Parameters for processing of E-TDS Returns

PrintPDF

Parameters for processing of E-TDS Returns – issuance of instruction – regarding

INSTRUCTION NO. 8/2010 [F.NO. 275/73/2009-IT(B)]

DATED 8-12-2010

1.In the present system of processing of e-TDS returns, the returns are processed online and mismatch report showing defaults on various accounts is generated. Based on this mismatch report, the assessing officers issue show-cause notices to the deductors and take follow up actions.

2. It has come to the notice of the Board that substantial number of TDS returns are pending where the deductee-wise default on account of short deduction of tax is less than Rs. 10.

3. This issue has been considered by the Board and it has been decided that:

(i) where the default on account of short deduction is less than Rs. 10 for each deductee, the demand is round off to zero; and

(ii) after considering (i) above, deductor-wise demand/default, if any, of Rs. 100 or less will also be ignored for further action.

4. However, the DDOs in such cases may be warned to be careful in future so as to ensure that they do not become habitual in short deduction of tax.

5. Earlier Instruction No. 11/2007, dated 18-12-2007 issued under F. No. 385/56/2007-IT(B) on the subject stands superseded by this instruction.

6. These instructions shall apply to all TCS/TDS cases under all Direct Tax Enactments. These instructions will come into force immediately.

Last minute tax planning? Here is a quick guide!

PrintPDF

Do you find yourself in a situation where there are just a bunch of days ahead for the deadline of submission of tax documents? Here is a quick guide to help you sort out your finances last minute!

1. Target full utilisation of Section 80 C: Maximum deduction available is to the tune of Rs. 100,000. Assess your income to arrive at the amount you need to invest in this section. The investment avenues include; Public Provident Fund (PPF) up to Rs. 70,000, National Saving Certificate (NSC), Life Insurance or ULIP premium, tuition fees paid for children's education (2 children max), Equity linked savings schemes (ELSS), Post office saving deposit (POSD) and five year fixed deposits with banks among others.

For individuals in the higher income bracket, section 80 C which is the most popular one may not be sufficient to reduce overall tax liability. Here is where the other sections will play a key role in reducing tax outflow.

2. Interest on home loan: Individuals intending to buy a house should consider opting for a home loan. Interest payments up to Rs 150,000 pa are eligible for deduction under Section 24

3. House Rent Allowance (HRA): You can take advantage of this if you are renting an accommodation. There are set guidelines determining the amount deductible. Please note that the rent agreement and the rent receipts need to be submitted

4. Health Insurance Premium: Annual deduction of Rs. 15,000 is permissible for self, spouse and dependent children. Also and additional Rs. 15,000 is allowed for parents

5. Medical reimbursement: Medical treatment expenses up to Rs. 15,000 can be claimed annually as deduction from salary u/s 17(2). Actual bills need to be produced

6. Donation to Charitable institutions: Subject to the stated limits, donations to specified funds/institutions are eligible for tax benefits under Section 80G. Receipt needs to be produced.

7. Interest paid on educational loans: Deduction can be claimed on interest paid on educational loans taken for higher education of you, your spouse and children under section (u/s) 80 E. There is no limit on the amount of deduction you can claim. However, the loan should be taken for a graduate or post-graduate program in engineering, medicine or management or a post-graduate course in the pure or applied sciences

No tax on additional interest on EPF money (diff. of 9.5 and 8.5 %)

PrintPDF

The additional quantum of interest on employees Provident Fund deposits would be exempted from income tax, the Lok Sabha was informed today. The provident fund trustees had on September 15 decided to raise the EPF interest rate by 1% to 9.5 for 2010-11.

However as per income tax rules interest on EPF is exempted only upto 8.5 % only. So as per present rule though the interest payable is 9.5% but interest exempted is only 8.5% means additional 1 % is taxable in employee's hand .But now in Lok sabha Govt has declared that in rate given in income tax for exemption for interest on EPF will also be increased to 9.5 %.

"The matter has been discussed with Finance Ministry and they have informed that they will revise the notification to 9.5% once it is approved by the Government," Minister of State for Labour and Employment Harish Rawat said in a written reply. The decision taken by the Central Board of Trustees of EPF to raise the interest rate would benefit 4.71 crore employees in both public and private sectors.

Implementation of the new application Software for MPCTD

PrintPDF

After series of modifications, amendments, incorporation of changes to bring the application software in consistence with the latest amendments in rules & Act, and to facilitate taxpayer of state with more citizen centric features, the application software went go-live on July 2010. Tata Consultancy Services Ltd (TCS) has customized and implemented their Value Added Tax Information System (VATIS) framework in state. The application software is helping the department to actualize its mission. Facilities include static and dynamic information, online registration, e-filing of return, payment of taxes, online request management, status self-tracking and direct downloading of statutory form 49, will be available to the registered dealers/taxpayers.

Receipts forming/not forming part of total turnover for Presumptive Taxation

PrintPDF

Receipts forming part of Turnover	Receipts not forming part of Turnover
1. Sales tax or any other levy	1. Advances or deposits received.
2. Sale of unusables, empties and packages	2. Consideration received on sale of fixed assets employed in the business.
3. Service charges charged for delivery may form part of turnover, having regard to terms of contract.	3. Any security or other deposit obtained from employees.
	4. Interest and any other receipts of similar nature.
	5. Incentive received from the suppliers, cash or other discount received on purchase should not form part of turnover.
	6. Value of stock in trade.

Transition to IFRS

PrintPDF

Entities	Transition wef
Companies with over ` 1000cr Net Worth and Companies Listed in Sensex – 30/ Nifty – 50 / Overseas Stock Exchanges.	01.04.2011
Listed and unlisted companies with a net worth of over ` 500cr.	01.04.2013
All listed companies with a net worth of less than or equal to ` 500cr.	01.04.2014
SME’s and unlisted companies with a a net worth of less than or equal to ` 500cr.	Presently Exempted
Banking and Insurance Companies	Separate roadmap to be drafted

Additional fees to ROC increased

PrintPDF MCA has issues a release revising the fees payable as per Section 611(2) of the Companies Act, 1956 (except for form 5) as per below details with effect from 5th December, 2010:

Period of Delay	Fixed rate of additional fee
Upto 30 days	Two times of normal filing fee
More than 30 days and upto 60 days	Four times of normal filing fee
More than 60 days and upto 90 days	Six times of normal filing fee
More than 90 days	Nine times of normal filing fee

Notification No. 80/2010

PrintPDF Central Government has through this notification specified TATA AIG easy retire annuity plan of the TATA AIG Life Insurance Company Limited and the annuity plan of the ICICI Prudential Life Insurance Company Limited for the purposes of deduction under section 80C.

Impact of Direct Tax Code on Power Sector

PrintPDF “When archaic rules have to be replaced with new ones, the changes must be dramatic and path breaking. “ --- Union Finance Minister Pranab Mukherjee at the time of releasing the draft Direct Tax Code (Tax Code). The New Direct Tax Code (DTC) is said to replace the existing Income Tax Act of 1961 in India.

It is expected to be passed in the monsoon session of 2010 and is expected to be enforced from 1st April, 2012. During the budget 2010 presentation, the finance minister Mr. Pranab Mukherjee reiterated his commitment to bringing into force the new direct tax code (DTC) into force from 1st of April, 2011, but same could not be fulfilled and now it will be applicable from Financial Year 2012 – 2013

Impact on Power Sector

Current Scenario: As per the existing provisions of the Income Tax Act, 1961, an Undertaking set up in any part of India for the Generation or Generation and Distribution of power or Reconstruction or revival of a power generating unit if it begins to generate power at any time during the period beginning on 1st April, 1993 to 31st March, 2011 is eligible for Profit based deduction subject to fulfillment of other conditions stipulated under the provisions of the Income Tax Act, 1961.

Direct Tax Code (DTC) Proposals DTC 2010 would replace the Income Tax Act, 1961 and, hence, it is provided that the businesses eligible for profit-linked incentives under the Income Tax Act, 1961 regime as of 31 March 2012, whose tax holiday period has not expired, shall continue to be eligible for profit-linked tax incentives for the unexpired period, subject to the following conditions: · The method of computation of profits shall be as per DTC 2010, except that capital expenditure and pre-commencement business expenses will not be allowed as a deduction. · The period of deduction shall not include a period for which deduction was not allowable under the Income Tax Act, 1961. However, question may arise as to whether the restriction will apply only during the period of tax holiday or on a perpetual basis. Question may also arise if the limitation on grant of capital allowances, including depreciation, will also extend to assets acquired prior to March 2012 and which have already become part of the block of assets. · The taxpayer continues to satisfy the conditions as specified under Section 80IA of the Income Tax Act, 1961.

Effect on Undertaking set up on or after 1st April, 2012: · An Undertaking set up in any part of India for the Generation or Transmission or Distribution of power and if it begins to generate power at any time on or after 1st April, 2012 will be eligible for investment-based incentives wherein capital expenditure and expenditure prior to commencement of Business shall be allowed as Business Expenditure except expenditure incurred on acquisition of any Land including Long Term Lease, Goodwill or Financial Instrument. Moreover, the Direct Tax Code has also allowed Power Companies to offset Losses against the Profits of other infrastructure projects or corporate income in the current year as well as future years which is a welcome measure. The Direct Tax Code, 2010 has curtailed the some of the provisions of Income Tax Act, 1961 even though it is positive step for the Power Sector and beneficial to Existing as well as New Power Undertakings.

Cancellation of registration obtained under section 12A

PrintPDF

ü Section 12AA(3) currently provides that if the activities of the trust or institution are found to be non-genuine or its activities are not in accordance with the objects for which such trust or institution was established, the registration granted under section 12AA can be cancelled by the Commissioner after providing the trust or institution an opportunity of being heard.

ü The power of cancellation of registration is inherent and flows from the authority of granting registration. However, judicial rulings in some cases have held that the Commissioner does not have the power to cancel the registration, which was obtained earlier by any trust or institution under provisions of section 12A, as it is not specifically mentioned in section 12AA.

ü It is, therefore, proposed to amend section 12AA so as to provide that the Commissioner can also cancel the registration obtained under section 12A as it stood before amendment by Finance (No.2) Act, 1996.

ü This amendment is proposed to take effect from 1st June 2010.

Gift - Shares

PrintPDF

ü U/s 56 shares of a company (not being a company in which public are substantially interested) in excess of Rs. 50,000 received without consideration by a firm or a company (not being a company in which public are substantially interested) will be chargeable to income tax in the hands of the recipient under the head ‘Income from other sources’.

ü In case shares are received for a consideration, if fair market value of the shares exceeds by an amount of Rs. 50,000/- over the consideration, then such excess amount shall be chargeable to tax as said above.

ü The above provisions shall not be applicable if the shares are received by the company in a scheme of amalgamation as mentioned in clauses (via), (vic), (vid) or (vii) of section 47.

ü The above amendment shall take effect from 1^st June 2010.

Power of the High Court to condone delay in filing of appeals

PrintPDF

A. Section 260A

ü The existing provisions of section 260A(2) provide that an appeal against the order of Income-tax Appellate Tribunal can be filed before the High Court within a period of 120 days from the date of the receipt of the order by the assessee or the Commissioner.

ü It is now proposed to insert sub-section (2A) in section 260A of the Income-tax Act to specifically provide that the High Court may admit an appeal after the expiry of the period of 120 days, if it is satisfied that there was sufficient cause for not filing the appeal within such period.

ü Consequential amendments on similar lines are proposed to be made in section 27A of the Wealth-tax Act.

ü These amendments are proposed to take effect retrospectively from 1st October 1998.

B. Section 256

ü Under section 256 of the Income-tax Act, the Income-tax Appellate Tribunal could refer a case to the High Court. In case where the Income-tax Appellate Tribunal refused to refer a case to the High Court, the assessee or the Commissioner were allowed to file an appeal before the High Court against such refusal of the Tribunal within a period of six months from the date on which he was served with an order of refusal.

ü It is proposed to retrospectively insert sub-section (2A) in section 256 so as to empower the High Court to admit an application after the expiry of the period of six months, if it is satisfied that there was sufficient cause for not filing the same within such period.

ü Consequential amendments on similar lines are also proposed to be made in section 27 of the Wealth-tax Act.

ü These amendments are proposed to take effect retrospectively from 1st June 1981.

IT Department is releasing 3 new services on the e-filing website

PrintPDF

Income Tax Department is releasing 3 new services on the e-filing website. These are available from the 'Services' menu on the Menu Bar on top. The services are available without requiring any login (and are also available under 'My Account' as well) are:

ITR-V receipt status at CPC Bangalore.

Refund failure status out of refunds issued or to be issued at CPC Bangalore

I-T dept introduces Document Identification Number - DIN for tax filing & correspondence

PrintPDF

Taxpayers will now have to procure a 'new number' for filing returns and making any communication with the Income Tax department.

The unique Document identification number (DIN), on the lines of numbers like PAN and TAN, will be quoted on "every" income tax-related communication, including returns to be filed next year for the financial year 2010-11.

According to the new guidelines brought out by the Central Board of Direct Taxes (CBDT), the DIN will be mandatory "in respect of every notice, order, letter or any correspondence" with the department, by the taxpayers.

"The DIN will be generated by the I-T department and will be useful, essentially, for error-free filing of tax returns, claiming refunds and other communication with the department by the assesses," a senior Finance Ministry official said.

The 'Aykar Sampark Kendras' will hand out the DIN from this month, the official said.

Assesses will not be put to any trouble, as the numbers will be generated and allotted by the department itself.

I-T officials will also be allotted the numbers in order to streamline the process, the official said, adding, the number has to be produced thereon for every activity with the department.

Taxpayers and tax collectors are currently required to quote Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) among others when returns are filed with the department.

According to section 282B of the Income Tax Act that deals with DIN, if the document sent to the tax authority does not bear this unique computer-generated number then "such document, letter or any correspondence shall be treated as invalid and shall be deemed never to have been received."

DIN is aimed at bringing more transparency in tax administration as the whole exercise involves a number of documents and proformas. Apart from regular filing of taxes, a taxpayer deals with the department for various other financial services, which DIN will help to ease, the official said.

RBI expected to raise interest rates for 6th time this year

PrintPDF

The Reserve Bank of India is expected to raise interest rates for the sixth time this year on Tuesday to battle stubborn inflation that remains well above its comfort zone of 5-6 per cent.

Most economists expect theReserve Bank of India (RBI) to raise key rates by at least 25 basis points at its quarterly review on Nov. 2 and another quarter percentage point before the fiscal year ends in March.

The RBI’s key lending rate, or the repo rate, at the end of March 2011 is seen at 6.5 per cent, from 6 per cent now, while the reverse repo rate, or borrowing rate, is seen at 5.5 per cent, from 5 per cent now.

The RBI is expected to pause in its tightening cycle after the current fiscal yearends.

Central bank officials have been flagging their discomfort over persistent price pressures, but are expected to follow a slow-but-steady approach towards tightening policy. Deputy governor Subir Gokarn said on Tuesday that surging food prices were structural and will put upward pressure on interest rates.

Headline inflation was in the double-digits for six months through July. The annual wholesale price index for September, the last key data point before the central bank’s Nov. 2 review, rose 8.62 per cent compared with 8.5 per cent in August.

Annual food price inflation eased to 13.75 per cent in mid-October but remains high, in part because of rising demand as incomes increase.

The economy of the world’s second most populous country is on track to grow 8.5 per cent this fiscal year.

Market Impact: The market has largely factored in quarter point rate rises on Tuesday. The focus will be on clues in the RBI’s commentary on further policy action as well as its liquidity outlook.

If there is indication of a pause in tightening, then the benchmark bond yield may ease to around 8.04 per cent from around 8.11 per cent, but if the statement suggests continued worries about inflation, then it could rise to 8.20 per cent.

Changes In Q2 eTDS Statement Filing Requirements :

PrintPDF

NSDL has notified changes in data structure and validations for filing eTDS statement for FY 2010-11. These changes are effective for the forthcoming second quarter statement filing due on Oct 15, 2010. The changes are primarily to give effect to Notification 41.

Changes

100% Valid PANs

Reporting of Transport Contract payments without deduction of TDS

Flagging penal rate deductions

Mandatory Contact details of Deductor

Reporting requirements for Govt Deductors

100% Valid PANs

Existing Rule

At present a minimum percentage of valid PAN is mandatory in any eTDS statement.

This is 95% for Form 24Q and 85% for others

Changed Rule

Form 24Q/26Q/27Q

All deductee records must have valid PANs. Even deductee records where tax has

been deducted at lower/NIL rate must have valid PAN

Only exception is deductee records where tax has been deducted at higher rate u/s

206AA

Form 27EQ

The existing rule of 85% continues

Reporting of Transport Contract payments without deduction of TDS

Finance Act 2009 had made an important change in respect of applicability of TDS on transport contractors. Section 194C was replaced and the following two sub sections provided for non deduction of TDS on transport contractors

(6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum.

(7) The person responsible for paying or crediting any sum to the person referred to in subsection (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed.

In terms of sub section (7), now such transactions are to be reported in regular eTDS statement.

All such deductions to transport contractors where tax has not been deducted are to be marked “T” in the column Reason for Non-deduction / Lower Deduction, if any in the deductee details.

Penal rate deductions

All deductions where tax has been deducted at hiigher rate in terms of section 206AA are to be marked “C” in the column Reason for Nond eduction / Lower Deduction, if any in the deductee sheet .Such transactions need not have valid PAN.

For records marked with higher rate only below mentioned fields can be updated:

PAN

Amount of payment

Date of payment

Mandatory Contact details of Deductor

In the deductor details , contact details of deductors are provided

Email-Id of deductor / responsible person is now mandatory

Field for mobile number of responsible person has been added.

Any one of the contact details of deductor is mandatory:

Deductor telephone no. along with STD code

Responsible person telephone no. along with STD code

Mobile no. responsible person

Reporting requirements for Govt Deductors

For TDS deposited by book entry, 7 digit number generated by TIN for accepted Form 24G statement to be quoted in BSR code field. This value will be provided by the Accounts Officer to the deductor.

For TDS deposited by book entry, 5 digit number generated by TIN for DDO record of accepted Form 24G statement will be quoted in Transfer voucher field. This value will be provided by the Accounts Officer to the deductor

Form No 27EQ

Form No 27EQ is to be filed for tax collection at source

Validation for no/lower/higher deduction will not be applicable for Form no. 27EQ

PAN compliance validation of 85% will be applicable for Form no. 27EQ

New File Validation Utility : FVU 3.0

Quarterly e-TDS statements (regular and correction) upto FY 2009-10 should be validated with FVU version 2.129. There is no change in the validations for statements upto F.Y. 2009-10

Quarterly e-TDS statements (regular and correction) for FY 2010-11 should be validated with FVU version 3.0.

Status of FY 2010-11 Q1 statements

If statement for Q1 FY 2010-11 is being filed late , does it need to be validated with FVU 3.0 ?

The answer is Yes. it needs to be validated with FVU version 3.0.

eTDS Statements are accepted at TIN-Centres by SAM software. Latest SAM will not accept any statement for FY 2010-11 , unless it is validated with FVU 3.0

Gifts under section 56(2)(vi) of the Income Tax Act, 1961

PrintPDF

(For gifts received between 01.04.2006 to 30.09.2009)

Where any sum of money, the aggregate value of which exceeds Rs.50,000, is received without consideration by individual/HUF, the whole of aggregate value is taxable as income from other sources.

Provided that this clause shall not apply to any sum of money received;

(a) from any relative; or

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

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

(d) in contemplation of death of the payer.

For the purpose of this, ‘relative’ means : ‐

(a) spouse of the Individual;

(b) brother or sister of the individual;

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

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

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

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

(g) spouse of the person referred to in clause (ii) to (vi).

Gifts under section 56(2)(vii) of the Income Tax Act, 1961

(For gifts received on or after 01.10.2009)

From 1.10.2009, new clause [Sec. 56(2)(vii)] introduced for charging of Gifts received by individual/HUF. Earlier, only gifts received in the sum of money was chargeable under Income Tax Act. However w.e.f. 01.10.2009 gift received in kind is also chargeable subject to certain conditions.

The new provisions is described as under :

I. If any sum of money received without consideration, the aggregate of which

exceeds Rs.50,000, the whole of such sum will be chargeable.

II. If any immovable property received –

(a) without consideration, the stamp duty value of which exceeds Rs.50,000,

the stamp duty value of such property will be chargeable.

(b) For a consideration, which is less than stamp duty value of property by an

amount exceeding Rs.50,000, the stamp duty value of such property as

exceeds such consideration will be chargeable.

III. if any property other than immovable property received –

(a) without consideration, the aggregate fair market value (FMV) of which

exceeds Rs.50,000, the whole of aggregate FMV of such property will be

chargeable.

(b) For a consideration, which is less than the aggregate FMV by an amount

exceeding Rs.50,000, the aggregate FMV as exceeds such consideration

will be chargeable.

However any such gifts received from relatives shall not be treated as income.

For the purpose of this, ‘relative’ means : ‐

(a) spouse of the Individual;

(b) brother or sister of the individual;

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

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

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

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

(g) spouse of the person referred to in clause (ii) to (vi).