Transcript Slide 1

Amendments by Finance Bill, 2012
with reference to Tax Audit
Venue:
ICAI BHAWAN, VADODARA
CA. Kejal V. Pandya
B.com, FCA, DISA, DIRM
Kejal Pandya & Associates
Chartered Accountants
[email protected]
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Presentation Overview
• Amendments in relation to Business and
Profession
• Amendments in relation to Deductions from
Gross Total Income
• Amendments in relation to TDS provisions
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Section 32(1) (iia)
Extending benefit of initial/additional depreciation
Amendment to existing provision w.e.f. 01.04.2013
Existing provision
• Benefit of initial /additional depreciation available to an assessee
engaged in the business or manufacture of any article or thing
Amendment
Eligible Assessee –
• An assessee engaged in the business of generation or generation
and distribution of power
What is allowed • Additional depreciation at the rate of 20% of actual cost of eligible
new machinery or plant (other than ships and aircraft) acquired and
installed in a previous year.
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Section 32(1) (iia)…
Depreciation on addition after September
• To be calculated as per the regular method as
per Income Tax Act, 1961 – 50% of applicable
rate of depreciation
• Balance depreciation to be claimed in next
year
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Section 35(2AB)
Deduction for in-house scientific research and
development
Amendment to existing provision
Existing provision
Deduction was available upto 31.03.2012
Amendment
Eligible Assessee –
• A company engaged in business of bio technology or in manufacture or
production of article or thing other than specified in Eleventh Schedule,
who spends on in-house research and development
What is allowed –
• Weighted deduction of 200% of revenue and capital expenditure (not
being in the nature of cost of any land or building)
• For a further period of 5 years i.e. up to 31.3.2017.
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Section 35AD
Deduction in respect of capital expenditure on
specified business
Amendment to existing provision w.e.f.01.04.2013
Eligible Assessee –
• Three new businesses added to the list of “specified business” for the
purposes of the investment-linked deduction of 100% of the capital
expenditure under section 35AD, namely: Setting up and operating an inland container depot or a container freight
station notified or approved under the Customs Act, 1962;
 Bee-keeping and production of honey and beeswax; and
 Setting up and operating a warehousing facility for storage of sugar.
What is allowed –
• deduction of 100% of the capital expenditure in “specified business”
• Date of commencement of operations for availing investment linked
deduction - on or after 1.4.2012
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Section 35AD...
Eligible Assessee –
• Businesses commencing operations on or after 1.4.2012 namely: Setting up and operating a cold chain facility;
 Setting up and operating a warehousing facility for storage of
agricultural produce;
 Building and operating, anywhere in India, a hospital with at least one
hundred beds for patients;
 Developing and building a housing project under a scheme for
affordable housing framed by the Central Government or a State
Government, as the case may be, and notified by the Board in this
behalf in accordance with the guidelines as may be prescribed; and
 Production of fertilizer in India.
What is allowed –
• Weighted deduction of 150% of the capital expenditure under
section 35/AD(1A) of the Income-tax Act
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Section 35AD...
• A new sub-section (6A) inserted in section 35AD
• w.r.e.f. AY 2011-12
Eligible Assessee –
• Where the assessee builds a hotel or two-star or above
category as classified by the Central Government and
subsequently, while continuing to own the hotel, transfers
the operation thereof to another person
• the assessee shall be deemed to be carrying on the
specified business of building and operating hotel and
What is allowed –
• shall continue to be eligible for the deduction under section
35AD(100% of capital expenditure)
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Section 35CCC
Deduction for expenditure incurred on agricultural
extension project
New section w.e.f. 01.04.2013
Eligible Assessee –
• Business entities engaged in agricultural extension services
What is allowed –
• Weighted deduction of 150% of the expenditure incurred
on agricultural extension project.
• Deduction not to be allowed in respect of such expenditure
under any other provisions of the Income-tax Act for the
same or any other assessment year.
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Section 35CCC…
Meaning of Agricultural Extension Service • Application of scientific research and new
knowledge to agricultural practices through
farmer education
• Communication and learning activities
organized for rural people by educators from
different disciplines, including agriculture,
agricultural marketing, health, and business
studies.
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Section 35CCD
Deduction for expenditure incurred by a company on
skill development project
New section
Eligible Assessee –
• Companies investing on skill development projects in the manufacturing
sector
• The skill development project eligible for this weighted deduction shall be
notified by the Board in accordance with the prescribed guidelines.
What is allowed –
• Weighted deduction of 150% of expenses (not being expenditure in the
nature of cost of any land or building) incurred on skill development
project.
• Deduction not to be allowed in respect of such expenditure under any
other provisions of the Income-tax Act for the same or any other
assessment year.
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Section 35CCD...
Skill Development aims at • Institution-based skill development including ITIs/ITCs/vocational
• schools/technical schools/ polytechnics/ professional colleges, etc.
• Learning initiatives of sectoral skill development organised by
different ministries/departments.
• Formal and informal apprenticeships and other types of training by
enterprises
• Training for self-employment/entrepreneurial development
• Adult learning, retraining of retired or retiring employees and
lifelong learning
• Non-formal training including training by civil society organizations
• E-learning, web-based learning and distance learning.
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Section 40(a) (ia)
Disallowance of business expenditure on a/c of nondeduction of tax on payment to resident payee
Amendment to existing provision w.e.f. 01.04.2013
Existing provision
• Expenditure were being disallowed if tax was not deducted on the
same.
Amendment
Where –
• An assessee makes payment of the nature specified in the said
section to a resident payee without deduction of tax, AND
• is not deemed to be an assessee in default under the amended
section 201(1) as the tax has been paid by the payee on such
income, AND
• the payee has furnished the return of income
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Section 40(a) (ia)…
Then • for the purpose of allowing deduction of such
sum, it shall be deemed that the assessee has
deducted and paid the tax on such sum on the
date of furnishing of return of income by the
resident payee.
• Therefore, the expenditure on which the tax was
actually not deducted, becomes an allowable
expenditure.
• These beneficial provisions are made to be
applicable only in the case of resident payee.
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Proviso to section 40A(2)(a) / Section 80-IA(8)
and section 80-IA(10)
New Proviso (Domestic Transfer Pricing)
• Payment to relative and close associates to be treated
as specified domestic transaction and should be done
at arm’s length price
• Transactions under section 80-IA(8) (Deduction for
infrastructure development – transfer at no/lower
price) and section 80-IA(10) (transaction with more
than eligible profit) to be treated as specified domestic
transactions and should be done at arm’s length price
• Previously, report to be submitted if asked by AO, now
mandatory
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Section 40A(2) (b)
Meaning of related person - amended
• Any other company carrying on business or
profession in which the first mentioned
company has substantial interest shall be
considered as related person
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Section 44AB
Turnover or gross receipts for audit of accounts
Increase in the threshold limit of total sales,
turnover or gross receipts, for getting accounts
audited –
Nature
Old Limit
New Limit
Business
60 Lacs
1 Crore
Profession
15 Lacs
25 Lacs
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Explanation to section 44AB
Due date of furnishing audit report
• w.r.e.f. AY 2012-13
• in case of international transactions/specified
domestic transactions
• 30th November of the relevant assessment
year in case of assessees carrying on
international transaction/specified domestic
transaction as per section 92B or specified
domestic transaction as per newly inserted
section 92BA
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Section 44AD
Presumptive taxation not to apply to professions etc.
• w.r.e.f. A.Y. 2011-12
• Sub-section (6) inserted in section 44AD
• Presumptive scheme is not applicable to:
 a person carrying on profession as referred to in section
44AA(1);
 a person earning income in the nature of commission or
brokerage income; or
 a person carrying on any agency business.
• Threshold limit of total turnover or gross receipts has
been increased from Rs.60 Lacs to Rs.1 crore.
Practical aspects to be considered before deciding about
presumptive taxation
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Section 80C(3A)
Eligibility condition for deduction in respect of life
insurance policies
• Premium or other payment made should not exceed 10% of
the actual capital sum assured, in case of
• Insurance policies other than a contract for deferred
annuity
• Issued on or after 1.4.2012
• Actual capital sum assured shall mean –
• Minimum amount assured under the policy on happening
of the insured event at any time during the term of the
policy, not taking into account the value of any premiums agreed to be returned, or
 any benefit by way of bonus or otherwise over and above the
sum actually assured, which is to be or may be received under
the policy by any person.
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Section 80CCG
Deduction in respect of investment made under an
equity savings scheme
Eligible Assessee –
An individual who is resident in India, who has• in a previous year, acquired listed equity shares in
accordance with a scheme, as may be notified by the
Central Government in this behalf, and
• satisfied the prescribed conditions.
What is allowed –
• 50% of the amount invested in such equity shares OR
• Rs.25,000/whichever is less.
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Section 80CCG…
Conditions to the satisfied [Section 80CCG(3)]
• The gross total income of the assessee for the relevant
assessment year should not exceed Rs.10,00,000
• The assessee is a new retail investor as may be specified
under the scheme notified in this behalf;
• The investment is made in such listed equity shares as may
be specified under the notified scheme;
• The investment is locked-in for a period of three years from
the date of acquisition in accordance with the notified
scheme; and
• Such other condition as may be prescribed.
Practically a risky investment
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Section 80CCG…
Consequences if the conditions of Section 80CCG(3) are
not satisfied [Section 80CCCG (4)]
The deduction originally allowed shall be deemed to be
the income of the assessee of such previous year and
shall be liable to tax for the assessment year relevant to
such previous year.
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Section 80D
Deduction for expenditure on preventive health
check-up
Amendment to existing provision
What is eligible
• Any payment made by an individual on account of
preventive health check-up of self, spouse, dependant
children or parent(s) during the previous year
• Payment to be made –
 by any mode, including cash, in respect of any sum paid on
account of preventive health check-up;
 by any mode other than cash, in all other cases.
Amount of Deduction
• Eligible within the overall limits prescribed in the
section, not exceed in the aggregate Rs.5,000
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Section 80D, 80DDB and Section 197A(1C)
Reduction of the eligible age for senior citizens
Reduced from 65 years to 60 years
• For section 80D(mediclaim) and
80DDB(medical treatment), effective from A.Y.
2013-14
• For section 197A(no TDS), effective from
1.7.2012
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Section 80-IA(4)(iv)
Extension of sunset date for tax holiday for power
sector
Terminal date extended for a further period of
one year, i.e., up to 31.3.2013 in case of
electricity undertakings
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Section 80TTA
Deduction in respect of interest on deposits in SB A/C
New Section
Who is eligible –
• An Individual and an HUF having interest income from savings
account with –
 Bank
 Co-operative Society engaged in banking businedd
 Post office
• Not available to partners of a partnership firm and to members of
an AOP or BOI, where, interest is earned by them from savings
account held on behalf of such firm or AOP or BOI, and is part of
their taxable income
What is allowed –
Deduction to the maximum extent of Rs.10,000/-
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Section 193
TDS on payment of interest on debentures
Amendment to existing provision
• Who is eligible –
• Resident individual or Hindu undivided family
receiving interest from debentures of a company
• What is allowed –
• TDS not to be deducted by the company on
interest on debenture to above upto Rs.5,000/-, if
payment is made by account payee cheque
(previous limit – Rs.2,500/-)
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Section 194 E
TDS on amount paid/payable to non-resident sports
person and an entertainer
Amendment to existing provision
• Rate increased from 10% to 20%
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Section 194J(1)[ba]
TDS on remuneration other than salary to a director
Amendment to existing provision w.e.f 01.07.2012
• TDS on the remuneration or fee or commission by
whatever name called
• paid to a director, which is not in the nature of salary
• at the rate of 10% of such remuneration
• Employer-employee relationship is a pre-requirement
• Covers any remuneration or fees or commission or any
other payment by whatever name called, other than
those on which tax is deductible u/s.192
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Section 194LC
TDC on interest payable to a non-resident in respect of
borrowing made in foreign currency by a specified
company
New Section
• Payment of interest on –
 Borrowings by an Indian company
 From a non resident, not being a company OR from a foreign
company
 in foreign currency during 01.07.2012 to 30.06.2015
 under a loan agreement OR by way of issue of long term
infrastructure bonds
 As approved by Central Government
• At the rate of interest approved by the Central Government
• TDS @ 5%
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Section 195(1)
TDS on any interest payable to non-resident
Amendment to existing provision w.e.f 01.04.2012
Section 195 shall not apply to –
• Interest on infrastructure debt fund
(section 194LB)
• Interest paid by a specified company
(section 194 LC)
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Section 195(7)
AO to decide sum chargeable to TDS
Amendment to existing provision w.e.f. 01.07.2012
Notwithstanding anything contained in section 195(1) and (2), the
Board may,
• by notification in the Official Gazette, specify a class of persons or
cases,
• where the person responsible for paying to a non-resident, not
being a company, or to a foreign company, any sum, whether or not
chargeable under the provisions of this Act, shall make an
application to the Assessing Officer
• to determine, by general or special order, the appropriate
proportion of sum chargeable, and
• upon determination, tax shall be deducted under section 195(1) on
that proportion of the sum which is so chargeable.
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Proviso to section 201(1)
Assessee in default
New proviso
• An assessee not to be considered as an assessee in default
when
• Payment of expenditure without TDS/less TDS
• Payee –
 has furnished his return of income under section 139;
 has taken into account such sum for computing income in such
return of income
 has paid the tax due on the income declared by him in such
return of income, AND
 the payer furnishes a certificate to this effect from a chartered
accountant in such form as may be prescribed
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!!!Thank You!!!
!!!Never give up!!!
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