TaxTMI 
TaxTMI 
Amendments at a glance , Rate structure , Amendments to Income-tax Act , Amendments to Wealth-tax Act , Amendments to Unit Trust of India Act , Amendments to Companies (Profits) Surtax Act
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....rds, development boards, etc. 41 10(22A) Exemption of income of hospitals and other medical institutions 42 11(1)(a), Exemption of income of public charitable and religious trusts 18-23 (Expln.)/(2)/ (3)/(4), 13, 139(4A), 80G, Expln. 2 16(iv) Standard deduction for expenditure on travelling in the case of salaried employees 43-44 35B(1)(b)(iii) Export markets development allowance 51 36(1)(viii) Deduction of profits transferred to special reserve account in case of certain financial corporations 52-53 37(2A), (2B) Entertainment expenditure in businesses and professions 33-34 37(4) Guest houses maintained in businesses and professions 35-37 80C(2)(g) Married couples governed by the concept of "community of property" in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu 45-47 80L Deduction of income from certain categories of investments 12-15 80MM(1) Income derived by companies from transfer or servicing of technical know-how 54-55 164 Charge of tax in the case of private discretionary trusts 24-28 193(iia), Exemption from deduction of tax a....
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....edule to the Finance Act, 1970. These rates - summarised in Annexure I to this circular - are the same as those specified in Part III of the First Schedule to the Finance Act, 1969, for the purpose of deduction of tax at source during the financial year 1969-70 from "salaries" and for computation of advance tax payable during that financial year. Accordingly, where the total income of the taxpayer consists only of income under the head "Salaries" from which tax has been correctly deducted at source during the financial year 1969-70, it will not be necessary to raise any additional demand or grant any refund on completion of the assessment for the assessment year 1970-71. Finance Act, 1970 Rates for deduction of tax at source from "salaries" and for computation of "advance tax" during the financial year 1970-71 3. The Finance Act, 1970 follows the principle adopted in the Finance Acts of the preceding years that, in prescribing the rates of tax and in making new provisions in the taxation laws, measures which have the effect of bringing about a change in the tax liability or which provide a tax incentive or disincentive in any sphere should apply prospectively to current in....
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....ght about by subjecting income in the successive slabs to tax at steadily increasing rates. Thus, on income in the first six slabs of Rs. 5,000 each (covering a span of Rs. 30,000), the present rates are respectively, 5 per cent, 10 per cent, 17 per cent, 23 per cent, 30 per cent and 40 per cent; in the next two slabs of Rs. 20,000 each (covering the range of Rs. 30,001— Rs. 70,000), the rates are, respectively, 50 per cent and 60 per cent; in the next higher slab covering a span of Rs. 30,000 (Rs. 70,001—Rs. 1,00,000), the rate is 65 per cent; in the next higher slab covering a span of Rs. 1,50,000 (Rs. 1,00,001—Rs. 2,50,000), the rate is 70 per cent; and on income in the slab above Rs. 2,50,000, the rate is 75 per cent. Finance Act, 1970 5. From the tax as computed at these rates, certain deductions are made, at present, in the case of resident individuals and Hindu undivided families only, so as to afford them some relief according to their personal circumstances. Thus, in the case of a resident unmarried individual, the deduction from the tax is Rs. 125, which is calculated on a personal allowance of Rs. 2,500 at the rate of 5 per cent, being the rate of tax applica....
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....onditions. [These conditions are that the family had, during the relevant year, at least two adult members entitled to claim partition or, alternatively, it had two members (whether adults or otherwise) entitled to claim partition who were not lineally descended one from the other and were not also lineally descended from any other living member of the family.] These "small income exemption limits" are not applicable in the case of non-resident taxpayers. Even in the case of resident taxpayers, the "small income exemption limit" of Rs. 4,000 is significant only in the case of unmarried individuals and also unregistered firms, associations of persons, etc. In the case of married individuals and also Hindu undivided families, the effect of the deduction on account of personal allowances, as stated in the preceding paragraph, is to exempt the first Rs. 4,000 or a higher amount (depending upon the number of children or minor coparceners) from tax altogether. Finance Act, 1970 7. Position applicable to current incomes - With a view to bringing about an increase in the level of personal taxation at higher income levels, while providing some relief at lower levels (particularly in t....
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.... one dependent child, and resident Hindu undivided families with one minor coparcener Rs. 33 in each case. c. Resident married individuals having no dependent child and resident Hindu undivided families having no minor coparcener Rs. 55 in each case. d. Resident unmarried individuals Rs. 137.50 in each case. Non-resident individuals and Hindu undivided families, as also unregistered firms, associations of persons, etc., whether resident or not, will also benefit in the tax payable by them. 4. The pre-existing "small income exemption limit" of Rs. 4,000, in the generality of cases of resident non-corporate taxpayers, has been dropped altogether. The prescription of a nil rate of tax on income in the initial slab of Rs. 5,000 as stated at (1) above, secures that no tax will be payable by a non-corporate taxpayer unless his income exceeds Rs. 5,000. The pre-existing special exemption limit of Rs. 7,000 in the case of resident Hindu undivided families satisfying certain conditions, however, continues. [Paragraph A of Part III of the First Schedule to the Finance Act] Finance Act, 1970 8. Co-operative societies, registered firms, local authorities, the Life....
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.... 3. Measures for strengthening the administrative machinery of the Income-tax Department. 4. Measures for providing tax reliefs in certain directions and avoiding inconvenience to assessees in certain cases. 5. Other amendments. The substance of these provisions is explained in the following paragraphs. Measures for facilitating savings and investment Finance Act, 1970 Increase in the quantum of exemption from tax of income from certain categories of investments 12. Under the provisions of the Income-tax Act and Unit Trust of India Act, before their amendment by the Finance Act, 1970, income derived by a taxpayer from investments in certain categories of financial assets enjoyed exemption from tax. These exemptions were : a. income up to Rs. 1,000 received on units in the Unit Trust of India; b. income up to Rs. 1,000 by way of dividends on shares in Indian companies; c. the whole of the interest on— i. Treasury Savings Deposits Certificates; ii. Post Office Cash Certificates; iii. Post Office National Savings Certificates; iv. Nati....
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....dia and which is approved by the Central Government for the purpose of section 36(1)(viii) of the Income-tax Act. It will be open to the taxpayer to make investments according to his choice in one or more of the above-mentioned categories of financial assets and qualify for the deduction up to Rs. 3,000 in the aggregate in respect of income derived from these investments in the computation of his taxable income. [The existing total exemptions in respect of income derived from investments in various small savings securities and deposits continue independently.] Finance Act, 1970 14. The provisions of section 80L as amended will be operative from 1-4-1971, and will, accordingly, apply to the assessment year 1971-72, i.e., in relation to income derived from the specified categories of investments during the financial year 1970-71 or any other previous year relevant to the assessment year 1971-72. Finance Act, 1970 15. Under a consequential amendment to section 80M, it has been provided that in the case of a company deriving income by way of dividends from an Indian company, the deduction under that section (in respect of inter-corporate dividends) will be allowed only i....
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....e attractive to investors. Some of the new small savings schemes carry the advantage of exemption from income-tax on the interest as in the past, while others provide for a higher rate of interest which will be subject to tax but will qualify for the deduction up to Rs. 3,000 under section 80L together with income from other specified categories of financial assets as explained in paragraph 13 above. With a view to encouraging large investments in these schemes, particularly by persons in the rural areas, the Finance Act, 1970 has amended the relevant provisions of the Income-tax Act so as to secure payment of the interest on investments of the taxable category without deduction of tax at source. This facility has been provided in respect of interest on the following new schemes : 1. 7-Year National Savings Certificates (IV Issue); 2. Debentures issued by any co-operative society (including a co-operative land mortgage bank or a co-operative land development bank) or any other institution or authority, which may be notified by the Central Government for the purpose of this exemption; 3. Deposits under any scheme framed by the Central Government and notified by it in the Of....
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....along, subject to tax. A similar exemption is available also in cases where property is held under trust in part only for charitable or religious purposes provided the trust was created before 1-4-1962. In both these types of trusts, accumulation of income beyond the limit of 25 per cent of the income of the trust or Rs. 10,000, whichever is higher, is allowed to be made without attracting tax liability on the excess, if the trust complies with certain procedural formalities (of giving notice to the Income-tax Officer specifying the purpose for which the income is desired to be accumulated, and the period for which the accumulation is proposed to be made) and subject to the requirement that the income so accumulated is invested in Government securities or any other approved securities. The maximum period for which such accumulation may be made under this provision is 10 years, and if the accumulated income is not applied to the purposes for which it was accumulated within one year of the expiry of the 10-year period, the exemption is lost and tax becomes chargeable on the accumulated income. Finance Act, 1970 19. These tax concessions have facilitated accumulation of ta....
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....med to have been applied to such purposes during such previous year under the option referred to above, will be subjected to tax as if such income were the total income of an association of persons. 2. The existing provisions in section 11(2) which allows accumulation of the income of the trust for specified purposes for a maximum period of 10 years will continue to be operative subject to the existing condition that the person in receipt of the income informs the Income-tax Officer in writing of the purpose for which the income is being accumulated and also subject to the requirement that the moneys so accumulated are invested in the specified manner. Besides investment in Government securities or any other approved securities as under the existing law, sub-section (2), as amended, allows the deposit of the accumulated moneys in any account with the Post Office Savings Bank [including deposits under the Post Office (Time Deposits) Rules, 1970] or in any banking company, co-operative bank, land mortgage bank or land development bank. Such moneys may also be deposited in an account with any financial corporation which is engaged in providing long-term finance for industrial devel....
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....he trust income enures for the direct or indirect benefit of the persons specified in new sub-section (3) of section 13. Such persons are : (a) the author of the trust or founder of the institution, (b) any person who has made a substantial contribution to the trust or institution, (c) where the author, founder or substantial contributor is a Hindu undivided family, a member of the family, (d) any relative of such author, founder, substantial contributor or member of the family, and (e) any concern in which any such author, founder, substantial contributor, member of the family or relative has a substantial interest. For the purposes of these provisions, the term "relative" will have the enlarged connotation as under the existing law. According to the definition of "relative" in section 2(41) an individual's relatives will comprise the individual's husband, wife, brother, sister and lineal ascendants and descendants of the individual. For the purposes of the provision in section 13, "relative" includes also a lineal descendant of a brother or sister of the individual. Under new Explanation 3 to section 13, a person will be deemed to have a substantial interest in a concern if....
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....r property of the trust or institution to any of the specified persons for less than adequate consideration; g. diversion of a substantial portion of the income or property of the trust or institution in favour of any of the specified persons ; h. investment of the trust funds in any concern in which any of the specified persons has a substantial interest. The transactions at (a), (b) and (h) above will result in forfeiture of the exemption not only where these are entered into for the first time during the previous year, but also where these had been entered into in any earlier previous year and the arrangements continue to be in force for any period during the relevant previous year. However, it has been specifically provided that in respect of transactions at (a) to (g) above, these would not result in the forfeiture of exemption from tax in the case of a religious trust or religious institution, whenever created or established, or a charitable trust or institution, created or established before 1-4-1962, insofar as these transactions secured the use or application of the trust income or property for the benefit of the specified persons in relation to any period before ....
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.... in clause (h) of sub-section (2) of section 13, relating to investment of the trust funds in any concern in which any of the specified persons has a substantial interest, it may be noted that this provision has to be applied only with reference to investments in the capital of the concern as distinct from investments in the debentures of a company or by way of loans to a company or other concern. This is because under clause (a) of sub-section (2), a trust will be deemed to have used or applied its income or property for the benefit of the specified persons if any part of such income or property is, or continues to be, lent to any such person for any period during the previous year without adequate security or adequate interest or both. From this it follows that if the lending of the trust funds to any of the specified concerns either by way of debentures or otherwise is for adequate security and for adequate interest, that would not constitute use or application of the income or property for the benefit of any of the specified persons. If clause (h) of sub-section (2) is applied to such lending by way of debentures or loans for adequate security and on adequate interest, th....
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.... trust or institution are invested in any concern in which the author of the trust, founder of the institution or any of the other persons specified in this behalf has a substantial interest. Accordingly, where the charitable institution or fund holds investments in any such concern, it will not satisfy the test of being eligible for exemption from tax on its income for the purpose of section 80G and, consequently, persons making donations to such an institution or fund would lose the tax relief in respect of their donations. As it is not the intention to deny tax relief to persons making donations to a charitable institution or fund which has invested its moneys in any of the prohibited concerns only up to the limit of 5 per cent of the capital of the concern, Explanation 2 appearing below sub-section (5) of section 80G has been amended. This amendment makes it clear that persons making donations to charitable institutions and funds will continue to be eligible for tax relief on such donations by way of deduction under section 80G, notwithstanding that the institution or fund is denied the exemption from tax under section 11 on income arising to it from any investment ....
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....inance Act, 1970 25. In order to put an effective curb on the proliferation of such trusts, and to reduce the scope for tax avoidance through such means, the Finance Act, 1970 has replaced section 164 by a new section. Under section 164 as so replaced, a "representative assessee", who receives income for the benefit of more than one person whose shares in such income are indeterminate or unknown, will be chargeable to income-tax on such income at the flat rate of 65 per cent or the rate which would be applicable if such income were the total income of an association of persons, whichever course would be more beneficial to the Revenue. Finance Act, 1970 26. With a view to obviating hardship in genuine cases where the circumstances are such that tax evasion could not be considered to be the main purpose of creating the trust, certain exceptions have been specified where the flat rate of tax of 65 per cent will not apply. These exceptions are as under : 1. Where none of the beneficiaries of the trust has any other income chargeable to income-tax, the income of the trust will be charged to tax at the progressive rates of tax applicable in the case of an association of perso....
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....t also brother or sister, parent, grandparent as well as grandchildren, great grandchildren, etc. In all these cases, the benefit of exemption from the flat rate of 65 per cent will be available only where it is shown that these relatives were, at the relevant time, mainly dependent on the settlor for their support and maintenance. This provision will accordingly cover cases where a discretionary trust was created any time in the past to provide for, e.g., a widowed sister, a disabled brother, besides the wife and children, including grandchildren of the settlor, all of whom were being maintained and supported by the settlor. If any of these relatives had their own independent means of livelihood, they would not be considered as being mainly dependent on the settlor for their support and maintenance. 4. Another exception to the provision for taxation of the income at the rate of 65 per cent is where the income is receivable by the trustees on behalf of a provident fund, superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for th....
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....d under the relevant year's Finance Act in the case of an association of persons, whichever is applicable. Accordingly, advance tax will be payable during the financial year 1971-72 and subsequent years on the income of private discretionary trusts in accordance with the provisions of section 164 as explained in the preceding paragraphs. [Section 2(37A) as amended by section 3(c) of the Finance Act, and section 164 as substituted by section 21 of the Finance Act] Finance Act, 1970 Capital gains arising from transfer of agricultural land in urban areas 29. Capital gains arising from the transfer of a capital asset have been chargeable to income-tax for several years past. Where the transfer of the capital asset is effected within a period of 24 months from the date of its acquisition by the assessee, the capital gain is treated on a par with ordinary income and charged to tax on that basis. Gains arising from the transfer of a capital asset held by the assessee for more than 24 months are charged to tax on a concessional basis. In the case of companies, such gains are taxed at the rate of 40 per cent where they relate to lands and buildings, ....
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....icipality or cantonment board having a population of not less than ten thousand and also beyond the distance notified by the Central Government from the limits of any such municipality or cantonment board, will continue to be excluded from the term "capital asset". Finance Act, 1970 31. The amendment to section 2(14), as stated in the preceding paragraph, applies from 1-4-1970, i.e., for and from the assessment year 1970-71. However, by an amendment to section 47 it has been specifically provided that no capital gain or loss will be computed with reference to any transfer of agricultural land in India effected before 1-3-1970. Finance Act, 1970 32. The effect of the amendments to section 2(14) and section 47, as stated above, will be that capital gains arising from transfer of agricultural lands situated in the municipal and other urban areas on or after 1-3-1970, will become liable to taxation even where such land was held for bona fide agricultural purposes, often as the main source of livelihood. With a view to relieving the burden of taxation on the capital gains in such cases, a provision has been made, in a new section 54B, for exempting from tax the capital gain ....
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.... [Section 37(2A) as amended by section 10(a) of the Finance Act, and section 37(2B) inserted by section 10(b) of the Finance Act] Finance Act, 1970 Guest houses maintained in businesses and professions 35. Under the Income-tax Act, prior to its amendment by the Finance Act, 1970, expenditure incurred by an assessee on the maintenance of guest houses for the purposes of his business or profession has been allowable as a deduction in computing the profits and gains of the business or profession, subject to certain limits and conditions specified in rule 6C of the Income-tax Rules. This rule covers expenditure on guest houses maintained at the principal place of the business or profession in India, any place where the assessee has an establishment for processing of raw materials, manufacture, processing or production of any article or thing, or any other industrial establishment employing not less than 50 whole-time employees throughout the relevant year, and, in the case of a business or profession having not less than 100 whole-time employees on its rolls also "holiday homes" for the use of such employees while on leave. The rule also covers guest houses at Del....
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....sp;STRENGTHENING THE ADMINISTRATIVE MACHINERY OF THE INCOME-TAX DEPARTMENT Finance Act, 1970 Present set up 38. The field organisation of the Income-tax Department is, at present, organised into territorial charges with one or more Commissioners of Income-tax at the head. Each Commissioner is assisted by several Inspecting Assistant Commissioners of Income-tax who supervise and control the work of the Income-tax Officers assigned to their charge. The jurisdiction of Commissioners of Income-tax is laid down by the Board, and, within their respective jurisdictions, they also perform the functions of Commissioners of Wealth-tax and Gift-tax as also Controllers of Estate Duty. In recent years, the functions of the Commissioner of Income-tax have increased enormously both in the technical sphere, partly statutory and partly non-statutory, and on the administrative side, with the result that the present strength of Commissioners is found to be inadequate for timely performance of all these functions. Finance Act, 1970 New cadre of Additional Commissioners 39. With a view to ensuring greater attention to the functions of Commissioners....
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....of Income-tax the following functions of the Commissioner of Income-tax: 1. Functions to be performed by the Additional Commissioners of Income-tax: a. revisionary powers under sections 263 and 264; b. sanction for proceedings under section 147(a) and issue of notice under section 148 [section 151(2)]; c. approval of annuity contract under section 80E(3) and withdrawal of approval; d. relief when salary, etc., is paid in arrears or in advance under section 89(1); e. determination of period to be excluded for interest calculation -section 243(2); f. determination of appearance by authorised representatives under section 288(4); g. recognition of Provident Funds under Part A of the Fourth Schedule; h. approval of Superannuation Funds under Part B of the Fourth Schedule; i. approval of Gratuity Funds under Part C of the Fourth Schedule; j. corresponding powers under the Gift-tax Act and Wealth-tax Act. 2. Functions to be performed by the Additional Commissioners of Income-tax (Recovery) - All the functions of the Commissioner of Income-tax, under the 1961 Act and the 1922 Act, i....
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....ons which exist solely for philanthropic purposes and not for purposes of profit will be totally exempt from tax. This provision covers also institutions for treatment of mental defectiveness as also those for treatment of persons during convalescence or of persons requiring medical attention or rehabilitation. The income of all these categories of institutions will be exempt from tax altogether, as in the case of Universities and other educational institutions. The amendment takes effect from 1-4-1970 and accordingly applies for and from the assessment year 1970-71. [Section 10(22A) inserted by section 4(b) of the Finance Act] Finance Act, 1970 Standard deduction for expenditure on travelling in the case of salaried employees 43. Hitherto, a salaried taxpayer owning a conveyance (motor car, motor cycle, scooter, bicycle, etc.) and using it for the purpose of employment, has been eligible for a standard deduction from his salary income to cover the expenditure incurred by him on the maintenance of the conveyance and its wear and tear attributable to its use for the purpose of employment. The standard deduction for a motor car has been Rs. 200 per month where....
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....f the Constitution. Under the personal law governing persons domiciled in these Union territories, married couples are subject to the system of "community of property" under which all present and future belongings of each spouse become the joint property of both the spouses. The joint ownership of the property continues as long as the marriage subsists. In view of this position, income from all properties, including business, shares, securities and other investments, which before the marriage belonged to the spouses separately, as also income from properties acquired by either spouse after the marriage, belongs to them jointly and the assessment of such income has to be made on the spouses jointly in the status of an association of persons or body of individuals. In regard to income from salary and other income derived by personal exertion, however, the spouses will be assessable individually on their separate incomes. Finance Act, 1970 46. The Finance Act, 1970 has amended section 80C (relating to tax relief in respect of long-term savings in specified media in the case of individuals and Hindu undivided families) so as to extend to married couples governed by the syst....
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....at the time of payment. [Income by way of salaries, "interest on securities" and dividends are also subject to deduction of tax at source in all cases, regardless of whether the recipient of the income is resident or not resident in India.] This provision causes avoidable inconvenience to persons and concerns, who though technically not resident in India, conduct their activities in this country on a more or less permanent basis through a branch or other establishment and are regularly assessed to income-tax here. Besides, the existing provision, if interpreted strictly, would require tax to be deducted at source with reference to the income element embedded in payments made by a large number of consumers for goods or services provided by non-resident concerns operating in India. With a view to avoiding hardship and inconvenience in such cases, the Finance Act, 1970 has made a specific provision in section 195 under which any non-resident, including a foreign company, may obtain, from the Income-tax Officer, a certificate authorising him to receive payments of income by way of interest (other than "interest on securities") or any other sum (other than dividends) which is chargeable....
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.... The statutory provisions on the other hand, require such a taxpayer to make an estimate of his current income and pay advance tax on the basis 15 days before the date of closing of the accounts. Finance Act, 1970 50. With a view to relieving hardship and inconvenience to taxpayers in such cases, the Finance Act, 1970 has made a provision in section 212 authorising the Commissioner of Income-tax to extend the due date for payment of the last instalment of advance tax in deserving cases. Such extension will be granted by the Commissioner where he is satisfied, that, having regard to the nature of the business carried on by the assessee and the date of expiry of the previous year in respect of such business, it will be difficult for the assessee to furnish the estimate of his current income and of the advance tax payable by him on such income before the due date of the final instalment. The assessee will, however, be required to pay the advance tax demanded from him by the Income-tax Officer on or before the due date specified in the law for this purpose and, if he does this, he may be allowed time to furnish the estimate of his current income and of the advan....
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....tion 36(1)(viii), financial corporations engaged in providing long-term finance for industrial development in India are entitled to a deduction in the computation of their taxable profits, of amounts transferred by them out of such profits to a special reserve account up to a specified percentage of their total income. This concession is admissible only where the financial corporation is approved by the Central Government for this purpose. Up to and inclusive of the assessment year1965-66, the amount of the deduction under this provision was limited to 10 per cent of the total income of the corporation. Under the Finance Act, 1966, the quantum of the deduction was increased to 25 per cent of the total income in the case of a financial corporation having a paid-up capital of not exceeding Rs. 3 crores. This amendment was made with a view to facilitating the building up of internal resources of these corporations at a fast pace, so as to enable them to dispense with the need for obtaining subventions from the State Governments. The amendment made by the Finance Act, 1966, was effective from 1-4-1966 and was applicable to assessments for the assessment year 1966-67 and subsequent asse....
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....the development of local know-how by Indian companies and thereby minimise the repetitive import of technology. Finance Act, 1970 55. Under the provision as originally introduced in the Finance Bill, 1969, there was a stipulation that the concessional basis of taxation will be available only where the agreement under which the technical know-how or technical services are provided, has been approved by the Central Government before 1st October of the relevant assessment year. During the clause-by-clause consideration of that Bill in the Lok Sabha, an amendment was made to this provision which had the effect of making the concessional basis of taxation available subject only to the condition that the approval of the Central Government to the relevant agreement should have been applied for before 1st October of the assessment year, even though approval may be refused subsequently. As the provision for approval of the agreement by the Central Government was intended to prevent abuse of the tax concession, the Finance Act, 1970 has made a clarificatory amendment to the above-mentioned provision in section 80MM so as to make it clear that the tax concession will be available only w....
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....a further exemption of Rs. 2 lakhs in all cases, and on the balance of the value of such lands and buildings, additional wealth-tax is levied at rates ranging from 1 per cent to 4 per cent. The 4 per cent rate applies to the value of urban lands and buildings over Rs. 19 — 22 lakhs depending upon the population of the city or town in which such assets are situated. "Business premises" (i.e., buildings and lands used by the taxpayer for the purposes of his own business or profession) are excluded from the scope of the levy. The Finance Act, 1970 has made certain modifications in the scheme of levy of additional wealth-tax in the case of individuals and Hindu undivided families, as explained in the following paragraphs. Finance Act, 1970 58. For and from the assessment year 1971-72, additional wealth-tax will be leviable on the net value of lands and buildings situated in "urban areas" and included in the net wealth of the individual or Hindu undivided family. For the purpose, "urban area" is defined to mean any area within the limits of a municipality or cantonment board which has a population of not less than 10,000 according to the latest census for which relevant figures ....
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....t to which the net wealth of the company includes the value of "urban assets". Finance Act, 1970 62. It has been specifically provided that in determining the value of lands and buildings in "urban areas" (other than business premises) for the purpose of levy of additional wealth-tax, deduction will be allowed from the gross value of such assets for debts incurred for the purpose of acquiring, improving, constructing, repairing, renewing or reconstructing such land or building. But in respect of other debts which are deductible in computing the net wealth of the assessee, these will first be deducted from the gross value of assets other than lands and buildings in "urban areas" (excluding business premises), and only the balance, if any, will be deducted from the value of such lands and buildings. Finance Act, 1970 63. The above-mentioned provisions, for increases in the rates of ordinary wealth-tax and changes in the scheme of levy of additional wealth-tax on the value of urban lands and buildings, will be effective from 1-4-1971, i.e., for and from the assessment year 1971-72. The maximum rate of ordinary wealth-tax was increased to 3 per cent with effect from the ass....
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.... other place, the whole of its value is exempt from wealth-tax. The provision in section 5(1)(iv) has been amended by the Finance Act, 1970, to extend the limit of Rs. 1 lakh over the value of a residential house eligible for exemption under this provision, to such houses situated even in areas with a population not exceeding 10,000. In effect, therefore, the exemption of the value of one residential house will be limited to Rs. 1 lakh in all cases. This provision will be effective from 1-4-1971, and will be applicable for and from the assessment year 1971-72. [Section 5(1)(iv) as amended by section 26(b) of the Finance Act] Finance Act, 1970 Exemption from wealth-tax of the value of one farm house 66. Under section 5(1)(iv), before its amendment by the Finance Act, 1970, as stated in the preceding paragraph, a "farm house" (i.e., a residential house used by the taxpayer which is situated on agricultural land and which is used by him for supervising or directing his agricultural operations) was exempt from wealth-tax irrespective of its value, because such farm houses would, by and large, be situated in places having a population of not more than 10,000 persons. Under t....
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.... small savings certificates mentioned above), or shares in Indian companies (except for a five-year period in respect of shares in certain manufacturing companies, forming part of the initial issue of equity share capital made by such companies after 31-3-1964). Finance Act, 1970 68. In order to widen the area of investments in financial assets qualifying for exemption from wealth-tax, the Finance Act, 1970 has extended the exemption from wealth-tax to the following categories of investments : 1. Securities of the Central Government or of any State Government. 2. Shares in Indian companies. 3. Debentures, issued by any co-operative society (including a co-operative land mortgage bank and a co-operative land development bank) or any other institution or authority, which may be notified by the Central Government in the Official Gazette for the purpose of this exemption. 4. Units in the Unit Trust of India. 5. Deposits in banking companies, or co-operative banks, including land mortgage banks and land development banks. 6. Deposits with a financial corporation which is engaged in providing long-term finance for industrial development in India and which is provi....
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.... continue to be held by the assessee. Finance Act, 1970 72. The above-mentioned provisions are effective from 1-4-1971, i.e., for and from the assessment year 1971-72. [Sections 5(1) and 5(3) as amended, and new sub-section (1A) inserted in section 5, by section 26(b) of the Finance Act] Finance Act, 1970 Consequential provision in the Wealth-tax Act relating to distribution and allocation of work on the functional basis among Commissioners of Wealth-tax including Additional Commissioners 73. The Wealth-tax Act already provides for the distribution and allocation of work among Commissioners of Wealth-tax on the functional basis by orders of the Central Board of Direct Taxes. In the context of the creation of a cadre of Additional Commissioners of Income-tax to take over some of the functions of the Commissioners and allocation of the work on the functional basis among Commissioners and Additional Commissioners for the purposes of the Wealth-tax Act as well, the Finance Act, 1970 has made a specific provision in new section 11AA. Under the new section, in a case where two or more Commissioners (including Additional Commissioners) have been vested with concurrent ju....
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....aph 24 of this circular, private discretionary trusts afford scope for reduction of tax liability both in respect of income-tax on the income derived from the property settled on such trusts and wealth-tax on the assets of such trusts. In order to put an effective curb on the proliferation of such trusts, the Finance Act, 1970 has amended section 21(4) for subjecting the assets settled on such a trust to wealth-tax at the flat rate of 1.5 per cent or at the appropriate higher rate of wealth-tax which would be applicable if such assets were held by an individual (who is a citizen of India and resident in India) at the progressive rates of tax applicable in the case of an individual. The flat rate of 1.5 per cent will be applied under this provision to the whole of the net wealth without the initial exemption of Rs. 1 lakh which is available under the rate schedule of ordinary wealth-tax in the case of individuals. Where the assets of the trust include lands and buildings in urban areas to which the additional wealth-tax applies (vide paragraphs 58-62 of this circular), such additional wealth-tax will also be chargeable for the purpose of ascertaining whether the appropriate rate of ....
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....x was chargeable at progressive rates rising from 5 per cent on the first slab of Rs. 15,000 to 50 per cent on the amount by which the total value of all taxable gifts exceeds Rs. 14,90,000. The corresponding rates of estate duty range from 4 per cent on the first taxable slab of principal value (after an initial exemption of Rs. 50,000) to 85 per cent on the principal value of the estate over Rs. 20 lakhs. With a view to bringing the rates of gift-tax more in line with the rates of estate duty and to reducing opportunities for avoidance of estate duty liability by making gifts, the Finance Act, 1970 has made the following changes in the rate structure of gift-tax : 1. The value of gifts generally exempt from gift-tax has been reduced from Rs. 10,000 to Rs. 5,000. 2. The slabs of taxable gifts have been regarded and the rates of gift-tax in some of the slabs have been revised upward. Under the revised rate schedule, the rate of gift-tax on the first slab of Rs. 20,000 of the value of all taxable gifts, [i.e., after deducting the initial exemption of Rs. 5,000 as stated at (1) above] is 5 per cent; on the next slab Rs. 20,001—Rs. 50,000 the rate is 10 per cent; in the slab R....
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.... the first Rs. 1,000 of income in respect of units received by him from the Trust. Under another provision, no tax was deductible from income in respect of units, payable to a non-resident where such income does not exceed Rs. 1,000; where such income exceeds Rs. 1,000, deduction of income-tax was to be made at the rate of 15 per cent from the whole of such income. In the context of the amendment of section 80L of the Income-tax Act for exempting income up to Rs. 3,000 from specified categories of investments including units in the Unit Trust of India (vide paragraphs 12 and 13 of this circular), the Finance Act, 1970, has made the following changes in the relevant provisions of the Unit Trust of India Act : 1. The existing provisions conferring exemption from tax up to Rs. 1,000 on income in respect of units has been deleted. 2. In the case of income in respect of units paid to a unit-holder who is a non-resident, tax will be deductible at source from such income only where it exceeds Rs. 3,000, as against Rs. 1,000 under the provision, before amendment. [Section 32 as amended by section 38 of the Finance Act] Amendment to companies (profits) Surtax Act Financ....
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....0 ; (11) exceeding Rs. 2,50,000 Rs. 1,52,750 plus 75 per cent of the excess over Rs. 2,50,000. Provisions in the case of resident taxpayers for certain exemptions and reliefs in respect of income-tax. 1. Exemptions from income-tax on total incomes not exceeding certain amounts : In the case of Limit of total income not chargeable to income-tax Rs. a. Resident Hindu undivided family which has at least two members, aged not less than 18 years, who are entitled to claim partition, or which has at least two members, entitled to claim partition who are not lineally descended one from the other and also who are not lineally descended from any other living member of the family 7,000 b. Resident taxpayers other than Hindu undivided families referred to in(a) above 4,000 Where the total income does not exceed Rs. 20,000, the tax chargeable after allowing the tax relief on account of personal allowances as at (2) below (where due) is limited, by way of marginal relief, to 40 per cent of the amount by which the total income exceeds the above limit of Rs. 7,000 or Rs. 4,000, as the case may be. 2. Tax relief in the case of resident i....
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....ich would have been payable by him if his total income had been Rs. 10,000 [i.e., after the tax relief as at (a) above] plus 40 per cent of the amount by which the total income exceeds Rs. 10,000. Note : A parent or grandparent of an individual shall not be treated as being mainly dependent on such individual if the income of the parent or the grandparent from all sources in respect of the previous year exceeds Rs. 1,000. Surcharge on income-tax Surcharge is leviable at the rate of 10 per cent of the amount of income-tax. 2. Co-operative Societies Rates of income-tax (exclusive of surcharge on income-tax) (1) On total income not exceeding Rs. 10,000 15 per cent of the total income; (2) On total income exceeding Rs. 10,000 but not exceeding Rs. 20,000 Rs. 1,500 plus 25 per cent of the excess; over Rs. 10,000; (3) On total income exceeding Rs. 20,000 Rs. 4,000 plus 40 per cent of the excess over Rs. 20,000. Surcharge on income-tax Surcharge is leviable at the rate of 10 per cent of the amount of income-tax. 3. Registered fir....
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..... Companies other than the Life Insurance Corporation of India Rates of income-tax I. In the case of domestic company— (1) where the company is a company in which the public are substantially interested,— (i) in a case where the total income does not exceed Rs. 50,000 45 per cent of the total income; (ii) in a case where the total income exceeds Rs. 50,000 55 per cent of the total income ; (2) where the company is not a company in which the public are substantially interested,— (i) in the case of an industrial company— (1) on so much of the total income as does not exceed Rs. 10,00,000 55 per cent; (2) on the balance, if any, of the total income 60 per cent (ii) in any other case 65 per cent of the total income Provision for marginal relief in the case of a domestic company in which the public are substantially interested and whose total income exceeds Rs. 50,000 In the case of such a company, the income-tax payable shall be limited to the aggregate of (a) the income-tax which would have been payable by it if its total income had been Rs. 50,000, and (b) 80 per cen....
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....te of the transfer) are chargeable to income-tax at the rates of income-tax applicable to the total income of the company. Annexure II Rates of income-tax for deduction of tax at source from "salaries" and retirement annuities and for computing "advance tax" payable during the financial year 1970-71 A. Taxpayers other than companies 1. Individuals, Hindu undivided families, unregistered firms, associations of persons (other than co-operative societies), bodies of individuals and artificial juridical persons Rates of income-tax (exclusive of surcharge on income tax) On total income— (1) not exceeding Rs. 5,000 Nil ; (2) exceeding Rs. 5,000 but not exceeding Rs. 10,000 10 per cent of the excess over Rs. 5,000 (3) exceeding Rs. 10,000 but not exceeding Rs. 15,000 Rs. 500 plus 17 per cent of the excess over Rs. 10,000; (4) exceeding Rs. 15,000 but not exceeding Rs. 20,000 Rs. 1,350 plus 23 per cent of the excess over Rs. 15,000; (5) exceeding Rs. 20,000 but not exceeding Rs. 25,000 Rs. 2,500 plus 30 per cent of the excess over Rs. 20,000; (6) exceeding Rs. 25,000 but not exceeding Rs. 30,000 Rs. ....
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....the excess over exceeding Rs. 25,000; (4) exceeding Rs. 50,000 but not exceeding Rs. 1,00,000 Rs. 2,100 plus 12 per cent of the excess over Rs. 50,000; (5) exceeding Rs. 1,00,000 Rs. 8,100 plus 20 per cent of the excess over Rs. 1,00,000. Surcharges on income-tax (1) Ordinary surcharge on income-tax Rate of surcharge (a) a registered firm whose total income to the extent of 51 per cent thereof or more, consist of income derived from a profession carried on by the firm 10 per cent of the amount of income tax; (b) any other registered firm 20 per cent of the amount of income-tax. (2) Special surcharge. The rate of this surcharge is 10 per cent of the amount of income-tax as increased by the ordinary surcharge on income-tax referred to in (1) above. 4. Local authorities Rate of income-tax (exclusive of surcharge on income-tax) On the whole of total income - 50 per cent. Surcharge on income-tax Surcharge is leviable at the rate of 10 per cent of the amount of income-tax. B. Companies 1. Life Insurance Corporation of India (established under the Life Insurance Corporation Act, 1....