AMENDMENTS FOR ASSESSMENT YEAR 2009-10

AMENDMENTS FOR ASSESSMENT YEAR 2009-10

APPLICABLE FOR MAY – 2009 & NOV – 2009
COMPUTATION OF TOTAL INCOME AND TAX LIABILITY
1. Individual, HUF, AOP, BOI, Artificial Juridical person
Total Income upto Rs.1,50,000 Nil
Next 1,50,000 10%
Next 2,00,000 20%
Balance 30%

2. Resident women below the age of 65 years at any time during the previous year
Total Income upto Rs.1,80,000 Nil
Next 1,20,000 10%
Next 2,00,000 20%
Balance 30%
3. Resident individual of the age of 65 years or more at any time during the year
Total Income upto Rs.2,25,000 Nil
Next 75,000 10%
Next 2,00,000 20%
Balance 30%
No change in surcharge and education cess.
No change in tax rate and education cess for partnership firm and company.
Short term capital gain under section 111A shall be taxable @ 15% in all assessees.
Example
Compute tax liability in the following cases:
Mr. X (resident) has total income of Rs.6,00,000
Mr. X (non-resident) has total income of Rs.6,00,000
Mrs. X (resident) has total income of Rs.6,00,000
Mrs. X (non-resident) has total income of Rs.6,00,000
Mr. X (resident), aged 65 years has total income of Rs.6,00,000
Mrs. X (resident), aged 65 years has total income of Rs.6,00,000
Mr. X (non-resident), aged 65 years has total income of Rs.6,00,000
Mrs. X (non-resident), aged 65 years has total income of Rs.6,00,000
Solution:
Rs.
(i) Computation of Tax Liability
Total Income 6,00,000
Tax on Rs.6,00,000 at slab rate 85,000
Add: Education cess @ 2% 1,700
Add: SHEC @ 1% 850
Tax Liability 87,550
(ii) Computation of Tax Liability
Total Income 6,00,000
Tax on Rs.6,00,000 at slab rate 85,000
Add: Education cess @ 2% 1,700
Add: SHEC @ 1% 850
Tax Liability 87,550
(iii) Computation of Tax Liability
Total Income 6,00,000
Tax on Rs.6,00,000 at slab rate 82,000
Add: Education cess @ 2% 1,640
Add: SHEC @ 1% 820
Tax Liability 84,460
(iv) Computation of Tax Liability
Total Income 6,00,000
Tax on Rs.6,00,000 at slab rate 85,000
Add: Education cess @ 2% 1,700
Add: SHEC @ 1% 850
Tax Liability 87,550
(v) Computation of Tax Liability
Total Income 6,00,000
Tax on Rs.6,00,000 at slab rate 77,500
Add: Education cess @ 2% 1,550
Add: SHEC @ 1% 775
Tax Liability 79,825
Rounded off u/s 288B 79,830
(vi) Computation of Tax Liability
Total Income 6,00,000
Tax on Rs.6,00,000 at slab rate 77,500
Add: Education cess @ 2% 1,550
Add: SHEC @ 1% 775
Tax Liability 79,825
Rounded off u/s 288B 79,830
(vii) Computation of Tax Liability
Total Income 6,00,000
Tax on Rs.6,00,000 at slab rate 85,000
Add: Education cess @ 2% 1,700
Add: SHEC @ 1% 850
Tax Liability 87,550
(viii) Computation of Tax Liability
Total Income 6,00,000
Tax on Rs.6,00,000 at slab rate 85,000
Add: Education cess @ 2% 1,700
Add: SHEC @ 1% 850
Tax Liability 87,550
DEFINITIONS
Agricultural Income Section 2(1A) Explanation 3

Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.



Charitable Purpose Section 2(15)
“Charitable purpose”
includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility:
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.

Reverse mortgage Scheme Section 10(43)

Any amount received by an individual as a loan, either in lump sum or in instalment, in a transaction of reverse mortgage referred to in clause (xvi) of section 47 shall be exempt from Income Tax.

Reverse mortgager
means the eligible person who has mortgaged the capital asset for the purpose of obtaining loan.

Reverse mortgage transaction
means a transaction in which the loan may be disbursed to the reverse mortgagor but does not include transaction of sale, or disposal, of the property for settlement of the loan.

Any transfer of a capital asset in a transaction of reverse mortgage under a scheme made and notified by the Central Government is not regarded as transfer.

BUSINESS/PROFESSION
1. Payments in excess of Rs.20,000 section 40A(3) Rule 6DD

If any person has made the payment to a particular person during a particular day in excess of Rs.20,000 and such payment was not made through account payee cheque or account payee bank draft, in that case entire payment is disallowed.
If any person has claimed expenditure on due basis but in the subsequent year the payment was not made by account payee cheque or draft, in that case it will be considered to be income of the year in which the payment has been made.
Example
During the previous year 2008-09 ABC Ltd. has incurred Rs.1,00,000 on advertisement and the company has not made the payment till 30.09.2009 and the expenditure was claimed on due basis and the company has filed the return of income. The company made the payment on 01.01.2010 in cash, in this case Rs.1,00,000 shall be considered to be income of the company in the previous year 2009-10.

2.
Rebate under section 88E has been omitted. The assessee is allowed to debit the amount of securities transaction tax to profit and loss account.

3.
Bank cash Transaction tax shall not be applicable from 01.04.2009 i.e. previous year 2009-2010 i.e. assessment year 2010-2011.

4.
The last date for filing the return of income for the company etc. shall be 30-09 of assessment year. The amendment is applicable from retrospective effect of assessment year 2008-09.


5.
Donation/contribution given to an Indian company for scientific research and development is also allowed 1.25 times.

6. Amortisation of certain preliminary expenses section 35D
The provisions shall be applicable to all the undertakings instead of only industrial undertaking.


Amendment of section 36.
In section 36 of the Income-tax Act, in sub-section (1), after clause (xiv), the following clauses shall be inserted with effect from the 1st day of April, 2009, namely:—
36 (1)(xv) , An amount equal to the securities transaction tax paid by the assessee in respect of the taxable securities transactions entered into in the course of his business during the previous year, if the income arising from such taxable securities transactions is included in the income computed under the head “Profits and gains of business or profession.’.
Explanation.—For the purposes of this clause, the expressions “securities transaction tax” and “taxable securities transaction” shall have the meanings respectively assigned to them under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004);
36(1) (xvi) an amount equal to the commodities transaction tax paid by the assessee in respect of the taxable commodities transactions entered into in the course of his business during the previous year, if the income arising from such taxable commodities transactions is included in the income computed under the head “Profits and gains of business or profession”.

Explanation.
—For the purposes of this clause, the expressions “commodities transaction tax” and “taxable commodities transaction” shall have the meanings respectively assigned to them under Chapter VII of the Finance Act, 2008.’.

Tax deduction at source for Payment of interest, commission, brokerage etc. in India Section 40(a)(ia)

In case of payment of interest, commission, brokerage, rent, royalty, professional fees, technical fees, payment to a contractor, payment to a sub-contractor and the payment is been made to a resident and tax has to be deducted at source as per provisions of Income Tax Act and the person making payment has deducted tax at source, the expenditure shall be allowed if tax has been paid to the government upto the end of the relevant previous year, in such cases amount shall be allowed to be debited in the relevant previous year. In section 115-O of the Income-tax Act, after sub-section (1), the following sub-section shall be inserted, namely:—
If the payment was made in the month of March, tax should be paid to the government till the last date of filling of return of income and in such cases amount shall be allowed to be debited in the relevant previous year.
If the above provisions have not been complied with, in such cases deduction shall be allowed in the year in which tax has been paid to the government.

Amendment of section 115-O.
24.
“(1A) The amount referred to in sub-section (1) shall be reduced by the amount of dividend, if any, received by the domestic company during the financial year, if—
(a) such dividend is received from its subsidiary;
(b) the subsidiary has paid tax under this section on such dividend; and
(c) the domestic company is not a subsidiary of any other company:
Provided
Explanation.

—For the purposes of this sub-section, a company shall be a subsidiary of another company, if such other company holds more than half in nominal value of the equity share capital of the company.”. that the same amount of dividend shall not be taken into account for reduction more than once.
DEDUCTION FROM GROSS TOTAL INCOME
1.
2.
Deduction shall be allowed if the assessee has paid premium towards medical insurance out of his income chargeable to tax.
3.
4.
Policy can be taken in case of an individual, in the name of wife or husband or dependent children and deduction shall be allowed equal to the amount of premium paid but subject to a maximum of Rs.15,000 but in case of senior citizen deduction shall be allowed upto Rs.20,000
If the individual has taken policy in the name of parents (dependent or independent), additional deduction shall be allowed to the extent of the premium paid but maximum Rs.15,000, however, if the policy has been taken in the name of senior citizen, deduction shall be allowed to the extent of Rs.20,000.
Hindu Undivided Family can take the policy in the name of any of its members and deduction shall be allowed in the similar manner.
5.
6.

Medical insurance shall be in accordance with a scheme framed in this behalf by the General Insurance Corporation of India or by any other insurer as approved by the Insurance Regulatory and Development Authority (IRDA). “Senior citizen” means an individual resident in India who is of the age of 65 years or more at any time during the relevant previous year.
Assessee engaged in operating and maintaining a hospital in India other than the excluded area Section 80-IB(11C)
2.
The amount of deduction in the case of an undertaking deriving profits from the business of operating and maintaining a hospital located anywhere in India, other than the excluded area, shall be 100% of the profits and gains derived from such business for a period of 5 consecutive assessment years, beginning with the initial assessment year, if–
(i) the hospital is constructed and has started or starts functioning at any time during the period beginning on the 01.04.2008 and ending on the 31.03.2013;
(ii) the hospital has at least 100 beds for patients;
(iii) the construction of the hospital is in accordance with the regulations or bye-laws of the local authority; and
(iv) the assessee furnishes along with the return of income, a report of audit in such form and containing such particulars, as may be prescribed, and duly signed and verified by an accountant, as defined in the Explanation to sub-section (2) of section 288, certifying that the deduction has been correctly claimed.

SERVICE TAX

Service tax exemption limit has been raised from Rs.8,00,000 to Rs.10,00,000 w.e.f. 01.04.2008.
Revision of Return Rule 7 Sub-Rule (7B)
An assessee may submit a revised return, in Form ST-3, in triplicate, to correct a mistake or omission, within a period of 90 days from the date of submission of the return under rule 7.
The payment must be made by any mode of payment other than cash.Deduction shall be allowed only to an individual or Hindu Undivided Family.
Deduction in respect of medical insurance premia Section 80D

sources:-http://www.caclubindia.com/forum/messages/2009/1/22412_amendments_for_may_2009.asp

How to read your Income Tax PAN?

How to read your Income Tax PAN?

The Income Tax Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Indian Income Tax Department.

A typical PAN for an individual would be AABPS1205E.

However, this appears to be a mysterious coded number to most of the people, there are some elements which would help you to validate a PAN.

The fourth letter of your PAN reflects your status. As such for an individual the letter will be 'P' for an HUF it will be an 'H', for firms - 'F' and for companies - 'C'.

The fifth letter of your PAN is the first letter of your surname in case of individuals and the first letter of the name in other cases. For example, in Nikhil Kumar's PAN the fourth letter will be 'P' and the fifth letter will be 'K'.

The other alphabets and numbers are allotted based on the Income Tax Department's series database.

Exemptions Of Capital Gain

EXEMPTION FROM CAPITAL GAIN:

A.

Section 54: Long Term Capital Gain arising from transfer of Residential House.

1.Who can claim benefit of this section?
Individual or H.U.F.

2.Which asset the tax payer should acquire to get the benefit this section?
Residential House Property in India or Outside India.

3.What is the time limit for acquiring the new asset?
Purchase: 1 Year before transfer or within year from the date of transfer.
Construction: Within 3 years from the date of transfer construction should be completed.
(Either of the two conditions should be satisfied But if both the conditions are satisfied then also there is no problem.)

4.From which date the time limit shall be computed?
From the date of Transfer but in case of compulsory acquisition from the date of receipt of compensation whether initial or full.*

5.Amount of Exemption?
Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower.

6.Possibility of revocation of exemption in the subsequent year?
If such new asset is transferred within 3 years from the date of acquisition.

7.In case of transfer of such new asset within 3 years how computation of capital gain is to be made for such new asset & such gain is Long term or short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
Sales Consideration of New Asset: XXXX
Less: (Cost of Acquisition of new asset
Capital Gain claim exempted earlier
undersection 54 ) XXXX
--------
Short term Capital Gain XXXX
8.Whether Benefit of scheme is available?
Yes

9. Notes:

a) Such exemption is not limited to purchase or construction of one residential house property only. Assessee
may purchase two houses by selling one or can purchase one house by selling two houses.

b) Cost of new house includes cost of land.

B.

Section 54B: Long Term/Short Term Capital Gain arising from transfer of Urban Land used for
Agricultural Purpose.

1. Who can claim benefit of this section?
Individual. Provided such land should be used for agricultural purpose by the assessee or by his parents at least for a period of two years immediately before the date of transfer.

2. Which asset the tax payer should acquire to get the benefit this section?
Agricultural Land may be situated at urban area or rural area.

3. What is the time limit for acquiring the new asset?
Such Asset should be acquired within 2 years from the date of transfer and in case of compulsory acquisition from the date of receipt of compensation initial or full.

4. From which date the time limit shall be computed?
From the date of Transfer but in case of compulsory acquisition from the date of receipt of compensation whether initial or full. *

5. Amount of Exemption?
Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower.

6. Possibility of revocation of exemption in the subsequent year?
If such new asset is transferred within 3 years from the date of acquisition.

7. In case of transfer of such new asset within 3 years how computation of
capital gain is to be made for such new asset & such gain is Long term or
short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
Sales Consideration of New Asset: XXXX
Less: (Cost of Acquisition of new asset
Capital Gain claim exempted earlier
undersection 54 B) XXXX
--------
Short term Capital Gain XXXX

8. Whether Benefit of scheme is available?
Yes

C.

Section 54D: Long Term/Short Term Capital Gain on compulsory acquisition of land or buildings forming part of Industrial Undertaking.

1. Who can claim benefit of this section?
(Meaning of Industrial Undertaking: It not only includes undertaking situated in industrial area but also include any project or business, a person
may undertake)
Any person. Provided such land or building forming part of industrial undertaking is used (not owned) by the assessee at least for a period of two years immediately before the date of compulsory acquisition.

2. Which asset the tax payer should acquire to get the benefit this section?
Land or Building for industrial purpose.

3. What is the time limit for acquiring the new asset?
Such Asset should be acquired or building should be constructed within 3 years from the date of receipt of compensation.

4. From which date the time limit shall be computed?
From the date of receipt of compensation whether initial or full. *

5. Amount of Exemption?
Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower.

6. Possibility of revocation of exemption in the subsequent year?
If such new asset is transferred within 3 years from the date of acquisition.

7. In case of transfer of such new asset within 3 years how computation of
capital gain is to be made for such new asset & such gain is Long term or
short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
Sales Consideration of New Asset: XXXX
Less: (Cost of Acquisition of new asset
Capital Gain claim exempted earlier
under section 54 D) XXXX
--------
Short term Capital Gain XXXX

8. Whether Benefit of scheme is available?
Yes

D.
Section 54EC: Long Term Capital Gain not to be charged if investment in Long Term Specified Assets i.e. Bonds of N.H.A.I. or R.E.C.

1. Who can claim benefit of this section?
Any person.

2. Which asset the tax payer should acquire to get the benefit under this section?
Bonds issued by the NHAI or REC redeemable after 3 Years and issued after April1, 2006.

3. What is the time limit for acquiring the new asset?
Such Asset should be acquired within 6 months from the date of transfer of original asset. However following should be considered:
(1) Upto 30th September, 2006: If Long Term Capital Asset is transferred between 29th September, 2005 and 31st December, 2005.
(2) Upto 31st December, 2006: If Long Term Capital Asset is transferred between 1st January, 2006 and 30th June, 2006.( Order F. No.142/09/2006 dated 30th June, 2006).

4. From which date the time limit shall be computed?
From the date of transfer of Long Term Capital Asset or from the date of receipt of compensation initial or full. *

5. Amount of Exemption?
Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower. (But from April 1, 2007 maximum investment allowed in such bonds is restricted to Rs.50 Lacs.

6. Possibility of revocation of exemption in the subsequent year?
If such new asset is transferred or it is converted into money or a loan is taken on the security of the new asset within 3 years from the date of acquisition.

7. In case of transfer of such new asset within 3 years how computation of
capital gain is to be made for such new asset & such gain is Long term or
Short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
The amount of Long term Capital Gain on transfer of Original Asset not charged to tax due to such investment is chargeable as Long Term Capital Gain in the year of transfer of such bonds.

8. Whether Benefit of scheme is available?
No.

9. Notes: The Benefit of Section 54 EC is available to capital gain arising on transfer of depreciable assets. [CIT v/s
Assam Petroleum Industries Private Limited].

E.
Section 54F: Capital Gain arises on transfer of Long Term Capital Asset other than Residential House Property.

1. Who can claim benefit of this section?
Individual or H.U.F.

2. Which asset the tax payer should acquire to get the benefit this section?
Residential House Property provided that on the date of transfer of Original Long Term Capital Asset the assessee does not own more than one residential house property. Moreover He should not purchase a residential house within 2 years or construct within 3 years from the date of transfer of original capital asset except the new one.

3. What is the time limit for acquiring the new asset?
Purchase: 1 Year before transfer or within year from the date of transfer.
Construction: Within 3 years from the date of transfer construction should be completed.
(Either of the two conditions should be satisfied But if both the conditions are satisfied then also there is no problem.)

4. From which date the time limit shall be computed?
From the date of transfer of original Capital asset but in case of compulsory acquisition from the date of receipt of compensation whether initial or full. *

5. Amount of Exemption?
Amount invested to acquire the new asset
Amount of Capital Gain X -----------------------
Net Sale Consideration
Net Sale Consideration = Full Value of
Sale ConsiderationExpenses on Transfer

6. Possibility of revocation of exemption in the subsequent year?
Consequences

(a) If such new asset is transferred within 3 years from the date of purchase / construction; or

(b) Ifassessee purchases, within a period of two years or constructs within a period of 3 years a residential house from the date of transfer of Original Capital asset except the new one.
Capital Gain on transfer of such new asset will be termed as short term capital asset and the capital gain which was claimed as exempt u/s 54 F earlier is taxable as Long term Capital gain in the year in which such new asset is transferred.
Capital Gain which was claimed as exempt earlier u/s 54F is taxable as Long Term Capital Gain in the year in which another residential house is purchased or constructed.


7. Whether Benefit of scheme is available?
Yes

8. Notes:
(a) Cost of the new house includes cost of Land.
(b) If the Transferor allows the transferee to retain and apply a part of total consideration to discharge the mortgage to which such property has been subject to, the amount so applied for discharge for mortgage would have to be excluded from the full value of consideration.
(c) The expenditure incurred on making the house habitable i.e. flooring, wooden work, sanitary work etc. should be considered as investment in purchase of house, subject to condition that payment is made during the period specified in sec. 54 F.
(d) If by applying section 54 F, there is no income in hands of minor child to be added under section 64(1A), the benefit under section 54F cannot be denied to minor child on the ground that father of minor had two residential houses at the time of transfer of the capital asset.

F.
Section 54G: Long Term/Short Term Capital Gain arises from the transfer of capital assets in cases of shifting of industrial undertaking from urban area.

1. Who can claim benefit of this section?
Any person. The term Capital asset includes Plant, Machinery, Land or Building or Right in Land or Building but does not include Furniture.

2. Which asset the tax payer should acquire to get the benefit this section?
Land, Purchase/Construction of Building, New Plant or Machinery in order to shift an undertaking to Rural Area.

3. What is the time limit for acquiring the new asset?
Assessee has to acquire within a period of 1 Year before or 3 Years after the date on which such transfer took place.

4. From which date the time limit shall be computed?
From the date of transfer.

5. Amount of Exemption?
Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower.

6. Possibility of revocation of exemption in the subsequent year?
If such new asset is transferred within 3 years from the date of acquisition.

7. In case of transfer of such new asset within 3 years how computation of
capital gain is to be made for such new asset & such gain is Long term or
Short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
Sales Consideration of New Asset: XXXX
Less: (Cost of Acquisition of new asset
Capital Gain claim exempted earlier
under section 54 G) XXXX
--------
Short term Capital Gain XXXX

8. Whether Benefit of scheme is available?
Yes

9.Notes: (a) The Cost of New Asset includes expenses incurred in relation to acquiring Land, Building, or Plant and
Machinery.

G.
Section 54GA: Long Term/Short Term Capital Gain arises from the transfer of capital assets in cases of shifting of industrial undertaking from urban area to SE
Z.

1. Who can claim benefit of this section?
Any person. The term Capital asset includes Plant, Machinery, Land or Building or Right in Land or Building but does not include Furniture.

2. Which asset the tax payer should acquire to get the benefit this section?
Land, Purchase/Construction of Building, New Plant or Machinery in order shifts an undertaking to Rural Area.

3. What is the time limit for acquiring the new asset?
Assessee has to acquire within a period of 1 Year before or 3 Years after the date on which such transfer took place.

4. From which date the time limit shall be computed?
From the date of transfer.

5. Amount of Exemption?
Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower.

6. Possibility of revocation of exemption in the subsequent year?
If such new asset is transferred within 3 years from the date of acquisition.

7. In case of transfer of such new asset within 3 years how computation of
capital gain is to be made for such new asset & such gain is Long term or
Short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
Sales Consideration of New Asset: XXXX
Less: (Cost of Acquisition of new asset
Capital Gain claim exempted earlier
under section 54 GA) XXXX
--------
Short term Capital Gain XXXX

8. Whether Benefit of scheme is available?
Yes

9.Notes: (a) The Cost of New Asset includes expenses incurred in relation to acquiring Land, Building, or Plant and
Machinery.

* Section 54 H: Extension of Time limit for Acquiring new Asset.

1. Initial Compensation
As we know in case of Compulsory Acquisition, Capital Gain will be taxable in the Previous year in which compensation is received whether Part or Full.
For availing the benefit of exemption U/S 54, 54B, 54D, 54EC, 54F the new asset should be acquired within prescribed time limit. But such time period shall be computed from the date receipt of such compensation. Even if the initial compensation is received in parts then such period shall be determined on the basis such different dates of receipts.

2. Enhanced Compensation
For availing the benefit of exemption U/S 54, 54B, 54D, 54EC, 54F, such specified period shall be computed from the date on which such enhanced compensation is received.
DEPOSIT SCHEME: If the new asset is not acquired upto the due date of submission of Return of Income of the previous year in which Original Asset is transferred, the taxpayer has to deposit the unutilized amount in Capital Gain Deposit Scheme with a nationalized bank and proof of such deposit should be attached with Return of Income in order to avail the benefit of exemption.
Now the taxpayer has to withdraw from this account for acquiring the new asset. If the deposit amount is not utilized within stipulated time period as stated in Point 3 of each exemption then unutilized amount on the expiry of such time period will be taxable in the previous year in which such period expires as Long Term or Short Term Capital Gain depending upon the Original Capital Gain. It is to be noted that for section 54 & 54 F such period is 3 years.
# Transfer includes compulsory acquisition.
# In order to take benefit of Section 54 B and 54 D it should be ensured that the investment in the new asset is made only after effecting transfer of capital asset.
# It will be advisable that instead of selling or converting assets acquired under section 54, 54B, 54D, 54 F, 54 G and 54GA into money, the tax payer should obtain loan against the security of such asset to meet exigency.

sources :www.caclubindia.com

ICAI sets ball rolling against auditors

The Institute of Chartered Accountants of India (ICAI) has written letters to government agencies and Satyam Computer Services, seeking relevant information to initiate investigation into the role of the statutory auditor in fudging the accounts of the Hyderabad-based software services firm.
However, the institute, which regulates the chartered accounting profession in India, is yet to communicate with the statutory auditor — Price Waterhouse — regarding the overstatement of profit by Satyam over the years.
“Based on the collected information, the disciplinary board of ICAI may summon the statutory auditor and also the internal auditors,” Ved Jain, president of ICAI, told Business Standard, adding they hope to get the inputs from the ministry of corporate affairs (MCA) and the Securities and Exchange Board of India (Sebi) in the next two to three days.
Jain also met Corporate Affairs Minister Prem Chand Gupta on Friday and appraised of the steps taken by ICAI and the future course of action. “We plan to coordinate between various government agencies and ICAI,” Jain added.
ICAI has disciplinary powers against its members who are acting as statutory and internal auditors of any company. It has maximum powers to revoke the license for lifetime and also levy a maximum penalty of Rs 5 lakh. While statutory auditors are appointed by the company’s shareholders, the internal auditors are hired by the management.
ICAI is seeking the list of auditors (both statutory and internal) employed by Satyam, and also the balance sheet and other documents filed with the Registrar of Companies (RoC), with whom firms are mandated to submit a list of documents on a regular basis.
If summoned, ICAI’s disciplinary committee could seek the “working paper file” maintained by statutory auditors. Working papers contains all audit evidences collected while auditing the financial statements of any company.
This is expected to help the investigators to piece together how the financial fraud of this magnitude had taken place at the country's fourth-largest software firm.
Satyam's promoter, in a letter to the stock exchanges, said they had inflated profits and revenue of the company for many years, involving a total amount of around Rs 7,000 crore. Cash position alone was inflated by Rs 5,000 crore.
Srinivas Talluri, a partner in Price Waterhouse, was the statutory auditor for the IT major in FY08, as per the corporate information provided by third party websites. Satyam’s website was inaccessible to retrieve information.
Price Waterhouse is the only from among the big four audit firms to have registered with ICAI, as all its partners are Indians, said Uttam Prakash Agarwal, vice-president of ICAI.

sources:-www.calubindia.com

ICAI to issue a show cause notice to Satyam auditors, PwC

The Institute of Chartered Accountants of India (ICAI) has decided to issue a show cause notice to the auditors of Satyam Computer Services in the backdrop of Satyam Computers chairman B Ramalinga Raju's sensational revelations on Wednesday. Talking to ET, ICAI president Ved Jain said: "We have set the ball rolling. On the basis of statements made by Mr Ramalinga Raju, ICAI has already initiated proceedings against the concerned auditor. Under legal provisions our disciplinary committee can take cognizance of information from external sources and initiate action against our members. On the basis of the statement, a show cause notice will be sent to the auditor of the Satyam Computer Services." Asked specifically, who the notice was being sent to, Mr Jain said: "I am told the audit firm was PricewaterhouseCoopers. A show cause notice will soon be sent to the auditor. This is indeed a situation where fingers are being pointed towards some chartered accountants." On the issue, an ICAI council member who declined to be named said: "As auditors, we definitely have a role to play. This incident gives the entire chartered accountants fraternity a bad name. If we unravel any wrong doings on the part of the auditors, the institute (ICAI) will initiate action against the concerned auditor. Auditors base their observations on documentary evidence provided to auditors and Mr Raju did not mention that the figures provided to auditors were wrong. However, if the auditors have failed, the institute will file an 'Information Case' against the concerned individual (at PwC, in this case) as a first step." The ICAI's Council is a core team that deals with critical aspects of running the Institute and policy matters involved as well as various accounting norms. Experience, however, shows the process of ruling on such cases takes time. For instance, ICAI had initiated proceddings against the auditors of the erstwhile Global Trust Bank (GTB) a couple of years ago. The case is yet to be diposed off, the council member said.

source:-www.caclubindia.com

Govt forecasts 7% growth in mid-year review report

The Government on Tuesday painted a sombre picture of the economy, holding out the hope of another interest rate cut while peering into the prospect of national income growth slipping below 7 per cent. Worse, the fiscal deficit is yawning, curbing the government’s elbowroom to spend its way out of the slowdown. “It is difficult to make a precise forecast about growth prospects for the whole year at this stage because of uncertainty, though the expectation is that it would be in the range of 7 to 8 per cent,” the mid-year review of the economy that was tabled in Parliament on Tuesday stated. “We have to be prepared, however, for growth to be around 7 per cent in 2008-09 as a whole.” Gross domestic product (GDP) has grown by 7.8 per cent during the first six months of current fiscal year, but the review cautioned that it will be “significantly slower” in the second half as the impact of slower export growth and weaker domestic demand, including a possible dampening of private investment, begin to be felt. India’s industrial output in October contracted by 0.4 per cent, exports plunged by 12 per cent, while excise duty collections — the tax imposed as products travel from the factory to the final retail selling point — fell by 15 per cent in November, mirroring the seriousness of the slowdown. In a mini-budget of sorts, the government had announced a series of measures in the first package on December 7 that included an across-the-board cut in the central value added tax (Cenvat or the key indirect tax imposed at various stages of the manufacturing process). Chief economic advisor Arvind Virmani said fiscal deficit for 2008-09 could exceed 5 per cent due to the extra spending reflecting widening disparity between current expenditure and revenues earned by the government. The International Monetary Fund has projected that India's GDP growth is likely to slow down to 6.3 per cent in 2009, while the Reserve Bank of India has revised GDP growth forecast for 2008-09 to a range of 7.5-8.0 per cent.

Accountants get tips from the tiffin man

The men who ensure workers in India’s financial capital of Mumbai get their food on time credit their success to simple principles: stick to time and work is worship.
Last week the secrets of ubiquitous dabbawalas, as they are known, were presented at a conference of chartered accountants in Dubai.
The conference which heard presentations on topics like wealth structuring crisis, India’s cost competitiveness, Middle East equity markets and commodities cycle, was perked up by a presentation on the men who transport lunch boxes.
Invited by the Dubai chapter of the Institute of Chartered Accountants of India, Manish Tripathi, honorary director of Mumbai’s dabbawalas, gave a presentation on the trade wearing a now globally recognizable dabbawala white cap and swearing with his hand on a tiffin box that he would "say the truth and nothing but truth" about his trade.
"Believe me, I will give you so much knowledge about dabbawalas that any of you can come to Mumbai and start working as a dabbawala," he told more than 1,000 people in the audience.
"Our work revolves around a few beliefs – the most important ones of which are sticking to time and believing that work is worship," he said.
"Annadan is mahadan (giving food is the greatest charity). We dabbawalas have a strong belief in god. But you don’t see god, do you? So, whom do you worship? People – after all, they are creations of god. You worship god by ensuring that people get to eat their food on time," he said.
"Time," Tripathi said, "is the first thing any dabbawala has to stick to if he has to succeed in the trade."
He explained that every dabbawala believes they are descended form the great Maratha leader Shivaji, and came from the same community.
"Our forefathers fought under Shivaji against powerful enemies. Today, we wage our war against time," he said, adding that this is what ensures that an office-goer in Mumbai gets his or her homemade food for lunch precisely at 12:30 p.m. every working day of the week.
There are about 5,000 dabbawalas in Mumbai who deliver some 200,000 tiffin-boxes. That means 400,000 transactions every day – first delivering the full tiffin boxes and then delivering the empty ones back home.
Every dabbawala has to report for duty at their designated locations at precisely 9:30 a.m.
For three hours – "We call this war time" – the dabbawalas work in a high pressure environment in traffic-congested Mumbai, moving dabbas on foot, carts and local trains to deliver the food to their customers across India’s commercial capital.
"We ensure that all our customers, too, stick to time. A dabbawala waits at a household to collect a dabba for half-a-minute to two minutes and not more," Tripathi said.
For three hours, the dabbawalas work on war footing to cover around 60 to 70 kilometres.
"Red lights, traffic jams, pedestrian crossings cannot stop us. Even policemen in Mumbai let us go when they see our trademark white cap," he said.
So what is the motivating factor for the dabbawalas?
"Every dabbawala is a stakeholder in the system. That is the single most motivating factor. Nobody is an employee, which is why there has not been a single record of strike in our business," he said.
This is what goes into the dabbawalas’ supply chain management – much studied by management gurus and schools – which has ensured a now globally renowned error rate of one in 16 million transactions.
That and the coding system are key factors in the success of their supply chain management.
"We cannot afford to have a mistake. Imagine what trust people will have on our services if a customer having orthodox vegetarian Jain food gets someone else’s chicken curry," Tripathi said.
As for the educational qualifications of the dabbawalas, Tripathi put his thumb up to mean most are illiterate. "Maybe 15 percent of us reach Class 8. More than that and we will start having problems. Educated people have many questions – why, how – which can act as hindrances in our strictly time-based trade," he said.

NEW LAW FOR REMOVING TIME LIMIT ON DIVIDEND CLAIM

The new company law proposes to remove the time limit for claiming dividend. The Companies Bill 2008 – recently cleared by the Cabinet and to be placed before Parliament soon – has removed the seven-year ceiling up to which unclaimed dividend remains safe in the government’s kitty. This means investors can claim their dividend even 10 years after declaration of dividend once the new Bill gets the approval of Parliament. Unclaimed dividend of investors is transferred to the Investor Education and Protection Fund (IEPF). The fund, which is maintained by the ministry of corporate affairs, allows claims only for seven years from the date of declaration of dividend. Officials in the ministry of corporate affairs say that the new law proposes to remove the time limit. This would mean that the rights of the investors to claim their unpaid dividend amounts credited to IEPF do not pass away. “The existing provisions on investor education and protection have been recast to ensure that the claim of an investor over a dividend not claimed for more than seven years is not extinguished,” an official in the ministry said. The idea, aimed at a safeguarding the interests of minority shareholders, would require the government to make statutory changes in the administration of IEPF. The new company law puts premium on the protection of investors rights. The ministry of corporate affairs is also known to have opposed the finance ministry’s stand that investor protection being the primary responsibility of market regulator Sebi, the investor protection fund should reside with the latter. Rejecting the finance ministry stand, the corporate affairs ministry had contended that investor protection was related to the corporate governance initiatives of the government and was necessary for safeguarding the interests of investors.
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How to Make Best Use of Section 80C

What to Check before investing for Section 80C
or
How to Make Best Use of Section 80C


Most of the Income Tax payee try to save tax by saving under Section 80C of the Income Tax Act. However, it is important to know the Section in toto so that one can make best use of the options available for exemption under income tax Act. One important point to note here is that one can not only save tax by undertaking the specified investments, but some expenditure which you normally incur can also give you the tax exemptions. Here are some tips for you : -
(1) Always Check YOUR FORCED SAVINGS / EXPENDITURE ELIGIBLE FOR DEDUCTION :
(A) Home Loan :
There is a provision that the payment made for repayment of the principal amount (not interest payment) of the Home Loan is eligible for a deduction under Section 80C if you have taken a home loan and you fulfill certain conditions.
(B) Payment towards Education Fee of the children :
Most of the young couples and middle aged income tax payee incur quite high payments
towards the education fees of their children. The expenditure incurred on education fees is also eligible for a deduction under Income Tax Act, Thus, if you are incurring expnediture towards educatin fee of your children, please check whether these are eligible for deduction under the IT Act.
(C) Payment towards Provident Fund :
Salaried income tax payee are usually have a forced saving which are eligible for deduction under section 80C. A fixed percentage of basic salary (ranges from 8.33% 12%) is deducted by your employer towards the Employees Provident Fund (EPF). Some employers allow higher deduction towards EPF. Thus, you should first of all check the total amount that is expected to be deducted towards EPF during the financial year. The total amount deducted from your salary will be eligible for investments under Section 80C.
(D) Interest on National Saving Certificates :
In case you have purchased NSCs during some earlier years, then the accrued interest as per the tables released by authorities is eligible for deductions under Section 80C.

(2) Always Check the Lock-In Period of the Investments
Tax saving investments have a minimum lock-in period i.e. the period during which withdrawals are usually not allowed. If the same are withdrawn, these will be taxable in the year of withdrawal. For example, National Savings Certificates (NSC) have a lock-in period of six years, Public Provident Fund (PPF) has a lock-in of 15 years, Equity Linked Saving Schemes (ELSS) have a lock-in period of three years. Insurance policies have even greater period of lock in.


(3) Always Check Whether the investment you intend to make will meet your goals :
You are saving every year and while saving you normally have some goal in mind, e.g. to meet the expenditure on education of children, purchase of a vehicle or house or marriage of your children. Therefore, you should always look at the investments from the angle whether it will meet your specific requirements on maturity. You should also try to diversify your savings in different instruments.
For instance, if you have already invested a fair portion of your money in equity (shares and mutual funds that invest in shares), avoid an ELSS. Opting for an ELSS means a huge portion of your investments will be in equity and that may not be what you want.

Source :

Professional tax may raise for Professionals

Doctors, lawyers and other professionals both salaried and self employed may now have to pay a higher professional tax. Acceding a long-pending demand of the state governments, the Centre has decided to raise the ceiling on professional tax from Rs 2,500 to Rs 7,500 per annum. The Union Cabinet is expected to take up the proposal on Thursday. Professional tax is levied by state governments or local bodies on professions, trades, callings and employment. The power to levy the tax flows from Article 276 of the Constitution that also caps the tax amount. The Centre will amend Article 276 to raise the limit. Although Delhi does not impose the tax, states such as Karnataka, Maharashtra, West Bengal, Andhra Pradesh, Tamil Nadu and Gujarat do so. The limit was fixed in 1998 at Rs 2,500 per annum. Increase in tax has been a long-pending demand of the states, pointing at rise in income levels in the past few years. The Centre’s reluctance to state governments’ demand for a hike in the limit is borne out of the fact that taxpayers who pay professional tax are eligible for a deduction under the Income-Tax Act. So, while the state governments’ revenues grow, the Centre loses tax on this count. However, with the direct tax collections witnessing stupendous growth, state governments had intensified pressure on the Centre. Their argument is that the tax does not have a substantial impact on Centre’s total kitty as the collection under this head by states was only Rs 3,500 crore. Some state governments wanted the limit to be increased to Rs 10,000 per annum, but the Centre has agreed to raise it to Rs 7,500.

Source : - caclubindia.com

Professionals cannot claim Sec 32 tax benefit

NEW DELHI: The Supreme Court said on Tuesday professionals cannot claim depreciation under Section 32 of the Income Tax Act. The Section is applicable to an assessee carrying on business and not to a professional, the apex court said, dismissing an appeal of a chartered accountants firm which had sought deduction under this provision. The appellant, GK Choksi & Company, an Ahmedabad-based chartered accountants firm, had claimed depreciation for the assessment year 1984-85. During the year, the appellant constructed a residential building for its low-paid employees and claimed initial depreciation of 40% under Section 32(1)(iv) of the Act, amounting to Rs 43,505, on the actual cost of the building that stood at Rs 1,08,757. The I-T department, on January 15, 1985, rejected the claim on the ground that the said provision was applicable to an assessee carrying on business and it was not available to a professional. On the plea of the assessee, the commissioner of income tax (appeals) reversed the order of the income tax officer dealing with the case. The revenue department then filed an appeal before the Income Tax Appellate Tribunal which overturned CIT (A) order and restored the order passed by the ITO. The matter then came to Gujarat high court which upheld the tribunal order. The assessee then appealed at the apex court. An SC bench comprising Justices Ashok Bhan, HS Bedi and VS Sirpurkar said: The word ˜business occurring in clause (iv) of Section 32(1), by no stretch of imagination, can be said to include ˜profession’ as well. There is nothing in Section 32(1)(iv) which envisages the scope of word business to include in it ˜profession as well.

ONE PERSON COMPANY MAY APPEAR SOON

The draft Companies Bill, 2007, has proposed a new entity called a one-person company (OPC) as a measure to provide start-up entrepreneurs and professionals the much- needed flexibility in setting up a business in India. The onerous compliance requirements that apply to large widely-held companies will not be imposed on such entities. Officials told Business Standard that a proposal to this effect has been included in the Bill, which has been sent for inter-ministerial consultation. The ministry of corporate affairs had said the Bill may be put up for legislative approval in the winter session of Parliament, but officials now say it is unlikely. “We are waiting for comments from other ministries. After that we will have to seek Cabinet approval and then take it to Parliament,” the official said. The move to permit OPCs in India was recommended by the J J Irani expert committee on revising India's company laws in May 2005. Various countries permit this kind of a corporate entity (China introduced it in October 2005) in which the promoting individual is both the director and the shareholder. The principal forms of business organisations permitted in India are sole proprietorship firms (in which only one person runs the business), partnerships (between two or more people) and companies (both private and public where it is possible for many individuals to own the business by subscribing to its shares). The fundamental difference between a sole proprietorship and an OPC is the way liability is treated in the latter. A one-person company is different from a sole proprietorship because it is a separate legal entity that distinguishes between the promoter and his company, said Rajiv Luthra, founder and managing partner, Luthra & Luthra. Luthra added that the promoter’s liability is limited in an OPC in the event of a default or legal issues. On the other hand, in sole proprietorships, the liability is not restricted and extends to the individual and his or her entire assets. For instance, if a sole proprietorship firm is sued, the promoter also gets sued automatically. In the case of companies, liability is restricted to the shares of a company, except for criminal matters. “It is a good and highly desirable move, especially as it reduces the level of compliance for OPC's vis-à-vis companies,” he said. The move is expected to ease start-up formalities for prospective entrepreneurs. Similarly, small entrepreneurs who are running their businesses under the proprietorship model could convert to OPCs, with the benefit of limited liability and none of the cumbersome compliance requirements, said corporate law expert Naveen Goel.

SAVE TAX ON LOSS FROM SHARE

By reading the title of the post you will be thinking that there is no tax on long term capital gain on shares then what is the relation between tax saving and long term capital loss?

But after reading the next few lines you will definitely understand the trick(tax planning tip).The trick is legitimate method to save the tax.


Brief Provision of Tax on LTCG on shares

To understand this tip first of all I would like to discuss the taxabilty provisions on Long term capital Gain/Loss From shares and securities

From 1.10.2004 onwards sale of a long term security (means where holding period is more than 12 month) ,on which STT paid (Securities Transaction Tax) is not liable for tax and fully exempted from Income Tax.
As the long term capital gain from the sale of securities is exempted from tax ,loss from such deals can not be adjusted from the other capital gain and can not be carry forward either.
Securities Transaction tax (stt) is payable for transaction made through stock exchanges.

what is the trick/tip

if you are planning to sell the shares on which you will have long term capital loss ,then sell them out of the exchange without paying STT and save tax .lets study with a example.

Example:Rajiv has sold a shares for 300000 which he has purchased for 500000 ,13 months back.similarly he has also sold a land for 600000 which he has purchased for 100000 four year ago.Rajiv has also salary income for Financial year 2008-09.

calculate tax in two situations

shares has been sold through stock exchange means stt paid.
shares has been sold to friend out of exchange.
Ans:Case -1:Calculation of tax Case one(through stock exchange)
income from salary =300000

Income from capital gain on capital gain =400000

(600000-100000)

tax liability=on 150000-300000 @ 10%=15000

20% on 400000 LTCG =80000

Net tax liability=15000+80000=95000

long term loss from shares sold through exchange being exempted income can not be adjusted from LTCG on land,and not not be carry forward either.

Case-2:(shares sold to friend out of stock exchange ) no stt paid

Income from salary =300000

Income from Long term capital gain

LTCG from land =400000

Less:LTCL from Shares=200000

net LTCG =200000

tax liability

salary=10% on 300000-150000=15000

Ltcg=20% on 200000 =40000

net tax liabilty =55000

so in First case Tax Liability is 95000 where as in second case the tax liability is 55000 means saving of 40000 tax by not selling shares through exchange !!!

Further if we have sold share out of exchange this year and made a loss and have no other long term capital gain then we can carry forward the loss for next eight years and adjust the loss from other long term gain,means the benefit is definite if we adjust it in this year or next eight year.

Note:


1. To avoid complication in calculation Indexation on cost of capital assets has not been done.
2. Shares and securities word has been used interchangeable though differently defined under the act.so read accordingly.
3. Sucharge and Cess on tax has also not shown to avoid complications.
4. You can also save tax from short term capital loss from same trick.



please comment

Under section 10 (13A) of the Income Tax Act, you can claim a deduction on the rent you pay

Aam aurat and aam aadmi just moved into the city of dreams. Aam aurat managed to get a good job with a big multinational company. Aam aadmi, never the one to discourage his wife, moved with her, hoping to find a better job in the city of dreams.
They managed to rent a one-room-kitchen house at Rs 15,000 per month from Boodhi Tai, affectionately called BT, who lived in the same building.
Aam aurat had just returned from her first day in the new office and told her husband over a cup of tea he made for her, "You know, one of my colleagues in office today told me I could take a tax deduction on the rent I pay."
"Ah, really?" replied aam aadmi.
"Yes. But he didn't explain everything. There are so many people who live in this building. Can you just ask around and find out?"
"Sure, I'll do that."
With that, aam aadmi stepped into the common passage and went looking for BT. "Can you tell me about the tax deductions allowed for rent?" he asked her as soon as he found her. "Beta. I don't understand any of these things. Why don't you ask Sri Sri Sri Baba Taxdev. He lives next to you. Baba handles all these things for me," she replied.
Aam aadmi went and knocked on Baba's door. "Hi. I am aam aadmi. Just moved into the next room. BT told me you could help me with some details I need," he said when Baba opened the door.
Baba twirled his long beard and replied, "Tell me. How can I help you?"
Aam aadmi parroted what his wife told him.
"The first thing I need to know is how much rent you are paying," Baba asked.
"Rs 15,000 per month."
The reply sent Baba into peals of laughter. "You know how much I pay? Rs 100. Rent Control Act, you see. Been staying here for ages. So somebody's got to bear the cost," he guffawed.
Immediately, aam aadmi regretted his parents' decision to buy a house in the capital and not in the city of dreams.
"Anyway, how much house rent allowance (HRA) do you get?" Baba asked.
"I am the house husband right now. Looking for a job. My wife is working. She gets Rs 16,000 per month as HRA. Her basic plus dearness allowance comes to around Rs 40,000 per month. I guess you would need to know that as well," aam aadmi said.
"So you want to know how much deduction your wife can get."
"Yes."
"The deduction is allowed under section 10 (13A) of the Income Tax Act. I like to discuss sections when talking about the Income Tax Act. The deduction is restricted to a minimum of:
a) The actual HRA that she gets
b) The actual rent paid less 10% of her salary, where salary includes the basic salary plus the dearness allowance
c) 50% of her salary if the rented house is in Mumbai, Chennai, Kolkata and Delhi and 40% of the salary in any other case," Baba explained. "The HRA that an individual receives over and above this is included in taxable income," he continued.
Looking confused, aam aadmi whined, "That went over my head...."
With his calm intact, Baba replied, "Ok, let me explain. Your wife gets an HRA of Rs 16,000 per month and pays a rent of Rs 15,000 per month. Her basic plus dearness allowance is Rs 40,000 per month. So the actual rent paid, less 10% of the salary, would equal Rs 11,000 per month (Rs 15,000 - 10% of Rs 40,000). Since she lives in the city of dreams, a k a Mumbai, for calculating her deduction, we would be considering 50% of her salary. This comes to Rs 20,000 (50% of Rs 40,000)."
In the same vein, he continued, "As we can see from the calculation, the minimum amount from the three specified conditions is Rs 11,000. And so, she would be allowed a total deduction of Rs 1.32 lakh (Rs 11,000 x 12) from her taxable income per year. For the remaining amount of HRA-Rs 4,000 per month or Rs 48,000 for the year-tax will have to be paid."
At that point, Baba's cell phone started ringing. "Arre Netaji. How much black to white will you do? Thoda to apni janta par reham karo," he loudly laughed into the phone. After a few minutes of conversation, he hung up.
"Sorry, that was Netaji calling. To claim this deduction, she would have to submit a rent receipt issued by the landlady or a copy of the house lease agreement to the company she works for. A proof of rent paid is required only if the rent being paid is higher than Rs 3,000 per month," Baba explained.
The explanation wasn't to aam aadmi's liking. "That's funny. Why can't we claim the entire rent paid as deduction?" he asked.
"Well, the Income Tax Act is funny sometimes. Come to one of my pravachan whenever you get some time. I will give you more examples of how funny the Income Tax Act can be," Baba said.
He ran a hand over his beard and then smiled cattily, "Don't forgot to bring some dakshina. You can get a deduction on donations made for an approved charitable cause under section 80G of the Income Tax Act." Aam aadmi smiled despite his disappointment with the HRA deduction allowed and thanked the Baba, then walked out the door.

TAX HOLIDAY FOR INDUSTRIAL UNITS IN FREE TRADE ZONES ETC. [SECTION

Section 10A of the Income-tax Act relates to special provision in respect of newly established
industrial undertakings in free trade zones, export processing zones, electronic hardware
technology parks, software technology parks or special economic zones notified by the Central
Government. The section exempts the profits and gains of such undertakings derived from
the export of articles or things or computer software.


(1) Assessees who are eligible to claim exemption

The benefit of exemption under this section is available to all categories of assessees who
derive any profits or gains from an undertaking engaged in export of articles or things or
computer software. The profits and gains derived from on-site development of computer
software (including services for development of software) outside India shall be deemed to be
the profits and gains derived from the export of computer software outside India.

(2) Conditions to be satisfied for claiming exemption

This section applies to any undertaking which fulfills the following conditions:

(i) It has begun manufacture or production (include the cutting and polishing of precious and
semi-precious stones) of articles, things or computer software during the previous year
relevant to the:
(a) A.Y.1981-82 or thereafter in any FTZ; or
(b) A.Y.1994-95 or thereafter in any electronic hardware technology park (EHTP) or
software technology park (STP); or
(c) A.Y.2001-2002 or thereafter in any SEZ.

(ii) It is not formed by the splitting up, or reconstruction, of a business already in existence.
However, this condition shall not apply to an undertaking which is formed as a result of
re-establishment, reconstruction or revival of the business of any undertaking falling
under section 33B.

(iii) It is not formed by the transfer of machinery or plant previously used for any purpose. For
the purposes of this clause, any machinery or plant used outside India by any person
other than the assessee shall not be regarded as machinery or plant previously used for
any purpose, if the following conditions are fulfilled:
(a) such machinery or plant was not, at any time previous to the date of installation by
the assessee, used in India;
(b) such machinery or plant is imported into India from any country outside India; and
(c) no deduction on account of depreciation in respect of such machinery or plant has
been allowed or is allowable under the provisions of this Act in computing the total
income of any person prior to the date of installation of the machinery or plant by
the assessee.
(d) Further, where in the case of an industrial undertaking, any machinery or plant or
any part thereof previously used for any purpose is transferred to a new business,
and the total value of the machinery, etc. transferred does not exceed 20% of the
total value of the machinery and plant used for the business.


(iv) The sale proceeds of articles, things or computer software exported out of India must be
brought into India in convertible foreign exchange within six months from the end of the
previous year, or such further period as the competent authority may allow. For this
purpose, "competent authority" means the RBI or such other authority as is authorised for
regulating payments and dealings in foreign exchange.
Further, where the sale proceeds are credited to a separate account maintained by the
assessee with any bank outside India with the approval of the RBI, such sale proceeds
shall be deemed to have been received in India.


(v) In order to claim deduction under this section, the assessee should furnish an audit
report from a chartered accountant in Form No.56F, along with the return of income,
certifying that the deduction has been correctly claimed. However, no deduction u/s 10A
shall be allowed to an assessee who does not furnish a return of his income on or before
the due date specified under section 139(1).