.utitsl.co.in/

Budget 2010- Income Tax

Budget and Income Tax



The Union Budget 2010 is definitely inflationary for Aam aadmi. Middle class shall become poor class! There is no respite from continuing inflation and the budget provisions are adding fuel to the fire of inflation. India too shall be in the list of most expensive countries in the world. It may break all the records and may be on the top of such list!

Income tax provisions:

There is no change in basic exemption limit in Income Tax for individuals including women and senior citizens; but tax slabs are changed to 10% for an income in between above Rs.160000 to Rs. 500000 ; 20@ above Rs.500000 to Rs.800000 and 30% for above 800000.There shall be some relief in total tax as earlier rates are same except 20% for above 300000 to Rs.500000 and 30% for above Rs.500000. Whatever there is relief in income tax that shall be offset by an increase in other essential items –mainly petrol / diesel prices.

There shall be deduction of an additional amount of Rs. 20,000 allowed, over and above the existing limit of Rs.1 lakh on tax savings, for investment in long-term infrastructure bonds as notified by the Central Government. It would be better if maximum ceiling is raised to Rs. 120000 and let the assesses decide in which funds or where an amount be invested within specified investments.

The current surcharge of 10 per cent on domestic companies is reduced to 7.5 per cent. Also the rate of Minimum Alternate Tax (MAT) increased from the current rate of 15 per cent to 18 per cent of book profits. For simplification surcharge and MAT should be abolished in toto.To compensate the revenue on account on these accounts, raise 1 or 2 per cent rate of tax!

The Limit of turnover for the purpose of presumptive taxation of small businesses

enhanced to Rs. 60 lakh. It should be further raised to Rs, 1 Crore.

The income tax department to notify SARAL-II form for individual salaried

taxpayers for the coming assessment year. It should be assesses friendly –salaried individuals must be able to fill themselves without any help from anyone!

Also such Saral forms are the need of the hour for individuals having small business or profession –i.e., who are outside the ambit of tax audit!





Tax Deduction at Source (TDS):

TDS limit for interest on bank deposit remains at Rs.10, 000, it must be raised to Rs. 20,000 and for Professional incomes it is proposed to enhance from Rs.20000 to Rs.30, 000 –it should be further enhanced to Rs.50, 000.



Senior Citizens are ignored:

No TDS should be deducted from any income for Senior Citizens. At present they are required to fill a Form in Duplicate for their TDS non deduction. It increases paper work and barring a low percentage of Senior citizens, their incomes are below taxable limits. Let them pay Advance tax for their income if it is more than taxable limits.

Even the age limit is maintained at 65 years for Senior citizens. In the present budget only it should be lowered to 60 years as per National Policy of Senior Citizens.



Administrative Reforms:

Further ordinary income tax assesses wish some Administrative Reforms too like Issuance of Refunds and completion their assessment in time limit and receiving Assessment Orders in time without a visit to the Income Tax Office (ITO) .As old as cases for Assessment Years 2006-07 there are a good number of such cases pending with the Income Tax Department. On its own the Department should find such cases and issue pending refunds and complete all such assessments and send assessment orders to all such assesses. Also Reduce Scrutiny time for issuance and completion of assessments. I hope this is not a dream!

Income Exempt from Tax

Overview of section 10

There are certain incomes which are absolutely exempt from tax under section 10 of the income tax act. It’s upon the assessee to prove that a particular item of income is exempted under this section.

· Receipt by a member from HUF [sec 10(2)]: This section is based on the principle of avoidance of double taxation. Wherein any sum received by an individual, as a member of HUF who are entitled to demand share on partition or are entitled to maintenance under the Hindu law, is exempt from tax.

· Share of Profit under partnership [sec 10(2A)]: Share of profit received by the partner from a firm is not taxable in the hands of partners. Here also the principle of avoidance of double taxation applies.

· Allowance to Government employee outside India [sec 10(7)]: Any allowance paid or allowed outside India by the government to Indian Citizen, for rendering service outside India, is wholly exempt from tax.

· Gratuity [sec 10(10)]: Any gratuity received by government employee is fully exempt from tax. Where gratuity is received by a non government employee covered by the payment of Gratuity Act,1970, it is exempt from tax fully or partly subject to conditions under sec 10(10)(ii). Where gratuity is received by a non government employee not covered by the payment of Gratuity Act,1970, it is exempt from tax fully or partly subject to conditions under sec 10(10)(iii).

· Educational Scholarship [sec 10(16): Scholarship granted to meet the cost of education is exempt from tax. The cost of education takes within its ambit tuition fee as well as incidental expenses incurred for acquiring education.

· Income of Minor [sec 10(32)]: In case the income of an individual includes the income of his minor child, such an individual shall be entitled to exemption of Rs.1500 in respect of each minor child.

· Dividends & Interest on units [sec 10(34)/(35)]: Any income by way of dividend referred to in sec 115-O , any income in respects of units of a mutual fund, income from units received by a unit holder of UTI, income in respect of units from a specified company is exempt from tax.

· Capital gain on compulsory acquisition of urban agricultural land [sec 10(37)]: Capital gain arising to individual/HUF on transfer by way of compulsory acquisition of urban agricultural land is not chargeable to tax subject to certain condition.

· Long term capital gain on transfer of equity share/units in cases covered by STT [sec 10(38)]: Such capital gain is not chargeable to tax if such transaction suffers securities transaction tax.

· Income from any international sporting event [sec 10(39)]: Income arising from a notified international sporting event (i.e., Commonwealth Games 2010) is exempt from tax , if such event is approved by the international body and has participation by more than two countries.

The Budget and the Indian Economy

he latest budgetary exercise has clearly been an attempt to reconcile two equally pressing considerations—economic growth and financial consolidation. While growth is important to have a larger cake to share, financial consolidation is needed to ensure that the gains do not dissipate as a consequence of inflation.



Fortunately, what the country is witnessing today is food inflation primarily due to supply constraints on account of the worst monsoon in 30 years. But as the Economic Survey report warns there is every danger of this inflation percolating to other sectors, if timely steps are not taken.



It was in this backdrop that the Finance Minister Mr. Pranab Mukherjee in his budget proposals, took the first step towards fiscal consolidation by making a modest beginning in partially withdrawing the concessions given in the stimulus package last year. The economy then was in a serious downturn and it needed government help to withstand global pressures. The picture today is different. All indicators point to a reviving economy, much before other world economies. The cuts in excise duties on all non- petroleum products have thus been restored by 2 percent to 10 percent, still less than 12 percent earlier. The service tax has not been raised but broad based.



The action is in line with not only the recommendations of the Economic Survey report but also the Prime Minister’s Economic Advisory Council suggesting a partial roll back of the stimulus package.



In his post-budget interviews Mr. Mukherjee has made it clear that while a modest beginning has been made he would consider a full withdrawal of the stimulus package only when the economy attains a growth of 8.5 to 9 percent. According to his own estimates, corroborated by other surveys, the economy would grow by around 7.2 percent in the current financial year which would go up to 8 to 8.5 percent in 2010-11 and reach 9 percent and more in the subsequent year.



The budget also envisages a fiscal deficit of 6.8 percent for the current year which would fall to 5.5 percent in the next fiscal and 4.9 percent in 2011-12. This would in turn mean lesser borrowings by the government, making more funds available for investment by the private sector. On the financial side the government will collect a revenue of Rs.46, 500 crore through taxes but would suffer a revenue loss of Rs.26, 000 crore by giving concessions in direct taxes. This will mean a net revenue of Rs. 20,500 crore.



A clear disinvestment plan has also been put in place. The government is confident that it will be able to raise Rs. 25,000 crore though disinvestment in the current fiscal ending 31 March 2010. It also envisages to collect Rs.40,000 crore through disinvestment in the next fiscal. The 3-G auction is estimated to bring in about another Rs.35,000 crore.



All these measures aim at checking the inflationary pressures on the fiscal side. But there is a supply side as well. The budget recognizes the fact that it is really the supply side that has to be tackled more effectively to control inflation. That explains a steep increase in the allocations for the farm sector. A 9 percent growth rate will be possible only if we achieve at least 4 percent growth in agriculture which grew only at 1.6 percent in 2008-09 and actually a shrinkage of 0.2 percent in the current year. A new strategy for farm growth has thus been put in place in tune with the needs of the economy. While allocating Rs. 400 crore for extending the green revolution to the eastern region comprising, Bihar, Chhatisgarh, Jharkhand , Eastern UP, West Bengal and Orissa, Rs. 200 crores have been provided for conservation farming to increase productivity and reduce losses. The target for farm credit too has been raised from 3,25,000 crore to 3,75,000 crore. Loans to farmers will be provided at a concessional rate of 5 percent. To give a push to the food processing sector, five more mega food parks will come up in addition to the 10 already being set up.



The relief given to the middle class by raising income slabs for personal tax and allowing a further savings of Rs.20,000 in infrastructure bonds for tax relief, will on the one hand leave more money will the people to spend and thus raise demand and on the other hand provide for better savings, given the propensities of an average Indian. This will lead to creation of additional funds for investment.



The increase in excise duty on petroleum prices is no doubt going to increase inflationary pressures but as the Minister put it the impact will only be marginal which will be absorbed in due course of time.



Massive allocation for the social sector will help the backward classes and boost incomes in the rural sector. It has been increased to 37 percent of the total plan outlay in 2010-11.



Mahatma Gandhi National Rural Employment Guarantee Scheme has been given Rs. 40,100 crore, a thousand crore more than the previous year. Rural infrastructure programmes under Bharat Nirman got Rs.40,000 crore. Similarly allocations for other sectors like education, health etc. have also been increased substantially.



By accepting all the major recommendations of the 13th Finance Commission, the Finance Minister has taken care of the states finances as well. The Commission has come up with a bonanza for the State Governments. Their share in central taxes will go up by 2.5 percent which means an additional amount of Rs.71, 000 crore out of the divisible pool next year. There will be a substantial increase in the states shared taxes and grants as well. The Finance Minister has also announced his plans to bring in both the Direct Taxes Code (DTC) and the Goods and Services Tax (GST) in April 2011 which will further streamline the financial structure in the country.



So the mood is upbeat and India is well on the path of economic recovery. By being the first country to kick off a calibrated fiscal consolidation it has demonstrated that the fundamentals of its economy are sound. As the Economic Survey points out the reforms would make India the 4th fastest growing economy in the next 4 years. What has helped the economy to look up is the brilliant performance of the industrial sector which has recorded consistent growth this year. Though the negative growth in the export sector has been arrested, it is still not out of the red. Calibrated policy measures are thus in tune with the needs of the economy. The focus now has to be on dealing with the double digit food inflation, which is a source of concern for the time being.