Direct tax code

1. Direct tax code Confederation of all India Traders New Delhi

2. DISCLAIMER • The presentation is not a legal interpretation of law. • It is prepared to give a general broad outline of the code. • It is to make a layman understand what is coming. • The provisions highlighted are generally those which are useful to trading community in general. • For specific understanding of law or for individual applicability it is adviced to consult your tax advisor who know you better.

3. Introduction • released on 12.08.2009. • to come into force on 1 April, 2011, if enacted • Chapter I to XVI (Section 1 to 285) • Part A (from Chapter II) to Part H • Eighteen Schedules • 318 definitions

4. MAIN OBJECTS • TO MINIMISE TAX EXCEPTIONS. • MINIMISE COST OF COLLECTION OF TAXES. • REDUCE COST OF COMPLIANCES OF TAX LAWS. • TO REDUCE AMBIGUITY IN TAX LAWS. • TO EXPAND TAX PAYERS BASE. • TO ENCOURAGE PROPER TAX COMPLIANCES. • TO REWRITE TAX LAW AND MAKE IT SIMPLER. • TO STOP TAX EVATION.

5. HIGHLIGHTS • ALL DIRECT TAXES HAS BEEN BROUGHT UNDER ONE CODE. • NOW INCOME TAX ACT WILL BE CALLED “DIRECT TAX CODE”. • IT WILL BE APPLICABLE THROUGHOUT THE COUNTRY. • Losses to be allowed to be carried forward indefinitely for set-off in the subsequent financial years • Certain expenses such as expenditure attributable to tax free income, expenditure incurred for any purpose prohibited by law, provision for unascertained liability, etc. not to be allowed as deduction in computing the total income. • Payments in respect of which tax has not been deducted at source to be disallowed; • however, deduction to be allowed in the year of payment, subject to certain exceptions. • Where the payment is made after two years from the end of the financial year in which the tax was deductible at source, no deduction to be allowed

6. LAW NEARLY OLD BUT WORDS NEWS • THE NEW CODE IS ON THE LINES OF OLD ACT. • MANY NEW WORDS HAVE BEEN INTRODUCED WITH THEIR DEFINATION. • A NEW CHAPTER DEFINING 318 WORDS HAS BEEN INTRODUCED. • ASSESSMENT YEAR AND PREVIOUS YEAR HAS BEEN REPLACED WITH ‘FINANCIAL YEAR’. • INCOME WILL NOW BE DETERMINED IN TWO CLASS; • SPECIAL SOURCE • ORDINARY SOURCE • CAPITAL ASSESTS WILL BE CALLED INVESTMENT ASSEST. • DIFFERENCE BETWEEN LONG TERM CAPITAL ASSEST AND SHORT TERM CAPITAL ASSET ABOLISHED. • THERE WILL BE SPECIAL TREATMENT FOR ASSEST ABOVE ONE YEAR HOLDING.

7. NEW WORDS • INSTEAD OF INCOME FROM SALARY IT WILL BE CALLED ‘INCOME FROM EMPLOYMENT’. • INSTEAD OF INCOME FROM OTHER SOURCES IT WILL BE CALLED ‘INCOME FROM RESIDUARY SOURCES’. • INSTEAD OF RETURN OF INCOME IT WILL BE CALLED ‘SELF REPORTING OF TAX BASE’. • BUSINESS EXPENDITURE WILL BE CLASSIFIED INTO THREE (I) OPERATING EXPENDITURE (ii) PERMITTED FINANCE CHARGES and (iii) CAPITAL ALLOWANCES. INSTEAD OF CAPITAL ASSET IT WILL BE CALLED INVESTMENT ASSET.

8. TAX FREE INCOME • AGRICULTURE INCOME. • Amount received as member of HUF from HUF. • Any amount received from a person received assessed separately. • Amount standing to credit of PF account as on 31.3.2010. • Dividends received from a company. • Capital gains on sale of agriculture land in rural area.

9. Total Income Ordinary Sources Special Sources employment house property business Capital Gains Residuary Sources specified income of non- residents, winning from lotteries, horse races, etc 9

10. INCOME FROM SALARY • NOW IT WILL BE CALLED ‘INCOME FROM EMPLOYMENT’. • NOW’GROSS SALARY’ WILL INCLUDE ALL SUM (ADVANCE AND ARREARS) RECEIVED FROM EMPLOYER. • FOLLOWING DEDUCTIONS WILL BE ALLOWED : • PROFESSIONAL TAX • CONVENANCE ALLOWANCE FOR COMMUTING BETWEEN RESIDENCE AND OFFICE. • EXPENDITURE ACTUALLY INCURRED ON EMOLOYMENT. • VRS, GRATUITY, PENTION ETC.

11. Impact on salaried individuals Mixed bag – carrot with a stick All allowances (including house rent allowance) except for transport allowance and special allowance for performance of duties of an office/employment of profit to be fully taxed. ‘Exempt-Exempt-Exempt’ to ‘Exempt-Exempt-Tax’ regime. Permitted Savings Intermediaries to be reduced to four. The current deduction available for housing loan interest up to INR 150,000 for self occupied property to be done away with. Gratuity payment made to employees on change of jobs will be allowed tax exemption only if it is invested in a retirement fund.  If an employee fails to invest it in such a fund, such receipts will be taxed at the appropriate marginal rate of tax. 11

12. INCOME FROM HOUSE PROPERTY • Tax will be levied on ‘GROSS RENT’. • Gross rent will be agreed rent or 6% of annual ratable value whichever is higher plus advance rent if any received. • If ratable value is not fixed then 6% of cost of construction shall be taken. • Gross rent of one ‘self occupied house’ shall be taken as NIL. • The deductions from Gross Rent shall be; • Actually paid taxes to local authority. • Taxes on services to central govt. • 20% of gross rent towards repairs and maintenance. • Interest paid on funds borrowed for acquiring, repair, renew etc. • For self occupied no deduction for taxes and interest.

13. INCOME FROM CAPITAL GAINS • Income from sale of investment asset will be taxed under this head. • It will be taxed in the year when the asset is transferred. • Gains arising from transfer of personal effects & agriculture land beyond certain limits will be exempt. • Capital gains will be full consideration minus; • Cost of acquisition, Cost of improvement., Transfer related expenses. • If asset is sold after one year from end of financial year in which it is acquired then cost etc will be indexed. • Capital gains from sale of shares will also be brought under tax. • For assets acquired prior to 1.4.2000 cost of acquisition will taken as value as on 1.4.2000. • Benefit of tax will be given if investment in one residential house is made (provided he do not own any house), agriculture land is purchased from sale of agriculture or amount is deposited in ‘Capital Gains saving scheme.

14. INCOME FROM OTHER SOURCES • Now it will be called ‘income from residuary sources’. • Income which is not taxable under any other will be taxed here. • Major sources of income will be: • Interest, withdrawal of investment eligible for deduction, advance or security deposit received from long term leasing or interest or investment asset. • Any sum exceeding Rs. 20,000/- taken or repaid otherwise by account payee cheque. • Any sum received from L.I.C. if the premium exceeds 5% of capital sum assured.

15. INCOME FROM BUSINESS • Income from each business will be computed separately. • Except for presumptive tax businesses income from each businesses will be taxed on basis of gross receipts minus expenses.

16. Income from business • Every business to constitute a separate source for the purpose of computation of income provided there is no interdependence between the two businesses. • Gross earnings • Deduction of business expenditure • Deduction of operating expenditure • Deduction for permitted finance charges • Computation of capital allowances • Computation of depreciation • All assets to be classified into business and investment assets, wherein business assets to be further classified into business trading assets and business capital assets. • Only income from transactions in business assets to form part of business income. • Profit on sale of business capital assets, profit on sale of an undertaking under a slump sale, transfer of any self generated business asset, etc. to be treated as business income

17. DISALLOWABLE EXPENDITURE • ,slk [kpZ tks ml vk; ds fy, fd;k x;k gks tks vk; bl dkuwu esa dqy vk; dk fgLlk u gksA • dksbZ jde tks fiNys lky ds [kpZ esa ’kkfey gks xbZ gksA • dksbZ [kpZ tks fdlh dkuwu esa euk gks ;k tks xqukg gksA • dksbZ ,slk tek [kpZ tks lky ds vUr esa ns; jde dk vkdyu u gks ldsA • dksbZ ,slk [kpZ ftlds L=ksr dk C;kSjk u ns lds ;k tks C;kSjk fn;k x;k gS o vf/kdkjh dh larq"Vh dk u gksA • vxj fdlh [kpZ ij L=ksr ij dj fd dVkSrh djuk gS o mls ugha fd;k x;k ;k dVkSrh dj ds ljdkjh [ktkus esa tek ugha djk;k x;kA

18. SECTORS ENJOYING SPECIAL INCENTIVE • Building running and maintaining infrastructure. • Power generation, trasmission and distribution. • Barring certain areas running of hospital. • Processing, frizzing and packing of fruits and vegetables. • Installation and running of cold chain facilities. • Establishing and running of wharehouses of agri produce.

19. RATES FOR DEDUCTION OF TAX AT SOURCE • .

20. T D S…..

21. Tax collection at source • On certain type of transaction the seller of goods will have to collect tax. • Rate of tax collection at source will be 3% of sale price of goods. • The provisions for tax collection at source will be applicable on sale of following. • Alcoholic drinks for human consumption • Tobacco leaves • Timber • Forest produce • Sale of Scrape • Lease money for Parking • Lease of Toll Plaza • Contract for mining lease

22. DETERMINATION OF INCOME ON PRESUMPTIVE BASIS . . • The income computed under Rule 1 shall be presumed to have been computed after giving full effect to every loss, allowance or deduction under this code • The provisions of this section shall not apply to- • the assessee keeps and maintains all the books of account and other documents referred to in section 85 in respect of the business regardless of anything to the contrary contained in that section • the assessee gets his accounts audited and obtains a report of such audit as required under section 86 in respect of the business regardless of anything to the contrary contained in that section;

23. MAINTAINANCE OF BOOKS OF ACCOUNTS • Every person whose income is more than Rs. 2 lakhs or • Whose turnover in any one year in preceeding three exceeds Rs. 10 lakhs. • Will have to maintain books of acconnts. • Cash book, Journal, Ledger daily stock book, copy of billsoriginals of purchase and expenditure. • If turnover exceeds Rs 40 lakhs than audit is compulsory. • This will not be applicable to persons covered under presumtive income scheme.

24. Tax Deduction at Source • Tax has to be deducted while incurring certain expenditure or while making certain payments • The recipient of money can apply to his assessing officer for lower rate of deduction of tas • The amount of tax deducted has to be deposited the govt. treasury. • The tax deductor has to issue certificate for the amount of tax deducted in prescribed form. • Tax deductor has to file return of TDS. • The credit for deducted will be given to deductor in the same year in which tax is deducted.

25. SPECIAL INCENTIVE TO CERTAIN BUSINESSES • In order to promote certain sectors, while determining their income out of gross receipts deduction for business including CAPITAL expenditure like land, building, plant & machinery etc will also be given • If the expenditure is not fully absorbed in a year it will be carry forward to be adjusted in subciquent year. • It will be presumed that full depreciation has been allowed to this assessee. • The special sector is:-

26. vk; esa ls eatwj dVkSfr;k • O;fDr dh dqy ^^lk/kkj.k vk;**esa ls fu/kkZjhr fuos’k djus ij vk; esa ls dVkSrh feysxhA • ,d foRr o"kZ esa ;g dVkSrh vf/kdre 3 yk[k :i;s jgsxhA • ;g NqV ml jde ij feysxh tks ^^ ijfeVsM+ lsfoax bUVjfeM+hvjh ** ds ikl tek djkbZ xbZ gksA • blesa og iSlk Hkh ’kkfey gksxk tks nks cPpksa rd dh i<+kbZ ds fy, fdlh Ldwy] dkWyst ;k ;qfuoflZVh dks fn;k x;k gksA • blds ds vykok fuEu [kpksZ dk Hkh vk; esa ls eqtjk feysxkA • [kqndh ;k fdlh fjLrsnkj dh mPp f’k{kk ds fy, fdlh foRr laLFkk ls fy, x;s dtZ ij fn, x;s C;kt dh jdeA • [kqn ds ifjokj ds LokLFk fcek ij :- 15000@& ¼ flfu;j flVh>u :- 20000@&½ rd Hkjk x;k fizfe;eA • vius ekrk&firk ds LokLFk fcek ij :- 15000@& ¼ flfu;j flVh>u :- 20000@&½ rd Hkjk x;k fizfe;eA • dqN [kkl fcekjh ds bykt ds fy, [kpZ dh xbZ jde :- 40000@& ¼ flfu;j flVh>u ds bykt ds fy, :- 60000@&½ rd vius ij fuHkZj fodykax ij fd;k x;k [kpZ :- 100000@& rd vxj T;knk fodykax gS rks ugha rks :- 500000@&A

27. NEW RATES OF TAXES

28. DUE DATES FOR PAYMENT OF ADVANCE TAX

29. WEALTH TAX

30. TAX RETURNS • For non business and non corporate due date is 30th June. • For others due date is 31st August. • Revise return or belated return can be filed upto 21 months from end of year. • There will be two categories of non filers of return • Non Filers and 2) Stop Filers • A non filer is a person who has not filed return for current year and last two years • A stop filer is a person who has not filed return for current year but had filed return in earlier year or was required to file return in earlier years.

31. THANKS YOU ARE GOOD AUDIENCE