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New TDS Procedure Kept In Abeyance by CBDT!

noreply@blogger.com (taxworry) — Tue, 30 Jun 2009 08:10:04 PDT

No.402/92/2006-MC (14 of 2009)
Government of India / Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
***
New Delhi dated 30th June 2009
PRESS RELEASE
The Central Board of Direct Taxes have further decided that the Notification No.31 of 2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962 shall be kept in abeyance for the time being.Taxpayers filing their income tax returns for assessment year (AY) 2009-10, or
any other earlier AY, may continue to file their returns without mentioning the Unique Transaction Number (UTN) as required under the said Notification. The filing of such returns shall be treated as valid and in compliance to the requirements under section 139 of the Income Tax Act, 1961.

Further, the date from which the Notification No. 31 / 2009 shall become applicable on tax deducted at source (TDS) or tax collected at source (TCS) and
deposited during the current financial year shall be notified by the Central Board of Direct Taxes subsequently.

All deductors / collectors of TDS / TCS may continue to deposit their TDS / TCS and file their quarterly TDS / TCS returns as per procedure existing prior to issuance of Notification No.31 / 2009 dated 25.3.2009.
XXX

Filing Information About Remittance of Foreign Exchange A Must Now!

noreply@blogger.com (taxworry) — Mon, 29 Jun 2009 19:35:31 PDT

CBDT has issued Circular No. 04/2009 dated 29/06/2009 by which procedure to file information regarding foreign exchange remittance electronically is now made must . The gist of the circular is given below:

Section 195 of the Income-tax Act, 1961 mandates deduction of income tax from payments made or credit given to non-residents at the rates in force. The Reserve Bank of India has also mandated that except in the case of certain personal remittances which have been specifically exempted, no remittance shall be made to a non-resident unless a no objection certificate has been obtained from the Income Tax Department.

This was modified to allow such remittances without insisting on a no objection certificate from the Income Tax Department, if the person making the remittance furnishes an undertaking (addressed to the Assessing Officer) accompanied by a certificate from an Accountant in a specified format. The certificate and undertaking are to be submitted (in duplicate) to the Reserve Bank of India / authorised dealers who in turn are required to forward a copy to the Assessing Officer concerned. The purpose of the undertaking and the certificate is to collect taxes at the stage when the remittance is made as it may not be possible to recover the tax at a later stage from non-residents

The format of the undertaking (Form 15CA) which is to be filed electronically and the format of the certificate of the Accountant (Form 15CB) have been notified vide Rule 37BB of the Income-tax Rules, 1962.

The revised procedure for furnishing information regarding remittances being made to non-residents w.e.f. 1st July, 2009 is as follows:-
(i) The person making the payment (remitter) will obtain a certificate from an accountant* (other than employee) in Form 15CB.
(ii) The remitter will then access the website to electronically upload the remittance details to the Department in Form 15CA (undertaking). The information to be furnished in Form 15CA is to be filled using the information contained in Form 15CB (certificate).

iii) The remitter will then take a print out of this filled up Form 15CA (which will bear an acknowledgement number generated by the system) and sign it. Form 15CA (undertaking) can be signed by the person authorised to sign the return of income of the remitter or a person so authorised by him in writing.
(iv) The duly signed Form 15CA (undertaking) and Form 15CB (certificate), will be submitted in duplicate to the Reserve Bank of India / authorized dealer. The Reserve Bank of India / authorized dealer will in turn forward a copy the certificate and undertaking to the Assessing Officer concerned.
(v) A remitter who has obtained a certificate from the Assessing Officer regarding the rate at or amount on which the tax is to be deducted is not required to obtain a certificate from the Accountant in Form 15CB. However, he is required to furnish information in Form 15CA (undertaking) and submit it along with a copy of the certificate from the Assessing Officer as per the procedure mentioned from Sl.No.(i) to (iv) above.

Complete circular is available from here.

Can Nominee of Deceased Prevent TDS on Deposit in Senior Citizen Savings Scheme

noreply@blogger.com (taxworry) — Mon, 08 Jun 2009 10:52:42 PDT

Yes, the good news is that now nominee of the deceased can file 15G or 15 H Form to the banks where the deceased had made deposits in Senior Citizen Savings Scheme 2004. Please read the circular of RBI to banks in this regard

RBI/2008-09/493
Ref. No. DGBA.CDD.H-10566/15.15.001/2008-09

June 5, 2009

The General Manager
Government Accounts / Business Department
State Bank of India / State Bank of Indore/State Bank of Patiala
State Bank of Bikaner & Jaipur /State Bank of Travancore
State Bank of Hyderabad / State Bank of Mysore /Allahabad Bank
Bank of Baroda / Bank of India / Bank of Maharashtra
Canara Bank/Central Bank of India /Corporation Bank Dena Bank / Indian Bank
Indian Overseas Bank / Punjab National Bank / Syndicate Bank / UCO Bank
Union Bank of India / United Bank of India / ICICI Bank Ltd / Vijaya Bank/IDBI Ltd

Dear Sir,

Senior Citizens Savings Scheme, 2004 – Acceptance of Form 15-G from the Nominees

As you are aware, investors under Senior Citizens Savings Scheme, 2004 (SCSS) are eligible to file Form 15-G and 15-H to claim exemption from TDS on the interest payable on the deposits under the said scheme.

2. Central Board of Direct Taxes have now clarified, vide their Office Memorandum F.No.275/36/2009-IT(B) dated May 14, 2009, that nominee of the investors of SCSS can also produce 15-G form (declaration of non-deduction of tax from the amount of interest payable) at the time of payment after the death of the depositor.

3. The contents of this circular may be brought to the notice of the designated branches of your bank for information and compliance.

4. Please acknowledge receipt.

Yours faithfully,

(Imtiyaz Ahmad)
Assistant General Manager

The Dilemma of Tax at Source (TDS) & Exchange Rates!

noreply@blogger.com (taxworry) — Sun, 31 May 2009 03:58:25 PDT

A foreign vendor provided technical assistance to M/s. ABC co. with a payment terms as follows. $30,000 USD and tax is to be borne by the foreign vendor at applicable rate. M/s. ABC Co. made a liability in its books on 31.03.2008 and deducted TDS u/s 195 of IT Act at applicable rate and deposited the same to IT department.(Dollar rate as on 31.03.08 was Rs.40 per USD, say) Now, actual payment is to be made by M/s. ABC Co. to that foreign vendor(i.e. $30,000 USD) . Dollar rate at the time of payment is Rs.46 per USD, say. Question is: 1. Whether additional TDS is to be deducted on the amount increased due to exchange. Sujit Talukdar, Kolkata

The fact is that section 195 prescribes that payer will deduct the income tax at the rates specified either at the time of credit of payment or at the time of payment whichever is earlier. M/s ABC Co did the right thing by deducting the tax on 31/3/2008 when it credited the forign vendor in its books. Only point to see is whether the exchange rate was taken as per Rule 26 of I T Rule which is as under

Rate of exchange for the purpose of deduction of tax at source on income payable in foreign currency.

26. For the purpose of deduction of tax at source on any income payable in foreign currency, the rate of exchange for the calculation of the value in rupees of such income payable to an assessee outside India shall be the telegraphic transfer buying rate of such currency as on the date on which the tax is required to be deducted at source under the provisions of Chapter XVIIB by the person responsible for paying such income.

Explanation : For the purposes of this rule, telegraphic transfer buying rate, in relation to a foreign currency, means the rate or rates of exchange] adopted by the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), for buying such currency , having regard to the guidelines specified from time to time by the Reserve Bank of India for buying such currency, where such currency is made available to that bank through a telegraphic transfer.

If the rates applied by ABC CO is same as telegraphic rate adopted by SBI on 31/3/2008 , the action of the company was according to the provision of the I T Act and any more payment in rupees terms on account of fluctuation of exchange rate shall not require tax at source.

How Income From Flat Given on Leave & License Taxed?

noreply@blogger.com (taxworry) — Sat, 30 May 2009 20:58:51 PDT

Nowadays there are Real State Mgt companies who take Flat on Leave & License basis, maintain them & offer License fee to owner.I have a 3BHK Flat which I want to give to such agency. I will also incur furnishing expenses to tune fo Rs 3L. The current License Fee for the Flat is Rs 20K + 2L deposit (Bare flat). However post furnishing, the Mgt co. is offering me Rs 50K pm as License Fee & Rs 5L as deposit.I am a salaried individual & use ITR 2 to file my return. I show my rental income from this flat & claim Loss of Income as my Interest outgo is Rs 3.5L pa.I want to know what will be Tax treatment if I give to Real estate co.

Asheet , Mumbai

The fact is that you will be putting your flat on rent to a company . There is separate head for rental properties under I T Act and therefore, the income from rental of property to real estate agency shall be taxed under the head “income from house property”. Following tax liability may be foreseen

1. Presuming you get rental of 50,000 per month, there will be annual income of Rs 6 lakhs , From there you can reduce municipal tax paid and the deduction for repairs and other @ 30% . No deduction of any kind are allowed except interest if borrowed for the flat.

2. If the leave licensee agreement is such that the rental is for property and the furnishing separately , the the rent of property shall be charged under the head “income from house property” and rental regarding the furniture's and other services shall be charged under the head “income from other sources”

3. There may be deduction of tax at source us/ 194 I as the rental of the property is more than Rs 1,20,000 in a year.

4. If you want that deduction of tax at lower rate , you will have to apply to Assessing officer u/s 197 of the I t Act in prescribed form . Read this How Can You Prevent TDS on Rental Receipts?

Can TDS Amount Be Increased or Reduced As Per Whims & Fancies Of Deductor?

noreply@blogger.com (taxworry) — Sat, 30 May 2009 20:49:00 PDT

Our client is an insurance company (PSU). The company had taken a premise on rent in New Delhi since 1996-97. The PSU had enhanced rent twice during the FY 2004-05 w.e.f. March 2003. The company had deducted TDS on such enhancement during the year 2004-05. Also it has been came into the knowledge of the company that earlier i.e. since 2001 the company was deducting the TDS @2% only. Hence, branch manager had decided to deduct the difference of prevailing rates of TDS and the amount deducted earlier with intt. Can PSU do it? please also note that the rent was paid to MCD, against the dues of landlord due to attachment. Landlord filed recovery suit agst the PSU. Advise. Vinod Gupta , New Delhi

The responsibility to deduct the tax in case of rent payment is on the payer. So, if the PSU has not deducted or short deducted during a year or applied a rate much below the rate prescribed under section 194I , fault squarely lies with the PSU and not the assessee. Now the issue is whether , PSU can deduct the difference of tax which it failed to deduct in past?

I feel the step taken by PSU is without any sanctity of law . In fact , unlike there is no provision under section 194I to increase or reduce the tax deducted during the year . Under section 192 (TDS on Salary ) , it is clearly provided under sub-section 3 that TDS during the year can be increased or reduced . Read the provision

(3) The person responsible for making the payment referred to in sub-section (1)or sub-section (1A) or sub-section (2) or sub-section (2A) or sub-section (2B) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year.

No such provision is there in section 194 I . So, PSU is not authorised to increase or decrease the TDS from the payment of rent .

For its own fault , it can not make the payee scapegoat.

As far as rent payment is concerned, if the attachment notice is correct, it is as per law.

Now Derivative Trading in Foreign Exchange Is Business Activity!

noreply@blogger.com (taxworry) — Mon, 01 Jun 2009 10:46:31 PDT

In India , there are two main commodity exchanges –Multi Commodity Exchange of India Ltd (MCX ) and National Commodity & Derivative Exchange Ltd NCDEX in India where one can trade in derivative contract of different items –from pulse to metal. Now there is another exchange MCX Stock Exchange Ltd in which one can trade derivatives of foreign exchange.

The transactions in derivative segments are regarded as “Speculative transaction” which has a great bearing on the taxation of one’s income as the loss out of speculation is not allowed to be adjusted with any other income . Speculation loss is allowed to be adjusted with only speculation gain.For example , a person having income of 10 lakhs from share dealing and Rs 10 lakhs loss out of commodity derivatives transaction , has actually did not earn any penny. Still, as per the provision of I T Act , he will have to pay tax on share dealing income of Rs 10 lakhs and the loss of Rs 10 lakhs will have to be carried forward as unadjusted speculation loss. That is the reason , the moment you incur loss in speculation , it becomes problematic if there is no speculation gain ti adjust.

Section 43(5) of the I T Act defines what is speculative transaction. The government vide Finance Act 2005 inserted a proviso (d) in section 5 to provide that trade in derivative segments of recognised stock exchange shall not be regarded as “speculative transaction” . The recognition of the stock exchange for the purpose of Futures and Options trades in shares was notified vide notification no SO 89(E) dated 25/01/2006.As per this notification NSE and BSE are recognised stock exchange for trade in Futures and Option . Therefore, now if the trade is done through these stock exchange , the trade will not be regarded as Speculative Transaction with effect from 25/01/2006.

What is new now?

Now the CBDT has issued Notification No. 46/2009, dated 22-5-2009 by which MCX Stock Exchnage Ltd has been recognised under section 43(5)(d) which means that the trade in foreign exchange derivatives through MCX Stock Exchange Ltd will now be regarded as Business transaction and therefore , the loss , if in unfortunate event of incurring loss will be allowed to be adjusted with any other business income or or from other heads.

The the notification 46/2005 dated 22-5-2009 is given below

In exercise of the powers conferred by clause (ii) in the Explanation to clause (d) of the proviso to sub-section (5) of section 43 of the Income-tax Act, 1961 (43 of 1961), read with rule 6DDB of the Income-tax Rules, 1962, the Central Government hereby notifies MCX Stock Exchange Ltd. as a recognized stock exchange for the purpose of the said clause with effect from the date of publication of this notification in the Official Gazette.

2. MCX Stock Exchange Ltd. shall separately maintain data regarding all transactions registered in the system in which client codes have been allowed to be changed for periodical inspection by the Director-General of Income-tax (Investigation) having jurisdiction over such exchange and provide copies of the relevant information as and when required.

3. The Central Government may withdraw the recognition granted to MCX Stock Exchange Ltd. if any of the conditions specified in rule 6DDA of the Income-tax Rules, 1962, subject to which the recognition is granted, is violated.

4. This notification shall remain in force until the approval granted by the Securities and Exchange Board of India is withdrawn or expires, or this notification is rescinded by the Central Government as provided in sub-rule (5) of rule 6DDB of the Income-tax Rules, 1962.

Caveat : This notification is effective from the date of publication in Gazette of India. Gazette notification date is still unknown, therefore exact date of publication will be the date from which the transaction in derivatives through MCX shall be regarded as business activity.

Most Important Thing to Know!

MCX and MCX Stock Exchange Ltd are two different exchanges. you can have only foreign exchange derivatives trade through MCX Stock Exchange Ltd whereas in MCX you can trade in derivatives of many items.

Why All Written Off Liability Is Not Taxable?

noreply@blogger.com (taxworry) — Fri, 29 May 2009 21:52:57 PDT

I have been showing certain amount as a liability in my balance sheet since last 6-7 yrs, which was to be paid back as interest to some loan. Loan was paid long back but no correspondence has taken place with the creditor re. the interest over 6-7 years. Now i would like to "Write Back" the amount. Will this reversed amount be subject to tax? Reading Sec. 41 of the I. Tax Act and certain judgements, I feel that unless there is a cessation or remission of a liability, liability, though unenforceable, still exists. Thus even if the liability is written back, the same can not be treated as profits and thus not taxable. Please advise, if i should offer this amt to tax. Swati Raut , Mumbai

Section 41 has five sub-section – 1 to 5 . Subsection 1 ,4 & 4A starts with the words “ allowance or deduction has been made or allowed ”. Which means that the provisions u/s 1 , 4 or 4A of Section 41 is not applicable if allowance or deduction was not allowed in any assessment year.

Subsection 2, 3 & 5 of section 41 are not related to allowance or deduction , but related to money received on account of capital assets or capital expenditure on scientific research or business not being in existence .

41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year, -

……………

(2) Where any building, machinery, plant or furniture,

(a) which is owned by the assessee;

(b) in respect of which depreciation is claimed under clause (i) of sub-section (1) of section 32; and

(c) which was or has been used for the purposes of business,

is sold, discarded, demolished or destroyed and the moneys payable in respect of such building, machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceeds the written down value, so much of the excess as does not exceed the difference between the actual cost and the written down value shall be chargeable to income-tax as income of the business of the previous year..

(3) Where an asset representing expenditure of a capital nature on scientific research within the meaning of clause (iv) of sub-section (1) , or clause (c) of sub-section (2B) , of section 35, read with clause (4) of section 43 , is sold, without having been used for other purposes, and the proceeds of the sale together with the total amount of the deduction made under clause (i) or, as the case may be, the amount of the deduction under clause (ia) of sub-section (2) , or clause (c) of sub-section (2B) , of section 35 exceed the amount of the capital expenditure, the excess or the amount of the deductions so made, whichever is the less, shall be chargeable to income-tax as income of the business or profession of the previous year in which the sale took place.

(4) Where a deduction has been allowed in respect of a bad debt or part of debt …

( 4A ) Where a deduction has been allowed in respect of any special reserve created and maintained ….

(5) Where the business or profession referred to in this section is no longer in existence and there is income chargeable to tax under sub-section (1) ,sub-section (3) or sub-section (4) or sub-section (4A) in respect of that business or profession, any loss, not being a loss sustained in speculation business omitted , which arose in that business or profession during the previous year in which it ceased to exist and which could not be set off against any other income of that previous year shall, so far as may be, be set off against the income chargeable to tax under the sub-sections aforesaid.

The Supreme Court in the case of Polyflex India (P) Ltd vs CIT [2002] 257 ITR 343 (SC) have made observation that section 41(1) has two limbs and caters to two different situations.

Section 41(1) applies if the following conditions and circumstances are satisfied :

In the assessment for the relevant year an allowance or deduction has been made in respect of any loss, expenditure or trading liability incurred by the assessee. This is the first step.

Coming to the next step the assessee must have subsequently

(i) obtained any amount in respect of such loss or expenditure, or

(ii) obtained any benefit in respect of such trading liability by way of remission or cessation thereof.

In case either of these events happen, the deeming provision enacted in the closing part of sub-section (1) comes into play. Accordingly, the amount obtained by the assessee or the value of benefit accruing to him is deemed to be profits and gains of business or profession and it becomes chargeable to income-tax as the income of that previous year.

Therefore, the facts required to be examined in your case is whether the interest on the loan taken was ever claimed as expenditure by debiting p & L Account . If yes, the provision of section 41 shall be applicable and the written off amounts shall be taxable, if not provision u/s 41 will not be applicable .

Can Non Resident File Form 15G or 15 H?

noreply@blogger.com (taxworry) — Mon, 18 May 2009 19:54:53 PDT

Sri Rajaratnam, the famous tax expert from Chennai, in his regular tax column in The Hindu, has opined that a Non resident can submit form no 15G to avoid tax being deducted on interest income, in all such cases where there is no taxable income. This would obviously save the assessee from needless filing of return and running round the income tax officer to get the refund. The form 15G clearly provides by asking a question whether the applicant is a resident or Non resident. N Rabindranath

With due respect to the taxation stalwart, in my opinion , a Non Resident is NOT eligible to file form 15 G or 15 H . The reason of such an opinion is as under

1. The Forms 15G & 15H are declaration in prescribed forms to prevent tax at source from payments of certain types . The provision of submitting declaration in Form 15G or 15H are given in section 197A of the I T Act.

2. Section 197A(1) clearly states that declaration filed by individual RESIDENT in India.

197A. (1) Notwithstanding anything contained in section 194 or section 194EE , no deduction of tax shall be made under any of the said sections in the case of an individual, who is resident in India, if such individual furnishes to the person responsible for paying any income of the nature referred to in section 194 or, as the case may be, section 194EE, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil.

3. Section 197A(1A) states about payments made under section 193 , section 194A or section 194K . The provision u/s 197A(1A) is as under

197A(1A) Notwithstanding anything contained in section 193 or section 194A or section 194K, no deduction of tax shall be made under any of the said sections in the case of a person (not being a company or a firm), if such person furnishes to the person responsible for paying any income of the nature referred to in section 193 or section 194A or section 194K, as the case may be, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil.

Now , one should note that each section 193 , section 194A or section 194K is meant for individual who are resident in India. The relevant portion of the section 193 , Section 194A or 194K are given as under

193. The person responsible for paying to a resident any income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other............

194A. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for payingto a resident any income by way of interest other than income by way of interest on securities, shall, at the time of credit of such income to the account.........

194K. Where any income is payable to a resident in respect of units of a Mutual Fund specified under clause (23D) of section 10 or of the Unit Trust of India, the person responsible for making the payment shall, at the time of credit of.. ..

So, it is clear that payments covered u/s 193, 194A and 194K are for RESIDENTS only. As such under these provisions , there can not be any question of deduction of tax at source in case of Non Residents.

4. 15H is a declaration prescribed in section 197A(1C) . section 197A(3) states as under

197A(1C) Notwithstanding anything contained in section 193 or section 194 or section 194A or section 194EE or section 194K or sub-section (1B) of this section, no deduction of tax shall be made in the case of an individual resident in India, who is of the age of sixty-five years or more at any time during the previous year , if such individual furnishes to the person responsible for paying any income of the nature referred to in section 193 or section 194 or section 194A or section 194EE or section 194K, as the case may be, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil.

Here also the said provision itself is applicable only for "individual resident in India" . So there can not be any question of Non Resident filing declaration u/s 15 H of the I T Act.

Therefore, I conclude that under the I T Act , declaration u/s 197A is not for Non Resident persons.

Beware of Most Dangerous Tax Amendment For Charitable Society !

noreply@blogger.com (taxworry) — Sun, 17 May 2009 23:59:53 PDT

One of my clients is a charitable society having more than twelve various activities like schools, charitable clinics, naturopathy centres, creches, old age homes, pension for widows, library, Masala Centre where various spices are prepared by poor ladies. Spices prepared by these ladies are sold over the counter which results in some income to the society. Besides sometimes a hall in building of the society is also given on rent to some commercial organisation for sale purposes.Pl confirm whether in light of the latest amendments in the Income tax Act, the activities like sale of spices and rent receipt will be liable for taxation ? Mahesh Kumar, New Delhi.

Before , I answer your specific question, it is important to clarify the position of taxation of charitable entities post Finance Act 2008 , because the govt has brought in an amendment which has far reaching consequences on the charitable entities of the country.

The income of an entity whose object is charitable are allowed exemption u/s 11 or 10(23C) of the I T Act. The definition of Charitable Purpose is given in section 2(15) to include following

Relief of the poor
Education
Medical relief
The advancement of any other object of general public utility.

The government vide Finance Act 2008 has tried to fill up the loop whole in the last limb of the definition of “charitable purpose” i.e a provisio has been insterted to state that “advancement of any other object of general public utility” shall not be charitable purpose if it involves the carrying of –

Any activity in the nature of trade ,commerce or business
Any activity of rendering any service in relation to any trade ,commerce, or business

For a cess or fee or any other consideration irrespective of nature of use or application or retention of the income from such activity.

What it means?
It means that the amendment is not affecting any entity with charitable purpose- relief of the poor, education or medical relief- even if the activity can be said to be business activity.

However, amendment will affect only if the entity has objectives “advance of any other object of general public utility” i.e 4th objective.

Answer to your specific query

The last para of the CBDT circular NO 11/2008 issued on the new proviso to Section 2(15) states as under

3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility i.e. the fourth limb of the definition of charitable purpose contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity.

3.1. There are industry and trade associations who claim exemption from tax u/s 11 on the ground that their objects are for charitable purpose as these are covered under any other object of general public utility. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants.

Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be charitable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15).

3.2. In the final analysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is charitable purpose within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business.

In your case, prima facie it seems that all the activities of your society are the first three prescribed under the definition of "charitable purpose" so no part of your income , prima facie , is taxable .

However , as the CBDT circular suggests , one must find the fact of the case and then decide ,if the objectives are the first three -relief of poor or medical or education- then whatever you do , even business activity for the purpose of the those objectives , the income will not be taxed.

From the circular itself, it appears that the said amendment has been brought to check the practice of evasion of tax by industry and other business association on income generated out of business activity conducted with all and sundry and then claiming that the income out of such activity is exempt as the activity is for the benefit of society.

Is Gift Received by An NRI From Another NRI Taxable In India?

noreply@blogger.com (taxworry) — Sat, 16 May 2009 03:22:42 PDT

I am an NRI and staying in Canada. One of my Distant Cousin(not relative) who is also an NRI in Gulf wants to Give an Gift of Rs.300000/- into my Indian Account. What will be the Tax Implications in India. I heard earlier that there is no Gift tax, but one of my friend says that presently if you receive Gift from other than relative it is taxable. My question is that we both are NRI and he is just remitting to my Indian Account that Gift, will it attract any tax. I will be using that amt for investment in housing. Suresh Jain , Chennai

Section 56(2)(vi) of the I T Act provides that any gift of money by following persons or in following circumstances are not taxable

(a) from any relative; or

(b) on the occasion of the marriage of the individual; or

(c) under a will or by way of inheritance; or

(d) in contemplation of death of the payer; or

(e) from any local authority as defined in the Explanation to clause (20) of section 10; or

(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

(g) from any trust or institution registered under section 12AA.

Who are relatives ?

As per Explanation given under section 56(2)(vi) of the I T Act , “relative” means—

(i) spouse of the individual;

(ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) brother or sister of either of the parents of the individual;

(v) any lineal ascendant or descendant of the individual;

(vi) any lineal ascendant or descendant of the spouse of the individual;

(vii) spouse of the person referred to in clauses (ii) to (vi).

Therefore, if a Non Resident Indian who is not a relative within the meaning of relative given in Explanation , gives gift of money to another Non resident Indian in his Indian bank account , such amount of money will become taxable under I T Act as income from other source.

When will it not be taxable ?

In following circumstances, however, there will not be tax on amount of gift

1. NRI is giving sums of money in any foreign bank account , in that case, since the gift is not received within India , such sum can not be taxable in case of a Non Resident.

2. There is no other income of Non Resident receiving the gift , in India and total income of the non resident is less than maximum exempt under I T Act. That is gift money plus other income of the NRI in India is below Rs 1,50,000 for FY 2008-09.

3. The aggregate gift of money is less than Rs 50,000 in a year.

Can I Claim Deduction of Interest & 80C for Construction on The Property Owned as per Will of Father But Not Yet Registered ?

noreply@blogger.com (taxworry) — Sat, 16 May 2009 00:27:06 PDT

I had built a house in my ancestral property owned by my Father. As per Will registered I will be the sole owner of the property after my father. With the will,property document and no objection certificate from my mother and only sister I approached a state bank and after clearance from there legal department the bank granted me loan for construction of house. Now the construction is over and when I submitted the Income Tax projection certificate received from the bank in my office I am told that as the property is still in my fathers name I cannot claim the benefit of the loan. Kindly let me know whether I can claim the exemption or not.Manos , Chennai

First thing to know is that deduction of interest is allowed in your hand if the income from property for which loan was borrowed is assessable under the head "income from house property" in your hand. It is common misconception that only legally registered owner are assessable under section 22 (Income from house property) .The legal requirement of income of a property being assessed in ones hand is not dependent on the legally registered owner itself. In CIT vs Podar Cements Ltd & Others 226 ITR 625 , Supreme Court held as under

We are conscious of the settled position that under the common law, " owner " means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. But, in the context of section 22 of the Income tax Act, having regard to the ground realities and further having regard to the object of the Income tax Act, namely, " to tax the income ", we are of the view, " owner " is a person who is entitled to receive income from the property in his own right.

Since the property belonged to you father and now after his death has devolved on you as per his will and that even your mother and sister have given no objection , the property for all practical purpose and law fully is yours. It is another matter that property has not been registered in your name .

You have been granted loan , interest is being paid by you , so income from such property is assessable in your hand and any deduction i.e municipal tax paid, the interest on borrowed fund is allowable as deduction .

Your claim for the benefit of interest and 80C deduction is full backing of law as well as decisions of various courts including Supreme Court of India. Even if the office , out of ignorance is not allowing you such benefits , you must claim in your return the benefits.

Should Return Filing Discontinued in Case Of Death of an Individual?

noreply@blogger.com (taxworry) — Sat, 16 May 2009 00:12:44 PDT

My aunt died on 18.04.2009. whether her income tax file should be filed for the assessment year 2009-10 or not ?. if not then why and if yes then who will sign the ITR papers in what capacity ?. Shall her file continue to be filed there after or discontinue ?. what will be the status for filling ITR in future?ANIL ARORA

Income Tax Act provides for taxing income of earning of deceased if the same is earned by the deceased even after death.It should also be filed if the assets of the deceased which earns income has not been transferred to his/her heir. So, question of discontinue arises only if the earning income in the name of deceased has stopped .

All income which was earned during the life time of deceased person should be assessed in hand of legal representative(s) as per section 159 of the I T Act.Therefore , in such case , legal representative should file the return of the deceased person.For example , in your case ,since your aunt had taxable income for the FY 2008-09 before her death , her return has to be filed u/s 159 of the I T Act despite the fact that she has expired

Who is/are Legal Representatives?
Legal representative is defined u/s 2(29) of the I T Act as same having meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure 1908 which states

“means a person who in law represents the estate of a deceased person, and includes any person who inter meddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued;”

In practical terms , the heir himself if there is only one or if there is more than one heir , should first make an agreement among different heirs so that others assign one person as legal representative for the purpose of income tax matter. That person can sign the return of the deceased person and can appear before the assessing officer in case of any proceedings.

Already detailed answer to question regarding tax liability of a deceased person has been answered on this blog earlier. Read this posting for knowing more .

What Should I Do In case of Earning from Website?

noreply@blogger.com (taxworry) — Thu, 14 May 2009 18:40:30 PDT

Greetings-I'm a student but having an online business with clickbank, I have a site where people pay to download a medical information ebook.The sale is by affiliates that get 75% commission for the visitor that buys.I get paid bi-monthly by cheque by clickbank sometimes for 2,500$ even.My query is will I have to declare myself as a business owner/service-provider or professional?.Also will IT investigate my business and cause legal problem or should I simply maintain proper accounts-and how do I account for the sales?.Will I have to give them printout of the receipts or otherwise give .csv files since it is all internet based. I would sincerely appreciate your advice. Samuel.A , Mumbai

First of all , you should note that you are liable to be taxed under the I T Act in FY 2008-09 only if the total income exceeds Rs 1,50,000 and you are liable to file return of income only if your gross total income exceeds Rs 1,50,000. Therefore, first ascertain the income from 1/4 2008 to 31/3/2009.

Since you are getting commission from clickbank or any other advertiser network , it means that payment is received by you through banking channel. Then, the reason for such receipt is also provided to you . So , in case you are ever required to explain your receipt of income, it can clearly be explained. Therefore , there is no question of hiding any thing.

Yes, you are carrying on a business of commission, however there is no prescribed books of accounts for commission earning. Just keep the CSV file of the transaction details or payments from click bank.

Also remember , you can reduce expenses which is incurred for earning the income. For example , the expense on setting up of website, internet charges etc. So reduce those expense from gross receipts.so, computation will be as under

Gross Receipt of commission during 1/4/2008 to 31/3/2009 XXXXX

Less

Internet charges XXXXX

Web site hosting fee XXXX

Depreciation on computer XXXX

Depreciation on Car/vehicle XXXXX

Office rent (if any?) xxxx

Net receipt ZZZZZ

If ZZZZ i.e Net receipt exceeds Rs 1,50,000, only then you are required to file return . The return form is ITR-4.

Got Long Term Capital Gains? Buy NHAI 54EC Bonds Now!

noreply@blogger.com (taxworry) — Wed, 13 May 2009 19:30:46 PDT

National Highway Authority of India has invited application for tax free bonds eligible for investment u/s 54EC. So , anyone who has long term capital gains in hand and wants to save tax can invest in the 54EC bonds issued by NHAI . The application acceptance starts on 11/5/2009 and ends on 31/3/2010 subject to total collection ceiling is Rs 4000 Crore. Interest rate is 6.25 % per annum tax free ,as such there is no TDS on it.

Date of Start: 11.05.2009

Date of Closure: 31.03.2010

Face Value Rs. 10000/- per Bond

Issue price Rs. 10000/- per Bond

Minimum application size : Five Bonds of Rs. 10,000/- each and in multiple of one Bond thereafter.

Maximum application size: Five Hundred Bonds of Rs. 10,000/- each (Rs. 50,00,000 ) subject to fulfillment of other conditions as specified in Income Tax Act.

Mode of Subscription: 100% on application

Deemed Date of Allotment: Last day of each month for application money cleared and credited in NHAI’s collection account

Transferability: The Bonds are non-transferable, non-negotiable and cannot be Offered as a security for any loan or advance

Maturity : 3 years from Deemed Date of Allotment

Interest payment : Annual

Coupon rate : 6.25% per annum

Redemption: at the time of Maturity

Availability of the prospectus and application form: Across the country with NHAI offices, leading SEBI Registered Category-I Merchant Bankers & Banks

Bankers , All the Branches of IDBI Bank and Selected branches of Syndicate Bank, HDFC Bank & Punjab National Bank. For details of bank branches please refer Information Memorandum (IM).

Date of Allotment:At the last day of every month

Registrar: M/s Beetal Finacial & Computer Services (P) Ltd, "Beetal House",3rd Floor, 99, Madangir,Behind Local Shopping Centre, New Delhi-110062 , ph. 011-29961281-83, Fax - 011-29961284,Email- beetal@beetalfinancial.com

The Applicants can download application forms from this website and deposit completed forms to the designated bank branches. The bank branches will allot the required application form number and will accept the application. For application form , please Click here

Form 17 & Amendment to Rules 30, 31, 31A and 31AA From 1/07/2009

noreply@blogger.com (taxworry) — Tue, 12 May 2009 07:36:16 PDT

The CBDT has decided to defer the implementation of Notification No.31/2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962. You can read the amendment by clicking New TDS Payment Challan Introduced and Now Deposit TDS/TCS By Online Method Mandatory For All!

CBDT has now postponed the implementation of change in the Rules. Read the press release below

No.402/92/2006-MC (11 of 2009)

Government of India / Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

***

New Delhi dated the 11th May 2009

PRESS RELEASE

The Central Board of Direct Taxes have decided to defer the implementation of

Notification No.31/2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962. The amended / substituted Rules will now come into effect on 1st July 2009 instead of 1st April 2009.Tax deductors / collectors may continue to deposit TDS / TCS tax and file TDS / TCS returns as per the pre-amended provisions in the interim period.

XXX

Plus & Minus Points of being Treated As Professional!

noreply@blogger.com (taxworry) — Sat, 09 May 2009 19:37:03 PDT

I am a software professional working for a private company as employee.They have now decided that I will work as a consultant for them and give my technical services on a 2 year contract basis.I am told 10.33% TDS will be done from consultancy charges.Will the company file my Income Tax, or i have to do it on my own?i come under 30% tax bracket. so i have to pay 30% + 10.33% tax or this 10.33% is included in the 30% filed?.I will not get HRA benefits?Then how should I do investments to minimize my tax?What are the rules for this situation?Do I get privileges of EPF and gratuity for these 2 years? Bhakti, Mumbai

The moment you are taken as professional by the company , you cease to be an employee under the law. The payments made by the company shall be subject to tax at source u/s 194 J of the I T Act . The rate of which is 10 % plus education cess.

Plus Points

As a salary earner , you had no chance of any expense deduction . However, now out of all receipts from your company , you can deduct all expense which you have incurred for earning those income. for example

Depreciation on car or vehicle you go to office.
Petrol expense
Repairing of vehicle.
Telephone expense.
If you have computer , you can deduction depreciation on computer.
If you have staff or driver

So, this will substantially reduce your taxable "professional receipts". The same amount received as Salary would not have been reduced as there was no scope for any reduction of expense.

Minus Points?

As a Salary earner, you had no responsibility of keeping any accounts book. However, as a professional you will have to maintain books of account as per section 44A of the I t Act. Read Who Are Required to Maintain Books of Accounts ?
If your total receipt is more than Rs 10 lakhs, you will have to get your accounts audited from a chartered accountant as persecution 44AB of the I T Act.
You will also have to pay the service tax if the gross receipt during the year exceeds Rs 10 lakh. If you cross s 9 Lakhs , you will have to be registered with Service Tax department , even though liability to pay service tax comes after one receives more than from Rs 10 lakhs in a year.

Important Points to Remember

As an employee , you were getting Form 16 , now the company will issue Form 16A for tax deducted at source.Keep it properly with you.
Keep all the bills and books of accounts for some years.
You will have to file return in form ITR-4 .
Return filing date is 30th July if the professional receipt is less than Rs 10 lakhs , but if your case is audited , then last date is 30th September
If your receipts are more than Rs 10 lakhs a year, get your accounts audited by 30th September of the assessment year if your accounts closes on 31/3/2009, audit must be done before 30/9/2009.
Claim credit for all tax deducted at source while computing the tax liability and pay advance tax to save from interest u/s 234B and 234C.

Therefore, it is better if you take service of a good chartered accountant .

When Is Your Wife Not Eligible For Deduction Despite Being Joint Home Loan Applicant?

noreply@blogger.com (taxworry) — Sat, 09 May 2009 18:13:55 PDT

I have taken a home loan of Rs. 8.36 lakhs from ICICI Bank about 3 years ago for purchasing a flat. The flat is registered in my name, but my wife has been taken as co-applicant for the Home loan for eligibility purposes. I have been paying the entire EMI of Rs. 10,500/- through ECS from an account held by me (Individual account). I have been solely claiming income tax benefits for the last 3 years. I have noticed that I am not using up the entire income benefit while my wife is paying income tax of around 30,000. Can you suggest me an idea where even my wife can claim tax benefits. What is the process or procedure that I have to follow ? Rups, Banglore

House as investment tool is great ! Benefit of buying a house jointly with wife is even greater as both can claim deduction of interest on the joint loan.However ,if the house is bought only in one person's name and not jointly , then even if the loan is taken jointly benefit of deduction shall not be available to both husband and wife. The reason is that the deduction is available to only those in whose name the income from property is assessed under "income from house property" . In case of joint , assessment is done in both persons-husband and wife - on the basis of share holding in the property. When the flat is in husband's name only, the wife is not assessable for any income out of such property.Therefore , she can not claim any deduction of interest or other expense irrespective of the fact whether she is paying the loan or not .

In your case , there can not be any question of any benefit to your wife on account of the purchase of house because the flat is purchased solely in your name and not jointly. The benefit of deduction of interest to your wife would have arisen only in case of joint ownership. Therefore, any creative tax planning for the benefit of deduction of interest as far as the flat is concerned , shall push you the charges of tax evasion. I suggest you to refrain from it.

How To Get New PAN Card If You Have PAN but No PAN Card or Have Lost PAN Card?

noreply@blogger.com (taxworry) — Wed, 06 May 2009 21:34:08 PDT

Step 1 : Click here to go to NSDL's online form. Go to bottom of this page. You will get following field. Select the type of assessee you are .

Step 2: once you select your type ,you will be taken to actual online . Fill all columns in the form but do not tick any of the boxes exceptt box 7 on the left margin. Remember , the box 7 will be ticked automatically as this updated communication address. Let it be the only ticked box. In case any tick in any other box, deselect it . If you want detailed instruction for filing the form you can click here.

Step 3: On confirmation or submission of online form, and in case of credit card payment (on successful payment) an acknowledgment screen will be displayed which will have A 15-digit unique acknowledgment number . Print this acknowledgement.

Step 4: You will have to send the acknowledgement after following work?

Signing within box provided for signature,
Affixing coloured photograph of size 3.5 cm X 2.5 cm (in case of 'Individuals')
Enclosing a demand draft/cheque in favour of NSDL - PAN payable at Mumbai for Rs 94
(Name of the applicant and the acknowledgment number should be mentioned on the reverse of the demand draft / cheque.) . If you pay be credit card , then there is no need to attach the cheque or draft.

Step 5 : Send the completed form to NSDL at 'National Securities Depository Limited, 3^rd floor, Sapphire Chambers, Near Baner Telephone Exchange, Baner, Pune - 411045'.

Superscribe the envelope with 'APPLICATION FOR PAN CHANGE REQUEST-Acknowledgment Number' (e.g. 'APPLICATION FOR PAN CHANGE REQUEST-881010200000097').

How to Track your PAN reprint application?

Visit this link https://tin.tin.nsdl.com/pan/index.html or
SMS PAN <15 class="blsp-spelling-error" id="SPELLING_ERROR_12">aWrite to: National Securities Depository Limited, 3^rd floor, Sapphire Chambers,
Near Baner Telephone Exchange, Baner, Pune - 411045acknowledgment number> to 53030 to enquire the status of your application
Call TIN Call Centre at 020 - 27218080

How To Get TAN Through Online Form 49?

noreply@blogger.com (taxworry) — Mon, 04 May 2009 19:03:09 PDT

TAN or Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting or collecting tax. It is compulsory to quote TAN in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan and TDS/TCS certificates.All those persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain TAN. Here are steps for applying for TAN.

Step 1 : Click here to visit the NSDL site's TAN Registration page. Go to bottom of the page you will find the following field where you are to select the type of deductor you are .

Step2 : On selecting the type of deductor , you will get online Form 49 .Fill it properly. For guide on filling the form , click here.

Step 3: There are three ways you can pay the fee of Rs 60 for application . Cheque, demand draft or credit card.The details regarding payment is as under

Demand draft / cheque shall be in favor of 'NSDL - TIN' payable at Mumbai.
Name of the applicant and the acknowledgment number should be mentioned on the reverse of the demand draft / cheque.
Applicants making payment by cheque shall deposit a local cheque (drawn on any bank) with any HDFC Bank branch across the country (except Dahej). The applicant shall mention TANNSDL on the deposit slip. List of HDFC Bank Branches.
Facility of making payment by credit card is not available for below mentioned categories:

Central Government / State Government and
Statutory / Autonomous Bodies

Step 4: On confirmation i.e submit button - an acknowledgment screen will be displayed.Save and print this acknowledgment.

Step 5 :Sign the Acknowledgment . Signature / Left thumb impression should only be within the box provided in the acknowledgment. In case of applicants other than 'Individuals', the authorised signatory shall sign the acknowledgment and affix the appropriate seal or stamp.Left hand Thumb impression, if used, should be attested by a Magistrate or a Notary Public or Gazetted Officer, under official seal and stamp.

Step 6 : Send the the acknowledgment duly signed, along with demand draft, to NSDL at

National Securities Depository Limited
3^rd floor, Sapphire Chambers,
Near Baner Telephone Exchange,
Baner,
Pune - 411045

(b) Superscribe the envelope with 'APPLICATION FOR TAN - Acknowledgment Number' (e.g. 'APPLICATION TAN - 88301020000244').

(d) Application will be processed only on receipt of duly signed acknowledgment and realisation of payment.

How to know the status of your application?

Choose any one way of following

Through this link
Call TIN Call Centre at 020 - 27218080; Fax: 020 - 27218081
e-mail us at: tininfo@nsdl.co.in
SMS TAN Acknowledgement No. & send to 53030 to obtain application status

How To Know PAN Of Any Person ?

noreply@blogger.com (taxworry) — Sun, 03 May 2009 19:44:33 PDT

Step 1 : You should have with you two data :

Last Name
Date of Birth
Father's full Name

Step2 : Click here to visit the site given below .

Step 3 : Fill up at least Last Name And Date of Birth in format DD-MM-YYYY . So if your birth day is 20th May 1969 , you should fill 20-05-1969. After that click "Submit Query " button.

Step 4 : After you click submit query , window as given below will come where you will have to fill out , Last Name , Middle Name and First Name of your father.

Once you click "Submit Query" , you will get the PAN , & Jurisdiction details.

How To View or Verify TDS or TCS or Tax Paid By You Online At One Place ?

noreply@blogger.com (taxworry) — Sat, 02 May 2009 21:29:55 PDT

Now every taxpayer can view TDS deducted on payments ,TCS collected or Advance Tax or Self Assessment Tax or regular assessment tax paid by the PAN holder. The online service for checking these payments are part of a consolidated tax statement issued under Rule 31 AB of Income Tax Rules to PAN holders in Form 26AS . This statement, with respect to a financial year, will include details of:

tax deducted at source (TDS);
tax collected at source (TCS); and
advance tax/self assessment tax/regular assessment tax etc., deposited in the bank by the taxpayers (PAN holders).

Form 26AS will be prepared only with respect to Financial Year 05-06 onwards.

So, here are steps to get user ID & Passwords for viewing your Annual Tax Statement.

Step1 : Online Registration is a one time activity wherein, a PAN holder has to fill in & submit a Registration form online through NSDL site. The detailed procedure is as mentioned below:

Select 'registration' option from online services menu.
After entering all the details (PAN, User ID, Password, Contact details if any etc), click on 'Submit'.
On successful registration, an acknowledgement receipt will be displayed on screen.
Save and print this acknowledgement receipt.

This registration request has to be authorised by a TIN-FC. Authorisation means verification of Identity of a PAN Holder for the purpose of viewing Annual Tax Statement.

Step 2 : For getting registration request authorised by a TIN FC, PAN holder may choose either to

Personally visit the TIN FC of his choice .
Select a TIN FC to visit the PAN Holder for personal verification.
- In this case, select any TIN-FC from a list of TIN-FCs who offer this facility in the city provided in contact address.
- Facility of selecting a TIN FC to visit can be availed of only in those locations where a TIN-FC is present.
- In this option, the PAN holder will be prompted to enter his contact details in the fields provided on the online registration form.
The documents to be produced before required for getting authorised can be found here.
Once you complete the formality, you can also verify the status of registration online by clicking here.

Step 3 : After three working days of authorization by TIN-FC, the PAN holder can login to the TIN central system and view Form 26AS by clicking View Tax Credit. There is no charge for viewing Tax Credit online . You will get the following window

Should The Consultancy Fee Paid To An Engineering College Be Subject to TDS?

noreply@blogger.com (taxworry) — Sat, 02 May 2009 08:33:00 PDT

A company has paid Rs 12 Lac as consultancy fees to an Engineering college. The Company engaged the college to undertake certain activities for its business and after doing the work, the college has raised an invoice for Rs 12 Lac towards consultancy fees for doing the same. Now my query is:
Whether TDS is required to be deducted from the said consultancy fees? Please elaborate the provisions of the law and the procedure to be taken by the deductor ie company.Sujit Talukdar, Kolkata

It is presumed that the college referred in the question is not a college whose income is totally exempt u/s 10(23C) of the I T Act. For any person receiving such payments , the tax may not be deducted at source . Read this posting to know the reason Should The Tax Be Deducted on Payments Which is Exempt from Tax in One's Hand?

Section 194 J of the I T Act provides for deduction of tax at source on payment of "professional fee" or "technical fee". The said provision is as under

194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of

(a) fees for professional services, or

(b) fees for technical services, or

(c) royalty, or

(d) any sum referred to in clause (va) of section 28,]

shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax on income comprised therein :

Since the payer is company and it is being paid for "consultancy ' by the engineering college , the payment is liable to be tax at source @ 10 % .

The tax has to be deposited in accordance with the new Rule notified by CBDT . Read the posting New TDS Payment Challan Introduced and Now Deposit TDS/TCS By Online Method Mandatory For All! . In short every payment of TDS has to be deposited in new form 17 and within specified time as per Rule 30 which is notified.

The deductor company will have to issue the certificate of deduction in new Form 16A notified .

Should The Tax Be Deducted on Payments Which is Exempt from Tax in One's Hand?

noreply@blogger.com (taxworry) — Sat, 02 May 2009 08:27:14 PDT

Section 4 is charging section under Income Tax Act.

Section 4(1 ) states "Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of, this Act in respect of the total income of the previous year of every person: "

Section 4(2 ) is charging section for TDS or TCS and it states "In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act "

Therefore , the prime condition for tax at source is that the payments should be chargeable to tax under I T Act .As such , in my opinion every payments which is not chargeable to tax under the I T Act is not liable to tax at source.

Section 10 of the I T Act exempt certain income to be included in total income of a person .

Therefore , any income which is exempt , should not be subject to tax at source.

Relevant Readings

Even Autonomous bodies of States are subject to TDS!

TDS Certificate Forms 16 & 16A Changed by CBDT!

noreply@blogger.com (taxworry) — Thu, 30 Apr 2009 08:00:56 PDT

UPDATE!

From 1/4/2009 , the rule regarding deposit of tax ,issuing certificate and reporting through returns have been changed .As such the form 16 & 16A have been changed by CBDT vide this notification and also new Form 17 has been introduced for depositing the tax deducted at source.

The new Form 16 , 16A & 17 may be downloaded from here.

Read more about change in relevant rules for deduction of tax in this article

New TDS Payment Challan Introduced and Now Deposit TDS/TCS By Online Method Mandatory For All!

All the things written below is valid upto 31/3/2009

Now the tax deductor has to fill up the date of filing the quarterly TDS returns (even acknowledgment number) in the certificate issued for tax deducted.

CBDT vide Notification - 83 , dt. 26-3-2007 Income-tax (Third Amendment) Rules, 2007-Form 16, Form 16a and Form 27d substituted, the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-
1. (1) These rules may be called the Income-tax (Third Amendment) Rules, 2007.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Income-tax Rules, 1962, in APPENDIX II, for Form No. 16, Form No. 16A and Form No. 27D, the following Forms shall be substituted, namely:"

The form 16 & 16A can be obtained in excel format from here.

(Use these forms at your own responsibility and being provided for your benefit and guidance only)
Although there are some controversy has arisen on account of time limitation given for issue of Form 16 & 16A and last dates of filing quarterly TDS return . But I feel CBDT will surely sort out such unintended controversy by suitable circular.
Update
CBDt has issued clarification to sort out the confusion.Read this posting.