TaxTMI 
TaxTMI 
The Finance Act, 1986-Explanatory Notes on the provisions relating to direct taxes
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....6. CHANGES MADE BY THE FINANCE ACT, 1986 2. The Finance Act, 1986 (hereinafter referred to as "Finance Act"), has,- (i) amended sections 10, 16, 23, 24, 32A, 43, 50, 54, 54E, 55, 58, 74, 74A, 80GG, 80HHA, 80L, 80T, 115A, 155, 193, 194B, 194BB and 204 of the Income-tax Act, 1961; (ii) inserted 6 new sections 32AB, 115BB, 133B, 269RR, 272AA, 276AB and also inserted a new Chapter XXC in the Income-tax Act, 1961; (iii) substituted section 80M of the Income-tax Act, 1961; (iv) omitted sections 80K, 80S, 80TT, 276AA and Twelfth Schedule to the Income-tax Act, 1961; (v) amended section 5 of the Wealth-tax Act, 1957; (vi) amended sections 3, 5, 18, 19A and Schedule to the Gift-tax Act, 1958; (vii) omitted section 6A of the Gift-tax Act, 1958; and (viii) amended section 4 of the Companies (Profits) Surtax Act, 19....
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.... of such asset for purposes of depreciation, etc.; levying a flat rate of tax of 40 per cent. on gross winnings from lotteries, crossword puzzles, horse races, etc.; discontinuing certain tax concessions; and certain other matters. (iv) Amendment of the Gift-tax Act, 1958, with a view to raising of the exemption limit, discontinuing the provisions relating to aggregation of gifts, withdrawal of exemption in respect of certain gifts, and levy of tax at a flat rate of 30 per cent. on the value of all taxable gifts. (v) Amendment of the Wealth-tax Act, 1957, with a view to exempting the bonds issued by a public sector company and enlarging the scope of exemption in respect of assets brought into India by persons of Indian origin. (vi) Amendment of the Companies (Profits) Surtax Act, 1964, with a view to discontinuing the levy of surtax with effect from the assessment year 1988-89. (vii) Subject to certain exemptions which have been indicated while dealing with the relevant provisions, the Finance Act follows the principle that changes in the rates of tax, as also in the provisions of the tax laws, should ordinarily be made operative prospectively in relation to current inc....
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....n of tax at source during the financial year 1986-87 from income other than "Salaries" and retirement annuities. 5. The rates for deduction of income-tax at source during the financial year 1986-87 from incomes, other than "salaries" and retirement annuities payable to partners of registered firms engaged in certain professions, have been specified in Part II of the First Schedule to the Finance Act. These rates apply to income by way of interest on securities, other categories of interest dividends, insurance commission, winnings from lotteries and crossword puzzles, income by way of winnings from horse races and income of non-residents (including non-resident Indians) other than salary income. There are certain changes in these rates as compared to the rates in force during the financial year 1985-86. In Part II of the Finance Act, 1985, the rates for deduction of tax at source in the case of non-corporate assessees on income by way of winnings from lotteries and crossword puzzles was 25 per cent. and that on income by way of winnings from horse races was 30 per cent. The rates for deduction in the aforesaid cases has been raised to 40 per cent. In the case of a company which ....
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....vely been specified in Paragraph B, Paragraph C and Paragraph D of Part III of the First Schedule to the Finance Act. These rates are the same as those specified in the corresponding Paragraphs of Part I of the First Schedule. (v) Rates of tax applicable to companies. 8.1 In the case of companies, the rates of income-tax have been specified in Paragraph E of Part III of the First Schedule to the Finance Act. These rates are the same as specified in the corresponding Paragraph of Part I of the First Schedule. 8.2 Abolition of surcharge.-Surcharge on income-tax for purposes of the Union in the case of companies was hitherto levied at the rate of 5 per cent. of the income-tax. The levy of surcharge for the purposes of the Union has been abolished in the case of companies. (vi) Partially integrated taxation of non-agricultural income with income derived from agriculture. 9. As in the past, the Finance Act provides that in the case of individuals, Hindu undivided families, unregistered firms, other associations of persons, etc., the net agricultural income will be taken into account for computation of "advance tax" and charging of income-tax. These provisions are broadly ....
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....fth of the amount of salary in respect of the accommodation situated at other places. This amendment will apply in relation to the assessment year 1987-88 and subsequent years. [Section 3(b) of the Finance Act] (iii) Modification of provisions relating to standard deduction in the case of salaried taxpayers. 12. At present, the salaried tax-payers are entitled to a standard deduction of 25 per cent. of their salary or Rs. 6,000, whichever is less. The Finance Act has increased the limit of this deduction to 30 per cent. of the salary or Rs. 10,000, whichever is less. This enhanced limit will be applicable from the assessment year 1987-88. [Section 4 of the Finance Act] (iv) Exemption of income from one self-occupied house property. 13.1 Under the existing provisions of section 23(2) of the Income-tax Act, the annual value of a self-occupied property is first determined in the same manner as if the property had been let and it is reduced by one-half of such amount or Rs. 3,600, whichever is less. Where the sum so arrived at exceeds 10 per cent. of the total income of the owner of the property, computed without including the inc....
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....operties, the annual value will be determined as if such house or houses had been let. 13.5 As a consequential amendment, section 23(2A) has been omitted. 13.6 Section 23(3) which has been substituted provides that where a house property consists of one residential house only and it cannot be actually occupied by the owner owing to his employment, business or profession being carried on at any other place compelling him to reside at that place in a building not belonging to him, its annual value shall be taken to be nil, provided the house is not actually let and no other benefit therefrom is derived by the owner. 13.7 The above amendments to section 23 shall apply in relation to the assessment year 1987-88 and subsequent years. [Section 5 of the Finance Act] (v) Restriction on deduction from income from house property. 14.1 By an amendment of section 24 of the Income-tax Act, it has been provided that where the self-occupied house property is acquired with the help of borrowed funds, a deduction in respect of interest payable up to a maximum of Rs. 5,000 per annum on such borrowed funds will be allowed. 14.2 This provision will be applicable....
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....l be regarded as a small scale industrial undertaking if the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed therein, as on the last day of any previous year ending after the 17th March, 1985, does not exceed Rs. 35 lakhs. In view of the Explanation 3 to section 80-I(2), the amended definition will automatically apply for the purposes of that section also. 15.3 This amendment will have retrospective effect and will apply in relation to the assessment year 1985-86 and subsequent years. [Sections 7(a)(ii) and 18 of the Finance Act] (vii) Other amendments to section 32A of the Income-tax Act. 16.1 As one of the measures of corporate tax reform announced in the Long-Term Fiscal Policy, the scheme of investment allowance has been replaced by the scheme of investment deposit account. Under the existing provisions of clause (c) of sub-section (2) of section 32A of the Income-tax Act, in the case of approved Indian companies any new machinery or plant installed for the purposes of business of repairs to ocean-going vessels or other powered craft, is entitled to investment allowance. As per section 32A(8), the Central G....
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....t been postponed to the third year, as envisaged earlier as per para 5.12 of the LTFP. Keeping in view, the interest of revenue, the surtax has been discontinued with effect from the assessment year 1988-89. The scheme of investment allowance has been replaced by a new scheme of investment deposit account. 17.3 One of the reasons for our having a high capital output ratio in the industry is that the tax concessions have so far favoured investment in assets per se rather than output generated from those assets. By the new scheme relating to investment deposit account along with the proposed high depreciation rates announced by the F.M., the retained earnings and internal resources generation of the companies would improve. As mentioned in paras. 5.12 to 5.18 of the LTFP, the investment allowance had tended to favour the larger and more established enterprises, partly because such concerns could set off investment allowance against profits of old established units without waiting for profits from fresh investments. The new scheme of investment deposit account will be neutral as between small and large companies and will also insulate the timing of investment decisions from tax con....
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....is available even if there is no such profit, because the deduction is linked merely to the cost of the plant and machinery. (c) The acquisition of a ship or an aircraft or installation of plant and machinery, as the case may be, during the previous year is a condition precedent for availing of the benefit of the existing investment allowance, whereas the deduction under the new provisions can be availed of even before the ship or aircraft is acquired or the plant or machinery has been installed by making a deposit with the designated Development Bank. (d) The investment allowance is allowed at 25 per cent. of the actual cost of the plant, machinery, ship or aircraft to the assessee. As against this, under the new scheme, the entire cost of the ship or aircraft or plant or machinery will qualify for deduction, if the same is up to 20 per cent. of the profits of the eligible business or profession. (e) Under the new provisions, the deduction is not admissible unless the accounts of the business or profession of the assessee, other than a company or a co-operative society have been audited by an accountant and the assessee furnishes along with the return of his income, the r....
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....e applicable in the cases of corporate as well as non-corporate assessees. 17.5 The requirements as per Part II of the Sixth Schedule to the Companies Act, include the following:- (i) The profit and loss account shall be so made out as clearly to disclose the result of the working of the company during the period covered by the account and shall disclose every material feature, including credits or receipts and debits or expenses in respect of non-recurring transactions or transactions of exceptional nature. (ii) The profit and loss account shall set out the various items relating to the income and expenditure under the most convenient heads; and in particular shall disclose the turnover, giving the amount of sales in respect of each class of goods dealt with by the company and indicating the quantities of such sales for each class separately. (iii) The commission, brokerage and discount on sales paid will be indicated. (iv) In the case of a manufacturing concern, the value of the raw material consumed, giving item-wise break-up and indicating the quantities thereof are to be indicated. The important basic raw material consumed, giving item-wise break-up and indicati....
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....ion "reserve" shall not include any amount written off or retained by way of providing for depreciation, renewal or diminution in value of the assets or retained by way of providing for any known liability. (iii) The expression "capital reserve" shall not include any amount regarded as free for distribution through the profit and loss account. (iv) The expression "revenue reserve" shall mean any reserve other than the capital reserve. (v) The expression "liability" shall include all liabilities in respect of expenditure contracted for and all disputed or contingent liabilities. (b) In a case where in respect of eligible business or profession, no separate accounts are maintained or available, the profits of the eligible business or profession shall be such amount which bears to the total profits of the business or profession of the assessee after allowing depreciation under section 32(1), the same proportion as the total sales, turnover or gross receipts of the eligible business or profession bear to the total sales, turnover or gross receipts of the business or profession carried on by the assessee. For example, if the gross receipts of business are Rs. 100 which inclu....
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....y or through borrowings to acquire the new ship, plant, etc. That being so, under the Investment Deposit Scheme, deduction will be admissible only if the deposit is made or the ship, plant, etc., is acquired out of income chargeable to tax under the head "Profits and gains of business or profession". 17.7 As provided in section 32AB(10), no deduction shall be allowed under section 32AB(1) in the case of an assessee carrying on business of growing and manufacturing tea in India who has claimed the deduction under section 33AB relating to the tea development account. However, any excess deposit made by such an assessee under section 33AB(2) may not be treated as a bar to deposit further amount under section 32AB for the assessment year 1987-88, so long as the overall celling of 20 per cent. of eligible profits is not exceeded. As this problem is limited to only one year, no enabling provision in law is considered necessary for this purpose. 17.8 Consequential amendments have been made in section 80VVA and in the Eleventh Schedule to the Income-tax Act. 17.9 The new section will apply in relation to the assessment year 1987-88 and subsequent years. 17.10 A notification rel....
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...., some tax-payers had adopted a contrary stance and had capitalised such interest. The first decision in favour of this stance had been rendered on May 13, 1974, in the case of CIT v. J.K. Cotton Spinning and Weaving Mills Ltd. ([1975] 98 ITR 153. This decision as well as the subsequent decisions were contrary to the legislative intent. Hence, in order to enable the Government to collect the tax legitimately due to it for the earlier years, a clarificatory amendment to this provision has been made retrospectively from 1st April, 1974 and will, accordingly, apply in relation to the assessment year 1974-75 and subsequent years. [Section 9 of the Finance Act] (x) Liberalisation and rationalisation of the provision relating to capital gains. 19. The Government had announced its intention as per the LTFP (Paras 5.24 to 5.26) to liberalise the taxation of capital gains. Accordingly, the following amendments have been made: 20.1 Liberalisation of the provisions permitting tax-payers to substitute the actual cost of asset by its fair market value for purposes of computing capital gains. Section 55(2) of the Income-tax Act provides that where the capi....
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.... frame than one year. The assessees, therefore, would experience difficulty in complying with the time-limit of one year for purchasing a new house after the date of transfer of the residential house. Hence, by amending this provision, the period of one year has been extended to two years. Where the transfer is by way of compulsory acquisition and the compensation awarded is enhanced by any court, tribunal or other authority, the period of one year after the date of receipt of the additional compensation for purchase of a residential house has also been increased to two years. As a consequential amendment in sub-sections (8) and (8A) of section 155 of the Income-tax Act meant for amending the assessment order, the period of one year has similarly been raised to two years. 21.2 These amendments will apply in relation to the assessment year 1987-88 and subsequent years. [Sections 11 and 28 of the Finance Act] 22.1 Exemption in respect of "long-term capital gains" in cases where the net consideration received or accruing as a result of transfer is invested or deposited in specified financial assets. Under the provisions of section 54E of the Income-tax A....
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....ification of the provisions relating to deduction in respect of long-term capital gains in the case of non-corporate tax payers. Under the provisions of section 80T read with Schedule XII to the Income-tax Act, in respect of long-term capital gains in the case of non-corporate tax-payers, an initial deduction of Rs. 5,000 is admissible and, in addition, a further deduction is admissible, depending upon whether the capital gains relate to buildings or lands or any rights therein on the one hand and other assets on the other, as also the number of years for which an asset has been held. With a view to rationalising the scheme of taxation of capital gains, the initial deduction has been raised from Rs. 5,000 to Rs. 10,000. In addition, if such gains relate to buildings or lands or any rights in buildings or lands, a deduction of an amount of 50 per cent. of the capital gains will be admissible. By another amendment, the deduction relating to the transfer of gold, bullion or jewellery will be treated on the same footing as buildings or lands or any rights in such assets. If the long-term capital gains relate to any other asset, the amount of deduction will be 60 per cent. Thus, the ....
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....the Finance Act has deleted section 80K of the Income-tax Act. As a consequential measure, sub-section (2) of section 80L, sub-section (2) of section 80M, clause (xxiv) of sub-section (1) of section 80VVA and sub-section (3) of section 197 of the Income-tax Act, have been deleted and amendment made in section 80A(3). 25.2 These amendments will take effect from 1st April, 1987, and will apply in relation to the assessment year 1987-88 and subsequent years. [Sections 19, 20(b), 21, 39(a)(i), (b)(ii) and (c)(ii) of the Finance Act] 26.1 Deduction in respect of compensation for termination of managing agency, etc., in the case of assessees other than companies. As per section 80S of the Income-tax Act, a non-corporate tax-payer is allowed a deduction of an amount equal to 25 per cent. of income by way of compensation for termination of managing agency of certain types subject to a maximum limit of deduction of Rs. 1 lakh. This provision applies to a very small number of taxpayers. Even in the case of those taxpayers, the relief available is only marginal unless the amount of compensation is very large. Besides, there was little justification for such a concession which was ....
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....t, a book-maker or a licencee for horse races in any race course or for arranging any wagering or betting in any race course responsible for paying to any person any income by way of winnings from any horse race in excess of Rs. 2,500 is required to deduct income-tax on such payments at the rates in force. The Finance Act has raised the aforesaid limit from Rs. 2,500 to Rs. 5,000. [Section 31 of the Finance Act] 30.1 Modification of the definition of the expression "person responsible for paying" for the purpose of deduction of tax at source from long-term capital gains in the case of a non-resident Indian. Under the provisions of section 195 of the Income-tax Act, any person responsible for paying to a non-resident any interest (other than "Interest on securities") or any other sum, not being dividends, which is chargeable under the Income-tax Act, is liable to deduct income-tax thereon at the rates in force. With a view to simplifying the procedure for the tax deduction at source and to avoid delay and inconvenience in the case of non-resident Indians wishing to remit the sale proceeds of "foreign exchange assets" [as defined in section 115C(b)],....
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.... 30.3 The amendment is effective from 1st June, 1986. [Section 32 of the Finance Act] (xiii) Provision of a flat rate of tax on winnings from lotteries, crossword puzzles, races, including horse races, etc. 31.1 Under the existing provisions, any income by way of winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever is chargeable to tax under the head "Income from other sources" along with the other income of an assessee. By inserting a new section 115BB in the Income-tax Act, it has been provided that any income of a casual and non-recurring nature of the type referred to above, shall be charged to income-tax at a flat rate of 40 per cent. This provision will, however, not apply to income from the activity of owning and maintaining race horses. For this purpose, a new sub-section has been added to section 58 to provide that no deduction shall be allowed in respect of any expenditure or allowance in computing the income from the aforesaid sources. What has to be borne in mind is that apart from the general exemption of Rs. 5,000 un....
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....me, if any, from the same activity. 32.2 These amendments will apply in relation to the assessment year 1987-88 and subsequent years. [Section 16 of the Finance Act] (xv) Modification relating to limit of deduction in respect of rent paid. 33.1 Under the provisions of section 80GG of the Income-tax Act, any expenditure incurred by an assessee, other than those covered under section 10(13A) of the Income-tax Act, in excess of 10 per cent. of his total income towards payment of rent is allowed as deduction in computing his total income. The amount of deduction is subject to a ceiling of Rs. 400 per month or 15 per cent. of his total income of the year whichever is less. With a view to liberalising the provisions of this section, by an amendment brought about by the Finance Act, the monetary ceiling of deduction has been raised from Rs. 400 per month to Rs. 1,000 per month. The ceiling of deduction in terms of percentage of total income has been raised from fifteen per cent. to twenty-five per cent. The lower of the two ceilings now stipulated will be admissible as deduction as at present. 33.2 The amendment will be applicable in relation to the....
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....n rise to the problems which had been apprehended relating to royalty vis-a-vis fees for technical services. It has been found that the foreign collaborators tend to take more by way of lump sum which attracts lower rate of tax than by way of royalty and in some cases payments for grant of licence for use in India of technical process are camouflaged as lump sum payments abroad. This is also not in the interest of absorption and adaptation of imported technology. An agreement for transfer of technology in India is more conducive, when compared to an agreement for lump sum payment, to self-reliance in our industrial production. Further, the differential rates of tax have been found to be open to abuse and have also given rise to litigation. Hence, by an amendment of section 115A of the Income-tax Act, the tax rate on lump sum payments has been increased from twenty per cent. to thirty per cent. and the tax rate on royalty payments and fees for technical services has been reduced from forty per cent. to thirty per cent. This will result also in reducing the cost of technology to Indian concerns thus enabling them to opt for the latest rather than intermediate technology and will enco....
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..... [Sections 27 and 35 of the Finance Act] (xviii) Measures for raising resources for the public sector. 36.1 Under the existing provisions of section 80L of the Income-tax Act, interest on such 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, as notified by the Central Government is allowed as a deduction within specified limits. Under the provisions of section 193 of the Income-tax Act, no tax is deductible at the time of payment of any interest on such debenture. 36.2 With a view to tapping rural savings for the benefit of public sector, section 80L(1)(ii) of the Income-tax Act has been amended so as to include also the interest on debentures issued by a public sector company as an item qualifying for deduction. With a view to avoiding inconvenience to those who may wish to subscribed to these debentures, section 193(iib) has been amended so as to exclude the interest payable on such debentures from the requirement of deduction of tax at source. 36.3 The amendment to section 80L will apply in relation to the assessment year 19....
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....eprivation of property or any rights therein but will only imply a restriction on the contractual rights of the parties. This restriction is just, fair and reasonable having regard to the object sought to be achieved. 37.5 It is a known fact that proliferation of black money is evident in the transfer of immovable properties. As mentioned in the LTFP (para. 5.30), one way of tackling the problem of tax evasion is to confer on the Government the pre-emptive right to acquire any immovable property undergoing a transfer for consideration above a certain value. The assumption of the powers by the Central Government to purchase immovable properties in certain cases of transfer thus has the object of including the transferors and the transferees to declare the full amount of consideration in the agreement for transfer. 37.6 On receipt of the statement by each of the parties to such transfers as are within the purview of section 269UC, the appropriate authority may make an order under section 269UD after recording the reasons in writing for the purchase of the immovable property at an amount equal to the amount of apparent consideration. This order has to be made within a period of ....
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....nless the appropriate authority has not made an order for purchase of the said property by the Central Government under section 269UD and the period specified for making such order has expired or the order of the appropriate authority stands abrogated under the provisions of section 269UH. Any transfer of any immovable property in contravention of these provisions shall be void. 37.9 As per a further condition under section 269UL, a registering officer under the Registration Act, 1908, has been barred from registering any document purporting to transfer any immovable property, exceeding the value prescribed unless the appropriate authority certifies that it has no objection to such a transfer. Further no person shall do anything or omit to do anything which will have the effect of transfer of any immovable property unless the appropriate authority certifies that it has no objection to such a transfer. 37.10 As per section 269UO, the provisions of this Chapter shall not apply to or in relation to any immovable property where the agreement for transfer of such property is made by a person to his relative on account of natural love and affection, if a recital to that effect is m....
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....ion, etc. Further, it is essential to find ways in which taxpayers could be induced to disclose the true value of their properties. In order to achieve this purpose, the new Chapter XXC conferring on the Central Government a pre-emptive right to purchase an immovable property has been inserted in the Income-tax Act and at the same time by a new section 269RR, it has been provided that the provisions of Chapter XXA of the Income-tax shall not apply to or in relation to the transfer of any immovable property made after the 30th day of September, 1986. 38.3 As a consequential measure, section 276AA of the Income-tax Act providing for punishment with rigorous imprisonment up to two years and also for liability to fine for failure to comply without reasonable cause or excuse with the provisions of section 269AB or with any direction issued under sub-section (5) of section 269-I of the Income-tax Act has been omitted with effect from 1-10-1986. [Sections 33 and 37 of the Finance Act] AMENDMENTS TO THE WEALTH-TAX ACT 39.1 Exemption of debentures issued by public sector companies. With a view to tapping rural savings and mobilising resources for the public....
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....ons in respect of moneys or assets which were not brought into the country at the time when the person returned to India but were brought before or after the person's return. It has been clarified by the CBDT as per Circular No. 411 (F. No. 317/5/85-WT dated 26-2-1985*) that the moneys which are deposited in the Non-Resident (External) Account shall continue to qualify for exemption under the Wealth-tax Act even after the person returns to the country and the moneys in the above account are converted into any other assets. In response to further representations, a clarificatory amendment has been made by the Finance Act by inserting Explanation 2 in clause (xxxiii) of section 5(1) of the Wealth-tax Act. This explanation clarifies that the moneys standing to the credit of a person in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Regulation Act, 1973, on the date of his return shall be deemed to be moneys brought by him into India for the purposes of the said clause on that date. Since section 5(1)(xxxiii) had been inserted by the Finance Act, 1976, with effect from 1-4-1977, the amendment has been given retrospective effect and will a....
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.... assessment year commencing on and from 1-4-1958 but before 1-4-1987, the rates specified in the Schedule to the Gift-tax Act. (b) For every assessment year commencing on and after 1-4-1987, at the rate of thirty per cent. 41.2 Consequential amendments have been made in sections 18 and 19 and Schedule to the Gift-tax Act. 41.3 These amendments will apply in relation to the assessment year 1987-88 and subsequent years. [Sections 41, 44, 45 & 46 of the Finance Act] 42.1 Withdrawal of exemptions in respect of certain gifts. Under the provisions of section 5(1)(iiia) of the Gift-tax Act, gift of National Defence Gold Bonds, 1980, not exceeding the value of such bonds for an aggregate weight of 5 kg. of gold in any previous year is exempt. These Bonds matured in 1980 and hence there is no likelihood of gift of such bonds now. This provision has thus become redundant and hence has been deleted by the Finance Act. 42.2 As per clause (vi) of sub-section (1) of section 5 of the Gift-tax Act, gifts for charitable purpose (other than gifts to an institution or fund to which section 80G of the Income-tax Act applies) are exempt, subject to a limit of Rs. 100 f....
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....xiv) of sub-section (1) of section 5 of the Gift-tax Act, gifts to the extent considered to have been made bona fide in the course of carrying on a business, profession or vocation for the purpose of such business, profession or vocation is exempt. The condition relating to the satisfaction of the officer regarding the bona fide nature of gifts in relation to carrying on of business has given rise to litigation and interpretations by the courts which were not in conformity with the legislative intent. For example, even gift of 25 per cent. of the share of a senior partner to a young lawyer partner has been held to be exempt, under this clause. (V.O. Markose v. CGT [1975] 98 ITR 504). Even otherwise, this provision does not appear to serve any purpose and hence it has been deleted, keeping in view the higher exemption limit now provided. 42.6 Under clause (xvi) of sub-section (1) of section 5 of the Gift-tax Act, gift to any person up to a maximum of rupees five hundred in any previous year is exempt. This clause was inserted with effect from 1-4-1985. With the enhancement of the basic exemption limit as per the Finance Act, this exemption will cease to have any purpose and hence....