GST in India

Feb 19, 2010
Goods and service Tax

Dr. Sanjiv Agarwal

Introduction:

So far, VAT at the state or Cenvat at the central level, along
with services tax, have been major steps in tax reforms.

Before the present tax regime, there was the sales tax regime,
where there was a cascading effect on tax.
 
VAT has removed this burden, but it had deficiencies.

The Cenvat load remains.

There were several state taxes which were not subsumed in any one tax.

The inter-state sales tax or CST was not fully relieved. 

All this will be accomplished by the state GST.

If VAT was a major improvement in the indirect tax system,
GST will be the next logical step and a major breakthrough in
the history of tax reforms in the country.

With the GST, the positive impact on the GDP and state
domestic product may be as high as a 2 per cent gain.

As a first major step in the GST direction, the release of first
discussion paper is a major break through. The second step is
the need for a Constitutional amendment, as the power of levying
service tax will be given to the state, because it is a dual structure.

To subsume so many, many Acts, we also require a
Constitutional amendment. The GST on imports will also
require one. The first draft of the Constitutional amendment
is expected by the end of November. Side by side, work on
the draft for theCentral GST and draft model state GST legislation,
and draft for inter-state GST (IGST) and rules and procedure will start.

State governments have autonomy in selecting rates. In GST, the rates
will be exactly the same , so it will be a harmonious structure.

If there is an exigency, or state have items of local importance in
our choice of the list of exempted items which do not effect inter-state
trade- these will be given flexibility. All federal structures have faced the
problem. We are going to take care of it through Constitutional amendments.

Threshold limit in GST

A threshold of gross annual turnover of Rs.l 0 lakh, both for goods
and services for all the States and Union Territories will be prescribed
with adequate compensation for the States (particularly, the States in
North-Eastern Region and Special Category States) where lower
threshold had prevailed in the VAT regime.

After taking into consideration
the interest of small traders and small & medium scale industries and to
avoid dual control, it has been proposed that the threshold forCentral GST 

for goods will be lakh, Rs.l.5 crore and the threshold for services

should also be appropriately high.

Service Tax under GST

Service Tax is  presently levied at 10.3% (inclusive of Education Cess)
percent tax on more than 105 services. States do not levy or collect
service taxes at present, but get a share from the Centre’s  collections.

It is proposed that states will keep the entire collection from certain
services from this year. States would also tax another set of proposed
new services, collect and appropriate as \ part of compensation forcentral
sales tax phase-out in 2010. Since there would be issues on taxing cross
border services it is expected that the. State GST would only include services
that are essentially of “local nature”.

It has also been proposed thatService tax rate under
Central GST and State GST is likely to be uniform.

Though State Service Tax proposed to be levied on new local services
would add to the cost, a redeeming feature is that Input Tax Credit
would be eligible on the StateService Tax and a host of other levies
like entry tax, electricity tax, and luxury tax etc that would be
integrated under State GST. Of course, the service will qualify as
an eligible input service for claiming cenvat credit.

Inter-state Transactions of Goods and Services (IGST)

Integrated GST (IGST) model for taxation of inter-state transaction
of goods and services has been proposed by the discussion paper.
According to this model, Centre would levy IGST which would be
CGST plus SGST on all ‘inter-State transactions of taxablegoods
and services with appropriate provision for consignment or stock
transfer of goods and services . The inter-State seller will pay IGST
on value addition after adjusting available credit of IGST, CGST,
and SGST on his purchases. The Exporting State will transfer to the
Centre the credit off GST used in payment off GST.

The importing dealer will claim credit of IGST while discharging
his output tax liability in his own State. The Centre will transfer
to the importing State the credit of IGST used in payment of SGST.

The relevant information will also be submitted to theCentral Agency
which will act as a clearing house mechanism, verify the claims and
inform the respective governments to transfer the funds.

The  advantages of IGST model are as follows-

    * Maintenance of uninterrupted input tax credit chain on inter State transactions.
    * No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer.
    * No refund claim in exporting State, as ITC is used up while paying the tax.
    * Self monitoring model.
    * Level of computerization is limited to inter-State
      dealers and Central and State Governments should be
       able to computerize their processes expeditiously.
    * As all inter-State dealers will be e-registered and
       correspondence with them will be by e­-mail, the
        compliance level will improve substantially.
    * Model is likely to  take ‘Business to Business’ as well
       as ‘Business to Consumer’ transactions into account.

Taxpayer Identification number

Under the GST regime, each taxpayer will be allotted a PAN
inked taxpayer identification number with a total on 13 to 15 digits.
This would bring the GST PAN-linked system in line with the prevailing
PAN-based system for Income tax, facilitating data exchange and
taxpayer compliance.

Composition Scheme

According  to the discussion paper, composition/compounding
scheme for the purpose of GST will have an upper ceiling on
gross annual turnover and a floor tax rate with respect to gross
annual turnover. In particular, there would be a compounding
cut-off at Rs. 50 lakh of gross annual turnover and a floor rate
of 0.5% across the States. The scheme would also allow option
for GST registration for dealers with turnover below the
compounding cut-off.

Documentation and compliance

Due to the dual structure of the GST, the assessees will
be required to maintain separate accounts for Central GST
and State GST. There will be one periodical return for both
CGST and SGST with one copy each to be submitted to the
respective GST authority.

Conclusion

GST will give more relief to industry, trade and agriculture
through a more comprehensive and wider coverage of input
tax set-off andservice tax set-off, subsuming of several
Central and State taxes in the GST and phasing out of CST.

The transparent and complete chain of set-offs which will
result in widening of tax base and better tax compliance may
also lead to lowering of tax burden on an average dealer in
industry, trade and agriculture.

The subsuming of majorCentral and State taxes in GST,
complete and comprehensive setoff of input goods and
services and phasing out of Central Sales Tax (CST)
would reduce the cost of locally manufactured goods and
services.
 
This is likely to  increase the competitiveness of Indian
goods and services in the international market and to
boost  Indian exports.

BSNL to launch money transfers on Mobile

 February 21, 2010, 0:44 IST
Bibhu Ranjan Mishra / Bangalore



   
Bharat Sanchar Nigam Limited (BSNL) plans to launch in
the near future a mobile banking platform that will help
a mobile subscriber send money orders electronically
through SMSes.

 

The SMS by the sender will be

encashable at all post offices in the country.



In the first phase of BSNL’s plan, anyone who wishes
to send a money through the money (order) transfer
service will have to go to his nearest post office and
transfer the money by way of an SMS.
The SMS willcontain a unique code.
 
The person who receives this 

SMS can go to his nearest post office and collect the 

money by showing the code.



This process is expected to save a lot of money as the SMS
will reach in real time. This will also help those who do not
have a proper address for physical delivery of the money order.

Groceries on SMS
In the next stage of BSNL’s plans, a person will be able
to use his mobile phone for even buying goods at the local
kirana shop or any other store, with the help of an electronic
authorisation from his bank on his mobile phone.

BSNL Board Director (Consumer Mobility) R K Agarwal 
said the platform had been test-piloted in Chandigarh and the
state-run telecom major expects to roll out the service
in association with the postal department, after getting the
Reserve Bank of India’s approval.

“The real revolution is going to come when we launch our
mobile banking services, on which BSNL is actively working.
We have test-piloted a platform in Chandigarh, on which money
could be transferred electronically through money orders by
sending an SMS,” Agarwal said.

He, however, said RBI was cautious in its guidelines for
mobile banking, as a result of which the proposed roll-out
would happen only in a phased manner. “RBI has a cautious
policy as it has to check for frauds that may occur,” he added.

BSNL intends to help users buy merchandise with electronic
authorisation from banks.
 
Agarwal said SBI and YES Bank

had come forward to participate in BSNL’s mobile

banking service platform.

Mobile banking is a concept where you tie up with different
banks and system aggregators. “We have already tied up
some system integrators, including Obopay,” he added.

3G rings in higher Arpu
The launch of 3G cellular services has helped BSNL
get an average revenue per user (ARPU) that is 40 per cent
higher than that from 2G subscribers, Agarwal said.

BSNL has about 850,000 3G mobile subscribers at
present, which is expected to go up to a million by
the end of the current financial year. In the next financial
year, the company aims to add two million 3G subscribers.

“All 3G services take some time to take off.

Customers have started taking our 3G services

only since December last year,” said Agarwal.

So far, BSNL has rolled out 3G services in 318 cities, which
will be extended to 760 cities before the end of March
next year. BSNL expects to derive a revenue of Rs 10,500 crore
from mobile services, including 3G.

Revenue Proposals Expected from Budget 2010

By MANAS MODY and SIDHARTH J. NEGANDHI

We expect Budget 2010 to lay down the roadmap for
achieving a 10% Gross Domestic Product growth rate
while containing inflation and the burgeoning fiscal deficit.
This appears to be an impossible trilogy given that increased
government spending and tax benefits are likely to be key
growth drivers which would make inflation and fiscal deficit
controls onerous tasks. Balancing these would be the most
important task for the finance minister on Budget Day.

This article focuses on the revenue proposals expected from Budget 2010.

 

There has been an engaging debate on the rollback of the
stimulus in the wake of the recovery. Opinions vary on both
the timing and extent of the rollback. One school
of thought argues that a withdrawal of the stimulus
is imperative to contain rising inflation, while an opposing
thought is that this would nip the economic recovery in the bud.

Let us split the stimulus into fiscal and monetary measures.

The Reserve Bank of India's decision to begin a rollback
of the monetary measures augurs well for inflation control.

Fiscal measures were meant to reduce production costs for
both consumer and capital goods and thereby stimulate
consumption and investment demand. Withdrawing these
measures is likely to result in cost-induced inflationary
pressure, especially if increased taxes are passed on to consumers.
Needless to say, the likely impact on growth will only spoil the party.

Also, with the much awaited Goods and Services Tax likely to
be unveiled in April 2011, any increase in the excise duty or
service tax would only be short term. However, measures
such as exemptions to exporters should be selectively
withdrawn given the strong recovery in exports.

Revenue proposals on indirect taxes
need to focus on widening the tax base to augment revenues

Area-specific excise duty exemptions have outlived their
purpose and are best withdrawn.

A single rate structure for excise duty
would pave the way for the GST rollout and
also augment revenues.

While the service tax net has been expanded
over the years to include a large number of services,
certain significant exceptions such as doctors are yet to be included. Also, the scope of certain taxable services must be expanded to widen the net.

An important focus of the budget must also be on plugging the procedural loopholes.

Manas Mody

The direct tax proposals are to be seen in the light
of two important developments – the introduction of the Direct
Tax Code bill and the growth of direct tax collections by 8.5% despite
the economic slump. Budget 2010 is significant as it will bridge the gap
between the current tax structure and the propositions made
by the new bill.

This promises that there would be considerable
relief for tax payers, encompassing the reshuffling of slabs,
reduced rates, increased deduction limits and so on.

The budget should take sizable steps towards a more
liberal and tax-payer friendly regime.

Hence, besides the rate of levy, a critical look
at some other provisions is vital.

The effective introduction of the much-hyped Limited Liability
Partnership has been marred because of the ambiguity in
spelling out taxation laws in the case of conversion from a
company to an LLP.

Otherwise, ambiguity prevails as the tax code
is not completely synchronized with the LLP memorandum.
Another grey area is the Minimum Alternate Tax for companies.

A complete shift in the basis of the levy of MAT puts in question
its applicability and relevance.

Search and seizure provisions have been at the dynamic
end for a long time. Amendments from a block assessment
to the assessment under section 153A have failed to achieve
the fine balance between increased collections and reduced litigation.

Budget 2010 should lay the pathway for the law going forward.

While tax exemptions have acted as investment catalysts for a
long time, many of these have outlived their purpose.

For a region to experience sustainable long-term growth,
the economics of investing there must exist beyond just tax benefits.
Withdrawing these exemptions would ensure a simplified structure
and equity for all regions, in addition to an expanded tax net.

Sector-specific exemptions linked to investments as opposed
to income, such as tax holidays for development of social
infrastructure like hospitals, schools in rural areas,
would be a more effective stimulant.

Sidharth Negandhi

Divestment claims importance in light of the increased fiscal deficit
and public debts. The government sees it as a means to soothe
its current fiscal stress.

However, the tall order of raising 25,000 crore rupees
annually puts pressure on the government for the
selection and modus for divestment. Given the current
market volatility and the low key response to the
government's share sale, the possibility of divesting
stakes through strategic partners must be considered
in the budget.


The long term objective of the budget's tax proposals would be
to provide ease of tax compliance to ensure ease of business
and to expand the net of taxpayers in India.

Steps taken towards simplifying tax compliance
have had a positive impact on direct tax revenues,
which contributed about 56% of the total tax
revenue in 2008-09 as compared to 41% in 2003-04.

However, procedural issues continue to remain the
proverbial "thorn in the flesh" and reforms on this
front would go a long way toward making India
a business-friendly destination.

Simplifying withholding tax norms, export
refund claim procedures and tax audit requirements
would be some of the steps expected in this direction.

The current tax administration is also burdened by longstanding
disputes and litigation. The 4-tier appellate system coupled
with ad hoc administrative discretion adds to the number of
outstanding cases. The introduction of a National Tax
Tribunal seems a possible way forward and must be kept
on a fast track to ensure the speedy disposal of tax disputes,
as well as serve as a way of releasing our already-stretched
higher judiciary.

The most significant part of the rationalization
would be the reorganization of tax treaties.

While some critics argue that this would impact foreign
investment, the crux of the investment rationale is strong
economic fundamentals; tax exemptions are only the icing
on the cake. Re-negotiating treaties would plug tax
leakages and also reduce money laundering practices.

About the authors:
 
Manas Mody is currently pursuing the Post Graduate
Programme in Management at ISB. He is a Chartered
Accountant and Lawyer, and was previously
working as an independent professional dealing
with appellate and assessment
stage work in direct taxes.

Sidharth J. Negandhi is a qualified Chartered
Accountant and currently pursuing his Post Graduate
Programme in Management at the ISB. Sidharth is the
President of the Finance Club and has keen interest in
Corporate Finance and Strategy.

New Form 16, Form 16A, Form 16AA, Form 27D, and forms showing breakup of TDS and TCS for Financial Year 2009-10 (A.Y. 2010-11)

Feb 21, 2010 Income Tax

Income-tax (First Amendment) Rules, 2010

Notification No. 9/2010/F.No. 142/27/2009-SO(TPL)

Dated 18-2-2010

S.O.  (E).– In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1.          (1)        These rules may be called Income-tax ( First Amendment) Rules, 2010.

(2)        They shall come into force from the 1^st day of April, 2009.
2. In the Income-tax Rules, 1962, -

(a)     for rules 30, 31 and 31A the following rules shall be substituted, namely:-

“Time and mode of payment to Government account of tax deducted at source or tax paid under sub?section (1A) of section 192.

30. (1) All sums deducted in accordance with the provisions of sections 192 to 194, section 194A, section 194B, section 194BB, section 194C, section 194D, section 194E, section 194EE, section 194F, section 194G, section 194H, section 194-I, section 194J, section 194K, section 194LA, section 195, section 196A, section 196B, section 196C and section 196D shall be paid to the credit of theCentral Government—

(a)                in the case of deduction by or on behalf of the Government, on the same day;

(b)               in the case of deduction by or on behalf of persons other than those mentioned in clause (a),—

(i) in respect of sums deducted in accordance with the provisions of section 193, section 194A, section 194C, section 194D, section 194E, section 194G, section 194H, section 194-I, section 194J, section 195, section 196A, section 196B, section 196C and section 196D—

(1) where the income by way of interest on securities referred to in section 193 or the income by way of interest referred to in section 194A or the sum referred to in section 194C or the income by way of insurance commission referred to in section 194D or the payment to non?resident sportsmen or sports associations referred to in section 194E or the income by way of commission, remuneration or prize on sale of lottery tickets referred to in section 194G or the income by way of commission or brokerage referred to in section 194H or the income by way of rent referred to in section 194-I or the income by way of fees for professional or technical services referred to in section 194J or the interest or any other sum referred to in section 195 or the income of a foreign company referred to in sub-section (2) of section 196A or the income from units referred to in section 196B or the income from foreign currency bonds or shares of an Indian company referred to in section 196C or the income of Foreign Institutional Investors from securities referred to in section 196D is credited by a person to the account of the payee as on the date up to which the accounts of such person are made, within two months of the expiration of the month in which that date falls;

(2)        in any other case, within one week from the last day of the month in which the deduction is made; and

(ii) in respect of sums deducted in accordance with the other provisions within one week from the last day of the month in which the deduction is made:

Provided that the Assessing Officer may, in special cases, and with the approval of the Joint Commissioner—

(a)                in cases falling under sub-clause (i), permit any person to pay the income-tax deducted from any income by way of interest, other than income by way of interest on securities or any income by way of insurance commission or any income by way of commission or brokerage referred to in section 194H quarterly on July 15, October 15, January 15 and April 15; and

(b)               in cases falling under sub-clause (ii), permit an employer to pay income-tax deducted from any income chargeable under the head “Salaries” quarterly on June 15, September 15, December 15 and March 15.

(1A) All sums paid under sub-section (1A) of section 192 shall be paid to the credit of the Central Government—

(a)                in the case of payment on behalf of the Government, on the same day;

(b)               in all other cases, within one week from the last day of each month on which the income-tax is due under sub-section (1B) of section 192.

(2) The person responsible for making the deduction from any income chargeable under the head “Salaries” or, the person who pays tax, referred to in sub-section (1A) of section 192 or, in cases covered by sub-section (5) of section 192, the trustees shall pay the amount of tax so deducted to the credit of theCentral Government by remitting it within the time prescribed in sub-rule (1) into any branch of the Reserve Bank of India or of the State Bank of India or of any authorized bank accompanied by an income-tax challan :

Provided that where the deduction or payment, as the case may be, is made by or on behalf of Government, the amounts shall be credited within the time and in the manner aforesaid without the production of a challan.

(3) The person responsible for making deduction under sections 193, 194, 194A, 194B, 194BB, 194C, 194D, 194E, 194EE, 194F, 194G, 194H, 194-I, 194J, 194K, 195, 196A, 196B, 196C and 196D shall pay the amount of tax so deducted to the credit of theCentral Government by remitting it within the time prescribed in sub-rule (1) into any branch of the Reserve Bank of India or of the State Bank of India or of any authorized bank accompanied by an income-tax challan, provided that where the deduction is made by or on behalf of Government the amount shall be credited within the time and in the manner aforesaid without the production of a challan.

Certificate of tax deducted at source or tax paid under sub?section (1A) of section 192.

31. (1) The certificate of deduction of tax at source or, the certificate of payment of tax by the employer on behalf of the employee, under section 203 to be furnished by any person deducting tax in accordance with theprovisions of—

(a)   section 192 shall be in Form No. 16:

Provided that in the case of an individual, resident in India, where his income from salaries before allowing deductions under section 16 of the Income-tax Act, 1961 does not exceed rupees one lakh fifty thousand,the certificate of deduction of tax at source shall be in Form No. 16AA;

(b)         section 193, section 194, section 194A, section 194B, section 194BB, section 194C, section 194D, section 194E, section 194EE, section 194F, section 194G, section 194-I, section 194J, section 194K,section 194LA, section 195, section 196A, section 196B, section 196C and section 196D shall be in Form No. 16A.

(2) The certificate mentioned in sub-rule (1) shall be furnished within a period of one month from the end of the month during which the credit has been given or the sums have been paid or, asthe case may be, a cheque or warrant for payment of any dividend has been issued to a shareholder:

Provided that where the income by way of interest on securities referred to in section 193 or the income by way of interest referred to in section 194A or the sum referred to in section 194C or the income by way ofinsurance commission referred to in section 194D or the payment to non-resident sportsmen or sports associations referred to in section 194E or the income by way of commission, remuneration or prize on sale of lottery tickets referred to in section 194G or the income by way of commission or brokerage referred to in section 194H or the income by way of rent referred to in section 194-I or the income by way of fees for professional ortechnical services referred to in section 194J or the interest or any other sum referred to in section 195 or the income of a foreign company referred to in sub-section (2) of section 196A or the income from units referred to in section 196B or the income from foreign currency bonds or shares of an Indian company referred to in section 196C or the income of ForeignInstitutional Investors from securities referred to in section 196D is credited by a person to the account of the payee as on the date up to which the account of such person are made,the certificate under sub-rule (1) shall be issued within a week after the expiry of two months from the month in which income is so credited:

Provided further that the certificate in the case of deduction of tax under sub-section (1) of section 192 or, payment of tax by the employer on behalf of the employee, under sub­section (1A) of that section or section 194D may be furnished within one month from the close of the financial year in which such deduction was made:

Provided also that the certificate in cases, other than those mentioned in the second proviso, where payment of income-tax deducted is permitted quarterly in accordance with clause (a) of the proviso to clause (b) of sub-rule (1) of rule 30 may be furnished within fourteen days from the date of payment of income- tax:

Provided also that where more than one certificate is required to be furnished to a payee for deductions of income-tax made during a financial year, the person deducting the tax, may on request from such payee, issue within one month from the close of such financial year a consolidated certificate in Form No. 16A for tax deducted during whole of such financial year.

(3)   Where in a case, the TDS certificate issued under this rule is lost, the person deducting tax at source may issue a duplicate certificate of deduction of tax at source on a plain paper giving necessary details as contained in Form No. 16 or Form No. 16A, as the case may be.

(4) The Assessing Officer before giving credit for the tax deducted at source on the basis of duplicate certificate referred to in sub-rule (3), shall get the payment certified from the Assessing Officer designated in this behalf by the Chief Commissioner or the Commissioner and shall also obtain an Indemnity Bond from the assessee.

Quarterly statement of deduction of tax under sub?section (3) of section 200.

31A.(1) Every person, being a person responsible for deducting tax under Chapter XVII­B shall, in accordance with the provisions of sub-section (3) of section 200, deliver or cause to be delivered to the Director-General of Income-tax (Systems) or the person authorized by the Director General of Income-tax (Systems), quarterly statement—

(i)           in Form No. 24Q in respect of deduction of tax at source under sub­sections (1) and (1A) of section 192; and

(ii)         in Form No. 26Q in respect of other cases of deduction of tax at source,

on or before the 15^th July, the 15^th October, the 15^th January in respect of the first three quarters of the financial year and on or before the 15^th June following the last quarter of the financial year:

Provided that where,—

(a)                the deductor is an office of Government; or

(b)               the deductor is a company; or

(c)                the deductor is a person required to get his accounts audited under section 44AB in the immediately preceding financial year; or

(d)               the number of deductees’ records in a quarterly statement for any quarter of the immediately preceding financial year is equal to or more than fifty,

the person responsible for deducting tax at source, and the principal officer in the case of a company shall deliver or cause to be delivered such quarterly statements on computer media (3.5” 1.44 MB floppy diskette or CD-ROM of 650 MB capacity):

Provided further that a person other than a person referred to in the first proviso, responsible for deducting tax at source, may at his option, deliver or cause to be delivered the quarterly statements on computer media (3.5” 1.44 MB floppy diskette or CD-ROM of 650 MB capacity):

Provided also that a person responsible for deducting tax at source from the payments referred to in rule 37A shall furnish quarterly statements in accordance with the provisions of rule 37A and rule 37B.

(2) The person responsible for deducting tax at source and preparing quarterly statements shall,—

(i)           quote his tax deduction and collection account number (TAN) and permanent account number (PAN) in the quarterly statement:

Provided that the permanent account number shall not be required to be quoted where tax has been deducted by or on behalf of the Government;

(ii)         quote the permanent account number of all persons in respect of whose income, tax has been deducted:

Provided that the permanent account number shall not be quoted in respect of the persons to whom the second proviso to sub-section (5B) of section 139A of the Act applies;

(iii) furnish particulars of the tax paid to the Central Government.

(3) The person responsible for deducting tax at source and preparing quarterly statements on computer media shall, in addition to the provisions in sub-rule (2),—

(i)               prepare the quarterly statement as per the data structure provided by the e-filing Administrator designated by the Board for the purposes of administration of Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003 supported by a declaration in Form No. 27A in paper format:

Provided that in case any compression software has been used for preparing the quarterly statement on computer media, such compression software shall be furnished on the same computer media;

(ii)               affix a label indicating name, permanent account number, tax deduction and collection account number and address of the person responsible for deduction of tax at source, the period to which the statement pertains and the volume number of the said computer media in case more than one volume of such media is used”.

(b)      after rule 31A the following rule shall be inserted, namely:-

“Quarterly statement of collection of tax under sub?section (3) of section 206C.

31AA. (1) Every person, being a person responsible for collecting tax under section 206C shall, in accordance with the proviso to sub-section (3) of section 206C, deliver or cause to be delivered to the Director-General of Income-tax (Systems) or the person authorized by the Director General of Income-tax (Systems), quarterly statement in Form No. 27EQ on or before the 15^th July, the 15^th October, the 15^th January in respect of the first three quarters of the financial year and on or before the 30^th April following the last quarter of the financial year:

(a)                  the collector is an office of Government; or

(b)                 the collector is a company; or

(c)                  the collector is a person required to get his accounts audited under section 44AB in the immediately preceding financial year; or

(d)                 the number of collectees’ records in a quarterly statement for any quarter of the immediately preceding financial year is equal to or more than fifty, the person responsible for collecting tax at source, and the principal officer in the case of a company shall deliver or cause to be delivered such quarterly statements on computer media (3.5” 1.44 MB floppy diskette or CD?ROM of 650 MB capacity):

Provided further that a person other than a person referred to in the first proviso, responsible for collecting tax at source, may at his option, deliver or cause to be delivered the quarterly statements on computer media (3.5” 1.44 MB floppy diskette or CD?ROM of 650 MB capacity).

(2) The person responsible for collecting tax at source and preparing quarterly statements shall,—

(i)            quote his tax deduction and collection account number (TAN) and permanent account number (PAN) in the quarterly statement:

Provided that the permanent account number shall not be required to be quoted where tax has been collected by or on behalf of the Government;

(ii)           quote the permanent account number of all persons in respect of whose income, tax has been collected;

(iii) furnish particulars of the tax paid to the Central Government.

(3) The person responsible for collecting tax at source and preparing quarterly statements on computer media shall, in addition to the provisions in sub?rule (2),—

(i)                 prepare the quarterly statement as per the data structure provided by the e?filing Administrator designated by the Board for the purposes of administration of Electronic Filing of Returns of Tax Collected at Source Scheme, 2005 supported by a declaration in Form No. 27B in paper format:

Provided that in case any compression software has been used for preparing the quarterly statement on computer media, such compression software shall be furnished on the same computer media;

(ii)                  affix a label indicating name, permanent account number, tax deduction and collection account number and address of the person responsible for collection of tax at source, the period to which the statement pertains and the volume number of the said computer media in case more than one volume of such media is used.”

(c)      after rule 37 the following rule shall be inserted, namely:-

“Returns regarding tax deducted at source in the case of non?residents.

37A. The person making deduction of tax in accordance with sections 193, 194, 194E, 195, 196A, 196B, 196C and 196D of the Act from any payment made to—

(i)          a person, not being a company, who is a non-resident or a resident but not ordinarily resident, or

(ii)        a company which is neither an Indian company nor a company which has made the prescribed arrangements for the declaration and payment of dividends within India;

shall send within fourteen days from the end of the quarter a statement in Form No. 27Q to the Director General of Income-tax (Systems) or the person or agency authorized by the Director General of Income-tax (Systems) referred to in rule 36A:

Provided that where the income by way of interest on securities referred to in section 193 or the payment to non-resident sportsmen or sports associations referred to in section 194E or the interest or any other sum referred to in section 195 or the income of a foreign company referred to in sub-section (2) of section 196A or the income from units referred to in section 196B or the income from foreign currency bonds or shares of an Indian company referred to in section 196C or the income of Foreign Institutional Investors from securities referred to in section 196D is credited by a person to the account of the payee as on the date up to which the accounts of such person are made, the statement in Form No. 27Q shall be sent within fourteen days after the expiry of two months from the month in which income is so credited.”

(d)     for rules 37CA and 37D the following rules shall be substituted, namely:-

“Time and mode of payment to Government account of tax collected at source under section 206C.

37CA. (1) All sums collected in accordance with the provisions of sub-section (1) or sub­section (1C) of section 206C shall be paid to the credit of the Central Government within one week from the last day of the month in which the collection is made.

(2) The person responsible for making collection under sub-section (1) or sub-section (1C) of section 206C shall pay the amount of tax so collected to the credit of the Central Government by remitting it within the time prescribed in sub-rule (1) into any branch of the Reserve Bank of India or of the State Bank of India or of any authorized bank accompanied by an income-tax challan:

Provided that where the collection is made by or on behalf of the Government, the amount shall be credited within the time and in the manner aforesaid without the production of a challan.

Certificate for collection of tax at source under section 206C (5).

37D. (1) The certificate of collection of tax at source under sub-section (5) of section 206C to be furnished by any person collecting tax at source under sub-section (1) or sub­section (1C) of that section shall be in Form No. 27D.

(2)   The certificate referred to in sub-rule (1) shall be furnished within a period of one month from the end of the month during which the amount is debited to the account of the buyer or licensee or lessee or payment is received from the buyer or licensee or lessee, as the case may be:

Provided that where more than one certificate is required to be furnished to a buyer or licensee or lessee for tax collected at source in respect of the period ending on the 30^th September and the 31^st March in each financial year, the person collecting the tax, may on request from such buyer or licensee or lessee, issue within one month from the end of such period, a consolidated certificate in Form No. 27D for tax collected during whole of such period.

(3) Where in a case, the certificate for tax collected at source issued under this rule is lost, the person collecting tax at source may issue a duplicate certificate of collection of tax at source on a plain paper giving necessary details as contained in Form No. 27D.

(4) The Assessing Officer before giving credit for the tax collected at source on the basis of duplicate certificate referred to in sub-rule (3), shall get the payment certified from the Assessing Officer designated in this behalf by the Chief Commissioner or Commissioner and shall also obtain an Indemnity Bond from the assessee. ”;

(e)    for Form No.16 and Form no. 16A the following forms shall be substituted, namely:-

Download New Form 16 in (Salary Certificate) after amendment by Income-tax (First Amendment) Rules, 2010 (notification No. 09/ 2010 Dated 18/02/2010)  for Financial Year 2009-10/ Assessment Year 2010-11

Download New Form 16A in (TDS Certificate) after amendment by Income-tax (First Amendment) Rules, 2010 (notification No. 09/ 2010 Dated 18/02/2010) for Financial Year 2009-10/ Assessment Year 2010-11

(f)       after Form 16A the following form shall be inserted, namely:

Download New Form 16AA in Certificate for tax deducted at source from income chargeable under the head “Salaries” – cum – Return of income) after amendment by Income-tax (First Amendment) Rules, 2010 (notification No. 09/ 2010 Dated 18/02/2010) for Financial Year 2009-10/ Assessment Year 2010-11

(g)               Forms 17 and 24C shall be omitted;

(h)               In Form 24Q, for Annexure I, the following Annexure I shall be substituted, namely:?

ANNEXURE I: DEDUCTEE WISE BREAK-UP OF TDS

ANNEXURE: DEDUCTEE WISE BREAK-UP OF TDS

(Please use separate Annexure for each line – item in the table at S. No. 4 of main Form 26Q)
(j)      for Form No. 27D, the following form shall be substituted, namely:

FORM NO. 27D

(k)         for Form 27EQ:

(i)               for the figure and letter “31A”, the figure and letter“ 31AA” shall be substituted;

(ii)             for the Annexure, the following Annexure shall be substituted, namely:?

ANNEXURE: PARTY WISE BREAK-UP OF TCS

(l)           for Form 27Q:?

(i)   for the words, figures and letters “see rule 31A(1)(c)(i)”, the words, figures and letters “see sections 194E, 195, 196A, 196B, 196C, 196D and rules 31A and 37A”, shall be substituted;

(ii)  or the Annexure, the following Annexure shall be substituted, namely:?

ANNEXURE: PARTY WISE BREAK-UP OF TCS

[Notification No.___ /2010/F.No. 142/27/2009?SO(TPL)]

(M. RAJAN)
Under Secretary to the Govt. of India

Note:? The principal rules were published vide Notification No. S.O 969 (e) dated the 26th of march, 1962 and last amended by Income?tax (13th Amendment ) Rules, 2009 vide Notification No. S.O. 3245 (E) dated 18th December, 2009.

Buy a house- Tax Planing

Feb 22, 2010

As the financial year comes to an end, it is time to 

start planning your tax saving strategies. 

 

A house can also be used to reduce the tax liability
to a certain extent. Under Section 24 of the Income

Tax Act, interest paid up to Rs 1.5 lakhs per annum 

on a home loan can be set-off from salary or business
income, for a self-occupied property.

Loan for construction eligible for deduction

A loan availed for the construction of a residential property,
purchase of a residential property, extension of an existing house,
and major repairs and renovation of a house are eligible for tax benefits.

Under Section 88 of theIncome Tax Act , a home loan borrower can
claim a deduction of up to Rs 1 lakh from his taxable income
on repayment during the year along with specified savings
instruments like provident fund.

All co-owners eligible for deduction

In case there are co-owners to a property, each of them can

claim tax benefits separately , in proportion to their share

holding in the property. If the share holding is not mentioned
in the purchase deed, they can execute an agreement on a
stamp paper, mentioning the shares in the property,
and claim tax benefits separately .

Co-owners can thus claim a deduction of up to Rs 1.5 lakhs
per annum separately, on interest paid towards a self-occupied house,
and also up to Rs 1 lakh per annum towards principal amount repaid.

Pre-EMI qualifies for benefit

The entire pre-EMI interest amount (the interest paid 

during the construction period ) is allowed as a deduction

under Section 24 of the Income Tax Act equally over five years
(20 percent of total interest paid per annum), starting from the
year in which the construction is completed.

However, if one avails a loan only for a land purchase, 
he is not eligible for any tax benefits. In the case of a
composite loan (for land and construction ) and the house
construction is completed within three years, only after
completion ofthe construction will one be eligible for the
tax benefits.


Posted by Bank Finance India at 3:05 PM

Expectation from forthcoming budget from the point of view of taxation of Individual

Feb 21, 2010

Some recommendations that could ease the income tax
burden on individuals, and improve the economic
growth rate on account of increased domestic demand are mentioned below:

Raise the bar:
 
The slab of tax free income has not moved
up in line with the real inflation.

The current basic exemption limit
of Rs 1,60,000 should be increased to Rs 3,00,000.

This will increase the purchasing power of individuals and stimulate demand.

Reduce the maximum tax rate:
 
Last year, removing the surcharge only
benefited the higher income group and there
was no respite for the lower income group.

So, this year lower and middle income group
can be benefitted by reducing the peak rate from
current 30% to 25%.

Further, the peak rate should be attracted
at significantly higher income slab (as compared
to current limit of Rs 5,00,000).

Though this aspect has been recognised in
the proposed Direct Tax Code (DTC),
the same also needs to be considered in the forthcoming budget.

Increase the investment limit under Section 80C of I-T Act: 

Though , the avenues for investment under Section 80C have
been increased with the years, the limit of Rs 100,000 has remained
the same.

The Government should increase the aggregate deductible
limit under Section 80C of I-T Act from Rs 1,00,000 to Rs 2,50,000.

This will encourage long term savings by tax payers and also
enhance availability of low cost funds for the Government to
meet its long term development needs.

Additional benefits related to housing:
 
Currently, an individual is permitted deduction
for interest on loan for a self-occupied property
up to Rs 1,50,000. This limit has not been
revised for a long time, while property prices
have increased manifold.

The Government should consider
increasing this limit to Rs 3,00,000 or
alternatively, this cap may be scrapped.

Also the deduction available under Section 80C of I-T Act
on repayment of principal amount of housing loan should
be appropriately increased. This would not only encourage
investment in the real estate sector but will also make
buying a house relatively affordable.

Medical expense reimbursements:

Medical expenses of up to Rs 15,000 reimbursed
by the employer to the employees for medical treatment
of employees or his family member are tax-free.
Accordingly, employee ends up paying tax on any
sum reimbursed over and above Rs 15,000.
With increasing healthcare costs, the existing tax
free limit of Rs 15,000 should be suitably increased.

Transportation expenses:
 
The transportation allowance granted by the employer
to his employee for commuting between the place of
work and residence is tax-free to the
extent of Rs 800 per month. This limit was fixed
more than a decade ago, and definitely needs
to be revised upwards given the rising commuting
costs across the country.

Tax relief on contribution to superannuation fund in excess of Rs 1,00,000: 

 
Currently employers contribution to superannuation fund in
excess of Rs 1,00,000 is taxed in employees hands. Employees
should not be made liable to pay tax on such contribution the
benefit of which may or may not arise and the benefit is
subjected to tax at the time of actual receipt.

I-T officer probing Koda Scam shifted to assessment wing from investigation wing

 

 Feb 21,2010
Ujjawal Chaudhary, senior Income Tax (I-T) officer,
who led the probe into the multi-crore Madhu Koda scam,
may have been on the verge of unravelling the link between
politicians and hawala traders when he was abruptly shifted this week.

Sources said the team led by Chaudhary, who has been taken
off the Koda probe and moved to the assessment wing, had
gathered strong evidence linking politicians and others to hawala
operators engaged in laundering black money abroad. Chaudhary
was transferred when raidswere still continuing
at Chaibasa in Jharkhand.
 

The official and his colleagues are learnt to have hit a `jackpot’ 

during their raids on Pune-based businessman Ajay Bafna, who 

was under surveillance since October last year when the first

indication of his dealings with Sanjay Chaudhary, 

close associate of the former Jharkhand chief minister 

Madhu Koda, surfaced.

The team struck gold also while raiding two hawala 

traders in Delhi. The search of the business premises of one 

Vipin Kapoor, a hawala operator based in Karol Bagh, 

yielded details of accounts of banks in Switzerland 

and other countries which seem to belong to politicians.

Kapoor is a familiar face for tax authorities, having been 

convicted for gold smuggling earlier. But evidence seized 

from him surprised the raiding team given the likely 

connections with influential accounts.

 

Within Jharkhand, raids by I-T personnel led by Chaudhary 

over three days beginning February 16, reveaked disclosures 

of hundreds of crores in concealed incomes of bureaucrats

and businessmen. Those targeted included Manohar Lal Pal, 

personal aide to current Jharkhand chief minister Shibu Soren.

 

A former employee of Coal India Limited who was sacked for 

allegedly forging his educational qualifications, Pal, faced with 

evidence, declared assets and investments totalling up to Rs 65 crore.

Similarly, two businessmen engaged in mining — 

much of it allegedly illegal — have also admitted to having 

concealed Rs 30 crore from the tax authorities. 

 

A similar admission from a Kolkata-based chartered accountant, 

accused of helping the scamsters fudge accounts and who was 

confronted with papers showing he had not declared income 

worth Rs 12 crore, had appeared to be on the cards when

Chaudhary was called off.

The findings of the investigation have generated a 

sensation in Jharkhand and other places like Delhi 

and Mumbai as slueths unearthed sordid details of the

brazen loot of public money. Those who are facing 

charges include officials as well as engineers working

in the mining and electricity departments.

 

In one particular instance, the team stumbled upon 

payment of Rs 4.6 crore allegedly made by cheque to 

functionaries of the Koda administration by an 

Andhra Pradesh-based construction company. 

In return, the company was allegedly allowed to 

nflate the cost of the project it was assigned under the

Rajiv Gandhi Gramin Vidyutikaran Yojana.

The explanation offered by the tax authorities makes 

Chaudhary’s transfer seem innocuous. 

“He will be based in Patna and his jurisdictions

will include both Bihar and Jharkhand. 

He has just been shifted to the assessment 

wing because he is best placed to assess the 

value of whatever the accused in the Koda 

scam and others have been found to possess,” it was said.

 

This does not wash with many because officers are 

seldom transferred mid-way through an investigation. 

Chaudhary, having spent just seven months at the last 

station, was not due for a transfer either. 

He took charge of the investigation on July 14, 2009.

What is puzzling political circles is that the I-T’s investigation

is all against politicians who, with the exception of NCP’s 

Kamlesh Singh, former colleague of Koda, are not part

of the UPA. 

In fact, many in Congress would be relishing 

the discomfiture of Shibu Soren over the raid on Pal, 

considering that he preferred the BJP for an alliance.

Chaudhary’s transfer has been taken to the judiciary, 

with a group of lawyers seeking the intervention of the 

Jharkhand High Court which is hearing the PIL against Koda.

 

But members of his team remain wary of more transfers. 

It is learnt that even during the course of investigation, 

Chaudhary and his team mates did not get enough 

cooperation while probing business dealings of Koda 

and his associates in Mumbai and elsewhere.