2015 Budget suggested by ICAI to Finance Ministry
Definition of the term “Accountant” in the Direct Tax Code, 2013.
Under clause 320(2) of Direct tax code, 2013 the definition of Accountant includes “Cost Accountants” and “Company Secretary” has been a cause of concern for the entire Profession and thus ICAI have placed on record their concern.2015 Budget suggested by ICAI to Finance Ministry suggested budget by The Institute of Charted Accountant Of India to the Ministry.
The Standing Committee has suggested widening of definition of term “Accountant” on the request of ICWAI and ICSI. Although ICWAI and ICSI have suggested widening of definition of term Accountant but Ministry of Finance had not accepted their suggestion.
Further Companies Act 2013 recognized the Domain of each professional and it says Audit of Financial Statements is the exclusive domain of Chartered Accountant.2015 Budget suggested by ICAI to Finance Ministry suggested budget by The Institute of Charted Accountant Of India to the Ministry.
In line with the recommendations of the standing committee on Finance on DTC and for the reasons mentioned therein,
the following tax Slabs are suggested:
- 0-3 Lakh : Nil
- 3-10 Lakh : 10%
- 10-20 Lakh : 20%
- 20 Lakh+ : 30%
Introduction of Citizen Tax
Every citizen of the age of 25 years or more and up to 70 years shall pay Rs. 1500 p.a as citizen tax. The same will be allowed as deduction from their income tax liability.
As on date, nearly 40 crore citizens in said age group are not assesses under Income tax Act, 1961. The gov. may collect 60000 crore as contribution by way of citizen tax.
Filing of Income tax return should be made mandatory for all Non Resident’s owning a Property or Asset in India.
TCS on Luxury Goods:
In order to bring unaccounted money in the main stream, it is suggested TCS be collected@ 1% on luxury goods purchased in cash in excess of Rs. 30000/-. Credit of same can however be claimed in ROI.
- TCS @ 1% on sale of all Motor Vehicles (high value cars) at ex showroom price.
- It is Suggested that forms of Income tax shall incorporate all relevant details of tax payments made under other legislation like central excise, Vat, Service tax etc.
- Currently few activities are under scope of TDS/TCS provisions. Where IT act 1961 does not specifically provides for TDS/ TCS provisions, a transaction tax may be introduced.The said transaction tax may be 1% on single transaction exceeding 20000/- and in aggregate exceeding 50000e in line with sec 194c.
- A single ITR form instead of ITR 1,2,3,4,5,6,7. This would amount to specification in true sense.
New type of Bank Account Numbers
The first 4 letters of proposed bank account no should reflect bank name, next 5 letters branch name in form of code, then 10 digit PAN and last digit should reflect the type of Bank account.Procedure for Surrender of PAN & exemption from filing of return in respect of firm having business discontinued, may be prescribed. With this, firms may be saved from penalty u/s 271F.
- It is suggested that OPC should be treated like any other company for taxation purposes. The concept of separate legal entity of OPC should be followed for both Income tax and wealth tax.
It is suggested that due date for furnishing of TDS return may be extended to 30 days from the end of quarter instead of 15 days.Sale of agricultural land shall be taxable as capital gain in certain situations i.e if the sold land is subsequently going to be used for the purpose other than agriculture.
Taxation of Agriculture Income:
- A beginning can be made by granting exemption limit of Rs 3 lac separately for agricultural income.This will enable to bring high income earners into tax net and spare small farmers.
- It is suggested that 25 lakh may be enacted as exemption limit and receipts in excess of Rs. 25 lakh may be subject to tax at maximum marginal rate after deducting related expenditure instead of denying exemption where receipt exceed specified limit.
- It is suggested that agricultural activities carried out by corporates may be brought into scope of the tax net.
- Sec 10(23c) should be amend to specifically exclude ‘Corpus Donation’ from the requirement of mandatory application of income by such trusts/institutions.
- It is suggested to amend sec 2(22)(e) so that genuine and bona fide transaction of loan and advance should not be treated as deemed dividend and it should be treated as deemed dividend if loan is not repaid within certain time period.Whenever a transaction is taxed as deemed dividend, it is treated as deemed dividend to extent of accumulated reserves.It is suggested that it should be deemed as dividend to the extent of shareholder’s share in accumulated reserves to whom loan or advance is given.
- In order to avoid disputes with regard to calculation of taxes based on month i.e 234a/b/c, sec 201 etc, it is suggested to define “month” in Income Tax Act, 1961.
- It is suggested to allow carry forward of the excess foreign tax credit.
- At present income of minors in hands of parents is exempt to the extent of Rs. 1500/– each minor.It is suggested that it should be raised to at least Rs. 10000/- for each minor. It is suggested that:
a) Only those expenses directly related to earning exempt income should be disallowed.
b) Overall max limit of expense to be disallowed should not exceed tax payable on Exempt income.
Deduction for Employee stock option cost
- Delhi Tribunal in case of Ranbaxy has taken a view that ESOP cost is not allowed as deduction.Thus ESOP is income in hands of employees for levy of tax but same is not allowed as deduction in hands of employer company.It is suggested that necessary amendment may be made in Income tax act to allow such Deduction Assesses is liable to pay income tax on annual letting out value of unsold flats owned by it under Income from H/P even though same are not let out.This is hardship for real estate developers.It is suggested that necessary amendment must be carried out in sec 22.Sec 25AA which provides taxation of unrealised rent should be suitably amended and such unrealised rent which is subsequently realized should be taxed after allowing 30% Deduction.
- It is suggested that ground rent should be allowed in addition to Sec 24(a) statutory deduction.
- It is suggested that the Depreciation on the books purchased by the professionals be restored to its original rate of 100% as against 60%.
- There may be a time gap between holding of the asset and using the asset so transferred. To avoid genuine difficulties in such cases, instead of the words, “used by them” , the words “held by them” may be substituted in proviso to sec 32
- Additional Depreciation u/s 32(1)(iia): It is suggested that an express provision may be incorporated in Act for the allowance of remaining 10% additional depreciation in next year in case additions which are used for less than 180 days.
- Amendment in 32AC: For the purpose of encouraging investment in Plant & Machinery, the benefit of Deduction may be extended to assesses other than companies as well.
- The condition of Acquisition and installation in the same year should be reconsidered for the purpose of claiming deduction u/s 32AC.
- It is suggested that sec 35D such be amended to allow deduction of all expenses incurred by an assesses for raising capital in five equal instalments over a Period of 5 years.
- Certain Preliminary Exp are allowed u/s 35D, there is no provision in the act for the Amortization of Exp such as fees paid to increase authorized capital, payment made towards elimination of competition etc.It is suggested that provisions may be incorporated in act to allow amortization of such exp which are essential to run the business.
- It is suggested that due date defined under explanation to sec 36(1)(va) shall be amended and accordingly the due date shall mean due date for filing ROI u/s 139(1) in order to avail deduction u/s 36(1)(va) of income as defined u/s 2(24)(x).
- It is suggested that a clarification may be issued to clarify whether direct deposit into account of recipient in excess of Rs. 20000 by debtor is subject to dis-allowance u/s 40(A)(3).
- Explanation 5 to 43(1) deals with actual cost in respect of building previously used by the assesses and subsequently brought into business. Building should be notionally depreciated & resultant WDV shall be deemed actual cost.It is suggested that term “Assets” should be used instead of Building.
- Section 43(1) permitted the capitalization of the foreign exchange loss in borrowings used for the acquisition of the assets used outside India.The exchange fluctuation loss is not permitted to be capitalized for tax purposes.It is suggested that sec 43A be amended to allow capitalization of such foreign exchange loss even for domestically acquired assets.
- It is suggested that an Explanation should be inserted in sec 54 and sec 54f to clarify the meaning of one RESIDENTIAL HOUSE as there are many litigation on this issue.
Considering the Inflationary conditions in the economy, it is suggested that the limit of Rs. 50 lakhs under section 54EC may be raised to Rs. 1 crore. Since there is no check on the withdrawal from capital gain scheme account and utilization thereof for specified purposes, the provision is being misused and leading to avoidance of tax.In order to prevent misuse, it is suggested that tax @1% should be deducted at source from any withdrawal from capital gain account scheme account.
For availing credit appropriate disclosures should be made by assesses
- Sec 56(2)(vii) was amended by F.A 2013 to bring within scope immovable property received for Inadequate consideration where the stamp duty value exceeds actual consideration by Rs. 50000/-.
- This has lead to Double taxation i.e. difference between stamp duty value and actual consideration would be taxable as ‘’Income From Other Source” in hands of buyer as per sec 56(2)(vii) and as capital gains in the hands of seller on adoption of stamp duty value as full value consideration as per sec 50C.
It is therefore suggested that immovable property transferred for inadequate consideration should be kept outside the scope of Sec 56(2)(vii).
- As Per sec 56(2)(ix) inserted by F.A 2014, amount received in the course of negotiation for transfer of property which is forfeited is taxed as a revenue receipt now as against capital receipt which was allowed deduction from the cost earlier.
It is suggested that Act needs to be amended to allow the benefit of the forfeited amount to the payer and it should be considered as a revenue expense.
- It is suggested that brought forward Business losses may be allowed to be set off against Short Term capital gains u/s 50 in subsequent assessment years.
- Section 78 deals with the provisions to carry forward and set off of losses in case of constitution of firm or on succession. It is suggested that such carry forward should be allowed either in the hands of the firm or the partner so as to remove the genuine hardship caused to assesses.
- It is suggested that Section 80D should be appropriately amended to allow the deduction of Rs.5000/- for preventive health check-up of any member of family, which is in addition to the existing limits of Rs.15000/20000.
- It is suggested that interest on all types of Deposits may also be included within the scope of sec 80TTA which as of now allows for a deduction of up to Rs.10000/- on interest in Savings Account.
- It is suggested that appropriate amendment in the ITR form as well as in the act may be made to clarify that EC & SHEC should not be made on the rates specified under DTAA.
It is suggested that the following may be allowed:
- Allowance of Foreign taxes paid as Normal expenditure.
- Carry Forward of Unabsorbed Foreign Taxes.
- Carry Backward of Unabsorbed Foreign Taxes.
At Present Long Term Capital Gains are taxed @20% and Short Term Capital Gains are taxed at 15%. Whereas in case of assesses having Normal Income up-to 500000/-, tax rate is 10%.It is suggested that appropriate provisions may be made in the act whereby the tax liability of an Individual whose income consists of only Long Term/ Short Term gains, Should not in any case exceed the amount of tax liability calculated deeming capital gain as regular Income.
In order to promote in House R&D in India, the amount of weighted deduction u/s 25(2AB) may be allowed to be deducted while computing tax under 115JB.
- It is suggested that at least Manufacturing units in SEZs be exempted from the applicability of MAT.
- It is suggested that MAT be abolished for companies having turnover not exceeding 10 crore. Alternatively the provisions of Dividend distribution tax should be abolished for such small companies.
- Section 115JD needs to be amended so as to allow carry forward of AMT credit in the hands of successor for remaining period of years.
In order to do away with highly unjustified double taxation on corporate sector and to act as an incentive for investment by retail investors, it is suggested to do away with the DDT or a exemption limit say 10% may be provided where the company distributing dividend up to 10% is not made liable to DDT.
Resolve the difficulties being faced by partners other than working partners
- it is suggested that wherever a firm is required to get its accounts audited, the due date of filing of return shall be 30th September for all partners including non working partners.The Scope of sec 139 should be widened so as to include:
a) A person having foreign tour twice in a block of three years or thrice in a block of five years should file his/her return of Income mandatorily.
b) A person having huge agricultural income or is in possession of large agricultural land should also come within the purview of sec 139.
c) A person paying electricity expense above a certain limit (say Rs 36000 pa).
d) A person paying School fees above specified limit (say Rs 72000 pa) should also come under the scope of return of Income.
e) If the aggregate amount deposited in current account exceed certain limit( say Rs.3000000) then provision of filing of return of Income should also apply to the person mandatorily.
f) Cash Withdrawal above certain limits should also take place in the annual information return.
- Section 139(5) should be amended so as to provide that return can be revised even in case of belated filing of return.
- Hardships arising out of the Apex court’s Decision in Goethe (India) Ltd v. CIT: Appropriate amendments may be made to enable to get relief during the assessment proceedings under section 143(1) and section 144 by methods otherwise than by way of filing of revised return.
- It is suggested that the distributors of recharge vouchers should be exempted from compliance requirement u/s 194H.
- It is suggested that commission paid by partnership firm to its partner shall not be liable to TDS u/s 194H.
- Considering the increase in the exemption limit for general assesses and senior citizens, it is suggested to increase the exemption limit of Rs.180000 in respect of TDS on Rent u/s 194-I.
- It is suggested that the limit of TDS in case of Real Estate transactions u/s 194-IA shall be reduced from Rs 50 lacs to Rs.20 lacs. This is based on banking norms which require in order to avail a Housing Loan of Rs 15 lacs, assesses needs to be a taxpayer.
- It is suggested that sec 194J should be amended to provide for independent limit of Rs 30000/- in case of remuneration or fees or commission to director.
- It is suggested that TCS on sale of jewellery be made applicable for consideration Exceeding Rs 200000/- instead of Rs 500000/-.
- It is suggested that any assesses whose advance tax payable does not exceed Rs 30000/- should be allowed to pay the entire payment in last instalment.
- It is suggested that cars used for all commercial purposes i.e whether in business or Profession should be excluded from the definition of Assets under Wealth Tax Act, as these are Productive Assets.
- Cash In hand Limit should be increased from 50000 to 250000/– under Wealth Tax Act,1957
- It is Suggested to Enhance the basic Exemption Limit under Wealth Tax Act,1957 to Rs 1 Crore from present Rs 30 la.
2015 Budget suggested by ICAI to Finance Ministry
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