Gift - Shares

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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

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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

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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

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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

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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 :

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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

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(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).