Chapter - 8. DDOs Role - Tax Laws, Direct & Indirect Taxes, VAT and CENVAT

Transcription

1 Chapter - 8 DDOs Role - Tax Laws, Direct & Indirect Taxes, VAT and CENVAT BSNL, India For Internal Circulation Only 1

2 Income Tax 1.1 Income tax is a composite tax on all incomes received by, or accruing or arising to, a taxpayer during a year. 1.2 In the language of the Income Tax Act, the year during which the income is received or is otherwise earned is called the Previous year and that income is assessed to tax in the year commencing on 1 st April next following the close of previous year. This latter year is termed Assessment year. 1.3 Though income Tax is a single Tax on the aggregate of incomes from various sources the taxable income is first computed under different heads of income. 1.4 If there are two or more sources of income falling under a head of income the income is computed separately for each source of income. These are then aggregated. From the aggregated amount, certain deductions are made before the taxable income is reached. The various heads of income are:- i) Salaries ii) Income from House Property iii) Profits and Gains of Business or Profession iv) Capital Gains; and v) Income from Other Sources 2. Income that is exempt from tax (only items related to salary) 2.1 Leave Travel concession in India (Only two journeys in a block of 4 years is exempt) [(Sec.10 (5)] 2.2 Gratuity [Sec.10 (10] Government Employee: - Fully exempt BSNL, India For Internal Circulation Only 2

3 Non Government Employee (Covered by Payment of Gratuities Act) The least of the following is exempt 15 days salary Last drawn (includes DA) X length of Service Rs.3,50,000 Actually Received Less than 6 months service ignored. 6 months & above service is treated as full year Non Government Employee ( Not covered by Payment of Gratuities Act) The least of the following is exempt Half months average salary(includes DA) (average of 10 months preceding the month of retirement) X Completed years of Service Rs.3,50,000 Actually Received Fraction of a year is ignored Average of 10 months preceding the month of retirement However, the assessee can claim relief under Sec Commuted Value of Pension [Sec.17(1)(iii)] Employee of Central/State Fully Exempt Govt., Local Authority & Statutory Corporation Non Government Employee If Gratuity is received If Gratuity is not received 1 / 3 rd of Pension Exempt ½ of Pension Exempt However, the assessee can claim relief under Sec.89 Any payment received by way of commutation of pension by an individual out of annuity plan of the LIC from a fund set up by that corporation shall be exempt under sec. 10 (10A). 2.4 Leave Encashment During Service: - Chargeable to Tax. However, relief can be taken under section 89. At the time of retirement/leaving job Government Employee Fully Exempt BSNL, India For Internal Circulation Only 3

4 Non Government Employee: - Least of the following is exempt (No. of months) EL at credit as per records X Average month salary 10 X Average month salary Rs.3,00,000 Actual Amount received Average month salary = Last 10 months (Basic salary + DA)/10 EL at credit to be 30 days per year of service ( fraction ignored) leave availed/ encashed during service 2.5 House Rent Allowance: [Sec.10(13A)] If an employee lives in rented house and paying rent, the least of the following is exempt from tax 1. 50% of salary, where residential house is at Bombay, Calcutta, Delhi or Madras and 40% of salary, where residential house is at any other place 2. HRA received for the period during which rental accommodation is occupied 3. The excess of rent paid over 10 percent of salary Salary includes Dearness Allowance, if the terms of employment so provide, but exclude all other allowances and perquisites. Salaried employees drawing HRA up to Rs.3000 p.m. will be exempted from production of rent receipt. 2.6 Special allowances prescribed as exempt under section 10(14): 1. Traveling allowance/transfer allowance 2. Conveyance allowance 3. Daily Allowance 4. Uniform allowance 5. Special Compensatory allowance (Hilly areas, High altitude, uncongenial climate, snow bound area, avalanche) [Rs. 300 p.m. to Rs.7000 p.m.) 6. Border area allowance (remote locality, difficult area, disturbed area) [Rs.200 p.m. to Rs.1300 p.m.] 7. Tribal areas/scheduled areas allowance: Rs. 200 p.m. 8. Children Education allowance: Rs.100 p.m. per child up to a maximum of two children 9. Hostel expenditure allowance: Rs.300 p.m. per child up to a maximum of two BSNL, India For Internal Circulation Only 4

5 10. Compensatory field area allowance: Rs.2600 p.m. in some cases. 11. Compensatory modified area allowance: Rs.1000 p.m. in some cases. 12. Counter insurgency allowance: Rs.3900 per month in some cases. 13. Transport allowance: up to Rs.800 p.m. (Rs.1600 per month in the case of an employee who is blind or orthopaedically handicapped 14. Underground allowance: Rs.800 per month 15. High altitude allowance: Up to Rs.1060 per month (for altitude of 9000 to feet) or Rs.1600 per month (for altitude above feet) 16. High active field area allowance up to Rs.4200 per month 17. Island duty allowance: Up to Rs.3250 per month 3. Taxable Perquisites 3.1 Rent free unfurnished accommodation: (a) (a) Accommodation provided by Central Government /State Government: Licence Fee chargeable (As per amended section 17 (2)(ii) of Income Tax Act 1961, vide Finance Act 2007) In a case where an unfurnished accommodation is provided by any employer other than the Central government or any State Government (AY ) City having population 15% exceeding 25 lakhs as per 2001 census City having population 10% exceeding 10 lakhs but not exceeding 25 lakhs as per 2001 census Any other place 7.5% Accommodation owned by the Employer Accommodation is taken on lease or rent by the employer Lease rent or 15% of salary whichever is lower Salary includes all monetary payments except exempted allowance & perquisites, DA if not considered for retirement Benefits 3.2 Rent free furnished accommodation (not being in a Hotel) BSNL, India For Internal Circulation Only 5

6 The charges at para 3.1 above + [ 10% of cost of furniture (P.A.) or Actual hire charges of furniture, if hired.] Rent free furnished accommodation in a Hotel (includes Guest House) 24% of salary or Actual charges paid by Employer whichever is lower 3.3 Accommodation provided at concessional rent In a case where an unfurnished accommodation is provided by any employer other than the Central government or any State Government (AY ): Difference between the amount arrived as per 3.1 above (A) and the rent recoverable from, or payable by, the assessee (B) [If A is more than B only] 3.4 Interest free loan or loan at concessional rate of interest It is taxable in the hands of all employees. The value of perquisite will be = Interest SBI for the year Less Interest actually recovered for the year The basis of calculation shall be the maximum outstanding balance on the last day of each month. SBI lending Rates (AY ) Housing loan Up to 5 years % Above 5 years but up to 15 years % Above 15 years but up to 20 years % Car Loan Up to 3 years (Rs.7.5 Lakhs & 11.5 % above) Up to 3 years (below 7.5 Lakhs) % Above 3 years and up to 5 years % Above 5 years and up to 7 years 12 % Two wheeler % loan Education Loan amount up to Rs.4 Lakh 11.5 % Loan Loan amount above Rs.4 Lakh 13.25% Personal Loan 15.25% BSNL, India For Internal Circulation Only 6

7 When perquisite is not chargeable to tax 1. If a loan is made available for medical treatment in respect of diseases specified in rule 3A (the exemption is, however, not applicable to so much of the loan as has been reimbursed to the employee under any medical insurance scheme). 2. Where the amount of original loan (loans) does not exceed in the aggregate Rs Use of Movable assets The value of benefit to the employee resulting from the use by the employee of any movable asset belonging to the employer shall be = 10% per annum of the actual cost of such asset (or amount of rent paid /payable by the employer, if hired) Less amount paid or recovered from the employee for such use. It is taxable in the hands of all employees. Nothing is taxable if laptop or computer is provided. 3.6 Movable assets sold by an employer to its employees at a nominal price:- Perquisite in respect of sale of movable assets to employees Cost of the asset Less normal wear and tear for completed years during which the asset was used by the employer for his business Less amount recovered from the employee Taxable value of the perquisite Electronic items/ computers Actual cost to the Employer 50% for each completed year by reducing balance method Consideration recovered from the employee Motor car Actual cost to the Employer 20% for each completed year by reducing balance method Consideration recovered from the employee Any other asset Actual cost to the Employer 10% for each completed year of actual cost Consideration recovered from the employee Balancing amount Balancing amount Balancing amount BSNL, India For Internal Circulation Only 7

8 3.7 Medical facilities: 1. Fixed medical allowance is always chargeable to tax. 2. The perquisite in respect of medical facilities is generally taxable in the hands of only specified employees. If, however, bills are issued in the name of an employee and the employer makes payment, then it is taxable in the hands of all employees whether specified or not. Hospital ( including clinic, dispensary or nursing home) Maintained by the employer Maintained by --Central/ State Government -Local authority -Any other person but approved by the Government for the treatment of its employees Approved by the Chief Commissioner Health insurance policy (i.e., group medical insurance premium for employees or medical insurance premium for employees and family members) Maintained by any other person (for example a private clinic) Nature of medical facility made available to employees & their family Any Any For prescribed diseases Any Expenditure Incurred by the employer Incurred or reimbursed by employer Incurred or reimbursed by employer Medical insurance premium paid or reimbursed by the employer Incurred or reimbursed by employer Is it chargeable to tax Not chargeable to tax (no monetary ceiling) Not chargeable to tax (no monetary limit) Not chargeable to tax (no monetary limit) Not chargeable to tax (no monetary ceiling) Not chargeable to tax up to Rs in aggregate per assessment year Tiffin allowance & Servant allowance are taxable. Tax is to be deducted at source by Employer / Payer BSNL, India For Internal Circulation Only 8

9 I. From Salary (Sec.192) Rate of tax deduction at source Normal rates applicable to an individual Income Tax Rates (A.Y ) (F.Y ) Individual/HUF/AOP/BOI/Artificial person Net income range Income-tax rates Education cess Up to Rs.1,10,000 Up to Rs.1,45,000 (Resident Woman below 65 years) Up to Rs.1,95,000 (Senior citizen) Above Rs.1,10,000 to Rs.1,50,000 Above Rs.1,50,000 to Rs.2,50,000 NIL NIL NIL 10% of the net income in excess of Rs.1,00,000 [10% of the net income in excess of Rs.1,45,000 (Resident Woman below 65 years)] Rs.4000 plus 20% of the net income in excess of Rs.1,50,000 [Rs.500 plus 20% of the net income in excess of Rs.1,50,000 (Resident Woman below 65 years)] 2% of income tax 2% of income tax Secondary & Higher education cess (1/4/2007) 1% of income tax 1% of income tax Above Rs.2,50,000 [20% of the net income in excess of Rs.1,95,000 (Senior Citizen)] Rs.24,000 plus 30% the net income in excess of Rs.2,50,000 2% of income tax 1% of income tax [Rs.20,500 plus 30% of the net income in excess of Rs.2,50,000 (Resident Woman below 65 years)] [Rs.11,000 plus 30% of the net income in excess of Rs.2,50,000 (Senior Citizen)] BSNL, India For Internal Circulation Only 9

10 If the net income exceeds Rs.10, Surcharge shall be of Income tax plus Education Cess 2% and Secondary & Higher education Cess 1% on [Income tax & Surcharge] 4. Permissible deductions from Salary Income (Sec16) 4.1 Standard Deduction [Sec.16 (i) ]: It is not available from Assessment year Entertainment Allowance [Sec.16 (ii)]: In the case of Government employee, the lease of the following is deductible: a. Rs.5000; b. 20% of basic salary or c. Amount of entertainment allowance granted during the previous year In the case of non-government employee entertainment allowance is not deductible 4.3 Professional Tax or Tax on Employment [Sec.16 (iii)]: Actual amount paid during the year 5. Computation of relief when salary has been received in arrears or in advance (Sec. 89) 1. Calculate the tax payable on the total income, including the additional salary (arrears/advance salary), of the relevant previous year in which the same is received. 2. Calculate the tax payable on the total income, excluding the additional salary, of the relevant previous year in which the additional salary is received. 3. Find out the difference between the tax at (1) and (2) 4. Compute the tax on the total income after including the additional salary in the previous year to which such salary relates. 5. Compute the tax on the total income after excluding the additional salary in previous year to which such salary relates. 6. Find out the difference between tax at (4) and (5) BSNL, India For Internal Circulation Only 10

11 7. The excess of tax computed at (3) tax computed at (6) is the amount of relief admissible under section 89. No relief is, however, admissible if tax computed at (3) is less than tax computed at (6). In such a case, assessee-employee need not apply for relief. Income from House Property Let Out House Property Gross annual value (Municipal valuation or Fair rent whichever is higher subject to a maximum of Standard Rent (Rent control Act) If the actual rent received/receivable is higher than the above, then that is gross annual value Less Municipal Taxes xxxx xxxx Net annual value Less Deduction under Section 24 Standard deduction 30% of net annual value Interest on borrowed capital (Accrual basis) (no maximum limit) Interest on pre-construction period in 5 equal installments from the construction year. Income from house property Self Occupied House Property (one) Gross annual value Less Municipal Taxes Net annual value Less Deduction under Section 24 Standard deduction 30% of net annual value Interest on borrowed capital Capital is borrowed before : (Max. ) Rs.30,000 Capital is borrowed on or after & the house is acquired/constructed within 3 years from the end of F.Y in which the capital is borrowed: (Max.) Rs.1,50,000 (Accrual basis) (Interest on pre-construction period in 5 equal instalments from the construction year) Income from self occupied property xxxx xxxx xxxx xxxx NIL NIL NIL NIL xxxx xxxx BSNL, India For Internal Circulation Only 11

12 Where a house is self occupied for a part of the year and let out for remaining part of the year, Income will be computed as if the property is let out. If there if a loss under the head Income from house property it can be set-off against any income under other heads of income during the current year (No loss can be set-off against winnings from lotteries, races etc.) If it is not possible to set-off the loss (fully or partly), it can be carried forward to the next year for being set-off against the income under the head Income from house property. Income from other sources a. Dividends b. Any winnings from lotteries, crossword puzzles, races including horse-races, card games and other games of any sort or form, gambling or betting of any form or nature whatsoever c. Income by way of interest on securities if the income is not chargeable to tax under the head Profits and gains of business or profession. [ Interest from P.O. Savings Bank Account & Post Office CTD is exempt from Tax] d. Where any sum of money exceeding Rs is received without consideration by an individual from any person, the whole of such sum e. Family Pension received by family members of deceased employee [Deduction Rs or 33 1 / 3 % of such income, whichever is less] f. Interest on bank deposits and loans 6. DEDUCTIONS FROM GROSS TOTAL INCOME The aggregate amount of deductions under sections 80C to 80U cannot exceed gross total income (i.e. gross total income after excluding long-term capital gains, short-term capital gain taxable under section 111A, winning from lotteries, races, etc.) These deductions are to be allowed only if the assessee claims these and establishes the circumstances warranting such deductions. BSNL, India For Internal Circulation Only 12

13 6.1 [Sec.80C[: (Only Individual or HUF) (From AY ) The investments eligible for deduction include life insurance premia, contributions to provident fund or schemes for deferred annuities, purchase of infrastructure bonds, payments of tuition fees, repayment of principal amount of housing loans, etc. However, in order to minimise distortions, there are no sectoral caps in the new section and the assessee is free to invest in any one or more of the eligible instruments within the overall ceiling specified. Amount deductible under section 80C is equal to (a) 100% of the investment eligible or (b) Rs.1 Lakh, whichever is lower. From AY investments in fixed deposits in scheduled banks for a term of not less than five years included in Sec. 80 C. The maximum amount deductible under sections 80C, 80CCC and 80CCD cannot exceed Rs.1 Lakh. 6.2 [Sec.80CCC] (only individual): Amount deposited under an annuity plan of the LIC or any other insurer for receiving pension, is allowed as deduction (Maximum Rs )(AY ). Other points:- 1. Where the assessee or his nominee surrenders the annuity before maturity date of such annuity, the surrender value shall be taxable in the hands of the assessee or his nominee, as the case may be, in the year of receipt. 2. The amount received by the assessee or his nominee as pension will be taxable in the hands of the assessee or the nominee, as the case may be, in the year of receipt. 3. If deduction is claimed under section 80C, in respect of the same investment, deduction will not be available under section 80CCC. 6.3 Medical Insurance Premia [Sec.80D]: Conditions:- 1. The Tax payer is an individual BSNL, India For Internal Circulation Only 13

14 2. Insurance premium is paid by the taxpayer in accordance with scheme of GIC and approved by Central Government or a similar scheme of any other insurer who is approved by IRDA. 3. The premium is paid by cheque 4. The policy taken on the health of taxpayer, spouse, dependent parents or dependent children. Amount of deduction: - Insurance premium paid or Rs [AY ]whichever is lower. [Rs (AY ) where the assessee or his wife or her husband or dependant parents or any member of the family is a senior citizen. (65 year of age at any time during the year)] 6.4 Maintenance including medical treatment of a dependent being a person with disability [Sec.80DD] The tax payer is an individual/huf. The tax payer has opted for any (or both) of the following options Option 1 Option 2 The taxpayer has incurred an expenditure The tax payer has paid or deposited under for the medical treatment, training and any scheme of LIC or any other insurer or rehabilitation of a dependent with disability the administrator or specified company and approved by the Board in this behalf, for maintenance of dependent with disability Amount of deduction: Rs.50000, irrespective of the amount incurred or deposited under Option 1 and /or Option2. A higher deduction of Rs shall be allowed, where such dependent is a person with severe disability having any disability over 80% If Dependent predeceases the taxpayer: An amount equal to the amount paid or deposited as stated above shall be deemed to be the income of the assessee of the previous year in BSNL, India For Internal Circulation Only 14

15 which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year. 6.5 Medical Treatment (Sec.80DDB) Conditions 1. The tax payer is an individual./huf 2. The tax payer has actually incurred expenditure for the medical treatment of a specified disease or ailment as prescribed by the Board. 3. The expenditure actually incurred for medical treatment of the assesse himself or wholly/ mainly dependent husband/wife, children, parents, brothers and sisters of the taxpayer. 4. The assessee shall have to submit a certificate in the prescribed form (10-I) from a specialist working in a Government Hospital. Amount of deduction:- Rs or the expenditure actually incurred whichever is lower. Where the expenditure incurred is in respect of the assessee or his dependant who is a senior citizen, then Rs.60,000 or actual expenditure, whichever is lower. Deduction under this section shall be reduced by the amount received, if any, under an insurance from an insurer, or reimbursed by an employer, for the medical treatment of the person referred to above. 6.6 Payment of interest on loan taken for higher Education (80E) (Individual) (no ceiling on amount A.Y ) The above deduction is allowed from the assessment year relevant to the previous year in which the assessee starts paying the interest on the loan and 7 immediately succeeding assessment years or until the above interest is paid in full, whichever is earlier. BSNL, India For Internal Circulation Only 15

16 From F.Y , it is extended to also include interest on such loan taken for higher education of his relative i.e. or her spouse and children. 6.7 Donations to certain Funds, Charitable Institutions, etc. (Sec.80G) The taxpayer may be individual, company, firm or any other person. Donee Amount deductible a. National Defence Fund set up by the Central Government 100% Yes b. Jawaharlal Nehru Memorial Fund 50% Yes c. Prime Minister s Drought Relief Fund 50% Yes d. Prime Minister s National Relief Fund 100% Yes e. National Children s Fund 50% Yes f. Indira Gandhi Memorial Trust 50% Yes g. Rajiv Gandhi Foundation 50% Yes h. National foundation for Communal Harmony 100% Yes i. An approved University/ Educational Institution of national 100% yes eminence j. Zilla Saksharta Samiti 100% k. National Blood Transfusion council and State council for 100% Yes Blood Transfusion l. Fund set up by a State government for the medical relief to 100% the poor m. Central Welfare Fund of the Army and Air Force and the 100% Yes Indian Naval Benevolent Fund n. National Illness Assistance Fund 100% Yes o. Chief Minister s Relief fund or Lieutenant Governor s 100% Yes Relief fund p. National Sports fund or National Cultural fund or Fund for 100% Yes Technology Development and Application q. Any other fund or any institution which satisfied 50% conditions mentioned in sec. 80G(5) r. Government or any local authority to be utilized for any charitable purpose other than the purpose of promoting family planning 50% s. Any authority constituted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both 50% t. Any corporation specified in sec.[10(26bb)] for promoting 50% interest of minority community u. Government or any approved local authority, institution or 100% Deduction can be allowed by DDO BSNL, India For Internal Circulation Only 16

17 association to be utilized for the purpose of promoting family planning v. Any notified temple, mosque, gurdwara, church or other place (for renovation or repair) w. The Indian Olympic Association or to an institute notified by the Central govt. for the development of infrastructure for sports and games in India (only donation by a company) x. National trust for Welfare of Persons with Autism, cerebral Palsy, Mental Retardation and Multiple disabilities 50% 100% 100% Yes The amount of deduction mentioned under q. to v. above should not exceed the 10% of gross total income of the assessee as reduced by the following:- 1. Amount deductible under sec. 80CCC to 80 U (except 80G) 2. Such incomes on which income-tax is not payable 3. Long-term capital gains 4. Short term capital gain which is taxable under sec.111a@ 10% (plus surcharge plus education cess) 5. Incomes referred to in section 115A to 115D 6.8 Deduction in the case of a person with disability [Sec.80 U] Amount of deduction: Rs [Rs in respect of a person with severe disability i.e. having any disability over 80%] Tax Liability-How to find out Assessment Year Rs. Rs. 1. Find out gross total income Less: Deductions 2.1 Under Section 80C 2.2 Under sections 80 CCC to 80 U Find out net income [(1) - (2) Find out income-tax on net income Add Surcharge Find out the total [ (4) + (5)] Add: Education cess [2% of (6)] Add: Sec. & High Education Cess [1% of 6] 9. Find out the total [ (6) to (8)] BSNL, India For Internal Circulation Only 17

18 10. Deduct: Relief under Section Tax liability [(9) (10)] Add : Interest/penalty, etc Less: pre-paid taxes [i.e. advance tax, selfassessment tax, TDS, TCS] 14. Tax payable [(11) + (12) (13)] Different payments Form No. In case of salary payment to a resident individual where the income 16AA from salary before deduction under section 16 does not exceed Rs.1,50,000 In case of salary payment not covered by above 12 BA and 16 In case of payment other than salary 16A De-materialisation of TDS and TCS certificates: The payer of income shall furnish a quarterly statement of tax deducted at source (in digital format) to the prescribed income tax authority in respect of tax deducted at source on or after April 1, 2005 (form 24Q for salary and 26Q for others). Such statement should be submitted within 15 days from the end of each quarter (30 days in the case of last quarter). The prescribed income-tax authority will in turn furnish an annual statement (in digital format) in form No.26AS of tax deducted to the recipient. The recipient will get tax credit in respect of tax deducted at source without production of a certificate in respect of tax deducted on or after March 31, Time limit for payment of tax deduction at source to the Government Different situations When amount under Sec. 194 A, 194 C, 194 H, 194 I and 194 J is credited to the account of the recipient as on the last date of the accounting year Time limit for deposit of tax Time limit for issue of certificate to the recipient Within one week from the last date of the month in In case of salary within 30 days from the close of the which tax deduction is financial year; Otherwise made within one month from the end of the month in which Within two month from the last date of the accounting year tax is deducted at source Within two months and seven days from the last date of the accounting year BSNL, India For Internal Circulation Only 18

19 Annual return to the Income-tax Department Different payments In case of a company Time limit for submission of return Salary Form No.24 in electronic format and Form No.27A May 31 immediately after the end of the financial year Payment (other than salary) to a resident Form No.26 in electronic format and Form No.27A June 30 immediately after the end of the financial year The above return (in electronic format) is to be prepared on the data structure provided by the NSDL and copied on a floppy. The floppy is to be affixed with a label indicating name, permanent account number, tax deduction account number and address of the person deducting tax, the period to which the return pertains, the form number of the return and the volume number of the floppy in case there is more than one volume of one return. Separate floppy is to be used for each form of TDS (i.e. Forms 24, 26 ) and each form on floppy is to be submitted along with the statement in form 27A. Tax deduction and collection account number (Sec.203A) Every person deducting tax or collecting tax, who has not been allotted a tax deduction account number or, as the case may be, a tax collection account number, shall, within one month from the end of the month in which tax is deducted/collected, apply to the Assessing Officer for the allotment of a tax deduction and collection account number in form no.49b. Where a tax deduction account number or tax collection account number or tax deduction and collection account number, has been allotted to a person, such person shall quote such number: a. In all challans for the payment of any sum in accordance with the provisions of section 200 or section 206 C (3); b. In all certificates furnished under section 203 or section 206 C (5); c. In all other documents pertaining to such transactions as may be prescribed. Compliance of TDS Provisions & consequences if the provisions are not followed From A.Y BSNL, India For Internal Circulation Only 19

20 [TDS provisions for Interest (Sec.194 A), Commission (Sec.194 H), Fees technical/professional services (Sec.194 J) & Payment to contractors (Sec. 194 C)] Different situations Tax has been deducted and paid to the Government in a subsequent year but after the expiry of time limit Tax has not been deducted or Tax has been deducted but not paid to the Government Expenditure deductible in which year Deductible in the year in which tax has been paid Not deductible BSNL, India For Internal Circulation Only 20

21 INCOME TAX RATES FOR TAX DEDUCTION AT SOURCE AY (F.Y ) If the recipient is (a) an individual, HUF, BOI or AOP and payment does not exceed Rs.10,00,000 or (b) a Co-Operative Society or (c) a local authority or (d) Domestic company or firm and payment does not exceed 1 crore If the recipient is (a) an individual, HUF, BOI or AOP and payment exceeds Rs.10,00,000 or (b) Domestic company or firm and payment exceeds 1 crore Interest other than interest on securities to resident (Sec. 194A) [Exceeds Rs.5000] [Exceeds Ra Interest paid by Banks] a. Payment to Domestic company 20% 20% b. Payment to other than Domestic company 10% 10% Payment to a resident contractor/ sub contractor (sec.194c)[exceeds Rs (aggregate Rs.50000)] a. Payment to a contractor (advertising) 1% 1% b. Payment to a contractor (other than advertising) 2% 2% c. Payment to sub contractor 1% 1% Commission or brokerage to a resident (Sec.194 H) [Exceeds Rs.2500] [Except to (PCO) franchisees of BSNL/MTNL] Rent to a resident (Sec.194-I) [Exceeds Rs.1,20,000] [Other than P&M] 10% ( ) 5% (up to ) a. Rent to an Individual or a HUF 15% 15% b. Rent to a person other than individual or a HUF 20% 20% No Surcharge Education cess on Intcome tax2% Secondary & Higher Education Cess on Income tax 1% 10% (1-6-07) 5% (up to ) Surcharge on Income tax 10% Education Cess on Income Tax and Surcharge 2% Secondary & Higher Education Cess on Income tax & Surcharge 1% BSNL, India For Internal Circulation Only 21

22 Fees for professional or Technical services to a resident (Sec.194 J) [Exceeds Rs.20,000] Payment to Non Resident (rent etc.) * Non Domestic Company 10% ( ) 5% (up to ) 30% 40% 10% (1-6-07) 5% (up to ) 30% 40% 2.5% BSNL, India For Internal Circulation Only 22

23 Tax collection at source [Sec.206 C] Who is responsible to collect tax at source: Every person, being a seller, shall collect from the buyer of goods specified in section 206 C tax at source Seller means the Central government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any accompany or firm or co-operative society. It also includes an individual or a HUF whose books of account are required to be audited under Sec.44AB(a)(b) during the financial year immediately preceding the financial year in which goods are sold. Buyer means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the table section 206 C (1) or the right to receive any such goods. It, however, does not include the following:- a. A public sector company, the Central Government, a State Government, and an embassy, a High Commission, Legation, commission, consulate and the trade representation, of a foreign State and a club, or b. A buyer in the retail sale of such goods purchased by him for personal consumption When tax has to be collected at source: Tax has to be collected by the seller at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the buyer in cash or by issue of cheque/draft, or by an other mode, whichever is earlier. How to compute tax collected at source Nature of goods/nature of contract or license or lease Alcoholic liquor for human consumption 1 Tendu leaves 5 Timber obtained under a forest lease 2.5 Percentage rate of tax collection at source (TCS) applicable 23

24 Timber obtained by any mode other than under a 2.5 forest lease Any other forest produce (not being timber or tendu 2.5 leaves) Scrap 1 Parking lot, toll plaza, mining and quarrying (to a 2 person other than PSU) The above rates are subject to surcharge & Education Cess Meaning of Scrap:- waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons Buyer exempt from tax: If income of buyer is exempt from tax, tax cannot be collected at source. Percentage is applicable on purchase price No tax will be collected at source from a buyer who purchases goods for the purposes of manufacturing, processing or producing any article or thing and not for the purpose of trading. If a buyer gives a declaration in Form No.27C to the seller that the goods to be purchased are to be utilized in the carrying on of any of the activities referred to above, no tax will be collected under section 206 C. Deposit of tax: Tax collected under sec.206c shall be deposited within one week from the last day of the month in which collection is made to the credit of Central government. For non-payment or late payment, interest is payable at the rate of 1 percent per month or part thereof. Issue of certificate: Within a period of one month from the end of the month in which tax is collected, the person collecting tax should issue a certificate of tax collected in form no.27d. 24

25 Quarterly statement of tax collected: Every person collecting tax shall be required to furnish quarterly statements in form no.27eq to the prescribed income tax authority, for the tax collected on or after April 1, Such statement should be given within 15 days from the end of each quarter (30 days in the case of last quarter). Return to the Government: Every person collecting tax at source under sec.206c is required to send yearly return in form no.27e. W.E.F , the annual TCS return will be in computer readable media along with form No.27B. Return/Assessment of Income When return is to be filed as statutory obligation Taxpayer Company A person other than a company Minimum income to attract the provision of filing return of income Any income or loss If the total income without giving effect to the provisions of sections 10A, 10B, 10BA and sections 80C to 80U exceeds the maximum amount which is not chargeable to income-tax (Rs.1,00,00/Rs.1,35,000/Rs.1,85,000) Time for filing return of income Where the assessee is a company October 31 Other cases (Individual) July 31 Banking Cash Transaction 0.1% w.e.f and restriction on withdrawal of Rs.1 lakh or more from bank from With reference to above, it is mentioned that Banking Cash Transaction Tax is introduced by Chapter VII of the Finance Act, It shall apply to all taxable banking transactions entered into on or after 1 st day of June,

26 It provides that a banking cash transaction 0.1% shall be charged in respect of every taxable banking transactions entered into on or after the 1 st day of June, 2005 of the value of every such taxable banking transaction. The value of taxable banking transaction shall be, the amount of cash withdrawn or the amount of cash received on encashment of term deposit or deposits as the case may be. Taxable banking transaction means---- (a) a transaction, being withdrawal of cash (by whatever mode) on any single day from an account (other than a savings bank account) maintained with any scheduled bank exceeding, (i) Rs.50,000/- (ii) one lakh rupees, in case such withdrawal is from the account maintained by a person other than any individual or Hindu Undivided Family (b) a transaction, being receipt of cash from any scheduled bank on any single day on encashment of one or more term deposits, whether on maturity or otherwise, from that bank, exceeding, (i) Rs.50,000/- (ii) one lakh rupees, in case such term deposit or deposits are by any person other than any individual or Hindu Undivided Family 26

27 Scope of the term FRINGE BENEFIT [sub sec.(1) of Sec.115WB] Any consideration for employment provided by way of:- (a) any privilege, service, facility or amenity, directly or indirectly, provided by an employer, whether by way of reimbursement or otherwise, to his employees (including former employee or employees); any contribution by the employer to an approved superannuation fund for employees. Value of fringe benefits vide sub sec.(1) of Sec.115 Aggregate of the actual amount of contribution made by the employer to an approved superannuation fund for the employees Does not include perquisites in respect of which tax is paid or payable by the employee sub sec.(3) of Sec. 115WB From AY , any benefit or amenity in the nature of free or subsidized transport or any such allowance provided by the employer to his employees for journeys by the employees from their residence to the place of work or such place of work to the place of residence shall not form part of FB. The contribution to approved gratuity or provident fund would not attract levy of FBT. The contribution by an employer to an approved superannuation fund to the extent that it does not exceed Rs.1 Lakh per employee in respect of whom contribution is made, shall not be liable to FBT. 27

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29 Scope of the term FRINGE BENEFIT DEEMED to have been provided [sub sec. (2) of Sec.115WB] If the employer has incurred any expense on, or made payment for, the purposes summarized below: Value of fringe benefits Clarifications by MOF Heads of Accounts & Instructions for Fringe Benefit Tax in BSNL (A) Entertainment 20% of expenses It includes all expenditure in connection with exhibition, performance, amusement, game or sport, for affording some sort of amusement and gratification / Entertainment (Liable to FBT) shall be utilized for incurring expenditure on furnishing accommodation, refreshment, good cheer or diversion; mental enjoyment, amusement, providing gratification or diversion, receiving a host, hospitable/public reception, hospitable provision for the wants of a guest, a formal or elegant meal etc., a hospitable resort, a banquet, receiving and accommodating guest. (Expenditure on items shall be other than those mentioned under Hospitality) The expenditure incurred for non-festival occasions (including annual day) shall be treated as expenditure on entertainment. The expenditure on entertainment is something, which may be beneficial for the mental or physical well being but is not essential or indispensable for human existence. 29

30 (B) Provision of hospitality of every kind to any person, whether by way of food or beverage or in any other manner excluding food or beverages provided to the employees in the office or factory or non transferable paid vouchers usable only at eating joints or outlets; 20% of expenses If an employer owns an exclusive training center used to train its employees (construed as an office or a factory ), any expenditure on food or beverages provided by the employer at such training center to the employees is not liable to FBT. If an employer reimburses to the employee, expenditure on food or beverages consumed by the employee in the office, such reimbursement will be liable to FBT / Hospitality given to employees at Admn./Operative Office premise of BSNL (Not liable to FBT) shall be utilized for booking expenditure incurred by BSNL for giving food or beverages to the employees of BSNL at office (both Administrative & Operative) premises of BSNL. Even expenditure on or payment through paid vouchers for providing food and beverages to employees of BSNL shall be booked under above mentioned accode provided such vouchers are not transferable and can be used only at eating joints or outlets / Hospitality given to any person anywhere and /or employees not at Admn./Operative Office premise of BSNL (Liable to FBT) shall be utilized for booking expenditure incurred by BSNL on food and beverages provided to any person anywhere and employees of BSNL at places other than Admn./Operative office. 30

31 (C) Conference excluding fee for participation by the employees in any conference; 20% of Expenses Expenditure incurred for attending training programmes organized by trade bodies or institutions or any other agency falls within the scope of this provision / Fee for participation in conference by employees (Not liable to FBT) shall be utilized for booking expenditure on fee paid by BSNL for its employees for attending the conference/seminars/training programs organized by trade bodies, institutions or any other agency It is liable to FBT, irrespective of whether the conference is of agents or dealers or development advisors or any other persons / Conference Expense other than fee for participation (Liable to FBT) shall be utilized for booking expenditure on items other than fee for participation, such as travel expense, charges towards hotel, boarding and lodging ( if allowed as per rules & regulation of BSNL to the employees for attending seminar/conference /training program) Expenditure incurred for conducting any conference and seminars (including conference organized for agents, dealers or development advisors) other than those mentioned under Exhibition, fair & Press conference shall also be booked. 31

32 (D) sales promotion including publicity but excluding specified expenditure on advertisement 20% of expenses FBT is not payable on brokerage and selling commission paid for selling goods (selling expenses). Discounts or rebates or bonus points (credit card customers) allowed to customers or wholesale dealers are in the nature of selling expenses & are not liable to FBT. Product-marketing research through a separate marketing agency is not liable to FBT. Any expenditure in the nature of call center charges for canvassing sales (cold calls) and carrying out post-sale activities is in the nature of selling cost and is not liable to FBT. Expenditure incurred for the purpose of providing incentives given to distributors for meeting sales targets (including free goods for achieving certain sales target and cash incentives adjustable against future supplies) do not liable to FBT. Any samples of products distributed to trade or consumers would be liable to FBT. Any expenditure on making an ad-film is not liable to FBT. Any expenditure (including on artwork and royalty charges) on free offers (with products) such as freebies like tattoos, cricket cards or similar products, to trade or consumers (excluding employees) is for the purposes of sales promotion and, publicity liable to FBT. Any expenditure incurred for the purposes of lodging and boarding, or travel of customer/clients liable to FBT [(D) or (G)] / Sales promotion & Publicity Expenditure (Liable to FBT) will be utilized for classifying any expenditure on sales promotion. Examples of sales promotion & publicity are expenditure (including expenditure on artwork and royalty charges) on free product, free offer (with product) distributed to trade or consumers etc. Any expenditure on photography & video (other than ad-film) for the purpose of sales promotion shall be booked under this head. Any expenditure on photography & video other than for sales promotion & publicity (including ad-film) shall be treated as general expense and booked under accodes for General Expenses under difference Administrative Expense schedules. 32

33 / / Advertisement & Publicity (Not liable to FBT) shall be utilized for expenditure (including rental) on advertisement of any form in any print (including journals, catalogues or price lists) or electronic media or transport system. The above mentioned code shall also be utilized for booking expenditure on advertisement by way of signs, artwork, paintings, banners, awnings, direct mail, electric spectaculars, hoardings, bill boards or by way of such other medium of advertisement. Any expenditure is by way of payment to any advertising agency for the purpose of accomplishing the advertising works mentioned above shall also be booked to above accodes. The expenditure on Ad-film shall also be booked under above-mentioned accodes , , , Exhibition, fair & Press Conference (Not liable to FBT) shall be utilized for booking expenditure on press conference, business convention, fair, exhibition held or participated by BSNL / Sponsorship of sports event or any other event (Not liable to FBT) For booking expenditure of any sports event or any other event organized by any Government agency or trade association or body. Any expenditure is by way of payment to any agency for the purpose of accomplishing the works mentioned above shall also be booked to above accodes. 33

34 (E) employee welfare excluding any expenditure or payment made to fulfill any statutory obligations or mitigate occupation al hazards or provide first aid facilities in the hospital or dispensary run by the employer; 20% of expense s If the expenditure is incurred for treatment of injuries suffered in the course of performance of duties but the treatment is at a hospital/dispensary not maintained by the employer, such expenditure is liable to FBT. However, if such expenditure is pursuant to a statutory obligation, it will not be liable to FBT. Any subsidy provided to a school not meant exclusively for employee s children is liable to FBT. Any expenditure incurred for the provision of facilities like garden, site cleaning, light decoration school, library, mess, television, cable connection etc. employees colonies are liable to FBT. Expenditure incurred on providing safety shoes or uniform or equipment to the employees or incurred for the purposes of reimbursement of washing charges, is exempt from FBT to the extent such expenditure is incurred to meet such statutory obligation. Any reimbursement of expenditure on books and periodicals to employees is liable to FBT Any expenditure incurred on prizes/rewards to employees for achievements is liable to FBT. Expenditure incurred for the purpose of providing transport facility to the children of employees is liable to FBT. The payment to any person of repute for promoting the sale of goods or services i.e. brand endorsement, shall not be included as part of Sales promotion and publicity expenditure for levy of FBT (AY ). Sch 151 to 166 xxx1000 Staff Welfare (Liable to FBT) shall be utilized for booking expenditure on welfare of employee. This may include any free product/ free offer (with product) given to the employees by BSNL as per existing rules & regulation. However, any expenditure incurred or payment made to fulfill any statutory obligation or mitigate occupational hazards or provide first aid facilities shall not be considered as expenditure for employees welfare Provision of facilities in staff colonies (Liable to FBT) Expenditure incurred by BSNL for the provision of facilities like garden, site cleaning, light decoration, school, library, mess, television, cable connection etc. in employees colonies 34

35 (Q) Tour and travel (including foreign travel); 5% of expenses (AY ) This expenditure paid by the client to the lawyer or auditor is treated as professional fee & not liable to FBT in the hands of the client. FBT would not be payable on payment of advance towards expenses to be incurred in the future. Rent paid or payable for an operating lease of a motor-car is expenditure for the purposes of conveyance, tour and travel. Sch.171 to 185, 192 & 471 xxx0901 Inland Travel-expense on journey, personal effects & conveyance shall be utilized for booking the expenditure on fare, road mileage, cost of transportation of personal effects, cost of transportation of conveyance in connection with TA on tour, TA for local journey, TA when deputed for training, TA on temporary transfer, TA on Transfer, TA on retirement etc. (Liable to FBT) / Foreign Travel-Expense on Journey (Liable to FBT) Sch.171 to 185, 192 & 471 xxx0903 Daily allowance for Inland travel (Not liable to FBT) The daily allowance portion of traveling allowance (excluding the lodging charges in case of stay in hotel etc. in connection with inland travel i.e. TA on tour, TA for local journey, TA when deputed for training, TA on temporary transfer shall be booked under this head / Daily Allowance for foreign travel (Not liable to FBT) The expenditure on foreign travel shall be booked by all units under these heads [(Basic segment Sch.171) (CMTS sch.471)] [Sch.171, 175, 177, 179, 180, 182, 183, 471 xxx1907 Expense on journey-branch Auditor Sch.171, 175, 177, 179, 180, 182, 183, 471 xxx1908 Expense on journey-internal Auditor Sch.171, 179, 180, 183, 471 xxx1909 Expense on journey-cost Auditor Sch.171, 179, 180, 183, 471 xxx1910 Expense on journey-tax Auditor Sch.171, 175, 177, 179, 180, 182, 183 xxx1912 Daily allowance, hotel charges of Branch/Internal/Tax/Cost Auditor (not liable to FBT)] / Expenses on journey-professional other than Branch /Internal/ Tax/ Cost Auditors (Liable to FBT) 35