Let's see, some silent proposals of the Income Tax

Karniti Part-45: Let’s see, some silent proposals of the Income Tax from the Financial Budget  

Arjuna (Fictional Character): Krishna, on 10th July Finance Minister Mr. Arun Jaitely has presented Financial Budget. Thereafter lots of discussions on the budget are going on. In this budget there are many provisions applicable to common man. But it is important to know silent proposals from the budget. Please tell us such proposals.

Krishna (Fictional Character): Arjuna, in budget Finance minister has increased tax slab that all knows. Now listen, some silent proposals applicable which does not became part of discussion of many:

Increase in Presumptive Income of the taxpayers in the business of Transportation: the taxpayers engaged in the business of transportation having less than 10 vehicles may show their income on presumptive basis. Earlier they have to consider income of Rs. 5,000/- per heavy goods vehicle and Rs. 4,500/- for other vehicles per month. Now Rs. 7,500/- per vehicle per month limit is proposed. The taxpayers disclosing income under this method are not required to maintain the books of accounts and also are not required to get books of accounts audited. But due to increase in the limt, higher amount of tax will have to be paid. This provision is applicable from 1st April 2015 i.e. from assessment year 2015-16.

1. If TDS is not paid then expenses of 30% will be disallowed instead of 100%: if TDS on expenses like, commission, interest, rent etc. is not deposited with the government in a F.Y. then it was allowed in year of payments. Previously deduction of 100% expenses was not allowed but now onwards expenses of 30% will be disallowed. This provision is applicable from 1st April 2015 i.e. from assessment year 2015-16.   

2. Now salary and all other expenses are included in disallowance of Expenses due to non-deduction of TDS: Further if TDS on salary, director fees is not deposited with the government as mentioned above, then previously expenditure was allowed but now 30% of expenditure will be disallowed. These TDS proposals will have impact on many business assesses. It means TDS on salary will have to be paid on time and accurately. 

3. Powers of TDS officer enlarged: TDS officers can visit the office and other premises of the taxpayers for survey and can verify that TDS is deducted at appropriate rates or not. Therefore the proposal of increase in powers of TDS officers is there.

4. Only One residential house is now allowed under Capital gains: When land, plot, capital assets, etc. is sold, then taxpayer may require paying capital gain tax. But if taxpayer invests in residential house as per the provisions of section 54 and 54F then exemption of tax can be availed. Previously taxpayer can buy more than one residential house and avail exemption but now onwards only one residential house can be purchased to avail the exemption.  For e.g. if one sells house for Rs. 50 Lakhs and had a capital gain of Rs. 40 Lakh then he may buy more than one new house and can avail the exemption but now exemption of only one residential house is available. It seems that loophole is closed by above proposal.

5. Forfeited advance in now taxed: If in capital assets transaction advance is taken and transaction is cancelled and advance taken is forfeited then the said income will be treated as Income from Other sources. Earlier they were to reduce the cost of assets.

6. CSR amount is non-deductible under Income tax Act: The companies having net profit of more than Rs. 5 crore or have turnover of more than Rs. 1000 crore then the companies will have to use 2% of net profits on Corporate Social Responsibility. The deduction of the said expenditure will not be allowed to the companies as the said expenditure is application of income and not expenditure for the purpose of business.

7. Stringent Proposal for Trusts: If excess income of the trust remained after being used as per provisions of section 11 and 12 then the exemptions were taken under the other provisions of the act. However now exemptions from other sections cannot be availed. For e.g. if hospital is registered under section 11 or 12 then it should not avail the exemptions of section 10. Further the provisions for cancellation of the trust were made stricter. Now running of trust must be according to the provisions otherwise its registration can be cancelled.

8. Now powers of levying penalty are also given to Transfer Pricing Officer in line with assessing officer.

9. Rs. 25 Crs or more, new reduced limit for manufacturing sector to claim benefit: If corporate taxpayer purchases new asset i.e, Plant and Machinery, etc. and installed it and its cost is more than Rs. 25 crores then it can claim additional deduction of 15% of the cost of asset in Income Tax with compliance of certain conditions. Earlier limit was Rs. 100 Crs.

10. In this budget two new concepts of Real Estate Investment Trust and Infrastructure Investment Trust were mentioned. These trusts will work like mutual fund companies. For e.g. if common man wants to invest in the land or plot in Mumbai then due to unaffordable prices it is not possible. But he may invest in these trusts and enjoy the benefits.

11. In this budget exchanging of information has been increased between Tax department and others. Now the information asked by the income tax department will have to be given. If the information is not given then penalty may be levied. Due to this the department will now receive more information. Same provisions were also inserted in the Customs and Excise also.

Arjuna: Krishna, what one should learn from Silent proposals of this budget?

Krishna: Arjuna, in every budget there are some hidden proposals, through which government achieves its hidden target. The impact of these changes comes to know gradually and slowly. Like after storm, in dark peace, one comes to know its impact. Government gives publicity to things which are beneficial to the public but there are various changes in the budget which affect all people but are not beneficial to them but to Govt. To judge a person, one should understand his internal habits of his character. Similarly one who knows the internal hick ups in his works wins. Hence silent provision of budget may have long lasting effects. Let’s see how many more changes take place in proposals till this financial budget gets sanctioned.

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