BVZ6A,BPG6C Income tax law & practice-ii BVZ6A,BPG6C INCOME TAX LAW & PRACTICE-II. Unit : I - V

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1 BVZ6A,BPG6C Income tax law & practice-ii BVZ6A,BPG6C INCOME TAX LAW & PRACTICE-II Unit : I - V

2 TM BVZ6A,BPG6C Income tax law & practice-ii 02 I UNIT-I SYLLABUS Capital assets Meaning and kind Procedure for computing Capital Gains Cost of Acquisition Exemption of Capital Gains Laws under Head Capital Gains.

3 TM CAPITAL GAINS As per section 45 any profit or gain arising from transfer of a capital asset effected in the previous year shall, save as otherwise provided in specified sections, be chargeable to income-tax under the head Capital Gain. Capital gains attract tax liability only when the following essentials are satisfied: CAPITAL ASSET : Assessee should have a capital asset.. TRANSFER OF CAPITAL ASSET: Capital asset held by the assessee. TRANSFER DURING THE YEAR : Transfer of capital asset should have taken place during the financial year. PROFITS OR GAINS ON TRANSFER : Asset transfer should have resulted in gain or profit BVZ6A,BPG6C I Income tax law & practice-ii 03

4 TM EXEMPTION UNDER SPECIFIRED SECTIONS: Such Capital Gains arising are not exempted under sections 54,54B,54D,54EC,54F,54G and 54GA Meaning of Capital Assets Capital asset is defined to include property of any kind, whether fixed or circulating, movable or immovable tangible or intangible. Except a few specified items, all other properties are capital assets. Ignore repairs, since it is not a capital expenditure The following assets are excluded from the definition of Capital Assets BVZ6A,BPG6C Income tax law & practice-ii 04

5 TM. EXEMPTED ASSETS: 1.Stock in trade held for business or profession 2. Assets held for personal use 3. Rural Agricultural land 4.Gold Bonds issued by the Government 5. Special Bearer Bonds 6. Gold Deposit Bonds. Short Term Capital Assets:Capital Asset held by an assessee for not more than 36 months/ 3 years immediately preceding the date of transfer is a Short Term Capital Asset. All depreciable assets and fixed assets which are used by the organisation for official purpose are treated as short term capital assets irrespective of its holding List of Short Term Capital Assets: Financial assets, are also short-term capital assets if they are not held for more than 12 months. 1. Shares held in a company 2. Debentures held in a company 3. Units of Unit Trust of India BVZ6A,BPG6C Income tax law & practice-ii 05

6 TM 4. Units of a Mutual fund 5. Any other securities listed in a stock exchange like Government securities 6. Zero coupon bonds Long Term Capital Asset Capital asset held by an assessee for more than 36 months/ 3 years immediately preceding the date of transfer is a Long Term Capital Gain. Determination of period of holding Shares and securities purchased through stock exchange Share and securities purchased and sold directly Shares and securities purchased and sold in several lots Transfer of securities by a depository Shares held in a company in liquidation When an asset is acquired by gift or will Shares becoming property in a scheme of Amalgamation Shares held in a demerged company Period of holding of bonus shares Period of holding of rights shares. BVZ6A,BPG6C Income tax law & practice-ii 06

7 TM Determining indexed cost of Acquisition and indexed cost of Improvement Indexed cost of acquisition: Indexed cost of acquisition means an amount which bears to be the cost of acquisition the same proportion as cost inflation index for the year in which, the assets is transferred bears to the cost inflation index for the first year in which the asset was held by the assessee of for the year beginning on the 1 st day of April, 1981, whichever is later. Indexed Cost of Improvement Indexed Cost of Improvement means an amount which bears to the cost of improvement the same proportion as cost inflation index for the year in which the asset is transferred bears to the cost inflation index for the year in which the improvement to the asset took place. Any additions or improvement made before should be ignored Cost inflation Index In relation to a previous year, means such index as the Central Government having regard to 75% percent of average rise in the consumer price index, for Urban non-manual employees for the previous year, by notification in the official Gazette, specify in this behalf. BVZ6A,BPG6C Income tax law & practice-ii 07

8 TM Asset is acquired before April 1,1981. Fair market value of the asset on or cost of acquisition cost inflation whichever is higher X index for the / year in which Cost inflation index for the asset is transferred Cost of improvement after cost inflation index / for the year in which Cost inflation index X the asset is for the year in which transferred. improvement took place BVZ6A,BPG6C Income tax law & practice-ii 08

9 Exemption of Capital Gains Exemption applicable to different assessee Individuals Sec.54, 54B,54D,54EC And 54G HUF Sec.54,54B, 54, 54EC,54F and 54G All assessee Sec. 54D,54EC and 54G BVZ6A,BPG6C Income tax 09

10 TM 1. Capital gain on transfer of residential house property (Sec.54) 2. Capital Gain arising from the transfer of agriculture land (Sec.54) 3. Capital gain on compulsory acquisition of lands and buildings (Sec.54D) 4. Capital gain not to be charged on investment in certain bonds (Sec.54EC 5. Investment of capital gain arising from transfer of long-term listed securities or units, in specified equity shares (Sec.54ED) 6. Exemption from tax on long term capital gain arising out of sale of an asset other than residential house property and investment of the consideration in residential house(sec.54f) 7. Capital gain arising on transfer of asset in cases of shifting of industrial undertaking from urban area(sec.54g) BVZ6A,BPG6C Income tax law & practice-ii 10

11 TM UNIT-II SYLLABUS Income from other sources their computation Grossing up Deductions in computing income under the head Other related provisions. BVZ6A,BPG6C Income tax law & practice-ii 11

12 TM Income From Other Sources Income chargeable under IFOS U/S 56(2) Dividends from co-operative societies and foreign companies. Interest on securities Winnings from lotteries, crossword puzzles, other games of any sort or from gambling or betting of any form. Income from letting of plant, machinery or furniture along with the building Any sum received by the assessee from his employees as contribution to any staff welfare scheme. Any sum received under key man insurance policy. BVZ6A,BPG6C Income tax law & practice-ii 12

13 TM Fees or commission received by an employee from a person other than his employer Annuity paid under the provisions of the Annuity Deposit scheme Interest on bank deposits Directors fees Remuneration for examination work Rent of land Agricultural income Royalty income Interest on own contribution to URPF. Remuneration received for writing. Interest from co-operative society. Family pension NSS Deposit withdrawn Director s commission Gratuity received by a director BVZ6A,BPG6C Income tax law & practice-ii 13

14 TM Income by subletting Income from undisclosed sources. a) Unexplained cash credits b) Unexplained Investments c) Unexplain Receipts by cricketers money d) Unexplained expenditure e) Amount borrowed or repaid on Hundi Kinds of Securities Government Securities These securities are issued by state or central Govt. The amount received or due, shall be included in the total income. No tax is deducted at source. Non government securities. a) Tax free commercial securities are issued by a local authority or statutory corporation or a company. These securities are called tax free, because the assessee is not to pay tax on the interest, since tax is paid by the company on assessee s behalf. BVZ6A,BPG6C Income tax law & practice-ii 14

15 TM b) Less tax commercial securities Less tax securities are also called taxable securities. Tax is deducted at source from the interest and balance of interest after deduction of the income tax is paid to the security holder. Casual Income Lottery winnings. Winnings from race including horse races. Winnings from card games. Winnings from crossword puzzles. Gambling or betting of any other nature. Grossing up: Net winnings * 100/ Casual incomes are subject to TDS at 30% if the income exceeds Rs.5,000. Race winnings are subject to TDS at 30% if the income exceeds RS. 2,500. No TDS on other race winnings, gambling and betting. Family pension received by widows or heirs of deceased employees. BVZ6A,BPG6C Income tax law & practice-ii 15

16 TM Income from subletting. Income from sub letting of house property or rent of vacant land is income from other sources Gifts Gifts received from relatives are fully exempted. Gifts received from unrelated persons are taxable as income from other sources., Gifts received in kind is exempted Property purchased for less than stamp duty value is taxable. (stamp duty value more than consideration Deduction U/S 57 Bank commission on collection of taxable dividends and interest on securities in deductible. Interest on loan to acquire investment whose income is taxable is deductible. Standard of family pension or Rs.15,000 which ever is deductible. Depreciation, repairs, fire insurance premium, local taxes relating to letout plant and machinery along with building and furniture. BVZ6A,BPG6C Income tax law & practice-ii 16

17 TM UNIT-III SYLLABUS Clubbing of Income Deemed incomes Provisions of the Act relating to clubbing of income Set off & Carry forward Set off of losses BVZ6A,BPG6C Income tax law & practice-ii 17

18 TM Set-off and carry forward of losses Inter source set off Loss under a particular head of income can be adjusted against income from any other source under the same head for the same assessment year. Exemptions to Inter source set off Loss from speculation business. Long term capital loss. Loss from the activity of owning and maintaining race horses. No loss can be set off against winning from lotteries, crossword puzzles, card games, etc. Loss from a source which is exempted. BVZ6A,BPG6C Income tax law & practice-ii 18

19 Inter head set-off Loss from one head of income can be set off against income from other heads of income. Exemption: Loss from speculation business Long term capital loss Loss from the activity of owning and maintaining race horses. Business loss cannot be setoff against salary income. Loss cannot be set off against casual income. BVZ6A,BPG6C Income tax law & practice-ii 19

20 Carry forward of loss If a loss cannot be adjusted in the same year, it may be carried forward and set off against the income of the subsequent years. House property loss can be carried forward for 8 years against income under the head house property. Speculation loss can be carried forward for 4 years to be set off against speculation income. Non speculation business loss can be carried forward for 8 years to be set off against any business income Loss on account of unabsorbed depreciation, capital expenditure on scientific research and family planning expenditure can be carried forward for any number of years to be set off against any income (other than salary) BVZ6A,BPG6C Income tax law & practice-ii 20

21 Clubbing of income Income of other persons to be included in an assessee s total income. (Sec 60) Transfer of income without transfer of an asset. Such income is clubbed in the hands of the transferor Revocable transfer of assets by an assessee to another person. It is clubbed in the hands of transferor. Irrevocable transfer of assets. Income arises out of such transfer is taxable in the hands of transferee. BVZ6A,BPG6C Income tax law & practice-ii 21

22 Income of an individual to include spouse income Remuneration of spouse:- Substantial interest is required. Husband and wife relationship should exist. Remuneration should be received in same concern. Remuneration should not be received out of professional qualification. BVZ6A,BPG6C Income tax law & practice-ii 22

23 Income from asset transferred to spouse Direct or indirect transfer Transfer made without adequate consideration. Relationship of Husband and wife. Change in the identity of asset- taxable in the hands of transferor. Sale or transfer of transferred asset- capital gain is taxable in the hands of transferor. Transferred Asset being invested in a business. Transferred asset being invested in a firm Acquisition of asset out of pin money Taxable in the hands of transferee. Transfer of asset in connection with an agreement to live apart not taxable in the hands of transferor. Income arising to the spouse from the accretion to transferred asset cannot be clubbed with transferor. BVZ6A,BPG6C Income tax law & practice-ii 23

24 Income of minor not to be clubbed Handicapped or disabled minor s income. Income earned by a minor out of any manual work. Income earned out of his skill, talent, or specialized knowledge and experience. Exemption granted to parent u/s 10(32) Rs is exempted in the hands of parent of each minor child income. Income of Minor child Income of a minor child shall be clubbed in the hands of parents. Minor s income should include with the income of parent whose total income is greater. BVZ6A,BPG6C Income tax law & practice-ii 24

25 Conversion of self acquired property into Joint family property If a member of HUF transfers self acquired property to HUF without adequate consideration. Income arising out of transferred asset is clubbed in the hands of transferor. Deemed Incomes Cash credits Unexplained investments. Unexplained money. Amount of investment not fully disclosed. Unexplained expenditure. Amount borrowed or repaid on Hundi BVZ6A,BPG6C Income tax law & practice-ii 25

26 UNIT -IV SYLLABUS Permissible deductions from gross total income Sec. 80C,80CCC, 80CCCD, 80DD, 80DDB, 80E, 80G,80GG,80GGA, 80QQB, 80RRB, 80U Assessment of Individual (Covering Capital gains, Income from other sources including the above mentioned deductions Computation of Tax). BVZ6A,BPG6C Income tax law & practice-ii 26

27 DEDUCTIONS Deduction in respect of rent paid [Sec 80 GG] Allowed to Individuals: Deduction in respect of rent paid is allowed to an individual assessee who does not have any income by way of house rent allowance, but who incurs expenditure by way of rent in respect of residential accommodation occupied by him. Amount of deduction : The amount of deduction is least of the following Conditions: (i) 25% of Adjusted Total Income (ii) Excess of rent paid over 10 % of Adjusted Total Income. (iii) Rs. 2,000 per month. The assessee, his or her spouse or minor child or a HUF of which he/she is a member, does not own any residential accommodation at the palace where he ordinarily resides or performs duties of his office or employment or carries BVZ6A,BPG6C on his business Income tax or law profession & practice-ii 27

28 Deduction in respect of income of Authors (u/s 80QQB) Allowed to individual being an author or joint author in literary, artistic or scientific nature. Whose gross total income includes royalty income. The amount of deduction is Rs. 3,00,000 or royalty income whichever is less. Deduction in respect of royalty on patents (u/s 80 RRB) The tax payer is an individual being a patentee or owner of patent and in receipt of income being royalty, the amount of deduction is Rs 3,00,000 or royalty income whichever is less. BVZ6A,BPG6C Income tax law & practice-ii 28

29 Deduction in the case of physically handicapped resident person[sec 80U] A resident Individual who is totally blind or suffers from permanent physical disability is entitled to a deduction of Rs 50,000 under Section 80U. A higher deduction of Rs. 1,00,000 with severe disability(having any disability over 80%) is allowed. Person eligible for deduction: Deduction under Section 80U is available in the case of resident Individual who is suffering from a permanent physical disability, blindness, or subject to mental retardation, specified in the rules made in this behalf by the Board. BVZ6A,BPG6C Income tax law & practice-ii 29

30 DEDUCTIONS UNDER SECTION 80C PROVISIONS SPECIFIED UNDER SECTION 80C: Deductions under section 80C is allowed from the gross total income. Deduction under section 80C is allowed to an individual or a hindu undivided family. It is allowed on the basis of specified qualifying investments/ deposits/ contribution/ payments made by the assessee during the previous year. The maximum amount deductible under sections 80C, 80CCC and 80CCD cannot exceed Rs 1 lakh as per section 80CCE. BVZ6A,BPG6C Income tax law & practice-ii 30

31 COMPUTATION OF DEDUCTION UNDER SECTION 80C Computation of gross qualifying amount. Computation of net qualifying amount. Amount of deduction. Life insurance premium Non commutable deferred annuity Amount deducted for securing a deferred annuity Contribution to provident fund Contribution to public provident fund Contribution to an approved superannuation fund Subscription to national savings certificates Contribution made by an individual to the unit linked plan of UTI Contribution to unit linked insurance plan of the LIC mutual fund Payment made to effect annuity plan of LIC BVZ6A,BPG6C Income tax law & practice-ii 31

32 COMPUTATION OF GROSS QUALIFYING AMOUNT Subscription to units of UTI or notified mutual fund Contribution to pension fund set up by a notified mutual fund or by UTI Subscription to home loan account scheme Subscription to any schemes Repayment of housing loan Any amount paid as tuition fee Investment in debentures and equity shares Term deposits with a bank Subscription to any notified bonds of NABARD Deposit made in 5 years time deposit scheme in post office Deposit made in senior citizens savings schemes rules BVZ6A,BPG6C Income tax law & practice-ii 32

33 Deductions in respect of contribution to certain pension funds- section 80CCC Allowed to individual assessee. The tax payer has paid a sum under an annuity plan of the LIC of India or any other insurer for receiving pension. Amount of deduction is the least of the amount deposited or Rs If the assessee receives any amount standing to the credit of the assessee in respect of which deduction under section 80ccc has been allowed such amount shall be included in the total income of the assessee or his nominee in the year of receipt. The aggregate deduction under section 80ccc cannot exceed Rs BVZ6A,BPG6C Income tax law & practice-ii 33

34 Deduction in respect of contribution to pension scheme of central government or any other employer section 80CCD The assessee is an individual. This deduction is applicable to central government or any other employer. The assessee in the previous year paid or deposited any amount in his amount under pension scheme notified by the central government. BVZ6A,BPG6C Income tax law & practice-ii 34

35 Deduction in respect of contribution to pension scheme of central government or any other employer section 80CCD Employees contribution = 10% Contribution by the central government or any other employer = 10% Self employed individual=upto 10% of his gross total income in the previous year. The amount received from pension scheme along with accretions will be taxed in the year of receipt by the employee. The aggregate deduction under section 80ccd cannot exceed Rs BVZ6A,BPG6C Income tax law & practice-ii 35

36 Deduction in respect of subscription to long term infrastructure bonds section 80CCF Subscription during the year made to long term infrastructure bonds to the extent of Rs is allowed gross total income of an individual or a HUF. Deduction under section 80CCF is in addition to Rs under section 80C, 80CCC and 80CCD. Section 80 D Amount paid to GIC or Other insurer for health insurance or mediclaim. Quantum of deduction: Actual amount paid or Rs 15,000 (W.E.L) In case of Senior citizen Actual amount paid or Rs. 20,000 (W.E.L) BVZ6A,BPG6C Additional Income deduction tax law & practice-ii on mediclaim taken on parents 36

37 Section 80DD Maintenance or treatment of Handicapped dependent. Deposit with LIC or UTI for the benefit of Mentally retarded or physically handicapped dependent. Quantum of deduction Rs.50,000 In case of severe disability Rs.1,00,000 Section 80 DDB Amount incurred on treatment of notified disease of self or dependent family members. Quantum of deduction Actual amount paid or Rs. 40,000 (WEL) In case of senior citizen : Actual amount or Rs. 60,000. (WEL) BVZ6A,BPG6C Income tax law & practice-ii 37

38 SEC 80E - Deductions in respect of interest on loan taken for higher education Deduction under Section 80E is allowed to an individual assessee who actually pays in the previous year any amount by way of interest on loan taken from a Financial institution or from approved charitable institution for the purpose of his higher education or for the purpose of any education of spouse/any child the student for whom the individual is the legal guardian. AMOUNT OF DEDUCTION: Amount paid during the year towards interest. PERIOD OF DEDUCTION: The deduction will be allowed for a maximum of eight years, beginning from the year in which the individual starts repaying the loan or interest or until the loan and interest have been paid full whichever is earlier BVZ6A,BPG6C Income tax law & practice-ii 38

39 SEC 80G-Deduction as to specified Donations Deduction in respect of donation to funds, and institutions specified under Section 80G is allowed to all assesses. Donation shall be of sum of money Donations in kind do not qualify for deduction Donation should be made only to specified institutions. To claim deduction U/S 80G, the assessee has to produce proof of payment. 100% deductible of amount donated towards 20 no limit donations. 50% deductible of amount donated towards 5 specific funds. 50% of amount qualifying. (Qualifying amount is least of actual amount donated to 10 specific funds or 10% of gross total income. BVZ6A,BPG6C Income tax law & practice-ii 39

40 A) Donations of sum of money made to the following funds or institutions are eligible for 100% deduction: a) National Defense Fund. b) Prime Minister s National Relief Fund. c) Prime Minister s Armenia Earth quake Relief Fund. d) Africa Fund. e) National Foundation for communal Harmony. f) University / Educational Institution approved by the prescribed authority. g) Maharashtra Chief Minister s Earthquake relief fund. h) Zilla Saksharta Samiti constituted in any district. i) The National blood transfusion council or any state blood transfusion. j) Fund set up by a state government to provide medical relief. BVZ6A,BPG6C Income tax law & practice-ii 40

41 (k) Army central welfare fund or air force welfare fund. (l) The Andhra Pradesh chief minister s cyclone relief fund, (m) National illness assistance fund. (n) Chief minister s relief fund are the lieutenant Governors relief fund. (o) National sports fund set-up by the Central Government. (p) National cultural fund set-up by the Central Government. (q) Fund for technology development and application. (r) National trust for welfare of persons with autism and multiple disabilities. (s) Any trust, institutions or fund covered under Section 80 G, for providing relief to the victims of earthquake in Gujarat, provided such donation is made between to BVZ6A,BPG6C Income tax law & practice-ii 41

42 (B) Donations made to the following funds / institutions are deductible upto 50 % a) Jawaharlal Nehru Memorial fund. b) Prime Minister s Drought Relief Fund. c) Indira Gandhi Memorial Trust. d) Rajiv Gandhi Foundation. e) National Children s Fund. BVZ6A,BPG6C Income tax law & practice-ii 24

43 (C) Restricted Donations Donations to the following institutions or funds are restricted to actual amount or 10 % of gross total income. a) Approved charitable institutions. b) Donation to government or any approved authority. c) Any authority referred for satisfying the need for housing accommodation or for the purpose of planning development or improvement of cities. d) Notified Temple, Mosque, Church, Gurudwara or other place notified by the Central Government to be of historic or repair of such place. e) Government or any approved local authority institution or association to be utilized for the purpose of promoting family planning. f) Indian Olympic association or to an institute notified under section 16 (23 G) for the development of infrastructure for sports and games in India. BVZ6A,BPG6C Income tax law & practice-ii 43

44 A. In the case of Category C qualifying amount is B. restricted to the least of the following : C. Actual amount donated (OR) A. b) 10% of Gross Total income (GTI-LTCG and STCG on sale of listed shares share from AOP deduction u/s 80C to 80U (but not Section 80G) B. Amount deductible is 50% of qualifying amount but in the case of amount paid for promotion of planning and Indian Olympic Association full amount is deductible. BVZ6A,BPG6C Income tax law & practice-ii 44

45 Unit : V SYLLABUS Income Tax Authorities Powers of the central Board of Direct Taxes (CBDT), Commissioners of Income Tax and Income Tax officers Assessment Procedures Self Assessment Best Judgment Assessment Income Escaping Assessment (Re assessment) Advance payment of Tax Meaning and Due dates Deduction of Tax at source Meaning. BVZ6A,BPG6C Income tax law & practice-ii 45

46 CBDT [ The Central Board Of Direct Taxes ] Additional Directors / commissioners of Income tax Directors generals of Income-Tax / Chief Commissioner of Income-Tax Directors of Income-tax / Commissioners of Income-tax (appeals) Joint directors of Income-tax Deputy directors of Income tax Income tax officers Inspectors of income tax BVZ6A,BPG6C Income tax law & practice-ii 46

47 II. JUDICIAL AUTHORITIES: CBDT COMMISSIONER OF INCOME TAX APPEAL APPLEATE TRIBUNAL Supreme court High court BVZ6A,BPG6C Income tax law & practice-ii 47

48 APPOINTMENT OF INCOME-TAX AUTHORITIES: APPOINTMENT BY CENTRAL GOVERNMENT The ultimate authority is in hands of central government though it may also, subject to rules & orders relating to public services & posts, authorize the board, any director central, chief commissioner etc APPOINMENT BY AN INCOMTAX AUTHORITY Subject to rules & orders of central government regulating the services of persons in public services & post an IT authority, authorized in this behalf by the board, may appoint such executive. BVZ6A,BPG6C Income tax law & practice-ii 46

49 CENTRAL BOARD OF DIRECT TAXES: The CBDT is the highest executive authority powers of ADMINISTRATION, SUPERVISION & CONTROL extend over the whole IT department. POWERS OF CBDT BVZ6A,BPG6C Income tax law & practice-ii 49

50 POWER TO ISSUE ORDERS The BOARD subject to control of government & by notification in OFFICIAL GAZETTE,make rules for carrying out purpose of the act Ascertain & determination of income, perquisites,% of depreciation, etc POWER TO ISSUE ORDERS, DIRECTION,& INSTRUCTION The board has the power to issue orders to I.T Authorities. It is for the administration of the act & IT Authorities are bound to follow such orders APPONT I.T AUTHORITIES BOARD HAS THE POWER TO APPOINT I.T AUTHORITIES below the rank of ASSISTANT COMMISSIONER. BVZ6A,BPG6C Income tax law & practice-ii 50

51 POWER TO AUTHORISE I.T AUTHORITIES The board may authorize I.T authorities to admit any application or claim for any exemption, deduction, refund or any other relief even AFTER THE EXPIRY OF PERIOD. POWER TO DETERMINE FUNCTIONS & JURIDICTION The board specify the function of I.T authority POWER TO ISSUE GENERAL OR SPECIAL ORDERS FOR COLLECTION OF REVENUE The board directs & instructs as to guidelines & procedures to be followed by I.T authorities for proper & efficient management of work of assessment & revenues. BVZ6A,BPG6C Income tax law & practice-ii 51

52 POWER TO AUTHORISE I.T AUTHORITIES The board may authorize I.T authorities to admit any application or claim for any exemption, deduction, refund or any other relief even AFTER THE EXPIRY OF PERIOD. POWER TO DETERMINE FUNCTIONS & JURIDICTION The board specify the function of I.T authority POWER TO ISSUE GENERAL OR SPECIAL ORDERS FOR COLLECTION OF REVENUE The board directs & instructs as to guidelines & procedures to be followed by I.T authorities for proper & efficient management of work of assessment & revenues. BVZ6A,BPG6C Income tax law & practice-ii 52

53 POWER TO ENTERTAIN OBJECTION EMPOWERED TO DECLARE AS A COMPANY POWER TO ISSUE DIRECTION The board has the power to entertain objections as regards searches & seizures [ sec 132 ] The CBDT is empowered to declare any institution, association or any body as a company for any assessment year CBDT has power to issue direction that income from property held under TRUST not to be included in income of assessee. Sub Code - Sub Name 53

54 GRANTING AUTHORITY REGARDING SEARCH & SEIZURE FURNISHING OF INFORMATION The CBDT may authorize & Director General or any joint director to conduct search & seizure The CBDT may order furnishing of any information to an officer, or body discharging the function of imposition of any tax, duty Cess, or dealing in foreign exchange under FERA or any authority under any other law as may be in the PUBLIC INTEREST. BVZ6A,BPG6C Income tax law & practice-ii 54

55 OFFICERS TO FUNCTION CONCURRENTLY ORDER OF TRANSFER CBDT may require 2 or more assessing officers to function CONCURRENTLY Where assessing officers from whom the case is to be transferred & the assessing officers to whom the case is to be transferred are not subordinate to same director or chief commissioner BVZ6A,BPG6C Income tax law & practice-ii 55

56 Types of Assessment STAGES IN ASSESSMENT PROCEDURE: SELF ASSESSMENT SUMMARY ASSESSMENT SCRUTINY ASSESSMENT BVZ6A,BPG6C Income tax law & practice-ii 56

57 1. SELF ASSESSMENT(sec.140A): The provisions of sec 140A apply in respect of self assessment. Following are the provisions. The assesses has to submit has return of income under sec 139 or 142 or 153A or 158BC. Return under sec 139 for obligatory filing of return. Return under sec 142 is return of income in the prescribed form. Return under sec 148 is return in response to notice for assessment. Before submitting the return of income the assesses is supposed to find out whether any tax and/or interest is payable. BVZ6A,BPG6C Income tax law & practice-ii 57

58 If the assesses fails to pay tax or interest or both as per the provisions of sec 140A, he is considered as assesses in default in respect of tax or interest or both and he is liable for the following: The assesses is liable for payment of self assessment tax (including interest). The assesses is liable for payment of simple interest at the rate of 1% p.m. or part there of for the period of default [sec 220(2)]. This interest is in addition to the interest payable under sec 234A, 234B and 234C. The assessee is also liable for penalty under sec 221(1), which should not exceed the amount of tax in arrears. Enquiry before assessment under sec 142 or 142A BVZ6A,BPG6C Income tax law & practice-ii v 58

59 Provisions of sec 142 and 142A deals with the following: 1. Giving notice to the assesses sec. 142(1): Return of income Documents and accounts Furnishing information 2. Conducting enquiry sec.142(2): In order to obtain information in respect of income or loss of any person the assessing officer may conduct such enquiry as he considers necessary. 3. Special audit [sec. 142(2A) to 2D]: The assessing officer may direct the assesses to get his accounts audited by an accountant nominated by the chief commissioner. BVZ6A,BPG6C Income tax law & practice-ii 59

60 The following are the conditions to be satisfied for direction of an audit: Directions for special audit can be given at any stage before the completion of assessment. Direction for audit can be issued only if having regard to the nature and complexity of the accounts of the assessee, the assessing officer is of the opinion that it is necessary to conduct an audit. From A.Y new procedure of regular been prescribed. assessment has An assessing officer can accept the return filed by the assesses as such and complete assessment accordingly. In such case, he shall issue an intimation in the following manner. I. Intimation of demand. II. Intimation of refund. BVZ6A,BPG6C Income tax law & practice-ii 60

61 Exception: In case there is no demand from or refund to the assesses is due than there is no need to issue an intimation. The acknowledgment copy of the return of income filed by the assesses is itself demand to be an intimation. Time limit for intimation under sec 143(1)(1): The intimation to the assesses should be sent with in 1 year from the end of the financial year in which return of income is made. 61

62 3. SCRUTINY ASSESSMENT UNDER SEC 143(3): Scrutiny assessment under sec 143(3) falls under the following categories- Scheme of scrutiny under sec 143(3): The scheme of scrutiny is applicable as follows: A return of income or loss has been made by the assesses. The assessing officer feels it necessary to ensure that the assesses has not understated the income or over stated the loss or has not under paid tax in any manner. BVZ6A,BPG6C Income tax law & practice-ii 62

63 A notice shall be served on the assessee requiring him produce any evidence which the assessee may reply in support of the return. The notice shall be sent on or before the expiry of 12 months from the end of the month in which return is furnished. On the basis of evidence gathered by the assessing officer from the assessee and other evidence the assessing officer shall pass an assessment order in writing determining. I. The total income or loss of the assessee and II. The sum payable by or to the assessee on the basis of such assessment order. Sub Code - Sub Name 63

64 DEDUCTION OF TAX AT SOURCE(TDS) In certain specified cases of income,tax should be deducted at source by the person responsible for making payment of such income. The specified cases where income tax is deductible at source are normally those cases where the income can be calculated in advance i.e., the assessee can know his income even before the expiry of the previous year. BVZ6A,BPG6C Income tax law & practice-ii 64

65 The specified cases where tax is deducted at source are as under: Salaries[sec.192] Interest on securities[sec.193] Dividends[sec.194] Winnings from lotteries,crossword puzzles, horse races and card games.[sec.56(2)] Tax deduction at source on Rent.[sec194-i] Tax deduction at source on commission etc. on sale of lottery tickets[sec.194g]. BVZ6A,BPG6C Income tax law & practice-ii 65

66 DEDUCTION OF TAX AT SOURCE FROM SALARY [SEC.192] Adjustment of tax Liability of the employer Deduction at the time of payment Person responsible for deduction of tax at source More than one employer Relief u/s 89 (1) Details of other income Adjustment of loss from house property S BVZ6A,BPG6C Income tax law & practice-ii 66

67 Employer to furnish statement to employee In relevant columns provided inform No.16, if the amount of salary paid or payable to the employee is more than Rs. 1,60,000 or In form No:12BA, the amount of salary paid or payable to the employee is more than Rs. 1,60,000 salary for the purpose shall have the same meaning as is given in rule 3 of valuation of rent free accommodation Any person responsible for paying any interest on securities is required to deduct income tax at rates in force at the time of credit of such income to the account of the payee. Tax rates: Tax is deduction at rate of 10 % in case of listed debentures and at the rate of 10% in case of non-listed debentures if the recipient is a resident. BVZ6A,BPG6C Income tax law & practice-ii 67

68 TDS FROM INTEREST ON SECURITIES[SEC.193] Any person responsible for paying any interest on securities is required to deduct income tax at rates in force at the time of credit of such income to the account of the payee. Tax rates: Tax is deduction at rate of 10 % in case of listed debentures and at the rate of 10% in case of non-listed debentures if the recipient is a resident. BVZ6A,BPG6C Income tax law & practice-ii 68

69 Tax not deductible from interest on securities; The recipient can obtain a certificate in Form No.15AA authorizing the payer to deduct tax or lower rates or deduct no tax as may be appropriate. Declaration to payer in Form No.154: No deduction of tax is made from interest on securities in the case of person if he furnishes a declaration in writing in duplication in Form No.154 Debenture interest up to Rs 2500: It is not necessary at source from any interest on debentures paid to an individual who is resident in India. BVZ6A,BPG6C Income tax law & practice-ii 69