income tax amendments 1 · rates of taxation 1. tax rates rate super senior citizen i.e. resident...
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GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 1
INTRODUCTION TO INCOME TAX
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RATES OF TAXATION
1. Tax rates
Rate
Super senior citizen
i.e. resident aged 80
years or more
Senior citizen resident i.e.
aged 60 years or more but
less than 80 years
Other (Individual, HUF, AOP, BOI,
Artificial Juridical Person).
Nil Up to Rs.5,00,000 Up to Rs.3,00,000 Up to Rs.2,50,000
5% NA 3,00,001 – 5,00,000 2,50,001 – 5,00,000
20% 5,00,001 – 10,00,000 5,00,001 – 10,00,000 5,00,001 – 10,00,000
30% Above 10,00,000 Above 10,00,000 Above 10,00,000
2. Firm/LLP
On the whole of the total income 30%
3. Local authority
On the whole of the total income 30%
4. Co-operative Society
Where the total income does not exceed
Rs.10,000
10% of the total income
Where the total income exceeds 10,000 but does
not exceed Rs.20,000.
Rs.1,000 plus 20% of the amount by which the total
income exceeds Rs.10,000
Where the total income exceeds Rs.20,000 Rs.3,000 plus 30% of the amount by which the total
income exceeds Rs.20,000
5. Company
In the case of a domestic company
If the Total Turnover or Gross receipts of the PY
2015-16 does not exceed Rs.50 crore
25%
In all other cases 30%
In case of other than a domestic company 40% on the Total Income
SURCHARGE
If the Total income is in the Range of
Upto Rs.50
lakhs
Rs.50 Lkah to
Rs.1 Crore
Rs.1 Crore to
Rs.10 Crore
Above Rs.10
crore
Individual/HUF/AOP/BOI/Artificial
juridical Person
Nil 10% 15% 15%
Firm/Cooperative society/local
Authority
Nil Nil 12% 12%
Domestic Company Nil Nil 7% 12%
Foreign Company Nil Nil 2% 5%
Rebate of income-tax in case of certain individuals (Section 87A)
1. Eligible Assessee: Resident Individual, whose total income does not exceed Rs.3,50,000.
2. Amount of rebate: Lower of;
a. 100% of Income tax; or
b. Rs.2,500.
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 2
Illustration
Mr. A, aged 50 years, earned a total income of Rs.3,40,000. Compute his tax liability.
Particulars Rs.
Tax on Rs.3,40,000 4,500
Less: Relief under section 87A 2,500
Add: Education cess & SHEC @ 3% 60
Net tax payable 2,060
INCOME FROM HOUSE PROPERTY
In case of a house property held as stock-in-trade [Section 23(5)]
In some cases, property consisting of any building or land appurtenant thereto may be held as stock-
in-trade, and the whole or any part of the property may not be let out during the whole or any part of
the previous year.
In such cases, the annual value of such property or part of the property shall be NIL.
This benefit would be available for the period upto one year from the end of the financial year in
which certificate of completion of construction of the property is obtained from the competent
authority
PGBP
Actual Cost: Where an assessee incurs any expenditure for acquisition of any asset in respect of which a
payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque
drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account,
exceeds Rs. 10,000, such expenditure shall not form part of actual cost of such asset [proviso to section
43(1)]
Illustration
Assessee purchased plant & machinery of Rs.4,00,000 on 01.01.2018 and pays Rs.4,00,000 by cash.Since
payment of Rs.4,00,000 is made by cash, it shall not be considered as part of actual cost of plant &
machinery. The actual cost of plant & machinery shall be taken to be NIL and NIL shall be added to WDV
of Block of assets.
Depreciation Rates
Block of Assets Depreciation
(% of WDV)
Tangible Assets
Mainly used for residential purposes except hotels and boarding houses. 5%
Buildings other than those mainly used for residential purposes. 10%
Purely temporary erections such as wooden structures. 40%
Furniture and fittings (including electrical fittings) 10%
Plant and Machinery
General rate. 15%
Motor cars, motor lorries and motor taxis used in the business of running them on hire. 30%
Motor cars other than those used in a business of running them on hire. 15%
Specified Air Control Pollution Equipments / Water Control Pollution Equipments. 40%
Computers including computer software. 40%
Books owned assessee’s a i g o p ofessio , other than annual publications. 40%
A book, being annual publications, owned by assesses carrying on a profession. 40%
A book owned by assesses carrying on business in running lending libraries. 40%
Ships. 20%
Intangible Assets
Know-how, Patents, Copyrights, Trademarks, Licenses, Franchises or any other business
or commercial rights of similar nature.
25%
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 3
SECTION 35: Expenditure on scientific research
PART A – In house Research (Self Spending)
[Research related to Business of Assessee]
100%
Deduction
Research after Commencement of Business Research before commencement of business
Maximum 3 yrs before the date of commencement of business
expenses allowed Assessee – Company
Engaged – Manufacturing
business
Research – Approved
Section 35(2AB)
Other Assessee
Revenue Expenses
Sec 35(1)(i)
Capital Expenses
Sec 35(1)(iv)
Revenue
Expenses
Capital
Expenses
150%
Deduction
Land Building Other Capital
Expenses
150%
Deduction
No
Deduction
100%
Deduction
Revenue Expenses
Sec 35(1) (i) Capital Expenses
Sec 35(1) (iv)
100% Deduction
Land
Other Capital Expenses
No Deduction
100% Deduction
Salary [Ex. Perks]
Material
Other
Expenses
Not Allowed
Other
Expenses
Land
Not Allowed 100%
Deduction
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 4
I vest e t - Li ked Tax I e tives for Spe ified Busi esses [Se tio 35AD] Further, any expenditure in respect of which payment or aggregate of payment made to a person of an
amount exceeding Rs. 10,000 in a day otherwise than by account payee cheque drawn on a bank or an
account payee bank draft or use of electronic clearing system through a bank account would not be eligible
for deduction.
Amounts not Deductible
Section Particulars
40A(3) 1. Any expenditure, in respect of which a payment or aggregate of payments made to a
person in a single day otherwise than by account payee cheque or account payee bank
draft or use of electronic system through bank account exceeds Rs. 10,000.
2. In case of payments made to transport operator for plying, hiring or leasing goods
carriages, an enhanced limit of Rs. 35,000 shall apply.
3. If the payment/payments exceed this limit, the entire expenditure would be
disallowed.
4. However, disallowance would not be attracted if the cases and circumstances in which
payment is made otherwise than by way of an account payee cheque or bank draft are
covered in Rule 6DD.
40A(3A) 1. Where an expenditure has been allowed as deduction on accrual basis in any previous
year, and payment is made in a subsequent previous year and such payment (or
aggregate of payments made to a person in a day is made in a subsequent previous
year) is in excess of the limits of Rs.10,000 / Rs.35,000 specified above, the
payment/aggregate of payments so made shall be deemed as profits and gains of the
business or profession and charged to tax as income of the subsequent previous year.
2. However, the deeming provision will not apply in the cases and circumstances covered
in Rule 6DD.
For Scientific Research
Section 35(2AA)
For Social &
Statistical Research
Section 35(1)(iii)
To Approved Indian Co.
engaged in R & D
For Scientific
Research
Section 35(1) (ii a)
To approved
Research Association
Institute
College
University
To IIT National Laboratory
150% Deduction
For Scientific Research
Section 35(1) (ii)
100% Deduction
100% Deduction 150% Deduction
Part B – Contribution to Outsiders
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 5
Certain Deductions to be allowed only on Actual Payment [Section 43B]
In respect of the following sums payable by an assessee, deduction is allowable only if the sum is actually
paid on or before the due date of filing of return under section 139(1).
a. Tax, duty, cess or fee, under any law for the time being in force; or;
b. Contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the
welfare of employees; or;
c. Bonus or commission for services rendered by employees, where such sum would not have been
payable to him as profits or dividend if it had not been paid as bonus or commission; or;
d. Interest on any loan or borrowing from any public financial institution or a State Financial Corporation or
a State Industrial Investment Corporation, in accordance with the terms and conditions of the
agreement governing such loan or borrowing; or;
e. Interest on any loan or advance from a scheduled bank or co-operative bank other than a primary
agricultural credit society or a primary co-operative agricultural and rural development bank on actual
payment basis. (FA-2017)
f. Payment in lieu of any leave at the credit of his employee.
g. Sum payable to Indian Railways for use of railway assets.
(Effective from: A.Y.2017-18)
Maintenance of Books of Accounts u/s 44AA
Maintain the books of accounts and other documents by notified professions [Section 44AA(1)] :
This section provides that every person carrying on the legal, medical, engineering or architectural
profession or accountancy or technical consultancy or interior decoration or any other profession as has
been notified by the Central Board of Direct Taxes in the Official Gazette must statutorily maintain such
books of accounts and other documents as may enable the Assessing Officer to compute his total income
in accordance with the provisions of the Income-tax Act, 1961.
From the assessment tear 2018-19
For an individual/HUF For any other
Assessee
Existing Business/Profession – Obligation to
maintain books of account if income from business
or profession/ gross turnover in any one of the 3
preceding previous years exceeds the following.
– Income from business or profession
– Total Sales, turnover/gross receipts in the
business or profession
Rs.2,50,000
Rs.25,00,000
Rs.1,20,000
Rs.10,00,000
New Business/Profession – Obligation to maintain
books of account if income from business or
profession/ gross turnover of the first previous year
is likely to exceed the following.
– Income from business or profession
– Total Sales, turnover/gross receipts in the
business or profession
Rs.2,50,000
Rs.25,00,000
Rs.1,20,000
Rs.10,00,000
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 6
Special Provision for Computing Profits & Gains of Business or Profession on Presumptive basis.
[Sec. 44AD]
Presumptive
income or
estimated income
8 % of the Total turnover or Gross receipts.
However, the presumptive rate of 6% of total turnover or gross receipts
will be applicable in respect of amount which is received
• by an account payee cheque or
• by an account payee bank draft or
• by use of electronic clearing system through a bank account
During the previous year or before the due date of filing of return
under section 139(1) in respect of that previous year.
Higher threshold for
non-audit of
accounts for
assessees opting for
presumptive
taxation under
section 44AD
Section 44AB makes it obligatory for every person carrying on business to
get his accounts of any previous year audited if his total sales, turnover
or gross receipts exceed Rs. 1 crore.
However, if an eligible person opts for presumptive taxation scheme as
per section 44AD(1), he shall not be required to get his accounts audited
if the total turnover or gross receipts of the relevant previous year does
not exceed Rs. 2 crore.
Advance tax Further, since the threshold limit of presumptive taxation scheme has
been enhanced to Rs. 2 crore, the eligible assessee is now required to
pay advance tax by 15th March of the financial year.
Illustration
The assessee is covered by provisions of section 44AD and his turnover is Rs.1,60,00,000 for the
year ended 31.03.2018. The breakup of turnover is as under:
Cash sales Rs.70,00,000
Sales through banking channel Rs.90,00,000
(including Account payee cheques)
The due date of filing of return of income is 31st
July, 2018. Out of Rs.90,00,000, the cheques of
Rs.82,00,000 are received by 31.7.2018 and cheques of Rs.8,00,000 are received after 31.07.2018.
Now, income on presumptive basis shall be as under:
On Rs.70,00,000 @ 8% 5,60,000
On Rs.82,00,000 @ 6% 4,92,000
On Rs.8,00,000 @ 8% 64,000
(Since received after the due date of filing of return of income)
Income from Business 11,16,000
Presumptive Taxation Scheme for assessees engaged in eligible profession [Section 44ADA]
Advance tax: Advance tax to be paid on or before 15th March of the financial year
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 7
CAPITAL GAINS
Term Capital Asset and Long Term Capital Asset
Fair Market Value
(i) If assessee or previous owner acquired the asset before 01-04 -2001 then the F.M.V. i.e. fair
market value as on 01-04-2001 may be adopted as the cost of acquisition.
(ii) This facility is not available in case of depreciable capital assets.
(iii) This facility is not available in case of Sec.55 assets.
Indexation
Financial Year Cost inflation Index Financial Year Cost Inflation Index
2001-02 100 2010-11 167
2002-03 105 2011-12 184
2003-04 109 2012-13 200
2004-05 113 2013-14 220
2005-06 117 2014-15 240
2006-07 122 2015-16 254
2007-08 129 2016-17 264
2008-09 137 2017-18 272
2009-10 148
1. Unlisted shares
2. Land or building or
both
Will be treated as short
term capital asset if it is
held for not more than
24 months immediately
preceding the date of its
transfer.
Capital Asset
Long Term Capital Asset 2(29A) Short Term Capital Asset (2(42A))
Other Assets Capital asset
which is not a
short-term
capital asset is
a long term
capital asset.
1. A security (other than a
unit) listed in a
recognized stock
exchange in India
2. A unit of UTI or a unit of
an equity oriented fund
3. A zero coupon bond
Will be treated as short term
capital asset if it is held for
not more than 12 months
immediately preceding the
date of its transfer.
Capital asset held
by an Assesse for
not more than 36
months
immediately
preceding the date
of its transfer is a
short term capital
asset.
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 8
PROFORMA FOR COMPUTATION OF CAPITAL GAINS
In
ca
se o
f a
Sh
ort
-te
rm C
ap
ita
l a
sse
t
Particulars Amount
(Rs.)
Amount
(Rs.)
Gross Sale consideration xxx
Less: Expenditure incurred wholly and exclusively in connection with
such transfer (for example, brokerage on sale)
xxx
(Note: Deduction on account of STT paid will not be allowed)
Net Sale Consideration xxx
Less: Cost of acquisition
Cost of improvement
xxx
xxx
xxx
Short-term Capital Gain xxx
Less: Exemption under sections 54B/54D xxx
Short term capital chargeable to tax xxx
In c
ase
of
a l
on
g-t
erm
Ca
pit
al
ass
et
Gross Sale consideration xxx
Less: Expenditure incurred wholly and exclusively in connection with
such transfer (for example, brokerage on sale)
xxx
(Note: Deduction on account of STT paid will not be allowed)
Net Sale consideration xxx
Less: Indexed cost of acquisition
Cost of acquisition X
CII for the year in which the asset is
transferred
CII for the year in which the asset was
first held by the assessee or P.Y. 2001-
02, whichever is later
xxx
(Note: Benefit of indexation will, however, not be available in respect of
long term capital gains from transfer of bonds or debentures other than
capital indexed bonds issued by the Government and sovereign gold
bonds issued by RBI)
Less: Indexed cost of improvement
Cost of improvement x
CII for the year in which the asset is
transferred
CII for the year in which the
improvement took place
xxx
xxx
Long-term capital gains xxx
Less: Exemption under sections 54/54B/54D/54EC/54EE/54F xxx
Long term capital gains chargeable to tax xxx
Note: Cost of improvement incurred before 01.04.2001 is ignored
CONVERSION OF COST OF ACQUISITION INTO INDEXED COST OF ACQUISITON
Treatment 1 Treatment 2
The previous owner holding period is to be
ignored for computing indexed cost of
acquisition.
The previous owner holding period is to be
considered for computing indexed cost of
acquisition. (Bombay High Court in CIT Vs.
Manjula J. Shah).
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 9
Bonus Shares – COA
If bonus shares are allotted before 1.4.2001. Fair Market Value on 1.4.2001.
If bonus shares are allotted on or after 1.4.2001. Nil.
Taxability of capital gains in case of Specified Agreement [Section 45(5A)]
1. Postponement of taxability of capital gains: With a view to minimise the genuine hardship
which the owner of land may face in paying capital gains tax in the year of transfer, a new sub-
section (5A) in section 45 has been inserted to provide that
o In case of an assessee being individual or Hindu undivided family,
o Who enters into a specified agreement for development of a project,
o The capital gain arising from such transfer shall be chargeable to income-tax as income of
the previous year in which the certificate of completion for the whole or part of the
project is issued by the competent authority.
2. Meaning of Specified Agreement: Specified agreement means the registered agreement in
which a person owing land or building or both, agrees to allow another person to develop a
real estate project on such land or building or both, in consideration of a share, being land or
building or both in such project, whether with or without payment of part of the
consideration in cash.
3. Full value of consideration: For this purpose, the stamp duty value of his share, being land or
building or both, in the project on the date of issuing of said certificate of completion as
increased by any consideration received in cash, if any, shall be deemed to be the full value of
the consideration received or accruing as a result of the transfer of the capital asset.
Full value of consideration deemed to be the cost of acquisition for determining capital gains
on subsequent sale of share of developed property
4. Non-applicability of the beneficial provision: It may, however, be noted that these beneficial
provisions would not apply, where the assessee transfers his share in the project on or before
the date of issue of said completion certificate and the capital gain tax liability would be
deemed to arise in the previous year in which such transfer took place. In such a case, full
value of consideration received or accruing shall be determined by the general provisions of
the Act.
Illustration no.1
Mr. X purchased a residential plot on 01.01.1998 for Rs.50,00,000. FMV of plot as on 01.04.2001
is Rs.65,00,000. Alpha builder enters into a Development Agreement with Mr.X on 01.05.2017
on the following terms and conditions.
(a) Mr. X will hand over the possession of plot to Alpha Builders on 01.05.2017.
(b) Alpha builders will pay a cheque of Rs.60,00,000 to Mr. X on 01.05.2017.
(c) Alpha Builders will construct 10 residential units on the plot of land and will give 6 units to
Mr.X. The 10 units on the plot of land and will give 6 units to Mr. X. The 10 units shall be
completed by 30.06.2019 and on that date 6 units will be handed over to Mr.X
(d) The stamp duty value of plot as on 01.05.2017 in Rs.2 Crores.
(e) The stamp duty value of each flat on 30.06.2019 is Rs.45 Lakhs.
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 10
Case I: The project completion certificate is issued by competent authority on 30.06.2019. 6
units are handed over to Mr.X on 30.06.2019
Case II: The project completion certificate is issued by competent authority on 30.04.2020 and
on that date the stamp duty value of each flat is Rs.50 lakh. 6 units are handed over to Mr.X on
30.04.2020.
Answer:
The e is a T a sfe o . . i ha ds of M .X si e he has gi e the possession of
residential plot pursuant to Development Agreement.
However as per section 45(5A) introduced by Finance Act, 2017, the capital gains shall not be
taxable in Previous Year 31.03.2018 but shall be taxable in the Previous Year in which
certificate of completion is issued by competent Authority. Thus, capital gains shall be taxable.
Section 45(5A) is applicable since assessee is an individual.
The holding period of residential plot shall be taken from 01.01.1998 to 30.04.2017 i.e. long
term.
As per section 55, the COA of plot is Rs.50,00,000 or FMV as on 01.04.2001, whichever is
higher. Therefore, COA of plot is Rs.65,00,000.
The Sale consideration of plot shall be worked out as under as per section 45(5A).
Sale consideration = SDV on the date of issue of completion certificate of his share in
land/building in project plus consideration received in cash
Capital Gains shall be worked out as under:
Case I: In Previous 31.03.2020, when completion certificate is issued by Competent Authority,
Capital Gains shall be worked out as under:
Assessment Year 2020-21
Capital Gains:
Period of holding : 01.01.1998 to 30.04.2017 (Long Term)
Sales Price
SDV of 6 Flats on 30.06.2019 : 45 Lakhs x 6 + Rs.60,00,000 Rs.3,30,00,000
+ Cash Received
Cost of Acquisition : Rs.65,00,000
Less: Indexed Cost of Acquisition : 65,00,000 x 272/100 Rs.1,76,80,000
Long term Capital Gain Rs.1,53,20,000
Case II: In Previous 31.03.2021, when completion certificate is issued by Competent Authority,
Capital Gains shall be worked out as under:
Assessment Year 2021-22
Capital Gains:
Period of holding : 01.01.1998 to 30.04.2017 (Long Term)
Sales Price
SDV of 6 Flats on 30.06.2020 : 50 Lakhs x 6 + Rs.60,00,000 Rs.3,60,00,000
+ Cash Received
Cost of Acquisition : Rs.65,00,000
Less: Indexed Cost of Acquisition : 65,00,000 x 272/100 Rs.1,76,80,000
Long term Capital Gain Rs.1,83,20,000
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 11
Illustration no.2
Suppose in Illustration 1, the residential plot was owned by a company X Ltd instead of Mr. X.
Answer:
Section 45(5A) is applicable only to an individual and HUF. If the plot is owned by the company X
Ltd., then capital gains arises on 01.05.2017 being date of possession and capital gains shall be
taxable in Previous Year 2017-18.
Period of holding : 01.01.1998 to 30.04.2017 (Long term)
Sales Price : SDV of Plot as on 01.05.2017 Rs.2,00,00,000
Cost of Acquisition : Rs.65,00,000
Less: Indexed Cost of Acquisition : 65,00,000 X 272/100 Rs.1,76,80,000
Long term Capital Gain Rs.23,20,000
Illustration no.3
Suppose in Illustration 1, part completion certificate for 2 units is obtained on 31.07.2018. The
stamp duty value of each unit on that date is Rs.42 lakhs per unit.
Answer:
As per section 45(5A), the entire capital gains shall be taxable in the Previous Year in which
certificate of completion for the whole or part of the project is issued by authority. Therefore,
Capital gains become taxable in Assessment Year 2019-20. [Holding period 01.01.1998 to
30.04.2017]
The sale price shall be SDV on the date of issuance of certificate of completion for part project of
his share in project as increased by cash received. Therefore, sale price shall be:
Pe iod of holdi g Sales P i e Cost of A uisitio • Less: I de ed Cost of A uisitio : , , X 272/100 Long term Capital Gain
Rs.42 Lakh x 6 unit + Rs.60,00,000 = Rs.3,12,00,000
Assessment Year 2019-20
Period of holding : 01.01.1998 to 30.04.2017 (Long term)
Sales Price : Rs.3,12,00,000
Cost of Acquisition : Rs.65,00,000
Less: Indexed Cost of Acquisition : 65,00,000 X 272/100 Rs.1,76,80,000
Long term Capital Gain Rs.1,35,20,000
Illustration 4:
In illustration 1 and in Illustration 3, if Mr. X sells the two units on 01.01.2021 for Rs.80,00,000
each, what will be the tax implications?
Answer: As per section 49(7), the cost of acquisition of share of the assessee in the project in form
of land or building or both shall be the amount which has been deemed as full value of
consideration under section 45(5A). The date of acquisition of the share of the assessee in the
project shall be the date on which possession of the share of the assessee in the project is handed
over to the assessee.
Therefore, position shall be as under:
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 12
Amount deemed
as sales
consideration for
section 45(5A)
COA per unit Date of
Acquisition
Sale
Consideration
Per Unit
Illustration 1
CASE I 3,30,00,000
(For Six Units)
3,30,00,000/6 =
Rs.55,00,000
30.06.2019 80,00,000
CASE II 3,60,00,000
[For Six Units]
3,60,00,000/6 =
Rs.60,00,000
30.04.2020 80,00,000
Illustration 3 3,12,00,000
[For Six Units]
3,12,00,000/6 =
52,00,000
31.07.2018 for 2
units and actual
date of
possession for
balance 4 units
80,00,000
Capital Gains shall be as under:
Illustration 1
Case I Short Term 25,00,000 per unit
Case II Short Term 20,00,000 per unit
Illustration 3 Long Term 28,00,000 per unit subject to indexation
Illustration no.5
Suppose in illustration 1, Mr. X sells two flats before the issue of completion certificate on
30.12.2018 for Rs.75 lakhs each.
Answer:
As per proviso to section 45(5A), since assessee has sold his share in the project before the Issue
of completion certificate, the provisions of main section 45(5A) shall not be applicable.
Capital gains shall be deemed to the income of the previous year in which transfer takes
place. Since transfer takes place on date of possession, the transfer has taken place on
01.05.2017 i.e. Assessment Year 2018-19.
Now the question arise as to what is the sale price of the plot. The answer seems be SDV of 6
flats plus Rs.60 Lakh. But this answer does not seem to be correct since the flats are not in
existence and are yet to be constructed. The sale price does not seem to be ascertainable in
this case.
As per section 50D, where the sale price is not ascertainable or cannot be determined, then
the fair market value of the asset transferred on the date of transfer shall be taken to the sale
price. Since stamp Duty Value is the Fair Market Value, therefore SDV on 01.05.2017 i.e. Rs.2
Crores shall be taken to be the sales price of the plot.
The holding period of plot shall be from 01.01.1998 to 30.04.2017 (Long Term)
DA of plot as per section 55 is Rs.65,00,000 being FMV on 01.04.2001.
Capital Gains on Plot taxable in Assessment Year 2018-19
Sale Price : 2,00,00,000
COA : 65,00,000 X 272/ 100 = 1,76,80,000
LTCG : 23,20,000
Assessee can file a revised return for Assessment Year 2018- 19 showing LTCC of Rs.23,20,000.
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 13
Capital Gains on Sale of 2 Units sold before the issue of completion certificate
Assessment Year 2019-20
Assessee has sold his right to get to flat and hence he has transferred a capital asset. The holding
period of capital asset is from 01.05.2017 to 29.12.2018 (short term less than 3 years) COA of
these flats will be = 2,00,00,000/6 x 2 = Rs.66,66,666.
Sale Price: Rs.1,50,00,000
Capital Gains: Rs.83,33,334
In this case, what assessee is selling is his right to get the flat, he is not selling land and / or
building. Hence, in the present case, the holding period shall be more than 36 months for capital
gains to be long term.
Exemption u/s10(38)
Finance act, 2017 provides that exemption under section 10(38) on equity shares shall be available
if the shares sold:
(i) Were acquired before 01.10.2004 in any manner (STT came into force from 01.10.2004).
(ii) Were acquired on or after 01.10.2004 and STT was paid on the acquisition of these shares.
However Central Governments has notified certain acquisitions made on or after 01.10.2014
which will be eligible for exemption under section 10(38) even if STT is not paid on the
acquisition.
SEC 50C:- DEEMED FULL VALUE OF CONSIDERATION FOR COMPUTATION
No
1. Capital asset = land (or) building (or) both
2. If consideration received (or) accruing as a result of transfer less than SDV, then FVC is SCV
3. If date of agreement is different from the date of transfer
Whole (or) part of consideration
received by way of a/c payer cheque
(or) bank draft (or) ECS on (or)
before the date of agreement
FVC = SDV on
the date of
agreement
FVC = SDV on
the date of
transfer
Yes
4. If the assessing officer refer the valuation to a valuation officer, on the assesse’s claim that the SDV > FMV of the property on the date of transfer
Valuation by valuation officer < SDV Valuation by valuation officer > SDV
FVC = value determined by valuation officer FVC = SDV
Note: A.O a ’t efe to aluatio offi e , if SDV halle ged efo e a autho it / ou t.
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 14
Special provision for full value of consideration for transfer of unlisted shares [section 50CA]
1. In order to ensure the full consideration is not understated in case of transfer of unlisted
shares, a new section 50CA has been inserted to provide that where the consideration
received or accruing as a result of transfer of a capital asset, being share of a company other
than a quoted share, is less than the fair market value of such share determined in such
manner as may be prescribed, such fair market value shall be deemed to be the full value of
consideration received or accruing as a result of such transfer.
2. Fo the pu pose, uoted sha es ea s the sha e uoted o a e og ized sto k e ha ge with regularity from time to time, where the quotation of such share is based on current
transaction made in the ordinary course of business.
For example, Mr. A transfers to Mr. B, unquoted equity shares on 01.01.2018 for Rs.2,00,000. The
FMV of these shares is Rs.5,00,000. Mr.A had purchased these shares for Rs.1,50,000. Now as per
section 50CA, the capital gains in hands of Mr.A shall be
Sale price (FMV as per section 50CA) 5,00,000
COA 1,50,000
Capital Gains 3,50,000
Also, in hands of Mr.B, section 56(2)(x) shall be attracted and Rs.3,00,000 shall be income from
other sources in hands of Mr.B. The COA of these shares in hands of Mr.B shall be Rs.5,00,000 as
per section 49(4).
INCOME FROM OTHER SOURCES
Tax on certain dividends received from domestic companies (Section 115BBDA)
(i) Any income by way of aggregate dividend in excess of Rs 10 lakh shall be chargeable to tax in
the case of specified assessee who is resident in India, at the rate of 10%.
(ii) Meaning of certain terms
Term Meaning
Specified
assessee
Person other than
Domestic company
A fund or institution or trust or any university or other educational
institution or any hospital or other medical institution
A trust or institution
Dividend Includes dividend referred under section 2(22)(a) to (d) but shall not include
sub-clause (e) thereof.
(iii) Further, the taxation of dividend income in excess Rs 10 lakh shall be on gross basis i.e., no
deduction in respect of any expenditure or allowance or set-off of loss shall be allowed to
the assessee in computing the income by way of dividends.
(iv) Accordingly, exemption available under section 10(34), in respect of dividend received by a
shareholder from a domestic company would not apply to income by way of dividend
chargeable to tax under section 115BBDA.
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 15
Illustration:
Mr. X invested in shares and received dividends during the year at various dates as under:
Date of Receipt Scrip Nature of Dividend Amount of Dividend (Rs.)
27.6.2017 GAIL Final 1,75,000
25.8.2017 TCS Final 82,000
12.9.2017 ONGC Final 2,34,000
15.9.2017 BHEL Final 98,000
27.11.2017 CIPLA Interim 2,73,000
2.2.2018 NTPC Interim 1,69,000
To earn dividend income Mr. X spend Rs.67,000 during the year. Mr. X also earned the following
incomes:
Rent received from House located in South Delhi – Rs.6,00,000
Income from business (Computed) – Rs.3,60,000
Compute the total tax payable by him for the Assessment Year 2018-19.
Answer:
Computation of Income and Tax Liability of Mr. X
Assessment Year 2018-19
Particulars Amount (Rs.) Amount (Rs.)
Income under the Head House Property
Rent Received
Less: 30% under section 24(b)
6,00,000
1,80,000
4,20,000
Profits and Gains of Business or Profession Income from
other sources
Income from dividends
3,60,000
31,000
Total Income 8,11,000
Tax on Dividend @ 10%
Tax on Other Income
Total Tax
Add : Education & Secondary & Higher Education Cess @ 3%
3,100
68,500
71,600
2,148
Tax Payable 73,748
Illustration:
Arya Global Shares and Securities Pvt. Ltd., a resident, earned a dividend of Rs.34,56,000 during
the year ended 31.3.2018 from various securities in which the company was trading. Discuss the
tax implication on the dividend income.
Answer:
Since the dividend is received by the company, therefore, section 115BBDA is not applicable. Total
dividend earned by the company shall be exempt from tax under section 10(34).
Any sum of money or value of property received without
consideration or for inadequate consideration to be subject to tax
in the hands of the any recipient [Section 56(2)(x)]
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 16
Nature of asset Taxable value
1. Money The whole amount if the same exceeds Rs 50,000.
2. Movable
property
(i) Without consideration: The aggregate fair market value of the
property, if it exceeds Rs 50,000.
(ii) Inadequate consideration: The difference between the aggregate
fair market value and the consideration, if such difference exceeds
Rs 50,000.
3. Immovable
property
(i) Without consideration: The stamp value of the property, if it
exceeds Rs 50,000.
(ii) Inadequate consideration: The difference between the stamp duty
value and the consideration, if such difference exceeds Rs 50,000.
If the date of agreement different from the date of transfer and whole or part of the consideration
paid by way of A/c payee/Bank Draft/ECS on or before the date of agreement than SDV on the
date of agreement to be considered.
Illustration: GIFT AND CAPITAL GAIN
Mr. Hari, a property dealer, sold a building in the course of his business to his friend Rajesh, who
is a dealer in automobile spare parts, for Rs. 90 lakh on 1.1.2018, when the stamp duty value
was Rs. 150 lakh. The agreement was, however, entered into on 1.9.2017 when the stamp duty
value was Rs. 140 lakh. Mr. Hari had received a down payment of Rs. 15 lakh by a crossed
cheque from Rajesh on the date of agreement. Discuss the tax implications in the hands of Hari
and Rajesh, assuming that Mr. Hari has purchased the building for Rs. 75 lakh on 12th July, 2016.
Would your answer be different if Hari was a share broker instead of a property dealer?
Solution:
Case 1: Tax implications if Mr. Hari is a property dealer
In the hands of Mr. Hari In the hands of Mr. Rajesh
In the hands of Hari, the provisions of section
43CA would be attracted, since the building
represents his stock-in trade and he has
transferred the same for a consideration less than
the stamp duty value on the date of agreement.
Therefore, Rs. 65 lakh, being the difference
between the stamp duty value on the date of
agreement (i.e., Rs. 140 lakh) and the purchase
price (i.e., Rs. 75 lakh), would be chargeable as
business income in the hands of Mr. Hari.
Since Mr. Rajesh is a dealer in automobile
spare parts, the building purchased would
be a capital asset in his hands. The
provisions of section 56(2)(x) would be
attracted in the hands of Mr. Rajesh who
has received immovable property, being a
capital asset, for inadequate consideration.
Therefore, Rs. 60 lakh, being the difference
between the stamp duty value of the
property on the date of registration (i.e., Rs.
150 lakh) and the actual consideration (i.e.,
Rs. 90 lakh) would be taxable under section
56(2)(x) in the hands of Mr. Rajesh, since
the payment is made by crossed cheque and
not account payee cheque/draft or ECS.
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 17
Case 2: Tax implications if Mr. Hari is a stock broker
In the hands of Mr. Hari In the hands of Mr. Rajesh
In case Mr. Hari is a stock broker and not a
property dealer, the building would represent his
capital asset and not stock-in-trade. In such a case,
the provisions of section 50C would be attracted in
the hands of Mr. Hari and Rs. 75 lakh, being the
difference between the stamp duty value on the
date of registration (i.e., Rs. 150 lakh) and the
purchase price (i.e., Rs. 75 lakh) would be
chargeable as short-term capital gains.
It may be noted that under section 50C, the option
to adopt the stamp duty value on the date of
agreement can be exercised only if whole or part of
the consideration has been received on or before
the date of agreement by way of account payee
cheque or draft or by use of ECS through a bank
account on or before the date of agreement. In this
case, since the payment is made by crossed
cheque, the option cannot be exercised.
There would be no difference in the
taxability in the hands of Mr. Rajesh,
whether Mr. Hari is a property dealer or a
stock broker. Therefore, the provisions of
section 56(2)(x) would be attracted in the
hands of Mr. Rajesh who has received
immovable property, being a capital asset,
for inadequate consideration. Therefore,
Rs. 60 lakh, being the difference between
the stamp duty value of the property on
the date of registration (i.e., Rs. 150 lakh)
and the actual consideration (i.e., Rs. 90
lakh) would be taxable under section
56(2)(x) in the hands of Mr. Rajesh.
Note:
As per section 43CA, stamp duty value on the date of agreement can be adopted, if whole or part
of consideration is received otherwise than by way of cash on or before the date of agreement.
However, both section 50C and 56(2)(x) permit adoption of stamp value duty on the date of
agreement only if whole or part of consideration is received/paid, as the case may be, by way of
account payee cheque or account payee bank draft or by use of ECS through a bank account.
SET-OFF & CARRY FORWARD OF LOSSES
Section 71: Inter-head adjustment
Loss under the head house property can be set off against income under the any other head to the
extent of 2lakhs only.
Illustration:
Mr. A submits the following particulars pertaining to the A.Y. 2018-19:
Particulars Rs.
Income from salary 4,00,000
Loss from self-occupied property (-)70,000
Loss from let-out property (-) 1,50,000
Business loss (-)1,00,000
Bank interest (FD) received 80,000
Compute the total income of Mr. A for the A.Y. 2018-19.
Solution:
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 18
Computation of total income of Mr. A for the A.Y. 2018-19
Particulars Amount (Rs.) Amount (Rs.)
Income from salary 4,00,000
Loss from house property of Rs. 2,20,000 to be restricted to
Rs. 2 lakhs by virtue of section 71(3A)
(-) 2,00,000 2,00,000
Balance loss of Rs. 20,000 from house property to be carry
forward to next assessment year
Income from other sources
(interest on fixed deposit with bank)
80,000
Business loss set-off (-) 1,00,000 –
Business loss of Rs. 20,000 to be carried forward
Gross total income [See Note below] 2,00,000
Less: Deduction under Chapter VI-A Nil
Total income 2,00,000
Note: Gross Total Income includes salary income of Rs. 2,00,000 after adjusting loss of Rs. 2,00,000
from house property. The balance loss of Rs. 20,000 from house property will be carried forward.
Business loss of Rs. 1,00,000 is set off against bank interest of Rs. 80,000 and remaining business
loss of Rs. 20,000 will be carried forward as it cannot be set off against salary income
DEDUCTIONS
Section 80 CCD
Contribution to pension scheme of Central Govt. / New pension scheme/ Atal pension Yojna.
a. Eligible assessee: Individual
b. Amount of deduction (Sec 80 CCD(1))
Deduction in respect of donations to certain funds, charitable institutions etc. [Section 80G]
No deduction shall be allowed under section 80G in respect of any donation of a sum exceeding
Rs.2,000 unless such sum is paid by any mode other than cash. Therefore, cash donations
exceeding Rs.2,000 are not eligible for deduction under section 80G
Section 80 CCG Investment made under an Rajiv Gandhi Equity Saving Scheme (RGESS)
Persons Entitled A new retail investor.
Being a resident individual, and;
Whose GTI ≤ 12 lacs(does not exceed).
Salaried employee Other individuals
(i) Employees contribution xx
(i) 10% of salary xx
(ii) Assessee’s o t i utio
(ii) 20% of GTI xx
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 19
Payment Regarding Specified listed equity shares or listed units of an equity oriented fund.
Quantum of
deductions
Deduction shall be @ 50% of the investment or Maximum deduction
in one year is Rs.25,000 which ever is lower.
Deduction is Allowed for 3 consecutive A.Y.s beginning with the AY
relevant to PY in which shares were first acquired.
Conditions for
deduction
Investment shall be locked in for a minimum period of 3 years from the
date of acquisition.
Non-Compliance of
conditions
Deduction shall be withdrawn, and;
The amount of deduction shall be included in the income of the
individual of the P/Y of non-compliance.
No deduction under this section shall be allowed from A.Y 2018-19. However an assessee who
has claimed deduction under this section for A.Y 2017-18 or earlier assessment years, shall be
allowed deduction till A.Y.2019-20, if he is otherwise eligible to claim the deduction as per
provisions of this section.
Illustration:
Mr. X, Mr. Y and Mr. Z, new retail investors for the previous year 2015-16, 2016-17 and 2017-18,
respectively, have made the following investments in equity shares/units of equity oriented
fund of Rajiv Gandhi Equity Savings Scheme for the P.Y. 2017-18 as below:
Particulars Mr. X(Rs.) Mr. Y(Rs.) Mr. Z(Rs.)
Investment in listed equity shares 20,000 45,000 32,000
Investment in units of equity-oriented fund 40,000 – 18,000
Gross Total Income (comprising of salary
income and bank interest)
11,25,000 12,15,000 11,50,000
Mr. X has claimed deduction under section 80CCG for A.Y. 2016-17 and A.Y. 2017-18 and Mr. Y
for A.Y. 2017-18.
Compute the deduction under section 80CCG for the Assessment Year 2018-19.
Solution:
Computation of Deduction under section 80CCG for the A.Y.2018-19
Particulars Mr. X(Rs.) Mr. Y(Rs.) Mr. Z(Rs.)
Deduction u/s 80CCG for A.Y. 2018-19 25,000 NIL NIL
Remark (Restricted to 50%
of Rs. 50,000)
(Since GTI > Rs.
12,00,000)
No deduction is
allowed from
A.Y. 2018-19.
Note – Mr. X is eligible for deduction under section 80CCG for A.Y. 2018-19, since he has claimed
deduction there under for A.Y. 2016-17 and A.Y. 2017-18 and he fulfils the conditions for claim of
deduction in A.Y. 2018-19.
RETURN OF INCOME
QUOTING OF AADHAR NUMBER [SECTION139AA]
1. Mandatory quoting of Aadhar Number
Every person who is eligible to obtain Aadhar Number is required to mandatorily quote Aadhar
Number, on or after 1st July, 2017:
(a) In the application form for allotment of Permanent Account Number (PAN)
(b) In the return of income
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 20
2. Mandatory quoting of Enrolment Id, where person does not have Aadhar Number
If a person does not have Aadhar Number, he is required to quote Enrolment ID of Aadhar
application form issued to him at the time of enrolment in the application form for allotment of
Permanent Account Number (PAN) or in the return of income furnished by him.
Enrolment ID means a 28 digit Enrolment Identification Number issued to a resident at the time of
enrolment.
3. Intimation of Aadhar Number to prescribed Authority
Every person who has been allotted Permanent Account Number (PAN) as on 1st
July, 2017, and
who is eligible to obtain Aadhar Number, shall intimate his Aadhar Number to prescribed authority
on or before a date as may be notified by the Central Government.
4. Consequences of failure to intimate Aadhar Number
If a person fails to intimate the Aadhar Number, the permanent account Number (PAN) allotted to
such person shall be deemed to be invalid and the other provisions of the Act shall apply, as if the
person had not applied for allotment of permanent account number (PAN).
5. Provision not to apply to certain person or class of persons
The provisions of section 139AA relating to quoting of Aadhar Number would, however, not apply
to such person or class or classes of persons or any State or part of any State as may be notified by
the Central Government.
ADVANCE TAX & INTEREST
Non-applicability of interest under section 234C in certain cases: Interest under section 234C
shall not be leviable in respect of any shortfall in payment of tax due on returned income, where
such shortfall is on account of under-estimate or failure to estimate.
(i) The amount of capital gains;
(ii) Income of nature referred to in section 2(24)(ix) i.e., winnings from lotteries, crossword
puzzles etc.
(iii) Income under the head profits a d gai s of usi ess or professio i ases he e the income accrues or arises under the said head for the first time.
(iv) Income of the nature referred to in section 115BBDA i.e., dividend in aggregate exceeding of
Rs. 10 lakhs received during the previous year.
However, the assessee should have paid the whole of the amount of tax payable in respect of such
income referred to in (i), (ii), (iii) and (iv), as the case may be, had such income been a part of the
total income, as part of the remaining installments of advance tax which are due or where no such
installments are due, by 31st March of the financial year
TDS
194
J
TDS on
professional
services
Any person (Other than
Individual/HUF not
liable to tax audit in last
pervious year)
Any resident
person
10%
However, in case payee
engaged in the business of
operating of call center @2%
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 21
New sections added by Finance Act 2017
Section Description Threshold
Limit
Payer Payee Rate
of TDS
Time of deduction
194 IB Payment of
rent by
certain
individual or
HUF
Rs 50,000
for a
month or
part of a
month
Individual
or HUF
( whose
turnover
not
exceeds
threshold
limit u/s
44AB in
preceding
financial
year)
Any
Resident
5% At the time of credit of
rent for last month of
PY or last month of
tenancy if property
vacated during the
year as the case may
be to the account of
payee or at the time of
payment whichever is
earlier.
194 IC Payment
under
specified
contract
u/s 45(5A)
- Any person Any
Resident
10% At the time of credit of
such income to the
account of the payee
or at the time of
payment whichever is
earlier.
ANALYSIS OF SECTION 194-IC
In joint development agreement referred to in section 45(5A), if the builder pays any cash to
the assessee in addition to share in the project, then builder shall deduct TDS @ 10% on the
cash payment made to the assessee.
It may be noted that capital gains are taxable in the hands of the assessee in the previous year
in which certificate of completion is issued by competent authority Therefore, the TDS credit
shall be claimed by the assessee in the previous year which capital gains are taxable.
To illustrate, the builder makes payment to the assessee on 1-1-2018 of Rs.1 crore. The
builder will deduct TDS @ 10% on Rs.1 crore on 1-1-2018. However, completion certificate is
obtained on 1-1-2020, then capital gains shall be taxable in the hands of assessee in previous
year 31.3.2020 and credit of TDS shall be claimed in previous year 31.3.2020.
Illustration
Mr. X, a salaried individual, pays rent of Rs. 55,000 per month to Mr. Y from June, 2017. Is he
required to deduct tax at source? If so, when is he required to deduct tax? Also, compute the
amount of tax to be deducted at source. Would your answer change if Mr. X vacated the
premises on 31st December, 2017? Also, what would be your answer if Mr. Y does not provide
his PAN to Mr. X?
Solution:
GURUKUL FOR CA & CMA INCOME TAX AMENDMENTS 22
Since Mr. X pays rent exceeding Rs. 50,000 per month in the F.Y. 2017-18, he is liable to deduct tax
at source @5% of such rent for F.Y. 2017-18 under section 194-IB. Thus, Rs. 27,500 [Rs. 55,000 x
5% x 10] has to be deducted from rent payable for March, 2018.
If Mr. X vacated the premises in December, 2017, then tax of Rs. 19,250 [Rs. 55,000 x 5% x 7] has
to be deducted from rent payable for December, 2017.
In case Mr. Y does not provide his PAN to Mr. X, tax would be deductible @20%, instead of 5%. In
case 1 above, this would amount to Rs. 1,10,000 [Rs. 55,000 x 20% x 10] but the same has to be
restricted to Rs. 55,000, being rent for March, 2018.
In case 2 above, this would amount to Rs. 77,000 [Rs. 55,000 x 20% x 7] but the same has to be
restricted to Rs. 55,000, being rent for December, 2017.
Exemption to Political Parties [Sec.13A]
1. Meaning:
Political party means a political Party registered u/s 29A of Representation of people Act, 1951.
2. Exempted Incomes:
The following Incomes are exempt from tax:
a) Income from House property.
b) Income from Other Sources.
c) Voluntary Contributions received.
d) Capital Gains.
3. Conditions:
The following conditions should be fulfilled for availing the exemption.
a) Proper books of accounts and documents must be maintained.
b) No donations of Rs. 2,000 or more received otherwise than by an account pay cheque/
draft/ use of electronic clearing system through a bank account or through electoral bonds.
c) The Accounts should be audited by a Chartered Accountant.
d) The Treasurer of the Political Party of any other Authorized person, shall submit the
prescribed Report u/s 29C (3) of the Representation of people Act, 1951.
4. Return of Income:
Political parties are under obligation to file their Return of Income u/s 139(4B) on or before
the due date u/s 139(1). If ROI not filed within time limit u/s 139(1) than exemption under
section 13A not available.