Amendment of section 40.
15. In section 40 of the Income-tax Act, in clause (b), in sub-clause (v), for items (1) and (2), the following shall be substituted with effect from the 1st day of April, 2010, namely :—
"(a) on the first Rs.3,00,000 of the Rs.1,50,000 or at the rate of 90 per cent. of book-profit or in case of a loss the book-profit, whichever is more;
(b) on the balance of the book-profit at the rate of 60 per cent.".
Notes on Clauses:
Clause 15 of the Bill seeks to amend sub-clause (v) of clause (b) of section 40 of the Income-tax Act, relating to amounts not deductible.
The existing sub-clause (v) of the said clause, inter-alia, provides that in case of working partners, payments of salary, bonus, commission or remuneration, by whatever name called, will be allowed as a deduction subject to the following limits, namely: (1) In case of a firm carrying on a profession referred to in section 44AA or which is notified for the purposes of that section -
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(a)
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on the first ₹ 1,00,000 of the book-profit or in case of a loss
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₹ 50,000 or at the rate of 90 per cent. of the book-profit, whichever is more;
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(b)
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on the next ₹ 1,00,000 of the book-profit
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at the rate of 60 per cent.;
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(c)
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on the balance of the book-profit
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at the rate of 40 per cent.;
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(2) in the case of any other firm -
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(a)
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on the first ₹ 75,000 of the book-profit, or in case of a loss
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₹ 50,000 or at the rate of 90 per cent. of the book-profit, whichever is more;
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(b)
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on the next ₹ 75,000 of the book-profit
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at the rate of 60 per cent.;
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(c)
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on the balance of the book profit
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at the rate of 40 per cent.;
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It is proposed to revise the above limits and provide uniform limits for both professional firms and non-professional firms as under-
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(a)
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on the first ₹ 3,00,000 of the book-profit or in case of a loss
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₹ 1,50,000 or at the rate of 90 per cent. of the book-profit, whichever is more;
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(b)
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on the balance of the book-profit
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at the rate of 60 per cent.
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The proposed amendment will take effect from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years.
