TaxTMI 
TaxTMI 
Notes on clauses - Income-tax
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....inancial year 2010-2011. Rates for deduction of tax at source during the financial year 2011-2012 from income other than "Salaries" Part II of the First Schedule to the Bill specifies the rates at which income-tax is to be deducted at source during the financial year 2011-2012 from income other than "Salaries". The rates are the same, as those specified in Part II of the First Schedule to the Finance Act, 2010 for the purposes of deduction of income- tax at source during the financial year 2010-2011. However, in view of the proposed insertion of new section 194LB, a special rate of tax deduction at five per cent will apply in case of certain interest payments to a non-resident. The amount of tax so deducted shall be increased by a surcharge in the case of every company other than a domestic company at the rate of two per cent. No surcharge will be levied in any other case. Rates for deduction of tax at source from "Salaries", computation of "advance tax" and charging of income tax in special cases during the financial year 2011-2012 Part III of the First Schedule to the Bill specifies the rates at which income-tax is to be deducted at so....
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....ontinue to be the same as that specified for the assessment year 2011-2012. No surcharge will be levied. Paragraph E of this Part specifies the rates of income-tax in the case of companies. In both the cases of domestic companies and companies other than domestic companies, the rate of tax will continue to be the same as that specified for assessment year 2011-2012. Surcharge in the case of domestic companies having income above one crore rupees is proposed to be reduced to five per cent. from the existing rate of seven and one-half per cent. In case of companies other than domestic companies, the surcharge is proposed to be reduced to two per cent. from the existing rate of two and one-half per cent. Marginal relief will be provided. In all other cases (including sections 115JB, 115-O, 115R, etc.) the surcharge will now be applicable at the rate of five per cent. "Education cess" at the rate of two per cent. and "Secondary and Higher Education Cess" at the rate of one per cent. shall continue to be levied in all cases covered under Part III of the First Schedule. In the cases covered under Part II of the First Schedule, there will be no levy of Education Ce....
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....vidend referred to in section 115-O shall not be included in the total income of the assessee, being a Developer or entrepreneur. Sub-clause (a) of this clause of the Bill seeks to omit the Explanation to clause (34) of the aforesaid section. This amendment will take effect from 1st June, 2011. Under the existing provisions contained in the Income-tax Act, any perquisites or allowances received by an employee is taxable under the head "salary" unless it is specifically exempted under the Act. Sub-clause (b) seeks to insert a new clause (45) in the said section so as to provide exemption to any allowance or perquisite, as may be notified by the Central Government in the Official Gazette in this behalf, paid to the Chairman or a retired Chairman or any other member or retired member of the Union Public Service Commission. This amendment will take effect retrospectively from 1st April, 2008 and will, accordingly, apply in relation to the assessment year 2008-2009 and subsequent years. The existing provisions contained in section 10 provide that income mentioned in any of the clauses of the said section shall not be included in the total income of the previous year of any person.....
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....business". The amendments proposed to the aforesaid section seek to include two new businesses as "specified business" along with their dates of commencement and also to omit the word "new" from the existing definition of ''specified business" in respect of new hotel and new hospital. Sub-clause (a) of this clause seeks to insert a new clause (ad) in the said sub-section (5) so as to provide that the date of commencement of operations shall be on or after the 1st day of April, 2011 where a business is in the nature of developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed. It further seeks to insert a new clause (ae) in the said sub-section (5) to specify that the date of commencement of operations shall be on or after the 1st day of April, 2011 in a new plant or in a newly installed capacity in an existing plant for production of fertiliser. These amendments will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-2013 and subsequent ....
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....t contribution made by the Central Government or any other employer to a pension scheme under sub-section (2) of section 80CCD shall not be included in the limit of deduction of one lakh rupees provided under section 80CCE. This amendment will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-2013 and subsequent years. Clause 9 of the Bill seeks to amend section 80CCF of the Income-tax Act relating to deduction in respect of subscription to long-term infrastructure bonds. Under the existing provisions contained in section 80CCF, deduction is allowed to the extent of such amount which does not exceed twenty-thousand rupees, paid or deposited during the previous year relevant to the assessment year beginning on the 1st day of April, 2011 as subscription to long-term infrastructure bonds. It is proposed to amend the said section so as to provide the same deduction for the amount paid or deposited during the previous year relevant to the assessment year beginning on the 1st day of April, 2012. This amendment will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-2013. Clause 10....
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.... Central or a State Government in any other manner. This amendment will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-2013 and subsequent years. Clause 12 seeks to amend section 92C of the Income-tax Act, relating to computation of arm's length price. Under the existing provisions contained in sub-section (2) of the aforesaid section, where more than one price is determined by the most appropriate method, then the arm's length price shall be taken to be arithmetical mean of such price. Further, the second proviso to the said sub-section provides that if the variation between the arm's length price as determined and price at which the international transaction has actually been undertaken does not exceed five per cent. of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm's length price. It is proposed to amend the second proviso to said sub-section (2) so as to provide that the allowable variation will be such percentage as may be notified by the Central Government in this behalf. This amendment will take effect from 1st April, 2012 and will, accordingl....
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....arties to the transaction is a person located in a notified jurisdictional area, then all the parties to the transaction shall be deemed to be associated enterprises within the meaning of section 92A, and that transaction shall be deemed to be an international transaction within the meaning of section 92B and, accordingly, the provisions of sections 92, 92A, 92B, 92C [except the second proviso to sub-section (2)], 92CA, 92CB, 92D, 92E and 92F shall apply to such transaction. It is also proposed to provide that notwithstanding anything contained in the Income-tax Act, no deduction in respect of any payment made to any financial institution located in the notified jurisdictional area shall be allowed unless the assesse furnishes an authorisation in the prescribed form authorising the Board or any other income-tax authority acting on its behalf to seek relevant information from the said financial institution and no deduction in respect of any other expenditure or allowance (including the depreciation) arising from the transaction with a person located in a notified territory shall be allowed under any provision of the Act unless the assessee maintains such other documents and furnish....
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....s at which income-tax shall be payable, where the total income of a non-resident (not being a company) or a foreign company, includes any income by way of interest received from an infrastructure debt fund referred to in clause (47) of section 10. It is also proposed to insert a new item (BA) after item (B) of clause (a) of sub-section (1) of the aforesaid section to provide that the tax shall be payable at the rate of five per cent. on any interest income received by a non-resident from an infrastructure debt fund referred to in clause (47) of section 10. These amendments will take effect from 1st June, 2011. Clause 16 of the Bill seeks to insert a new section 115BBD in the Income-tax Act relating to tax on certain dividends received from foreign companies. Under the existing provisions of the Income-tax Act, dividend received from foreign companies is taxable in the hands of the recipient at his applicable marginal rate of tax. Therefore, in case of companies who receive foreign dividend, such dividend is taxable at the rate of thirty per cent. plus applicable surcharge and cess. Sub-section (1) of the aforesaid new section seeks to provide that where the total income of an ....
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.... Zones Act, 2005 read with the Second Schedule thereof. The existing provisions contained in the aforesaid sub-section (6) provide that the provisions of section 115JB shall not apply to the income accrued or arising on or after the 1stday of April, 2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be. It is proposed to insert a proviso to the said sub-section (6) so as to provide that the provisions of that sub-section shall cease to have effect in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2012. These amendments will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-2013 and subsequent years. Clause 18 of the Bill seeks to insert a new Chapter XII-BA [consisting of new sections 115JC, 115JD, 115JE and 115JF] in the Income-tax Act containing special provisions relating to certain limited liability partnerships. Under the provisions of newly inserted section 115JC, where the regular income-tax payable for a previous year by any limited liability partnership is less than ....
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....maintaining a Special Economic Zone for any assessment year on any amount declared, distributed or paid by such Developer or enterprise, by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2005 out of its current income either in the hands of the Developer or enterprise or the person receiving such dividend. It is proposed to insert a proviso to the said sub-section (6) to provide that the provisions of the said sub-section shall cease to have effect from the 1st day of June, 2011. Accordingly, tax on distributed profits shall be chargeable under this section on any amount declared, distributed or paid by way of dividends by the aforesaid undertaking or enterprise on or after the 1st day of June, 2011. This amendment will take effect from 1st June, 2011. Clause 20 of the Bill seeks to amend section 115R of the Income-tax Act relating to tax on distributed income to unit holders. Under the existing provisions contained in sub-section (2) of the aforesaid section, any amount of income distributed by the specified company or a Mutual Fund to its unit holders shall be chargeable to tax and such specified company or Mutual Fund shall be liable to pay....
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....ferred under sub-section(1) on the income-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before it or any other income-tax authority. It is further proposed to amend sub-section (3), so as to empower the aforesaid authority as notified by the Board, to impound and retain any books of account and other documents produced before it in any proceeding under the Act. These amendments will take effect from 1st June, 2011. Clause 22 of the Bill seeks to amend section 133 of the Income-tax Act relating to power to call for information. Under the existing provisions contained in section 133, the income-tax authorities referred to in that section have been empowered to call for information which is useful for or relevant to, any proceeding under the Act. It is proposed to insert a new proviso after the second proviso to the aforesaid section so as to provide that for the purposes of an agreement referred to in section 90 or section 90A, an income-tax authority notified under sub-section (2) of section 131 may exercise all the powers conferred under section 133, notwithstanding that no proce....
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....ich is not chargeable to income-tax, furnish a return of such income of the previous year. It is proposed to amend the aforesaid sub-section to insert therein new clauses (g) and (h) in order to require that any body or authority or Board or Trust or Commission referred to in clause (46) of section 10 and infrastructure debt fund referred to in clause (47) of section 10, respectively, shall also furnish a return of income. This amendment will take effect from 1st June, 2011. Clause 24 of the Bill seeks to amend section 143 of the Income-tax Act relating to assessment. Under the existing provisions contained in sub-section (1B) of the aforesaid section, the Central Government may, save as otherwise expressly provided, for the purpose of giving effect to the scheme made under sub-section (1A) of that section, by notification in the Official Gazette, direct that any of the provisions of the Income-tax Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in that notification, so, however, that no direction shall be issued after the 31st day of March, 2011. It is proposed to amend sub-section (1....
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....10, the person responsible for making the payment shall, at the time of credit of such income to the account of payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of five per cent. This amendment will take effect from 1st June, 2011. Clause 28 of the Bill seeks to amend section 245C of the Income-tax Act relating to application for settlement of cases. The existing provisions contained in the proviso to sub-section (1) of the aforesaid section provide that, no application shall be made before the Settlement Commission unless the proceedings under section 153A or under section 153C have been initiated against the applicant and the additional amount of income-tax payable on the income disclosed in the application exceeds fifty lakh rupees and in other cases if the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees. It is proposed to insert a new clause (ia) in the proviso to sub-section (1) of the aforesaid section. It provides that no application shall be made unless, in a case where the applicant is related to t....
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....rom 1st April, 2011. Clause 31 of the Bill seeks to insert a new section 285 [in place of said section which was omitted by the Finance Act, 1987] in the Income-tax Act relating to the submission of statement by a non-resident having liaison office. The proposed new section provides that every person, being a non-resident having liaison office in India, set up in accordance with the guidelines issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999, shall in respect of its activities in a financial year, prepare and deliver or cause to be delivered to the Assessing Officer having jurisdiction, within sixty days from the end of such financial year, a statement in such form and containing such particulars as may be prescribed. This amendment will take effect from 1st June, 2011. Clause 32 of the Bill seeks to amend section 296 of the Income-tax Act relating to rules and certain notifications to be placed before Parliament. As proposed, clause 23 of the Bill seeks to insert sub-section (1C) in section 139 of the Income-tax Act so as to empower the Central Government to exempt, by notification, any class or classes of persons from the requirement of fur....