The separate concept of Previous Year and Assessment Year will be replaced by a unified

Size: px

Start display at page:

Download "The separate concept of Previous Year and Assessment Year will be replaced by a unified"

Derick Anderson
7 years ago
Views:

1 HIGHLIGHTS OF DIRECT TAX CODE All Direct Taxes integrated in one Act. 16 chapters, 285 sections, 18 schedules. The separate concept of Previous Year and Assessment Year will be replaced by a unified concept of Financial Year. Classification of source of income has been replaced as under- 1 / 14

2 a. Income from Special Sources- Items listed in the table in rule 3 of the first schedule shall be considered as income from special sources. b. Income from Ordinary Sources- All the income accruing from a source other than the special sources, shall be classified under the following heads of income- Income from Employment 2 / 14

3 Income from House Property Income from Business Income from Capital Gain Income from Residuary Sources Definition of Person to include An office or establishment of the Central or the State Government. A foreign company will be treated as resident in India, if at any time in the financial year, it is 3 / 14

4 controlled partly in India (as against wholly in the present act) The concept of Resident but not Ordinary Resident (R but not OR) done away with, but their taxation Personal taxation reduced drastically in increasing the slab ranges, though the basic exemption Saving limit eligible for deduction increased to Rs.3 lakhs (existing limit Rs.1 lakh) Corporate tax rate reduced and proposed to 25%. 4 / 14

5 No surcharge, no cess to be levied. Advance tax installments and due dates remain the same. Tax Deduction at Source (TDS) rates largely remain the same. All expenditures to be disallowed for TDS defaults. Non-compete fees specially made eligible for Lease premium specially made eligible for 5 / 14

6 Books to be maintained for notified professionals and for business if income exceeds Rs.2 lakhs and turnover exceeds Rs.10 lakhs. Definition of Books of Account to include Data stored in Pc. Minimum Alternative Tax (MAT) calculation changes it is now 2% of Gross Assets and for banking companies it is (existing calculated on Book Profit) MAT will be considered as a final tax so No carry forward of MAT credit. 6 / 14

7 Dividend Distribution Tax No wealth tax for companies. Wealth tax only for individual, HUF and private discretionary trust, if wealth tax exceeds Rs.50 crores. Wealth tax 0.25% on above Rs.50 crores. Capital asset to exclude only stock-in-trade, consumable stores and raw materials in business. Even 7 / 14

8 personal effects etc. not liable to Capital Gain. Only capital loss and speculation loss not allowed against other heads. Other losses to be aggregated and identified carry forward. So even business loss carry forward can be set off against Standard deduction of 30% of NAV (Net Annual Value), now made 20% of Gross Rent. Annual Value linked to rateable value. Housing loan interest not allowed for self occupied house. 8 / 14

9 Composite letting (with machinery etc) included in IFHP. Profits on business assets (old sections 50, 50A, 50B etc) to be business income and not capital Radical changes in computation of business income, though the substance obviously remains the Business expenditure classified in three groups- Operating Expenditure Permitted Financial Charges 9 / 14

10 Capital Allowances Differences between Long Term Capital Gain (LTCG) and Short Term Capital Gain (STCG) abolished. However, indexation allowed if held for more than 1 year. Base year for indexation shall be revised and year to considered as a base year. Security Transaction Tax (STT) to be abolished. So, share profit taxable as usual. 10 / 14

11 Capital gains reinvested only in agricultural land and in one residential house. Interest income to be considered under residuary head (earlier known as income from other Savings to be taxable on withdrawals (EET), except pure life policies and provident funds. Exempt Exempt- Taxation (EET) only for new investments and not for the existing ones. Any amount exceeding Rs taken or accepted or repaid as loan or deposit otherwise than by A/c payee cheque or draft shall be now treated as Income from Residuary Source. 11 / 14

12 Tuition fee for children allowed to individuals and HUF. Deductions like 80D, 80DD, 80DDB, 80U, 80E, and 80GG retained. Profit based incentives like section 80 IA etc. changed to investment based incentives. Limits on remuneration and interest to partners removed. Charitable purpose renamed as Permitted Welfare Activities but definition largely remains the Various exemptions to charitable entitles clubbed together for simplification. 12 / 14

13 Charitable entities liable to of the surplus as calculated in a prescribed manner and under Due dates for filing return 30th assesses and for other assesses respectively. The time limit for filing revised return will be limited to 21 months from the end of the relevant June and 31st August for non-business income of non-corporate 13 / 14

14 Foreign companies liable to pay branch profit 14 / 14

Paper 7- Direct Taxation

Paper 7- Direct Taxation Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1 Paper 7- Direct Taxation Full Marks:100 Time allowed: 3 hours