Budget 2009-2010

Direct Taxes :

Change in Tax Rate of Individuals / HUFs/ Non Residents / AOPs / BOIs :

Taxable Income Existing Proposed
Rs. 1,50,000 – Rs. 1,60,000 10% NIL
Rs. 1,60,001 – Rs. 3,00,000 10% 10%
Rs. 3,00,001 – Rs. 5,00,000 20% 20%
Rs. 5,00,001 – Rs. 10,00,000 30% 30%
Above Rs. 10,00,001 30% + 10% 30%

Special Concession has been given to women assessee below the age of 65 years :

Taxable Income Existing Proposed
Rs. 1,80,000 – Rs. 1,90,000 10% NIL
Rs. 1,90,001 – Rs. 3,00,000 10% 10%
Rs. 3,00,001 – Rs. 5,00,000 20% 20%
Rs. 5,00,001 – Rs 10,00,000 30% 30%
Above Rs. 10,00,001 30% + 10% 30%

Similarly special concession has been given to Senior Citizens :

Taxable Income Existing Proposed
Rs. 2,25,000 – Rs. 2,40,000 10% NIL
Rs. 2,40,001 – Rs. 3,00,000 10% 10%
Rs. 3,00,001 – Rs. 5,00,000 20% 20%
Rs. 5,00,001 – Rs 10,00,000 30% 30%
Above Rs. 10,00,001 30% + 10% 30%

Tax Rates of Firms: 30% of the total income

Note: In all the above cases surcharge has been removed with effect from Financial Year 2009-10.
In the case of co-operative society rates are given below :

Taxable Income Existing
Up to Rs. 10,000 10%
From Rs. 10,001-Rs. 20000 20%
Above Rs. 20000 30%

Tax Rates of Domestic Companies: 30% of the total income plus 10% surcharges on tax payable if total income exceeds rupees one crore. Notes: In all the above cases;

  • Education Cess @ 2% to be continued on all slabs.
  • Secondary and Higher Education Cess @1% to be continue. This will make total education cess at 3%.

Section wise amendments of Income Tax Act, 1961

Sr.No. Section Relating to Subject Existing Provisions Proposed amendment Proposed to be applicable from
1 2(15) Definition of “Charitable purpose” Charitable purpose includes relief to poor, education, medical relief and the advancement of any other object of general public utility Charitable purpose will now also include (in addition to the purposes mentioned earlier) “preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest” 1st April, 2009
2 2(22AAA)(Newly inserted) Definition of “Electoral Trust” Newly inserted It is a trust approved by CBDT in accordance with the scheme made by the Central Government in this behalf 1st April, 2010
3 Section 2(24) (iia) and Section 13A Definition of “Income” with respect to Voluntary contribution received by various organizations Voluntary contribution received by a trust or institution or association or university or educational institutions or any hospital or other institutions will be their income. Now as proposed, Electoral Trust (as defined in section 2(22AAA) will also come in this list of institutions. In other words, voluntary contribution received by Electoral Trust will be its income. It is further proposed that if voluntary contribution received by an electoral trust shall not be included in the total income of the previous year of such electoral trust, if (i) such electoral trust distributes to any political party, registered under section 29A of the Representation of the People Act, 1951, during the said previous year, ninety-five percent of the aggregate donations received by it during the said previous year along with the surplus, if any brought forward from any earlier previous year: and (ii) such electoral trust functions in accordance with the rules made by the Central Government. 1st April, 2010
4 Clause (i), (ii) and (iii) of Section 2(23) Definition of “Firm”, “Partner”, “Partnership” Under the existing provisions, the expression “firm”, “partner” and “partnership” derives their meaning from The Indian Partnership Act, 1932 Now as proposed:-

  • In the context of partnership formed under the Indian Partnership Act, 1932 : The expression “firm”, “partner” and “partnership” will derive their meaning from The Indian Partnership Act, 1932
  • In the context of the entity registered under the Limited Liability Partnership Act, 2008 : The expression “firm”, “partner” and “partnership” will derive their meaning from Clause (i), (ii) and (iii) of Section 2(23)

The main difference in these two set of definitions is that in LLP, the expression “partner” also includes any person who, being a minor, has been admitted to the benefit of partnership.

 1st April, 2010
5 Section 2(29BA) (Newly Inserted) Definition of “Manufacture” Newly Inserted
  • The term “manufacture” with its grammatical variations would mean a change in a non-living physical object or article or thing resulting in transformation of the object or article or thing into a new an distinct object or article or thing having a different name, character and use or
  • bringing into existence of a new and distinct object or article or thing with a different chemical composition of integral structure.
 1st April, 2009
6 Section 2(48) Definition of “Zero Coupon Bond” A bond issued by any infrastructure capital company or infrastructure capital fund or public sector company Now as proposed, Schedule Bank is also eligible to issue Zero Coupon Bond in addition to earlier mentioned company / Fund. 1st April, 2009
7 Subclause vi, vii and vii of Section 17(2) Taxable perquisite provided to employees by employer As per Chapter XII-H following benefits to employees are chargeable to employer as Fringe Benefit Tax.

  • The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer or former employer, free of cost or at confessional rate to the assessee.
  • The amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees.
  • The value of any other fringe benefit or amenity as may b prescribed.
 Now as proposed, due to abolition of Fringe Benefit Tax, this benefits provided by the employer to employee are taxable to employee as perquisite under the Head Salary 1st April, 2010
8 Section 10 (10C) and Relief u/s 89 (Newly Inserted) Voluntary Retirement Newly inserted Proviso It has been proposed that after the second proviso, it has been provided also that where any relief has been allowed u/s 89 for any Assessment Year for any amount, received or receivable on his voluntary retirement, or termination of service or voluntary separation, or in case of Public sector Company u/s 10(10C) (i), no exemption under this clause shall be allowed to him in relation to such or any other Assessment Year. 1st April, 2010.
9 Section 10(23C) Certain trusts whose income is exempt in 14th proviso to clause (23C) of section 10. Application made on or after 1st June,2006 for the purpose of grant of exemption or continuance thereof, such application shall be made at any time during the Financial Year immediately preceeding the Assessment Year from which the exemption is sought. It is proposed to amend the said proviso so as to allow the filing of application on or before 30th September of relevant Assessment Year. 1st April, 2009.
10 Explanation in clause (a) of Section 10(23D) Mutual Fund registered under SEBI, 1992 or set up by a Public Sector Bank or Public Financial Institution or authorised by RBI, Income is Exempt. The expression “Public Sector Banks” included certain banks. It has been proposed that the words “and a bank included in the category ‘other public sector banks’ by RBI” shall be inserted with effect from 1st April, 2010. 1st April, 2010.
11 Clause 44 to section 10. Income received for or on behalf of New Pension System Trust. Newly Inserted Clause. It is proposed to provide that any income received by any person for, or on behalf of, the New Pension System Trust established on 27 th February, 2008 under the provisions of the Indian Trust Act, 1882 will also not be included in total income of such trust. Will take effect retrospe ctively from 1st April, 2009.
12 Section 10A(1) Special provisions in respect of newly established undertaking in Free Trade Zone etc. In the fourth Proviso, no deduction under section 10A shall be allowed to any undertaking from 1st day of April, 2011. It has been proposed to substitute the date from 1st April, 2011 to 1st day of April, 2012. 1st April, 2012.
13 Section 10AA(7) Special provisions in respect of newly established undertaking in Special Economic Zone. In subsection (7), the words “by the assessee” are occurring at the end. It shall be substituted by the words, “By the undertaking” with effect from 1st April, 2010. 1st April, 2010.
14 Section 10B(1) Special provisions in respect of newly established 100% E.O.U’s In the 3rd proviso, no deduction under Section 10B shall be allowed to any undertaking from 1st day of April, 2011. It has been proposed to substitute the date from 1st April, 2011 to ‘1st day of April, 2012.’ 1st April, 2012.
15 Section 28(vii) (Newly Inserted) Chargeability of the expenses claimed under section 35AD Newly Inserted The expenses claimed under section 35 AD will be again subject to tax, if the capital assets (charged as expenses in 35 AD) is demolished, destroyed, discarded or transferred. Here land or Goodwill or Financial Instrument will not be covered under capital assets. 1st April, 2010
16 Explanation 3 to Section 32(1) Meaning of “Assets” and “Block of Assets” for the purpose of provisions relating to depreciation. The words “Assets” and “Block of Assets” were separately defined. Now this explanation will only define “assets”. “Block of Assets” shall have the meaning as assigned to it in section 2(11). 1st April, 2010
17 35 (2AB) Deduction in respect of incurred by a company engaged in certain businesses Where a company engaged in the business of bio-technology or in the business of manufacture or production of any drugs, pharmaceuticals, electronic equipments, computers, telecommunication equipments, chemicals or any other article or thing notified by the board incurs any expenditure on scientific research(not being expenditure in the nature of cost of any land or building) on in house research and development facility as approved by the prescribed authority, then , there shall be allowed a deduction of a sum equal to 150% of the expenditure. It is proposed to extend the benefit of the said deduction to all businesses engaged in the manufacturing or production of article or thing except those specified in the Eleventh Schedule. 1st April, 2010
18 Section 35AD (Newly Inserted) Allowing deduction of capital expenses incurred for specified business Newly Inserted The capital expenses (Other than land or goodwill or financial instrument) incurred during the year by the Assessee , will be allowed as deduction if it is incurred wholly or exclusively, for specified business. The Specified business has been defined to mean the business of setting up and operating of cold chain facilities for storage or transportation of agricultural produce, dairy products and other related items. It would also include the business of warehousing for storing agricultural produce and the business of laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network. 1st April, 2010
19 Clause (i) of the Explana tion to Section 36(1)(iii a) Meaning of “Discount” for the purpose of provisions relating to “Other deduction” U/S 36 The definition contains the amount received or receivable and payable by only “infrastructure capital company” or “infrastructure capital fund” or “public sector company” issuing the bond. Now it has been proposed to include “Schedule Bank” after the word “Public Sector Company”. Retrospectively from 1st April, 2009
20 Clause (b)(i) of the Explanation to Section 36(1)(viii) Deduction in respect of any special reserve created and maintained by eligible entities carrying out eligible businesses for an amount not exceeding 20% of Profit derived from eligible business activities, carried to such reserve. The definition of “eligible business” for the purpose of availing deductions has been given. Now it is proposed to substitute the words “Construction or Purchases of houses in India for residential purposes” (as given in this definition) with the words “Housing Development”. 1st April, 2010
21 Section 36(1)(xvi) Commodity Transaction Tax (CTT) paid allowed as deduction Commodity Transaction Tax paid shall be allowed as deduction if the income arising from such taxable commodities is included in the income computed under the head “Profits and gains of business and profession.” It is Proposed to abolish CTT therefore this clause is also proposed to be abolished. Retrospe ctively from 1st April, 2009
22 Section 40(b)(v) Limits of deduction related to Payments of salary, bonus, commission or remuneratio n to working partners Limits for the firm carrying on a profession referred to in section 44A and for the purpose of any other firm was separately provided. Now, to provide Uniform limit for all the firms has been proposed, which is as follows:

  • on the first Rs. 300000 of the book profit or in case of a loss—Rs. 150000 or at the rate of 90% of the book profit, whichever is more.
  • On the balance—60% of book profit.
 1st April, 2010
23 Second Proviso to Section 40A(3A) (Newly inserted) Expenses or Payments not deductible if amount exceeding Rs. 20000 has been paid otherwise than by account payee cheque and bank draft Newly Inserted Now it is proposed that in case of payment made for plying, hiring or leasing goods carriages, the limit of Rs.20000 shall be enhanced to Rs. 35000. 1st October, 2009
24 Explana tion 13 to Section 43(1) (Newly Inserted) Definition of actual cost of capital assets relevant to income from “Profits and gains from business and profession” Newly inserted The actual cost of the expenses claimed U/S 35AD shall be ‘nil’ in the case of this Assessee and any other if the asset is received or acquired by way of will, gift or irrevocable trust, on any distribution on liquidation of the company and by such mode of transfer as is referred to in clauses (iv),(v),(vi),(vib),(xiii) and (xiv) of section 47. 1st April, 2010
25 Explana tion 7 to Section 43(6) (Newly Inserted) Definition of certain terms relevant to income from “Profits and gains from business and profession” Newly inserted Where the income of an Assessee is derived both from agriculture and business of the Assessee chargeable to the income tax under the head “Profits and gains from business and profession”, then for computing the WDV of the assets acquired before the previous year, the depreciation will be computed and allowed as if the whole income is derived from the business chargeable to the income tax under the head “Profits and gains from business and profession”. 1st April, 2010
26 Section 44AA(2)(iii) and insertion of new clause (iv) Relating to maintenance of accounts by certain persons carrying on profession or business If the Assessee has claimed his income to be lower than the profits and gains deemed under section 44AD or section 44AE or section 44AF or section 44BB or section 44BBB , then he has to keep and maintain books of accounts. In clause (iii), the words “section 44AD or section 44AE or section 44AF” are proposed to be substituted by words “section 44 AE”.

In clause (iv), it is proposed to provide that in case of an Assessee, who is covered under the proposed amended section 44AD, the maintenance of books of accounts is required if he claims that the profits and gains are lower than the profit and gains as per section 44AD(1) and if his income exceeds the maximum amount which is not chargeable to tax.

 1st April, 2011
27 Section 44AB (c) and insertion of new clause (d) Audit of accounts of certain persons carrying on business and profession It is obligatory to get his accounts audited, for a person carrying on business, if he has claimed lower profits than presumptive under section 44AD or section 44 AE or section 44AF or section 44 BB or section 44BBB. In clause (c), the words “section 44AD or section 44AE or section 44AF” are proposed to be substituted by words “section 44 AE”.

In clause (d), it is proposed to provide that in case of an Assessee, who is covered under the proposed amended section 44AD, audit of books of account is In clause (d), it is proposed to provide that in case of an Assessee, who is covered under the proposed amended section 44AD, audit of books of account is obligatory if he claims that the profits and gains are lower than the profit and gains as per section 44AD(1) and if his income exceeds the maximum amount which is not chargeable to tax.

 1st April, 2011
28 Section 44AD Income on presumptive basis 8% of the gross receipts in the previous year on account of “civil business” or a sum higher as declared by the Assessee in his return shall be deemed to the profits and gains chargeable to tax. Earlier this section was dealing only civil construction, Now it is proposed to be for any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE. This will be applicable to individual, HUF, Partnership firms but not limited liability partnership firm, whose turnover does not exceed Rs. 40Lacs. 1st April, 2011
29 Section 44AE Computation of Profits and gains of business of plying, hiring or leasing goods carriages In Case of heavy vehicles, the profits and gains from each such goods carriage shall be deemed to be Rs. 3500 and Rs.3150 in case of other than heavy Vehicles per month or part of a month or the higher amount as declared by the Assessee. It is proposed that, In Case of heavy vehicles, the profits and gains from each such goods carriage shall be deemed to be Rs. 5000 per month or part of a month or the amount actually earned whichever is higher and in case of other than heavy Vehicles Rs. 4500 per month or part of a month or the amount actually earned whichever is higher. 1st April, 2011
30 Clause (6) in Section 44AF (Newly Inserted) Computation of Profits and gains of retail business Estimating income of the retail trade will be 5% of the total turnover or a higher sum as declared by the Assessee in his return of income. In this newly inserted clause, it is proposed to provide that the provisions of the said section shall not apply to any Assessment Year beginning on or after 1st April, 2011. In other words from 01.04.11, section 44AF will be abolished and then the relevant section will be Section 44AD. 1st April, 2011
31 Section 49(2AA) Capital Gain arises from the transfer of the shares, debentures or warrants “Where the capital Gain arises from the transfer of the shares, debentures or warrants, the value of which has been taken into account while computing the value of perquisite U/S 17(2), the cost of acquisition of such shares, debentures or warrants shall be the value under that clause.” It is proposed to substitute the section with the following: “Where the capital Gain arises from the transfer of the specified security or sweat equity shares referred to in section 17(2)(vi), the cost of acquisition of such security or shares shall be the fair market value which has been taken into account for the purposes of the said sub clause.” 1st April, 2010
32 Clause (b) Explana tion 2 Section 50B and newly inserted clause (c) Computation of aggregate value of total assets for computing “Net Worth” for the purpose of the provisions of the Slump Sale As per Clause (b) of the said explanation in case of non depreciable assets, the book value will be the value of such assets. The said clause is proposed to be substituted by the following:

(b) In case of expenses allowed or allowable U/S 35AD —- Nil (c) In case of assets other than depreciable and (b) above—- The book value of such assets.

 1st April, 2010
33 Section 50C and its newly inserted explanation Special consideration for full value consideration of land or building or both Consideration received for transfer of land or building or both or the value “assessed” by the State Government whichever is higher will be deemed to be the full value consideration. Now the words so “assessed” proposed to be substituted with the words “So assessed or assessable”. It is also proposed to insert an explanation after the existing explanation to define the word “assessable” as the price which the stamp valuation authority would have adopted or assessed, if it were referred to such authority for the payment of stamp duty. 1st October, 2009
34 Section 56(2)(vi) Income from other Sources: Gifts received from a person other than relatives Any “Sum of money” received aggregating value of which exceeds Rs. 50000.00, which is received without consideration by Individual / HUF from any person other than relatives is taxable. Now the proposed amendment seeks to tax “specified properties” including “sum of money”, received without consideration or for inadequate consideration. Here “specified properties” means the following properties.

  • Sum of Money : No change in the existing provisions. (Taxable if exceeds Rs. 50000.00)
  • Any immovable property :
    • If it is received without consideration, then the Stamp Duty Value is taxable
    • If the same is received for a consideration less (by an amount exceeding Rs. 50000.00) than the Stamp Duty Value then the difference will be taxable
  • Any property other than immovable property :
    • If it is received without consideration, then the Fair market value is taxable
    • If the same is received for a consideration less (by an amount exceeding Rs. 50000.00) than the Fair market value then the difference will be taxable.
 1st October, 2009
35 56(2)(viii) (Newly Inserted) Income from other Sources: Interest received on compensation or enhanced compensation. Newly Inserted As per the new proposed provision, Interest received on compensation or enhanced compensation as referred in Section 145 A (2), will be taxable as income from other sources. 1st April, 2010
36 57(iv) (Newly inserted) Deductions available from “income from other sources” Newly inserted As proposed, a deduction of a sum equal to 50% of income of interest received on compensation or enhanced compensation as referred in Section 145 A (2) (referred to in section 56(2)(viii) as above) will be allowed. 1st April, 2010
37 Section 73A (Newly Inserted) Carry forward & set off of losses relating to specified business Newly Inserted Sub-section (1) to Section73A seeks to provide that any loss incurred by a specified business referred to in newly inserted Section 35AD can be set-off only against profit & gains from the same or any other specified business in the relevant assessment year of the assessee.

Sub-section (2) to Section73A specifies that any loss which cannot be wholly set-off in the relevant assessment year can be carried forward to next assessment year and so on.

 1st April, 2010
38 Section 80A (4) (Newly inserted) Deductions from Gross total income Newly inserted The proposed Sub-section (4) to Section 80A provides that notwithstanding anything to the contrary to section 10Aor 10AA or 10B or 10BA or in provisions of Chapter VIA, where any assessee who claims deduction of profit and gains of an undertaking or unit or enterprise or eligible business under the above mentioned sections, will not get any deduction of such profit and gains under any other provisions of the act and the deduction shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be. With retrospe ctive effect from 1st April, 2003 (Assess ment Year 2003- 2004)
39 Section 80A (5) (Newly inserted) Deductions from Gross total income Newly inserted This is with reference to Section 80A (4), which is effective retrospectively from 01.04.2003. The proposed Sub-section (5) to Section 80A provides that where the assessee fails to make a claim in his return of income for any deduction under section 10A or Section 10AA or Section 10B or Section 10BA or under any provisions of this chapter under the heading “C- Deductions in respect of certain income”, no deduction shall be allowed to him thereunder. With retrospective effect from 1st April,2003 (Assessment Year 2003-2004)
40 Section 80CCD Deductions from Gross total income in respect of Pension. The existing provisions state that an assessee being an individual employed by Central Government or any other employer on or after 1st Jan 2004, who has paid or deposited any amount in his account under a pension scheme notified or as may be notified by central govt. can claim a deduction under the mentioned section. It is proposed to amend the subsection so as to allow deduction to any other assessee in addition to an assessee, being an individual, employed by the Central Govt. or any other employer on or after 1st Jan 2004. Retrospective effect from 1st April 2009 (Assessment year 2009-2010).
41 Section 80CCD Deductions from Gross total income in respect of Pension. Newly Inserted It is proposed to provide that the assessee shall be deemed not to have received any amount in the previous year if such amount is used for purchase of any annuity plan in the same year. Retrospective effect from 1st April,2009(Assessment year 2009-2010).
42 Section 80DD Deduction from Gross total income in respect of maintenance including medical treatment of a dependent, who is a person with severe disability. Previously a deduction of Rs. 75000/- was allowed for a person being of severe disability. It is proposed to enhance the present limit from Rs. 75000/-to Rs. 100000/-. Assessment year 2010-2011 onwards.
43 Section 80E(3)(c) Deduction in respect of interest paid on loan taken for higher education As per clause(c) “higher education” means full time studies for any graduate or post graduate course in, engineering medicine, management or for post graduate courses in applied science or pure sciences including mathematics and statistics. It is proposed to provide that “higher education “ will mean any course of study pursued after passing the senior secondary examination or its equivalent from any school, board or university recognized by the Central Government or State Government or local authority or by any other authority authorised by the Central government or State government or local authority. 1st April, 2010
44 Section 80G Deduction in respect of donations made to institution or funds, charitable institutions, etc. The existing proviso to clause (vi) of subsection (5) of the said section provides that the approval granted by the Commissioner to any institution or fund shall have the effect for such number of years not exceeding five assessment years, as the case may be specified in the approval. The proposed amendment seeks to omit the proviso to clause (vi) of sub-section (5) of section 80G so as to do away with the time limit specified in the aforesaid proviso. 1st October, 2009
45 Section 80G Deduction in respect of donations made to institution or funds, charitable institutions, etc. The existing provisions contained in subsection (5) of the said section provides that the deduction under sub-section(1) is available to donations made to any institution or fund if it is established for a charitable purpose and it fulfills such other conditions as are specified. The proposed amendment seeks to provide that if any institution or fund had been approved under clause (vi) of sub-section (5) of section 80G for the previous year beginning on the 1st April 2007 and ending on the 31st March 2008, such institution or fund shall, for the purposes of aforesaid section and notwithstanding anything contained in the proviso to clause(15) of section 2, be deemed to have been

  • Established for charitable purposes for the previous year beginning on the 1st April 2008 and ending on the 31st March 2009;
  • Approved under said clause (vi) for the previous year beginning on the 1st April 2008 and ending on the 31st March 2009.
 Retrospective effect from 1st April, 2009 (Assessment year 2009-2010)
46 80GGB Deduction in respect of contributions given by companies to political parties. The existing provisions of the said section provides for deduction of any sum contributed by an Indian Company to any political party in the previous year while computing the total income of such Indian company. It is proposed to amend the aforesaid section so as to bring “electoral trust” within the scope of the said section so that contribution made by an Indian company to electoral trusts would also be eligible for deduction under that section. 1st April, 2010
47 Section 80GGC Deduction in respect of contributions given by any person to political parties. The existing provisions of the said section provides for deduction of any sum contributed by any person, except local authority and every artificial juridical person wholly or partly funded by the government to any political party in the previous year while computing the total income of any person. It is proposed to amend the aforesaid section so as to bring “electoral trust” within the scope of the said section so that contribution made by any person to electoral trusts would also be eligible for deduction under that section. 1st April, 2010
48 Section 80-IA Deductions in respect of profit and gains from industrial undertakings or enterprises engaged in infrastructure development , etc. Under the existing provisions contained in the clause (iv) of subsection (4) of the said section a deduction is allowed to an undertaking which is set up for the generation or/and distribution of power (beginning on 1st April 1993 and ending on 31st March 2010) or starts transmission or distribution (beginning on 1st April 1999 and ending on 31st March 2010) or undertakes renovation / modernization of the existing network of transmission or distribution lines (beginning on 1st April 2004 and ending on 31st March 2010). It is proposed to amend subclauses (a), (b) and (c) of the said clause so as to extend the time limit from 31st March 2010 to 31st March 2011. 1st April, 2009
49 Section 80-IA Deductions in respect of profit and gains from industrial undertakings or enterprises engaged in infrastructure development , etc. Under existing provisions of subclause (b) of clause (v) of sub- section which provides that an undertaking owned by an Indian company and set up for reconstruction or revival of a power generating plant are eligible for deduction if such undertaking begins before 31st March 2008. It is proposed to amend the said sub-clause so as to extend the date to begin generation, transmission or distribution of power from 31st March, 2008 to 31st March 2011. With retrospective effect from 1st April, 2008
50 Section 80-IA Deductions in respect of profit and gains from industrial undertakings or enterprises engaged in infrastructure development , etc. Clause (vi) of subsection (4) of said section which provides for deduction to any undertaking carrying on the business of laying and operating a cross- country natural gas distribution network, including pipelines and storage pipelines and storage facilities being an integral part of such network. It is proposed to omit clause (vi) of sub-section (4) of Section 80-IB. In view of the said amendment, it is also proposed to make amendments, with respect to subsection (1) and sub-section (3) of the said section. 1st April, 2010
51 Section 90 Double Taxation Avoidance Agreement The Central Government has the power to enter into agreement with the Government of any country outside India for granting of relief in respect of income on which income-tax has been paid both under the said Act and income-tax in that foreign country. Now as proposed, The Central Government has got the power to enter into agreement with the Government of any specified territory outside India in addition to entering into agreement with foreign countries. 1st October, 2009
52 Section 92C Determination of arm’s length price for Transfer pricing purpose The most appropriate method may be applied for arm’s length price. If the most appropriate method results in more than one price, the arithmetical mean of such or, at he option of the assessee, a price which differs from the arithmetical mean by an amount not exceeding five percent of such mean may be taken to be the arm’s length price in relation to the international transactions. Now as proposed, the arithmetic mean will be taken as arm’s length price, if more than one price is determined by most appropriate method. It is further provided that if the variation between the arm’s length price so determined and price at which the international transaction has actually been undertaken does not exceed five percent of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm’s length price. 1st October, 2009
53 Section 92CA Determination of arm’s length price by ‘safe harbour rules’. New section inserted The CBDT has been empowered to make ‘safe harbour rules’. Safe harbour means circumstances in which the income tax authorities shall accept the transfer price declared by the assessee. 1st April, 2009
54 Section 115BBC Anonymous donations to be taxed in certain cases Any income by way of anonymous donation is taxed at the rate of 30% and total income as reduced by the amount of anonymous donation is taxed at the normal rate. Anonymous donation, to the extent the aggregate of anonymous donation exceeds 5% of the total income of the assessee or an amount of Rs.1lac, which ever is higher would be taxed at 30%. 1st April, 2010
55 Section 115JA Deemed income relating to certain companies diminution in the value of any asset will also be included in the computation of the profit under the section Retrospective from 1st April, 1998
56 Section 115JAA Tax credit in respect of tax paid on deemed income relating to certain companies allowed to carry forward upto seven succeeding assessment years Tax credit determined under sub section (2A) is proposed to be allowed to carry forward upto ten succeeding assessment years instead of seven years. 1st April, 2010
57 Section 115JB Payment of tax by certain companies Previously tax rate was 10% of the Book Profit Rate of tax is proposed to be increased from 10% to 15% i.e. the tax payable shall be 15% of the book profit. 1st April, 2010
58 Section 115WM Fringe Benefit Tax It is proposed to be abolished 1st April, 2010
59 Section 132(1) Search and Seizure It is proposed to clarify that Additional Director or Additional Commissioner had always the power to issue warrant of authorisation for conducting search and seizure under the said section. It is proposed to clarify that Joint Director or Joint Commissioner had always the power to issue warrant of authorisation for conducting search and seizure under the said section. It is further proposed that above powers can be used unless it is empowered by the board. Retrospective from 1st June, 1994 Retrospective from 1st October, 1998 1st October, 2009
60 Section 132A(1) Powers to requisition books of account, etc. It is proposed to clarify that Additional Director or Additional Commissioner may be authorised to exercise the powers specified in the said section. Retrospective from 1st June, 1994
61 Section 139A Relating to PAN It is proposed to provide that every person deducting tax shall quote the PAN of the person to whom such sum has been paid by him in all statements prepared and delivered or caused to be delivered in accordance with the provision of 200(3). 1st October, 2009
62 Section 140 Relating to signing of return New section inserted In LLP, the return shall be signed and verified by the designated partner only. In case designated partner is not available by any unavoidable reason, any other partner may sign the return. 1st April, 2010
63 Section 144C Relating to Dispute resolution Panel It is proposed to create an alternative dispute resolution mechanism for issues between Transfer Pricing Officer and Assessing Officers regarding transfer pricing audit and the taxation of foreign company. 1st October, 2009
64 Section 145A Method of accounting in certain cases It is proposed to include the interest received by an assessee on compensation shall be deemed to be the income of the year in which it is received. 1st April, 2010
65 Section 147 Relating to income escaping assessment It is proposed to insert Explanation 3 to the said section which provides that the Assessing Officer may assess or reassess income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of the section 148. Retrospe ctive from 1st April, 1989
66 Section 167C Insertion of new section relating to Liability of partners of LLP Newly inserted ax due from a LLP, if cannot be recovered from LLP every person who was the partner of the LLP at any time during the relating previous year shall be jointly and severally liable for the payment of such tax. 1st April, 2010
67 Section 194C A deduction of Tax from source on payment to contractor and subcontractors
  • If the payee is an individual or HUF, TDS will be at 1% and in other cases it is 2%
  • If the sum is credited to a suspense account, then also TDS is to be deducted
  • Tax shall be deducted at source on the invoice value excluding the value of material if such value mentioned separately, otherwise on the whole of the invoice value
  • In case of payment for plying, hiring or leasing goods carriages and if the contractor provides his PAN no tax shall be deducted at source
 1st October, 2009
68 Section 194I TDS on income payable by way of rent 1st October, 2009
Use of Asset Payee Type Existing Rate Proposed Rate
Machinery or Plant and equipment 10% 2%
Land and Building including Factory Building, Furniture & Fixture Individual or HUF 15% 10%
Land and Building including Factory Building, Furniture & Fixture Other than Individual or HUF 20% 20%
69 Section 200A Statement of TDS Newly inserted Statement of TDS made under section 200 shall be processed and sums deductible shall be computed after making adjustment of any arithmetical error or apparent incorrect claim in the statement and interest, if any shall be charged on the sum so computed. 1st April, 2010
70 Section 206A Furnishing of quarterly returns in respect of payment of interest to residents The TDS returns are to be filed by a banking company or a cooperative society or a public company referred to in section 194A (3) (i) on floppy diskette, magnetic cartridge tap, CD-ROM or any other computer readable media. 1st October, 2009
71 section 206AA TDS Statements Newly inserted
  • If any person who is entitled to receive any sum or income or amount on which TDS is deductible does not furnish PAN, the rate of TDS will be rate in force or at the rate of 20% whichever is higher.
  • If the declaration is without PAN, it will be considered invalid. If the declaration becomes invalid, TDS has to be deducted as per the provision stated in first para.
  • The PAN furnished by deductee shall be indicated in all correspondence bills, documents vouchers, and other documents which are exchanged between them.
  • Wrong statement of PAN will amount to non statement of PAN.
 1st April, 2010
72 Section 208 Relating to conditions of liability to pay advance tax The limit of Rs.5000 for the payment of the advance tax. It is proposed to be enhanced to Rs.10000 Retrospective from 1st April, 2009
73 Section 271 Penalties The income not disclosed and found during the search and if the assessee has not filed the return of income for such year, then notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of his income.) 1st June, 2007
74 Section 282 Service of notice A notice or requisition under this act may be served on the person there in named either by post or as if it were a summons issued by a court under the code of civil procedure 1908(5 of 1908), It is proposed to provide that the service of notice or summons or any other communication by delivering or transmitting a copy thereof by post or courier service or in such manner as provided in the Code of Civil procedure or by any other means of transmissions. It is also proposed that the electronic mail or electronic mail message can be the address on which the communication may be delivered.
75 section 282B Allotment of DIN (Document Identification Number) Newly inserted Every income tax authority shall allot a computer generated DIN in respect of every notice, order, letter or any correspondence issued by him to any other income tax authority or assessee or any other person and such number shall be quoted thereon. If the DIN is not mentioned on the notice etc., it shall be treated as in valid and shall be deemed to have never been issued.

If the document, letter or any correspondence received by IT authority does not bear DIN, such document, letter, etc. shall be treated as in valid and shall be deemed to have never been issued.

 1st October, 2010
76 section 293C Power to withdraw approval Newly inserted It is proposed that the income tax authority who has been conferred upon the power under any provision of this act to grant any approval to any assessee, may withdraw such approval at any time, although such provision to withdraw such approval has not been specifically provided for in such provision, after giving reasonable opportunity of showing cause to the concerned assessee and record the reason for doing so. 1st October, 2009

Limit for payment of wealth tax increased from 15.00 Lakh to 30 Lakh.

GLIMPSES ON EXCISE DUTY

  • Excise duty rate on items currently attracting 4% to be raised to 8% with following major exceptions:
    • Specified food items including biscuits, sharbats, cakes and pastries
    • Drugs and pharmaceutical products falling under Chapter 30
    • Medical equipment
    • Certain varieties of paper, paperboard and articles thereof
    • Paraxylene
    • Power driven pumps for handling water
    • Footwear of RSP exceeding Rs.250 but not exceeding Rs.750 per pair
    • Pressure cookers
    • Vacuum and gas filled bulbs of RSP not exceeding Rs.20 per bulb
    • Compact Fluorescent Lamps
    • Cars for physically handicapped
  • Specific component of excise duty applicable to large cars/utility vehicles of engine capacity 2000 cc and above to be reduced from Rs. 20,000/- per vehicle to Rs.15,000 per vehicle.
  • Excise duty on manmade fibre and yarn to be increased from 4% to 8%.
  • The scheme of optional excise duty of 4% for pure cotton to be restored.
  • Excise duty for man-made and natural fibres other than pure cotton, beyond the fibre and yarn stage, to be increased from 4% to 8% under the existing optional scheme.
  • An optional excise duty exemption to be provided to tops of manmade fibre manufactured from duty paid tow at par with tops manufactured from duty paid staple fibre.
  • Suitable adjustments to be made in the rates of duty applicable to DTA clearances of textile goods made by Export Oriented Units using indigenous raw materials/ inputs for manufacture of such goods.
  • Full exemption from excise duty to be provided on goods of Chapter 68 of Central Excise Tariff manufactured at the site of construction for use in construction work at such site.
  • Benefit of SSI exemption scheme to be extended to printed laminated rolls bearing the brand name of others by excluding this item from the purview of the brand name restriction.
  • On packaged or canned software, excise duty exemption to be provided on the portion of the value which represents the consideration for transfer of the right to use such software, subject to specified conditions.
  • Excise duty on branded articles of jewellery to be reduced from 2% to Nil.
  • Section 9A (2) of the Central Excise Act has been amended to provide for the manner of compounding of the offences and further to provide that certain offences and circumstances wherein the offences shall not be compoundable.
  • Section 14A of the Central Excise Act has been amended to empower Chief Commissioner of Central Excise to nominate Chartered Accountant or Cost Account for Special Audit under this section.
  • Section 14AA of the Central Excise Act has been amended to empower Chief Commissioner of Central Excise to nominate Chartered Accountant or Cost Account for Special Audit under this section.
  • Section 23A of Central Excise Act has been proposed to amend the definition of Authority
  • Section 35G of Central Excise Act has been proposed to be amended retrospectively with effect from 1st July, 2003 empowering the High Court to condone the delay in filing of appeals beyond the specified period of one hundred and eighty days.
  • Section 35H of Central Excise Act has been proposed to be amended retrospectively with effect from 1st July, 1999 so as to make express provisions empowering the High Court to condone the delay in filling of application or memorandum of cross-objections beyond the relevant period.
  • Section 37 of the Central Excise Act has been proposed to be amended to empower the Central Government to make rules regarding the manner of compounding.
  • Section 3A of the Central Excise Act has been proposed to be amended to empower the Central Government to notify rates of excise duty under the amended notification number G.S.R. 448(E), dated 1st August, 1997, G.S.R. 503(E), dated 30th August, 1997 and G.S.R. 130(E), dated the 10th March, 1998 with retrospective effect from the date of issue of respective notification.

Central Excise Tariff

First Schedule to the Central Excise Tariff Act has been proposed to be amended

  • by substituting Note 1 of Chapter 8 so as to specify that certain items shall not be covered under the said Chapter
  • by inserting Note 6 in Chapter 21 so as to declare the process of adding or mixing certain ingredients to betel nut as amounting to “manufacture” and
  • by amending entry against tariff item 5801 22 10 so as to provide unit quantity and rate of duty therein.

SERVICE TAX:

In case of exporters, two taxable services, namely” Transport of goods by road” and “Commission paid to foreign agents” have been exempted from the levy of service tax, if the exporter is liable to pay service tax on reverse charge basis. However, as the present cap of 10% on commission agency charges has been retained, the exporter will have to pay service tax on the amount of commission which is in excess of 10%.