TaxTMI 
TaxTMI 
Memorandums
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....conomic development, measures to boost tourism, tax payers assistance, rationalisation and simplification, measures to curb tax avoidance, widening of tax base, welfare measures , resource mobilization measures and strengthening tax administration. (iii) Amendment of the Wealth-tax Act, 1957. (iv) Amendment of the Expenditure-tax Act, 1987. (v) Amendment of the Life Insurance Corporation Act, 1956. (vi) Amendment of General Insurance Business (Nationalisation) Act, 1972. (vii) Amendment of Oil Industry (Development) Act, 1974. (viii) Amendment of National Dairy Development Board Act, 1987. (ix) Amendment of Prasar Bharati (Broadcasting Corporation of India) Act, 1990. 2. Subject to certain exceptions, which have been indicated while dealing with the relevant provisions, the Bill follows the principle that changes in the provisions of the tax laws, should ordinarily be made operative prospectively in relation to current incomes and not in relation to incomes of past years. The substance of the main provision in the Bill relating to direct taxes is explained in the following paragraphs :- INCOME-TAX I. Rates of income-tax in respect of incomes liable to ....
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....ates for deduction of income-tax at source from "Salaries", computation of "advance tax" and charging of Income-tax in special cases during the financial year 2002-2003. The rates for deduction of income-tax at source from or payment of tax on "Salaries" during the financial year 2002-2003 and also for computation of "advance tax" payable during that year in the case of all categories of tax payers have been specified in Part III of the First Schedule to the Bill. These rates are also applicable for charging income-tax during the financial year 2002-2003 on current incomes in cases where accelerated assessments have to be made, e.g., provisional assessment of shipping profits arising in India 2 to non-residents, assessment of persons leaving India for good during that financial year, assessment of persons who are likely to transfer property to avoid tax, or assessment of bodies formed for short duration, etc. The salient features of the rates specified in the said Part III are indicated in the following paragraphs :- A. Individuals, Hindu undivided families, etc. Paragraph A of Part III of the First Schedule specifies the rates of income-tax in the case of individual....
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....1 2.98 60,200 1,061 1,092 31 2.92 65,000 2,040 2,100 60 2.94 75,000 4,080 4,200 120 2.94 1,50,000 19,380 19,950 570 2.94 2,00,000 34,680 35,700 1,020 2.94 3,00,000 65,280 67,200 1,920 2.94 4,00,000 95,880 98,700 2,820 2.94 5,00,000 1,26,480 1,30,200 3,720 2.94 10,00,000 2,79,480 2,87,700 8,220 2.94 25,00,000 7,38,480 7,60,200 21,720 2.94 1,00,00,000 30,33,480 31,22,700 89,220 2.94 * Marginal relief would be provided to ensure that the additional income-tax payable, including surcharge, on the excess of income over Rs.60,000/- is limited to the amount by which the income is more than Rs.60,000/ -. 3 B. Co-operative societies In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Bill. These rates are the same as those specified in the corresponding Paragraph of Part I of the First Schedule to the Bill. The tax payable would be enhanced by a surcharge for the purposes of the Union at the rate of five per cent. of the tax payable. C. Firms In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule t....
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....t April, 2003 and will, accordingly, apply in relation to the assessment year 2003- 2004 and subsequent years. [Clause 14] Fiscal incentives for modernization and fleet expansion of the shipping business Under the existing provisions of section 33AC of the Income-tax Act, a government company or a public company formed and registered in India with the main object of carrying on the business of operation of ships is allowed a deduction of an amount not exceeding hundred per cent of the profits derived from the business of operation of ships and carried to a reserve account, subject to certain conditions. The first proviso to sub-section (1) of the said section, however, provides that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid-up share capital (excluding the amounts capitalized from the reserves) of the assessee, no allowance shall be made in respect of such excess. In order to help the shipping industry modernise and expand its fleet, it is proposed to expand the scope of the reserve to provide that in case the aggregate of the amounts carried to the reserve account exceeds twice the aggregate....
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....issued on or after the 1st day of April, 2002 by the Small Industries Development Bank of India (SIDBI). This amendment will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003-04 and subsequent years. [Clause 25] In order to give further support to the small scale industries, it is proposed to exempt income of the Credit Guarantee Fund Trust for Small Scale Industries for a period of five previous years relevant to the assessment years beginning on 1st day of April, 2002 and ending on 31st day of March, 2007. The proposed amendment will take effect retrospectively from 1st April, 2002 and will, accordingly, apply in relation to the assessment year 2002-2003 and four subsequent assessment years. [Clause 4(v)] Incentive for investment in housing Under the existing provisions contained in section 24 of the Income-tax Act, interest payable on capital borrowed on or after 1st April, 1999, for acquiring or constructing one self-occupied house is deductible upto one lakh fifty thousand rupees where such acquisition or construction is completed before 1st April, 2003. To sustain the pace of investment in the housing se....
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....mputed before making any deduction under this clause and Chapter VI-A) is allowed to a public financial institution, a State financial corporation and a State industrial investment corporation in respect of any provision for bad and doubtful debts made by such institutions or corporations. It is proposed to increase the limit of five per cent given under the proviso to sub-clause (a) to ten per cent and also extend this facility to a public financial institution, State financial corporation or State industrial investment corporation. This optional deduction shall be available for a period of two assessment years commencing on or after 1st April, 2003 and ending before 1st April, 2005. The proposed amendments will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003- 2004 and subsequent years. [Clause 19] Exemption of capital gains on lending of securities through the RBI Under the existing provision contained in clause (xv) of section 47 of the Income-tax Act, any transfer in a scheme for lending of any securities under an agreement or arrangement, which the assessee has entered into with the borrower of such securities a....
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....proposed amendments will take effect retrospectively from 1st April, 2002 and will, accordingly, apply in relation to the assessment year 2002-2003 and subsequent years. [Clause 43] MEASURES TO ACCELERATE ECONOMIC DEVELOPMENT Incentive for amalgamation in telecom sector Under the existing provisions contained in section 72A of the Income-tax Act, the benefit of carry forward of losses and unabsorbed depreciation is allowed in cases of amalgamation of a company owning an industrial undertaking or a ship, with another company. Industrial undertaking is defined to mean any undertaking which is engaged in the manufacture or processing of goods or computer software, the business of generation or distribution of electricity or any other form of power, mining or the construction of ships, aircrafts and railway systems. With a view to encourage rapid consolidation and growth in an important infrastructural area it is proposed to extend the benefit under this section to an industrial undertaking engaged in the business of providing telecommunication services, related to infrastructure. This amendment will take effect from 1st April, 2003 and will, accordingly, apply in relati....
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....ces provided to foreign tourists and a further amount equal to 20% of such profits, as are transferred to a reserve account and utilised in the prescribed manner for development of tourism related infrastructure within five years. For the assessment year 2004-2005, the total amount of deduction is equal to 10% of eligible profits and a further 10% of such profits, as are transferred to the reserve account. In view of the slowdown in the tourism sector, subsequent to the recent global events, as a measure to provide fiscal support to this sector, the Bill seeks to enhance the rate of deduction in the following manner. For the assessment year 2003-2004, 25% of profits from services to foreign tourists, and further 25% of such profits, as are transferred to the reserve, thereby raising the overall deduction from 40% to 50%. For the assessment year 2004-2005, 15% of profits from services to foreign tourists, and further 15% of such profits as are transferred to the reserve, thereby raising the overall deduction from 20% to 30%. This amendment will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003-2004 and subsequent years. [C....
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....ompany. In the year of transfer, no deduction shall be available to the amalgamating company, the demerged company or to the firm or proprietary concern. The proposed amendment will take effect retrospectively from 1st April, 2001 and will, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. [Clause 18] Publication of accounts by religious and charitable trusts in a local news paper Under the existing provision contained in clause (c) of section 12A, the exemption under sections 11 and 12 is not available to a trust or institution, having total income exceeding one crore rupees without giving effect to the provisions of sections 11 and 12, unless such trust or institution publishes its accounts in a local newspaper, before the due date of furnishing the return of income and also furnishes a copy of such newspaper along with the return of income. Under the existing provisions contained in the ninth proviso of clause (23C), income of trust or fund or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clauses (iv), (v), (vi), (via) of the said clause, whose gros....
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....ase may be, and credit is given to such person for the amounts so deducted on the production of a certificate furnished under section 203 in the assessment made under this Act for the assessment year for which such income is assessable. Hardship is being faced by the assessees since in many cases certificates under section 203 are not furnished to them and as a result credit is not given for the tax so deducted. With a view to mitigate this hardship, it is proposed to insert a new sub-section (14) in section 155 to provide that where in the assessment for any previous year or in any intimation or deemed intimation under sub-section (1) of section 143 for any previous year, credit for tax deducted in accordance with the provisions of section 199 has not been given on the ground that the certificate furnished under section 203 was not filed with the return and subsequently such certificate is produced before the Assessing Officer within two years from the end of the assessment year in which such income is assessable, credit of tax deducted at source shall be given to the assessee on production of such certificate. Nothing contained in the proposed sub-section shall apply unless....
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....rs to fulfil their tax obligations and receive refunds, if any, within a very short period without any interface with the Income-tax Department, it is proposed to amend section 139 to provide that a return furnished by an employee through his employer, in accordance with a scheme to be notified by the Central Board of Direct Taxes for bulk filing of returns on computer readable media, will be deemed to be a return furnished under that section by the employee. This amendment will take effect retrospectively from 1st April, 2002, and will, accordingly, apply in relation to the assessment year 2002-2003 and subsequent years. [Clause 56] 8 Amendment of section 14A Through the Finance Act, 2001, a new section namely 14A was inserted in the Income-tax Act retrospectively with effect from 1.4.1962 to clarify the intention of the legislature that no deduction shall be allowed in respect of any expenditure incurred by an assessee in relation to income which does not form part of the total income under the Income-tax Act. The intention of inserting the new section retrospectively was to set the existing controversy on this issue at rest and not to unsettle the cases by raising....
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.... certificates, etc., are specified or issued by the Central Government for the purposes of the said clauses for tax exemption on or after 1st day of June, 2002. The proposed amendments will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003- 2004 and subsequent assessment years. [Clauses 4(b), 4(c), 4(k)(i) and 4(k)(ii)] Withdrawl of exemption of grossing up of tax in certain cases Under the existing provision contained in clause (5B) of section 10, the tax paid by an employer (being the Government, local authority, any corporation set up under any special law or any approved institution or body carrying on scientific research), on remuneration payable to a technician, (being an individual not resident in India in any of the four financial years immediately preceding the year in which he arrived in India) is not included in computing the total income of the technician. Under the existing provision of clause (6A) of section 10, the tax paid by Government or Indian concern, on royalty/ or fees for technical services paid by them under an agreement, which either relates to a matter included in the industrial policy of the ....
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....rein they collect an exchange risk premium to meet the actual losses on account of exchange fluctuation. The ERAFs have been in existence for a considerable period now and the tax exemptions have outlived their utility. It is, therefore, proposed to withdraw exemption on income of Exchange Risk Administration Funds and income received as Exchange Risk Premium by a Public Financial Institution by deleting clauses (14A) and (23E) of section 10. The proposed amendments will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003- 2004 and subsequent years. [Clauses 4(j) and 4(u)] Addition or deduction to the actual cost of a capital asset on account of change in the rate of exchange to be allowed on actual discharge of the liability Under the existing provisions contained in section 43A, where an assessee has acquired any capital asset from a country outside India for the purposes of his business or profession on deferred payment terms or against a foreign loan, before the date of devaluation of the rupee, the additional rupee liability incurred by him in meeting the instalments of the cost of the asset or of the foreign loa....
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....t no deduction of income-tax shall be made on any interest or dividend payable to the Corporation in respect of any securities or shares owned by it or in which it has full beneficial interest. Section 35A of the General Insurance Business (Nationalisation) Act, 1972 provides that no deduction of income-tax shall be made on any interest or dividend payable to the Corporation or to any of the four companies formed by virtue of the schemes framed under sub-section (1) of section 16 of that Act, in respect of any securities or shares owned by the Corporation or such company or in which the Corporation or such company has full beneficial interest. It is proposed to omit section 43A of the Life Insurance Corporation Act, 1956 and section 35A of the General Insurance Business (Nationalisation) Act, 1972. It is also proposed to amend section 193 and section 194 to provide that no tax shall be deducted at source under the said sections in respect of any interest or dividend payable to the Life Insurance Corporation of India or the General Insurance Corporation of India or to any of the four companies formed by virtue of the schemes framed under sub-section (1) of section 16 of the....
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.... book profit. This clarification is also being provided in section 115JA of the Income-tax Act, 1961, with retrospective effect from the 1st day of April, 1997. The proposed amendments in section 115JB shall take effect retrospectively from 1st April, 2001. [Clauses 48 and 49] Presumptive income for truck owners revised for inflation-adjustment Under the existing provisions of section 44AE of the Income-tax Act, 1961 a presumptive scheme is available to assessees engaged in business of plying, hiring or leasing goods carriages. The scheme applies to an assesee, who owns not more than ten goods carriages. Under this scheme, which is optional for the assessee, a fixed amount of income per vehicle is presumed to accrue to the owner of the vehicle and charged to tax at applicable tax rates for the year. Under the existing provisions, income under this section is presumed to be Rs.2,000/- per month, per vehicle for owners of heavy goods vehicles, and Rs.1,800/- per month, per vehicle for the owners of light goods vehicles. An assessee opting for this scheme is exempted from maintaining books of accounts and other details to substantiate the income. With a view to ratio....
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....ode of repayment of certain deposits Under the existing provisions of section 269T of the Income-tax Act, no branch of a banking company, cooperative bank and no 11 other company or cooperative society or partnership firm or other person, can repay any deposit made with such entity otherwise than by an account payee cheque or an account payee draft drawn in the name of the person who has made the deposit, in cases where the amount of deposit or the aggregate of the deposits held, exceeds twenty thousand rupees. The Explanation below sub-section (2) of the said section defines 'deposit' to mean any deposit of money, which is repayable after notice or repayable after a period and, in the case of a person other than a company, includes deposit of any nature. The said section, which is intended to counteract tax evasion, is applicable only to deposits. It is proposed to substitute the existing section by a new section so as to extend its scope to loans also, and delete provisions contained therein, which have become obsolete. These amendments will take effect from 1st June, 2002. [Clause 95] Modifications of provisions relating to set off of long-term capital loss ....
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....s seized during search, prohibitory orders to remain in force and handing over of books of accounts to the Assessing Officer. With a view to rationalise the provisions, it is accordingly proposed- (i) to amend sub-section (8) to provide that the books of accounts or other documents seized shall not be retained for a period exceeding thirty days after the completion of the relevant assessment proceedings under Chapter XIV-B, unless the reasons for retaining the same are recorded in writing and the approval of the specified authorities is obtained; (ii) to amend sub-section (8A) of the said section to provide that the prohibitory order passed under sub-section (3) shall not remain in force for a period exceeding sixty days from the date of the order. (iii) to substitute sub-section (9A) to provide that the books of account, other documents and assets seized shall be handed over to the Assessing Officer within sixty days from the date on which the last of the authorisations for search was executed. The proposed new Explanation 1 occurring below sub-section (14) of the said section clarifies the meaning of execution of an authorisation for search. The existing provisions of....
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....nts which represent a false claim of any expense, deduction, or allowance under the Income-tax Act; (ii) amend sub-section (1) of section 158BB to clarify that the block assessment of undisclosed income is to be based on the evidence found in the search and the evidence gathered in post-search inquiries made on the basis of material found in the search. (iii) amend clauses (a) and (b) of the said sub-section to clarify that the assessments mentioned in clause (a) are those which have been concluded prior to the date of commencement of search or date of requisition, and the returns mentioned in clause (b) include a return filed in response to notice issued under sub-section (1) of section 142; (iv) substitute clause (c) of the said sub-section to clarify that losses incurred in years for which no return has been filed by the due date shall be added back while computing the undisclosed income, and further, that where returns were not filed because the total income was not taxable, undisclosed income shall not include such total income; (v) amend the Explanation to the said sub-section to provide that for the purpose of aggregation, the total income or loss of each previou....
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....Act provides that the Assessing Officer or the Commissioner (Appeals) shall levy penalty in cases of failure to comply with certain notices issued in the course of assessment proceedings and cases in which particulars of income have been concealed or inaccurate particulars furnished. It is proposed to amend the section to include a reference to the Commissioner as being an authority who can initiate and levy penalty under sub- section (1) of the said section. Similar reference is proposed to be made in Explanation 1 and Explanation 7 to the said sub-section. Amendment on similar lines is proposed to be made in section 18 of the Wealth-tax Act. These amendments will take effect from 1st June, 2002. The existing provisions of clauses (ii) and (iii) of sub-section (1) of the said section provide for levy of the penalty specified therein, in addition to any tax payable. It is proposed to amend the said clauses to clarify that the penalty specified in them can be levied even if no tax is payable on the total income assessed. The Bill further proposes to amend Explanation 4 which defines the expression 'the amount of tax sought to be evaded' in different circumstances, ....
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....o provide as to when two enterprises shall be deemed to be associated enterprises. It is proposed to amend sub-section (2) of the said section to clarify that the mere fact of participation by one enterprise in the management or control or capital of the other enterprise, or the participation of one or more persons in the management or control or capital of both the enterprises shall not make them associated enterprises, unless the criteria specified in sub-section (2) are fulfilled. Under the existing provisions contained in the proviso to sub-section (2) of section 92C of the Income-tax Act, if the application of the most appropriate method leads to determination of more than one price, the arithmetical mean of such prices shall be taken to be the arm's length price in relation to the international transaction. With a view to allow a degree of flexibility in adopting an arm's length price, it is proposed to amend the proviso to sub-section (2) of the said section to provide that where the most appropriate method results in more than one price, a price which differs from the arithmetical mean by an amount not exceeding five per cent of such mean may be taken to be the arm....
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....the Commission has been vested with the powers to send a case back to the Assessing Officer if the assessee does not cooperate in the proceedings before the Commission. In order to ensure early settlement of such applications, and speedy recovery of taxes at low cost, it is proposed to amend sub- section (1) of section 245D to provide that the Settlement Commission may where it is possible, pass an order rejecting the application or allowing the application to be proceeded with within a period of one year from the end of the month in which such application is made. It is further proposed to amend sub-section (4) of section 245D of the Income-tax Act to provide that in every application admitted, the Settlement Commission may, where it is possible, pass a final order within a period of four years from the end of the financial year in which such application was allowed to be proceeded with. The Bill also proposes to withdraw the power of Settlement Commission given under section 245HA of sending back the case to the Assessing Officer, thereby requiring the Settlement Commission to finally decide and settle all applications admitted by it. 14 Similar amendments are propose....
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.... the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes, the Assessing Officer shall not adopt such fair market value and will take the full value of consideration to be the value adopted or assessed for stamp duty purposes. It is also proposed to provide that if the value adopted or assessed for stamp duty purposes is revised in any appeal, revision or reference, the assessment made shall be amended to recompute the capital gains by taking the revised value as the full value of consideration. These amendments will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003-2004 and subsequent years. [Clauses 24 and 59] Modification of provisions relating to interest payable to the assessee Under the existing provisions of the Income-tax Act, interest is payable to the assessee at the rate of three-fourth per cent. for every month or part of a month or nine per cent. per annum. The Bill seeks to reduce the aforesaid rate of interest from three-fourth per cent. to two-third per cent. for every month or part of a month and from 9% to 8% per annum, as the case....
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....not carrying out activity in relation to any business; or not to share any know-how, patent, copyright, trade-mark, licence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision for services, under the head "Profits and gains of business or profession". The proposed amendment will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003- 2004 and subsequent years. [Clauses 3 and 13] Provisions of section 197A not to apply in certain cases Under the existing provisions of section 197A, no tax is deducted at source on the basis of declaration furnished by the assessee that tax on his estimated total income of the relevant previous year would be nil. The provisions of sub-section (1) of the said section apply to deduction at source from payments by way of dividends and payments in respect of deposits under National Saving Schemes, etc. Provisions of sub-section (1A) apply in respect of income from interest on securities, interest other than "Interest on securities" and units in the case of a person other than a co....
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....mpany, any amount declared, distributed or paid by way of dividends is charged to additional income-tax at the rate of 10 per cent. The tax so paid by the company is treated as the final payment of tax in respect of the amount declared, distributed or paid by way of dividend. Such dividend referred to in section 115-O is exempt in the hands of the shareholders under sub-clause (i) of clause (33) of section 10. The incidence of tax is, thus, on the payer company and not on the recipient, where it should normally be. The dividend is income in the hands of the shareholders and not in the hands of the company. The incidence of the tax should therefore, be on the recipient. Moreover, the present provisions levy tax at a flat rate of 10% on the distributed profits, across the board, irrespective of the marginal rate at which the recipient is otherwise taxed. The provisions are hence, considered, iniquitous also. It is, therefore, proposed to revert to the earlier system of taxing dividend and shift the incidence of tax on to the shareholder receiving the dividends, by omitting sub-clause (i) of clause (33) of section 10 and amending section 115-O so as to make the provisions of thi....
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....Schedule to the Finance Act. Since provisions of section 115-O would now be inoperative, it is also proposed to omit references to "other than dividends referred to in section 115-O" in sections 10(23FA), 10(23G), 115A, 115AC, 115ACA, 115AD and 115C. It is further proposed to omit the provisos to sections 196C and 196D, so that the tax shall be deducted at source with respect to incomes referred to in sections 115AC and 115AD, where the income is received in the form of dividends referred to in section 115-O also. The proposed amendments will take effect from 1st April, 2003, and will, accordingly, apply in relation to the assessment year 2003- 2004 and subsequent years. However, the provisions relating to tax deduction at source under sections 194, 195, 196C and 196D will take effect from 1st June, 2002. [Clauses 4(w), 4(x), 4(y), 34, 42, 43, 44, 45, 47, 50, 70, 77, 80 and 81] Taxation of income received in respect of units of UTI and Mutual Funds Under the existing provision contained in section 115R any amount of income distributed by the Unit Trust of India (UTI) or a Mutual Fund to its unit holders is chargeable to tax and the UTI or the Mutual fund is liable to....
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....s 194K and 196A will take effect from 1st June, 2002. [Clauses 4(t), 4(y), 46, 51, 76 and 79] Local Authorities Under the existing provisions contained in clause (20) of section 10, the income of a local authority chargeable under the head 'Income from house property', 'Capital gains' or 'Income from other sources' or from a trade or business carried on by it which accrue or arises from the supply of a commodity or service within its jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area is exempt from payment of income-tax. It is proposed to restrict this exemption to the Panchayats and Municipalities as referred to in Article 243(d) and 243(P)(e) of the Constitution of India, Municipal Committees and District Boards, legally entitled to or entrusted by the Government with the control or management of a Municipal or a local fund and Cantonment Boards as defined under section 3 of the Cantonments Act, 1924. The proposed amendment will take effect from 1st April, 2003 and will, accordingly, apply in relation to assessment year 2003-2004 and subsequent years. [Clause 4(l)] 17 Housing Boards etc. Under the e....
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....Prasar Bharati (Broadcasting Corporation of India) is exempted from payment of any income-tax or any other tax in respect of any income, profits or gains, accruing or arising out of the Fund of the corporation or any amount received in that Fund, and on any income, profits or gains, derived or any amount received, by the corporation under section 22 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990. The Oil Industry Development Board is exempted from payment of income-tax on its income, profits or gains under section 22A of the Oil Industry (Development) Act, 1974. It is proposed to omit section 44 of the National Dairy Development Board Act, 1987, section 22 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 and section 22A of the Oil Industry (Development) Act, 1974. The proposed amendments will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003- 2004 and subsequent years. [Clauses 150, 152 and 153] Individuals and Hindu undivided families to deduct tax in cases where total turnover or gross receipts exceed the specified limit under section 44AB Individuals and Hindu undivided fam....
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....961. Further, such trusts, funds and institutions, had to maintain separate accounts in respect of such funds and had to render the same to the prescribed authority by 30th June, 2002. In view of the large-scale extent of the damage, it may not be possible to complete the relief work in the limited time of one year. It is, therefore, proposed to extend the time limit for utilization of eligible donations and transfer of unutilized funds to the Prime Minister's National Relief Fund from 31st March 2002 to 31st March, 2003. It is also proposed to extend the date of submission of separate accounts to the prescribed authority to 30th June, 2003. Further, in order to ensure fiscal discipline, it is also proposed that if no accounts are submitted to the prescribed authority within the prescribed time, the amount of donations received by the trusts, funds or institutions for relief of earthquake victims, would be treated as the income of such trusts, funds or institutions and charged to tax accordingly. The proposed amendment shall be effective retrospectively from 3rd February, 2001. [Clauses 4(i), 8 and 29] Relief under section 89 for recipients of family pension Under the e....
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...., so as to provide that an employer shall have an option to pay tax on behalf of an employee, without making any deduction from his income, on the income in the nature of perquisites, (not provided for by way of monetary payment). The employer shall also continue to have the option to deduct the tax on whole or part of such income. It is also proposed to amend section 200 of the Income-tax Act, 1961, to provide that such tax shall be paid within the prescribed time, to the credit of the Central Government or as the Board directs. It is also proposed to amend section 203 of the Income-tax Act, 1961, to provide that where any such tax has been paid by an employer, on behalf of an employee, the employer shall provide to the employee, a certificate in the prescribed form, giving details of the amount of tax paid, the rate at which the tax has been paid and other particulars, within the prescribed time. It is also proposed to amend section 199 of the Income-tax Act, 1961, in order to give credit to the employee in respect of tax paid by the employer on behalf of the employee, on the income in the nature of perquisites, (not provided for by way of monetary payment). It is also p....
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....se (10C) of section 10 so as to enlarge the scope of the exemption by extending it to an employee of an institution, having its importance throughout India or any State of States, as may be specified by the Central Government by notification in the Official Gazette for the purposes of the said clause. This proposed amendment will take effect retrospectively from 1st April, 2002 and will, accordingly, apply in relation to the assessment year 2002-2003 and subsequent years. [Clause 4 (h)] RESOURCE MOBILIZATION Rationalization of tax rebate under section 88 Section 88 of the Income-tax Act provides for a deduction from income-tax payable by individuals or Hindu undivided families, on contribution to life insurance premia, provident fund, etc. The deduction is equal to 20% of the aggregate amount invested in specified instruments. In the case of an author, playwright, artist, musician or sportsman, the deduction is equal to 25% of the amounts invested in such instruments. For tax payers having gross salary income not exceeding rupees 1 lakh (before allowing deduction under section 16) and in whose case, gross salary income is not less than 90% of the gross total income f....
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....Zs), which are engaged in manufacture or production of articles or things or computer software, are provided with a deduction equal to 100% of such profits. 20 Section 10B provides for a similar deduction in respect of export earnings of 100% Export Oriented Units. Such deduction is available for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be. For computing the deduction, the profits derived from export of articles or things or computer software are worked out by taking the amount, which bears to the net profits of the business, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. In view of the need for resource mobilization in the short run, the amendment seeks to restrict the deduction to 90% of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for the assessment year 2003- 2004 only. [Clauses 5 and 6] STRENGTHENING TAX ADMINISTRATION Expenditure by way of pa....
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....ng the previous year by way of payment of any sum to a public sector company or a local authority or to an association or institution approved by the National Committee for carrying out any eligible project or scheme is allowed. Eligible project or scheme means a project or a scheme for promoting the social and economic welfare of, or upliftment of, the public as the Central Government may, by notification in the Official Gazette, specify in this behalf on the recommendations of the National Committee. Correspondingly, section 80GGA provides for a deduction in the case of assessees not carrying on any business or profession. Sub-section (4) of the said section provides that where National Committee is satisfied that the project or scheme is not being carried on in accordance with all or any of the conditions, it may withdraw the approval earlier granted to the association or institution. Sub-section (5) also provides for withdrawal of the notification where the project or scheme is not being carried out in accordance with all or any of the conditions on the basis of which such project or scheme was notified. It is proposed to amend section 35AC to provide that in cases where the....
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....hether or not, such person or body or authority or juridical person, was formed or established or incorporated with the object of deriving income, profits or gains. This amendment is clarificatory in nature. The proposed amendment will take effect retrospectively from 1st April, 2002 and will, accordingly, apply in relation to the assessment year 2002-2003 and subsequent years. [Clause 3(b)] Special provision for early assessment of bodies formed for short duration At present, there is no provision in the Income-tax Act for making assessment in the cases of such persons, which are formed for a short duration and are dissolved in the same assessment year or shortly thereafter. A new section 174A is, therefore, proposed to be inserted to provide that where it appears to the Assessing Officer that any association of persons or a body of individuals or an artificial juridical person formed or established or incorporated for a particular event or purpose, is likely to be dissolved in the same assessment year in which it was formed or established or incorporated, or immediately after such assessment year, the total income of such person or body or juridical person, for ....
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.... under the first proviso to that section shall also be levied only if the return is not filed by the end of the relevant assessment year. Under the existing provision contained in clause (d) of sub-section (1) of section 272A of the Income-tax Act a penalty of ten thousand rupees is leviable for failure to comply with the provisions of section 139A of the Income-tax Act relating to permanent account number (PAN). In view of the importance of complying with the provisions relating to PAN, it is proposed to omit the said clause from section 272A and to insert a new section 272B in the said Act, to provide for penalty of ten thousand rupees for failure to comply with the provisions of section 139A or for quoting or intimating a PAN which is false. An opportunity of being heard shall be given to the assessee before the imposition of such penalty. It is further proposed to insert a reference to section 272B in section 273B of the Income-tax Act to provide that such penalty shall not be imposed if it is proved that there was reasonable cause for the failure. The proposed amendment is consequential in nature. These amendments will take effect from 1st June, 2002 [Clauses 98....
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....f the specified instalments of advance tax by the dates specified under section 211. This amendment will take effect from 1st June, 2002. [Clause 89] Strengthening of provisions relating to search and seizure Under the existing provision contained in sub-section (1) of section 132 of the Income-tax Act, the authorised officer is empowered inter alia, to enter and search any building, place, vessel, vehicle, or aircraft and seize any books of account or other documents found as a result of search. With a view to make search operations more effective, it is proposed to amend sub-section (1) to provide that in addition to the powers specified therein, the Authorised Officer shall also have the power to require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic records, to afford the necessary facility to the authorised officer to inspect all such books of account or other documents. It is further proposed to insert a new section 275B in the Income-tax Act to provide that if any person who is required to afford such facility to the authorised officer, fails to do so, he shall be punish....
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....clause (22B), association or institution referred to in clause (23A), institution referred to in clause (23B), fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other institution referred to in sub-clause (via) of clause (23C), trade union referred to in sub-clause (a) or association of trade unions referred to in sub-clause (b) of clause (24) of section 10 are not obliged to file return of income in respect of which they are assessable. It is, therefore, not possible to ascertain as to whether these bodies are complying with the conditions specified in those clauses. It is proposed to insert a new sub-section (4C) in section 139 to provide that every such person mentioned above, shall, if the total income in respect of which person, is assessable without giving effect to the provisions of section 10, exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year. 23 It is also proposed to amend section 272A so as to provide that a delay in the filing of returns ma....
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....otification or withdrawing the approval, it is also proposed to amend section 153 so as to provide that the period commencing from the date on which the Assessing Officer intimates to the Central Government or the prescribed authority the contravention, of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B) or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, under clause (a) of the proviso of sub-section (3) of section 143 and ending with the date on which the copy of the order withdrawing the approval or rescinding the notification, as the case may be, under those clauses is received by the Assessing Officer, shall be excluded in computing the period of limitation under this section. These amendments will take effect from 1st April, 2003 and will, accordingly apply in relation to the assessment year 2003-2004 and subsequent years. [Clauses 57 and 58] Modified conditions for accumulation of income of any fund, trust or institution, university or other educational institution and hospital or other medical institution and restriction on payment or credit out of such accumulation The existing pro....
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....respect of which an option is exercised under the Explanation to the said sub-section, is not applied to charitable or religious purposes in India during the previous year in which the income was received, or during the previous year immediately following, then, such income shall be deemed to be the income of the previous year immediately following the previous year in which the income was received. 24 It is also proposed to omit the words "seventy-five per cent. of" in the said sub-section (2) so as to provide that if the whole of the income derived from property held under trust is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, income so accumulated or set apart will not be included in the total income of the previous year of the person in receipt of the income provided the conditions specified in this sub-section are complied with. These amendments will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003-2004 and subsequent years. [Clause 7] Restriction on the application of accumulated income of the charitable ....
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....3-2004 and subsequent years. [Clause 7] Document 3 CUSTOMS Note : (a) "Customs Duty" means the customs duty levied under the Customs Act 1962. (b) CVD means the Additional Duty of Customs under Section 3 of the Customs Tariff Act, 1975. (c) SAD means Special Additional Duty of Customs under Section 3A of the Customs Tariff Act, 1975. Major Proposals about customs duties are the following : GENERAL RATE STRUCTURE :- A. Peak rate of ad-valorem customs duty reduced : • Peak rate of customs duty reduced from 35% to 30%. B. AGRICULTURE : (i) Customs duty on tea and coffee increased from 70% to 100%. (ii) Customs duty on spices (Pepper, Cloves and Cardamom), natural rubber and poppy seeds, increased from 35% to 70%. (iii) Customs duty on pulses, increased from 5% to 10%; exemption from SAD will continue. (iv) Customs duty on specified agricultural machinery and implements [falling under headings 84.32, 84.33, 84.36 and 84.37 of the Customs Tariff Act], reduced from 25% to 15%. (v) Duty rate of 30% will apply to such non-edible oil that contains 20% or more of free fatty acid. C STEEL: (i) Customs duty on refractory raw materials, ....
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.... (ii) Customs duty @ 5% has been imposed on specified 88 drugs. 47 drugs have been excluded from the list of exemption. (iii) Vaccine for Japanese encephalitis has been fully exempted from customs duty. H PORTS AND AIRPORTS: (i) Customs duty on specified equipment for ports and airports has been reduced from 25% to 10%. (ii) Aeroplanes, helicopters, gliders, simulators of aeroplane, parts thereof (excluding rubber tyres and tubes for aeroplanes and gliders) and raw materials, have been exempted from customs duty. I INTERNATIONAL COMMITMENT: (i) Extent of exemption under Indo Sri Lanka Free Trade Agreement has been extended from 50% to 90% for specified goods. (ii) Customs duty on liquors has been reduced from 210% to 182% J Duty rate of CVD on liquors modified as under : Upto US $ 25 per case : 75% Others : 50% K SPECIAL ECONOMIC ZONE : Developers and manufacturing/processing units in Special Economic Zones shall be entitled to exemption on inputs and all other materials including capital goods. L TEXTILE MACHINERY: Customs duty on specified items of reeling, twisting, weaving and processing machinery for silk textile industry reduced fro....
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....preserving fishery products 17. Dredgers, tugs, pusher crafts 18. Hospital equipment for use in specified hospitals 19. Linear accelerator with beam energy 15 MeV or more N MISCELLANEOUS (i) Customs duty on cement and clinkers has been reduced from 25% to 20%. (ii) Customs duty on Glucometers and test strips has been reduced from 25% to 10%. (iii) Customs duty on specified fire fighting equipment has been reduced from 25% to 20%. (iv) Customs duty on nylon 6,12 chips for making nylon monofilaments for tooth brushes has been reduced from 35% to 25%. (v) Customs duty on specified studio equipment and earth station equipment has been reduced from 35% to 25%. (vi) Customs duty on raw material for manufacture of parts of writing instruments has been reduced from 35% to 15% . (vii) Customs duty on specified raw materials for manufacture of sports goods reduced from 35% to 15%. (viii) Customs duty on equipment, parts and spares required for setting up of a planetarium reduced from 35% to 15% with CVD and SAD exempted. (ix) Raw materials for manufacturing blades for rotors of wind operated electricity generators have been exempted from CVD. (x) SAD....
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.... woven garments reduced from 16% to 12%. e. Excise duty @ 12% is imposed on knitted or crocheted garments on optional basis. f. Ready made garments made from Handloom fabrics exempted subject to declaration to this effect by the manufacturer and certification by the Handloom Export Promotion Council g. Optional compounded levy schemes for independent textile processors abolished. F. PETROLEUM a) Cess on domestic crude oil increased from Rs 900 p.m.t. to Rs 1800 p.m.t. b) Ad valeorem duty on Petrol reduced from 90% to 32%. c) A surcharge of Rs 6/litre imposed on Petrol. The surcharge on Petrol doped with 5% ethanol would be Rs 5.25/ litre. d) Excise duty on HSD reduced from 20% to 16% e) All four refineries in the North East namely, NRL, Digboi, Guwahati and BRPL would pay duty at the rate of fifty percent of the normal rate of duty. 29 G. SSI a. SSI exemption withdrawn on granite. b. SSI exemption has been extended to air guns, air rifles, air pistols, which are exempted from the provision of Arms act. H. COLD STORAGE EQUIPMENT : Following items have been exempted from excise duty if supplied to cold storages: a. Mobile pre-cooling eq....
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....to Service Tax - (a) To enhance the time limit for issue of notice for recovery of service tax from 6 months to one year and prescribing the 'relevant date' for issue of notices for recovery of service tax in specified situations; (b) To allow credit of service tax paid on input services for payment of service tax on output services provided both the input and output services fall in the same category; (c) Enhancement of value limit for imposition of penalty by Asst. Commissioner/Dy. Commissioner from RS. 25000 to RS. 2 lakhs without prior approval of the Commissioner of Central Excise; (d) Amendments in the definitions relating to Broadcasting service with retrospective effect from 16th July, 2001 to clarify the scope of the levy and recovery of duty accordingly; M. INLAND AIR TRAVEL TAX : IATT exempted on all routes to and from the North Eastern States of Tripura, Assam, Meghalaya, Arunachal Pradesh, Nagaland, Manipur and Mizoram. This is in addition to the existing exemption for routes within these states. MISCELLANEOUS I EXPERT COMMITTEE An Expert Committee will be set up to undertake comprehensive examination of the system of indirect tax administrat....