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TMI BlogAmendments at a glance, Rate Structure, Amendment to Income-tax Act, Amendments to Wealth-tax Act, Amendments to Gift-tax Act, Amendments to Companies (Profits) Surtax ActX X X X Extracts X X X X X X X X Extracts X X X X ..... ains arising from transfer of personal jewellery 28 80C(2)(v) Deduction in respect of long-term savings in specified media - Area of tax incentives widened 12-14 80G(5), Donations to charitable trusts or institutions 20-22 Expln. 2 80-1, 80B(7) Withdrawal of relief in respect of specified priority and 6th Sch. industries 8 80Q, 80L(1)(ix) Withdrawal of deduction in respect of dividends from co-operative societies 9 90, 228A Provisions for enabling the Central Government to enter into tax treaties with foreign countries for exchange of information for preventing evasion or avoidance of taxes and recovery thereof 23 132A(4)(a), Increase in the rate of interest chargeable from assessees, 201(1A), 213, and also payable to assessees by Government under the prov., 214(1), provisions of the Act 27 215(1), 216, 217(1)/(1A), 220(2), 243(1), 244(1) and rule 60 of 2nd Sch. 139(1)(a), 8(a) Curtailment of time allowed for filing returns of along with its income and modification of the provisions relating to prov. and charging of interest for delay in furnishing such Expln. 1 returns 26 194B Deduction of income-tax from payments in respect of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce from "salaries" and retirement annuities payable to partners of registered firms engaged in specified professions and computation of the tax payable in certain special cases, during the financial year 1971-72. In the case of the Life Insurance Corporation of India and other companies, the basic rates of income-tax on incomes assessable for the assessment year 1972-73 are the same as those laid down in Part III of the First Schedule to the Finance (No. 2) Act, 1971, for the purpose of computation of "advance tax" during the financial year 1971-72. The income-tax payable by these entities will, however, be increased by a surcharge on income-tax calculated at the rate of 2.5 per cent on such income-tax. The provision for the levy of surcharge on income-tax has been made in the context of the levy of surcharge at the rate of 2.5 per cent of income-tax payable in advance by all companies during the financial year 1971-72 under the Companies (Surcharge on Income-tax) Act, 1971, enacted in December 1971. These rates have been laid down in Paragraphs E and F of Part I of the First Schedule to the Finance Act, 1972. The rates of income-tax have been summarised in Annexure I to this ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-contractors resident in India - Under the new section 194C, inserted by section 28 of the Finance Act, 1972, income-tax will be deductible at source from income comprised in payments made by the Central Government or any State Government, local authorities, statutory corporations and companies to contractors engaged for carrying out any work or for supplying labour for carrying out such work. Income-tax will be deductible at 2 per cent of such payments. Similarly, deduction will be made from payments made by contractors other than individuals and Hindu undivided families, to sub-contractors at the rate of 1 per cent of the payment. No deduction would, however, be required to be made if the consideration for the contract or the sub-contract does not exceed Rs. 5,000 or where the payment is made before 1-6-1972. In view of the position that the rates for deduction of tax at source in respect of payments to contractors and sub-contractors have been laid down in the Income-tax Act, no specific provision in this regard has been made in Part II of the First Schedule. The provisions of the new section 194C have been explained in detail in paragraph 11 of this circular. Payments of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision. In conformity with this principle, changes in the rates of tax which were considered necessary or desirable have been made operative prospectively in relation to incomes of the financial year 1972-73 or other accounting period which would be relevant for the assessment year 1973-74. The rates for deduction of tax at source from "salaries" in the case of individuals during the financial year 1972-73 and for the computation of "advance tax" payable during that year in the case of all categories of taxpayers during the said financial year are specified in Part III of the First Schedule to the Finance Act, 1972. These rates apply also for the purposes of deduction of tax at source during the financial year 1972-73 from retirement annuities payable under section 80E(9) to partners of registered firms engaged in specified professions and for charging or calculating income-tax payable in certain special cases. These special cases are : section 132(5), first proviso [calculating income-tax on undisclosed income represented by seized assets in certain cases]; section 172(4) [levy of tax on provisional basis on the income of non-residents from shipping of cargo or passengers from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever will be regarded as income for purposes of the Income-tax Act. [Section 3(b)(ii) of the Finance Act] 2. Winnings from state or other lotteries in the case of non-corporate tax-payers will be taxed on a concessional basis in the same manner as long-term capital gains relating to assets other than lands and buildings. Under the new section 80TT, the whole of the income by way of lottery winnings will be allowed as deduction in computing the taxable income where the gross total income of the assessee does not exceed Rs. 10,000 or where winnings do not exceed Rs. 5,000. In other cases, a deduction equal to Rs. 5,000 plus 50 per cent of the balance will be allowed in computing the taxable income. A consequential amendment has also been made to section 80A. [Sections 14 and 22 of the Finance Act] 3. Clause (3) of section 10 has been substituted by a new clause. The effect of this change will be that casual and non-recurring receipts, other than winnings from lotteries, which are in excess of Rs. 1,000 in a year, will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t income from any other source. Consequential amendments have been made to sections 75 and 77. [Sections 11, 12 and 13 of the Finance Act] 6. By virtue of the amendment made to section 207, income by way of winnings from lotteries, crossword puzzles, races including horse races, card games, other games or from gambling or betting will not be included in the "income subject to advance tax" and, accordingly, no "advance tax" will be payable in respect of income from the aforesaid sources. Consequential changes have also been made to sections 208, 209, 211 and 212. [Sections 33 to 37 of the Finance Act] Finance Act, 1972 7. The provisions set forth in the preceding paragraph have come into force with effect from 1-4-1972. It has, however, specifically been provided in section 59 of the Finance Act, 1972 that income by way of casual and non-recurring receipts will continue to be exempt from income-tax for the assessment year 1972-73 to the same extent as hitherto. [Section 59 of the Finance Act] Finance Act, 1972 Withdrawal of relief in respect of specified priority industries 8. Under section 80-I, income derived by certain domestic companies from specified priority industrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth-tax Act Finance Act, 1972 Exemption of co-operative societies from wealth-tax 32. Under section 3, wealth-tax is chargeable in respect of the net wealth of (i) individuals, (ii) Hindu undivided families, and (iii) companies. Wealth-tax is, however, not being charged in respect of the net wealth of companies from the assessment year 1960-61 onwards in view of a special provision made in this behalf in the Finance Act, 1960. Recently, some doubt has been raised that a co-operative society could, in law, be regarded as an "individual" for purposes of the Wealth-tax Act and charged to tax accordingly. Such an interpretation would not be in keeping with the intention underlying these provisions. Levy of wealth-tax on co-operative societies will also have an adverse effect on the co-operative movement in the country. Section 45 has, therefore, been amended to provide for exemption of co-operative societies from wealth-tax retrospectively from 1-4-1957 (i.e., from the date of commencement of the Wealth-tax Act). A definition of the term "co-operative society" has also been incorporated in the Wealth-tax Act by inserting a new clause (ha) in section 2 and renumbering the existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society to whom a building or part thereof is allotted or leased under a house building scheme of the society, which are separately exempted from wealth-tax without any limit to the extent such deposits have been made under the house building scheme of the society). The Finance Act, 1972 has added two new clauses (xxxi) and (xxxii) to sub-section (1) of section 5 enlarging this list so as to include the value of assets forming part of an industrial undertaking belonging to the assessee, as also the value of his interest in the assets forming part of an industrial undertaking belonging to a firm or an association of persons of which the assessee is a partner or a member. Accordingly, in computing the exemption from wealth-tax up to Rs. 1,50,000, the value of these assets will also be taken into account. The value of any land or building or any rights in any land or building or the value of assets of the industrial undertaking which are otherwise exempt from wealth-tax under section 5(1) will, however, not be taken into account for the purposes of this exemption. "Industrial undertaking" for the purposes of this provision has been defined to mean an undertaking engaged in the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the relevant valuation date, will also be taken into account. This relaxation will be available only if the assessee acquires the relevant asset within thirty days after he ceases to hold the first asset. The concession under this provision will, however, not apply in the case of shares or securities held as stock-in-trade by the assessee for the purposes of his business. These amendments will take effect from 1-4-1973 and will, therefore, apply for the assessment year 1973-74 and subsequent years. [Section 45(c) of the Finance Act] Finance Act, 1972 Forfeiture of exemption from wealth-tax in the case of public charitable or religious trusts and institutions 36. Income derived from property held under trusts or other legal obligation for charitable or religious purposes is exempt from income-tax to the extent such income is applied to such purposes or accumulated for being so applied in accordance with the provisions of the Income-tax Act. Section 13 provides for the forfeiture of the exemption from tax in the case of a trust or institution created or established after 31-3-1962, if under the terms of the trust or the rules governing the institution, any part of the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest, and the quantum of the investment does not exceed 5 per cent of the capital of the concern, the trust or institution forfeits exemption from income-tax only in respect of the income arising from such investment and not its entire income. Similarly, exemption from wealth-tax, in such cases, will be denied only in relation to such investment and other assets will continue to qualify for exemption. The new section 21A takes effect from 1-4-1973 and will, therefore, apply in relation to assessments for the assessment year 1973-74 and subsequent assessment years. [Section 46 of the Finance Act] Finance Act, 1972 Increase in the rate of interest chargeable from or payable to assessees 38. Simple interest at 9 per cent per annum is chargeable from assessees on the arrears of tax due from them for the period of the default in payment. Likewise, assessees are entitled to receive simple interest from the Central Government at 9 per cent per annum on the amount of refunds due to them for the period of delay in the issue of refund beyond six months from the date of the order giving rise to the refund. In line with the increase in the rate of interest chargeable from or payable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth-tax may permit the appellant to produce evidence which he did not produce or which he was not allowed to produce before the Wealth-tax Officer. Under the Wealth-tax (Amendment) Rules, 1973, a new rule 5A has been inserted in the Wealth-tax Rules, 1957. This rule is broadly on the lines of rule 46A of the Income-tax Rules, 1962, the scope of which has been explained in paragraph 29 of this circular. [Section 51 of the Finance Act and rule 2 of the Wealth-tax (Amendment) Rules, 1973] Finance Act, 1972 Miscellaneous 42. Certain entities enumerated in section 45 have been exempted from wealth-tax. This section has been amended to clarify that while wealth-tax is not to be levied in respect of the net wealth of the entities enumerated in this section, the application of the other provisions of the Act (e.g., calling for evidence from such entities) will not be barred. This amendment is effective from 1-4-1972. [Section 50(a) of the Finance Act] Amendments to Gift-tax Act Finance Act, 1972 Increase in the rate of interest chargeable from or payable to assessees 43. Simple interest at 9 per cent per annum is chargeable from assessees on the arrears of tax due from them for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with any of provisions of section 11 of the Income-tax Act relating to application of income during the accounting year itself ; or (b) the institution or fund forfeits exemption in respect of a part of its income which arises from investments made in a concern in which the founder of the institution or fund or his relatives have a substantial interest, where the aggregate of the funds invested by the institution or fund in such a concern does not exceed 5 per cent of the capital of that concern. Finance Act, 1972 46. Section 12 of the Income-tax Act has been substituted by two new sections 12 and 12A. As already explained, the effect of the substitution of section 12 is that voluntary contributions received by charitable or religious trusts or institutions will qualify for exemption from income-tax only if the conditions specified in section 11 regarding application of income or accumulation thereof are satisfied also in relation to such income by way of voluntary contributions. Further, the trust or institution will forfeit exemption from tax in respect of its entire income if any part of its income enures or any part of its income or property is used or applied directly o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission of evidence which is not produced by the assessee before the Gift-tax Officer but is produced for the first time in the course of the appellate proceedings. With a view to regulating the admission of such additional evidence, section 46 has been amended in order to empower the Central Board of Direct Taxes to prescribe in the Gift-tax Rules, the circumstances in which, the conditions subject to which and the manner in which the Appellate Assistant Commissioner of Gift-tax may permit the appellant to produce the evidence which he did not produce or which he was not allowed to produce before the Gift-tax Officer. Under the Gift-tax (Amendment) Rules, 1973, a new rule 5A has been inserted. This rule is broadly on the lines of rule 46A of the Income-tax Rules, the scope of which has been explained in paragraph 29 of this circular. [Section 56 of the Finance Act and rule 2 of the Gift-tax (Amendment) Rules, 1973] Amendments to Companies (Profits) Surtax Act Finance Act, 1972 Extension of scope of tax treaties between the Central Government and the Government of a foreign country 50. Section 24A of the Companies (Profits) Surtax Act, which empowers the Central Government to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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