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Paper Presentation on
DIRECT TAX CODE
BILL 2009
By
CA. Vijay R KalaniM.Com, ACA, LCS, ICWAI (FNL)
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DIRECT TAX CODE BILL, 2009
The Direct Tax Code (DTC
) 2009 is to come into force on 1 April,
2011, if enacted
The concept of previous year has been replaced with a new concept
of financial year which inter alia means a period of 12 months
commencing from the 1st day of April
Every person is liable to pay income-tax in respect of his total income
for the financial year at the rates / conditions specified in the
Schedules to the DTC after allowing credit for pre-paid taxes
(including foreign tax credits)
Income has been proposed to be classified into two broad groups:
Income from Ordinary Sources and income from Special Sources
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DIRECT TAX CODE BILL, 2009 Income from Ordinary Sources refers to:
- Income from employment
- Income from house property
- Income from business
- Capital Gains- Income from Residuary Sources
Income from Special Sources to include specified income of non-
residents, winning from lotteries, horse races, etc.
Losses arising from Ordinary sources to be eligible for set off orcarry forward and set-off against income only from ordinary sources
without any time limit.
Similar treatment for set off and carry forward of losses from Special
sources.
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DIRECT TAX CODE BILL, 2009General Rules
Total income of the tax payer to be the aggregate of Income fromOrdinary Sources and Income from Special sources.
Loss under the head 'Capital gains' and loss from speculative
business will not be allowed to be set off against income under other
heads.
Losses to be allowed to be carried forward indefinitely for set-off inthe subsequent financial years.
Certain expenses such as expenditure attributable to tax free
income, expenditure incurred for any purpose prohibited by law,
provision for unascertained liability, etc. not to be allowed as
deduction in computing the total income. Payments in respect of which tax has not been deducted at source
to be disallowed; however, deduction to be allowed in the year of
payment, subject to certain exceptions. Where the payment is made
after two years from the end of the financial year in which the tax
was deductible at source, no deduction to be allowedCA. Vijay R Kalani,
Nanded
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DIRECT TAX CODE BILL, 2009Rules for computation of heads of income falling within income from
ordinary sources
Income from employment
Gross salary, including the value of perquisites and profits in lieu of salary,
to be taxed on due or receipt basis, whichever is earlier and to be reduced
by permissible deductions.
Permissible deductions to include professional tax, transport allowance,prescribed special allowance, compensation under voluntary retirement
scheme, gratuity, commutation of pension, amongst others.
Income from house property
Income from house property to be the gross rent less specified deductions.
Gross rent to be higher of contractual rent or presumptive rent calculated at6% per annum of the rateable value fixed by local authority / 6% of cost of
construction or acquisition of property (in the absence of rateable value).
Advance rent to be taxed in the financial year to which it relates to.
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DIRECT TAX CODE BILL, 2009Income from house property
The following deductions will be admissible against the gross rent:
Amount of taxes levied by a local authority and tax on services, if
actually paid
20% of the gross rent towards repairs and maintenance
The amount of any interest payable on:
Capital borrowed for the purposes of acquiring, constructing,
repairing, renewing or reconstructing the property (i.e. the standard
limits at present regarding to interest being allowed as a deduction
shall be thrashed and full amount of interest shall be allowed as a
deduction from the gross rent)
Amount of any interest on capital borrowed for the purpose ofrepayment of the capital borrowed for the purposes of acquiring,
constructing, repairing, renewing or reconstructing the property
In case of self-occupied property, the gross rent of one self-
occupied property will be deemed to be nil, as at present and
no deduction for interest will be allowedCA. Vijay R Kalani,Nanded
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DIRECT TAX CODE BILL, 2009Income from business
Every business to constitute a separate source for the purpose ofcomputation of income provided there is no interdependence
between the two businesses.
Key features of the provisions relating to computation of business
income are:
All assets to be classified into business and investment assets,wherein business assets to be further classified into business
trading assets and business capital assets.
Only income from transactions in business assets to form part of
business income.
Profit on sale of business capital assets, profit on sale of anundertaking under a slump sale, transfer of any self generated
business asset, etc. to be treated as business income.
Business expenditure to be classified into (i) operating expenditure
(ii) permitted financial charges and (iii) capital allowances as
defined. CA. Vijay R Kalani,Nanded
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DIRECT TAX CODE BILL, 2009Income from business
The Assessing Officer may restrict the amount of deduction
under this section to such amount as he considers appropriate
having regard to the use of the asset for the purposes of the
business if such asset is not exclusively used for the purposes
of the business Loss on sale of business capital assets (which was hitherto treated
as a capital loss) to be treated as an intangible asset on which
depreciation to be allowed. Effectively, a taxpayer will be allowed to
set-off only a fraction of loss every year.
Presumptive basis of taxation to apply for certain businesses. Separate income determination regimes provided for certain
specified businesses such as business of insurance, operating a
qualifying ship, mineral oil or natural gas, generation, transmission
or distribution of power, developing a special economic zone, etc.
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DIRECT TAX CODE BILL, 2009Income from capital gains
Definition of capital assets have been modified and replaced withthe term investment asset. Investment asset does not include
business assets like self generated assets, right to manufacture and
other capital asset connected with the business
All gains from sale of investment asset would be considered as
capital gains without any distinction as to short term and longterm and is to be taxable. Further, the indexation facility would be
available to all investment assets held for more than one year
Gains and losses to be included in the total income of the financial
year in which the investment asset is transferredirrespective of the
year of receipt of consideration, except in the case of compulsoryacquisition of an asset.
Capital gains arising from transfer of personal effects and
agricultural land excluded from the ambit of taxation.
Base date for determining cost of acquisition for the purpose of
computing capital gains shifted from 1 April1981 to 1 April 2000.CA. Vijay R Kalani,
Nanded
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DIRECT TAX CODE BILL, 2009Income from capital gains
Securities Transaction Tax to be abolished.
Benefit of indexation available in computing capital gains on transfer
of capital assets held for more than one year.
If the cost of acquisition/ cost of improvement of an asset is not
determinable by the tax payer, for example in the case of self-
generated assets, then such cost shall be taken as nil and capitalgains to be computed.
Income from residuary source
Residuary income to comprise any income which does not form part
of any other head of income.
The scope of gross residuary income widened to include income
having incidental nexus with some other head of income.
Any amount exceeding Rs. 20,000, taken or accepted or repaid
as loan or deposit otherwise than by account payee cheque or
draft to be taxed as income from residuary sources.CA. Vijay R Kalani,
Nanded
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DIRECT TAX CODE BILL, 2009
CA. Vijay R Kalani,Nanded
Person Slab of Income Rate of Tax
Individual &HUF
Up to Rs. 160000*
Rs. 160000 Rs. 1000000
Rs. 1000000 Rs. 2500000
Rs. 2500000 and above
NIL
10%
20%
30%
Co-operative
Society
Up to Rs. Nil Rs. 10000
Income Rs. 10000 Rs. 20000
Income Rs. 20000 and above
10%
20%
30%
Companies Any Income 25%
Unincorporated Bodies, Local Authority &
Income derive from lottery or crossword
Puzzle, Race, including horse race, Card gameor any other game or gambling or betting
30%
* Women Up to Rs. 190000 & Senior Citizen Up to Rs. 240000
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DIRECT TAX CODE BILL, 2009Exempt-Exempt-Tax (EET) regime for savings scheme
All long-term retrial savings schemes are proposed to be moved to the EETregime
Contributions (both by employee and employer) ofup to Rs 3 lakhs to any
account with permitted savings intermediaries is proposed to be deductible
Accretion of income till withdrawal is exempt
Any withdrawal made under any circumstances is taxable.
Savings from one eligible savings scheme to another, is not to be treated as
a withdrawal
Permitted savings intermediaries to include approved provident and
superannuation funds, life insurer and New Pension System Trust.
Other Deductions
Aggregate deductions for above long term eligible savings along with tuitionfees paid proposed to be increased from Rs 1 lakh to Rs 3 lakhs
No further investments eligible.
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DIRECT TAX CODE BILL, 2009Maintenance of Records
Section 83 under New Tax Code provides for Maintenance of records.
Currently section 44AA under Income Tax Act,1961 deals with maintenanceof records which is mandatory for specified professionals such as persons
carrying on legal, medical, engineering , architectural profession or
profession of accountancy, technical consultancy and interior decorator.
In addition of the above, in section 83 of the New Tax Code it shall be
mandatory for a person carrying on business to maintain books of
accounts if;
His income from the business exceeds 2 lakh rupees;
His total turnover or gross receipts, in the business exceeds ten lakh
rupees in any one of the three financial year immediately preceding the
relevant financial year; or
If business is newly set up in any financial year, income from business islikely to exceed two lakh rupees or his total turnover or gross receipts, as
the case may be, in the business is likely to exceed ten lakh rupees, during
such financial year.
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DIRECT TAX CODE BILL, 2009 Under New Tax Code following books of accounts are prescribed:
Cash book; Journal, if the accounts are maintained according to the mercantile
system of accounting;
A ledger;
Register of daily inventory of business trading asset;
Carbon copies of serially numbered bills issued by the person, if thevalue of the bill exceeds fifty rupees;
Carbon copies or counterfoils of serially numbered receipts issued
by the person, if the value of the bill exceeds fifty rupees;
Original bills or receipts issued to the person in respect of
expenditure incurred by him, if the amount of the expenditureexceeds fifty rupees;
Payment vouchers prepared and signed by the person in respect of
expenditure not exceeding fifty rupees, if there are no bills or
receipts for such expenditure.
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DIRECT TAX CODE BILL, 2009Wealth Tax
Individuals, HUF and Private DiscretionaryTrusts are liable to
wealth tax
Wealth to be taxable at 0.25 percentof net wealth
Basic exemption limit has been enhanced to Rs. 50 Crores.
Threshold limit of Rs. 50 crores not to apply to a private
discretionary trust.
New concept of wealth includes all assets except exempt specially.
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DIRECT TAX CODE BILL, 2009Return of Income and Assessment
The due date for filing the return of income for non-corporatetaxpayers is to be 30 June of the year following the financial year
and for other assesses is to be 31 August.
Belated / Revised return can be filed within 21 months from the end
of the financial year as stipulated
An electronic acknowledgement to be issued on receipt of eachreturn of tax bases and initial processing to be completed within 12
months from the month in which the return is filed
Selection of cases for scrutinywill be made within four months
from the end of the year in which the return is furnished in
accordance with a risk management strategy framed by CentralBoard of Direct Taxes, which will not be revealed to any member
of the public
The time limit for rectification of mistake in the order / intimation is to
be two years from the end of the year in which the order / intimation
is passedCA. Vijay R Kalani,
Nanded
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DIRECT TAX CODE BILL, 2009Return of Income and Assessment
Assessment to be generally completed within 21 months from theend of the financial year in which the return is furnished
Assessment of taxes after search and seizure operations to be
treated as tax base escaped assessment and would be subject to
re-opening.
Penalty & Prosecution
Maximum amount of penalty that can be levied is reduced to 2
times from the existing 3 times of the tax sought to be evaded
In the case of individuals and cooperative societies, penalty will be
calculated at the maximum marginal rate of tax
No income tax authority to have the power to waive the penalty
imposed
Provisions made for compounding of an offence
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With Thanks & Regards
CA. Vijay R Kalani
Vijay R Kalani & Co.
Chartered AccountantsSevasadan, New Mondha,
Maganpura, Nanded 431602
E-mail : [email protected]
Mobile : 94232 13129, Phone : 02462 222775
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