INCOME TAX PROPOSALS
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Capital Gains on compulsory acquisition
Existing provisions in section 45(5) deal with computation if capital
gain arising on compulsory acquisition of a capital asset where compensation is enhanced.
They do not take care of a case where such compensation is reduced by a court.
It is proposed to insert a new clause (c) to section 45(5) to provide
that where the compensation is reduced by a subsequent order of court, such assessed
capital gains shall be recomputed by taking the reduced compensation as the full value of
consideration.
1-4-04
Capital Gains on transfer of stock exchange
membership
The present section 47 contains provisions relating to transactions not
considered as transfer for the purpose of capital gains.
It is proposed to amend section 47 (xiii) to provide that any transfer
of membership right held by a member of recognised stock exchange for acquisition of
shares and trading / clearing rights acquired by that member in accordance with the
approved scheme of Demutualisation or corporatisation shall not be regarded as transfer.
1-4-04
Income from other sources
In section 57, there is consequential amendment to exclude dividend, as
dividend will no longer be taxable.
1-4-04
Carry Forward Loss
Section 72(A) will be amended to provide that in cases of amalgamation
of a company owning industrial undertaking or hotel with another company or a bank with
another specified bank, the accumulated loss and unabsorbed depreciation of amalgamating
company shall be deemed to be the loss / depreciation of the amalgamated company for the
previous year in which amalgamation was effected and set-off will be allowed as per
relevant provisions
Deduction in respect of medical treatment of a
dependant with disability.
It is proposed to substitute the existing section 80 DD with a view to
harmonize the criteria for defining disability as existing under the Income Tax Rules with
the criteria prescribed under the persons with disability (equal opportunities, protection
of rights and full participation) act, 1995. IT is proposed to provide a deduction of
amount of Rs. 50,000/- for the medical expenditure etc. incurred in respect of a dependent
being a person with disability, as defined under the person with disability (equal
opportunities, protection of rights and full participation) act, 1995. A higher deduction
of Rs. 75,000/- shall be allowed if such dependent is a person with severe disability
under the persons with disability (equal opportunities, protection of rights and full
participation) Act 1995 having any disability over 80%. "Dependent" includes in
the case of an individual, the spouse, the children, parents, brothers and sisters and in
the case of a HUF, a member thereof, who is wholly or mainly dependent on the assessee and
has not claimed any deduction u/s. 80U in the computation of his income.
The assessee shall have to furnish a copy of the certificate issued by
the medical authority under the persons with disability (equal opportunities, protection
of rights and full participation) Act 1995 alongwith the return of income filed u/s. 139.
Where the condition of disability requires re-assessment, a fresh certificate from the
medical authority shall have to be obtained after the expiry of the period mentioned on
the original certificate in order to continue to claim the deduction. (A.Y. 2004-05)
Deduction in the case of a handicapped assessee
It is proposed to substitute the existing section 80U with the view to
harmonise the criteria for defining disability as existing under the Income tax Rules with
the criteria prescribed under the persons with disability (equal opportunities, protection
of rights and full participation) act, 1995 to allow deduction of Rs. 50,000/-. A higher
education of Rs. 75,000/- shall be allowed in respect of a person with severe disability
under the persons with disability (equal opportunities, protection of rights and full
participation) act, 1995, having any disability over 80%.
The assessee shall have to furnish a copy of the certificate issued by
the medical authority under the persons with disability (equal opportunities, protection
of rights and full participation) act, 1995 alongwith the return of income filed under
section 139. Where the condition of disability requires re-assessment, a fresh certificate
from the medical authority shall have to be obtained after the expiry of the period
mentioned on the original certificate in order to continue to claim the deduction. (A.Y.
2004-05)
Deduction in respect of Medical Treatment etc.
specified diseases
It is proposed to amend section 80DDB so as to provide that deduction
will be equal to he amount of expenditure incurred or Rs.40,000/- which ever is less.
Extension of Time Limit for providing
telecommunication services etc. for the purpose of Tax Holiday u/s. 80IA
Under the existing provision contained in Section 80IA(4) an
undertaking which has started or starts providing telecommunication services, before the
31-03-2003, is allowed for any 10 consecutive Assessment years beginning from the year in
which the undertaking starts providing telecommunication services. The amount of deduction
is 100% of profits for the first 5 years and thereafter at 30% of profits for the next 5
years.
With a view to give incentives to the new telecom services or domestic
satellite services, etc. to operate it is proposed to extent the time limit before which
the eligible undertaking has to start providing telecommunication services etc. to 31st
March 2004.
(A.Y. 2004-05)
Extension of Time Limit for the purpose of tax
holiday u/s. 80IB to any company carrying scientific research and development.
Under existing provisions of sub section 8A of Section 80IB any company
carrying out scientific research and development is allowed a deduction of hundred Percent
of the profits and gains of such business for a period of ten consecutive assessment
years. If such company is for the time being approved by the prescribed authority after 31st
March 2000, but before the 1st April 2003. The outer limit is proposed to be
extended to 01-04-2004
(A.Y. 2004-05)
Deduction for Housing
It has been proposed to relax the conditions relating to completion and
extending the time limit for obtaining approval for the purpose of tax holiday u/s. 80IB
for approved housing projects. Under the existing provision of sub section 10 of Section
80IB a deduction equals to 100 % of the profits of an undertaking engaged in developing
and building housing projects is allowed. The deduction is available to the Housing
projects approved by the local authority before the 31st day of March 2001 and
which are completed before the 31st day of March 2003. The time limit for
obtaining approval is proposed to be extended to 31st March 2005.
The Finance Minister has retained the deduction u/s 24 in respect of
interest on housing loans to Rs.1,50,000 for self occupied property.
(A.Y. 2004-05).
Extension of Time Limit for setting up and operating
a cold chain facility for agricultural produce for the purpose of tax holiday u/s. 80IB.
Under the existing provision contained in Section 80IB(11), an
industrial undertaking deriving profits from the business of setting up and operating a
cold chain facility for agricultural produce is allowed a deduction of 100% of such
profits for 5 years and subsequently 25% (30% in case of Companies) for the next 5 years,
if such undertaking begin to operate such facility before 31-03-2003. The time limit is
proposed to be extended to 31-03-2004.
(A.Y. 2004-05).
New provision relating to tax holiday in respect of
undertakings in certain states (80IC)
Special Deduction for a period of ten years under this new section will
be allowed to industries producing or undertaking a substantial expansion from 23-12-2002
to 01-04-2012 in Sikkim, Uttaranchal, Himachal Pradesh and North Eastern States.
Provisions of sub section of 5, 7 to 12 of Section 80IA shall apply to the eligible
undertaking under this section. Industrial Area, Industrial Growth Centre, Industrial
park, Software Technology Park and thermal Park have been defined in this section.
As a part of fiscal package granted to States of Himachal Pradesh,
Uttaranchal, Sikkim and North-Eastern states, the Bill proposes to insert a new section
80IC to allow a deduction for 10 years in respect of the profits of new undertakings or
existing undertakings on their substantial expansion in these states.
The deduction will be allowable to the undertakings which manufacture
or produce any article, not being an article specified in 13th schedule and
which commences operation in any EPZ or IIDC or Industrial growth center or Industrial
estate or industrial park or STP or Industrial area or theme park notified by the Board.
Similar deduction will be available to thrust industries specified in
the 14th schedule.
The amount of deduction for State of Sikkim and North-eastern States will be 100% of
profit for 10 assessment years. For undertakings in Uttaranchal and Himachal Pradesh it
will be 100% of profits for the first five assessment years and thereafter 25% (30% for
companies) for next five assessment years.
For computing the total income no deduction shall be allowed under any
other section in chapter VIA or in section 10A or 10B.
13th schedule and 14th schedule have been
inserted in the act specifying list of articles and things and the states for the purposes
of availing deductions under this section.
As a consequential measure provisions of section 10C and section 80IB(4) are proposed to
be made inoperative in respect of the undertakings which are eligible for deductions under
this section.
The amendment takes effect from 1st April 2004 and will
apply in assessment 2004-2005.
Increase in the deduction in respect of interest.
The permissible deduction u/s 80L to Individual / HUF deriving income
from interest on specified deposits or income from mutual funds is increased from existing
limit of Rs.9,000/- to Rs.12,000/-. The existing deduction of Rs.3,000/- in respect of
Govt. securities shall continue in addition.
(A.Y. 2003-04)
New provision for allowing deduction up to Rs.
3,00,000/- in respect of Royalty Income, etc. of authors of certain books.
The new section 80QQB proposes to provide for a deduction of up to Rs.
3,00,000/- to an individual resident, being an author, in respect of any income derived
from the exercise of his profession, on account of any lumpsum consideration for the
assignment or grant of his interest in the copyright of any book, or of royalties or
copyright fees (whether receivable in lumpsum or otherwise) in respect of such book.
Deduction shall be allowed in respect of any book, being a work of literary, artistic or
scientific nature. However the deduction shall not be available in respect of income from
textbooks for schools, guides, commentaries, etc.
It is proposed to provide that for calculating the deduction under this
section, the amount of eligible income shall not exceed 15% of the value of the books sold
during the previous year. However, this condition is not applicable where the royalty or
copyright fees is receivable in lumpsum in lieu of all right of the author in the book.
For claiming the deduction, the assessee shall have to furnish a certificate in the
prescribed manner in the prescribed format, duly verified by the person responsible for
paying the income, setting forth details as may be prescribed.
Where the eligible income is earned outside India, the deduction shall
be allowed on so much of income earned in foreign exchange, which is brought in India
within six months from the end of previous year or within such period as the competent
authority may allow in this behalf. For this purpose, competent authority shall mean the
R.B.I or such other authority as is authorised under any law for the time being in force
for regulating payments and dealings in foreign exchange. In order to claim deductions in
such cases, a certificate in line with similar provisions existing in the Act to the
effect that the deduction has been correctly claimed in accordance with the provisions of
this section would be required to be furnished (A.Y.2004-05)
New provisions for allowing deduction in the nature
of Royalty on patents.
A new section of 80RRB is proposed to be inserted to provide that where
in the case of the resident individual, the gross total income of the previous year
includes any income by way of royalty in respect of a patent registered on or after 1st
day of April 2003 under the Patents Act, 1970 a deduction equals to the whole of such
amounts or a sum of Rs. 3,00,000/- which ever is less shall be allowed. The deduction
shall be available to any individual resident in India who is registered under the Patent
Act, 1970 as the true and first inventor in respect of invention, including the co-owner
of the patent. The proposed tax benefit is not available to Patentees who are assignees or
mortgagees in respect of all or any right in the patent.
The proposed deduction shall be allowed to any royalty income from
working or of use of the patent and shall include consideration for the transfer of all or
any rights (including the granting of license) in a patent or for imparting of any
information concerning the working or use thereof in India or for rendering of any
services in connection with the above. However no deduction shall be available on any
consideration for sale of product manufacture with the use of patented process or of the
patented article perse for commercial use. Further, any consideration which is chargeable
under the head Capital gains shall not be eligible for deduction. Where a compulsory
licence is granted in respect of any patent under the patent Act 1970 the income eligible
for deduction under this section shall not exceed the amount of royalty under the terms
and conditions of a licence settled by the controller under the Act.
Where any income is earned from sources outside India on which
deduction under the proposed section is claimed only so much of income may be considered
as is brought to India in convertible foreign exchange within 6 months from the end of the
year or within the extended period. Where any income is earned from sources outside India
a certificate certifying that deduction has been correctly claimed in accordance with the
provision of the section in the prescribed form is required alongwith a certificate in a
prescribed form signed by the prescribed authority alongwith the Return of Income.
Where the patent is subsequently revoked by the High Court the
deduction already allowed shall be withdrawn and the assessment will rectified
accordingly.
(A. Y. 2004-05)
Rebate for tuition fees paid for the education of
any two children
In order to provide necessary fiscal support for imparting education,
it is proposed to include within the purview of tax rebate u/s. 88, any sum paid, as
tuition fees whether at the time of admission or thereafter to any university, college,
school or any educational institution situated within India for the purpose of full time
education of any two children of an assessee as does not exceed an amount of Rs. 12,000/-
in respect of each such child. However, the eligible amount shall not include any payment
towards any development fees or donation or payment of similar nature. Deduction in
respect of this payment shall be available within the eligible limit of Rs. 70,000/-.
A.Y. 2004-05.
Increasing the amount of Rebate of Income Tax in
case of Senior Citizens.
Under the existing provision, individuals in the age group of 65 years
or more are entitled to a deduction from the amount of income tax on their total income in
any assessment year of an amount equal to 100% of such income tax or an amount of Rs.
15,000/- whichever is less.
It is proposed to enhance the said limit of tax rebate to Rs. 20,000/-.
Accordingly, a senior citizen having income upto Rs. 1,53,000/- and where such senior
citizen is a pensioner or a salaried tax payer having income up to Rs. 1,83,000/- shall
not have to pay any income tax. (A.Y. 2004-05)
"Eligible Issue of Capital" to be allowed
to be utilised in the business of development of Industrial park or a Special Economic
Zone.
For the purpose of claiming rebate u/s. 88 the term Eligible issue of
Capital has been defined as an issue made by an public company formed and registered in
India or a public financial institution and the entire proceeds of the issue is utilised
wholly and exclusively either for the purpose of developing, maintaining and operating an
infrastructure facility or generating and distributing power or providing
telecommunication services, whether basic or Cellular.
With a view to give boost to the export sector through the special
economic zone it is proposed to provide that the eligible issue of capital shall also
include an issue by an public company formed and registered in India or a public financial
institution and the entire proceeds of the issue is utilised wholly and exclusively either
for the purpose of developing, maintaining and operating an infrastructure facility or
generating and distributing power for the purpose of developing, maintaining, operating an
industrial park or a special economic zone also.
(A.Y. 2004-05)
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